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Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Rules and Regulations
BUREAU OF CONSUMER FINANCIAL
PROTECTION
12 CFR Part 1003
[Docket No. CFPB–2014–0019]
RIN 3170–AA10
Home Mortgage Disclosure
(Regulation C)
Bureau of Consumer Financial
Protection.
ACTION: Final rule; official
interpretations.
AGENCY:
The Bureau of Consumer
Financial Protection is amending
Regulation C to implement amendments
to the Home Mortgage Disclosure Act
made by section 1094 of the Dodd-Frank
Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act).
Consistent with section 1094 of the
Dodd-Frank Act, the Bureau is adding
several new reporting requirements and
clarifying several existing requirements.
The Bureau is also modifying the
institutional and transactional coverage
of Regulation C. The final rule also
provides extensive guidance regarding
compliance with both the existing and
new requirements.
DATES: This rule is effective on January
1, 2018, except that the amendment to
§ 1003.2 in amendatory instruction 3 is
effective on January 1, 2017; the
amendments to § 1003.5 in amendatory
instruction 8, the amendments to
§ 1003.6 in amendatory instruction 10,
the amendments to appendix A to part
1003 in amendatory instruction 12, and
the amendments to supplement I to part
1003 in amendatory instruction 16 are
effective on January 1, 2019; and the
amendments to § 1003.5 in amendatory
instruction 9 are effective on January 1,
2020. See part VI for more information.
FOR FURTHER INFORMATION CONTACT:
Jaydee DiGiovanni, David Jacobs, Terry
J. Randall, or James Wylie, Counsels; or
Elena Grigera Babinecz, Courtney Jean,
Joan Kayagil, Thomas J. Kearney, or
Laura Stack, Senior Counsels, Office of
Regulations, at (202) 435–7700.
SUPPLEMENTARY INFORMATION:
SUMMARY:
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I. Summary of the Final Rule
Regulation C implements the Home
Mortgage Disclosure Act (HMDA),
which was amended by the Dodd-Frank
Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act). On
July 24, 2014, the Bureau issued a
proposed rule to amend Regulation C,
which was published in the Federal
Register on August 29, 2014 (the 2014
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HMDA Proposal or the proposal).1 The
Bureau is publishing final amendments
to Regulation C modifying the types of
institutions and transactions subject to
the regulation, the types of data that
institutions are required to collect, and
the processes for reporting and
disclosing the required data.
A. Modifications to Institutional and
Transactional Coverage
The Bureau is modifying Regulation
C’s institutional and transactional
coverage to better achieve HMDA’s
purposes in light of current market
conditions and to reduce unnecessary
burden on financial institutions. The
Bureau is adopting uniform loanvolume thresholds for depository and
nondepository institutions. The loanvolume thresholds require an institution
that originated at least 25 closed-end
mortgage loans or at least 100 open-end
lines of credit in each of the two
preceding calendar years to report
HMDA data, provided that the
institution meets all of the other criteria
for institutional coverage. The final rule
also includes a separate test to ensure
that covered institutions that meet only
the 25 closed-end mortgage loan
threshold are not required to report their
open-end lending, and that covered
institutions that meet only the 100
open-end line of credit threshold are not
required to report their closed-end
lending.
In addition, the final rule retains the
current institutional coverage criteria for
depository institutions, which require
reporting by depository institutions that
satisfy an asset-size threshold, have a
branch or home office in an
Metropolitan Statistical Area (MSA) on
the preceding December 31, satisfy the
current federally related test, and
originated at least one first-lien home
purchase loan or refinancing secured by
a one- to four-unit dwelling in the
previous calendar year. For
nondepository institutions, the final
rule replaces the current loan-volume or
-amount test with the loan-volume
thresholds discussed above, and
removes the current asset-size or loanvolume threshold, but retains the
current criterion that the institution
have a branch or home office in an MSA
on the preceding December 31.
The Bureau also is modifying the
types of transactions subject to
1 79 FR 51731 (Aug. 29, 2014). See also Press
Release, U.S. Bureau of Consumer Fin. Prot., CFPB
Proposes Rule to Improve Information About Access
to Credit in the Mortgage Market (July 24, 2014),
available at http://www.consumerfinance.gov/
newsroom/cfpb-proposes-rule-to-improveinformation-about-access-to-credit-in-the-mortgagemarket/.
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Regulation C. The final rule adopts a
dwelling-secured standard for all loans
or lines of credit that are for personal,
family, or household purposes. Thus,
most consumer-purpose transactions,
including closed-end home-equity
loans, home-equity lines of credit, and
reverse mortgages, are subject to the
regulation. Most commercial-purpose
transactions (i.e., loans or lines of credit
not for personal, family, or household
purposes) are subject to the regulation
only if they are for the purpose of home
purchase, home improvement, or
refinancing. The final rule excludes
from coverage home improvement loans
that are not secured by a dwelling (i.e.,
home improvement loans that are
unsecured or that are secured by some
other type of collateral) and all
agricultural-purpose loans and lines of
credit.
B. Modifications to Reportable Data
Requirements
The final rule amends several of
Regulation C’s currently required data
points to clarify the requirements and
make the data more useful. To
streamline the regulation, the final rule
removes appendix A; all of the
substantive requirements contained in
appendix A have been moved, with
some modifications, to the regulation
text or commentary. The final rule also
adopts several new data points, many of
which were added by the Dodd-Frank
Act, and some of which were added
pursuant to the Bureau’s discretionary
authority to carry out the purposes of
HMDA. The final rule does not adopt
some of the new or amended data points
set forth in the 2014 HMDA Proposal,
such as the proposed requirements to
report qualified mortgage status or the
initial draw on an open-end line of
credit. The data points required to be
reported under the final rule can be
grouped into four broad categories:
• Information about applicants,
borrowers, and the underwriting
process, such as age, credit score, debtto-income ratio, and automated
underwriting system results.
• Information about the property
securing the loan, such as construction
method, property value, and additional
information about manufactured and
multifamily housing.
• Information about the features of
the loan, such as additional pricing
information, loan term, interest rate,
introductory rate period, non-amortizing
features, and the type of loan.
• Certain unique identifiers, such as a
universal loan identifier, property
address, loan originator identifier, and a
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legal entity identifier for the financial
institution.2
The final rule also amends the current
requirements related to the collection of
ethnicity, race, and sex of applicants
and borrowers. The final rule requires
financial institutions to report whether
ethnicity, race, or sex information was
collected on the basis of visual
observation or surname when an
application is taken in person and the
applicant does not provide the
information. For transactions where
ethnicity and race information is
provided by the applicant or borrower,
the final rule requires financial
institutions to permit applicants and
borrowers to self-identify using
disaggregated ethnic and racial
categories. However, when race and
ethnicity data is completed by the
financial institution, the final rule
retains the current requirements,
requiring financial institutions to
provide only aggregated ethnic or racial
data.
C. Modifications to Disclosure and
Reporting Requirements
The final rule retains the current
requirement that financial institutions
submit their HMDA data to the
appropriate Federal agency by March 1
following the calendar year for which
the data are collected. The final rule
imposes a new requirement that
financial institutions that report large
volumes of HMDA data for a calendar
year also submit their data for the first
three quarters of the following calendar
year to the appropriate Federal agency
on a quarterly basis. However, the final
rule removes the current requirements
that a financial institution provide to
the public its disclosure statement and
its loan/application register, modified to
protect applicant and borrower privacy,
and instead requires financial
institutions to provide a notice to
members of the public seeking these
data that the information is available on
the Bureau’s Web site.
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II. Background
A. HMDA and Regulation C
For nearly 40 years, HMDA has
provided the public with information
about mortgage lending activity within
communities throughout the nation.
Public officials use the information
available through HMDA to develop and
allocate housing and community
development investments, to respond to
market failures when necessary, and to
monitor whether financial institutions
2 All of the data points required by the final rule
are discussed in detail below in the section-bysection analysis of § 1003.4(a).
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may be engaging in discriminatory
lending practices. The data are used by
the mortgage industry to inform
business practices, and by local
communities to ensure that lenders are
serving the needs of individual
neighborhoods. To maintain the data’s
usefulness, HMDA and Regulation C
have been updated and expanded over
time in response to the changing needs
of homeowners and evolution in the
mortgage market. This part II.A provides
an abbreviated discussion of the
detailed background information
presented in the proposal, which the
Bureau considered and relied on in
preparing this final rule.3
The Statute and Current Regulation
The Home Mortgage Disclosure Act
(HMDA), 12 U.S.C. 2801 et seq., requires
certain depository institutions and forprofit nondepository institutions to
collect, report, and disclose data about
originations and purchases of mortgage
loans, as well as mortgage loan
applications that do not result in
originations (for example, applications
that are denied or withdrawn). As
originally adopted, HMDA identifies its
purposes as providing the public and
public officials with information to help
determine whether financial institutions
are serving the housing needs of the
communities in which they are located,
and to assist public officials in their
determination of the distribution of
public sector investments in a manner
designed to improve the private
investment environment.4 Congress
later expanded HMDA to, among other
things, require financial institutions to
report racial characteristics, gender, and
income information on applicants and
borrowers.5 In light of these
amendments, the Board of Governors of
the Federal Reserve System (Board)
subsequently recognized a third HMDA
purpose of identifying possible
discriminatory lending patterns and
enforcing antidiscrimination statutes,
which now appears with HMDA’s other
purposes in Regulation C.6
In 2010, Congress enacted the DoddFrank Act, which amended HMDA and
also transferred HMDA rulemaking
authority and other functions from the
Board to the Bureau.7 Among other
3 See
79 FR 51731, 51734–39 (Aug. 29, 2014).
section 302(b), 12 U.S.C. 2801(b); see
also 12 CFR 1003.1(b)(1)(i)–(ii).
5 Financial Institutions Reform, Recovery, and
Enforcement Act of 1989, Public Law 101–73,
section 1211 (‘‘Fair lending oversight and
enforcement’’ section), 103 Stat. 183, 524–26 (1989).
6 54 FR 51356, 51357 (Dec. 15, 1989), codified at
12 CFR 1003.1(b)(1).
7 Public Law 111–203, 124 Stat. 1376, 1980,
2035–38, 2097–101 (2010). Also, in 2010, the Board
4 HMDA
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changes, the Dodd-Frank Act expands
the scope of information relating to
mortgage applications and loans that
must be compiled, maintained, and
reported under HMDA. New data points
include the age of loan applicants and
mortgagors, information relating to the
points and fees payable at origination,
the difference between the annual
percentage rate (APR) associated with
the loan and a benchmark rate or rates
for all loans, the term of any
prepayment penalty, the value of real
property to be pledged as collateral, the
term of the loan and of any introductory
interest rate for the loan, the presence of
contract terms allowing non-amortizing
payments, the origination channel, and
the credit scores of applicants and
mortgagors.8 The Dodd-Frank Act also
authorizes the Bureau to require, ‘‘as [it]
may determine to be appropriate,’’ a
unique identifier that identifies the loan
originator, a universal loan identifier,
and the parcel number that corresponds
to the real property pledged or proposed
to be pledged as collateral for the
mortgage loan.9 The Dodd-Frank Act
also provides the Bureau with the
authority to require ‘‘such other
information as the Bureau may
require.’’ 10
The Bureau’s Regulation C, 12 CFR
part 1003, implements HMDA.
Regulation C currently requires
depository institutions (i.e., banks,
savings associations, and credit unions)
and for-profit nondepository mortgage
lending institutions to submit and
publicly disclose certain HMDA data if
they meet criteria set forth in the rule.
Whether a depository institution is
required to report and publicly disclose
data depends on its asset size, the
location of its home and branch offices,
the extent to which it engages in
residential mortgage lending, and the
extent to which the institution or its
loans are federally related. Whether a
for-profit nondepository mortgage
lending institution is required to report
and publicly disclose data depends on
its size, the location of its home and
branch offices, including the extent of
its business in MSAs, and the extent to
which it engages in residential mortgage
lending.
Covered financial institutions are
required to report originations and
purchases of mortgage loans (home
purchase and refinancing) and home
improvement loans, as well as loan
conducted public hearings on potential revisions to
Regulation C. The Board’s hearings are discussed
below.
8 Dodd-Frank Act section 1094(3), amending
HMDA section 304(b), 12 U.S.C. 2803(b).
9 Id.
10 Id.
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applications that do not result in
originations. The information reported
under Regulation C currently includes,
among other items: application date;
loan or application type, purpose, and
amount; property location and type;
race, ethnicity, sex, and annual income
of the loan applicant; action taken on
the loan application (approved, denied,
withdrawn, etc.), and date of that action;
whether the loan is subject to the Home
Ownership and Equity Protection Act of
1994 (HOEPA); lien status (first lien,
subordinate lien, or unsecured); and
certain loan price information.
Depository financial institutions
report HMDA data to their supervisory
agencies, while nondepository financial
institutions report HMDA data to the
U.S. Department of Housing and Urban
Development (HUD). Financial
institutions report their data on an
application-by-application basis using a
register format referred to as the loan/
application register. Institutions must
make their loan/application registers
available to the public, with certain
fields redacted to preserve applicants’
and borrowers’ privacy. At present, the
Federal Financial Institutions
Examination Council (FFIEC),11 on
behalf of the supervisory agencies,
compiles the reported data and prepares
an individual disclosure statement for
each institution and aggregate reports
for all covered institutions in each
metropolitan area. These disclosure
statements and reports are available to
the public. On behalf of the agencies,
the FFIEC also annually releases a loanlevel dataset containing all reported
HMDA data for the preceding calendar
year with certain fields redacted to
protect the privacy of applicants and
borrowers.
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Overview of HMDA’s Purposes and
Evolution
In the decades that followed World
War II, the standard of living declined
sharply in many U.S. cities as people
migrated to the suburbs. A significant
cause of this decline was the gradual
deterioration of the urban housing
supply. Although Congress took several
steps to address this problem, by the
1970s it was clear that inadequate
private investment and a lack of access
11 The FFIEC is a formal interagency body
empowered to prescribe uniform principles,
standards, and report forms for the Federal
examination of financial institutions by the Bureau,
the Board, the Federal Deposit Insurance
Corporation (FDIC), the National Credit Union
Administration (NCUA), and the Office of the
Comptroller of the Currency (OCC), and to make
recommendations to promote uniformity in the
supervision of financial institutions. In 2006, the
State Liaison Committee was added to the Council
as a voting member.
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to credit was contributing to an ongoing
cycle of decline in urban
neighborhoods. However, Congress
lacked adequate data to determine the
extent and severity of these market
failures. To create transparency in the
mortgage market Congress enacted
HMDA in 1975, which the Board
implemented by promulgating
Regulation C in 1976. As originally
enacted, HMDA applied to certain
depository institutions that were located
in standard metropolitan statistical
areas, and required the disclosure of a
limited amount of data regarding home
improvement and residential mortgage
loans.12
HMDA substantially improved the
public’s ability to determine whether
financial institutions were serving the
needs of their communities, but during
the 1980s several events occurred that
illustrated the need to improve and
expand the HMDA data. A series of
investigative reports and studies
revealed that discrimination against
certain applicants and borrowers was
common during the mortgage lending
process. Concerns over this
discrimination, coupled with the need
to respond to the savings and loan crisis
of the late 1980s, led Congress to amend
HMDA significantly in 1988 and 1989.
These amendments, among other things,
expanded the coverage of depository
and nondepository institutions, required
transaction-level disclosure of
applications and loans, and added new
reporting requirements regarding the
applicant’s or borrower’s race, gender,
and income. These amendments
dramatically improved the public’s
understanding of how mortgage lending
decisions affected both communities
and individual applicants and
borrowers.13
The mortgage market evolved and
became more complex during the 1990s,
particularly with respect to the
expansion of the secondary market and
the growth of the subprime market.
Faced with concerns about potential
predatory and discriminatory practices
in the subprime market, community
groups and others began to call for new
amendments to HMDA to provide
increased visibility into market
practices. The Board addressed some of
these concerns by amending Regulation
C in 2002. However, as delinquencies,
foreclosures, and other harmful effects
of subprime lending unfolded, it became
apparent that communities throughout
the nation lacked sufficient information
to understand the magnitude of the risk
to which they were exposed.
12 See
13 See
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79 FR 51731, 51735–36 (Aug. 29, 2014).
79 FR 51731, 51736–37 (Aug. 29, 2014).
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Community groups, local, State, and
Federal officials relied on the HMDA
data to identify at-risk neighborhoods
and to develop foreclosure relief and
homeownership stabilization programs.
However, the limited data provided
presented several challenges for those
who attempted to create effective and
responsive relief programs. As
discussed above, Congress added
several new reporting requirements, but
left the Bureau to determine which
additional information is necessary.
Many argue that more publicly available
information is needed to help inform
communities of lending practices that
affect local economies and may
endanger neighborhood stability. The
Bureau believes that the HMDA data
must be updated to address the
informational shortcomings exposed by
the financial crisis and to meet the
needs of homeowners, potential
homeowners, and neighborhoods
throughout the nation.14
B. Applicant and Borrower Privacy
In its proposal, the Bureau set forth
the approach it proposed to take to
protect applicant and borrower privacy
in light of HMDA’s purposes. It
proposed the use of a balancing test to
determine whether and how HMDA
data should be modified prior to its
disclosure to the public in order to
protect applicant and borrower privacy
while also fulfilling the disclosure
purposes of the statute.15 For the
reasons described below, the Bureau is
adopting the balancing test described in
the proposal. The Bureau will provide at
a later date a process for the public to
provide input on the application of the
balancing test to determine the HMDA
data to be publicly disclosed.
HMDA’s purposes are to provide the
public and public officials with
sufficient information to enable them to
determine whether institutions are
serving the housing needs of the
communities and neighborhoods in
which they are located, to assist public
officials in distributing public sector
investments in a manner designed to
improve the private investment
environment, and to assist in identifying
possible discriminatory lending patterns
and enforcing antidiscrimination
statutes. Today, HMDA data are the
primary source of information for
regulators, researchers, economists,
industry, and advocates analyzing the
mortgage market both for HMDA’s
purposes and for general market
monitoring. Developing appropriate
protections for applicant and borrower
14 See
15 79
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79 FR 51731, 51737–39 (Aug. 29, 2014).
FR 51731, 51742 (Aug. 29, 2014).
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privacy in light of HMDA’s purposes is
a significant priority for the Bureau. The
Bureau is mindful that privacy concerns
may arise both when financial
institutions compile and report HMDA
data to their regulators and when the
data are disclosed to the public.
Compiling and Reporting of HMDA Data
Financial institutions collect various
types of information from consumers in
the course of processing loan
applications. To promote HMDA’s goals,
HMDA and Regulation C require
financial institutions to compile and
report to regulators some of this
information and other information
obtained or generated concerning the
application or loan. As discussed above,
the Dodd-Frank Act both expanded the
scope of information that financial
institutions must compile and report
and authorized the Bureau to require
financial institutions to compile and
report additional data. The Bureau
carefully considered the potential risks
to applicant and borrower privacy
associated with compiling and reporting
data in developing the proposal and
adopting this final rule.
Neither consumer advocate
commenters nor the privacy advocate
that submitted a comment identified
concerns about applicant and borrower
privacy associated with the compilation
and reporting of data to regulators under
the proposal. However, the Bureau
received many comments from industry
arguing that the compilation and
reporting of certain data under the
proposal created significant and
unjustified risks to applicant and
borrower privacy. These comments
focused on concerns relating to the
potential identifiability and sensitivity
of the data to be compiled and reported.
Most commenters expressed concerns
about potential harms to applicants and
borrowers if the data compiled and
reported under the proposal were
subject to unauthorized access. A few
commenters also expressed concerns
about potential legal liability and costs
to financial institutions associated with
the compilation and reporting of the
proposed data.
Many industry commenters argued
that the proposed requirement to report
the postal address of the property
securing the covered loan or, in the case
of an application, proposed to secure
the covered loan 16 would allow data
users to easily link all reported data to
an individual applicant or borrower.
Some commenters also suggested that
proposed data fields other than postal
address could allow individual
16 Proposed
§ 1003.4(a)(9)(i).
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applicants and borrowers to be
identified in the reported HMDA data.
Many industry commenters asserted
that some of the proposed data fields, if
tied to an individual, would reveal
sensitive information about the
applicant or borrower.17
Some industry commenters expressed
general concern about government
collection of information that may be
linkable to individuals, but most
commenters expressed specific concerns
about potential harms to applicants and
borrowers in the event of unauthorized
access to the HMDA data maintained by
the agencies. Commenters asserted that
the proposal increased both the
potential harm a breach of the HMDA
data at the Bureau or another agency
could cause affected applicants and
borrowers as well as the risk that such
a data breach would occur. Many
comments stated that the proposed
HMDA data could be used to target
applicants and borrowers with
marketing for harmful financial
products and to commit identity theft
and other fraud. Several commenters
stated that data breaches at corporations
and government agencies have become
common and suggested that the
proposed HMDA data are sufficiently
valuable to identity thieves and others
that agency systems maintaining the
data would be subject to hacks and
other attacks aiming to access the data.
A few commenters expressed concern
that the HMDA data would be
vulnerable to unauthorized access
during transmission from financial
institutions to their regulators. Several
industry commenters expressed
particular concern with the Bureau’s
information security practices and
suggested that HMDA data held by the
Bureau would be at heightened risk of
breach. A few of these commenters
urged the Bureau to publish the details
of its information security practices and
procedures in order to address these
concerns. Some industry commenters
questioned the benefit of some of the
proposed data in light of HMDA’s
purposes. Several commenters argued
that, in light of the potential risks to
applicant and borrower privacy
presented by the compilation and
reporting of the some of the proposed
data, any benefits of such compilation
and reporting were not justified.
In addition, a few commenters
expressed concern that compiling and
reporting the proposed data would
17 Some commenters suggested that the Bureau
require certain data to be reported in ranges, rather
than exact values, to mitigate privacy concerns.
Comments received concerning particular data
points are addressed in the applicable section-bysection analysis below.
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66131
create legal risks for financial
institutions and would impose related
costs. A few comments suggested that a
financial institution would face
regulatory or legal liability if an agency
suffered a breach that compromised the
financial institution’s HMDA data. One
comment suggested that reporting the
proposed data would expose financial
institutions to liability under the Right
to Financial Privacy Act (RFPA) 18 and
a few other commenters suggested that
doing so would violate the GrammLeach-Bliley Act (GLBA)19. Several
national trade associations argued that
compiling and reporting the proposed
data would require financial institutions
to strengthen significantly their
information security programs and
would also increase costs associated
with compensating customers in the
event of a financial institution’s data
breach.
The Bureau has analyzed these
industry comments carefully and has
determined that any risks to applicant
and borrower privacy created by the
compilation and reporting of the data
required under the final rule are
justified by the benefits of the data in
light of HMDA’s purposes.20 The
Bureau takes seriously the concerns
raised about the security of reported
HMDA data maintained at the agencies.
The Bureau has addressed or is actively
addressing each of the
recommendations made in the
Government Accountability Office
(GAO) report cited by some industry
commenters as a basis for concern that
the Bureau’s information security
practices are insufficient to protect
HMDA data.21 The GAO report
18 12
U.S.C. 3401 et seq.
U.S.C. 6801 et seq.
20 Several industry commenters asserted that,
under the Bureau’s proposal, none of the proposed
new data points would be made available to the
public, or would be made available only in
aggregate form, and that this was evidence of the
limited value of the proposed data in light of
HMDA’s purposes. These commenters
misunderstood the proposal. The Bureau proposed
that the data financial institutions would disclose
on their modified loan/application registers would
be limited to the currently disclosed data, see
proposed § 1003.5(c), but stated that it would apply
a balancing test to determine whether and how the
HMDA data should be modified prior to its public
release by the agencies in their annual loan-level
data release, see 79 FR 51731, 51742, 51816 (Aug.
29, 2014). Based on its analysis to date, the Bureau
believes that some of the proposed new data points
may create privacy concerns sufficient to warrant
some degree of modification, including redaction,
before public disclosure, but it has determined that
all of the data required to be compiled and reported
under the final rule significantly advance HMDA’s
purposes.
21 U.S. Gov’t Accountability Office, GAO–14–758,
Consumer Financial Protection Bureau: Some
Privacy and Security Procedures for Data
19 15
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recognized the many steps that the
Bureau has taken to ensure the privacy
and security of the data it collects;
indeed, the report’s recommendations
focused primarily on formalizing and
documenting the privacy and
information security practices the
Bureau already had in place at the time
the report was issued. The Bureau takes
strong measures to mitigate and address
any risks to the security of sensitive data
it receives, consistent with the guidance
and standards set for Federal
information security programs,22 and is
committed to protecting the privacy and
information security of the HMDA data
it receives from financial institutions.
As discussed in its proposal,23 the
Bureau is developing improvements to
the HMDA data submission process,
including, for example, further
advancing encryption if necessary to
protect data reported under the final
rule.
The Bureau does not believe a
financial institution could be held
legally liable for the exposure of data
due to a breach at a government agency
or for reporting data to a government
agency if the institution was legally
required to provide the data to the
agency and did so in accordance with
other applicable law. The comments
raising this concern provided no
evidence or analysis concerning how
such liability might be created. Contrary
to a few commenters’ suggestions,
reporting data as required under the
final rule would not create liability for
a financial institution under the RFPA
or cause the financial institution to
violate the GLBA, as both of these laws
permit financial institutions to disclose
information as required by Federal law
or regulation.24 Finally, in light of the
Collections Should Continue Being Enhanced
(2014), available at http://www.gao.gov/assets/670/
666000.pdf. In this report, the GAO examined the
Bureau’s authority to receive consumer financial
information as well as steps taken to implement the
privacy and information security protections to
address risks associated with the receipt of such
information. The report contained eleven
recommendations directed to the Bureau.
22 The Bureau’s information security program is
aligned with the requirements of the Federal
Information Security Management Act of 2002
(FISMA). Like other Federal information security
programs, the policies and principles that form the
CFPB information security program are based on
guidance and standards provided by the National
Institute of Standards and Technology (NIST). The
Bureau declines to publish details of its information
security safeguards, as suggested by some industry
commenters, because such disclosure would pose a
significant security risk.
23 79 FR 51731, 51741 (Aug. 29, 2014).
24 See 12 U.S.C. 3413(d) (providing an exception
to the RFPA’s general prohibition on disclosure to
the Federal government for financial records or
information ‘‘required to be reported in accordance
with any Federal statute or rule promulgated
thereunder’’); 15 U.S.C. 6802(e)(8), 12 CFR
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significant amounts of highly sensitive,
personally identifiable information
concerning customers that financial
institutions collect and maintain in the
course of conducting their business
regardless of HMDA and Regulation C,
the Bureau does not believe the
requirement to compile and report some
of these data pursuant to the final rule
will meaningfully increase financial
institutions’ information security needs
or the amounts required for victim
compensation in the event of a financial
institution’s security breach. The
industry commenters that made these
arguments offered no detail or evidence
of such needs or costs. It is the Bureau’s
understanding that substantially all of
the new data to be compiled under the
final rule are either data that HMDA
reporters compile for reasons other than
HMDA or Regulation C or are
calculations that derive from such data,
and must be retained by a financial
institution to comply with other
applicable laws.
Disclosures of HMDA Data
As discussed in part II.A above,
HMDA is a disclosure statute. To fulfill
HMDA’s purposes, the types of data a
financial institution is required to
compile and report under HMDA and
Regulation C have been expanded since
the statute’s enactment in 1975, and the
formats in which HMDA data have been
disclosed to the public also have
evolved. At present, HMDA and
Regulation C require data to be made
available to the public in both aggregate
and loan-level formats. First, each
financial institution must make its
‘‘modified’’ loan/application register
available to the public, with three fields
deleted to protect applicant and
borrower privacy.25 Each financial
institution must also make available to
the public a disclosure statement
prepared by the FFIEC that shows the
financial institution’s HMDA data in
aggregate form.26 In addition, the FFIEC
makes available to the public disclosure
statements for each financial
institution 27 as well as aggregate reports
1016.15(a)(7)(i) (providing an exception to GLBA’s
general prohibition on disclosing nonpublic
personal information to a nonaffiliated third party
absent notice and an opportunity to opt-out of such
disclosure where the disclosure is ‘‘to comply with
Federal, State, or local laws, rules, and other
applicable legal requirements.’’).
25 Section 1003.5(c); HMDA section 304(j)(2)(B).
Section 1003.5(c) requires that, before making its
loan/application register available to the public, a
financial institution must delete three fields to
protect applicant and borrower privacy:
Application or loan number, the date that the
application was received, and the date action was
taken.
26 Section 1003.5(b); HMDA section 304(k).
27 Section 1003.5(f); HMDA section 304(f).
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for each MSA and metropolitan division
(MD) showing lending patterns by
certain property and applicant
characteristics.28 Since 1991, on behalf
of the agencies receiving HMDA data,
the FFIEC also has released annually a
loan-level dataset containing all
reported HMDA data for the preceding
calendar year (the agencies’ release). To
reduce the possibility that data users
could identify particular applicants or
borrowers in these data, the same three
fields that are deleted from the modified
loan/application register are deleted
from the agencies’ release.29
Changes to financial institutions’
disclosure obligations under the final
rule. The Bureau’s proposal addressed
both of the disclosures financial
institutions must make to the public
under current Regulation C. First, the
Bureau proposed to allow a financial
institution to meet its obligation to make
its disclosure statement available to the
public by making available a notice that
clearly conveys that the disclosure
statement may be obtained on the FFIEC
Web site and that includes the FFIEC’s
Web site address.30 Second, it proposed
to require that the modified loan/
application register a financial
institution must make available show
only the data fields that currently are
released on the modified loan/
application register.31 The Bureau
explained that the new data points
adopted under the final rule would be
disclosed in the agencies’ release,
modified as appropriate to protect
applicant and borrower privacy.32 These
proposals aimed to reduce burden on
financial institutions associated with
their disclosure of HMDA data and
allow for the appropriate protection of
applicant and borrower privacy in
HMDA data disclosed by shifting much
of the responsibility for making HMDA
data available to the public to the
agencies.
The Bureau received several
comments on the proposed provisions
relating to financial institutions’
disclosure obligations. As discussed
below in the applicable section-bysection analysis, after consideration of
28 Section
1003.5(f); HMDA section 310.
agencies first released loan-level HMDA
data in October 1991. In announcing that the loanlevel data submitted to the agencies on the loan/
application register would be made available to the
public, the FFIEC noted that ‘‘[a]n unedited form of
the data would contain information that could be
used to identify individual loan applicants’’ and
that the data would be edited prior to public release
to remove the application identification number,
the date of application, and the date of final action.
55 FR 27886, 27888 (July 6, 1990).
30 Proposed § 1003.5(b)(2).
31 Proposed § 1003.5(c).
32 79 FR 51731, 51742–43, 51816 (Aug. 29, 2014).
29 The
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these comments and further analysis,
the Bureau has decided to finalize
proposed § 1003.5(b)(2) concerning the
disclosure statement with minor
modifications. The Bureau is not
finalizing § 1003.5(c) concerning the
modified loan/application register as
proposed and instead is aligning
§ 1003.5(c) with § 1003.5(b)(2) by
adopting a requirement that a financial
institution make available to the public
a notice that clearly conveys that the
institution’s modified loan/application
register may be obtained on the Bureau’s
Web site. Thus, under the final rule, the
disclosure of HMDA data is shifted
entirely to the agencies; financial
institutions will no longer be required to
provide their HMDA data directly to the
public, but only a notice advising
members of the public seeking their data
of where it may be obtained online.
Use of a balancing test to determine
data to be publicly disclosed. The DoddFrank Act amendments to HMDA added
new section 304(h)(1)(E), which directs
the Bureau to develop regulations, in
consultation with the other agencies,
that ‘‘modify or require modification of
itemized information, for the purpose of
protecting the privacy interests of the
mortgage applicants or mortgagors, that
is or will be available to the public.’’
Section 304(h)(3)(B), also added by the
Dodd-Frank Act, directs the Bureau to
‘‘prescribe standards for any
modification under paragraph (1)(E) to
effectuate the purposes of [HMDA], in
light of the privacy interests of mortgage
applicants or mortgagors. Where
necessary to protect the privacy
interests of mortgage applicants or
mortgagors, the Bureau shall provide for
the disclosure of information . . . in
aggregate or other reasonably modified
form, in order to effectuate the purposes
of [HMDA].’’ 33
The Bureau explained in its proposal
that it interprets HMDA, as amended by
the Dodd-Frank Act, to call for the use
of a balancing test to determine whether
and how HMDA data should be
modified prior to its disclosure to the
public in order to protect applicant and
borrower privacy while also fulfilling
HMDA’s public disclosure purposes.34
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33 Section
304(h)(3)(A) provides that a
modification under section 304(h)(1)(E) shall apply
to information concerning ‘‘(i) credit score data . . .
in a manner that is consistent with the purpose
described in paragraph (1)(E); and (ii) age or any
other category of data described in paragraph (5) or
(6) of subsection (b), as the Bureau determines to
be necessary to satisfy the purpose described in
paragraph (1)(E), and in a manner consistent with
that purpose.’’
34 Section 1022(c)(8) of the Dodd-Frank Act
provides that, ‘‘[i]n collecting information from any
person, publicly releasing information held by the
Bureau, or requiring covered persons to publicly
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Using the balancing test to evaluate
particular HMDA data points,
individually and in combination, and
various options for providing access to
HMDA data, the Bureau proposed to
balance the importance of releasing the
data to accomplish HMDA’s public
disclosure purposes against the
potential harm to an applicant or
borrower’s privacy interest that may
result from the release of the data
without modification. The proposal
explained that modifications the Bureau
may consider where warranted include
various disclosure limitation
techniques, such as techniques aimed at
masking the precise value of data
points,35 aggregation, redaction, use
restrictions, and query-based systems.
HMDA’s public disclosure purposes
might also be furthered by
implementing a restricted access
program.36 The Bureau explained that it
interpreted HMDA, as amended by the
Dodd-Frank Act, to require that public
HMDA data be modified when the
release of the unmodified data creates
risks to applicant and borrower privacy
interests that are not justified by the
benefits of such release to the public in
light of the statutory purposes. The
Bureau also sought comment on its view
that, considering the public disclosure
of HMDA data as a whole, applicant and
borrower privacy interests arise under
the balancing test only where the
disclosure of HMDA data may both
substantially facilitate the identification
of an applicant or borrower in the data
and disclose information about the
applicant or borrower that is not
otherwise public and may be harmful or
sensitive. The proposal explained that
the Bureau’s analysis of the proposed
HMDA data under the balancing test
was ongoing and included data fields
currently disclosed on the modified
loan/application register and in the
agencies’ release. The Bureau stated that
it would provide at a later date a process
for the public to provide input on the
application of the balancing test to
determine the HMDA data to be
publicly disclosed.
report information, the Bureau shall take steps to
ensure that’’ certain information is not ‘‘made
public under this title.’’ The Bureau interprets
‘‘under this title’’ to not include data made public
pursuant to HMDA and Regulation C.
35 Binning and suppression are examples of
commonly-used data masking techniques. Binning,
sometimes known as recoding or interval recoding,
provides only a range for certain fields. Binning
allows data to be shown clustered into ranges rather
than as precise values.
36 A restricted access program could allow
‘‘trusted researchers’’ access to privacy-sensitive
information that is unavailable to the public, for
research purposes.
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The Bureau received very few
comments concerning the proposed
balancing test itself, most of which
supported the balancing test. One
industry commenter stated that the
balancing test was too narrow, but its
comment concerned the types of
available information the Bureau should
consider in analyzing the potential risks
of re-identification and harm to
applicants and borrowers presented by
the public disclosure of HMDA data,
and the types of potential harmful uses
of HMDA data, rather than the balancing
test itself.
The Bureau received many comments
from consumer advocates, researchers,
industry, and a privacy advocate
concerning the application of the
balancing test to the current and
proposed HMDA data. These comments
concerned (i) the benefits of public
disclosure of the data, (ii) the potential
risks to applicant and borrower privacy
created by such disclosure, and (iii)
modifications and data access and use
restrictions the Bureau might consider
to protect applicant and borrower
privacy where warranted.
Many comments, especially from
consumer advocates and researchers,
identified the benefits of public
disclosure of the current and proposed
HMDA data. These commenters noted
that public disclosure is the
fundamental purpose of the Act and
argued that public availability of HMDA
data: Allows the public to supplement
limited government resources to enforce
fair lending and other laws and
otherwise accomplish the goals of the
Act; mitigates the impact of regulator
capture or inattention to illegal practices
and troublesome trends; and reduces
information asymmetry between
industry and the public concerning the
residential mortgage market.
Several comments raised concerns
about potential risks to applicant and
borrower privacy created by the
disclosure of HMDA data. Similar to
comments received concerning such
potential risks associated with the
compilation and reporting of HMDA
data, these comments addressed sources
of data that could be combined with
HMDA data to identify applicants and
borrowers in the HMDA data. Several
comments also suggested that the
Bureau consider how HMDA data may
be combined with other available data
to harm consumers. Many comments,
especially from industry, raised
concerns about a variety of specific
proposed data points as well as
potential harmful uses to which data
disclosed to the public may be put,
including fraud, identity theft, and
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targeted marketing of harmful financial
products.
Finally, several comments concerned
data access and use restrictions that the
Bureau could consider. Some consumer
advocate and researcher comments
offered suggestions and
recommendations concerning a
restricted access program. Several
industry comments expressed concerns
about the implementation of a restricted
access program, however, including
concerns that it may create
opportunities for data leakage and
unauthorized access to the HMDA data.
A privacy advocate commenter urged
the Bureau to restrict the uses of HMDA
data to certain defined purposes, similar
to the approach taken with respect to
consumer reports under the Fair Credit
Reporting Act.37
The Bureau has determined that its
interpretation of HMDA to call for the
use of the balancing test described
above is reasonable and best effectuates
the purposes of the statute. The Bureau
interprets HMDA, as amended by the
Dodd-Frank Act, to require that public
HMDA data be modified when the
release of the unmodified data creates
risks to applicant and borrower privacy
interests that are not justified by the
benefits of such release to the public in
light of the statutory purposes. In such
circumstances, the need to protect the
privacy interests of mortgage applicants
or mortgagors requires that the itemized
information be modified. Considering
the public disclosure of HMDA data as
a whole, applicant and borrower privacy
interests arise under the balancing test
only where the disclosure of HMDA
data may both substantially facilitate the
identification of an applicant or
borrower in the data and disclose
information about the applicant or
borrower that is not otherwise public
and may be harmful or sensitive. Thus,
disclosure of an unmodified individual
data point or field may create a risk to
applicant or borrower privacy interests
if such disclosure would either
substantially facilitate the identification
of an applicant or borrower or disclose
information about an applicant or
borrower that is not otherwise public
and that may be harmful or sensitive.
