Two Decisions Lenders Should Make Now to Get Ready for New HMDA Requirements
By John Vong
June 13, 2017
John Vong, CMB, CMT, is president and co-founder of ComplianceEase, Burlingame, Calif. He can be reached at email@example.com.
Recently, the Consumer Financial Protection Bureau published a number of clarifications to the new Home Mortgage Disclosure Act reporting rules that will help lenders better understand the type of information that they will soon be required to report. But at the same time, the Bureau again made it clear that the effective date for most of this rule isn't changing: it will still be January 1, 2018, or slightly more than six months from now.
If our industry's experience with the TILA-RESPA Integrated Disclosure rule has taught us anything, it is this: six months sounds like a long time, but it isn't. Compliance is more complex that it seems, and, despite the best intentions and efforts, little things can delay and even derail the whole process.
With that in mind, there are two things that lenders should resolve to do right now that will pay dividends down the road in terms of HMDA compliance.
The first is decide now to move to the new Uniform Residential Loan Application as soon as you can. Yes, it is not mandatory yet, and it is also true that the date when the GSEs will require it is still up in the air. Additionally, when it will be available on all loan origination systems is something of a question mark.
But LOSs are working on their HMDA solutions in addition to the GSE's UCD integrations, and most, if not all, will be ready by this summer. At that point, the new 1003 will be available, and it will have the new fields that will be required for HMDA reporting beginning in 2018. By migrating to it now, lenders will be comfortable with it by Q4. This is important because loans originated at year-end, and that close in 2018, will be covered by the new reporting rules. Why wait and take a chance of having to scramble to collect the additional data?
The second decision is to begin training your loan officers [and brokers?] on what the new rules require and their roles in collecting and maintaining the needed data.
There's an old saying: "Success has many fathers, but failure is an orphan." And that applies in spades when it comes to originations. Loan officers get paid when loans close. They have little incentive, therefore, to collect data on denials and loans that, for one reason or another, go into "limbo."
But as a covered lender, you're responsible for collecting and reporting the details on these loan applications. Until now, regulators haven't really enforced these rules, and many lenders, particularly non-banks, have reportedly been lax in following them. Federal and state regulators will most likely be changing their approach to enforcement of collection and maintenance of this data in 2018.
Making data collection an integral part of the LO's job description, and giving them the training and the tools to make it as painless as possible will save lenders time and angst in the long run. But rolling these training programs out will take time, so start early.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor does it connote an endorsement of a specific company, product or service. MBA Insights welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at firstname.lastname@example.org; or Michael Tucker, editorial manager, at email@example.com.)