This interpretation implements HMDA
sections 304(h)(1)(E) and 304(h)(3)(B)
because it prescribes standards for
requiring modification of itemized
information, for the purpose of
protecting the privacy interests of
mortgage applicants and borrowers, that
is or will be available to the public.
In applying the balancing test, the
Bureau will carefully consider all
37 15
U.S.C. 1681 et seq.
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comments received concerning the
benefits of disclosure of HMDA data, the
risks to applicant and borrower privacy
created by such disclosure, and options
for data use and access restrictions.
However, the Bureau believes that it
will be most helpful in applying the
balancing test to provide an additional
process through which all stakeholders
can provide additional comment now
that the data to be compiled and
reported are finalized. Accordingly, the
Bureau intends to provide a process for
the public to provide input on the
application of the balancing test to
determine the HMDA data to be
publicly disclosed.
The Bureau received some comments
suggesting that disclosure of certain
HMDA data could reveal confidential
business information. As these
comments do not concern applicant and
borrower privacy, they are addressed in
the appropriate section-by-section
analyses below.
III. Summary of the Rulemaking
Process
This final rule is the product of
several years of research and analysis. In
2010, when the Board had rulemaking
authority over HMDA, the Board
conducted a series of public hearings
that elicited feedback on improvements
to Regulation C. After the rulemaking
authority for HMDA was transferred to
the Bureau, the Bureau conducted
additional outreach by soliciting
feedback in Federal Register notices, by
meeting with community groups,
financial institutions, trade associations,
and other Federal agencies, and by
convening a Small Business Review
Panel. To prepare this final rule, the
Bureau considered, among other things,
the comments presented to the Board
during its public hearings, feedback
provided to the Bureau prior to the
issuance of its proposal, including
information provided during the Small
Business Review Panel, interagency
consultations, and feedback provided in
response to the proposed rule.
A. Pre-Proposal Outreach
In 2010, the Board convened public
hearings on potential revisions to
Regulation C (the Board’s 2010
Hearings).38 The Board began the
reassessment of HMDA in the aftermath
of the financial crisis, as Congress was
considering the legislation that later
became the Dodd-Frank Act.
Participants addressed whether the
Board should require reporting from
additional types of institutions, whether
certain types of institutions should be
38 See
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exempt from reporting, and whether any
other changes should be made to the
rules for determining which types of
institutions must report data. For
example, representatives from Federal
agencies, lenders, and consumer
advocates urged the Board to adopt a
consistent minimum loan threshold
across all types of institutions,
including banks, savings associations,
credit unions, and nondepository
institutions.39 In particular, industry
representatives noted the limited value
derived from data reported by lowervolume depository institutions.40
Industry and community advocate
representatives also asserted that loan
volume, rather than asset size, should
trigger reporting, particularly for
nondepository lenders because they
tend to have a different capital structure
than banks, savings associations, and
credit unions.41 Participants also urged
the Board to expand coverage of
nondepository institutions.42 In
addition, participants commented that
the coverage scheme for nondepository
institutions was too complex and
should be simplified.43
The Board solicited feedback on ways
to improve the quality and usefulness of
HMDA data, including whether any data
elements should be added, modified, or
deleted. Participants provided
39 Transcript of Fed. Reserve Board Public
Hearing on Potential Revisions to the Home
Mortgage Disclosure Act, Washington DC (Sept. 24,
2010) [hereinafter Washington Hearing], (remarks of
Faith Schwartz, Senior Advisory, HOPE Now
Alliance) (‘‘I think everyone should have the
burden of reporting that has any meaningful
originations out there. * * *’’), http://
www.federalreserve.gov/communitydev/files/full_
transcript_board_20100924.pdf ; id. (remarks of
Josh Silver, Vice President of Research and Policy,
National Community Reinvestment Coalition) (‘‘[I]n
terms of your threshold, it is very confusing because
you have depository institutions that have different
thresholds and nondepository institutions . . . I
suggested just make it the same for everybody. If
you make more than [50 reportable loans under
HMDA], you disclose.. . . So that’s a threshold I
would propose across the board for nondepository
institutions and depository institutions.’’).
40 See, e.g., Transcript of Fed. Reserve Board
Public Hearing on Potential Revisions to the Home
Mortgage Disclosure Act, Atlanta, Georgia (July 15,
2010) [hereinafter Atlanta Hearing], http://
www.federalreserve.gov/communitydev/files/full_
transcript_atlanta_20100715.pdf.
41 See, e.g., id. (remarks of Faith Anderson, Vice
President and General Counsel, American Airlines
Federal Credit Union) (‘‘[A]n exemption from
HMDA reporting should be based on the volume of
mortgage loans that are given. Exemptions should
not be based on the asset size of a financial
institution.’’).
42 See, e.g., Transcript of Fed. Reserve Board
Public Hearing on Potential Revisions to the Home
Mortgage Disclosure Act, San Francisco, California
(Aug. 5, 2010) [hereinafter San Francisco Hearing],
http://www.federalreserve.gov/communitydev/files/
full_transcript_sf_20100805.pdf; Washington
Hearing, supra note 39; Atlanta Hearing, supra note
40.
43 See, e.g., Washington Hearing, supra note 39.
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suggestions about ways to improve the
utility of HMDA data. Participants
discussed modifications to the data
fields currently collected in Regulation
C that may clarify reporting
requirements and improve the
usefulness of HMDA data. For example,
participants urged the Board to augment
the information collected concerning
multifamily properties44 and
manufactured housing 45 and to expand
the reporting of rate spread to all
originations.46 Participants also urged
the Board to clarify specific reporting
requirements, such as how to report
modular homes 47 and conditional
approvals.48 Participants discussed the
reluctance of applicants to provide
demographic information, such as race
and ethnicity, and the challenges
financial institutions face in collecting
the information.49
In addition, participants commented
on data fields that could be added to the
data collected under HMDA to improve
its utility. For example, participants
suggested collecting information
regarding points and fees, including
prepayment penalties,50 information
concerning the relationship of the loan
amount to the value of the property
securing the loan,51 and information
concerning whether an application was
submitted through a mortgage broker.52
In developing the proposal to amend
Regulation C, the Bureau, through
outreach and meetings with
stakeholders, built on the feedback
received during the Board’s 2010 HMDA
hearings. The Bureau conducted
meetings in-person and through
conference calls. In addition, the Bureau
solicited feedback through
correspondence and Federal Register
notices.53
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44 See,
e.g., San Francisco Hearing, supra note 42;
Washington Hearing, supra note 39.
45 See, e.g., id.
46 See, e.g., Atlanta Hearing, supra note 40;
Transcript of Fed. Reserve Board Public Hearing on
Potential Revisions to the Home Mortgage
Disclosure Act, Chicago, Illinois (Sept. 16, 2010)
[hereinafter Chicago Hearing], http://
www.federalreserve.gov/communitydev/files/full_
transcript_chicago_20100916.pdf; id. (remarks of
Professor Jim Campen, University of
Massachusetts).
47 See, e.g., Atlanta Hearing, supra note 40.
48 See, e.g., Washington Hearing, supra note 39.
49 See, e.g., Atlanta Hearing, supra note 40; San
Francisco Hearing, supra note 42; Chicago Hearing,
supra note 46.
50 See, e.g., San Francisco Hearing, supra note 42;
Chicago Hearing, supra note 46.
51 See, e.g., Atlanta Hearing, supra note 40; San
Francisco Hearing, supra note 42; Chicago Hearing,
supra note 46; Washington Hearing, supra note 39.
52 See, e.g., Chicago Hearing, supra note 46.
53 76 FR 31222 (May 31, 2011); 76 FR 43570 (Jul.
21, 2011); 76 FR 75825 (Dec. 5, 2011); 76 FR 78465
(Dec. 19, 2011).
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In 2011, the Bureau issued a proposed
rule seeking feedback on regulations
inherited from other agencies (2011
Streamlining Proposal).54 While the
Bureau sought general feedback on
opportunities to streamline inherited
regulations, the Bureau also solicited
specific feedback on whether a small
number of refinancings should not
trigger Regulation C coverage.55 The
Bureau received comments from
consumer advocates, fair housing
advocates, financial institutions, State
bank supervisory organizations, and
national industry trade associations.
Comments addressed issues ranging
from reporting thresholds and data
reporting exemptions to clarifying
certain definitions and reporting
issues.56
On December 19, 2011, the Bureau
published an interim final rule
establishing Regulation C in 12 CFR part
1003, implementing the assumption of
HMDA authority from the Board (the
Bureau’s 2011 Regulation C
Restatement).57 The Bureau’s 2011
Regulation C Restatement substantially
duplicated the Board’s Regulation C and
made only non-substantive, technical,
formatting, and stylistic changes. As
part of the Bureau’s 2011 Regulation C
Restatement, the Bureau solicited
comment on any outdated, unduly
burdensome, or unnecessary technical
issues and provisions.58 Commenters
generally suggested aligning Regulation
C definitions with other regulations,
providing a tolerance for enforcement
actions based on low error rates, and
establishing a loan-volume threshold.
Commenters also raised other issues,
some of which the Bureau discussed in
the proposal and which are also
discussed in the section-by-section
analysis below.
The Bureau met with a few groups to
better understand existing and emerging
data standards and whether Regulation
C could be aligned with those standards.
The Bureau met with staff from
Mortgage Industry Standards
Maintenance Organization (MISMO) 59
54 76
FR 75825 (Dec. 5, 2011).
Bureau noted in the 2011 Streamlining
Proposal that a depository institution that did not
ordinarily originate home purchase loans, but that
occasionally refinanced a home purchase loan to
accommodate a customer, would be required to
report under Regulation C. 76 FR 75825, 75828
(Dec. 5, 2011).
56 The Bureau’s 2014 HMDA proposal provides a
more detailed description of the comments
received. See 79 FR 51731, 51744 (Aug. 29, 2014).
57 76 FR 78465 (Dec. 19, 2011).
58 Id.
59 MISMO is the federally registered service mark
of the Mortgage Industry Standards Maintenance
Organization, a wholly-owned subsidiary of the
Mortgage Bankers Association.
55 The
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and the GSEs 60 regarding the MISMO
dataset and the ULDD 61, respectively.
The Bureau also met with community,
regional, and national banks to
understand their HMDA compliance
processes and obtain feedback on areas
for improvement, and with consumer
and fair housing advocates as well as
industry trade associations to
understand their concerns with the
HMDA data and Regulation C.
B. Small Business Review Panel
In February 2014, the Bureau
convened a Small Business Review
Panel (Panel) with the Chief Counsel for
Advocacy of the Small Business
Administration (SBA) and the
Administrator of the Office of
Information and Regulatory Affairs with
the Office of Management and Budget
(OMB).62 As part of this process, the
Bureau prepared an outline of the
proposals then under consideration and
the alternatives considered (Small
Business Review Panel Outline), which
the Bureau posted on its Web site for
review by the small financial
institutions participating in the panel
process, as well as the general public.63
Prior to formally convening, the Panel
participated in teleconferences with
small groups of the small entity
representatives to introduce the
materials and to obtain feedback. The
Panel conducted a full-day outreach
meeting with the small entity
representatives in March 2014 in
Washington, DC. The Panel gathered
information from the small entity
representatives and made findings and
recommendations regarding the
potential compliance costs and other
impacts of the proposed rule on those
entities. Those findings and
60 Government-sponsored enterprises, specifically
Federal National Mortgage Association (Fannie
Mae) and Federal Home Loan Mortgage Corporation
(Freddie Mac).
61 The Uniform Loan Delivery Dataset is a
common set of data elements required by Fannie
Mae and Freddie Mac.
62 The Small Business Regulatory Enforcement
Fairness Act of 1996 (SBREFA), as amended by
section 1100G(a) of the Dodd-Frank Act, requires
the Bureau to convene a Small Business Review
Panel before proposing a rule that may have
significant economic impact on a substantial
number of small entities. See Public Law 104–121,
tit. II, 110 Stat. 847, 857 (1996) as amended by
Public Law 110–28, and Public Law 111–203,
section 1100G (2010).
63 Press Release, CFPB Takes Steps to Improve
Information About Access to Credit in the Mortgage
Market (Feb. 7, 2014), http://
www.consumerfinance.gov/newsroom/cfpb-takessteps-to-improve-information-about-access-tocredit-in-the-mortgage-market/. The Bureau also
gathered feedback on the Small Business Review
Panel Outline from other stakeholders and members
of the public, and from the Bureau’s Consumer
Advisory Board and Community Bank Advisory
Council.
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recommendations are set forth in the
Panel’s report (Small Business Review
Panel Report), which will be made part
of the administrative record in this
rulemaking.64 The Bureau carefully
considered the findings and
recommendations in preparing the
proposal and this final rule.
C. The Bureau’s Proposal
In July 2014, the Bureau published on
its Web site for public comment a
proposed rule regarding Regulation C to
implement section 1094 of the DoddFrank Act, which amended HMDA to
improve the utility of the HMDA data
and revise Federal agency rulemaking
and enforcement authorities. The
proposal was published in the Federal
Register in August 2014.65 The Bureau
proposed modifications to the
institutional coverage and transactional
coverage in light of market conditions,
to reduce burden on financial
institutions, and to address gaps in the
HMDA data regarding certain segments
of the housing market. The proposed
modification to institutional coverage
would have simplified the coverage
criteria for depository and
nondepository institutions with a
uniform threshold of 25 loans. Under
the proposal, depository and
nondepository institutions that
originated 25 covered loans, excluding
open-end lines of credit, in the previous
calendar year would be required to
report HMDA data so long as all the
other reporting criteria were met. The
proposed modification to transactional
coverage would have expanded the
types of transactions subject to
Regulation C. Under the proposal,
financial institutions would be required
to report all closed-end loans, open-end
lines of credit, and reverse mortgages
secured by dwellings, which would
have relieved financial institutions from
the requirement to ascertain an
applicant’s intended purpose for a
dwelling-secured loan to determine if
the loan was reportable under HMDA.
The Bureau also proposed
modifications to reportable data
requirements. First, the Bureau
proposed to align many HMDA data
requirements with the MISMO data
standards for residential mortgages.
Second, the Bureau proposed to modify
existing data points already established
under Regulation C as well as add new
64 See Final Report of the Small Business Review
Panel on the CFPB’s Proposals Under Consideration
for the Home Mortgage Disclosure Act (HMDA)
Rulemaking (April 24, 2014), http://files.consumer
finance.gov/f/201407_cfpb_report_hmda_
sbrefa.pdf.
65 79 FR 51731 (Aug. 29, 2014). See part II.A for
a discussion of section 1094 of the Dodd-Frank Act.
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data points to the reporting
requirements. Some of these data points
were specifically identified by the
Dodd-Frank Act and others were
proposed pursuant to the Bureau’s
discretionary rulemaking authority to
carry out the purposes of HMDA by
addressing data gaps. The following four
categories of new or modified data
points were proposed by the Bureau:
• Information about applicants,
borrowers, and the underwriting
process, such as age, credit score, debtto-income ratio, reasons for denial if the
application was denied, the application
channel, and automated underwriting
system results.
• Information about the property
securing the loan, such as construction
method, property value, lien priority,
the number of individual dwelling units
in the property, and additional
information about manufactured and
multifamily housing.
• Information about the features of
the loan, such as additional pricing
information, loan term, interest rate,
introductory rate period, non-amortizing
features, and the type of loan.
• Certain unique identifiers, such as a
universal loan identifier, property
address, loan originator identifier, and a
legal entity identifier for the financial
institution.
In addition, the Bureau proposed
modifications to the disclosure and
reporting requirements and
clarifications to the regulation. Under
the proposal, financial institutions that
report large volumes of HMDA data
would be required to submit their data
to the appropriate agency on a quarterly
basis rather than an annual basis. The
Bureau noted its belief that quarterly
reporting would reduce reporting errors
and improve the quality of HMDA data,
allow regulators to use the data in a
more timely and effective manner, and
could facilitate an earlier release of
annual HMDA data to the public. The
Bureau also proposed to allow HMDA
reporters to make their disclosure
statements available by referring
members of the public that request a
disclosure statement to a publicly
available Web site, which would
facilitate public access to the HMDA
data and minimize the burden on
HMDA reporters.
The Bureau also proposed
clarifications to Regulation C to address
issues that are unclear or confusing.
These proposed clarifications included
guidance on types of residential
structures that are considered dwellings;
the treatment of manufactured and
modular homes and multiple properties;
preapproval programs and temporary
financing; how to report a transaction
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that involved multiple financial
institutions; reporting the action taken
on an application; and reporting the
type of purchaser for a covered loan.
D. Feedback Provided to the Bureau
The Bureau received approximately
400 comments on the HMDA proposal
during the comment period from, among
others, consumer advocacy groups;
national, State, and regional industry
trade associations; banks, community
banks, credit unions, software
providers, housing counselors; Federal
agencies, including the Office of
Advocacy of the Small Business
Administration (SBA); and individual
consumers and academics. In addition,
the Bureau also considered other
information, including ex parte
communications.66 Materials on the
record are publicly available at http://
www.regulations.gov. This information
is discussed below in the section-bysection analysis and subsequent parts of
the notice, as applicable. The Bureau
considered the comments and ex parte
communications, modified the proposal
in certain respects, and adopts the final
rule as described below in the sectionby-section analysis.
IV. Legal Authority
The Bureau is issuing this final rule
pursuant to its authority under the
Dodd-Frank Act and HMDA. Section
1061 of the Dodd-Frank Act transferred
to the Bureau the ‘‘consumer financial
protection functions’’ previously vested
in certain other Federal agencies,
including the Board.67 The term
‘‘consumer financial protection
function’’ is defined to include ‘‘all
authority to prescribe rules or issue
orders or guidelines pursuant to any
Federal consumer financial law,
including performing appropriate
functions to promulgate and review
such rules, orders, and guidelines.’’ 68
Section 1022(b)(1) of the Dodd-Frank
Act authorizes the Bureau’s Director to
prescribe rules ‘‘as may be necessary or
appropriate to enable the Bureau to
administer and carry out the purposes
and objectives of the Federal consumer
financial laws, and to prevent evasions
thereof.’’ 69 Both HMDA and title X of
the Dodd-Frank Act are Federal
66 CFPB Bulletin 11–3, CFPB Policy on Ex Parte
Presentations in Rulemaking Proceedings (2011),
available at http://files.consumerfinance.gov/f/
2011/08/Bulletin_20110819_ExPartePresentations
RulemakingProceedings.pdf.
67 12 U.S.C. 5581. Section 1094 of the Dodd-Frank
Act also replaced the term ‘‘Board’’ with ‘‘Bureau’’
in most places in HMDA. 12 U.S.C. 2803 et seq.
68 12 U.S.C. 5581(a)(1)(A).
69 12 U.S.C. 5512(b)(1).
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consumer financial laws.70 Accordingly,
the Bureau has authority to issue
regulations to administer HMDA.
HMDA section 305(a) broadly
authorizes the Bureau to prescribe such
regulations as may be necessary to carry
out HMDA’s purposes.71 These
regulations can include ‘‘classifications,
differentiations, or other provisions, and
may provide for such adjustments and
exceptions for any class of transactions,
as in the judgment of the Bureau are
necessary and proper to effectuate the
purposes of [HMDA], and prevent
circumvention or evasion thereof, or to
facilitate compliance therewith.’’ 72
A number of HMDA provisions
specify that covered institutions must
compile and make their HMDA data
publicly available ‘‘in accordance with
regulations of the Bureau’’ and ‘‘in such
formats as the Bureau may require.’’ 73
HMDA section 304(j)(1) authorizes the
Bureau to issue regulations to define the
loan application register information
that HMDA reporters must make
available to the public upon request and
to specify the form required for such
disclosures.74 HMDA section
304(j)(2)(B) provides that ‘‘[t]he Bureau
shall require, by regulation, such
deletions as the Bureau may determine
to be appropriate to protect—(i) any
privacy interest of any applicant . . .;
and (ii) a depository institution from
liability under any Federal or State
privacy law.’’ 75 HMDA section 304(j)(7)
also directs the Bureau to make every
effort in prescribing regulations under
the subsection to minimize the costs
incurred by a depository institution in
complying with the subsection and
regulations.76
HMDA section 304(e) directs the
Bureau to prescribe a standard format
for HMDA disclosures required under
HMDA section 304.77 As amended by
the Dodd-Frank Act, HMDA section
304(h)(1) requires HMDA data to be
submitted to the Bureau or to the
appropriate agency for the reporting
financial institution ‘‘in accordance
with rules prescribed by the Bureau.’’ 78
HMDA section 304(h)(1) also directs the
Bureau, in consultation with other
appropriate agencies, to develop
regulations after notice and comment
that:
(A) Prescribe the format for such
disclosures, the method for submission
of the data to the appropriate agency,
and the procedures for disclosing the
information to the public;
(B) require the collection of data
required to be disclosed under [HMDA
section 304(b)] with respect to loans
sold by each institution reporting under
this title;
(C) require disclosure of the class of
the purchaser of such loans;
(D) permit any reporting institution to
submit in writing to the Bureau or to the
appropriate agency such additional data
or explanations as it deems relevant to
the decision to originate or purchase
mortgage loans; and
(E) modify or require modification of
itemized information, for the purpose of
protecting the privacy interests of the
mortgage applicants or mortgagors, that
is or will be available to the public.79
HMDA also authorizes the Bureau to
issue regulations relating to the timing
of HMDA disclosures.80
As amended by the Dodd-Frank Act,
HMDA section 304 requires itemization
of specified categories of information
and ‘‘such other information as the
Bureau may require.’’ 81 Specifically,
HMDA section 304(b)(5)(D) requires
reporting of ‘‘such other information as
the Bureau may require’’ for mortgage
loans, and section 304(b)(6)(J) requires
reporting of ‘‘such other information as
the Bureau may require’’ for mortgage
loans and applications. HMDA section
70 Dodd-Frank Act section 1002(14), 12 U.S.C.
5481(14) (defining ‘‘Federal consumer financial
law’’ to include the ‘‘enumerated consumer laws’’
and the provisions of title X of the Dodd-Frank Act);
Dodd-Frank Act section 1002(12), 12 U.S.C.
5481(12) (defining ‘‘enumerated consumer laws’’ to
include HMDA).
71 12 U.S.C. 2804(a).
72 Id.
73 See, e.g., HMDA section 304(a)(1), (j)(2)(A),
(j)(3), (m)(2), 12 U.S.C. 2803(a)(1), (j)(2)(A), (j)(3),
(m)(2); see also HMDA section 304(b)(6)(I), 12
U.S.C. 2803(b)(6)(I) (requiring covered institutions
to use ‘‘such form as the Bureau may prescribe’’ in
reporting credit scores of mortgage applicants and
mortgagors). HMDA section 304(k)(1) also requires
depository institutions covered by HMDA to make
disclosure statements available ‘‘[i]n accordance
with procedures established by the Bureau pursuant
to this section.’’ 12 U.S.C. 2803(k)(1).
74 12 U.S.C. 2803(j)(1).
75 12 U.S.C. 2803(j)(2)(B).
76 12 U.S.C. 2803(j)(7).
77 12 U.S.C. 2803(e).
78 12 U.S.C. 2803(h)(1); see also HMDA section
304(n), 12 U.S.C. 2803(n) (discussing submission to
the Bureau or the appropriate agency ‘‘in
accordance with regulations prescribed by the
Bureau’’). For purposes of HMDA section 304(h),
HMDA section 304(h)(2) defines the appropriate
agencies for different categories of financial
institutions. The agencies are the Federal banking
agencies, the FDIC, the NCUA, and the Secretary of
HUD. 12 U.S.C. 2803(h)(2).
79 12 U.S.C. 2803(h)(1). The Dodd-Frank Act also
added new HMDA section 304(h)(3), which directs
the Bureau to prescribe standards for any
modification pursuant to HMDA section
304(h)(1)(E), to effectuate HMDA’s purposes, in
light of the privacy interests of mortgage applicants
or mortgagors. 12 U.S.C. 2803(h)(1)(E), 2803(h)(3).
80 HMDA section 304(l)(2)(A), 12 U.S.C.
2803(l)(2)(A) (setting maximum disclosure periods
except as provided under other HMDA subsections
and regulations prescribed by the Bureau); HMDA
section 304(n), 12 U.S.C. 2803(n).
81 HMDA section 304(b)(5)(D), (b)(6)(J), 12 U.S.C.
2803(b)(5)(D), (b)(6)(J).
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304 also identifies certain data points
that are to be included in the
itemization ‘‘as the Bureau may
determine to be appropriate.’’ 82 It
provides that age and other categories of
data shall be modified prior to release
‘‘as the Bureau determines to be
necessary’’ to satisfy the statutory
purpose of protecting the privacy
interests of the mortgage applicants or
mortgagors.83
The Dodd-Frank Act amendments to
HMDA also authorize the Bureau’s
Director to develop or assist in the
improvement of methods of matching
addresses and census tracts to facilitate
HMDA compliance by depository
institutions in as economical a manner
as possible.84 The Bureau, in
consultation with the Secretary of HUD,
may also exempt for-profit mortgagelending institutions that are comparable
within their respective industries to a
bank, savings association, or credit
union that has total assets of
$10,000,000 or less.85
In preparing this final rule, the
Bureau has considered the changes
below in light of its legal authority
under HMDA and the Dodd-Frank Act.
The Bureau has determined that each of
the changes addressed below is
consistent with the purposes of HMDA
and is authorized by one or more of the
sources of statutory authority identified
in this part.
V. Section-by-Section Analysis
Section 1003.1
and Scope
Authority, Purpose,
1(c) Scope
As summarized in part I, the Bureau
proposed to revise the provisions of
Regulation C that determine which
financial institutions and transactions
are covered by the regulation. The
Bureau also proposed to reorganize the
regulation to reduce burden. The Bureau
proposed to revise § 1003.1(c) and its
accompanying commentary to reflect
both the proposed substantive changes
to Regulation C’s institutional and
transactional coverage and the proposed
reorganization of the regulation. The
Bureau did not receive any comments
addressing proposed § 1003.1(c).86 As
82 HMDA section 304(b)(6)(F), (G), (H), 12 U.S.C.
2803(b)(6)(F), (G), (H).
83 HMDA section 304(h)(3)(A)(ii), 12 U.S.C.
2803(h)(3)(A)(ii).
84 HMDA section 307(a), 12 U.S.C. 2806(a)
(authorizing the Bureau’s Director to utilize,
contract with, act through, or compensate any
person or agency to carry out this subsection).
85 HMDA section 309(a), 12 U.S.C. 2808(a).
86 The Bureau received a large number of
comments about the proposed revisions to
Regulation C’s transactional and institutional
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discussed in the section-by-section
analyses of § 1003.2(d), (e), (g), and (o)
and of § 1003.3, the final rule in some
cases revises the Bureau’s proposed
changes to institutional and
transactional coverage. However, none
of those changes affect the technical
revisions that the Bureau proposed for
§ 1003.1(c). The Bureau thus is
finalizing § 1003.1(c) largely as
proposed, with several non-substantive
revisions for clarity.
Section 1003.2 Definitions
Section 1003.2 of Regulation C sets
forth definitions that are used in the
regulation. As discussed below, the
Bureau proposed both substantive
revisions to several definitions and
technical revisions to § 1003.2 to
enumerate the terms defined therein.
The Bureau addresses comments
concerning its proposed substantive
revisions below. The Bureau received
no comments opposing its proposal to
enumerate the terms in § 1003.2, and the
final rule sets forth enumerations for all
such terms. The Bureau believes that
this technical revision will facilitate
compliance with Regulation C by
making defined terms easier to locate
and cross-reference in the regulation,
commentary, and the procedures
published by the Bureau.
2(a) Act
Section 1003.2 of Regulation C sets
forth a definition for the term ‘‘act.’’ The
Bureau is adopting a technical
amendment to add a paragraph
designation for this definition. No
substantive change is intended.
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2(b) Application
2(b)(1) In General
Section 1003.2 currently defines an
application as an oral or written request
for a home purchase loan, a home
improvement loan, or a refinancing that
is made in accordance with the
procedures used by a financial
institution for the type of credit
requested. The Bureau proposed to
make technical corrections and minor
wording changes to conform the
definition of application to the proposed
changes in transactional coverage. In
addition, the Bureau proposed to make
technical and minor wording changes to
the applicable commentary. For the
reasons discussed below, the Bureau is
adopting § 1003.2(b)(1) and the
associated commentary as proposed.
Commenters generally addressed
aspects of the definition of application
that differ from other regulations or
challenges in applying the definition in
multifamily and commercial lending.
The Bureau received several comments
urging that the Regulation C definition
of application should be aligned with
the definition used in Regulation Z
§ 1026.2(a)(3)(ii) to simplify compliance
across regulations. As the Bureau noted
in the proposed rule, the Bureau did not
propose to align the definitions because
they serve different purposes.87 The
definition of application in Regulation Z
§ 1026.2(a)(3)(ii) establishes a clear rule
for triggering when disclosures must be
provided. In contrast, the definition for
Regulation C is closely related to
Regulation B and serves HMDA’s fair
lending purposes by requiring
information about the disposition of
credit requests received by financial
institutions that do not lead to
originations.88 Therefore it is important
for the Regulation C definition of
application to be based on the
procedures used by the financial
institution for the type of credit
requested rather than the defined
elements of the definition in Regulation
Z § 1026.2(a)(3)(ii) under which
creditors may be sequencing and
structuring their information collection
processes in various different ways.89
Some comments argued that the
definition of application would be
difficult to comply with for multifamily
loans, which generally involve a more
fluid application process. They also
argued that the Bureau should exclude
‘‘pitch book requests’’ from the
definition of application. Pitch book
requests are preliminary investment
packages related to multifamily
residential structures requesting specific
loans terms. The Bureau has considered
the comments but believes that changes
to the proposed definition of application
related to multifamily loans are not
warranted. Because the definition of
application in Regulation C is closely
related to the Regulation B definition of
application and Regulation B applies to
business credit, including multifamily
lending,90 the Bureau believes that the
flexible definition of application as
proposed and the commentary in
Regulation B and Regulation C provide
adequate guidance for multifamily
lending. The Bureau is also concerned
that an exception for pitch book
requests may be difficult to adopt
because financial institutions may have
different definitions of pitch book
87 79
FR 51731, 51746 (Aug. 29, 2014).
CFR 1003.2, comment Application–1; 12
CFR 1002.2(f).
89 78 FR 79730, 79767 (Dec. 31, 2013).
90 12 CFR 1002.2(j), comment 2(j)–1.
request or procedures for handlings
them. The Bureau is not adopting an
exclusion specific to pitch book
requests, and believes that the existing
commentary regarding the definition of
application and prequalifications is
appropriate.91 Whether pitch book
requests would be considered
applications under Regulation C would
depend on how the specific financial
institution treated such requests under
its application process for covered loans
secured by multifamily residential
structures under the definition of
application in Regulation C. As
discussed below, the Bureau is also
excluding covered loans secured by
multifamily dwellings from the
definition of a preapproval program,
which may address some of the
commenters’ concerns. After
considering the comments, the Bureau
is finalizing § 1003.2(b)(1) and
comments 2(b)–1 and 2(b)–2 as
proposed.
2(b)(2) Preapproval Programs
Regulation C incorporates certain
requests under preapproval programs
into the definition of application under
§ 1003.2. Such programs are only
covered if they involve a comprehensive
analysis of the creditworthiness of the
applicant and include a written
commitment for up to a specific
amount, subject only to certain limited
conditions. The Bureau proposed to
make technical and clarifying wording
changes to the definition of a
preapproval program under
§ 1003.2(b)(2) and the applicable
commentary to add language adapted
from additional FAQs regarding
preapproval programs that had been
provided by the FFIEC.92 For the
reasons discussed below, the Bureau is
finalizing § 1003.2(b)(2) with
modifications to exclude certain types
of covered loans from the definition.
Several commenters addressed the
Bureau’s proposed definition of
preapproval programs. Some
commenters questioned the value of
preapproval reporting or argued that
preapproval reporting discourages
financial institutions from offering
preapproval programs. However, the
Bureau is not excluding preapproval
requests from Regulation C in this final
rule because this information is valuable
for fair lending purposes, as it provides
visibility into how applicants are treated
in an early stage of the lending
88 12
coverage. Those comments are addressed in the
section-by-section analyses of § 1003.2(d), (e), (g),
(o) and of § 1003.3(c)(10).
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91 See existing comment Application–2, final
comment 2(b)–2.
92 79 FR 51731, 51747 (Aug. 29, 2014).
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process.93 The statute requires lenders
to report action taken on applications,94
and the Bureau believes that requests for
preapproval as defined in the proposal
and final rule represent credit
applications. The Bureau does not
believe that Regulation C’s coverage of
preapproval programs has discouraged
offering of preapproval programs, and it
concludes that any discouragement
would be justified by the benefits of
reporting. The reporting requirement is
limited only to preapproval programs
that meet certain conditions.
Additionally, the Bureau is finalizing
changes to comment 2(b)–3 that specify
that programs described as preapproval
programs that do not meet the definition
in § 1003.2(b)(2) are not preapproval
programs for purposes of HMDA
reporting.
Some commenters requested
clarification about occasional
preapprovals and some argued for a
broader and more flexible definition of
preapproval programs. The Bureau is
not adopting a broader or more flexible
definition of preapproval programs
because it believes that limiting the
scope of the definition allows for
comparison of similar programs across
institutions, where a broader definition
could expand reportable transactions,
lead to new compliance issues, and
make preapproval data less comparable
across institutions. The Bureau
continues to believe that a financial
institution that does not have a
preapproval program and only
occasionally considers preapproval
requests on an ad hoc basis need not
report those transactions and believes
that proposed comment 2(b)–3
addresses the commenters’ concerns. It
provides, in part, that a financial
institution need not treat ad hoc
requests as part of a preapproval
program for purposes of Regulation C.
The Bureau is therefore finalizing
comment 2(b)–3 as proposed.
After considering the comments and
conducting additional analysis, the
Bureau is finalizing § 1003.2(b)(2)
generally as proposed, with minor
revisions to exclude home purchase
loans that will be open-end lines of
credit, reverse mortgages, or secured by
multifamily dwellings. Some loans
secured by multifamily dwellings have
been previously reported in HMDA
under preapproval programs. The
definition of a home purchase loan
could include these types of loans. The
definition of preapproval programs in
current Regulation C and adopted by the
93 67 FR 7222, 7224 (Feb. 15, 2002); 79 FR 51731,
51747 (Aug. 29, 2014).
94 HMDA section 303(4).
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final rule is primarily focused on
programs associated with closed-end
home purchase loans for one- to fourunit dwellings. The Bureau believes it is
appropriate to categorically exclude
loans secured by multifamily dwellings,
open-end lines of credit, and reverse
mortgages from the definition of
preapproval programs in order to
facilitate consistent reporting and
analysis of preapprovals by limiting the
definition to closed-end home purchase
loans for one- to four-unit dwellings.
2(c) Branch Office
Section 1003.2 currently provides a
definition of branch office, which
includes separate definitions for
branches of (1) banks, savings
associations, and credit unions and (2)
for-profit mortgage-lending institutions
(other than banks, savings associations,
and credit unions). The Bureau
proposed technical and nonsubstantive
modifications to the definition of branch
office. The Bureau received no
comments on proposed § 1003.2(c) or
proposed comments 2(c)–2 and –3. The
Bureau is adopting § 1003.2(c) and
comments 2(c)–2 and –3, renumbered as
comment 2(c)(1)–2 and comment
2(c)(2)–1, with technical modifications.
The Bureau is also republishing
comment (Branch Office)–1,
renumbered as comment 2(c)(1)–1.
2(d) Closed-End Mortgage Loan
Under existing Regulation C, financial
institutions must report information
about applications for, and originations
of, closed-end loans made for one of
three purposes: Home improvement,
home purchase, or refinancing.95
Closed-end home purchase loans and
refinancings must be reported if they are
dwelling-secured.96 Closed-end home
improvement loans must be reported
whether or not they are dwellingsecured.
As discussed in the section-by-section
analysis of § 1003.2(e) (‘‘covered loan’’),
the Bureau proposed to adjust
Regulation C’s transactional coverage to
require financial institutions to report
all dwelling-secured loans (and
applications), instead of reporting only
those loans and applications for the
purpose of home improvement, home
95 Reverse mortgages currently are subject to these
same criteria for reporting; thus, a closed-end
reverse mortgage currently must be reported if it is
for one of Regulation C’s three purposes.
96 Regulation C defines ‘‘dwelling’’ broadly to
include single-family homes, rental properties,
multifamily residential structures (e.g., apartment
buildings), manufactured homes, and vacation
homes. See the section-by-section analysis of
§ 1003.2(f) and related commentary.
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66139
purchase, or refinancing.97 To facilitate
this shift in transactional coverage, the
Bureau proposed to define the term
‘‘closed-end mortgage loan’’ in
Regulation C. Proposed § 1003.2(d)
provided that a closed-end mortgage
loan was a dwelling-secured debt
obligation that was not an open-end line
of credit under § 1003.2(o), a reverse
mortgage under § 1003.2(q), or an
excluded transaction under § 1003.3(c).
The Bureau did not propose
commentary to accompany proposed
§ 1003.2(d) but solicited feedback about
whether commentary would be helpful.
The proposal to remove Regulation
C’s current purpose-based reporting
approach for closed-end mortgage loans
in some cases broadened, and in some
cases limited, the closed-end loans that
would be reported under the regulation.
For example, the proposal provided for
reporting of all closed-end home-equity
loans and all closed-end, dwellingsecured commercial-purpose loans. At
the same time, the proposal eliminated
the requirement to report home
improvement loans not secured by a
dwelling.
As discussed in the section-by-section
analysis of § 1003.2(e), the Bureau is
finalizing the proposed shift to
dwelling-secured transactional coverage
for consumer-purpose transactions and
is retaining Regulation C’s traditional
purpose test for commercial-purpose
transactions. The Bureau believes that
the shift serves HMDA’s purposes, will
improve HMDA data, and will simplify
transactional reporting requirements.
Accordingly, the Bureau is finalizing
§ 1003.2(d) largely as proposed, but with
technical revisions for clarity, to define
the universe of closed-end mortgage
loans that must be reported under
Regulation C unless otherwise excluded
under § 1003.3(c). The Bureau also is
finalizing commentary to § 1003.2(d) to
address questions that commenters
raised about the scope of the closed-end
mortgage loan definition.
Relatively few commenters
specifically addressed the benefits and
burdens of reporting all dwellingsecured, consumer-purpose, closed-end
mortgage loans.98 Consumer advocacy
97 As discussed in the section-by-section analysis
of § 1003.2(o) and (q), the proposal applied the
same dwelling-secured test to open-end lines of
credit and reverse mortgages, the two other
categories of ‘‘covered loans’’ in proposed
§ 1003.2(e).
98 As discussed in the section-by-section analysis
of § 1003.2(e), nearly all commenters addressed in
some fashion the Bureau’s proposal to shift
Regulation C’s transactional coverage test from a
purpose-based test to a collateral-based test.
However, most commenters focused either on the
benefits and burdens of the shift overall, or on the
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group commenters supported the
proposal to cover all such loans, and
industry stakeholders expressed mixed
views. A number of consumer advocacy
group commenters also requested that
the Bureau clarify in the final rule
whether particular categories of
transactions are included under the
closed-end mortgage loan definition.
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Coverage of Dwelling-Secured,
Consumer-Purpose, Closed-End
Mortgage Loans
A large number of consumer advocacy
group and community development
commenters supported having
information about all closed-end homeequity loans. They stated that having
information about all such loans would
be valuable in assessing whether
neighborhoods that the consumer
groups serve, especially those that are
low- and moderate-income, are
receiving the full range of credit that
they need and would be appropriate to
ensure an adequate understanding of the
mortgage market.
A small group of industry
commenters supported the proposed
shift to dwelling-secured coverage to the
extent that it meant reporting all
dwelling-secured, closed-end,
consumer-purpose loans. Some of these
commenters argued that reporting all
such loans would be less burdensome
than discerning whether each loan was
for a reportable purpose.99 Others
asserted that dwelling-secured coverage
would eliminate the possibility that
exists under current Regulation C of
erroneously gathering race, gender, and
ethnicity data for consumer-purpose
loans that later are determined not to be
reportable. One industry commenter
supported dwelling-secured coverage
only for closed-end, consumer-purpose
loans secured by one- to four-unit
dwellings, arguing that these
specific benefits and burdens of reporting all openend lines of credit, all reverse mortgages, or all
dwelling-secured, commercial-purpose mortgage
loans and lines of credit. Those comments are
addressed in the section-by-section analyses of
§ 1003.2(e), (o), (q), and § 1003.3(c)(10),
respectively. The section-by-section analysis of
§ 1003.2(d) focuses on the comments that
specifically addressed the proposal to cover all
consumer-purpose, closed-end home-equity loans.
99 One commenter provided a specific example.
The commenter stated that, when a borrower owns
a home outright but takes out a dwelling-secured
debt consolidation loan, the loan is recorded as a
refinancing in the lender’s loan origination system
and on the GSE’s standard loan application form.
However, the loan currently is not reported under
Regulation C because it does not meet the purposebased test. Therefore, an employee later must
remove the transaction manually from the
institution’s HMDA report. If all dwelling-secured,
consumer-purpose, closed-end loans were covered,
the transaction would be reported and the extra,
manual step of removing the transaction would be
unnecessary.
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transactions are the most common, are
similar in their underwriting and in
their risks to consumers, and have hit
the economy hardest when they default
en masse. Other industry commenters
agreed that the shift to dwelling-secured
coverage for closed-end, consumerpurpose loans was appropriate and
would serve HMDA’s purposes, would
simplify reporting, would improve data
for HMDA users, and would better align
Regulation C’s coverage with
Regulations X and Z.100
As discussed in the section-by-section
analysis of § 1003.2(e), a majority of
industry commenters opposed the
proposed shift to dwelling-secured
coverage, and some of those
commenters specifically objected to
reporting data about all closed-end
home-equity loans. Some argued that
the Bureau should maintain current
coverage; a few argued that closed-end
home-equity loans should be excluded
from coverage altogether. The
commenters argued that funds obtained
through home-equity loans could be
used for any purpose. If a transaction’s
funds were not used for home purchase,
home improvement, or refinancing
purposes, commenters asserted, then
having data about that transaction
would not serve HMDA’s purpose of
ensuring that financial institutions are
meeting the housing needs of their
communities. One commenter argued
that concerns about home-equity
lending’s role in the financial crisis no
longer justified covering all home-equity
loans, because the Bureau’s ability-torepay and qualified mortgage rules have
addressed any issues with such
lending.101 A few commenters also
objected that such reporting would
increase loan volume or argued that
compiling data about all closed-end
home-equity loans would be onerous,
would require costly systems upgrades,
or would distort HMDA data because
loans would be reported even if their
funds were not used for housing-related
purposes.
As discussed in the proposal, the
Bureau believes that covering all
dwelling-secured, consumer-purpose,
closed-end mortgage loans will provide
useful data that will serve HMDA’s
purposes by providing additional
information about closed-end homeequity loans, which research indicates
were a significant factor leading up to
100 Regulation X implements the Real Estate
Settlement Procedures Act (RESPA), 12 U.S.C. 2601
et seq. Regulation Z implements the Truth in
Lending Act (TILA), 15 U.S.C. 1601 et seq.
101 See the Bureau’s Ability-to-Repay and
Qualified Mortgage Standards rule (2013 ATR Final
Rule), 78 FR 6408 (Jan. 30, 2013).
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the financial crisis,102 and which
impeded some borrowers’ ability to
receive assistance through foreclosure
relief programs during and after the
crisis.103 The Bureau also believes, as
some industry commenters observed,
that covering all such transactions will
simplify the regulation and ease
compliance burden. The Bureau thus is
adopting proposed § 1003.2(d) largely as
proposed, but with several revisions for
clarity, as discussed below.
Clarifications to the Closed-End
Mortgage Loan Definition
General. The Bureau is making two
clarifying changes to § 1003.2(d) and is
adding comment 2(d)–1 to provide
general guidance about the definition of
closed-end mortgage loan. First,
proposed § 1003.2(d) provided that a
closed-end mortgage loan was a
dwelling-secured debt obligation that
was not an open-end line of credit
under § 1003.2(o), a reverse mortgage
under § 1003.2(q), or an excluded
transaction under § 1003.3(c). To align
with lending practices, to streamline the
definitions of closed-end mortgage loan
and open-end line of credit, and to
streamline the reverse mortgage flag in
final § 1003.4(a)(36), the final rule
eliminates the mutual exclusivity
between closed-end mortgage loans and
reverse mortgages.104 Second, the final
rule eliminates the proposed language
that provided that an excluded
transaction under § 1003.3(c) was not a
closed-end mortgage loan. The Bureau is
making this change to avoid circularity
with final § 1003.3(c), which
incorporates for clarity the defined
terms ‘‘closed-end mortgage loan’’ and
‘‘open-end line of credit’’ into the
descriptions of excluded transactions.
Final § 1003.2(d) thus provides that a
closed-end mortgage loan is a dwellingsecured extension of credit that is not an
open-end line of credit under
§ 1003.2(o). Comment 2(d)–1 provides
an example of a loan that is not a
closed-end mortgage loan because it is
not dwelling-secured.
Extension of credit and loan
modifications. As proposed, § 1003.2(d)
102 See 79 FR 51731, 51747–48 (Aug. 29, 2014)
(citing Atif Mian & Amir Sufi, House Prices, Home
Equity-Based Borrowing, and the U.S. Household
Leverage Crisis, 101 Am. Econ. Rev. 2132, 2154
(Aug. 2011) and Donghoon Lee et al., Fed. Reserve
Bank of New York, Staff Report No. 569, A New
Look at Second Liens, at 11 (Aug. 2012)).
103 See id. (citing Vicki Been et al., Furman Ctr.
for Real Estate & Urban Policy, Essay: Sticky
Seconds—The Problems Second Liens Pose to the
Resolution of Distressed Mortgages, at 13–18 (Aug.
2012)).
104 As discussed in the section-by-section analysis
of § 1003.2(q), under the final rule a reverse
mortgage thus may be either a closed-end mortgage
loan or an open-end line of credit, as appropriate.
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Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Rules and Regulations
generally provided that a closed-end
mortgage loan was a dwelling-secured
‘‘debt obligation.’’ Many consumer
advocacy group commenters asked the
Bureau to clarify the scope of
transactions covered under the term
‘‘debt obligation.’’ In particular, a large
number of consumer advocacy group
commenters asked the Bureau to require
reporting of all loan modifications.105
The commenters argued that financial
institutions’ performance in modifying
loans is and will continue to be a major
factor in determining whether they are
meeting local housing needs,
particularly the needs of communities
that have been devastated by the
mortgage crisis. The commenters also
argued that financial institutions’ loan
modification performance will be a
major factor in determining whether
they are complying with fair housing
and fair lending laws. Specifically,
commenters cited several studies
showing that, since the mortgage crisis,
borrowers of color, or borrowers who
live in communities of color or in lowto-moderate income communities, have
received less favorable loss mitigation
outcomes than white borrowers.
Commenters stated that many millions
of loan modifications have been made
since the mortgage crisis, and millions
more will be made in the coming years.
Commenters argued that the need for
data about loan modifications is
compelling given the volume of
transactions, the identified fair lending
concerns, and the lack of other publicly
available data about them.
As several of these commenters noted,
however, loan modifications currently
are not reported because they are not
‘‘originations’’ under existing
Regulation C. Indeed, since its adoption,
Regulation C has required reporting
only of applications, originations, and
purchases, and the proposal did not
seek to change this. While there is a
need for publicly available data about
loan modifications, the final rule does
not require reporting of loan
modifications. Covering all loan
modifications would be a complex
undertaking and would constitute a
major revision of Regulation C.
However, the Bureau has no information
about the burdens to financial
institutions of reporting loan
modifications under Regulation C, and
the Bureau neither has proposed, nor
has received feedback about, how
existing data points would need to be
105 These comments related to loan workout
modifications. Several commenters also addressed
coverage of loan consolidation, extension, and
modification agreements. Those comments are
discussed separately, below.
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modified, or whether additional data
points would be required, to
accommodate reporting of loan
modifications.
After considering the comments, the
Bureau is adopting § 1003.2(d) to
provide that a ‘‘closed-end mortgage
loan’’ is a dwelling-secured ‘‘extension
of credit’’ that is not an open-end line
of credit under § 1003.2(o). Comment
2(d)–2 provides guidance about
‘‘extension of credit.’’ First, comment
2(d)–2 provides an example of a
transaction that is not a closed-end
mortgage loan because no credit is
extended. Comment 2(d)–2 also
explains that, for purposes of Regulation
C, an ‘‘extension of credit’’ refers to the
granting of credit pursuant to a new
debt obligation. If a transaction
modifies, renews, extends, or amends
the terms of an existing debt obligation
without satisfying and replacing the
original debt obligation with a new debt
obligation, the transaction generally is
not an extension of credit under
Regulation C.
The Bureau understands that it is
interpreting the phrase ‘‘extension of
credit’’ differently in § 1003.2(d) than in
Regulation B, 12 CFR part 1002, which
implements the Equal Credit
Opportunity Act (ECOA).106 Regulation
B defines ‘‘extension of credit’’ under
§ 1002.2(q) to include the granting of
credit in any form, including the
renewal of credit and the continuance of
existing credit in some circumstances.
As discussed above, the Bureau
generally is interpreting the phrase
‘‘extension of credit’’ in § 1003.2(d) to
refer at this time only to the granting of
credit pursuant to a new debt obligation.
The Bureau may in the future revisit
whether it is appropriate to require loan
modifications to be reported under
Regulation C.
Exceptions to ‘‘extension of credit’’
rule. As discussed below, comments
2(d)–2.i and .ii provide two narrow
exceptions to the general rule that an
‘‘extension of credit’’ under the final
rule occurs only when a new debt
obligation is created. One exception
addresses assumptions, which
Regulation C historically has covered.
The second addresses transactions
completed pursuant to New York
consolidation, extension, and
modification agreements (New York
CEMAs). As discussed below, the
Bureau believes that both assumptions
and transactions completed pursuant to
New York CEMAs represent situations
where a new debt obligation is created
in substance, if not in form, and that the
benefits of requiring such transactions
to be reported justify the burdens.
Assumptions. The final rule adds new
comment 2(d)–2.i to address Regulation
C’s coverage of assumptions. Under
existing comment 1(c)–9, assumptions
are reportable transactions. Existing
comment 1(c)–9 provides that
assumptions occur when an institution
enters into a written agreement
accepting a new borrower as the obligor
on an existing obligation. Existing
comment 1(c)–9 also provides that
assumptions are reportable as home
purchase loans. The Bureau proposed to
move existing comment 1(c)–9 to the
commentary to the definition of home
purchase loan, and the Bureau is
finalizing that comment, with certain
modifications, as comment 2(j)–5. See
the section-by-section analysis of
§ 1003.2(j).
Consistent with the final rule’s
continued coverage of assumptions, the
Bureau is adding comment 2(d)–2.i to
the definition of closed-end mortgage
loan to clarify that an assumption is an
‘‘extension of credit’’ under Regulation
C even though the new borrower
assumes an existing debt obligation.
When the Board first clarified
Regulation C’s application to
assumptions, it stated that, when an
institution expressly agrees in writing
with a new party to accept that party as
the obligor on an existing home
purchase loan, the transaction should be
treated as a new home purchase loan.107
The Bureau agrees and final comment
2(d)–2.i thus provides that assumptions
are considered ‘‘extensions of credit’’
even if the new borrower assumes an
existing debt obligation.
Comment 2(d)–2.i also addresses
successor-in-interest transactions. A
successor-in-interest transaction is a
transaction in which an individual first
succeeds the prior owner as the
property owner and afterward seeks to
take on the debt secured by the
property. One industry association
recommended that the Bureau exclude
successor-in-interest transactions from
Regulation C’s definition of assumption.
The comment noted that the Bureau
recently published interpretive
guidance under Regulation Z stating
that successor-in-interest transactions
are not assumptions under that
regulation because the successor already
owns the property when the debt is
assumed.108 The comment argued that
successor-in-interest transactions
should be treated the same under
Regulations C and Z.
107 See
106 15
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108 See
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53 FR 31683, 31685 (Aug. 19, 1988).
79 FR 41631 (July 17, 2014).
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The Bureau is clarifying in comment
2(d)–2.i that successor-in-interest
transactions are assumptions under
Regulation C. The Bureau’s interpretive
guidance providing that successor-ininterest transactions are not
assumptions under Regulation Z relies
on Regulation Z’s existing definition of
assumption in § 1026.2(a)(24), which
provides that the new transaction must
be a residential mortgage transaction,
i.e., a transaction to finance the
acquisition or initial construction of the
dwelling being financed. Successor-ininterest transactions do not fit
Regulation Z’s definition because no
dwelling is being acquired or
constructed.109 In contrast, Regulation
C’s definition of assumption requires
only that a new borrower be accepted as
the obligor on an existing obligation.
Successor-in-interest transactions fit
Regulation C’s definition.110
Moreover, when the Bureau issued its
Regulation Z interpretive guidance, it
was concerned that subjecting
successor-in-interest transactions to an
ability-to-repay analysis could decrease
the frequency of such transactions,
which could harm successors inheriting
homes after, for example, a family
member’s death. The Bureau does not
believe that similar concerns apply to
requiring such transactions to be
reported under Regulation C. On the
contrary, the Bureau believes that
collecting information about successorin-interest transactions under
Regulation C will help to monitor for
discrimination in such transactions.
Comment 2(d)–2.i thus specifies that
successor-in-interest transactions are
assumptions under Regulation C. Like
assumptions generally, successor-ininterest transactions represent an
exception to the general rule that an
‘‘extension of credit’’ requires a new
debt obligation. As noted, the Bureau
believes that assumptions, including
successor-in-interest transactions,
represent new debt obligations in
substance, if not in form, and should be
reported as such.
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Consolidation, Extension, and
Modification Agreements
Several consumer advocacy group
commenters stated that it was unclear
whether the proposal covered
transactions completed pursuant to
109 See id. at 41633 (‘‘Although [successor-ininterest] transactions are commonly referred to as
assumptions, they are not assumptions under
§ 1026.20(b) because the transaction is not a
residential mortgage transaction as to the
successor.’’)
110 Consistent with Regulation Z’s interpretive
guidance, however, final comment 2(j)–5 provides
that successor-in-interest transactions are not home
purchase loans under § 1003.2(j).
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modification, extension, and
consolidation agreements (MECAs) or
consolidation, extension, and
modification agreements (CEMAs). They
asked the Bureau to specify that
MECAs/CEMAs are reportable
transactions. As noted below,
Regulation C’s commentary at one time
specified that MECAs/CEMAs were not
reportable as refinancings, and this
guidance currently exists in an FFIEC
FAQ. Some uncertainty has remained,
however, about the reportability of
MECAs/CEMAs used for home purchase
or home improvement purposes. For the
reasons discussed below, the final rule
clarifies that CEMAs completed
pursuant to section 255 of the New York
Tax Law are covered loans. Other
MECA/CEMA transactions are not
covered loans under the final rule.
New York CEMAs are loans secured
by dwellings located in New York State.
They generally are used in place of
traditional refinancings, either to amend
a transaction’s interest rate or loan term,
or to permit a borrower to take cash out.
However, unlike in traditional
refinancings, the existing debt
obligation is not ‘‘satisfied and
replaced.’’ Instead, the existing
obligation is consolidated into a new
loan, either by the same or a different
lender, and either with or without new
funds being added to the existing loan
balance. Under New York State law, if
no new money is added during the
transaction, there is no ‘‘new’’ mortgage,
and the borrower avoids paying the
mortgage recording taxes that would
have been imposed if a traditional
refinancing had been used and the
original obligation had been satisfied
and replaced. If new money is part of
the consolidated loan, the borrower
pays mortgage recording taxes only on
the new money.111 While generally used
in place of traditional refinancings, New
York CEMAs also can be used for home
purchases (i.e., to complete an
assumption), where the seller and buyer
agree that the buyer will assume the
seller’s outstanding principal balance,
and that balance is consolidated with a
new loan to the borrower for the
remainder of the purchase price.
A number of consumer advocacy
group commenters stated that the
Bureau should include MECAs/CEMAs,
particularly New York CEMAs, as
reportable transactions under the
dwelling-secured coverage scheme.
These commenters stated that New York
CEMAs very often are used in lieu of
traditional refinance loans, especially
for larger-dollar, multifamily apartment
building loans, which are central to
111 See
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maintaining the stock of private
affordable housing complexes. The
commenters argued that, without New
York CEMA data, it is difficult or
impossible to know where and how
much credit banks are extending for
such residential buildings, and whether
the credit is extended on equitable
terms. The commenters noted that
CEMAs optionally are reported under
the Community Reinvestment Act (CRA)
but that CRA reporting provides less
data to the public or to policymakers
than if the transactions were HMDAreportable.
These commenters also stated that
HMDA reporters historically have
experienced confusion about whether to
report MECAs/CEMAs. Under
Regulation C’s traditional loan-purpose
coverage scheme, the Board declined to
extend coverage to MECAs/CEMAs,
because the Board found that the
transactions did not meet the definition
of a refinancing (because the existing
debt obligation was not satisfied and
replaced). The Board determined that
maintaining a bright-line ‘‘satisfies and
replaces’’ rule for refinancings was
preferable to revising the definition to a
‘‘functional equivalent’’ test that would
cover MECAs/CEMAs but that also
would introduce uncertainty about
whether other types of transactions
should be reported as refinancings.112
Because the Board’s guidance
concerning MECAs/CEMAs was limited
to refinancings, however, it appears that
at least some financial institutions have
reported MECAs/CEMAs as home
improvement loans when the
transactions involved new money for
home improvement purposes, or as
home purchase loans when the
transactions were the functional
equivalent of traditional assumptions.
The various consumer advocacy
group commenters that addressed
MECAs/CEMAs asserted that the
proposal did not resolve the uncertainty
that has existed about whether to report
these transactions. Proposed § 1003.2(d)
provided that all closed-end, dwellingsecured ‘‘debt obligations’’ were
reportable transactions, and ‘‘debt
obligations’’ arguably would include
MECAs/CEMAs. At the same time,
however, the proposal retained
Regulation C’s existing definition of
‘‘refinancing,’’ which arguably would
continue to exclude MECAs/CEMAs
from coverage or would make it unclear
112 See 59 FR 63698, 63702 (Dec. 9, 1994); 65 FR
78656 (Dec. 15, 2000); 67 FR 7222, 7227 (Feb. 15,
2002). In 1995, the Board adopted commentary to
clarify that MECAs/CEMAs were not reportable as
refinancings. 60 FR 63393 (Dec. 11, 1995). This
commentary later was dropped from Regulation C
inadvertently, but it was retained in an FFIEC FAQ.
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how such transactions should be
reported.
The Bureau concludes that having
data about New York CEMAs, in
particular, will improve HMDA data.
These transactions are used regularly in
New York in place of traditional
refinancings and sometimes in place of
traditional home purchase loans. New
York CEMAs are used not only for
multifamily dwellings, but also for
single-family transactions in high-cost
areas like New York City. While it is
difficult to identify precisely how often
New York CEMAs are used, industry
professionals familiar with the New
York CEMA market believe that the
transactions are used on a daily basis in
New York State and represent a
significant percentage of the
refinancings that occur in the State.
Requiring reporting of New York
CEMAs will improve HMDA data and
also will resolve lingering confusion
about how Regulation C applies to them.
Finally, the change is consistent with
the shift to dwelling-secured coverage
for most transactions.113
Like assumptions, New York CEMAs
represent an exception to the general
rule that an ‘‘extension of credit’’
requires a new debt obligation.
However, the Bureau believes that New
York CEMAs represent new debt
obligations in substance, if not in form,
and should be reported as such. The
Bureau acknowledges that, by requiring
reporting of New York CEMAs, it is
departing from the Board’s historical
guidance that such transactions need
not be reported. The Bureau believes
that the benefits of this departure justify
the burdens both for the reasons
discussed above and because the Bureau
is defining the scope of transactions to
be reported narrowly to encompass only
those transactions that fall within the
scope of New York Tax Law section
113 The Bureau understands that MECAs/CEMAs
may be used in States other than New York.
However, based on the comments received and the
Bureau’s own research, it appears that CEMAs are
particularly common in New York State. As noted
elsewhere in this section-by-section analysis, the
Bureau understands that, by requiring reporting of
New York CEMAs, it is departing from the Board’s
historical guidance on this topic. The Bureau
believes that such a departure is warranted based
on the apparent frequency with which such
transactions are used. Like the Board, however, the
Bureau believes that the benefits of modifying the
overall ‘‘satisfies and replaces’’ standard for
refinancings to capture MECAs/CEMAs do not
justify the burdens of such a change. Therefore, the
Bureau is incorporating New York CEMAs into the
final rule by referencing the specific provision of
the New York Tax Code that permits them. If the
Bureau becomes aware of CEMAs/MECAs being
completed in significant numbers in other States,
the Bureau may evaluate whether it would be
practicable to require them to be reported in a
similar manner.
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255.114 The Bureau believes that
limiting the scope of reportable MECAs/
CEMAs to those covered by New York
Tax Law section 255 will permit New
York CEMAs to be reported while
avoiding the confusion that, as the
Board worried, could result from
departing from a bright-line ‘‘satisfies
and replaces’’ rule for the definition of
refinancings generally.
After considering the comments
received, the Bureau is adopting new
comment 2(d)–2.ii, specifying that a
transaction completed pursuant to a
New York CEMA and classified as a
supplemental mortgage under N.Y. Tax
Law § 255, such that the borrower owed
reduced or no mortgage recording taxes,
is an extension of credit under
§ 1003.2(d). To avoid any implication
that other types of loan modifications or
extensions must be reported, the
commentary language is narrowly
tailored to require reporting only of
transactions completed pursuant to this
specific provision of New York law. See
the section-by-section analysis of
§ 1003.2(i), (j), and (p) for details about
whether a New York CEMA is a home
improvement loan, a home purchase
loan, or a refinancing.
2(e) Covered Loan
HMDA requires financial institutions
to collect and report information about
‘‘mortgage loans,’’ which HMDA section
303(2) defines as loans secured by
residential real property or home
improvement loans. When the Board
adopted Regulation C, it implemented
this requirement by mandating that
financial institutions report information
about applications and closed-end loans
made for one of three purposes: Home
improvement, home purchase, or
refinancing.115 As noted, under existing
Regulation C, closed-end home
purchase loans and refinancings must
be reported if they are dwelling-secured,
and closed-end home improvement
loans must be reported whether or not
they are dwelling-secured.116 For
transactions that meet one of the three
purposes, reporting of closed-end loans
is mandatory and reporting of homeequity lines of credit is optional.117
114 Under the final rule, MECAs/CEMAs
completed in States other than New York are not
reported, regardless of whether they are used for
home purchase, home improvement, or refinancing
purposes, and regardless of whether new money is
extended as part of the transaction.
115 41 FR 23931, 23932 (June 14, 1976).
116 See the section-by-section analysis of
§ 1003.2(d), (f), (i).
117 Specifically, under existing § 1003.4(c)(3),
financial institutions optionally may report homeequity lines of credit made in whole or in part for
the purpose of home improvement or home
purchase.
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Under existing Regulation C, reverse
mortgages are subject to these same
criteria for reporting: A closed-end
reverse mortgage must be reported if it
is for one of the three purposes; a
reverse mortgage that is an open-end
line of credit is optionally reported.
To simplify Regulation C’s
transactional coverage test and to
expand the types of transactions
reported, the Bureau proposed to
require financial institutions to report
applications for, and originations and
purchases of, all dwelling-secured loans
and lines of credit. The Bureau also
proposed to add the defined term
‘‘covered loan’’ in § 1003.2(e). The term
referred to all transactions reportable
under the proposed dwelling-secured
coverage scheme: Closed-end mortgage
loans under proposed § 1003.2(d), openend lines of credit under proposed
§ 1003.2(o), and reverse mortgages
under proposed § 1003.2(q). The term
provided a shorthand phrase that
HMDA reporters and data users could
use to refer to any transaction reportable
under Regulation C. For the reasons
discussed below, the Bureau is
finalizing in § 1003.2(e) the defined
term ‘‘covered loan’’ and the shift to
dwelling-secured coverage largely as
proposed for consumer-purpose loans
and lines of credit. The Bureau is
retaining Regulation C’s existing
purpose-based test for commercialpurpose loans and lines of credit.
Only a few commenters specifically
addressed the Bureau’s proposal to add
the defined term ‘‘covered loan’’ to
Regulation C to refer to all covered
transactions, and the commenters
generally favored the proposal. They
believed that having a standard
shorthand for all covered transactions
would facilitate compliance. The
Bureau is finalizing § 1003.2(e) ‘‘covered
loan’’ to define the universe of
transactions covered under Regulation
C.
A large number of commenters
addressed the proposed shift from
purpose-based to collateral-based
transactional coverage, with consumer
advocacy group commenters supporting
the shift and industry commenters
expressing mixed views.118 Some
consumer advocacy groups stated that
having information about all loans
secured by residential property would
118 This section-by-section analysis provides a
high-level discussion of comments concerning the
proposed shift to dwelling-secured coverage. See
the section-by-section analyses of § 1003.2(d), (i),
(o), (q) and of § 1003.3(c)(10) for specific comments
concerning closed-end mortgage loans, home
improvement loans, open-end lines of credit,
reverse mortgages, and commercial-purpose
transactions, respectively.
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improve the usefulness and quality of
HMDA data. Others stated that having
data about all such loans would be
valuable in assessing whether financial
institutions are providing the
neighborhoods that the consumer
advocacy groups serve with the full
range of credit the neighborhoods need.
One consumer advocacy commenter
asserted that financial institutions
should report any transaction that could
result in a borrower losing his or her
home. Another stated that removing the
subjectivity from determining whether
to report a loan would ease burden for
financial institutions, and that having
information about more loans would
improve HMDA’s usefulness. The
commenter noted that consumer
mortgage lending products evolve
rapidly, and there is no principled
reason to require reporting of some but
not others.
Industry commenters and a group of
State regulators expressed mixed views
about the proposed shift to dwellingsecured coverage. A small number of
industry commenters supported the
proposal unconditionally because they
believed that it would ease burden.
These commenters, who generally were
smaller financial institutions and
compliance consultants, stated that
deciding which loans meet the current
purpose test is confusing. They stated
that a simplified transactional coverage
test would stop the erroneous overreporting of loans that has occurred
despite financial institutions’ best
efforts,119 and that the benefits of a
streamlined test justified the burdens of
more reporting. One industry
commenter appreciated the fact that
HMDA would provide a more
comprehensive view of mortgage
transactions across the country. A group
of State regulators supported dwellingsecured coverage for consumer-purpose
transactions only.
The majority of industry commenters
that addressed transactional coverage
opposed the proposed shift to dwellingsecured coverage, supported it only for
consumer-purpose transactions or for
closed-end mortgage loans, or supported
it only to the extent that it would
eliminate reporting of home
improvement loans not secured by a
dwelling. Numerous industry
commenters generally objected to the
overall compliance burdens and costs of
reporting additional transactions,
particularly in light of the Bureau’s
proposal simultaneously to expand the
119 These commenters seemed to be concerned
about erroneously classifying consumer-purpose
transactions as HMDA-reportable and, in turn,
unnecessarily collecting race, sex, and ethnicity
data from applicants and borrowers.
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data reported about each transaction
and to lower (for some institutions) the
institutional coverage threshold.120 One
government agency commenter
expressed concern that the revisions to
transactional coverage would burden
small financial institutions and urged
the Bureau not to adopt the proposed
changes. Some industry commenters
generally asserted that their reportable
transaction volume would increase
significantly,121 that they would not be
able to comply without hiring
additional staff, and that compliance
costs would be passed to consumers.
Others generally argued that the Bureau
should keep Regulation C’s existing
purpose-based coverage because it
serves HMDA’s purposes better than a
collateral-based scheme. Most industry
commenters that opposed the proposed
shift, however, specifically objected to
the burdens of reporting all home-equity
lines of credit and all dwelling-secured
commercial-purpose loans and lines of
credit.
As explained in the section-by-section
analyses of § 1003.2(d) and (o), the
Bureau is finalizing the shift to
dwelling-secured coverage for closedand open-end consumer-purpose
transactions, with some modifications to
ease burden for open-end reporting.
After considering the comments
received, and as discussed fully in the
section-by-section analyses of those
sections, the Bureau believes that the
benefits of expanded reporting justify
the burdens. As discussed in the
section-by-section of § 1003.3(c)(10),
however, the Bureau is maintaining
Regulation C’s existing purpose-based
coverage test for commercial-purpose
transactions.
2(f) Dwelling
The Bureau proposed to revise the
definition of dwelling in § 1003.2 by
moving the geographic location
requirement currently in the definition
of dwelling to § 1003.1(c), to add
additional examples of dwellings to the
definition and commentary, and to
revise the commentary to exclude
certain structures from the definition of
dwelling. A few commenters supported
120 A number of commenters argued that, in light
of the Bureau’s proposal to expand transactional
coverage, the Bureau should modify its institutional
coverage threshold proposal. Those comments are
discussed in the section-by-section analysis of
§ 1003.2(g).
121 Many commenters discussed the overall
increase in reporting from a shift to dwellingsecured coverage. Others estimated only the
increase from particular categories of transactions,
such as home-equity lines of credit or commercialpurpose transactions. Those estimates are discussed
in the section-by-section analyses of § 1003.2(o) and
of § 1003.3(c)(10).
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the proposed changes to the definition
of dwelling, while others argued that
certain types of structures should be
included or excluded from the
definition. For the reasons discussed
below, the Bureau is finalizing
§ 1003.2(f) with minor technical
revisions to the definition and with
additional revisions to the commentary
discussed in detail below. The
definition is revised to clarify that
multifamily residential structures
include complexes and manufactured
home communities.
Some commenters argued that second
homes and investment properties
should no longer be covered by
Regulation C and that only primary
residences should be reported because
second homes and investment
properties do not relate to housing
needs in the same way that primary
residences do. HMDA section 303(2)
defines a mortgage loan, in part, as one
secured by ‘‘residential real property’’
and HMDA section 304(b)(2) requires
collection of information regarding
‘‘mortgagors who did not, at the time of
execution of the mortgage, intend to
reside in the property securing the
mortgage loan.’’ The Bureau believes
that second homes as well as investment
properties are within the scope of
information required by HMDA and
should continue to be covered by
Regulation C. The Bureau is therefore
finalizing comment 2(f)–1 generally as
proposed, with certain material from
proposed comment 2(f)–1 incorporated
into comment 2(f)–2 as discussed below.
Some commenters argued that all
multifamily properties should be
excluded from Regulation C. The
Bureau believes that multifamily
residential structures should continue to
be included within Regulation C
because they provide for housing needs
and because, as the Bureau noted in the
proposal, HMDA data highlight the
importance of multifamily lending to
the recovering housing finance market
and to consumers.122
Many commenters addressed
multifamily loan reporting in more
specific ways. Some commenters
supported the proposal’s coverage of
manufactured home community loans
and other aspects related to multifamily
lending. Others requested guidance on
reporting multifamily transactions.
Some commenters argued that certain
types of multifamily lending should be
excluded from Regulation C. The
Bureau is adopting new comment 2(f)–
2 dealing specifically with multifamily
residential structures and communities,
122 79 FR 51731, 51800 (Aug. 29, 2014); San
Francisco Hearing, supra note 42.
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which incorporates certain material
from proposed comment 2(f)–1 and
additional material in response to
comments. The Bureau believes that
providing a specific comment relating to
multifamily residential structures will
facilitate compliance by providing
guidance on when loans related to
multifamily dwellings would be
considered loans secured by a dwelling
for purposes of Regulation C. The
comment provides that a manufactured
home community is a dwelling for
purposes of Regulation C regardless of
whether any individual manufactured
homes also secure the loan. The
comment also provides examples of
loans related to certain multifamily
structures that would nevertheless not
be secured by a dwelling for purposes
of Regulation C, and would therefore
not be reportable, such as loans secured
only by an assignment of rents or dues
or only by common areas and not
individual dwelling units.
The Bureau is adopting new comment
2(f)–3 relating to exclusions from the
definition of dwelling (incorporating
material from proposed comment 2(f)–2)
and clarifying that recreational vehicle
parks are excluded from the definition
of dwelling for purposes of Regulation
C. Several commenters agreed with the
proposed exclusions for recreational
vehicles, houseboats, mobile homes
constructed prior to June 15, 1976 (pre1976 mobile homes),123 and other types
of structures.
Regarding the exclusion of
recreational vehicles, the Bureau agrees
with the commenters that supported the
proposed clarification that recreational
vehicles are not dwellings for purposes
of Regulation C, regardless of whether
they are used as residences. As noted in
the proposal, the Bureau believes that
making this exclusion explicit will
provide more clarity on what structures
qualify as dwellings and reduce burden
on financial institutions. The Bureau
also believes it will improve the
consistency of reported HMDA data.
Clarifying that recreational vehicle
parks are excluded from the definition
of dwelling for purposes of Regulation
C is consistent with the exclusion of
recreational vehicles. The Bureau
believes that, as discussed above, while
manufactured home communities
should be included in the definition of
dwelling for purposes of Regulation C,
including recreational vehicle parks
would not be appropriate given that
123 The
HUD standards for manufactured homes
do not cover mobile homes constructed before June
15, 1976. 24 CFR 3282.8(a). 79 FR 51731, 51749
(Aug. 29, 2014).
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they are not frequently intended as longterm housing.
Some commenters stated that the
proposed exclusion of pre-1976 mobile
homes would create compliance
problems because the financial
institution could mistakenly collect
race, ethnicity, and sex information
before knowing whether the home was
a manufactured home and therefore
violate Regulation B. The Bureau
believes that this concern is unlikely to
result in ECOA violations because
Regulation B would still require
collection of demographic information
on some pre-1976 mobile home
lending.124 Other commenters argued
that pre-1976 mobile home lending
should be reported under Regulation C
because of consumer protection and
housing needs concerns related to this
type of housing. The Bureau does not
believe this concern justifies the
additional burden of requiring financial
institutions to report these loans and
identify them distinctly from
manufactured home loans, especially
given that the amount of lending
secured by this type of collateral will
continue to decrease as time passes.
Therefore, the Bureau is finalizing the
exclusion of pre-1976 mobile homes as
part of comment 2(f)–3. Clarifying that
recreational vehicle parks are excluded
from the definition of dwelling for
purposes of Regulation C is consistent
with the exclusion of recreational
vehicles.125 The Bureau believes that, as
discussed above, while manufactured
home communities should be included
in the definition of dwelling for
purposes of Regulation C, including
recreational vehicle parks would not be
appropriate given that they are not
frequently intended as long term
housing.
The Bureau proposed a special rule
for mixed-use properties that contained
five or more individual dwelling units.
The Bureau proposed that such a
property always be considered to have
a primary residential use and therefore
report a covered loan secured by it. A
few commenters supported the proposal
to report all residential structures with
five or more individual dwelling units,
but most commenters who addressed
mixed-use property argued that this was
overbroad and that the current primary
use rules should apply to multifamily
residential structures as well. The
124 12
CFR 1002.13(a)(2).
discussed in the proposal, the final rule’s
definition of dwelling would differ from Regulation
Z’s definition of dwelling with respect to some
recreational vehicles, because Regulation Z treats
recreational vehicles used as residences as
dwellings. 12 CFR part 1026, comment 2(a)(19)–2.
79 FR 51731, 51749 (Aug. 29, 2014).
125 As
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66145
Bureau is revising comment 2(f)–3
relating to mixed-use properties and
finalizing it as comment 2(f)–4 by
removing the sentence requiring that
financial institutions always treat
residential structures with five or more
individual dwelling units as having a
primary residential purpose. Requiring
financial institutions to report mixeduse multifamily properties in all
circumstances would result in reporting
of multifamily properties with relatively
small housing components and large
commercial components. Data users
could not differentiate between those
properties and multifamily properties
with larger housing components, which
would decrease the data’s usefulness.
Thus retaining the existing discretion
for financial institutions to determine
the primary use for multifamily
properties is appropriate.
The Bureau is adopting new comment
2(f)–5 relating to properties with
medical and service components. Some
commenters requested guidance on
when properties such as retirement
homes, assisted living, and nursing
homes should be reported under
Regulation C. Other commenters
requested exclusions for all properties
that provide any service or medical care
component. The Bureau does not
believe it is appropriate to exclude all
such properties. Information about loans
secured by properties that provide longterm housing and that are not transitory
or primarily medical in nature provides
valuable information on how financial
institutions are serving the housing
needs of their communities. The
comment provides that properties that
provide long-term housing with related
services are reportable under Regulation
C, while properties that provide medical
care are not, consistent with the
exclusion of hospitals in comment 2(f)–
3. The comment also clarifies that such
properties are reportable when they
combine long-term housing and related
services with a medical care component.
The comment will facilitate compliance
by expanding on earlier guidance
provided by the Board.126 Section
1003.2(f) is being adopted to implement,
in part, the definition of ‘‘mortgage
loan’’ in HMDA section 303(2). That
term would be implemented through
other terms in Regulation C as well,
including the definitions of ‘‘closed-end
mortgage loan’’ and ‘‘covered loan.’’ In
combination with other relevant
provisions in Regulation C, the Bureau
126 60 FR 63393, 63395 (Dec. 11, 1995). Fed.
Reserve Bank of St. Louis, CRA/HMDA Reporter,
Census 2000 and CRA/HMDA Data Collection,
(Sept. 2000), available at http://www.ffiec.gov/
hmda/pdf/00news.pdf.
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lines of credit in each of the two
preceding calendar years to report
HMDA data, provided that the
institution meets all of the other criteria
for institutional coverage.
The final rule’s changes to
institutional coverage will provide
several important benefits. First, the
coverage test will improve the
availability of data concerning the
practices of nondepository institutions.
The expanded coverage of
nondepository institutions will ensure
more equal visibility into the practices
of nondepository institutions and
depository institutions. With expanded
HMDA data about nondepository
lending, the public and public officials
will be better able to protect consumers
because historically, some riskier
lending practices, such as those that led
to the financial crisis, have emerged
from the nondepository market
2(g) Financial Institution
sector.128
Regulation C requires institutions that
Second, a significant number of
meet the definition of financial
lower-volume depository institutions
will no longer be required to report
institution to collect and report HMDA
HMDA data under the revised coverage
data. HMDA and current Regulation C
test, which will eliminate those
establish different coverage criteria for
institutions’ compliance costs. At the
depository institutions (banks, savings
associations, and credit unions) than for same time, the coverage test will
preserve sufficient data for analyzing
nondepository institutions (for-profit
mortgage-lending institutions other than mortgage lending at the national, local,
and institutional levels.
banks, savings associations, or credit
Third, the coverage test, by
unions).127 Under the current definition,
considering both an institution’s closeddepository institutions that originate
end and open-end origination volumes,
one first-lien home purchase loan or
will support the goal of increasing
refinancing secured by a one- to fourvisibility into open-end dwellingunit dwelling and that meet other
secured lending. This change to
criteria for ‘‘financial institution’’ must
institutional coverage, along with the
collect and report HMDA data, while
change to transactional coverage
certain nondepository institutions that
discussed in the section-by-section
originate many more mortgage loans
analysis of § 1003.2(o), will improve the
annually do not have to collect and
public and public officials’ ability to
report HMDA data.
understand whether, and how, financial
The Bureau proposed to adjust
institutions are using open-end lines of
Regulation C’s institutional coverage to
credit to serve the housing needs of
adopt a uniform loan-volume threshold
their communities. Incorporating openof 25 loans applicable to all financial
end lending into the institutional
institutions. Under the proposal,
coverage test will not require financial
depository institutions and
nondepository institutions that meet all institutions that originate a small
number of closed-end mortgage loans or
of the other criteria for a ‘‘financial
institution’’ would be required to report open-end lines of credit to report those
HMDA data if they originated at least 25 loans. As discussed below in the
covered loans, excluding open-end lines section-by-section analysis of
of credit, in the preceding calendar year. § 1003.3(c)(11) and (12), the final rule
also includes transactional thresholds.
For the reasons discussed below, the
The transactional thresholds ensure that
Bureau is finalizing changes to
financial institutions that meet only the
Regulation C’s institutional coverage
25 closed-end mortgage loan threshold
and adopting uniform loan-volume
are not required to report their open-end
thresholds for depository and
lending, and that financial institutions
nondepository institutions. The loanvolume thresholds require an institution that meet only the 100 open-end line of
credit threshold are not required to
that originated at least 25 closed-end
report their closed-end lending.
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believes that the proposed definition of
‘‘dwelling’’ is a reasonable
interpretation of the definition in that
provision. Section 1003.2(f) is also
adopted pursuant to the Bureau’s
authority under section 305(a) of
HMDA. Pursuant to section 305(a) of
HMDA, the Bureau believes that this
proposed definition is necessary and
proper to effectuate the purposes of
HMDA. The definition will serve
HMDA’s purpose of providing
information to help determine whether
financial institutions are serving the
housing needs of their communities by
providing information about various
types of housing that are financed by
financial institutions. The definition
will facilitate compliance with HMDA
requirements by providing clarity
regarding what transactions must be
reported for purposes of Regulation C.
127 HMDA sections 303(3) and 309(a); Regulation
C § 1003.2 (definition of financial institution).
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128 See the section-by-section analysis of
§ 1003.2(g)(ii) below for complete discussion.
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Finally, by considering two years of
lending for coverage, the final rule will
provide stability in reporting obligations
for institutions. Accordingly, a financial
institution that does not meet the loanvolume thresholds established in the
final rule and that has an unexpected
and unusually high loan-origination
volume in one year will not be required
to report HMDA data unless it maintains
that level of lending for two consecutive
years. The specific changes to the
definition of financial institution
applicable to nondepository institutions
and depository institutions are
discussed below separately.
The Bureau also proposed technical
modifications to the commentary to the
definition of financial institution. The
Bureau received no comments on the
proposed comments 2(g)–1 or –3
through –6, and is finalizing the
commentary as proposed and with
technical modifications to conform to
definition of financial institution
included in the final rule. The Bureau
is also renumbering proposed comments
2(g)–3 through –6 as comments 2(g)–4
through –7. The Bureau is also adopting
new comment 2(g)–3 to address how to
determine whether an institution
satisfies the definition of financial
institution after a merger or acquisition.
For ease of publication, the Bureau is
reserving comment 2(g)–2, which sets
forth the asset-size adjustment for
depository financial institutions for
each calendar year. The Bureau updates
comment 2(g)–2 annually to make the
adjustments to the level of the asset-size
exemption for depository financial
institutions required by HMDA section
309(b). The reserved comment will be
replaced when the asset-size adjustment
for the 2018 calendar year is published.
2(g)(1) Depository Financial Institutions
HMDA extends reporting
responsibilities to depository
institutions (banks, savings associations,
and credit unions) that satisfy certain
location, asset-size, and federally related
requirements.129 Regulation C
implements HMDA’s coverage criteria
in the definition of financial institution
in § 1003.2. Under the current definition
of financial institution in § 1003.2, a
bank, savings association, or credit
union meets the definition of financial
institution if it satisfies all of the
following criteria: (1) On the preceding
December 31, it had assets of at least
$44 million; 130 (2) on the preceding
December 31, it had a home or branch
office in a Metropolitan Statistical Area
(MSA); (3) during the previous calendar
129 12
U.S.C. 2802(3).
Financial institution-2 to § 1003.2.
130 Comment
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year, it originated at least one home
purchase loan or refinancing of a home
purchase loan secured by a first-lien on
a one- to four-unit dwelling; and (4) the
institution is federally insured or
regulated, or the mortgage loan referred
to in item (3) was insured, guaranteed,
or supplemented by a Federal agency or
intended for sale to the Federal National
Mortgage Association or the Federal
Home Loan Mortgage Corporation.131
Proposed § 1003.2(g)(1) modified the
definition of financial institution by
defining a new term, depository
financial institution, and adding a loanvolume threshold to the coverage
criteria for depository institutions. The
proposed loan-volume threshold would
require reporting only by depository
institutions that met the current criteria
in § 1003.2 and that originated at least
25 covered loans, excluding open-end
lines of credit, in the preceding calendar
year.
The Bureau received a large number
of comments on proposed § 1003.2(g)(1).
Industry commenters generally
supported eliminating the requirement
to report from low-volume depository
institutions, but urged the Bureau to
exclude more institutions from the
requirement to report HMDA data.
Consumer advocate commenters
generally opposed decreasing
Regulation C’s depository institution
coverage.
The Bureau is adopting § 1003.2(g)(1),
which defines depository financial
institution, to include banks, savings
associations, and credit unions, that
meet the current criteria to be
considered a financial institution,132
and originated at least 25 closed-end
mortgage loans or 100 open-end lines of
credit in each of the two preceding
calendar years. The Bureau is finalizing
the proposed exclusion of depository
institutions that originate fewer than 25
closed-end mortgage loans. In addition,
the final rule also requires lenders that
meet the other criteria and that originate
at least 100 open-end lines of credit to
report HMDA data, even if those
131 Section
1003.2(financial institution)(1).
§ 1003.2, a bank, savings association, or
credit union meets the definition of financial
institution if it satisfies all of the following criteria:
(1) On the preceding December 31, it had assets in
excess of the asset threshold established and
published annually by the Bureau for coverage by
the Act; (2) on the preceding December 31, it had
a home or branch office in a MSA; (3) during the
previous calendar year, it originated at least one
home purchase loan or refinancing of a home
purchase loan secured by a first-lien on a one- to
four-unit dwelling; and (4) the institution is
federally insured or regulated, or the mortgage loan
referred to in item (3) was insured, guaranteed, or
supplemented by a Federal agency or intended for
sale to the Federal National Mortgage Association
or the Federal Home Loan Mortgage Corporation.
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132 Under
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institutions did not originate at least 25
closed-end mortgage loans. The final
rule includes a two-year look-back
period for the loan-volume threshold.
Each of these aspects of the final rule is
discussed below separately.
Loan-Volume Threshold for Closed-End
Mortgage Loans
The Bureau received many comments
on proposed § 1003.2(g)(1). Industry
commenters generally supported
adopting a loan-volume threshold that
would eliminate reporting by lowvolume depository institutions,133 but
urged the Bureau to adopt a much
higher loan-volume threshold that
would exempt more depository
institutions from reporting. Industry
commenters stated that low-volume
depository institutions lack resources
and sophistication and that their data
have limited value. Industry
commenters argued that a higher loanvolume threshold would not impact the
availability of data for analysis at the
national level or the ability to analyze
lending at an institutional level. The
commenters also advocated a consistent
approach between the loan-volume
threshold in Regulation C and the small
creditor and small servicer definitions
in the Bureau’s title XIV Rules.134
On the other hand, several
community advocate commenters
expressed strong opposition to
decreasing Regulation C’s coverage of
depository institutions. Most noted that
the depository institutions that would
be excluded are currently reporting, and
therefore are accustomed to reporting.
Many also highlighted the importance of
the data reported by the depository
institutions that would be excluded at
the community level, especially in rural
and underserved areas or to low- and
moderate-income (LMI) individuals and
minorities. Commenters provided
examples of reports and programs that
rely on HMDA data at the census tract
level.
Other community advocate
commenters expressed support for the
proposed loan-volume threshold, but
noted concerns about the loss of data
that may result if the Bureau adopted a
loan-volume threshold greater than 25
loans. They highlighted concerns about
133 Participants in the Board’s 2010 Hearings also
urged the Board to eliminate reporting by lowervolume depository institutions. See, e.g., Atlanta
Hearing, supra note 40, (remarks of Phil Greer,
Senior Vice President of Loan Administration, State
Employees Credit Union) (noting that the burden of
reporting only one loan would be low, but that the
data reported would not provide ‘‘meaningful
information’’).
134 12 CFR 1026.35(b)(2)(iii)(B) (describing small
creditor thresholds); 12 CFR 1026.41(e)(4) (defining
small servicer).
PO 00000
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66147
the loss of data on particular types of
transactions, such as applications
submitted by African Americans, loans
related to multifamily properties, and
loans related to manufactured housing.
The Bureau believes that Regulation
C’s institutional coverage criteria should
balance the burden on financial
institutions with the value of the data
reported. Depository institutions that
are currently reporting should not bear
the burden of reporting under
Regulation C if their data are of limited
value in the HMDA data set. At the
same time, Regulation C’s institutional
coverage criteria should not impair
HMDA’s ability to achieve its purposes.
Higher closed-end mortgage loanvolume thresholds, as suggested by
industry, might not significantly impact
the value of HMDA data for analysis at
the national level. For example, it is
possible to maintain reporting of a
significant percentage of the national
mortgage market with a closed-end
mortgage loan-volume threshold higher
than 25 loans annually. In addition, it
may also be true that data reported by
some institutions that satisfy the
proposed 25-loan-volume threshold may
not be as useful for statistical analysis
as data reported by institutions with
much higher loan volumes.
However, the higher closed-end
mortgage loan-volume thresholds
suggested by industry commenters
would have a material negative impact
on the availability of data about patterns
and trends at the local level. Data about
local communities is essential to
achieve HMDA’s three purposes, which
are to provide the public and public
officials with sufficient information: (1)
To determine whether institutions are
meeting their obligations to serve the
housing needs of the communities in
which they are located; (2) to identify
communities in need of targeted public
and private investment; and (3) to assist
in identifying discriminatory lending
patterns and enforcing
antidiscrimination statutes.135 Public
officials, community advocates, and
researchers rely on HMDA data to
analyze access to credit at the
neighborhood level and to target
programs to assist underserved
communities and consumers.
Local and State officials have used
HMDA data to identify and target relief
to localities impacted by high-cost
lending or discrimination. For example,
policy makers in Lowell, Massachusetts
identified a need for homebuyer
counseling and education in Lowell,
based on HMDA data, which showed a
high percentage of high-cost loans
135 Section
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compared to surrounding
communities.136 Similarly, in 2008 the
City of Albuquerque used HMDA data to
characterize neighborhoods as ‘‘stable,’’
‘‘prone to gentrification,’’ or ‘‘prone to
disinvestment’’ for purposes of
determining the most effective use of
housing grants.137 As another example,
Antioch, California, monitors HMDA
data, reviews it when selecting financial
institutions for contracts and
participation in local programs, and
supports home purchase programs
targeted to households purchasing
homes in census tracts with low
origination rates.138 In addition, the City
of Flint Michigan, in collaboration with
the Center for Community Progress,
used HMDA data to identify
neighborhoods in Flint to target for a
blight eradication program.139 Similarly,
HMDA data helped bring to light
discriminatory lending patterns in
Chicago neighborhoods, resulting in a
large discriminatory lending
settlement.140 Researchers and
consumer advocates also analyze HMDA
data at the census tract level to identify
patterns of discrimination at the
national level.141
Any loan-volume threshold will affect
individual markets differently,
136 See City of Lawrence, Massachusetts, HUD
Consolidated Plan 2010–2015, at 68 (2010),
available at http://www.cityoflawrence.com/Data/
Sites/1/documents/cd/Lawrence_Consolidated
_Plan_Final.pdf.
137 See City of Albuquerque, Five Year
Consolidated Plan and Workforce Housing Plan, at
100 (2008), available at http://www.cabq.gov/
family/documents/ConsolidatedWorkforce
HousingPlan20082012final.pdf.
138 See City of Antioch, California, Fiscal Year
2012–2013 Action Plan, at 29 (2012), available at
http://www.ci.antioch.ca.us/CitySvcs/CDBGdocs/
Action%20Plan%20FY12-13.pdf.
139 Luke Telander, Flint’s Framework for the
Future, Ctr. for Cmty. Progress, Cmty. Progress Blog
(July 1, 2014), http://www.communityprogress.net/
blog/flints-framework-future.
140 See, e.g., Yana Kunichoff, Lisa Madigan
Credits Reporter with Initiating Largest
Discriminatory Lending Settlements in U.S. History,
Chicago Muckrakers Blog (June 14, 2013, 2:53 p.m.),
http://www.chicagonow.com/chicago-muckrakers/
2013/06/lisa-madigan-credits-reporter-withinitiating-largest-discriminatory-lendingsettlements-in-u-s-history/ (‘‘During our ongoing
litigation . . . the Chicago Reporter study looking
at the HMDA data for the City of Chicago came out.
. . . It was such a startling statistic that I said . . .
we have to investigate, we have to find out if this
is true. . . . We did an analysis of that data that
substantiated what the Reporter had already found.
. . . [W]e ultimately resolved those two lawsuits.
They are the largest fair-lending settlements in our
nation’s history.’’).
141 See, e.g., California Reinvestment Coalition, et
al, Paying More for the American Dream VI: Racial
Disparities in FHA/VA Lending (2012), available at
http://www.woodstockinst.org/sites/default/files/
attachments/payingmoreVI_multistate_july2012_0.
pdf; Samantha Friedman & Gregory D. Squires, Does
the Community Reinvestment Act Help Minorities
Access Traditionally Inaccessible Neighborhoods?,
52 Social Problems 209 (2005).
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depending on the extent to which
individual markets are served by
smaller creditors and the market share
of those creditors. The Bureau believes
that a 25-closed-end mortgage loanvolume threshold would impact the
robustness of the data that would
remain available only in a relatively
small number of markets. For example,
only about 45 census tracts would lose
over 20 percent of currently reported
data if a 25 closed-end mortgage loanvolume threshold is used to trigger
reporting.142 In contrast, the higher
closed-end mortgage loan-volume
thresholds requested by industry
commenters would have a negative
impact on data about more communities
and consumers. For example, at a
closed-end mortgage loan-volume
threshold set at 100, the number of
census tracts that would lose 20 percent
of reported data would increase from
about 45 tracts to about 385 tracts,
almost eight times more than the
number with a threshold set at 25
closed-end mortgage loans.143 The
number of affected lower-middle
income tracts would increase from
about 20 tracts to about 145 tracts, an
increase of over six times over the
number at the 25-loan level.144 The
Bureau believes that the loss of data in
communities at closed-end mortgage
loan-volume thresholds higher than 25
would substantially impede the public’s
and public officials’ ability to
understand access to credit in their
communities.
In addition, the Bureau does not
believe that it should set the closed-end
mortgage loan-volume threshold at the
levels in the small creditor and small
servicer definitions in the Bureau’s title
XIV rules.145 While the Bureau’s title
XIV rules and Regulation C may apply
to some of the same institutions and
transactions, Regulation C and the
Bureau’s title XIV rules have different
objectives. HMDA aims to provide
specific data to the public and public
officials. For example, HMDA aims to
provide sufficient information to the
public and public officials to identify
whether the housing needs of their
communities are being served by the
existing financial institutions. In
contrast, the title XIV rule thresholds
are designed to balance consumer
protection and compliance burden in
142 As discussed in part VII below, the Bureau
derived these estimates using 2013 HMDA data.
143 Id.
144 As discussed in part VII below, the Bureau
prepared these estimates using 2013 HMDA data
and 2012 Community Reinvestment Act data.
145 12 CFR 1026.35(b)(2)(iii)(B) (describing small
creditor thresholds); 12 CFR 1026.41(e)(4) (defining
small servicer).
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the context of very specific lending
practices. As discussed above, an
institutional coverage threshold at the
levels of the small creditor and small
servicer thresholds, which include
thresholds of 2,000 and 5,000 loans,
respectively,146 would undermine both
the utility of HMDA data for analysis at
the local level and the benefits that
HMDA provides to communities.
Finally, the Bureau believes that
eliminating the requirement to report by
institutions that originated fewer than
25 closed-end mortgage loans annually
would meaningfully reduce burden. As
discussed in part VII below, the
proposed loan-volume threshold would
relieve about 22 percent of depository
institutions that are currently reporting
of the obligation to report HMDA data
on closed-end mortgage loans.
For the reasons discussed above, the
Bureau is adopting a loan-volume
threshold for depository institutions
that will require reporting by depository
institutions that originate at least 25
closed-end mortgage loans annually and
meet the other applicable criteria in
§ 1003.2(g)(1).
The Bureau, as discussed below in
part VI, believes that the 25 closed-end
loan-volume threshold for depository
institutions should go into effect on
January 1, 2017, one year earlier than
the effective date for most of the
remaining rule. To effectuate this earlier
effective date, the Bureau is amending
the definition of ‘‘financial institution’’
in § 1003.2.
Loan-Volume Threshold for Open-End
Lines of Credit
The loan-volume threshold provided
in proposed § 1003.2(g)(1)(v) excluded
open-end lines of credit from the loans
that would count toward the
threshold.147 The Bureau solicited
feedback on what types of loans should
count toward the proposed loan-volume
threshold and, in particular, whether
open-end lines of credit should count
toward the proposed loan-volume
threshold. The final rule incorporates an
institution’s origination of open-end
lines of credit into HMDA’s institutional
coverage criteria. Under the final rule, a
financial institution will be required to
146 Id. The Bureau recently increased the small
creditor threshold to 2,000 applicable loans
annually. See 80 FR 59943 (Oct. 2, 2015).
147 Under the proposed loan-volume threshold,
the definition of open-end line of credit did not
include open-end reverse mortgages. As a result,
neither open-end nor closed-end reverse mortgages
were excluded from the proposed loan-volume
threshold. The definitions of closed-end mortgage
loan and open-end line of credit included in the
final rule include closed-end and open-end reverse
mortgages, respectively, as discussed in the sectionby-section analysis of § 1003.2(d) and (o).
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report HMDA data on open-end lines of
credit if it meets the other applicable
criteria and originated at least 100 openend lines of credit in each of the two
preceding calendar years.148
Relatively few commenters provided
feedback on this issue. Some industry
commenters stated that they supported
the proposed exclusion of open-end
lines of credit from the loans that count
toward the loan-volume threshold.
These commenters also suggested
excluding other types of loans from the
loans that count toward the threshold,
including commercial loans, homeequity loans, and reverse mortgages. On
the other hand, some industry
commenters and a community advocate
commenter stated that open-end lines of
credit should count toward the loanvolume threshold. They explained that
this would prevent institutions from
steering consumers to open-end lines of
credit to avoid being required to report
HMDA data.
The Bureau is not finalizing the
proposed exclusion of open-end lines of
credit from Regulation C’s institutional
coverage criteria for the reasons
discussed below. As noted above, the
Bureau believes that Regulation C’s
institutional coverage criteria should
balance the burden on financial
institutions with the value of the data
reported. Depository institutions that
are currently reporting should not bear
the burden of reporting under
Regulation C if their data are of limited
value in the HMDA data set. At the
same time, Regulation C’s institutional
coverage criteria should support
HMDA’s purposes. The Bureau has
determined that the exclusion of openend lines of credit from Regulation C’s
institutional coverage criteria would not
appropriately balance those
considerations.
As discussed in the section-by-section
analysis of § 1003.2(o), the Bureau is
finalizing the proposed expansion of the
transactions reported in HMDA to
include dwelling-secured, consumerpurpose open-end lines of credit, unless
an exclusion applies.149 Data about such
transactions are not currently publicly
available and, as discussed in the
section-by-analysis of § 1003.2(o), the
Bureau believes that having data about
them will improve the understanding of
how financial institutions are serving
148 Under the final rule, all open-end transactions,
whether traditional, reverse, or a combination of the
two, count toward the open-end loan-volume
threshold.
149 Under the final rule, dwelling-secured,
commercial-purpose open-end lines of credit will
be covered loans only if they are for home purchase,
home improvement, or refinancing purposes. See
the section-by-section analysis of § 1003.3(c)(10).
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the housing needs of their communities
and assist in the distribution of public
sector investments. Like closed-end
home-equity loans and refinancings,
both of which are subject to broad
coverage under the final rule, dwellingsecured credit lines may be used for
home purchase, home improvement,
and other purposes. Regardless of how
they are used, they liquefy equity that
borrowers have built up in their homes,
which often are their most important
assets. Borrowers who take out
dwelling-secured credit lines increase
their risk of losing their homes to
foreclosure when property values
decline, and in fact, the expansion of
open-end line of credit originations in
the mid-2000s contributed to the
foreclosure crises that many
communities experienced in the late
2000s.150 Had open-end line of credit
data been reported in HMDA, the public
and public officials could have had a
much earlier warning and a better
understanding of potential risks, and
public and private mortgage relief
programs could have better assisted
distressed borrowers in the aftermath of
the crisis. As discussed in the sectionby-section analysis of § 1003.2(o),
dwelling-secured open-end lending is
again on the rise now that the mortgage
market has begun to recover from the
crisis. The Bureau believes that it is
important to improve visibility into this
key segment of the mortgage market for
all of the reasons discussed here and in
the section-by-section analysis of
§ 1003.2(o).
By excluding open-end lines of credit
from the loan-volume threshold, the
proposed coverage test would not
support that goal. Under the proposed
institutional coverage test, institutions
that originate large numbers of open-end
lines of credit, but fewer than 25 closedend mortgage loans, would not be
required to report HMDA data on any of
their loans. The proposed test may,
therefore, exclude institutions with
significant open-end lending, whose
data may provide valuable insights into
the open-end dwelling-secured market.
The proposed test may also create an
incentive for institutions to change their
business practices to avoid reporting
open-end data (e.g., by transferring all
open-end lending to a separate
subsidiary). This result would
undermine the goals articulated in the
section-by-section analysis of
§ 1003.2(o) to increase visibility into
open-end dwelling-secured lending.
In addition to possibly excluding high
volume open-end lenders, the proposed
test may also burden some institutions
150 See
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with low open-end origination volumes
with the requirement to report data
concerning their open-end lending. The
proposed institutional coverage test
would require institutions with
sufficient closed-end—but very little
open-end—mortgage lending to incur
costs to begin open-end reporting. As
discussed in the section-by-section
analysis of § 1003.2(o) below,
commencing reporting of open-end lines
of credit, unlike continuing to report
closed-end mortgage loans, represents a
new, and in some cases significant,
compliance burden. The proposal
would have imposed these costs on
small institutions with limited open-end
lending, where the benefits of reporting
the data do not justify the costs of
reporting.
In light of these considerations and
those discussed in the section-bysection analysis of § 1003.2(o), the
Bureau concludes that only institutions
that originate at least 100 open-end lines
of credit in each of the two preceding
calendar years should report HMDA
data concerning open-end lines of
credit. Accordingly, the Bureau is
adopting a separate, open-end loanvolume threshold to determine whether
an institution satisfies the definition of
financial institution. The Bureau is also
adopting transactional coverage
thresholds, discussed below in the
section-by-section analysis of
§ 1003.3(c)(11) and (12). The
institutional and transactional coverage
thresholds are designed to operate in
tandem. Under these thresholds, a
financial institution will report closedend mortgage loans only if it satisfies
the closed-end mortgage threshold and
will report open-end lines of credit only
if it satisfies the separate open-end line
credit threshold.
The Bureau believes that adopting a
100-open-end line of credit threshold
will avoid imposing the burden of
establishing open-end reporting on
many small institutions with low openend lending volumes. Specifically, the
Bureau estimates that almost 3,400
predominately smaller-sized
institutions, that would have been
required to begin open-end reporting
under the proposal will not be required
to report open-end data under the final
rule.151 At the same time, the final rule
151 As the Bureau discussed in the proposal, due
to the lack of available data concerning open-end
lending, the Bureau has faced challenges in
analyzing the impact on HMDA’s institutional and
transactional coverage of including open-end lines
of credit. See 79 FR 51731, 51754 (Aug. 29, 2014).
Although it solicited information that would assist
it in making these estimates, see id., commenters
did not provide responsive data. After careful
analysis, the Bureau has developed rough estimates
79 FR 51731, 51757 (Aug. 29, 2014).
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will improve the availability of data
concerning open-end dwelling-secured
lending by collecting data from a
sufficient array of institutions and about
a sufficient array of transactions. The
Bureau estimates that nearly 90 percent
of all open-end line of credit
originations will be reported under the
final rule.152 This change to
institutional coverage, along with the
finalization of mandatory reporting of
all consumer-purpose open-end lines of
credit, will improve the public and
public officials’ ability to monitor and
understand all sources of dwellingsecured lending and the risks posed to
consumers and communities by those
loans.
For those reasons, the Bureau is
modifying Regulation C’s definition of
depository financial institution by
adopting an open-end loan-volume
threshold. Under the revised definition,
an institution satisfies the definition of
a depository financial institution if it
meets the other applicable criteria and
either originated at least 25 closed-end
mortgage loans or 100 open-end lines of
credit in each of the two preceding
calendar years.
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Two-Year Look-Back Period
The proposed loan-volume threshold
provided in proposed § 1003.2(g)(1)(v)
considered only a financial institution’s
lending activity during the previous
calendar year. The Bureau solicited
feedback on whether to structure the
loan-volume threshold over a multiyear
period to provide greater certainty about
the reporting requirements. Many
industry commenters, including small
entity representatives, urged the Bureau
to include a multiyear look-back period
in the loan-volume threshold.
The Bureau believes that a two-year
look-back period is advisable to
eliminate uncertainty surrounding
reporting responsibilities. Under the
final rule, a financial institution that
does not meet the loan-volume
thresholds established in the final rule
and that experiences an unusual and
unexpected high origination-volume in
one year will not be required to begin
HMDA reporting unless and until the
of home-equity line of credit origination volumes by
institutions using 2013 HMDA data, 2013 Reports
of Condition and Income (Call Report) data, and the
Bureau’s Consumer Credit Panel data. Given the
scarcity of certain underlying data, these estimates
rely on a number of assumptions. Nonetheless, for
the reasons given above, including supporting
increased visibility into the open-end line of credit
market and reducing compliance burden for many
institutions, the Bureau believes HMDA’s purposes
are best effectuated by adopting an open-end line
of credit threshold. Part VII below discusses these
estimates in more detail.
152 See part VII.
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higher origination-volume continues for
a second year in a row. A first-time
HMDA reporter must undertake
significant one-time costs that include
operational changes, such as staff
training, information technology
changes, and document retention
policies. Therefore, the Bureau believes
that it is appropriate to develop a twoyear look-back period for HMDA
reporting to provide more stability
around reporting responsibilities.
Regulations that implement the
Community Reinvestment Act provide
similar look-back periods to determine
coverage.153
Therefore, the Bureau is finalizing the
loan-volume threshold included in
§ 1003.2(g)(1)(v) and (2)(ii) with
modifications to include a two-year
look-back period. Sections
1003.2(g)(1)(v) and (2)(ii) provide that,
assuming the other criteria are satisfied,
an institution qualifies as a depository
financial institution or a nondepository
financial institution if the institution
meets the applicable loan-volume
threshold in each of the two preceding
calendar years.
Multifamily-Only Depository
Institutions
Under Regulation C, loans related to
multifamily dwellings (multifamily
mortgage loans) do not factor into the
coverage criteria applicable to
depository institutions. A depository
institution that does not originate at
least one home purchase loan or
refinancing of a home purchase loan,
secured by a first lien on a one- to fourunit dwelling in the preceding calendar
year is not required to report HMDA
data.154 The Bureau did not propose to
eliminate the current loan activity test
included in the coverage criteria for
depository institutions. The proposal
also did not solicit feedback on this
aspect of the current coverage criteria or
on other aspects of depository
institutions’ current coverage criteria.
Many community advocate
commenters nonetheless urged the
Bureau to expand depository institution
coverage to require reporting by
depository institutions that originate
multifamily mortgage loans, but do not
originate first-lien one- to four-unit
home purchase loans or refinancings,
and that meet the other coverage
153 See,
e.g., 12 CFR 345.12(u)(1).
12 CFR 1003.2 (definition of financial
institution). When HMDA was enacted, the term
‘‘federally related mortgage loan’’ was defined in
the Real Estate Settlement Procedures Act (RESPA)
to include a loan secured by real property secured
by a first lien on a one- to four-family dwelling and
that meets other federally related tests. See Public
Law 93–533, section 3164, 88 Stat. 1724 (1974).
154 See
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criteria. They argued that the current
formulation makes it more difficult to
understand availability of credit for
multifamily dwellings. No industry
commenters addressed this issue.
The Bureau is not adopting the
commenters’ suggestion at this time.
The Bureau recognizes that this prong of
HMDA’s depository institution coverage
test may exclude certain depository
institutions and their loans from HMDA
data. However, the Bureau estimates
that this provision excludes a very small
number of depository institutions and
loans, fewer than 20 institutions and
about 200 covered loans under the final
rule.155
The Bureau adopts § 1003.2(g)(1)
pursuant to its authority under section
305(a) of HMDA to provide for such
adjustments and exceptions for any
class of transactions that the Bureau
judges are necessary and proper to
effectuate the purposes of HMDA.
Pursuant to section 305(a) of HMDA, for
the reasons given above, the Bureau
finds that this proposed exception is
necessary and proper to effectuate the
purposes of HMDA. By reducing burden
on financial institutions and
establishing a consistent loan-volume
test applicable to all financial
institutions, the Bureau finds that the
proposed provision will facilitate
compliance with HMDA’s requirements.
2(g)(2) Nondepository Financial
Institutions
HMDA extends reporting
responsibilities to certain nondepository
institutions, defined as any person
engaged for profit in the business of
mortgage lending other than a bank,
savings association, or credit union.156
HMDA section 309(a) also authorizes
the Bureau to adopt an exemption for
covered nondepository institutions that
are comparable within their respective
industries to banks, savings
associations, and credit unions with $10
million or less in assets in the previous
fiscal year.157
Under the current definition of
financial institution in § 1003.2, a
nondepository institution is a financial
institution if it meets three criteria.
First, the institution satisfies the
following loan-volume or amount test:
In the preceding calendar year, the
155 The Bureau developed this estimate using
2013 Call Report data.
156 See generally HMDA sections 303(5) (defining
‘‘other lending institutions’’), 303(3)(B) (including
other lending institutions in the definition of
depository institution), and 304(a) (requiring
depository institutions to collect, report, and
disclose certain data if the institution has a home
or branch office located in an MSA), 12 U.S.C.
2802(5), 2802(3), 2803(a).
157 See HMDA section 309(a), 12 U.S.C. 2808(a).
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institution originated home purchase
loans, including refinancings of home
purchase loans, that equaled either at
least 10 percent of its loan-origination
volume, measured in dollars, or at least
$25 million.158 Second, on the
preceding December 31, the institution
had a home or branch office in an
MSA.159 Third, the institution meets
one of the following two criteria: (a) On
the preceding December 31, the
institution had total assets of more than
$10 million, counting the assets of any
parent corporation; or (b) in the
preceding calendar year, the institution
originated at least 100 home purchase
loans, including refinancings of home
purchase loans.160
The Bureau proposed to modify the
coverage criteria for nondepository
institutions by replacing the current
loan-volume or amount test with the
same loan-volume threshold that the
Bureau proposed for depository
institutions. Proposed § 1003.2(g)(2)
defined a new term, nondepository
financial institution, and provided that
an institution that is not a bank, saving
association, or credit union is required
to report HMDA data if it had a home
or branch office in an MSA on the
preceding December 31 and it originated
at least 25 covered loans, excluding
open-end lines of credit, in the
preceding calendar year. For the reasons
discussed below, the Bureau is adopting
§ 1003.2(g)(2), which revises the
coverage criteria applicable to
nondepository institutions. Under the
final rule, a nondepository institution is
a nondepository financial institution
and required to report HMDA data if it
has a home or a branch office in an MSA
and if it originated at least 25 closed158 The Board adopted the 10 percent loanvolume test in 1989 to implement the 1989 FIRREA
amendments, which extended HMDA’s reporting
requirements to institutions ‘‘engaged for profit in
the business of mortgage lending.’’ See 54 FR
51356, 51358–59 (Dec. 15, 1989). In 2002, the Board
modified the test and added the $25 million loanvolume test to require reporting by additional
nondepository institutions. See 67 FR 7222, 7224
(Feb. 15, 2002).
159 Under § 1003.2 (definition of branch office), a
nondepository institution has a branch office in an
MSA if it originated, received applications for, or
purchased five or more covered loans in that MSA
in the preceding calendar year.
160 In 1989, the $10 million asset test, derived
from section 309, applied to both depository and
nondepository institutions. See 54 FR 51356, 51359
(Dec. 15, 1989). Because the 1989 amendments
failed to cover as many nondepository institutions
as Congress had intended, in 1991, Congress
amended the asset test in HMDA section 309 to
apply only to depository institutions, and it granted
the Board discretion to exempt comparable
nondepository institutions. See Public Law 102–
242, section 224 (1991). Pursuant to that authority,
the Board added the 100 loan-volume test for
nondepository institutions in 1992. See 57 FR
56963, 56964–65 (Dec. 2, 1992).
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end mortgage loans in each of the two
preceding calendar years or 100 openend lines of credit in each of the two
preceding calendar years.
Loan-Volume Threshold
Most of the industry comments on
this issue opposed the proposed
expansion of nondepository institution
coverage. These commenters explained
that the proposed expansion would add
only a small amount of additional data.
Commenters also raised concerns about
the burden on the nondepository
institutions that would be newly
covered. Some commenters suggested
excluding more nondepository
institutions from HMDA’s institutional
coverage, rather than expanding
coverage of nondepository institutions,
by adopting a loan-volume threshold
higher than 100 closed-end mortgage
loans annually, such as one set at
origination of 250 closed-end mortgage
loans annually. On the other hand,
several consumer advocate commenters
and a few industry commenters
expressed support for the proposed
expansion of nondepository institution
coverage, arguing that nondepository
institutions, like depository institutions,
should be held accountable for their
lending practices.
The Bureau believes, as stated in the
proposal, that it is important to increase
visibility into nondepository
institutions’ practices due to their
history of riskier lending practices,
including their role in the financial
crisis, and the lack of available data
about lower-volume nondepository
institutions’ mortgage lending practices.
Therefore, the Bureau is adopting
§ 1003.2(g)(2), which requires reporting
if the institution meets the location test
and originated at least 25 closed-end
mortgage loans in each of the two
preceding calendar years or 100 openend lines of credit in each of the two
preceding calendar years. The Bureau
estimates that the final rule will require
HMDA reporting by as much as 40
percent more nondepository institutions
than are currently reporting.161
The expansion of nondepository
institution reporting will address the
longstanding need for additional
monitoring of the mortgage lending
practices of nondepository institutions.
During the years leading up to the
financial crisis, many stakeholders
called for increased monitoring of
nondepository institution activity in the
mortgage market. Concerns about
nondepository institution involvement
161 As discussed in part VII below, the Bureau
developed this estimate using 2012 HMDA data and
NMSLR data.
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in the subprime market motivated the
Board to expand nondepository
institution coverage in 2002.162 In 2007,
the GAO also identified risks associated
with the lending practices of
nondepository institutions, which were
not subject to regular Federal
examination at the time.163 GAO found
that 21 of the 25 largest originators of
subprime and Alt-A loans in 2006 were
nondepository institutions and that
those 21 nondepository institutions had
originated over 80 percent in dollar
volume of the subprime and Alt-A loans
originated in 2006.164 GAO concluded
that nondepository institutions ‘‘may
tend to originate lower-quality
loans.’’ 165 In 2009, GAO found that
nondepository institutions that reported
HMDA data had a higher incidence of
potential fair lending problems than
depository institutions that reported
HMDA data.166 GAO also suggested that
the loan products and marketing
practices of those nondepository
institutions may have presented greater
risks for applicants and borrowers.167
In the aftermath of the financial crisis,
Congress also expressed concerns about
the lending practices of nondepository
institutions generally and called for
greater oversight of those institutions.168
In the Dodd-Frank Act, Congress
granted Federal supervisory authority to
the Bureau over a broad range of
mortgage-related nondepository
162 See 65 FR 78656, 78657 (Dec. 15, 2000)
(proposing changes to coverage of nondepository
institutions); 67 FR 7222, 7224–25 (Feb. 15, 2002)
(finalizing changes to coverage of nondepository
institutions).
163 See U.S. Gov’t Accountability Office, GAO–
08–78R, Briefing to the House of Representatives
Committee on Fin. Services, Information on Recent
Default and Foreclosure Trends for Home
Mortgages and Associated Economic and Market
Dev., at 54 (2007), available at http://www.gao.gov/
assets/100/95215.pdf.
164 Id.
165 Id.
166 See U.S. Gov’t Accountability Office, GAO–
09–704, Fair Lending: Data Limitations and the
Fragmented U.S. Financial Regulatory Structure
Challenge Federal Oversight and Enforcement
Efforts at 28–29 (2009) (‘‘[I]ndependent lenders and
nonbank subsidiaries of holding companies are
more likely than depository institutions to engage
in mortgage pricing discrimination.’’), available at
http://www.gao.gov/new.items/d09704.pdf.
167 Id. at 29–30. See also GAO–08–78R at 54.
168 See, e.g., House Consideration of HR 4173, 155
Cong. Rec. H14430 (daily ed. Dec. 9, 2009)
(statement of Cong. Ellison), ‘‘One of the most
important causes of the financial crisis, as I
mentioned, is the utter failure of consumer
protection. The most abusive and predatory lenders
were not federally regulated, were not regulated at
all in some cases, while regulation was overly lax
for banks and other institutions that were
covered.’’); U.S. Gov’t Accountability Office, GAO–
09–704, Fair Lending: Data Limitations and the
Fragmented U.S. Financial Regulatory Structure
Challenge Federal Oversight and Enforcement
Efforts at 28–29 (2009), available at http://
www.gao.gov/new.items/d09704.pdf.
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institutions because it was concerned
about nondepository institutions’
practices generally and believed that the
lack of Federal supervision of those
institutions had contributed to the
financial crisis.169 In addition, officials
that participated in the Financial Crisis
Inquiry Commission hearings in 2010
noted that practices that originated in
the nondepository institution mortgage
sector, such as lax underwriting
standards and loan products with
potential payment shock, created
competitive pressures on depository
institutions to follow the same practices,
which may have contributed to the
broader financial crisis.170 During the
Board’s 2010 Hearings, community
advocates and Federal agencies
specifically urged expansion of HMDA’s
institutional coverage to include lowervolume nondepository institutions.
They stated that Regulation C’s existing
institutional coverage framework
prevented them from effectively
monitoring the practices of
nondepository institutions.171
Despite these calls for increased
monitoring of nondepository
institutions, currently there are less
publicly available data about
nondepository institutions’ mortgage
lending practices than about those of
depository institutions. Currently, under
Regulation C, lower-volume depository
institutions may be required to report
even if they originated only one
mortgage loan in the preceding calendar
year, but lower-volume nondepository
institutions may not be required to
report unless they originated 100
applicable loans in the preceding
calendar year.172 In addition, outside of
169 See
Dodd-Frank Act section 1024.
Official Transcript of First Public Hearing
of the Financial Crisis Inquiry Commission at 97–
98 (Jan. 10, 2010), (remarks of Sheila C. Bair,
Chairman, Federal Deposit Insurance Corporation,
and Mary L. Schapiro, Chairman, U.S. Securities
and Exchange Commission), available at http://fcicstatic.law.stanford.edu/cdn_media/fcic-testimony/
2010-0114-Transcript.pdf.
171 See, e.g., San Francisco Hearing, supra note
42; Washington Hearing, supra note 39 (remarks of
Faith Schwartz, Senior Advisor, HOPE NOW
Alliance) (urging reporting by all institutions that
have ‘‘any meaningful originations’’); id. (remarks
of Allison Brown, Acting Assistant Director,
Division of Financial Practices, Federal Trade
Commission) (urging expanded reporting by
nondepository institutions ‘‘to ensure that all
nondepository institutions that made significant
numbers of mortgage decisions report these
essential data, providing the government and the
public an accurate, timely picture of mortgage
lending activity’’); id. (remarks of Michael Bylsma,
Director for Community and Consumer Law, Office
of the Comptroller of the Currency) (urging the
Board to ‘‘review whether its rule-making
authority’’ would permit it to expand HMDA
coverage to additional institutions); Atlanta
Hearing, supra note 40.
172 Banks, savings associations, and credit unions
are required to report if they originate at least one
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170 See
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HMDA, there are less publicly available
data about nondepository institutions
than about depository institutions.
Depository institutions, even those that
do not report HMDA data, report
detailed financial information at the
bank level to the Federal Deposit
Insurance Corporation (FDIC) or to the
National Credit Union Association
(NCUA), much of which is publicly
available.173 Nondepository institutions,
on the other hand, report some data to
the Nationwide Mortgage Licensing
System and Registry (NMLSR), but
detailed financial information and data
on mortgage applications and
originations are not publicly
available.174
The final rule addresses this
information gap by including the same
loan-volume threshold for
nondepository institutions as for
depository institutions. The expanded
coverage of nondepository institutions
will provide more data to the public and
public officials for analyzing whether
lower-volume nondepository
institutions are serving the housing
needs of their communities. In addition,
with the expanded coverage, the public
and public officials will be better able
to understand access to and sources of
credit in particular communities, such
as a higher concentration of risky loan
products in a given community, and to
identify the emergence of new loan
products or underwriting practices. In
addition, the final rule will provide
more data to help the public and public
officials in understanding whether a
lower-volume nondepository
institution’s practices pose potential fair
lending risks.
The final rule also considers
origination of open-end lines of credit in
the institutional coverage test for
nondepository institutions. The Bureau
home purchase or refinancing of a home purchase
loan secured by a first lien on a one- to four-family
dwelling and if they meet the other criteria in the
definition of financial institution. See Section
1003.2 (definition of financial institution).
173 Every national bank, State member bank, and
insured nonmember bank is required by its primary
Federal regulator to file consolidated Reports of
Condition and Income, also known as Call Report
data, for each quarter as of the close of business on
the last day of each calendar quarter (the report
date). The specific reporting requirements depend
upon the size of the bank and whether it has any
foreign offices. See, e.g., FDIC, Call and Thrift
Financial Reports, http://www2.fdic.gov/
call_tfr_rpts/. Credit unions are also required to
report Call Report data to NCUA. See, e.g., NCUA,
53000 Call Report Quarterly Data, http://
www.ncua.gov/DataApps/QCallRptData/Pages/
default.aspx.
174 NMLSR is a national registry of nondepository
institutions. Nondepository institutions report
information about mortgage loan originators,
mortgage loan originations, the number and dollar
amount of loans brokered, and HOEPA originations.
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believes that this revision is necessary
to achieve greater visibility into all
extensions of credit secured by a
dwelling, as discussed above in the
section-by-section analysis of
§ 1003.2(g)(1). In addition, for the
reasons discussed above in the sectionby-section analysis of § 1003.2(g)(1), the
final rule also incorporates a two-year
look-back period for nondepository
institution coverage.
Asset-Size or Loan-Volume Threshold
The current coverage criteria for
nondepository institutions include an
asset-size or loan-volume threshold.175
This test is satisfied both by institutions
that meet a certain asset-size threshold
and by those with smaller asset sizes
that have a higher loan-volume.176 The
Bureau proposed to eliminate the assetsize or loan-volume threshold for
nondepository institutions currently
included in Regulation C because, for
the reasons discussed above, the Bureau
believes it is important to increase
visibility into the practices of
nondepository institutions. A few
industry commenters objected to the
proposal’s elimination of the asset-size
portion of the asset-size or loan-volume
threshold for nondepository
institutions. The Bureau believes that
the current asset-size or loan-volume
threshold is no longer necessary,
because the Bureau is adopting the 25
closed-end mortgage loan-volume
threshold and 100 open-end line of
credit threshold discussed in this
section. Under the final rule,
nondepository institutions will be
required to report if they originated 25
closed-end mortgage loans or 100 openend lines of credit in each of the two
preceding calendar years. An
institution’s asset-size will no longer
trigger reporting (i.e., nondepository
institutions with assets greater than $10
million that originated fewer than 25
closed-end mortgage loans or fewer than
100 open-end lines of credit in each of
the two preceding calendar years will
not be required to report HMDA data).
In addition, at this time and in light of
the coverage criteria being finalized, the
Bureau does not believe the asset-size
exemption is necessary. The Bureau
believes that it is appropriate to exercise
its discretion under HMDA section
309(a) to eliminate the exemption of
certain nondepository institutions based
on their asset-size.177
175 Section
176 Section
1003.2 (financial institution) (2).
1003.2 (financial institution)
(2)(B)(iii).
177 The Bureau consulted with HUD as part of the
interagency consultation process for this
rulemaking.
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Loan-Amount or Loan-Volume
Threshold
No commenters discussed the
proposed new implementation of
HMDA sections 303(3)(B) and 303(5),
which require persons other than banks,
savings associations, and credit unions
that are ‘‘engaged for profit in the
business of mortgage lending’’ to report
HMDA data. As the Bureau stated in the
proposal, the Bureau interprets these
provisions, as the Board also did, to
evince the intent to exclude from
coverage institutions that make a
relatively small volume of mortgage
loans.178 In light of more recent
activities of nondepository institutions
discussed above, the Bureau believes
that Regulation C’s current coverage test
for nondepository institutions
inappropriately excludes certain
persons that are engaged for profit in the
business of mortgage lending. The
Bureau estimates that financial
institutions that reported 25 loans in
HMDA for the 2012 calendar year
originated an average of approximately
$5,359,000 in covered loans annually.
Given this level of mortgage activity,
and consistent with the policy reasons
discussed above, the Bureau interprets
‘‘engaged for profit in the business of
mortgage lending’’ to include
nondepository institutions that
originated at least 25 closed-end
mortgage loans or 100 open-end lines of
credit in each of the two preceding
calendar years. Due to the questions
raised about potential risks posed to
applicants and borrowers by
nondepository institutions and the lack
of other publicly available data sources
about nondepository institutions, the
Bureau believes that requiring
additional nondepository institutions to
report HMDA data will better effectuate
HMDA’s purposes.
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2(h) Home-Equity Line of Credit
Regulation C currently defines
‘‘home-equity line of credit’’ as an openend credit plan secured by a dwelling as
defined in Regulation Z (Truth in
Lending), 12 CFR part 1026. The Bureau
did not propose to change this
definition. Existing § 1003.4(c)(3), in
turn, provides that financial institutions
optionally may report home-equity lines
of credit made in whole or in part for
home improvement or home purchase
purposes. As discussed in the sectionby-section analysis of § 1003.2(e) and
(o), the Bureau proposed to expand
Regulation C’s transactional coverage to
require reporting of all home-equity
lines of credit.
178 See
54 FR 51356, 51358–59 (Dec. 15, 1989).
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As part of the shift to dwellingsecured coverage, the Bureau proposed
a separate definition for ‘‘open-end lines
of credit’’ in § 1003.2(o), to reflect the
proposed coverage of both consumerand commercial-purpose lines of credit.
As proposed, § 1003.2(o) generally
defined an open-end line of credit as a
dwelling-secured transaction that was
an open-end credit plan under
Regulation Z § 1026.2(a)(20), but
without regard to whether the
transaction: (1) Was for personal, family,
or household purposes; (2) was
extended by a creditor; or (3) was
extended to a consumer. In other words,
the proposal defined ‘‘open-end line of
credit’’ broadly to include any dwellingsecured open-end credit transaction,
whether for consumer or commercial
purposes, and regardless of who was
extending or receiving the credit. In
general, then, the proposed definition of
open-end line of credit included all
transactions covered by the existing
definition of home-equity line of credit
in § 1003.2. For the reasons discussed
below, the final rule removes the term
‘‘home-equity line of credit’’ from the
regulation, reserves § 1003.2(h), and
retains the term ‘‘open-end line of
credit.’’
As discussed in the section-by-section
analysis of § 1003.2(o), the Bureau
received a large number of comments
about its proposal to require reporting of
all dwelling-secured open-end lines of
credit, and those comments are
addressed in that section. One
commenter specifically addressed the
Bureau’s proposal to define both ‘‘homeequity line of credit’’ and ‘‘open-end
line of credit.’’ The commenter
supported adding a definition for
‘‘open-end line of credit’’ but believed
that distinguishing between open-end
lines of credit and home-equity lines of
credit was confusing. The commenter
suggested that the Bureau streamline the
types of covered transactions into
dwelling-secured closed-end mortgage
loans, dwelling-secured open-end lines
of credit, and reverse mortgages
(whether closed- or open-end).
As discussed in the section-by-section
analysis of § 1003.2(o), the final rule
adopts the proposed definition of openend line of credit largely as proposed.
For simplicity, the final rule removes
the defined term ‘‘home-equity line of
credit’’ and retains the defined term
‘‘open-end line of credit’’ to refer to all
open-end credit transactions covered by
the regulation.
The final rule requires financial
institutions to report whether a
transaction is an open-end line of credit
(§ 1003.4(a)(37)), a commercial- or
business-purpose transaction
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66153
(§ 1003.4(a)(38)), or a reverse mortgage
(§ 1003.4(a)(36)). Using this information,
it will be possible to determine whether
a given open-end line of credit primarily
is for consumer purposes (i.e., a homeequity line of credit) or primarily is for
commercial or business purposes, and
also whether it is a reverse mortgage.
The Bureau thus believes that it is
unnecessary to retain the defined term
‘‘home-equity line of credit.’’
2(i) Home Improvement Loan
Proposed § 1003.2(i) provided that a
home improvement loan was any
covered loan made for the purpose, in
whole or in part, of repairing,
rehabilitating, remodeling, or improving
a dwelling, or the real property on
which the dwelling is located. Pursuant
to the Bureau’s authority under HMDA
section 305(a), the proposal revised
§ 1003.2(i) and its accompanying
commentary to conform to the proposal
to remove non-dwelling-secured home
improvement loans from coverage, and
to clarify when to report dwellingsecured home improvement loans. For
the reasons discussed below, the Bureau
is finalizing § 1003.2(i) largely as
proposed, with certain technical
revisions to the regulation text,179 and
with revisions to the commentary to
streamline it and to add examples or
details requested by commenters.
The Bureau received numerous
comments from consumer advocacy
groups, financial institutions, trade
associations, and other industry
participants concerning proposed
§ 1003.2(i). Most of the comments
focused on the proposal to exclude nondwelling-secured home improvement
loans from reporting, with nearly all
industry participants supporting the
proposal and consumer advocacy
groups generally opposing it. A few
commenters requested that the Bureau
clarify certain aspects of the
commentary to the home improvement
loan definition.
Non-Dwelling-Secured Home
Improvement Lending
Consumer advocacy groups uniformly
stated that the Bureau should maintain
reporting of home improvement
lending, because such lending has been
particularly important to low- and
179 For example, the final rule replaces the term
‘‘covered loan’’ in § 1003.2(i) with the terms
‘‘closed-end mortgage loan’’ and ‘‘open-end line of
credit.’’ This change reflects the fact that, under
final §§ 1003.2(e) and 1003.3(c)(10), business- or
commercial-purpose transactions are covered loans
only if they are for the purpose of home purchase,
home improvement, or refinancing. Retaining the
term ‘‘covered loan’’ in the definition of home
improvement loan would cause circularity in the
definition of commercial-purpose transactions.
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moderate-income borrowers and
borrowers of color as a way to finance
home repairs. Most of these commenters
did not specifically distinguish between
dwelling-secured and non-dwellingsecured home improvement lending or
specify how they use non-dwellingsecured home improvement lending
data, in particular, to achieve HMDA’s
purposes.
One financial institution urged the
Bureau to retain reporting of nondwelling-secured home improvement
lending, at least on an optional basis.
This commenter stated that nondwelling-secured home improvement
lending can be critical in revitalizing
low-to-moderate income communities,
including in rural areas, and for
financing manufactured home
improvements. The commenter
expressed concern that financial
institutions might stop offering nondwelling-secured home improvement
loans if they were no longer HMDAreportable. The commenter believed that
borrowers would be steered toward
home-equity lines of credit, which
might be unavailable to low- and
moderate-income borrowers with
inadequate home equity. The
commenter argued that optional
reporting would relieve burden for
institutions that choose not to report,
while allowing institutions that do
report to receive credit for serving the
housing needs of their communities.
All other industry commenters that
addressed proposed § 1003.2(i)
supported excluding non-dwellingsecured home improvement loans from
coverage.180 Many of these commenters
stated that reporting such loans is
burdensome and costly because it is
difficult to determine whether the loan
will be used for a housing-related
purpose, because reporting errors occur
frequently, and because examiners have
not treated non-dwelling-secured home
improvement lending consistently.
Other commenters noted that the value
of non-dwelling-secured home
improvement loan data is limited.
Interest rates and terms can vary
dramatically depending on the loan and
non-dwelling collateral used, and
consumers now often use home-equity
lines of credit. One commenter stated
that the burdens of reporting can
outweigh the benefits of making the
loans, because non-dwelling-secured
home improvement loan amounts tend
to be small.
180 Various commenters recommended
eliminating the home improvement purpose
category for all loans. Those comments are
addressed in the section-by-section analysis of
§ 1003.4(a)(3).
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The Bureau is finalizing § 1003.2(i) as
proposed, without a requirement to
report non-dwelling-secured home
improvement loans. At this time, the
Bureau does not believe that the benefits
of requiring reporting of such loans
justify the burdens. For example, many
consumer advocacy group commenters
urged the Bureau to retain reporting of
all home improvement loans because
such loans are important to low-tomoderate income communities. These
commenters, however, did not state that
they or others have used HMDA data
about non-dwelling-secured home
improvement loans to further HMDA’s
purposes. Moreover, as discussed in the
proposal, non-dwelling-secured home
improvement loans may have been
common when HMDA was enacted.
However, such loans now comprise only
a small fraction of transactions
reported,181 and borrowers have other
non-dwelling-secured credit options,
such as credit cards, to fund home
improvement projects.182 Data about
credit card usage for home improvement
purposes, however, is not reported
under HMDA. Without such data, it is
not clear that HMDA users can evaluate
fairly the non-dwelling-secured home
improvement loan data that is reported.
On the other hand, the burdens of
reporting such transactions appear to be
significant. As discussed in the
proposal, these loans are processed,
underwritten, and originated through
different loan origination systems than
are used for dwelling-secured
lending.183 As noted above, many
industry commenters confirmed and
elaborated on the burdens of reporting
non-dwelling-secured home
improvement loans discussed in the
Bureau’s proposal.
On balance, the Bureau concluded
that the compliance burden that will be
eliminated by streamlining the
181 See 79 FR 51731, 51755 (Aug. 29, 2014)
(noting that non-dwelling-secured home
improvement loans comprised only approximately
1.8 percent of all HMDA records in 2012).
182 See id. at 51755, 51765–66 (Aug. 29, 2014)
(citing Arthur Kennickell & Martha Starr-McCluer,
Bd. of Governors of the Fed. Reserve Sys., 80 Fed.
Reserve Bulletin 861, Changes in Family Finances
from 1989 to 1992: Evidence from the Survey of
Consumer Finances, at 874–75 (Oct. 1994),
available at http://www.federalreserve.gov/
econresdata/scf/files/1992_bull1094.pdf; Arthur
Kennickell & Janice Shack-Marquez, Bd. of
Governors of the Fed. Reserve Sys., 78 Fed. Reserve
Bulletin 1, Changes in Family Finances from 1983
to 1989: Evidence from the Survey of Consumer
Finances, at 13 (Jan. 1992), available at http://
www.federalreserve.gov/econresdata/scf/files/
bull0192.pdf; and David Evans & Richard
Schnakebsee, Paying With Plastic, Massachusetts
Institute of Technology Press 98–100 (1991)).
183 See id. at 51755 (Aug. 29, 2014) (citing
Chicago Hearing, supra note 46 and Atlanta
Hearing, supra note 40).
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regulation to require reporting only of
dwelling-secured loans justifies the
relatively small data loss that will
accompany the change. The Bureau
considered, as one commenter
suggested, maintaining optional
reporting of non-dwelling-secured home
improvement loans. However, one of the
proposal’s goals was to simplify
Regulation C’s transactional coverage.
Maintaining optional reporting of nondwelling-secured home improvement
loans would inhibit the Bureau’s ability
to reduce regulatory complexity by
focusing on dwelling-secured lending
for an apparently small benefit.184 Thus,
the final rule requires financial
institutions to report only dwellingsecured loans. Unsecured home
improvement loans and home
improvement loans secured by collateral
other than a dwelling (e.g., a vehicle or
savings account), are not reportable.
One commenter objected that the
Bureau’s proposal to eliminate reporting
of non-dwelling-secured home
improvement loans did not address the
fact that the HMDA statute still requires
reporting of home improvement loans.
The Bureau believes, however, that
requiring financial institutions to report
dwelling-secured home improvement
loans satisfies the statutory requirement.
As the proposal noted, HMDA does not
expressly define ‘‘home improvement
loan.’’ Although non-dwelling-secured
home improvement loans traditionally
have been reported, the Bureau believes
that it is reasonable to interpret HMDA
section 303(2) to include only loans that
are secured by liens on dwellings, as
that interpretation aligns with common
definitions of the term mortgage loan,
and such loans will include home
improvement loans.185
The Bureau also is eliminating
reporting of non-dwelling-secured home
improvement loans pursuant to its
authority under section 305(a) of
HMDA, as the Bureau believes that this
adjustment and exception is necessary
and proper to effectuate HMDA’s
purposes and to facilitate compliance.
Specifically, the Bureau believes that
non-dwelling-secured home
improvement loan data may distort the
overall quality of the HMDA dataset for
the reasons described above. The
Bureau believes that eliminating
reporting of non-dwelling-secured home
improvement loans will improve the
184 The Bureau acknowledges that removing nondwelling-secured home improvement lending will
affect some institutions’ reported transaction
volumes, which in turn will affect CRA reporting.
The Bureau will work with other regulators during
the Regulation C implementation period to address
these issues.
185 See 79 FR 51731, 51755–56 (Aug. 29, 2014).
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quality of HMDA data, which will
provide citizens and public officials of
the United States with sufficient
information to enable them to determine
whether financial institutions are
meeting the housing needs of their
communities and to assist public
officials in determining how to
distribute public sector investments in a
manner designed to improve the private
investment environment. The Bureau
further believes that eliminating these
loans will facilitate compliance by
removing a significant reporting burden.
Home Improvement Loan Definition
A few commenters asked the Bureau
to clarify certain aspects of home
improvement loan reporting as
addressed in the commentary. The final
rule adopts the commentary generally as
proposed, but with several revisions and
additions to address commenters’
questions, as well as certain other
modifications for clarity, as discussed
below.
Proposed comment 2(i)–1, which
provided general guidance about home
improvement loans, is adopted as
proposed, but with several nonsubstantive revisions for clarity and
with an additional example of a
transaction that meets the home
improvement loan definition. Consistent
with the final rule’s requirement under
§ 1003.2(d) to report loans completed
pursuant to a New York CEMA, final
comment 2(i)–1 explains that, where all
or a portion of the funds from a CEMA
transaction will be used for home
improvement purposes, the loan is a
home improvement loan under
§ 1003.2(i). One commenter asked
whether loans that are not ‘‘classified’’
by an institution as home improvement
loans nonetheless should be reported as
home improvement loans if the
supporting documents show that they
were for home improvement purposes.
The classification test in existing
Regulation C applies only to nondwelling-secured home improvement
loans. As discussed, the final rule
eliminates such loans from coverage.
Under the final rule, there no longer is
any requirement that a loan be
‘‘classified’’ by a financial institution as
a home improvement loan to be a home
improvement loan under § 1003.2(i).
The Bureau did not propose to revise
existing comment Home improvement
loan-3. The final rule adopts this
comment as comment 2(i)–3 with minor
revisions to reflect the fact that the final
rule requires reporting of both closedand open-end transactions.
Proposed comment 2(i)–4 concerning
mixed-use properties is adopted largely
as proposed. The comment is revised for
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clarity and to eliminate the statement
that a home improvement loan for a
mixed-use property is reported as such
only if the property itself is primarily
residential in nature. Under § 1003.2(e)
and (f), a transaction is a covered loan
and subject to Regulation C only if it is
secured by a dwelling, which by
definition is property that is primarily
residential in nature. Thus, financial
institutions need not separately
consider whether a dwelling primarily
is residential in nature when
determining whether a loan is a home
improvement loan under § 1003.2(i).
The proposal would have removed
existing comment Home improvement
loan-5, which discusses how to report a
home improvement loan that also is a
home purchase loan or a refinancing,
because the proposal consolidated all
such reporting instructions in § 1003.4.
The final rule retains existing comment
Home improvement loan-5 and adopts it
as comment 2(i)–5 to explain that a
transaction with multiple purposes may
meet multiple loan-type definitions. The
comment provides an example to
illustrate that a transaction that meets
the definition of a home improvement
loan under § 1003.2(i) may also meet the
definition of a refinancing under
§ 1003.2(p). Comment 2(i)–5 also
specifies that instructions for reporting
a multiple-purpose covered loan are in
the commentary to § 1003.4(a)(3).
A few commenters asked the Bureau
to clarify further how a financial
institution determines whether a loan is
a home improvement loan. For example,
one commenter asked whether a cashout refinance also is a home
improvement loan if the borrower states
that some of the cash may be used for
home improvement. Another asked
whether a loan is a home improvement
loan when a consumer states that a loan
is for home improvement purposes but
it is in fact for purchasing a household
item. This commenter also requested
that ‘‘small-dollar’’ home improvement
loans be exempt from reporting.
In response to these comments, the
final rule includes comment 2(i)–6,
which provides that a financial
institution relies on the borrower’s
stated purpose for the loan when the
application is received or the credit
decision is made, and need not confirm
that the borrower actually uses any of
the funds for home improvement
purposes. If the borrower does not state
that any of the funds will be used for
home improvement purposes, or does
not state any purpose for the funds, the
loan is not a home improvement loan.
Section 1003.4(a)(3) and related
commentary provide instructions about
how to report such loans. See the
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66155
section-by-section analysis of
§ 1003.4(a)(3). The final rule does not
specifically exempt small-dollar home
improvement loans, because the Bureau
believes that information about such
loans is valuable, but the final rule
retains in § 1003.3(c)(7) the current
exclusion from coverage for transactions
for less than $500.
2(j) Home Purchase Loan
Regulation C currently provides that a
home purchase loan is a loan secured by
and made for the purpose of purchasing
a dwelling. Proposed § 1003.2(j) revised
the definition to provide that a home
purchase loan is a ‘‘covered loan’’
extended for the purpose of purchasing
a dwelling. The proposal also revised
the commentary to proposed § 1003.2(j)
in several ways, primarily to conform
the commentary to the proposal’s
overall shift to covering only dwellingsecured transactions. Only a handful of
commenters addressed proposed
§ 1003.2(j) or its accompanying
commentary, and none of them
specifically commented on the proposed
regulation text. The Bureau is finalizing
§ 1003.2(j) largely as proposed, with
technical revisions for clarity.186 The
Bureau is finalizing the commentary to
§ 1003.2(j) with revisions to address
questions that commenters raised
regarding assumptions, to clarify how
Regulation C applies to multiplepurpose transactions, and to remove
certain comments as unnecessary.
First, the Bureau is not adopting
proposed comment 2(j)–1 in the final
rule. Proposed comment 2(j)–1 provided
general guidance about the definition of
home purchase loan, including an
illustrative example stating that a home
purchase loan includes a closed-end
mortgage loan but does not include a
home purchase completed through an
installment contract. No commenters
addressed proposed comment 2(j)–1.
The final rule incorporates the terms
‘‘closed-end mortgage loan’’ and ‘‘openend credit plan’’ in § 1003.2(j). Thus,
there is no need to restate in
commentary that a closed-end mortgage
loan used to purchase a dwelling is a
home purchase loan. The Bureau is
finalizing the illustrative example
discussing installment contracts in
commentary to § 1003.2(d), which
186 Specifically, the final rule replaces the term
‘‘covered loan’’ in § 1003.2(j) with the terms
‘‘closed-end mortgage loan’’ and ‘‘open-end line of
credit.’’ This change reflects the fact that, under
final §§ 1003.2(e) and 1003.3(c)(10), business- or
commercial-purpose transactions are covered loans
only if they are for the purpose of home purchase,
home improvement, or refinancing. Retaining the
term ‘‘covered loan’’ in the definition of home
purchase loan would cause circularity in the
definition of commercial-purpose transactions.
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provides guidance about the term
closed-end mortgage loan. See the
section-by-section analysis of
§ 1003.2(d).
The proposal renumbered as proposed
comment 2(j)–2 existing comment Home
purchase loan-1, which provides that a
home purchase loan includes a loan
secured by one dwelling and used to
purchase another dwelling. Two
industry commenters stated that ‘‘home
purchase loan’’ should not include these
loan types and recommended that they
be defined instead as ‘‘home-equity
loans.’’ The commenters stated that,
under Regulation Z, a loan is not a home
purchase loan (i.e., a ‘‘residential
mortgage transaction’’ under Regulation
Z § 1026.2(a)(24)) unless its funds are
used to purchase the property securing
the dwelling. The commenters stated
that industry stakeholders generally
view loans secured by one dwelling but
used to purchase a different dwelling as
home-equity loans, not as purchase
loans.
Revising § 1003.2(j) in the way that
commenters suggested would better
align Regulations C and Z. In general,
regulatory consistency is desirable;
however, HMDA’s purposes are
different from Regulation Z’s purposes.
To understand how financial
institutions are meeting the housing
needs of their communities, it is
important to understand the total
volume of loans made to purchase
dwellings, even if those loans are
secured by dwellings other than the
ones being purchased. The suggested
revision also would require adding a
new defined term, home-equity loan, to
Regulation C. This term necessarily
would lump together loans secured by
one dwelling, but used to purchase,
improve, or refinance loans on other
dwellings; reporting the loans in this
way would obscure the valuable
information described above. Thus, the
Bureau is finalizing proposed comment
2(j)–2 largely as proposed, with certain
non-substantive revisions for clarity,
and renumbered as comment 2(j)–1.
The Bureau received no comments
addressing proposed comment 2(j)–3,
which made only minor revisions to
existing comment Home purchase loan2 addressing whether a transaction to
purchase a mixed-use property is a
home purchase loan. However, the final
rule eliminates this comment as
unnecessary. As proposed, the comment
stated that a transaction to purchase a
mixed-use property is a home purchase
loan if the property primarily is used for
residential purposes, and it provided
guidance about how to determine the
primary use of the property. Under the
final rule, a transaction is not covered
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by Regulation C unless it is secured by
a dwelling, which is defined under
§ 1003.2(f) to include only mixed-use
properties that primarily are used for
residential purposes. Because financial
institutions will have determined under
§ 1003.2(f) whether a mixed-used
property is a dwelling, there is no need
to reevaluate that decision when
determining whether a transaction is a
home purchase loan.
Consistent with the proposal’s
consolidation of excluded transactions
into § 1003.3(c), the proposal moved
existing comment Home purchase loan3, which discusses agricultural-purpose
loans, to proposed comment 3(c)(9)–1.
No commenters addressed this
reorganization, and the Bureau is
finalizing proposed comment 3(c)(9)–1,
with revisions, as discussed in the
section-by-section analysis of
§ 1003.3(c)(9).
The proposal did not propose to
revise existing comments Home
purchase loan-4, -5, or -6, and the
Bureau received no comments
addressing them. These comments are
adopted in the final rule as comments
2(j)–2 through –4, respectively, with
minor revisions for clarity.
As discussed in the section-by-section
analysis of § 1003.1(c) regarding
Regulation C’s scope, the proposal
reorganized the commentary to
§ 1003.1(c). Consistent with that
reorganization, the proposal
incorporated a revised version of
existing comment 1(c)–9, which
discusses coverage of assumptions, as
comment 2(j)–7 to the definition of
home purchase loan. One industry
commenter addressed this comment.
The commenter argued that proposed
comment 2(j)–7 should specify,
consistent with Regulation Z, that a
successor-in-interest transaction is not
an assumption.
The final rule adopts proposed
comment 2(j)–7 as comment 2(j)–5, with
revisions to address the comment
received, and with other clarifying
revisions, as follows. First, comment
2(j)–5 states that an assumption is a
home purchase loan only if the
transaction is to finance the new
borrower’s acquisition of the property
(and not, e.g., if the borrower has
succeeded in interest to ownership).187
Also, consistent with § 1003.2(d) and
comment 2(d)–2.ii, which provide that
transactions documented pursuant to
New York consolidation, extension and
modification agreements are extensions
187 However, as discussion in the section-bysection analysis of § 1003.2(d), the final rule
provides that successor-in-interest transactions are
assumptions for purposes of Regulation C.
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of credit, comment 2(j)–5 clarifies that a
transaction in which borrower B
finances the purchase of borrower A’s
dwelling by assuming borrower A’s
existing debt obligation is a home
purchase loan even if the transaction is
documented pursuant to a New York
consolidation, extension, and
modification agreement.
The Bureau proposed to remove
existing comment Home purchase
loan-7, which described how to report
multiple-purpose home-purchase loans,
because the proposal consolidated all
such reporting instructions in § 1003.4.
The final rule retains as comment 2(j)–
6 a variation of existing comment Home
purchase loan-7 to explain that a
transaction with multiple purposes may
meet multiple loan-type definitions. The
comment provides an illustrative
example and specifies that instructions
for reporting a multiple-purpose loan
are in the commentary to § 1003.4(a)(3).
Two commenters requested additional
guidance about the definition of home
purchase loan. One commenter stated
that additional guidance is necessary
because there are several ways to
transfer property ownership to third
parties, not all of which are called a
‘‘purchase.’’ The commenter did not
specify the other methods it was
referencing. As discussed, comment
2(j)–5 provides guidance about two
additional methods of title transfer. The
Bureau can address additional scenarios
in the future, if necessary. Another
commenter requested guidance about
whether a loan to one sibling to
purchase half of another sibling’s home,
which the other sibling owns outright,
is a reportable home purchase loan or a
refinancing when the loan is secured by
the portion of the home being
purchased. Based on the details
provided, such a transaction is
reportable, because it is a dwellingsecured loan and is not excluded under
§ 1003.3(c). Because it is for the purpose
of purchasing a dwelling, and it does
not satisfy and replace an existing,
dwelling-secured debt obligation, it is a
home purchase loan but it is not a
refinancing. See the section-by-section
analysis of § 1003.2(p).
2(k) Loan/Application Register
Regulation C requires financial
institutions to collect and record
reportable data in a format prescribed by
the regulation. The Bureau proposed to
refer to this format as the ‘‘loan
application register’’ to improve the
readability of the regulation and
proposed to define it as a register in the
format prescribed in appendix A. The
Bureau did not receive any comments
on this proposed definition. As
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explained in part I.B above, in order to
streamline the regulation, the final rule
removes appendix A. Therefore, the
Bureau is revising proposed § 1003.2(k)
to remove references to appendix A and
defining loan/application register to
mean both the record of information
required to be collected pursuant to
§ 1003.4 and the record submitted
annually or quarterly, as applicable,
pursuant to § 1003.5(a). In addition, the
Bureau is adding ‘‘/’’ to maintain
consistency with the term as currently
used and to clarify that the data
recorded represents applications as well
as loan originations. Accordingly, the
Bureau is adopting § 1003.2(k) with
revisions.
in the proposal.188 Some commenters
requested clarification on the reporting
requirements for multifamily dwellings.
Other comments related to multifamily
residential structures are addressed in
the section-by-section analysis of
§ 1003.2(f). The Bureau is finalizing
§ 1003.2(n) as proposed. In response to
the requests for clarification, the Bureau
is also adding two comments related to
the definition of multifamily dwelling.
Comment 2(n)–1 clarifies how the
definition interacts with the definition
of dwelling and its reference to
multifamily residential structures.
Comment 2(n)–2 clarifies the special
reporting requirements applicable to
multifamily dwellings.
2(l) Manufactured Home
2(o) Open-End Line of Credit
HMDA section 303(2) defines
‘‘mortgage loan’’ as a residential real
property-secured loan or a home
improvement loan but does not
specifically address coverage of openend lines of credit secured by dwellings.
Regulation C also currently does not
define the term ‘‘open-end line of
credit.’’ However, as discussed in the
section-by-section analysis of
§ 1003.2(h), Regulation C currently
defines the term ‘‘home-equity line of
credit’’ as an open-end credit plan
secured by a dwelling as defined in
Regulation Z. Under existing Regulation
C § 1003.4(c)(3), financial institutions
may, but are not required to, report
home-equity lines of credit made in
whole or in part for home purchase or
home improvement purposes.189
Commercial-purpose lines of credit
secured by a dwelling fall outside of
Regulation Z’s definition of open-end
credit plan and thus are not optionally
reported as home-equity lines of credit
under existing Regulation C.
In 2000, in response to the increasing
importance of open-end lending in the
housing market, the Board proposed to
revise Regulation C to require
mandatory reporting of all home-equity
lines of credit.190 The Board’s proposal
was based on research showing that
about 70 percent of all home-equity
The Bureau proposed to make
technical corrections and minor
wording changes to the definition of
manufactured home. Commenters
generally supported aligning the
definition of manufactured home with
the HUD standards and clarifying that
other factory-built homes and
recreational vehicles are excluded.
Other comments related to coverage and
reporting of manufactured homes and
similar residential structures are
discussed in the section-by-section
analysis of § 1003.2(f) and § 1003.4(a)(5).
The Bureau is finalizing § 1003.2(l)
generally as proposed, with minor
revisions. The definition is revised to
clarify that, for purposes of the
construction method reporting
requirement under § 1003.4(a)(5), a
manufactured home community should
be reported as manufactured home. The
Bureau received no specific feedback on
proposed comments 2(l)–1 and –2,
which are adopted as proposed.
2(m) Metropolitan Statistical Area
(MSA) and Metropolitan Division (MD)
Section 1003.2 of Regulation C sets
forth a definition for the terms
‘‘metropolitan statistical area or MSA’’
and ‘‘Metropolitan Division or MD.’’
The Bureau is adopting a technical
amendment to this definition and its
commentary. No substantive change is
intended.
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2(n) Multifamily Dwelling
The Bureau proposed to add a new
definition of multifamily dwelling as
§ 1003.2(n). Commenters supported the
Bureau’s proposal to define a
multifamily dwelling as one that
includes five or more individual
dwelling units. A few commenters also
supported the inclusion of
manufactured home parks, as discussed
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lines of credit were being used at least
in part for home improvement purposes.
The Board believed that requiring
reporting of all home-equity lines of
credit would provide more complete
information about the home
improvement market, one of HMDA’s
original purposes.191 The Board’s 2002
final rule concluded that, while
collecting data on home-equity lines of
credit would give a more complete
picture of the home mortgage market,
the benefits of mandatory reporting
relative to other proposed changes (such
as collecting information about higherpriced loans) did not justify the
increased burden.192 The Board thus
decided to retain optional reporting.
Open-end mortgage lending
continued to increase in the years
following the Board’s 2002 final rule,
and the Board continued to receive
feedback urging such lending to be
reported in HMDA.193 The Bureau
received similar feedback after it
assumed rulemaking authority for
HMDA from the Board in 2011.194 The
feedback suggested that home-equity
lines of credit have become increasingly
important to the housing market and
that requiring such lending to be
reported under Regulation C would help
to understand how financial institutions
are meeting the housing needs of
communities. The Bureau thus
proposed to require financial
institutions to report all home-equity
lines of credit, as well as all
commercial-purpose lines of credit
secured by a dwelling.
Specifically, the Bureau proposed
new § 1003.2(o) to define the term
‘‘open-end line of credit,’’ which
included any dwelling-secured openend credit plan, as described under
Regulation Z § 1026.2(a)(20), even if the
credit was issued by someone other than
a creditor (as defined in Regulation Z
§ 1026.2(a)(17)), to someone other than
a consumer (as defined in Regulation Z
§ 1026.2(a)(11)) and for business rather
than consumer purposes (as defined in
191 See
65 FR 78656, 78659–60 (Dec. 15, 2000).
67 FR 7222, 7225 (Feb. 15, 2002).
193 See, e.g., Donghoon Lee et al., Fed. Reserve
Bank of New York, Staff Report No. 569, A New
Look at Second Liens, at 11 (Aug. 2012)
(approximately $20 billion in home-equity lines of
credit were originated in the fourth quarter of 1999;
by the fourth quarter of 2005, approximately $125
billion in HELOCs were originated). See generally,
e.g., Atlanta Hearing, supra note 40; San Francisco
Hearing, supra note 42; Chicago Hearing, supra note
46; Washington Hearing, supra note 39.
194 See, e.g., National Community Reinvestment
Coalition et al., Creating Comprehensive HMDA and
Loan Performance Databases: White Paper
Submitted to the Consumer Financial Protection
Bureau at 15 (Feb. 15, 2013), available at http://
www.empirejustice.org/assets/pdf/policy-advocacy/
consumer-organizations-urge.pdf.
192 See
188 79 FR 51731, 51749 (Aug. 29, 2014); Fed. Fin.
Insts. Examination Council, CRA/HMDA Reporter,
Changes Coming to HMDA Edit Reports in 2010
(Dec. 2010), available at http://www.ffiec.gov/
hmda/pdf/10news.pdf.
189 Under existing Regulation C § 1003.4(a)(7) and
comment 4(a)(7)–3, if a financial institution opts to
report home-equity lines of credit, it reports only
the portion of the line intended for home
improvement or home purchase.
190 Home-equity lines of credit were rare in the
1970s and early 1980s when Regulation C was first
implemented. Regulation C first addressed homeequity lines of credit in 1988, when it permitted
financial institutions to report home-equity lines of
credit that were home improvement loans. See 53
FR 31683, 31685 (Aug. 19, 1988).
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Regulation Z § 1026.2(a)(12)). Together
with proposed § 1003.2(e), which
provided that all open-end lines of
credit were ‘‘covered loans,’’ proposed
§ 1003.2(o) provided that financial
institutions must report: (1) all
consumer-purpose home-equity lines of
credit, which currently are optionally
reported, and (2) all dwelling-secured
commercial-purpose lines of credit,
which currently are not reported. In
short, the proposal provided for
reporting of all dwelling-secured openend lines of credit.195
As discussed below and in the
section-by-section analyses of
§ 1003.2(e) and (g) and of § 1003.3(c)(10)
and (12), the Bureau is finalizing
mandatory reporting of open-end lines
of credit, but with certain modifications
from the proposal to: (1) Limit the
number of institutions that will report;
(2) limit the number of transactions that
will be reported; (3) clarify certain
reporting requirements for open-end
lines of credit; and (4) clarify the
definition of ‘‘open-end line of credit.’’
As discussed below, the Bureau believes
that finalizing mandatory reporting of
open-end lines of credit will provide
information critical to HMDA’s
purposes. The Bureau understands that,
notwithstanding the modifications
described above, financial institutions
may incur significant costs as a result of
open-end line of credit reporting.
However, the Bureau believes that the
benefits of reporting justify the burdens.
The Bureau received a large number
of comments about proposed
§ 1003.2(o). The vast majority of the
comments discussed whether reporting
of dwelling-secured open-end lines of
credit should be mandatory and, if so,
the scope of transactions that should be
reported. A few commenters raised
specific questions about the proposed
definition of open-end line of credit.
Consumer advocacy group commenters
and researchers favored mandatory
reporting, while the majority of industry
commenters strongly opposed it. Among
industry commenters that addressed
mandatory reporting, most objected to
reporting any open-end lines of credit.
Some, however, specifically objected to
mandatory reporting of commercialpurpose lines of credit. For
organizational purposes, the Bureau
addresses in this section-by-section
analysis comments about: (1) Open-end
line of credit coverage generally; (2)
consumer-purpose line of credit
coverage specifically; and (3) the
definition of ‘‘open-end line of credit’’
195 79
FR 51731, 51757–59 (Aug. 29, 2014).
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in proposed § 1003.2(o).196 Comments
specific to commercial-purpose lines of
credit are addressed in the section-bysection analysis of § 1003.3(c)(10)
concerning commercial-purpose
transactions.
Consumer advocacy group
commenters and researchers favored
mandatory reporting of all consumerpurpose open-end lines of credit. A
large number of these commenters
stated that data about open-end lines of
credit would be valuable in assessing
whether neighborhoods are receiving
the full range of credit that they need on
nondiscriminatory terms. The
commenters stated that open-end lines
of credit are much more widely used
today than when HMDA was enacted,
that problematic practices were
associated with these products during
the 2000s, that defaults on open-end
credit lines contributed significantly to
the foreclosure crises in many
neighborhoods, and that open-end
credit lines are important sources of
home improvement financing,
particularly in minority and immigrant
communities. The commenters stated
that fully understanding the mortgage
market, including problems relating to
overextension of credit in minority and
immigrant neighborhoods, requires
more detailed information about such
transactions. They stated that
information about home-equity
products, for example, is important for
understanding the total amount of debt
and, in turn, default risk on a property.
A few consumer advocacy group
commenters noted that open-end lines
of credit, especially when fully drawn at
account opening, can be interchangeable
with closed-end products such as
closed-end, subordinate-lien loans and
cash-out refinancings. All such products
provide borrowers with cash to do
something, borrowers face the same
risks of discrimination, and borrowers
put their homes on the line in exchange
for the funds. Commenters argued that
requiring reporting of all dwellingsecured closed-end mortgage loans
while continuing optional reporting of
open-end lines of credit only would
encourage more open-end lending,
which in turn would decrease visibility
into home-secured lending. Finally, one
commenter noted that there is a lack of
other publicly available information
196 Many commenters used the common phrase
‘‘home-equity lines of credit’’ or ‘‘HELOC’’ to
discuss all open-end mortgage lending. For
simplicity and to align with the final rule’s deletion
of the defined term ‘‘home-equity line of credit’’
from Regulation C (see the section-by-section
analysis of § 1003.2(h)), the Bureau hereinafter
refers to covered (i.e., dwelling-secured) open-end
transactions simply as consumer- or commercialpurpose ‘‘open-end lines of credit.’’
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about dwelling-secured open-end lines
of credit.
A minority of industry commenters
either supported (or stated that they did
not oppose) reporting consumerpurpose open-end lines of credit.197 A
few of these commenters argued that
eliminating optional open-end line of
credit reporting for consumer-purpose
credit lines would reduce confusion and
compliance costs by streamlining
reporting obligations, or would improve
data for HMDA users. Some industry
commenters believed that data about
consumer-purpose open-end lines of
credit would serve HMDA’s purposes.
For example, one industry commenter
acknowledged that, even though
reporting open-end lines of credit would
be burdensome, the data reported would
provide additional information for fair
lending use.
A large number of industry
commenters objected to mandatory
reporting of consumer-purpose openend lines of credit; a few of these
commenters suggested that only credit
lines for home purchase, home
improvement or refinancing should be
reported. Commenters generally
asserted that mandatory reporting
would impose significant burdens for
little benefit. Some argued that the
burdens are what have kept most
financial institutions from voluntarily
reporting home-equity line of credit data
under current Regulation C. Financial
institutions of various types and sizes
objected to mandatory reporting, but
smaller- or medium-sized banks and
their industry associations, and credit
unions and their industry associations,
generally expressed the greatest
concerns, with some stating that openend coverage was their primary concern
with the proposal.
A primary concern among many
financial institutions and industry
associations, and particularly among
many credit unions and credit union
associations, was the operational costs
and burdens of collecting and reporting
data about open-end lines of credit. The
most commonly cited operational
difficulty was that financial institutions
treat open-end lines of credit more like
consumer loans than mortgage loans.
Thus, financial institutions frequently
originate and maintain data about openend lines of credit on different computer
systems than traditional mortgages, or
use different software vendors.
Commenters asserted that upgrading,
replacing, or programming their systems
197 Industry commenters unanimously opposed
reporting dwelling-secured commercial-purpose
open-end lines of credit. The Bureau addresses
those comments in the section-by-section analysis
of § 1003.3(c)(10).
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to enable open-end reporting would be
difficult, expensive, and timeconsuming. For example, financial
institutions could use their mortgage
loan origination systems for open-end
reporting, but those systems are more
expensive than the consumer systems
typically used for credit lines.
Commenters noted that, if financial
institutions decided to keep separate
systems for open- and closed-end credit,
they would incur costs from
programming and adding data fields in
multiple systems, as well as from
compiling and aggregating the data. For
some (smaller) institutions, aggregating
the data would mean manually entering
data from two different systems.
Some commenters similarly observed
that financial institutions use different
departments, staff, and processes to
originate open-end lines of credit and
traditional mortgages. Commenters
argued that open-end reporting would
require financial institutions to incur
costs to change their operations. For
example, consumer lending staff either
would need to be trained on HMDA
reporting, or credit line originations
would need to be moved from the
consumer- to the mortgage-lending
divisions of financial institutions. Some
commenters also argued that reporting
open-end lines of credit would require
institutions to spend even more time
and money on quality control and presubmission auditing and would increase
the risk of errors.
A number of commenters perceived
other types of operational burdens. For
example, a few commenters emphasized
that the reporting burden would be
particularly great because it would be
entirely new even for most current
HMDA reporters, so infrastructure
would need to be built from the ground
up. A few commenters similarly worried
that some institutions that focus on
open-end lending would become HMDA
reporters for the first time and would
incur significant start-up expenses to
begin reporting. Finally, some
commenters noted that aligning openend lending with the MISMO data
standards would be burdensome.
Many industry commenters argued
that reporting all open-end line of credit
applications and originations would
increase institutions’ ongoing HMDA
reporting costs because their volume of
reportable transactions would increase
significantly. Some commenters
asserted that the proposal
underestimated the increase. Only a
handful of commenters specifically
estimated how many additional
applications and originations they
would be required to report. Estimated
increases ranged from 20 percent to 200
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percent per institution, or from
hundreds to thousands of transactions,
depending on the institution’s size and
volume of open-end mortgage lending.
Many commenters, particularly smaller
institutions, stated that they would need
to hire additional staff, or that they
would need to allocate more money to
technology and staff, to handle the
volume increase. A few commenters
estimated that collecting data about all
dwelling-secured open-end lines of
credit would double or triple their
ongoing compliance costs.
Several commenters also argued that
reporting open-end lines of credit would
be burdensome because gathering and
accurately reporting information about
credit lines would be difficult. For
example, several industry associations
stated that fewer data are gathered from
consumers for small-dollar, open-end
credit lines than for traditional
mortgages, so lenders would need to
create systems and procedures to collect
the data. One commenter further noted
that lines of credit are consumer loan
products with different offerings by
different institutions and are less
standardized than traditional mortgages.
Another commenter pointed out that
open-end lines of credit are exempt
from other regulations because they are
different than closed-end loans. Some
commenters stated that it would be
burdensome to determine whether, and
if so how, data points apply to open-end
lines of credit. These commenters
asserted that reporting open-end lines of
credit thus could increase reporting
errors. A few of these commenters were
particularly concerned about the
Bureau’s proposal to require
information about the first draw on a
home-equity line of credit.
Many commenters argued that, in
addition to being burdensome, reporting
open-end lines of credit would have few
benefits. First, many commenters
asserted that mandatory reporting
would exceed HMDA’s mission and that
the data reported would not serve
HMDA’s purposes. They argued that the
data would not show whether financial
institutions were meeting the housing
needs of their communities because
open-end lines of credit often are used
for personal, non-housing-related,
purposes (e.g., vacations, education, and
bill consolidation). Some commenters
argued that data about credit lines used
for non-housing-related purposes would
produce misleading information about
mortgage markets and that reporting
should be limited, at most, to credit
lines for home purchase, home
improvement, or refinancing purposes.
Others asserted that, even if a consumer
intended to use a line of credit for a
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66159
housing-related purpose, such as home
improvement, financial institutions
could not know at account opening
whether the borrower ever actually
drew on the account or, if so, whether
the funds were used for housing or other
purposes. The commenters thus asserted
that the data reported would not be
useful.
Some commenters argued that data
about open-end lines of credit would
not serve HMDA’s fair lending purpose,
because borrowers taking out open-end
credit lines borrow against the equity in
their homes and are not fully assessed
as new borrowers. A few commenters
asserted that it was inappropriate for the
Bureau to require open-end reporting for
market monitoring and research
purposes or to address safety and
soundness concerns. One commenter
argued that open-end lines of credit are
less risky for consumers than closed-end
loans, because they often are smaller,
with smaller payments that are easier to
make. Another argued that the change
was not required by the Dodd-Frank
Act.
Many commenters also argued that
mandating reporting of open-end lines
of credit would be of little benefit,
because certain current and proposed
data points (e.g., results from automated
underwriting systems, some pricing
data, and whether a transaction has nonamortizing features) would not apply to
open-end credit. In addition, many
commenters stated that mixing data
about open-end, ‘‘consumer-purpose’’
transactions with traditional, closed-end
mortgage loans will skew HMDA data
and impair its integrity for HMDA users.
Finally, a few commenters noted that
the Board previously had considered
and rejected mandatory reporting of
open-end lines of credit; these
commenters asserted that the Board had
found that open-end reporting would
not serve HMDA’s purposes.
A few smaller financial institutions,
credit unions, and credit union leagues
predicted that they or other small
institutions could be forced to stop
offering open-end lines of credit. Others
argued that adding open-end line of
credit reporting would strain the limited
resources of smaller banks and credit
unions already struggling with
burdensome compliance requirements,
would inhibit such institutions from
serving their customers, would increase
costs to consumers and credit union
members, or could force such
institutions to exit the market for homeequity lines of credit, thereby reducing
consumers’ low-cost credit options.
Commenters suggested various
alternatives to mandatory reporting of
open-end lines of credit. Some urged the
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Bureau to maintain optional reporting,
while others asserted that open-end
lines of credit should be excluded from
reporting altogether. Some argued that
smaller- or medium-sized banks and
credit unions should be exempt from
reporting, because small institutions did
not cause the financial crisis and
reporting would burden them unfairly.
As noted, a few commenters urged the
Bureau to require reporting only of
open-end lines of credit for home
purchase, home improvement, or
refinancing purposes.
The Bureau has considered the
comments concerning mandatory
reporting of open-end lines of credit,
and the Bureau is finalizing § 1003.2(o)
largely as proposed, but without
covering certain commercial-purpose
lines of credit.198 The Bureau is
finalizing separate open-end line of
credit coverage thresholds under
§ 1003.2(g) and § 1003.3(c)(12) to ensure
that only financial institutions with a
minimum level of open-end line of
credit originations will be required to
report.199 The Bureau acknowledges
that, even with these modifications,
many financial institutions may incur
significant costs to report their open-end
lines of credit, and that one-time costs
may be particularly large. However, the
Bureau believes that the benefits of
mandatory reporting justify those costs.
As discussed in the proposal, the
Bureau believes that including
dwelling-secured lines of credit within
the scope of Regulation C is a reasonable
interpretation of HMDA section 303(2),
which defines ‘‘mortgage loan’’ as a loan
secured by residential real property or a
home improvement loan. The Bureau
interprets ‘‘mortgage loan’’ to include
dwelling-secured lines of credit, as they
are secured by residential real property
and they may be used for home
improvement purposes.200 Moreover,
pursuant to section 305(a) of HMDA, the
Bureau believes that requiring reporting
of all dwelling-secured, consumerpurpose open-end lines of credit is
necessary and proper to effectuate the
purposes of HMDA and to prevent
circumvention of evasion thereof.201
HMDA and Regulation C are designed to
provide citizens and public officials
sufficient information about mortgage
lending to ensure that financial
institutions are serving the housing
needs of their communities, to assist
public officials in distributing public
198 See the section-by-section analysis of
§ 1003.3(c)(10).
199 See the section-by-section analyses of
§ 1003.2(g)(1)(v)(B) and (2)(ii)(B) and of
§ 1003.3(c)(12).
200 See 79 FR 51731, 51758–59 (Aug. 29, 2014).
201 See id. at 51759.
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sector investments, and to identify
possible discriminatory lending
patterns. The Bureau believes that
collecting information about all
dwelling-secured, consumer-purpose
open-end lines of credit serves these
purposes.202
First, financial institutions will know,
and the data will show, when an openend line of credit is being taken out for
the purpose of purchasing a home. This
data alone will serve HMDA’s purposes
by providing information about how
often, on what terms, and to which
borrowers’ institutions are originating
open-end lines of credit to finance home
purchases. Although many commenters
argued that dwelling-secured lines of
credit are used for purposes unrelated to
housing, in the years leading up to the
financial crisis, they often were made
and fully drawn more or less
simultaneously with first-lien homepurchase loans (i.e., as piggybacks),
essentially creating high loan-to-value
ratio home-purchase transactions that
were not visible in the HMDA
dataset.203 Some evidence suggests that
piggyback lending may be on the rise
again now that the market has begun to
recover from the crisis.204
Second, the data will help to
understand how often, on what terms,
and to which borrowers institutions are
originating open-end lines of credit for
home improvement purposes. It is true,
as many commenters argued, that funds
from lines of credit may be used for
many purposes, and that lenders cannot
track how funds ultimately are used.
However, the same is true of funds
obtained through cash-out refinancings,
which currently are reported under
Regulation C, and through closed-end
home-equity loans and reverse
mortgages, some of which are reportable
today and all of which will be
reportable under the final rule (unless
202 Contrary to some commenters’ assertions, the
Board did not find that open-end reporting would
not serve HMDA’s purposes; rather, the Board in
2002 determined that the burdens of open-end
reporting did not justify the benefits at that time.
203 See, e.g., Donghoon Lee et al., Fed. Reserve
Bank of New York, Staff Report No. 569, A New
Look at Second Liens, at 11 (Aug. 2012) (estimating
that, prior to the crisis, as many as 45 percent of
purchasers in coastal and bubble areas used a
piggyback loan to subsidize the down payment on
a first mortgage, hoping to eliminate the need for
mortgage insurance).
204 See, e.g., Joe Light and AnnaMaria Andriotis,
Borrowers Tap Their Homes at a Hot Clip, Wall St.
J., May 29, 2014), available at http://www.wsj.com/
articles/borrowers-tap-their-homes-at-a-hot-clip1401407763 (discussing the recent increase in
home-equity line of credit lending and noting that
some lenders have begun to bring back piggyback
loans, which ‘‘nearly vanished’’ during the
mortgage crisis).
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an exception applies).205 Funds from all
of these products may be used for
personal purposes, but they may also be
used for home improvement (and home
purchase) purposes. Citizens and public
officials long have analyzed data about
such products to understand how
financial institutions are satisfying
borrowers’ needs for home improvement
lending.206
The Bureau believes that financial
institutions serve the housing needs of
their communities not only by
providing fair and adequate financing to
purchase and improve homes, but also
by ensuring that neither individual
borrowers nor particular communities
are excessively overleveraged through
open-end home-equity borrowing. The
Bureau thus declines to limit reporting
of open-end mortgage lending to
transactions for home purchase, home
improvement, or refinancing purposes,
as some commenters suggested. Openend home-equity lending, regardless of
how the funds are used, liquefies equity
that borrowers have built up in their
homes, which often are their most
important assets. Borrowers who take
out dwelling-secured credit lines
increase their risk of losing their homes
to foreclosure when property values
decline.
Indeed, as discussed in the proposal,
open-end line of credit originations
expanded significantly during the mid2000s, particularly in areas with high
home-price appreciation, and research
indicates that speculative real estate
investors used open-end lines of credit
to purchase non-owner-occupied
investment properties, which correlated
with higher first mortgage defaults and
home-price depreciation.207 In short,
overleverage due to open-end mortgage
lending and defaults on dwellingsecured open-end lines of credit
contributed to the foreclosure crises that
many communities experienced in the
late 2000s. Communities’ housing needs
would have been better served if these
crises could have been avoided (or
remedied more quickly).208 Had open205 As discussed in the section-by-section analysis
of § 1003.2(q), commenters raised some of the same
concerns about reverse mortgages. The final rule
requires reporting of all reverse mortgages for the
reasons discussed in the section-by-section analysis
of § 1003.2(q).
206 For example, financial institutions currently
report closed-end home-equity loans when
borrowers indicate that some or all of the funds will
be used for home improvement purposes. Financial
institutions, however, do not track what portion (if
any) of the funds ultimately are used for that
purpose. No data reporting regime can provide
perfect information; the information that is reported
nevertheless assists in serving HMDA’s purposes.
207 See 79 FR 51731, 51757 (Aug. 29, 2014).
208 As noted in the proposal, many public and
private mortgage relief programs encountered
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end line of credit data been reported in
HMDA, the public and public officials
could have had a much earlier warning
of potential risks. The Bureau believes
that obtaining data about open-end
mortgage lending remains critical, with
open-end lending on the rise once again
as home prices have begun to recover
from the financial crisis.209
Finally, mandatory reporting of openend lines of credit will help to
understand whether all dwellingsecured credit is extended on equitable
terms. It may be true, as some
commenters asserted, that borrowers are
not necessarily evaluated for open-end
credit in the same manner as for
traditional mortgage loans and that
adequate home equity is the key
consideration. Lending practices during
the financial crisis demonstrated,
however, that during prolonged periods
of home-price appreciation, lenders
became increasingly comfortable
originating home-equity products to
borrowers with less and less equity to
spare. The more leveraged the borrower,
the more at risk the borrower is of losing
his or her home. Obtaining data about
open-end mortgage lending could show,
during future housing booms, whether
such risky lending practices are
concentrated among certain borrowers
or communities and permit the public
and public officials to respond
appropriately. In this and other ways,
data about open-end lines of credit will
help to assist in identifying possible
discriminatory lending patterns.
Certain commenters pointed out that
several data points will not apply to
open-end lines of credit. However, the
Bureau believes that the public and
public officials will receive valuable
information from all of the data points
unique difficulties assisting distressed borrowers
who had obtained subordinate-lien loans, including
dwelling-secured open-end lines of credit. See 79
FR 51731, 51757 (Aug. 29, 2014).
209 See, e.g., Press Release, Equifax, First Quarter
Mortgage Originations Soar (June 29, 2015),
http://investor.equifax.com/releasedetail.cfm
?ReleaseID=919892 (stating that more than 285,700
new accounts were originated during the first
quarter of 2015, a year-over-year increase of 21.2
percent and the highest level since 2008); CBA, Icon
Market Analysis Finds Growing Consumer Demand
for Home Equity Lines of Credit (Mar. 23, 2015)
(home-equity line of credit originations have
increased in each of the past 13 quarters, with
annual growth of nearly 22 percent in both 2013
and 2014 and an increase of 36 percent for the first
quarter of 2015 versus the first quarter of 2014); Joe
Light and AnnaMaria Andriotis, Borrowers Tap
Their Homes at a Hot Clip, Wall St. J., May 29,
2014), available at http://www.wsj.com/articles/
borrowers-tap-their-homes-at-a-hot-clip1401407763 (quoting the chief economist of Equifax
Inc. that lenders had begun marketing more
aggressively in areas where home prices had
recovered and that originations had picked up as
consumers had returned to home improvement
projects postponed during the crisis).
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that do apply. With applicable data
points, HMDA users will have, for the
first time, good information about which
financial institutions are originating
open-end lines of credit, how
frequently, on what terms, and to which
borrowers. HMDA users will be able to
evaluate whether, and how, financial
institutions are using open-end lines of
credit to serve the housing needs of
their communities. Moreover, as
discussed below, the final rule adopts
several measures to minimize the
burdens to financial institutions of
determining whether and how data
points apply to open-end lines of
credit.210 The final rule also requires
financial institutions to flag whether a
transaction is for closed- or open-end
credit. See § 1003.4(a)(37). This flag
addresses commenters’ concerns about
commingling information about closedend mortgage loans and open-end lines
of credit.211
Not only will data about open-end
lines of credit help to serve HMDA’s
purposes, but the Bureau believes that
expanding the scope of Regulation C to
include dwelling-secured, consumerpurpose lines of credit is necessary to
prevent evasion of HMDA. As discussed
in the proposal, consumer-purpose
open-end lines of credit may be
interchangeable with consumer-purpose
closed-end home-equity products, many
of which currently are reported, and all
of which will be reported, under final
§ 1003.2(d) and (e). The Bureau believes
that, if open- and closed-end consumerpurpose home-equity products are
treated differently under the final rule,
there is a heightened risk that financial
institutions could steer borrowers to
open-end products to avoid HMDA
reporting.212 The Bureau believes that
steering could be particularly attractive
(and risky for borrowers) given that
open-end lines of credit are not subject
210 Some commenters were concerned that
financial institutions would be required to report
the portion of the open-end line of credit that
would be used for home purchase, home
improvement, or refinancing purposes. However,
the final rule, like the proposal, requires financial
institutions to report the total amount of the line at
account opening. See the section-by-section
analysis of § 1003.4(a)(7).
211 Indeed, commingling of information is more a
of problem under existing Regulation C than it will
be under the final rule, because there currently is
no way for users of HMDA data to distinguish
information about optionally reported open-end
lines of credit from the rest of the HMDA dataset.
212 See 79 FR 51731, 51758 (Aug. 29, 2014). The
Bureau believes the risk of steering is highlighted
by lending practices described during the Board’s
2010 Hearings; for example, one individual
described how a loan officer persuaded her to open
a home-equity line of credit simultaneously with
her primary mortgage, even though she had not
inquired about or been interested in opening a line
of credit. See id.
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66161
to the Bureau’s 2013 ATR Final Rule
and currently are subject to less
complete disclosure requirements than
closed-end products under Regulation
Z. The Bureau believes that some
financial institutions likely would
attempt to evade Regulation C if
mandatory reporting were not adopted
for open-end lines of credit. The Bureau
thus has determined that, in addition to
being a reasonable interpretation of the
statute, requiring reporting of dwellingsecured, consumer-purpose open-end
lines of credit also is authorized as an
adjustment that is necessary and proper
to prevent evasion of HMDA.
The Bureau acknowledges that
reporting open-end lines of credit will
impose one-time and ongoing
operational costs on reporting
institutions. The proposal estimated that
the one-time costs of modifying
processes and systems and training staff
to begin open-end line of credit
reporting likely would impose
significant costs on some institutions,
and that institutions’ ongoing reporting
costs would increase as a function of
their open-end lending volume.213 As
discussed above, many commenters
emphasized both these one-time and
ongoing costs.214 The Bureau
acknowledges these costs and
understands that many institutions’
reportable transaction volume many
increase significantly.
As discussed in the proposal, in the
section-by-section analysis of
§ 1003.2(g), and in part VII below, the
Bureau has faced challenges developing
accurate estimates of the likely impact
on institutional and transactional
coverage of mandatory reporting of
open-end lines of credit due to the lack
of available data concerning open-end
lending. These challenges affect the
Bureau’s ability to develop reliable onetime and ongoing cost estimates, as
well, because such costs are a function
of both the number of institutions
reporting open-end data and the number
of transactions each of those institutions
reports.215 After careful analysis, the
213 See id. at 51825–26, 51836–37 (estimating the
one-time and ongoing costs, respectively, to low-,
medium-, and high-complexity institutions of
reporting open-end lines of credit, all dwellingsecured home-equity loans, and reverse mortgages).
214 Certain commenters argued that the proposal
underestimated the costs of reporting open-end
lines of credit. Those comments are addressed in
part VII, along with the methodology the Bureau
has used to estimate the costs of open-end
reporting, and the challenges the Bureau has faced
in developing its estimates.
215 The Bureau solicited information that would
assist it in making these estimates and in
determining whether the estimates provided in the
proposal were accurate, but commenters generally
did not provide responsive data. See 79 FR 51731,
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Bureau has developed estimates of
open-end line of credit origination
volumes by institutions and, as
discussed in part VII, has used those
estimates to estimate both the overall
one-time and overall ongoing costs to
institutions of open-end reporting.216
The Bureau expects that both one-time
and ongoing costs will be larger for
more complex financial institutions that
have higher open-end lending volume
and that will need to integrate separate
business lines, data platforms, and
systems, to begin reporting open-end
lending. Precisely because no good
source of publicly available data exists
concerning dwelling-secured open-end
lines of credit, it is difficult to predict
the accuracy of the Bureau’s cost
estimates, but the Bureau believes that
they are reasonably reliable and
acknowledges that, for many lenders,
the costs of open-end reporting may be
significant. As discussed further below,
the final rule revises the proposal in
several ways to reduce open-end
reporting costs for certain financial
institutions.217
51754 (Aug. 29, 2014). Some commenters argued,
based on their particular institution’s lending
volume, that the Bureau underestimated the
number of open-end lines of credit that institutions
would be required to report. As discussed in part
VII, the proposal’s and the final rule’s estimates of
transaction volumes are averages. Thus, they may
be low for some financial institutions and high for
others. Moreover, some industry commenters did
not distinguish between consumer- and
commercial-purpose credit lines. As discussed in
the section-by-section analysis of § 1003.3(c)(10),
the final rule requires financial institutions to
report only a subset of commercial-purpose lines of
credit. Thus, it is possible that some commenters
overestimated the number of open-end transactions
that they would report under the final rule. Based
on available information, including the feedback
provided by commenters, the Bureau cannot
definitively conclude whether the proposal
significantly underestimated reportable open-end
line of credit volume as a general matter.
216 As noted in part VII, with currently available
sources, the Bureau can reliably estimate: (1) Total
open-end line of credit originations in the market
and (2) subordinate-lien open-end line of credit
originations by credit union. Both of these estimates
are under- and over-inclusive of the open-end
transactions that are reportable under the final rule.
Neither includes applications that do not result in
originations, which will be reported, and both
include commercial-purpose lines of credit, many
of which will be excluded under final
§ 1003.3(c)(10). For banks and thrifts, the Bureau’s
estimates of open-end line of credit originations
have been extrapolated from several data sources
using simplified assumptions and may not
accurately reflect open-end lending by such
institutions.
217 The Bureau does not believe that open-end
reporters will incur burden from aligning with
MISMO. As discussed in part VII, the Bureau did
not propose to require, and the final rule does not
require, any financial institution to use or become
familiar with the MISMO data standards. Rather,
the rule merely recognizes that many financial
institutions are already using the MISMO data
standards for collecting and transmitting mortgage
data and uses similar definitions for certain data
points to reduce burden for those institutions.
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A few commenters argued that
reporting open-end lines of credit will
be difficult because financial
institutions collect less information
from consumers when originating openend products than when originating
traditional, closed-end mortgage loans.
In part, this may be because open-end
lines of credit are not subject to the
Bureau’s 2013 ATR Final Rule.
However, the Bureau believes that this
lack of substantive regulation only
strengthens the need for open-end line
of credit reporting in HMDA so that the
public and policymakers have sufficient
data about the dwelling-secured openend credit market to understand
whether lenders offering open-end
products are serving the housing needs
of their communities.
Methods To Reduce the Burden of
Open-End Line of Credit Reporting
The Bureau is finalizing mandatory
reporting of dwelling-secured
consumer-purpose open-end lines of
credit because of the many benefits
discussed above. The Bureau is
adopting several measures to address
commenters’ concerns about the
burdens of implementing open-end
reporting and their concerns about
ongoing open-end reporting costs.
Institutional coverage threshold. As
discussed in the section-by-section
analysis of § 1003.2(g), the Bureau is
finalizing a separate, open-end
institutional coverage threshold to
determine whether an institution is a
HMDA reporter. As discussed in that
section, the Bureau concluded that its
proposed institutional coverage test
achieved appropriate market coverage of
closed-end mortgage lending. However,
in light of the costs associated with
open-end reporting, the Bureau was
concerned that finalizing the proposed
institutional coverage test would have
required institutions with sufficient
closed-end—but very little open-end—
mortgage lending to incur costs to begin
open-end reporting. The Bureau thus is
adopting an institutional coverage test
that covers a financial institution only if
(in addition to meeting the other criteria
under § 1003.2(g)) it originated either (1)
25 or more closed-end mortgage loans or
(2) 100 or more open-end lines of credit
in each of the two preceding calendar
years. As discussed in the section-bysection analysis of § 1003.2(g), the
Bureau believes that the 25 closed-end
and 100 open-end loan-volume
origination tests appropriately balance
the benefits and burdens of covering
institutions based on their closed- and
open-end mortgage lending,
respectively. Specifically, as discussed
further in the section-by-section
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analysis of § 1003.2(g) and in part VII,
the Bureau estimates that adopting a
100-open-end line of credit threshold
will avoid imposing the burden of
establishing open-end reporting on
approximately 3,000 predominantly
smaller-sized institutions with low
open-end lending compared to the
proposal, while still requiring reporting
of a significant majority of dwellingsecured, open-end line of credit
originations. As discussed in those
sections, the Bureau also believes that
all institutions that will be required to
report open-end line of credit data are
current HMDA reporters.
Transactional coverage threshold.
The final rule also adds in
§ 1003.3(c)(12) a transactional coverage
threshold for open-end mortgage
lending. The transactional coverage
threshold is designed to work in tandem
with the open-end institutional coverage
threshold in § 1003.2(g). Specifically,
§ 1003.3(c)(12) provides that a financial
institution that originated fewer than
100 open-end lines of credit in each of
the preceding two calendar years is not
required to report data about its openend lines of credit, even if the financial
institution otherwise is a financial
institution under § 1003.2(g) because of
its closed-end lending (i.e., even if the
institution will be reporting data about
closed-end mortgage loans).218
Effective date. The Bureau is mindful
that most financial institutions have
never reported open-end mortgage
lending data, that collecting and
reporting such data for the first time
will be time-consuming and complex,
and that implementation costs may be
sensitive to the time permitted to
complete the required changes. The
Bureau thus is providing financial
institutions approximately two years to
complete the changes necessary to begin
collecting the data required under the
final rule, including data about openend lines of credit. As noted in part VI,
financial institutions will report the
data required under the final rule for
actions taken on covered loans on or
after January 1, 2018.
Other efforts to mitigate burden. Some
of the anticipated burdens of reporting
open-end lines of credit also likely will
be mitigated by the operational
218 For balance, the Bureau is adopting a parallel
transactional coverage threshold for closed-end
mortgage loans in § 1003.3(c)(11). Under
§ 1003.3(c)(11), a financial institution that
originated fewer than 25 closed-end mortgage loans
in each of the preceding two calendar years is not
required to report data about its closed-end
mortgage loans, even if the financial institution
otherwise is a financial institution under § 1003.2(g)
because of its open-end mortgage lending (i.e., even
if the institution will be reporting data about openend lines of credit).
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enhancements and modifications that
the Bureau is exploring for HMDA
reporting generally. For example, as
discussed elsewhere in the final rule,
the Bureau is improving the edit and
submission process, which should
reduce reporting burden for all covered
loans. While these improvements will
not reduce the costs that financial
institutions will incur to adapt their
systems and processes to report openend lines of credit, they should reduce
ongoing costs to institutions by reducing
the amount of time financial institutions
may spend submitting and editing this
data.
Clarifying which data points apply to
open-end lines of credit, and how they
apply, also will alleviate compliance
burden. For example, commenters
expressed concern about reporting
information about initial draws under
open-end lines of credit. As discussed
in the section-by-section analysis of
§ 1003.4(a)(39), the Bureau is not
finalizing that data point, in part in
response to commenters’ concerns. The
final rule also provides that several
other data points do not apply to openend lines of credit.219 Finally, the final
rule provides guidance about how
several data points apply to open-end
lines of credit.220
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Open-End Line of Credit Definition
The Bureau is adopting a few
technical revisions to streamline
§ 1003.2(o) and to align it with revisions
made elsewhere in the final rule.
Proposed § 1003.2(o) provided that an
open-end line of credit was a dwellingsecured transaction that was neither a
closed-end mortgage loan under
proposed § 1003.2(d) nor a reverse
mortgage under proposed § 1003.2(q).
To align with lending practices, to
streamline the definitions of closed-end
mortgage loan and open-end line of
credit, and to streamline § 1003.4(a)(36)
(which requires financial institutions to
identify reverse mortgages), the final
rule eliminates the mutual exclusivity
between open-end lines of credit and
reverse mortgages. Final § 1003.2(o) thus
provides that an open-end line of credit
is an extension of credit that (1) is
secured by a lien on a dwelling; and (2)
is an open-end credit plan as defined in
Regulation Z, 12 CFR 1026.2(a)(20), but
without regard to whether the credit is
219 See
§ 1003.4(a)(4) (preapproval request);
§ 1003.4(a)(18) (origination charges); § 1003.4(a)(19)
(discount points); and § 1003.4(a)(20) (lender
credits).
220 See § 1003.4(a)(7)(ii) and comment 4(a)(7)–6
(loan amount); comments 4(a)(12)–3 and –4 (rate
spread); § 1003.4(a)(17) (total points and fees);
comment 4(a)(25)–4 (amortization term); and
comment 4(a)(26)–1 (introductory rate).
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consumer credit, as defined in
§ 1026.2(a)(12), is extended by a
creditor, as defined in § 1026.2(a)(17), or
is extended to a consumer, as defined in
§ 1026.2(a)(11).
Consistent with § 1003.2(d), final
§ 1003.2(o) provides that an open-end
line of credit is a dwelling-secured
‘‘extension of credit.’’ New comment
2(o)–2 clarifies the meaning of the term
‘‘extension of credit’’ for open-end
transactions for purposes of § 1003.2(o).
It states that financial institutions may
cross-reference the guidance concerning
‘‘extension of credit’’ under § 1003.2(d)
and comment 2(d)–2, and it provides an
example of an open-end transaction that
is not an extension of credit and thus
not covered under the final rule. It
further clarifies that, for purposes of
§ 1003.2(o), each draw on an open-end
line of credit is not an extension of
credit. Thus, financial institutions
report covered open-end lines of credit
only once, at account opening.
2(p) Refinancing
Prior to the proposal, the Bureau
received feedback that Regulation C’s
definition of refinancing was confusing.
To address those concerns, the Bureau
proposed § 1003.2(p) and related
commentary. Proposed § 1003.2(p)
streamlined the existing definition of
refinancing by moving the portion of the
definition that addresses institutional
coverage to proposed § 1003.2(g), the
definition of ‘‘financial institution.’’ For
the reasons discussed below, the Bureau
is adopting § 1003.2(p) largely as
proposed, and is adopting revised
commentary to § 1003.2(p) to provide
additional guidance about the types of
transactions that are refinancings under
Regulation C.221
The Bureau received a number of
comments on proposed § 1003.2(p) and
its accompanying commentary from
financial institutions, industry trade
associations, and other industry
participants. The comments generally
supported the Bureau’s proposed
revisions, but several commenters
suggested different definitions or
additional clarifications.
The Bureau received only a few
comments addressing proposed
§ 1003.2(p)’s regulation text, all from
industry participants. One commenter
specifically supported the Bureau’s
221 Prior
to the proposal and in public comments
on the proposal, the Bureau received feedback that
agricultural-purpose refinancings should be
excluded from Regulation C’s coverage. The final
rule clarifies that all agricultural-purpose
transactions, whether for home purchase, home
improvement, refinancing, or some other purpose,
are excluded transactions. See the section-bysection analysis of § 1003.3(c)(9).
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66163
proposal to move the ‘‘coverage prong’’
of § 1003.2(p) to the definition of
financial institution in § 1003.2(g) and
stated that the move would reduce
confusion. Another commenter
suggested that the Bureau could reduce
compliance costs by aligning the
definition of refinancing in proposed
§ 1003.2(p) with Regulation Z
§ 1026.37(a)(9), so that a refinancing is
any transaction that is not a home
purchase loan and that satisfies and
replaces an existing obligation secured
by the same property. For the reasons
set forth in the section-by-section
analysis of § 1003.4(a)(3), the final rule
does not include this modification.
The Bureau is finalizing comment
2(p)–1 generally as proposed, but with
several non-substantive revisions for
clarity. In addition, final comment
2(p)–1 is modified to provide that a
refinancing occurs only when the
original debt obligation has been
satisfied and replaced by a new debt
obligation, based on the parties’ contract
and applicable law. This is consistent
with the definition of refinancing in
Regulation Z § 1026.20(a) and comment
20(a)–1. The comment further specifies
that satisfaction of the original lien, as
distinct from the debt obligation, is
irrelevant in determining whether a
refinancing has occurred. A few
commenters requested that the Bureau
provide additional guidance concerning
loan modifications and renewals, stating
that examiners provide inconsistent
guidance about whether to report
renewal transactions when there is no
new note. Accordingly, final comment
2(p)–1 specifies that a new debt
obligation that renews or modifies the
terms of, but does not satisfy and
replace, an existing debt obligation is
not a refinancing under § 1003.2(p).222
As discussed in the section-by-section
analysis of § 1003.2(d), the final rule
considers a transaction completed
pursuant to a New York State
consolidation, extension, and
modification agreement and classified
as a supplemental mortgage under N.Y.
Tax Law § 255 such that the borrower
owes reduced or no mortgage recording
taxes to be an ‘‘extension of credit’’ and
therefore reportable. The final rule adds
new comment 2(p)–2 to provide that a
transaction is considered a refinancing
under § 1003.2(p) where: (1) The
222 To further address uncertainty about the types
of transactions that are reportable under Regulation
C, the final rule also clarifies in the commentary to
§ 1003.2(d) (definition of closed-end mortgage loan)
and (o) (definition of open-end line of credit) that
loan modifications and renewals are not
‘‘extensions of credit’’ under Regulation C and thus
are not reportable transactions under the final rule.
See the section-by-section analysis of § 1003.2(d)
and (o).
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Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Rules and Regulations
transaction is completed pursuant to a
New York State consolidation,
extension, and modification agreement
and is classified as a supplemental
mortgage under N.Y. Tax Law § 255
such that the borrower owes reduced or
no mortgage recording taxes, and (2) but
for the agreement the transaction would
have met the definition of a refinancing
under § 1003.2(p).
The Bureau received one comment
addressing proposed comment 2(p)–2.
The comment requested that the Bureau
eliminate from the definition of
refinancing the requirement that both
the existing and the new debt
obligations be dwelling-secured,
because it is burdensome to confirm
whether the new transaction pays off an
existing mortgage. This requirement,
however, is consistent with Regulation
Z’s definition of refinancing. The
Bureau notes that, under the final rule,
whether a consumer-purpose
transaction meets this test (or, for that
matter, whether such a transaction
otherwise is a refinancing) no longer
determines whether the transaction is a
covered loan.223 Thus, for consumerpurpose transactions, when a financial
institution originates a dwelling-secured
debt obligation that satisfies and
replaces an existing debt obligation, the
financial institution no longer needs to
determine whether the existing debt
obligation was dwelling-secured to
know that the transaction is HMDAreportable. The financial institution
will, however, need to determine
whether the existing debt obligation was
dwelling-secured to determine whether
to report the transaction as a refinancing
or an ‘‘other purpose’’ transaction. See
§ 1003.4(a)(3).
The Bureau is finalizing proposed
comment 2(p)–3 generally as proposed,
with minor modifications for clarity,
and renumbered as comment 2(p)–4.
The Bureau received a few comments
addressing proposed comment 2(p)–3.
One financial institution specifically
supported the proposed commentary,
but another asked for additional
guidance for situations, such as a
divorce, where only one of the original
borrowers is obligated on the new loan.
As proposed, comment 2(p)–3
addressed this scenario. It specified
that, if one debt obligation to two
borrowers was satisfied and replaced by
a new debt obligation to either one of
the original borrowers, then the new
obligation was a refinancing, assuming
the other requirements of proposed
223 As discussed in the section-by-section analysis
of § 1003.3(c)(10), Regulation C’s existing purposebased coverage test applies to business- or
commercial-purpose transactions under the final
rule.
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§ 1003.2(p) were met. Proposed
comment 2(p)–3 also specified that, if
two spouses were divorcing, and a debt
obligation of only one spouse was
satisfied and replaced by a new debt
obligation of only the other spouse, then
the transaction was not a refinancing
under proposed § 1002.3(p). Final
comment 2(p)–4 retains these examples
but revises and expands them for
clarity.
Several commenters asked whether
two or more new loans that are
originated to satisfy and replace one
existing loan are refinancings. The final
rule adopts new comment 2(p)–5 to
clarify that each of the two new
obligations is a refinancing if, taken
together, they satisfy and replace the
existing obligation. Comment 2(p)–5
also specifies that the same rule applies
when one new loan satisfies and
replaces two or more existing debt
obligations.
The final rule adds new comment
2(p)–6 to clarify that a transaction that
meets the definition of a refinancing
may also be used for other purposes.
The comment provides an illustrative
example and specifies that instructions
for reporting a multiple-purpose
covered loan are in the commentary to
§ 1003.4(a)(3).
2(q) Reverse Mortgage
Proposed § 1003.2(q) added a ‘‘reverse
mortgage’’ definition to Regulation C.
Regulation C currently requires
financial institutions to report a reverse
mortgage if it otherwise is reportable as
a home purchase loan, a home
improvement loan, or a refinancing. The
current regulation, however, does not
define ‘‘reverse mortgage’’ or require
financial institutions to identify which
applications or loans are for reverse
mortgages. The proposed definition
generally provided that a reverse
mortgage is a reverse mortgage
transaction as defined under Regulation
Z § 1026.33(a). Taken together with
proposed § 1003.2(e) (definition of
‘‘covered loan’’), proposed § 1003.2(q)
effectively provided that all reverse
mortgage transactions, regardless of
their purpose, were covered loans and
HMDA-reportable.
The Bureau received a number of
comments about proposed § 1003.2(q)
and coverage of reverse mortgages.
While consumer advocacy group
commenters generally supported the
proposal, industry participants that
discussed proposed § 1003.2(q)
generally opposed expanding coverage
of reverse mortgages. For the reasons
discussed below, the Bureau is
finalizing § 1003.2(q) substantially as
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proposed, with minor technical
revisions.
A number of consumer advocacy
groups supported the Bureau’s proposed
reverse mortgage definition. They stated
that having data about all reverse
mortgages would be valuable in
assessing whether the neighborhoods
that they serve are receiving the full
range of credit that the neighborhoods
need and would be appropriate to
ensure an adequate understanding of the
mortgage market. These commenters
stated that publicly available data about
all reverse mortgages will be essential in
the coming years as the country’s
population ages and older consumers,
many of whom are cash-poor but own
their homes outright, may increasingly
use home equity for living expenses and
other purposes. The commenters noted
that reverse mortgages often are not
reported under current Regulation C
because they often are not for the
purpose of home purchase, home
improvement, or refinancing.
The commenters further noted that
Regulation C’s reverse mortgage data
lack information about open-end,
reverse mortgage transactions. Having
data about ‘‘other purpose’’ reverse
mortgages, as well as open-end reverse
mortgages, will help to determine how
the housing needs of seniors are being
met. This is particularly true because
poorly structured or higher-priced
reverse mortgages can result in financial
hardship to seniors. The commenters
also noted the general importance of
having data about housing-related
transactions to older consumers, who
may be particularly vulnerable to
predatory or discriminatory lending
practices. Several of these commenters
urged the Bureau to adopt a flag to
identify reverse mortgages. One industry
commenter generally supported
proposed § 1003.2(q). The commenter
agreed that the proposed definition of
reverse mortgage was appropriate
because it aligned with Regulation Z.
A number of industry commenters,
including trade associations, several
financial institutions, and a compliance
professional, disagreed with the
Bureau’s proposal to require reporting of
all reverse mortgages. Some of these
commenters asserted that Regulation C
should not apply to reverse mortgages at
all, or that reverse mortgages are outside
the scope of HMDA. Others argued that
the Bureau should maintain current
coverage of reverse mortgages and
require them to be reported only if they
are for home purchase, home
improvement, or refinancing. The
commenters generally argued that
reporting all reverse mortgages would
create new costs for financial
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institutions and that the burdens did not
justify the benefits.
Regarding burden, commenters stated
that reverse mortgage lenders already
are exiting the market because of
regulatory demands and uncertainties
with reverse mortgages, and that
requiring reporting of all reverse
mortgages under HMDA would continue
that trend. A few commenters argued
that data for reverse mortgages is kept
on separate systems from traditional
mortgage loans and that it would be
costly and time-consuming to upgrade
systems for reporting. Some commenters
stated that the burden would be
particularly great for reverse mortgage
lenders that make fewer than 100
mortgages in a year.
These commenters argued that the
benefits of reporting all reverse
mortgages would be small. They stated
that financial institutions already report
the necessary data about reverse
mortgages (i.e., data about closed-end
reverse mortgages for home purchase,
home improvement, or refinancing).
They stated that HMDA does not require
data about other types of reverse
mortgages, which are used for purposes
unrelated to housing finance. They also
stated that many of HMDA’s data points
(e.g., points and fees and debt-to-income
ratio) do not apply, or apply differently,
to reverse mortgages than to traditional
mortgages. The commenters asserted
that the data reported thus would have
large gaps and would not clarify
whether financial institutions are
meeting the housing needs of their
communities. Some commenters noted
that the reverse mortgage market
currently is small and that many
financial institutions do not offer
reverse mortgages, so the value of the
data reported would be low.
Some commenters stated that
comparing reverse mortgage data with
data for traditional mortgage loans or
lines of credit would lead only to
inaccurate conclusions about reverse
mortgage originations because, for
example, reverse mortgages are
underwritten and priced differently
than other mortgages and are for
different purposes. Other commenters
noted that the Bureau has exempted
reverse mortgages from other
rulemakings, such as the 2013 ATR
Final Rule and the Bureau’s Integrated
Mortgage Disclosures rule (2013 TILA–
RESPA Final Rule),224 given their
differences from traditional mortgages.
Finally, one commenter noted that there
would be no harm in the Bureau
delaying reverse mortgage reporting
until after the Bureau has reviewed and
224 78
FR 79730 (Dec. 31, 2013).
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considered other reverse mortgage
rulemakings.
The Bureau is finalizing § 1003.2(q)
generally as proposed, with minor
technical revisions. The Bureau
acknowledges that requiring reporting of
data on additional transactions will
impose burden on financial institutions,
but the Bureau believes that the benefits
of reporting justify the burdens. As
discussed in the proposal and in
comments from consumer advocacy
groups, the reverse mortgage market
currently may be small, but it may
become increasingly important as the
country’s population ages.225 While
reverse mortgages may provide
important benefits to homeowners, they
also pose several risks to borrowers,
including that they may be confusing,
may have high costs and fees, and may
result in elderly borrowers or their heirs
or non-borrowing spouses losing their
homes to foreclosure.226 As discussed in
the proposal, communities have faced
risks due to reverse mortgage lending,
particularly communities with sizable
populations of borrowers eligible for
reverse mortgages programs,227 and
many State officials have focused on
harmful practices associated with
reverse mortgage lending.228
Information on all reverse mortgages,
regardless of purpose, would help
225 See 79 FR 51731, 51759 (Aug. 29, 2014) (citing
Lisa Prevost, Retiring on the House: Reverse
Mortgages for Baby Boomers, N.Y. Times, Feb. 13,
2014, at RE5, available at http://www.nytimes.com/
2014/02/16/realestate/reverse-mortgages-for-babyboomers.html?_r=0). See also Nora Caley, Aging In
Place, With A Loan: The State of the Reverse
Mortgage Industry, Mortgage Orb, Vol. 2, Issue 17
(May 8, 2013), http://www.mortgageorb.com/e107_
plugins/content/content.php?content.13765.
226 See 79 FR 51731, 51759 (Aug. 29, 2014) (citing
Consumer Fin. Prot. Bureau, Report to Congress on
Reverse Mortgages 110–145 (June 28, 2012)),
http://files.consumerfinance.gov/a/assets/
documents/201206_cfpb_Reverse_Mortgage_
Report.pdf).
227 See id. (citing Susan Taylor Martin,
Complexities of Reverse Mortgages Snag
Homeowners, Tampa Bay Times, May 30, 2014;
Kevin Burbach & Sharon Schmickle, As State Ages,
Minnesota Braces for Problems With Risky ReverseMortgages, MinnPost (April 5, 2013), http://
www.minnpost.com/business/2013/04/state-agesminnesota-braces-problems-risky-reversemortgages; and HUD Presentation, Nat’l Reverse
Mortgage Lenders Ass’n Eastern Regional Meeting
(Mar. 26, 2012) (noting that 8.1 and 9.4 percent of
active Home Equity Conversion Mortgage loans
were in default in July 2011 and February 2012,
respectively).
228 See id. at 51759–60 (citing Press Release,
Illinois Attorney General, Madigan Sues Two
Reverse Mortgage Brokers For Using Deceptive
Marketing to Target Seniors (Feb. 8, 2010), http://
www.illinoisattorneygeneral.gov/pressroom/2010_
02/20100208.html; Press Release, Washington State
Office of the Attorney General, Ferguson Files
Complaint Against Bellevue Insurance Agent and
His Company for Targeting Elderly Widows (July 29,
2013), http://www.atg.wa.gov/news/news-releases/
ferguson-files-complaint-against-bellevueinsurance-agent-and-his-company.
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communities understand the risks posed
to local housing markets, thereby
providing the citizens and public
officials of the United States with
sufficient information to enable them to
determine whether financial institutions
are filling their obligations to serve the
housing needs of the communities and
neighborhoods in which they are
located. Furthermore, private
institutions and nonprofit organizations,
as well as local, State, and Federal
programs, traditionally have facilitated
or engaged in reverse mortgage lending.
However, the proprietary market for
reverse mortgages has substantially
declined in recent years. Thus, requiring
improved information regarding all
reverse mortgages would assist public
officials in their determination of the
distribution of public sector investments
in a manner designed to improve the
private investment environment.
Indeed, it is particularly important to
obtain better information about the
reverse mortgage market because it
serves older consumers, a traditionally
vulnerable population. State officials
provided feedback during the Board’s
2010 Hearings that expanding the
transactional coverage of Regulation C
to include all reverse mortgages would
assist in the identification of
discriminatory and other potentially
harmful practices against this protected
class.229 In this regard, the Bureau notes
that requiring reporting of all reverse
mortgages dovetails with the DoddFrank Act’s requirement to report age
for all covered loans. The Bureau
believes that the currently small size of
the market, and the fact that the Bureau
may address reverse mortgages in
future, substantive rulemakings, further
support the decision to require reverse
mortgage reporting as soon as possible.
The flow of information to the public
and policymakers will better position
them to identify housing needs and
market developments as they occur.
The Bureau acknowledges that, as
commenters observed, reverse
mortgages are underwritten and priced
differently than other mortgages, some
data points apply differently to reverse
mortgages, and some do not apply at all.
However, this is just as true for the
reverse mortgages that currently are
reported (and that most commenters
agree should be reported) as for the
reverse mortgages that will be added
under the final rule. Where possible, the
229 See id. at 51760 (citing New York State
Banking Department comment letter, Board of
Governors of the Fed. Reserve System docket no.
OP–1388, p. 5, submitted Aug. 6, 2010; San
Francisco Hearing, Remarks of Preston DuFauchard,
Commissioner of the California Department of
Corporations).
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Bureau has provided additional
guidance to instruct financial
institutions how particular data points
apply to reverse mortgages. Finally, the
Bureau is adopting a flag to ensure that
data reported for reverse mortgages will
not be commingled unknowingly with
data reported for other covered loans.
See the section-by-section analysis of
§ 1003.4(a)(36).
The final rule modifies proposed
§ 1003.2(q) to specify that a reverse
mortgage is a reverse mortgage
transaction as defined in Regulation Z,
12 CFR 1026.33(a), but without regard to
whether the security interest is created
in a principal dwelling. Thus, under
Regulation C, a transaction that
otherwise meets the definition of a
reverse mortgage must be reported even
if the security interest is taken in, for
example, the borrower’s second
residence.
Section 1003.2(q) also contains one
revision to align the definition with
other changes being adopted in the final
rule. As discussed in the section-bysection analysis of § 1003.2(d) and (o),
the proposal provided that closed-end
mortgage loans and open-end lines of
credit were mutually exclusive of
reverse mortgages, and thus a covered
loan under proposed § 1003.2(e) was a
closed-end mortgage loan, an open-end
line of credit, or a reverse mortgage that
was not otherwise excluded under
proposed § 1003.3(c). The final rule
eliminates the mutual exclusivity
between: (1) Closed-end mortgage loans
and open-end lines of credit and (2)
reverse mortgages. Thus, the final rule
both eliminates reverse mortgages as a
category of covered loans under
§ 1003.2(e) and eliminates the crossreference to § 1003.2(e) from the reverse
mortgage definition.
Final § 1003.2(q) is adopted pursuant
to the Bureau’s authority under section
305(a) of HMDA. For the reasons given
above, the Bureau believes that
including reverse mortgages within the
scope of the regulation is a reasonable
interpretation of HMDA section 303(2),
which defines ‘‘mortgage loan’’ to mean
a loan which is secured by residential
real property or a home improvement
loan. The Bureau interprets that term to
include reverse mortgages, as those
transactions are secured by residential
real property, and they may be used for
home improvement. In addition,
pursuant to its authority under section
305(a) of HMDA, the Bureau believes
that this proposed adjustment is
necessary and proper to effectuate the
purposes of HMDA, to prevent
circumvention or evasion thereof, and to
facilitate compliance therewith. For the
reasons given above, by requiring all
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financial institutions to report
information regarding reverse
mortgages, this proposed modification
would ensure that the citizens and
public officials of the United States are
provided with sufficient information to
enable them to determine whether
depository institutions are filling their
obligations to serve the housing needs of
the communities and neighborhoods in
which they are located. Furthermore, as
reverse mortgages are a common method
of obtaining credit, this proposed
modification would assist in identifying
possible discriminatory lending patterns
and enforcing antidiscrimination
statutes.
Section 1003.3 Exempt Institutions
and Excluded Transactions
3(c) Excluded Transactions
Regulation C currently excludes
several categories of transactions from
coverage, but the exclusions are
scattered throughout the regulation text,
appendix A, and commentary. To
streamline the regulation, the Bureau
proposed to consolidate all existing
exclusions in new § 1003.3(c). The
Bureau also proposed guidance
concerning two categories of excluded
transactions: Loans secured by liens on
unimproved land and temporary
financing.
The Bureau received no comments
opposing, and one comment supporting,
the consolidation of excluded
transactions into § 1003.3(c) and is
finalizing the reorganization as
proposed. The Bureau received a
number of comments addressing
specific categories of excluded
transactions and suggesting additional
categories of transactions that should be
excluded. For the reasons discussed
below, the Bureau is finalizing § 1003.3
to clarify that certain categories of
transactions, including all agriculturalpurpose transactions and commercialpurpose transactions not for home
purchase, home improvement, or
refinancing purposes, are excluded from
reporting. The final rule also revises
§ 1003.3 and its accompanying
commentary for clarity and to address
questions raised by commenters.
Suggested Exclusions Not Adopted
A few commenters suggested
specifically excluding loans made by
financial institutions to their employees.
The commenters stated that it is and
will continue to be difficult to report
such loans and that, because such loans
typically are offered on better terms
than loans to non-employees, their
inclusion in HMDA data will skew the
dataset and will serve no purpose for
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fair lending testing. The final rule does
not specifically exclude loans made to
financial institutions’ employees. It is
not clear why such loans are more
difficult to report than other loans, and
commenters did not provide any details
to explain the difficulty. Loans to
employees may be made on more
favorable terms than other loans, but the
Bureau doubts that employee loans are
originated in sufficient quantities to
skew the overall HMDA data. Finally, as
always, HMDA data are used only as the
first step in conducting a fair lending
analysis. Examiners conducting fair
lending examinations will be able to
identify by looking at loan files when
differences in loan pricing, for example,
are attributable to an applicant’s or
borrower’s status as a financial
institution’s employee.
Commenters suggested excluding a
number of other types of transactions
from coverage. The section-by-section
analysis of § 1003.2(f) (definition of
dwelling) discusses coverage of
transactions secured by other than a
single-family, primary residence; the
section-by-section analysis of
§ 1003.3(c)(10) discusses coverage of
loans made to trusts; and the section-bysection analysis of § 1003.4(a) (reporting
of purchases) discusses coverage of
repurchased loans.
3(c)(1)
Proposed § 1003.3(c)(1) and comment
3(c)(1)–1 retained Regulation C’s
existing exclusion for loans originated
or purchased by a financial institution
acting in a fiduciary capacity, which
currently is located in § 1003.4(d)(1).
The Bureau received no comments
concerning proposed § 1003.3(c)(1) or
comment 3(c)(1)–1 and finalizes them as
proposed, with several technical
revisions for clarity.
3(c)(2)
Proposed § 1003.3(c)(2) retained
Regulation C’s existing exclusion for
loans secured by liens on unimproved
land, which currently is located in
§ 1003.4(d)(2). The Bureau proposed
new comment 3(c)(2)–1 to clarify that
the exclusion: (1) Aligns with the
exclusion from RESPA coverage of loans
secured by vacant land under
Regulation X § 1024.5(b)(4), and (2) does
not apply if the financial institution
‘‘knows or reasonably believes’’ that
within two years after the loan closes,
a dwelling will be constructed or placed
on the land using the loan proceeds. For
the reasons discussed below, the Bureau
is finalizing § 1003.3(c)(2) as proposed
but is finalizing comment 3(c)(2)–1 with
certain changes in response to
comments received.
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The Bureau received a number of
comments from financial institutions,
trade associations, and other industry
participants about proposed comment
3(c)(2)–1. Commenters agreed that loans
secured by unimproved land should be
excluded, but they stated that the
proposed comment was inappropriate
and that the Bureau either should
remove it entirely or should clarify it. A
few commenters stated that aligning
with Regulation X was unnecessary and
advocated a simple rule that would
exclude all loans secured only by land
when made. Other commenters stated
that, if retained, the exemption should
be based on the financial institution’s
actual knowledge, rather than on a
‘‘knows or reasonably believes’’
standard that would require lenders to
speculate about whether a dwelling
would be constructed. Commenters
argued that examiners later could
second-guess such speculative
decisions. Some commenters stated that,
as written, the proposed comment
would make almost all consumer lot
loans reportable, because they generally
are built on within two years.
The Bureau believes that providing
guidance about the types of transactions
covered by the exclusion for loans
secured by liens on unimproved land is
preferable to eliminating the proposed
comment, and that aligning with
Regulation X helps to achieve regulatory
consistency. Moreover, where a loan’s
funds will be used to construct a
dwelling in the immediate future,
having information about that loan
serves HMDA’s purposes of
understanding how financial
institutions are meeting the housing
needs of their communities. On the
other hand, the Bureau acknowledges
that the Regulation X standard does not
provide sufficient specificity for
purposes of HMDA reporting, because it
does not state how and when a financial
institution must know that a dwelling
will be constructed on the land.
The final rule adopts comment
3(c)(2)–1 without the cross-reference to
Regulation X but with a statement,
consistent with the spirit of Regulation
X, that a loan is secured by a lien on
unimproved land if the loan is secured
by vacant or unimproved property at the
time that is originated, unless the
financial institution knows, based on
information that it receives from the
applicant or borrower at the time the
application is received or the credit
decision is made, that the loan’s
proceeds will be used within two years
after closing or account opening to
construct a dwelling on the land or to
purchase a dwelling to be placed on the
land. If the applicant or borrower does
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not provide the financial institution this
information at the time the application
is received or the credit decision is
made, then the exclusion applies.
Financial institutions should note that,
even if a loan is not exempt under
§ 1003.3(c)(2), it may be exempt under
another § 1003.3(c) exclusion, such as
the temporary financing exclusion
under § 1003.3(c)(3).
3(c)(3)
Proposed § 1003.3(c)(3) retained
Regulation C’s existing exclusion for
temporary financing, which currently is
located in § 1003.4(d)(3). Comments
3(c)(3)–1 and –2 were proposed to
clarify the scope of the exclusion. For
the reasons discussed below, the Bureau
is adopting § 1003.3(c)(3) as proposed
but is finalizing the commentary to
§ 1003.3(c)(3) with revisions to address
questions and concerns that
commenters raised.
Consumer advocacy group
commenters generally argued that
construction loans should not be
excluded as temporary financing.
Financial institutions, trade
associations, and other industry
participants generally argued that
temporary financing should be excluded
from coverage. Several of these
commenters argued that all construction
loans should be excluded as temporary
financing. Most such commenters
agreed that guidance about the scope of
the temporary financing exclusion
would be helpful, but many found the
guidance in proposed comments
3(c)(3)–1 and –2 confusing or objected
that it relied on a subjective standard.
Commenters suggested several methods
to clarify the proposed guidance.
Regarding proposed comment 3(c)(3)–
1, which provided general guidance
about the temporary financing
exclusion, a few commenters objected to
the cross-reference to Regulation X.
They stated that the Regulation X
standard is unclear and ambiguous and
that cross-referencing it would create
confusion about which construction
loans qualify for Regulation C’s
exclusion. Some construction loans
would be reported (e.g., construction
loans involving title transfer) and others
would not (e.g., construction-only
loans). Similarly, one commenter
suggested that long-term construction
loans should be excluded regardless of
whether they were made to ‘‘bona fide
builders.’’ Another commenter argued
that all construction loans should be
exempt, except for construction loans
with one-time closings, where the
construction loan automatically rolls
into permanent financing after a
predetermined time. On the other hand,
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66167
at least one commenter stated that
aligning with Regulation X was helpful.
Still others suggested that Regulation C
should align with Regulation Z and that
the Bureau either should adopt a brightline test (similar to Regulation Z’s) to
define any loan with a term shorter than
a prescribed period of time (e.g., one or
two years) as temporary financing, or
should adopt a bright-line test to
exclude all short-term construction
loans. One commenter requested that
the Bureau specifically define the term
‘‘bridge loan,’’ which is listed as an
example of temporary financing in both
existing § 1003.4(d)(3) and proposed
comment 3(c)(3)–1.
Several commenters also argued that
proposed comment 3(c)(3)–2 was
confusing. Comment 3(c)(3)–2 explained
that loans designed to convert to (i.e.,
rather than designed to be replaced by)
permanent financing were not
temporary financing and thus were
reportable. Consistent with Regulation
X, the comment provided that loans
issued with a commitment for
permanent financing, with or without
conditions, were considered loans that
would ‘‘convert’’ to permanent
financing and thus were not excluded
transactions. Some commenters urged
the Bureau to remove this statement or
to clarify further the difference between
a loan ‘‘replaced by’’ permanent
financing and a loan ‘‘converted’’ to
permanent financing. One commenter
observed that a loan issued with a
commitment for permanent financing
could encompass a situation covered
under proposed comment 3(c)(3)–1’s
first sentence (i.e., a loan designed to be
replaced by permanent financing at a
later time). The commenter argued that
such transactions would be excluded as
temporary financing under proposed
comment 3(c)(3)–1 but would lose the
exemption under proposed comment
3(c)(3)–2. Other commenters questioned
the meaning of the term ‘‘designed’’ and
asked the Bureau to clarify whether
construction-only loans that eventually
are refinanced into longer-term
financing must be reported. Some
commenters stated that proposed
comment 3(c)(3)–1’s first sentence
provided clear and sufficient guidance
and that proposed comment 3(c)(3)–2
should be removed altogether.
The Bureau is finalizing the
commentary to § 1003.3(c)(3) with
revisions to address the foregoing
concerns. Final comment 3(c)(3)–1
provides that temporary financing is
excluded from coverage and provides
that a loan or line of credit is temporary
financing if it is designed to be replaced
by permanent financing at a later time.
The comment provides several
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illustrative examples designed to clarify
whether a loan or line of credit is
designed to be replaced by permanent
financing. The final rule does not
provide for reporting of all construction
loans, as some consumer advocacy
group commenters recommended. The
Bureau believes that the benefits of
requiring all construction loans to be
reported do not justify the burdens
given that the permanent financing that
replaces such loans will be reported.
The Bureau believes that comment
3(c)(3)–1 achieves HMDA’s purposes
while providing better guidance to
financial institutions than existing
Regulation C. Specifically, the
comments should help to ensure that
transactions involving temporary
financing are not reported more than
once; instead, such transactions will be
captured by the separate reporting of the
longer-term financing, if it otherwise is
covered by Regulation C. At the same
time, the comments will help to ensure
reporting of short-term transactions that
function as permanent financing (e.g., a
loan with a nine-month term to enable
an investor to purchase a home,
renovate, and re-sell it before the term
expires).230
After considering the comments
received, the Bureau believes that
neither aligning with Regulation X or Z,
nor creating a new, bright-line rule
centered around a loan’s term, would
serve HMDA’s purposes as well as the
guidance provided in final comment
3(c)(3)–1. Regulation Z generally
excludes loans with terms of less than
one year from, for example, the
regulation’s ability-to-repay rules.
Conducting a full ability-to-repay
analysis may not be critical for such
short-term financing. However, it is
important for HMDA purposes to know
how often and under what
circumstances such financing is granted,
for example, to investors to purchase
property and then to sell it for
occupancy before the term expires.
Similarly, the Bureau believes that it is
important for HMDA purposes to ensure
that construction loans are not doublecounted when they are replaced by
permanent financing. Thus, the Bureau
230 The final rule thus is consistent with the
existing FFIEC FAQ concerning temporary
financing, which acknowledges that temporary
financing is exempt and states that ‘‘financing is
temporary if it is designed to be replaced by
permanent financing of a much longer term. A loan
is not temporary financing merely because its term
is short. For example, a lender may make a loan
with a 1-year term to enable an investor to purchase
a home, renovate it, and re-sell it before the term
expires. Such a loan must be reported as a home
purchase loan.’’ See Fed. Fin. Insts. Examination
Council, Regulatory & Interpretive FAQ’s,
Temporary Financing, http://www.ffiec.gov/hmda/
faqreg.htm#TemporaryFinancing.
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has not aligned with Regulation X’s
guidance concerning construction loans,
which would have required, for
example, some longer-term construction
loans to be reported.
Two commenters requested that the
Bureau clarify whether a loan’s purpose
is ‘‘construction’’ or ‘‘home
improvement’’ when improvements to
an existing dwelling are so extensive
that they fundamentally change the
nature of the dwelling. The commenters
suggested that, if a loan’s purpose was
‘‘construction,’’ then the loan would be
excluded from coverage, whereas if its
purpose was ‘‘home improvement,’’ it
would be included. Under the final rule,
the temporary financing exclusion
depends on whether the loan is or is not
designed to be replaced by longer-term
financing at a later time. Thus, for
example, if a financial institution
originates a short-term loan to a
borrower to add a second floor to a
dwelling or to complete extensive
renovations, the loan is temporary
financing if it is designed to be replaced
by longer-term financing at a later time
(e.g., financing completed through a
separate closing that will pay off the
short-term loan). If the loan is, for
example, a traditional home-equity loan
that is not designed to be replaced by
longer-term financing, or if it is a
construction-to-permanent loan that
automatically will convert to permanent
financing without a separate closing,
then it is not temporary financing and
is not excluded under § 1003.3(c).
3(c)(4)
Proposed § 1003.3(c)(4) and comment
3(c)(4)–1 retained Regulation C’s
existing exclusion for the purchase of an
interest in a pool of loans, which
currently is located in § 1003.4(d)(4).
The Bureau received no comments
concerning proposed § 1003.3(c)(4) or
comment 3(c)(4)–1 and finalizes them as
proposed, with technical revisions for
clarity.
3(c)(5)
Proposed § 1003.3(c)(5) retained
Regulation C’s existing exclusion for the
purchase solely of the right to service
loans, which currently is located in
§ 1003.4(d)(5). The Bureau received no
comments concerning proposed
§ 1003.3(c)(5) and finalizes it as
proposed, with technical revisions for
clarity.
3(c)(6)
Proposed § 1003.3(c)(6) and comment
3(c)(6)–1 retained Regulation C’s
existing exclusion for loans acquired as
part of a merger or acquisition, or as part
of the acquisition of all of the assets and
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liabilities of a branch office, which
currently is located in § 1003.4(d)(6) and
comment 4(d)–1. The Bureau received
no comments concerning proposed
§ 1003.3(c)(6) or comment 3(c)(6)–1 and
finalizes them generally as proposed,
with technical revisions for clarity.
3(c)(7)
Proposed § 1003.3(c)(7) retained
Regulation C’s existing exclusion for
loans and applications for less than
$500, which currently is located in
paragraph I.A.7 of appendix A. The
Bureau received no comments
concerning proposed § 1003.3(c)(7) and
finalizes it as proposed, with technical
revisions for clarity.
3(c)(8)
Proposed § 1003.3(c)(8) retained
Regulation C’s existing exclusion for the
purchase of a partial interest in a loan,
which currently is located in comment
1(c)–8. The Bureau received no
comments concerning proposed
§ 1003.3(c)(8) and finalizes it generally
as proposed, with technical revisions for
clarity.
3(c)(9)
As proposed, § 1003.3(c)(9) stated that
a loan used primarily for agricultural
purposes was an excluded transaction.
Proposed comment 3(c)(9)–1, in turn,
retained the existing exclusion of home
purchase loans secured by property
primarily for agricultural purposes,
which currently is located in comment
Home purchase loan-3. For the reasons
discussed below, the Bureau is adopting
§ 1003.3(c)(9) with technical revisions
for clarity and is adopting comment
3(c)(9)–1 with revisions to clarify that
all agricultural-purpose loans are
excluded transactions.
The Bureau received a number of
comments from financial institutions,
industry associations, and other
industry participants about proposed
§ 1003.3(c)(9) and comment 3(c)(9)–1.
Some commenters stated that the
proposed regulation text appeared to
exclude all agricultural loans, while the
commentary appeared to exclude only
home-purchase agricultural loans. These
commenters stated that all agricultural
loans should be excluded, because they
are not comparable to other loans
reported under HMDA, and reporting
them does not serve HMDA’s purposes.
Other commenters noted that proposed
comment 3(c)(9)–1 retained a crossreference to Regulation X § 1024.5(b)(1),
which had exempted loans on property
of 25 acres or more from coverage, even
though that provision since had been
removed from Regulation X. A few of
these commenters argued that the
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Bureau should retain an independent
25-acre test in Regulation C, while
others stated that the 25-acre test should
be removed altogether because smaller
properties can be primarily agricultural
and thus should be excluded from
coverage, while larger properties can be
primarily consumer-purpose and thus
should be included in coverage.
The Bureau is finalizing § 1003.3(c)(9)
and comment 3(c)(9)–1 with revisions to
address commenters’ concerns. First,
final comment 3(c)(9)–1 clarifies that all
primarily agricultural-purpose
transactions are excluded transactions,
whether they are for home purchase,
home improvement, refinancing, or
another purpose. The comment also
clarifies that an agricultural-purpose
transaction is a transaction that is
secured by a dwelling located on real
property used primarily for agricultural
purposes or that is secured by a
dwelling and whose funds will be used
primarily for agricultural purposes. The
final rule eliminates from the comment
both the proposed cross-reference to
Regulation X and the 25-acre test. The
comment instead provides that financial
institutions may consult Regulation Z
comment 3(a)–8 for guidance about
what is an agricultural purpose.
Comment 3(c)(9)–1 provides that a
financial institution may use any
reasonable standard to determine
whether a transaction primarily is for an
agricultural purpose and that a financial
institution may change the standard
used on a case-by-case basis. This
flexible standard should provide
sufficient latitude for a financial
institution to justify its determination
that a property was, or that a loan’s
funds were, intended to be used
primarily for agricultural purposes.
3(c)(10)
Unlike certain other consumer
protection statutes such as TILA and
RESPA, HMDA does not exempt
business- or commercial-purpose
transactions from coverage. Thus,
Regulation C currently covers closedend, commercial-purpose loans made to
purchase, refinance, or improve a
dwelling. Examples of commercialpurpose loans that currently are
reported are: (1) A loan to an entity to
purchase or improve an apartment
building (or to refinance a loan secured
thereby); and (2) a loan to an individual
to purchase or improve a single-family
home to be used either as a professional
office or as a rental property (or to
refinance a loan secured thereby).
Dwelling-secured, commercial-purpose
lines of credit currently are not required
to be reported. Regulation C currently
does not provide a mechanism, such as
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a commercial-purpose flag, to
distinguish commercial-purpose loans
from other loans in the HMDA dataset,
but it appears that commercial-purpose
loans currently represent a small
percentage of HMDA-reportable
loans.231
As discussed in the section-by-section
analysis of § 1003.2(d), (e) and (o), the
proposal provided for dwelling-secured
transactional coverage and for
mandatory reporting of open-end lines
of credit. Under the proposal, financial
institutions would have reported
applications for, and originations of, all
dwelling-secured, commercial-purpose
closed-end mortgage loans and openend lines of credit. For example, a
financial institution would have
reported all closed-end mortgage loans
or open-end lines of credit to a business
or sole proprietor secured by a lien on
the business owner’s dwelling, even if
only out of an abundance of caution
(i.e., in addition to other collateral such
as a storefront, inventory, or equipment)
and regardless of how the funds would
be used (e.g., to purchase the storefront,
inventory, or equipment). A financial
institution also would have been
required to report any transaction
secured by a multifamily dwelling, such
as an apartment building, even if the
loan or line of credit was for nonhousing-related business expansion.
The proposal thus would have
expanded Regulation C’s coverage of
commercial-purpose transactions. For
the reasons discussed below, the Bureau
is maintaining Regulation C’s existing
purpose-based transactional coverage
scheme for commercial-purpose
transactions.
A large number of comments
addressed the proposal’s coverage of
dwelling-secured commercial-purpose
transactions. Consumer advocacy
groups favored covering all such
transactions, while a significant number
of industry commenters, a government
agency commenter, and a group of State
regulators, urged the Bureau to exclude
some or all of these transactions.
Numerous consumer advocacy groups
generally asserted that having
information about dwelling-secured
commercial transactions would help
them to understand whether
neighborhoods are receiving the full
range of credit they need. Some
consumer advocacy groups specifically
urged the Bureau to collect data about
231 For example, applications and originations for
multifamily housing represented about 0.4 percent
of all applications and originations reported for
2013. See Neil Bhutta & Daniel R. Ringo, Bd. of
Governors of the Fed. Reserve Sys., 100 Fed.
Reserve Bulletin 6, The 2013 Home Mortgage
Disclosure Act Data, at 4 (Nov. 2014).
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all transactions secured by multifamily
properties, to understand whether
financial institutions are supporting the
development of affordable rental
housing. Others argued that dwellingsecured commercial-purpose reporting
would help to understand the full range
of liens against single-family properties.
Some of these commenters asserted that,
during the mortgage crisis, dwellingsecured commercial lending contributed
to overleveraging and foreclosures in
many communities, and that HMDA
data about such loans could have
warned policymakers and advocates of
potential concerns.
Some consumer advocacy group
commenters specified that dwellingsecured commercial lending is an
important source of small business
financing, particularly in minority and
immigrant communities, and that
having information about the
availability and pricing of such
transactions would help to understand
those communities’ economies,
including the total amount of debt and
default risk on properties and potential
problems related to overextension of
credit. A few consumer advocacy
commenters noted that information
about all dwelling-secured commercial
lending also would provide insight into
the demand for, and use of, credit for
expansion of small businesses.232
A significant number of industry
commenters addressed the proposal’s
expanded coverage of commercialpurpose transactions, and they all
opposed the change. Indeed, many
commenters who objected to dwellingsecured transactional coverage cited
expanded reporting of commercialpurpose transactions as their main
concern. Industry commenters argued
that implementing reporting of all
dwelling-secured, commercial-purpose
transactions would be burdensome, that
the data reported would be of little
value, and that requiring such reporting
would exceed the Bureau’s authority
under HMDA.233
Regarding burden, industry
commenters stated that removing the
purpose test for commercial-purpose
232 Some of these commenters also asserted that
the Bureau should include in the final rule a flag
to distinguish commercial- and consumer-purpose
transactions. The Bureau is finalizing such a flag in
§ 1003.4(a)(38).
233 A subset of industry commenters specifically
objected to reporting commercial-purpose open-end
lines of credit. Indeed, even the small group of
industry commenters that did not object to
reporting consumer-purpose lines of credit argued
that commercial-purpose lines should not be
covered. Commenters’ concerns about the burdens
and benefits of reporting commercial-purpose lines
of credit were similar to those raised about
commercial-purpose transactions generally.
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applications and originations would
increase significantly financial
institutions’ reportable transactions. A
subset of commenters specifically
estimated the increase, which varied
widely (i.e., from 10 percent to over 900
percent) depending on institution type
and the extent of an institution’s
engagement in dwelling-secured, smallbusiness lending. Some institutions
argued that many community banks
focus on small-business lending, so
expanded commercial coverage
particularly could burden smaller
institutions. A number of commenters
worried about ongoing costs from
collecting, quality checking, and
reporting information for such a large
number of transactions, and some
worried about incurring penalties for
errors that likely would occur in the
commercial data.234
Industry commenters also argued that
reporting all dwelling-secured
commercial transactions would be
difficult operationally. Different staff
and systems typically handle
commercial and residential mortgage
loans, and lenders may have relied on
manual processes for reporting and
assembling data for the limited set of
commercial-purpose transactions
traditionally reported. Commenters
argued that expanded coverage,
particularly when combined with new
data points, would require updating
systems or software, implementing new
policies and procedures, and training or
hiring new staff. These would be
expensive and time-consuming
processes, with costs passed to
consumers.
Industry commenters asserted that the
benefits of reporting all commercialpurpose transactions would not justify
the burdens. A significant number of
commenters argued that reporting data
about all commercial-purpose
transactions would not serve HMDA’s
purposes. Some industry commenters
asserted that commercial-purpose
transactions often are provided to nonnatural persons. In such cases, no race,
ethnicity, and sex data would be
collected and no fair lending analysis
could be done (except of the
demographics of the dwelling’s census
tract). Commenters argued that reporting
data about such transactions would not
234 Some commenters argued that the Bureau’s
proposal to expand HMDA-reportable data points
only compounded their concerns about increased
volume. Others argued that any reporting burden
that might be mitigated by aligning Regulation C’s
data reporting with MISMO standards would not
apply to commercial-purpose transactions, because
MISMO has not been widely adopted in commercial
and multifamily financing.
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help to uncover discriminatory lending
practices.
Many commenters focused on what
they referred to as ‘‘abundance of
caution’’ transactions and asserted that
such transactions would not help to
determine whether financial institutions
are serving community housing needs.
Commenters argued that, in abundance
of caution transactions, the home is
added to an already adequately secured
transaction (to over-collateralize the
loan), is secondary to business
collateral, and is an insignificant piece
of the overall loan structure.235 In
contrast, commenters argued, consumerpurpose loans typically are fully
collateralized by the home. Commenters
also argued that there is only a
tangential relationship between the loan
and housing because the loan’s funds
are used for business, not housing,
purposes.236
Regarding data collection, some
commenters argued that the application,
documentation, and underwriting
processes are different for commercialand consumer-purpose transactions, so
data for many of the Bureau’s proposed
data points are not gathered in a
systematic way for commercial-purpose
transactions. Some commenters
similarly asserted that reporting data for
all dwelling-secured commercial
transactions would be challenging
because Regulation C’s existing and the
Bureau’s newly proposed data points
focus on consumer lending.
Commenters argued that many data
points would not apply to, or would be
difficult to define for, commercial
transactions.237
235 Commenters explained that, when lenders
originate small business loans, they routinely rely
on a business owner’s dwelling as supplemental
collateral out of an abundance of caution, even if
other (business) collateral fully collateralizes the
loan. Several commenters emphasized that
abundance of caution transactions occur frequently,
noting that the SBA as a matter of course requires
a lien on the borrower’s residence when
guaranteeing loans. One commenter elaborated that
the likelihood that a dwelling would be part of the
workout of a distressed commercial loan is ‘‘slimto-none.’’ The commenter asserted that lenders take
dwellings as collateral as a matter of safety and
soundness, merely to ensure that the borrower has
‘‘skin in the game.’’
236 A few commenters expressed similar concerns
about loans subject to cross-collateralization
agreements, which commonly occur in commercial
lending and in which all of the collateral for
multiple loans secures all of the loans. Commenters
worried that non-dwelling-secured commercial
transactions would be HMDA-reportable merely
because they were cross-collateralized by dwellingsecured loans.
237 Commonly cited examples included:
application and application date; applicant’s
income; credit score; pricing data such as points
and fees; debt-to-income ratio; combined loan-tovalue ratio; property value; and ethnicity, race, sex,
and age data.
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Other commenters worried that even
correctly reported data would be of little
value in understanding commercialpurpose transactions. For example,
some commenters observed that
numerous data points would be
reported ‘‘not applicable’’ for
commercial-purpose transactions and
argued that the limited number of
reportable data points would not further
HMDA’s purposes or assist
policymakers in preventing or
responding to future mortgage crises.
Others observed that much information
that would be relevant to understanding
the economics of commercial-purpose
loans, such as the debt service coverage
ratio, leasing requirements and
expirations, zoning restrictions,
environmental regulations, and cash
flow, would not be reported. Some
commenters also asserted that there
would be little value in comparing all
dwelling-secured commercial- and
consumer-purpose transactions, because
they are underwritten and priced
differently (e.g., based on cash flow
rather than income), and they have
different loan terms and features (e.g.,
rate and fee structures, balloon, interestonly and prepayment penalty terms).
Finally, some industry commenters
worried that mixing data about all
dwelling-secured, commercial-purpose
transactions with traditional mortgage
loans would distort or skew the HMDA
dataset and impair its integrity for
HMDA users.
Numerous industry commenters
argued that HMDA does not authorize
the Bureau to require reporting of all
dwelling-secured commercial-purpose
transactions. They argued that HMDA
itself focuses on home mortgage lending
and that Congress understood, but opted
not to revise, Regulation C’s current
coverage when it passed the Dodd-Frank
Act.238 Some commenters similarly
argued that, when Congress intended to
grant the Bureau authority to collect
business lending data, it did so
explicitly.239 Other commenters argued
238 A group of State regulators similarly argued
that the expansion into commercial lending was
outside of HMDA’s scope and would burden
financial institutions for little benefit. They argued
that Federal and State regulators should determine
whether financial institutions are structuring
transactions to evade reporting or other disclosure
requirements, and that regulators could assess
evasion efforts through risk-scoping and
examinations.
239 For example, section 1071 of the Dodd-Frank
Act amended ECOA to authorize the Bureau to
obtain data about loans and lines of credit to
women-owned, minority-owned, and small
businesses. Some commenters argued that reporting
commercial transactions in HMDA was unnecessary
because data about small-business lending would
be reported when the Bureau implements section
1071.
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that HMDA reporting of all commercialpurpose transactions would duplicate
CRA reporting or would negatively
affect CRA performance.
Finally, some commenters expressed
concerns that reporting all dwellingsecured commercial-purpose
transactions could be particularly
burdensome for smaller institutions,
because small-business loans may
represent a large portion of their lending
activity. A few commenters asserted that
some small institutions exited consumer
mortgage lending to focus on smallbusiness lending specifically to avoid
the costs of complying with Dodd-Frank
Act regulations and that the proposal
unfairly would burden such institutions
with HMDA reporting. Others expressed
concern that financial institutions
would stop taking small-business
borrowers’ homes as collateral to avoid
reporting, or would increase borrowers’
fees to cover reporting costs, in turn
decreasing small businesses’ access to
credit and harming local and national
economies.
Industry commenters provided a
number of alternatives for coverage of
commercial-purpose transactions. A
significant number of commenters urged
the Bureau specifically to exclude all
dwelling-secured commercial-purpose
transactions. These commenters cited
the benefits and burdens already
discussed, asserted that such an
exclusion would reduce burden
significantly, and argued that it would
align coverage across Regulations C, X,
and Z. A number of commenters urged
the Bureau specifically to exclude
transactions for multifamily housing (or
alternatively to non-natural persons),
emphasizing the differences in
underwriting between multifamily and
other lending, and asserting that
multifamily loan data is particularly illsuited to serving HMDA’s purposes
because multifamily loans typically are
made to corporate borrowers rather than
to consumers.240 A few commenters
expressed concern about the privacy of
multifamily borrowers, fearing that
multifamily loans easily could be
identified in the dataset because
relatively few are made each year and
they have unique characteristics.
Other commenters variously urged
that reporting of commercial
applications and originations should be
required only for: (1) Multifamily
transactions; (2) closed-end mortgage
loans; (3) first-lien transactions; or (4)
240 Commenters cited other differences, such as
the lack of standardized underwriting criteria in
multifamily lending, and heavy reliance on a
property’s income-producing capacity, on the
borrower’s cash flow, and on an evaluation of the
strength of the overall market.
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transactions for home purchase, home
improvement, or refinancing.241
Commenters who recommended
retaining Regulation C’s home purchase,
home improvement, and refinancing test
for commercial-purpose transactions
argued that: (1) The purpose test
reasonably limits the scope of reportable
commercial transactions and better
serves HMDA’s purposes; and (2)
financial institutions easily can identify
their dwelling-secured commercial- and
consumer-purpose transactions, because
they are accustomed to making a similar
determination for coverage under
Regulations X and Z.
As discussed in the proposal, the
Bureau believes that HMDA’s scope is
broad enough to cover all dwellingsecured commercial-purpose
transactions and that collecting
information about all such transactions
would serve HMDA’s purposes. HMDA
section 303(2) defines ‘‘mortgage loan’’
as a loan secured by residential real
property or a home improvement loan.
While the Board historically interpreted
HMDA section 303(2) to refer to loans
for home purchase, home improvement,
or refinancing purposes, the Bureau
believes that the definition is broad
enough to include all dwelling-secured
mortgage loans and lines of credit, even
if their funds are used in whole or in
part for commercial (or for other, nonhousing-related) purposes.242
Moreover, the Bureau believes that
collecting data about all such
transactions would serve HMDA’s
purposes by showing not only the
availability and condition of
multifamily housing units, but also the
full extent of leverage on single-family
homes, particularly in communities that
may rely heavily on dwelling-secured
loans to finance small-business
expenditures. The Bureau believes that
financial institutions serve the housing
needs of their communities not only by
providing fair and adequate financing to
purchase and improve homes, but also
by ensuring that neither individual
borrowers nor particular communities
are excessively overleveraged through
business-related home-equity
241 Several commenters discussed commercialand agricultural-purpose loans together and urged
the Bureau to exclude both categories of loans
entirely from Regulation C. For the reasons
discussed in the section-by-section analysis of
§ 1003.3(c)(9), the final rule excludes agriculturalpurpose transactions from reporting.
242 As noted in the Bureau’s proposal, when the
Board first proposed to implement HMDA, it
proposed to require reporting of all loans secured
by residential real property. See 41 FR 13619, 13620
(Mar. 31, 1976). The Board subsequently decided to
adopt a narrower scope based on loan purpose,
because the Board believed that focusing on loan
purpose would provide more useful data. See 41 FR
23931, 23932 (June 14, 1976).
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66171
borrowing, and that all such credit is
extended on equitable terms.243
The Bureau nevertheless has
determined at this time to require
reporting only of applications for, and
originations of, dwelling-secured
commercial-purpose loans and lines of
credit for home purchase, home
improvement, or refinancing purposes.
After considering the comments, the
Bureau concluded that it is unclear
whether the benefits of reporting all
dwelling-secured commercial-purpose
transactions justify the burdens,
particularly in light of the many other
changes required under the final rule.
While the Bureau has no data with
which to estimate specifically how
many additional transactions would
have been reported under the proposal,
it seems clear that some financial
institutions’ HMDA reports would have
expanded dramatically. The Bureau is
concerned that the impact could be
greatest for smaller institutions that
specialize in small-business lending.
The Bureau considered other burdens,
as well, including the unique burdens of
collecting and reporting information
about commercial-purpose transactions
(relative to consumer-purpose
transactions) and the burdens of
addressing loans subject to crosscollateralization agreements. Against
these burdens, the Bureau weighed
commenters’ arguments that abundance
of caution transactions likely would
pose less risk to borrowers’ homes than
consumer-purpose equity lending and
that data reporting for commercialpurpose lending could be addressed in
a future Bureau rulemaking to
implement section 1071 of the DoddFrank Act.
The Bureau concluded that, at this
time, maintaining purpose-based
reporting of dwelling-secured
commercial-purpose transactions
appropriately balances reporting
benefits and burdens. The final rule
thus adds to Regulation C new
§ 1003.3(c)(10), which provides that
loans and lines of credit made primarily
for a commercial or business purpose
are excluded transactions unless they
are for the purpose of home purchase
under § 1003.2(j), home improvement
under § 1003.2(i), or refinancing under
§ 1003.2(p).
New comment 3(c)(10)–1 explains the
general rule and clarifies that
§ 1003.3(c)(10) does not exclude all
dwelling-secured business- or
commercial-purpose loans or credit
lines from coverage. New comment
3(c)(10)–2 explains how financial
243 See also 79 FR 51731, 51747–48 (Aug. 29,
2014).
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institutions should determine whether a
transaction primarily is for a
commercial or business purpose.
Specifically, comment 3(c)(10)–2
provides that a loan or line of credit that
is business, commercial, or
organizational credit under Regulation Z
§ 1026.3(a) and related commentary also
is business or commercial credit under
Regulation C and subject to special
reporting under § 1003.3(c)(10).244
Comments 3(c)(10)–3 and –4 provide
illustrative examples of business- or
commercial-purpose loans and credit
lines that are covered loans under the
final rule, or that are excluded
transactions under § 1003.3(c)(10).
The Bureau intends § 1003.3(c)(10) to
maintain coverage of commercialpurpose transactions generally at its
existing level. Section 1003.3(c)(10)
does expand coverage of dwellingsecured commercial-purpose lines of
credit, which are not currently required
to be reported, by requiring them to be
reported if they primarily are for home
purchase, home improvement, or
refinancing purposes.245 For the reasons
discussed in the section-by-section
analysis of § 1003.2(o), the final rule
equalizes reporting of closed-end loans
and open-end credit lines. Section
1003.3(c)(10) thus treats all dwellingsecured, commercial-purpose
transactions the same, whether closedor open-end. The Bureau believes that
relatively few dwelling-secured,
commercial-purpose open-end lines of
credit are used for home purchase,
home improvement, or refinancing
purposes.246 The Bureau thus expects
that reporting them will impose a
relatively small burden on financial
institutions. And, for the reasons given,
the Bureau concludes that coverage of
dwelling-secured, commercial-purpose
credit lines for home improvement,
244 The commentary to Regulation Z § 1026.3(a)
discusses some transactions (such as credit card
transactions) that are not subject to Regulation C at
all, and others (such as agricultural-purpose loans)
that are excluded from Regulation C under final
§ 1003.3(c)(9) regardless of whether they are for
home purchase, home improvement, or refinancing
purposes. The Bureau believes that the burden
relief achieved through regulatory alignment
supports relying on Regulation Z’s commentary to
the extent applicable.
245 A few commenters specifically requested that
the Bureau exclude from coverage dwellingsecured, agricultural-purpose lines of credit. The
final rule excludes such transactions under
§ 1003.3(c)(9). See the section-by-section analysis of
§ 1003.3(c)(9).
246 As discussed in part VII below, the Bureau has
faced challenges estimating institutions’ open-end
lending volume given limitations in publicly
available data sources. For example, it is difficult
to estimate commercial-purpose open-end lending
volume because available data sources do not
distinguish between consumer- and commercialpurpose lines of credit.
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home purchase, or refinancing
purposes, as finalized in this rule, is
necessary to further HMDA’s purposes,
especially because this is a segment of
the mortgage market for which the
public and public officials lack
significant data.
Section 1003.3(c)(10) also expands
coverage of applications by, or
originations to, certain trusts. For
simplicity and regulatory consistency,
final comment 3(c)(10)–2 aligns the
definition of business or commercial
credit under Regulation C with that
definition under Regulation Z
§ 1026.3(a). In the 2013 TILA–RESPA
Final Rule, the Bureau revised
comments 3(a)–9 and –10 to § 1026.3(a)
to provide that certain trusts made
primarily for personal, family, or
household purposes are transactions to
natural persons in substance if not in
form. Thus, transactions involving trusts
as described in Regulation Z comment
3(a)–10 are subject to general dwellingsecured reporting under Regulation
C.247 The Bureau believes that the
benefits of aligning the § 1003.3(c)(10)
test with Regulation Z justify the
burdens of reporting these
transactions.248
Maintaining commercial reporting
roughly at its existing level will burden
financial institutions more than
eliminating reporting of all commercialpurpose transactions, as many
commenters suggested. Financial
institutions will continue to report
transactions for home purchase, home
improvement or refinancing purposes,
and they will incur some burden
distinguishing commercial-purpose
transactions subject to § 1003.3(c)(10)
from non-commercial-purpose
transactions subject to the general
dwelling-secured coverage test. Like the
commercial-purpose test under
Regulation Z § 1026.3(a), the
§ 1003.3(c)(10) test requires financial
247 Section 1003.3(c)(10) sets forth rules only
concerning coverage. When determining whether
and how to report particular data points for covered
trust transactions, financial institutions should rely
on the guidance set forth in § 1003.4 and
accompanying commentary and instructions.
248 In aligning with Regulation Z’s interpretation
of trusts for coverage purposes, the Bureau is
declining to exclude trusts from reporting as some
commenters urged. As discussed in the 2013 TILA–
RESPA Final Rule, the Bureau believes that many
dwelling-secured loans made to trusts are
consumer-focused transactions in substance and
that data about such transactions will fulfill
HMDA’s purposes of understanding how financial
institutions are serving the housing needs of their
communities, even if particular data points like age
or credit score may not apply to all trust
transactions. The final rule includes specific
guidance about whether and how to report age
(comment 4(a)(10)(ii)–4) or ethnicity, race, and sex
(appendix B, instruction 7) for transactions
involving trusts.
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institutions to determine the primary
purpose of the transaction by looking at
a variety of factors (and not, for
example, by applying a bright-line rule).
In some cases, for transactions that have
multiple purposes, this approach will
require financial institutions to exercise
their judgment about the transaction’s
primary purpose.
The Bureau believes that the benefits
of maintaining purpose-based reporting
of commercial transactions, however,
justify these burdens. As noted at the
beginning of this section-by-section
analysis, HMDA, unlike TILA and
RESPA, does not exempt business- or
commercial-purpose transactions from
coverage. Rather, HMDA, like ECOA, as
implemented by the Bureau’s
Regulation B, and the CRA, provides
authority to cover commercial-purpose
transactions. HMDA’s scope reflects that
HMDA has a somewhat broader-based,
community-level focus than certain
other consumer financial laws.
Specifically, while HMDA endeavors
to ensure that applicants and borrowers
are not discriminated against in
particular transactions, it also seeks to
ensure that financial institutions are
meeting the housing needs of their
communities and that public-sector
funds are distributed to improve private
investments in areas where they are
needed. HMDA’s broader purposes are
served by gathering data both about
individual transactions to applicants or
borrowers and, for example, about the
available stock of multifamily rental
housing in particular communities.249
The final rule achieves these goals
without requiring institutions to report
all dwelling-secured commercialpurpose transactions. The final rule also
addresses commenters’ concerns about
commingling consumer- and
commercial-purpose data by adding a
commercial-purpose flag in
§ 1003.4(a)(38).250 Finally, the final rule
clarifies whether and how certain data
points apply to commercial-purpose
transactions.251
249 It is also for this reason that the final rule does
not exclude particular categories of commercialpurpose lending, such as multifamily or
subordinate-lien commercial lending, from
coverage.
250 See the section-by-section analysis of
§ 1003.4(a)(38).
251 See, e.g., comments 4(a)(10)(iii)–7 and
4(a)(23)–5, specifying that a financial institution
reports ‘‘not applicable’’ for income relied on and
debt-to-income ratio when the applicant or coapplicant is not a natural person or when the
covered loan is secured by a multifamily dwelling.
See also § 1003.2(n) and comment 2(n)–2, which list
special reporting requirements for multifamily
dwellings.
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3(c)(11)
As discussed in the section-by-section
analysis of § 1003.2(g), the final rule
provides that a financial institution is
covered under Regulation C and must
report data about covered loans if,
among other things, the financial
institution originated more than 100
open-end lines of credit in the
preceding two years. The Bureau
recognizes that some financial
institutions may be covered financial
institutions because they meet the openend line of credit threshold in
§ 1003.2(g)(1)(v)(B) or (2)(ii)(B), but that
these institutions may have closed-end
mortgage lending volume that falls
below the 25-loan coverage threshold in
§ 1003.2(g)(1)(v)(A) or (2)(ii)(A). Section
1003.3(c)(11) provides that such
institutions’ closed-end mortgage loans
are excluded transactions. The Bureau
does not believe that it is useful to
burden such institutions with reporting
closed-end mortgage data merely
because their open-end lending
exceeded the separate, open-end loanvolume threshold in § 1003.2(g).
Comment 3(c)(11)–1 provides an
illustrative example of the rule.
3(c)(12)
As discussed in the section-by-section
analysis of § 1003.2(g), the final rule
provides that a financial institution is
covered under Regulation C and must
report data about covered loans if,
among other things, the financial
institution originated more than 25
closed-end mortgage loans in the
preceding two years. The Bureau
recognizes that some financial
institutions may be covered financial
institutions because they meet the
closed-end mortgage loan threshold in
§ 1003.2(g)(1)(v)(A) or (2)(ii)(A), but that
these institutions may have open-end
line of credit volume that falls below the
100-line of credit coverage threshold in
§ 1003.2(g)(1)(v)(B) or (2)(ii)(B). Section
1003.3(c)(12) provides that such
institutions’ open-end lines of credit are
excluded transactions. The Bureau does
not believe that it is useful to burden
such institutions with reporting data
about open-end lines of credit merely
because their closed-end lending
exceeded the separate, closed-end loanvolume threshold in § 1003.2(g).
Comment 3(c)(12)–1 provides an
illustrative example of the rule.
Section 1003.4 Compilation of
Reportable Data
4(a) Data Format and Itemization
Section 1003.4(a) requires financial
institutions to collect and record
specific information about covered
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loans, applications for covered loans,
and purchases of covered loans. As
discussed in detail below, the Bureau
proposed several changes to § 1003.4(a)
to implement the Dodd-Frank Act
amendments to HMDA and to exercise
its discretionary authority under the
Dodd-Frank Act to require collection of
certain additional information. In
addition, the Bureau proposed
modifications to Regulation C to reduce
redundancy, provide greater clarity, and
make the data more useful.
The Bureau proposed modifications to
§ 1003.4(a) and comments 4(a)–1 and
4(a)–4 through –6. These revisions
addressed reporting transactions
involving more than one institution,
reporting repurchased loans, and other
technical modifications. In addition, the
proposal solicited feedback on the
number and type of data proposed to be
collected. These issues are discussed
below separately.
Reporting Transactions Involving More
Than One Institution
Currently, commentary to § 1003.1(c)
describes the ‘‘broker rule,’’ which
explains a financial institution’s
reporting responsibilities when a single
transaction involves more than one
institution. Proposed comments 4(a)–4
and –5 modified and consolidated
current comments 1(c)–2 through –7
and 4(a)–1.iii and.iv. Proposed comment
4(a)–4 described which financial
institution reports a covered loan or
application when more than one
institution is involved in reviewing a
single application and provided
illustrative examples. Proposed
comment 4(a)–5 discussed reporting
responsibilities when a financial
institution makes a credit decision
through the actions of an agent. The
Bureau is adopting comment 4(a)–4,
renumbered as comments 4(a)–2 and –3,
with changes to address certain industry
comments, discussed below. The
Bureau received no comments on
proposed comment 4(a)–5 and is
adopting it as proposed, renumbered as
comment 4(a)–4.
Two industry commenters stated that
they supported proposed comment 4(a)–
4. Other industry commenters expressed
concerns with proposed comment 4(a)–
4. One industry commenter pointed out
that loans originated as part of a State
housing finance agency (HFA) program
may not be reported under the proposed
commentary because under those
programs the State HFA, which the
commenter asserted may not be required
to report HMDA data, usually makes the
credit decision. Another industry
commenter urged the Bureau to allow
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more than one institution to report the
same origination.
The Bureau recognizes that some
applications and loans will not be
reported under proposed comment 4(a)–
4, finalized as comments 4(a)–2 and –3,
if the institution making the credit
decision is not a financial institution
required to report HMDA data.
However, the Bureau believes that it is
appropriate to limit reporting
responsibilities to the financial
institution that makes the credit
decision. Requiring that only one
institution report the origination of a
covered loan eliminates duplicate data.
For example, if more than one financial
institution reported the same
origination, the total origination volume
for a particular census tract would
appear higher than the actual number of
loans originated in that tract. On
balance, the Bureau concludes that only
the financial institution that makes the
credit decision should report an
origination.
Other industry commenters asked for
examples of how to report a loan or
application involving more than two
institutions. The Bureau has added an
example to proposed comment 4(a)–4,
finalized as comment 4(a)–3, to
illustrate financial institutions’
reporting responsibilities when multiple
institutions are involved. The example
demonstrates that more than one
financial institution will report the
action taken on the same application if
the same application is forwarded to
multiple institutions. However, only
one financial institution will report the
loan as an origination.
An industry commenter sought
clarification about what is meant by
application for the purposes of the
proposed comment. Section 1003.2(b)
defines application for purposes of
Regulation C and, accordingly, for
purposes of § 1003.4(a) and its
commentary. The Bureau is modifying
proposed comment 4(a)–4, finalized as
comments 4(a)–2 and –3, to clarify that
§ 1003.4(a) requires a financial
institution to report data on applications
that it receives even if the financial
institution received an application from
another financial institution rather than
directly from an applicant.
In addition, a trade association asked
the Bureau to clarify the reporting
responsibilities when a credit union
contracts a credit union service
organization (CUSO) to perform loan
origination services. The commentary to
the final rule addresses these situations.
Comment 4(a)–2 explains that the
institution that makes the credit
decision prior to closing or account
opening reports that decision.
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Accordingly, if a credit union makes a
credit decision prior to closing or
account opening, then the credit union
reports that decision. In addition,
comment 4(a)–3.v addresses situations
when a financial institution (in this case
the CUSO) makes a credit decision
using the underwriting criteria of a third
party (in this case the credit union). In
that case, if the CUSO makes a credit
decision without the credit union’s
review before closing, the CUSO reports
the credit decision. However, if the
CUSO approves the application acting
as the credit union’s agent under State
law, comment 4(a)–4 clarifies that the
credit union is required to report the
actions taken through its agent.
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Purchased Loans
In 2010, the FFIEC issued a
publication in which it noted that
repurchases qualify as purchases for
Regulation C, and provided guidance on
how and when to report such
purchases.252 The Bureau proposed to
incorporate this guidance into
Regulation C by adding new comment
4(a)–5 to clarify that covered loans that
had been originated by a financial
institution, sold to another entity, and
subsequently repurchased by the
originating institution should be
reported under Regulation C unless the
sale, purchase, and repurchase occurred
within the same calendar year. When
the FFIEC publication was issued, data
users could not reliably identify
repurchased loans within HMDA data
because each loan was reported with a
unique application or loan number,
even if it was a loan being repurchased.
Thus loans repurchased and reported
multiple times within the same calendar
year would distort the annual HMDA
data, because the characteristics of those
loans would be represented multiple
times within the data. For the reasons
discussed below, the Bureau is not
adopting comment 4(a)–5 as proposed
and, instead, is revising it to require the
reporting of most repurchases as
purchased loans regardless of when the
repurchase occurs.
Most commenters opposed the
Bureau’s proposal. Some industry
commenters argued that repurchases
should never be reported, even outside
of the calendar year in which the loan
was originated. Some industry
commenters argued that the calendar
year exception would negatively affect
CRA ratings for some financial
institutions that temporarily purchase
252 Fed. Fin. Insts. Examination Council, CRA/
HMDA Reporter, Changes Coming to HMDA Edit
Reports in 2010, at 5 (Dec. 2010), available at
http://www.ffiec.gov/hmda/pdf/10news.pdf.
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CRA-eligible loans under certain
lending arrangements. Other industry
commenters argued that any reporting of
repurchases would inflate CRA ratings
by allowing the loans to appear in a
financial institution’s HMDA data more
than once. However, a few commenters
supported the Bureau’s proposal and
argued that repurchases should be
considered purchases for purposes of
HMDA except for when the repurchase
occurs within the same calendar year as
the loans were originated.
The Bureau recognizes that the onecalendar-year reporting exception in the
FFIEC guidance has led to inconsistent
reporting of repurchased loans, because
loans originated late in a calendar year
and repurchased early in the succeeding
calendar year are reported as loan
purchases, while loans originated early
in a calendar year and repurchased
within the same calendar year are not
reported. The Bureau also understands
that there have been questions
concerning the scope of the guidance
and whether various scenarios
constitute a repurchase or are addressed
by the guidance.
The Bureau has determined that
repurchases of covered loans should be
reported as loan purchases, with only a
narrow exception discussed below. The
Bureau believes that the one-calendaryear reporting exception, which was
based on guidance originally published
by the FFIEC, will no longer be needed
in light of other elements of the final
rule.253 The universal loan identifier
(ULI), as adopted in § 1003.4(a)(1)(i),
will enable a loan to be identified in the
HMDA dataset through multiple HMDA
reporting events and the repurchase
reporting event could be identified and
not included in an analysis or
compilation of HMDA data focused on
originated loans or annual market
volume. Repurchases after the
origination and sale of a covered loan to
a secondary market investor still effect
a transfer of legal title to the covered
loan, which then could be held in
portfolio by the originating institution
or sold to another secondary market
investor later. Information about these
transfers should be reflected in HMDA
as purchases, just as the original
purchase is, so that the information may
be included in the HMDA dataset to
further the purposes of HMDA, and so
that the ULI may be used effectively to
monitor covered loans through their
lifecycle.
In addition, if repurchase data are not
included, there could be gaps in the
history of a covered loan. The DoddFrank Act also requires the U.S.
Frm 00048
Other Technical Modifications
The Bureau also proposed technical
modifications to 4(a) and proposed
comment 4(a)–1. The Bureau received
no comments on the proposed changes
to 4(a) and proposed comment 4(a)–1
and is adopting them as proposed, with
minor modifications. The Bureau is also
moving comments 4(a)–1.iv, –2, and –3
to the commentary to § 1003.4(f) to
clarify a financial institution’s
254 Dodd-Frank Act section 943; see also 17 CFR
240.15Ga–1.
253 Id.
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Securities and Exchange Commission to
prescribe regulations that require
securitizers to disclose fulfilled and
unfulfilled repurchase requests across
all trusts aggregated by the
securitizer.254 The Bureau believes that
the usefulness of the HMDA data would
be enhanced by having repurchases
included so that information could be
available through multiple HMDA
reporting events.
For the reasons discussed above, the
Bureau is adopting comment 4(a)–5
with modifications. However, the
Bureau is creating an exception for
certain assignments of legal ownership
of covered loans through interim
funding arrangements that operate as
the functional equivalent of warehouse
lines of credit because they may not
truly reflect sales and purchases of
covered loans. These interim funding
agreements are used as functional
equivalents of warehouse lines of credit
where legal title to the covered loan is
acquired by the party providing interim
funding, subject to an obligation of the
originating institution to repurchase at a
future date, rather than taking a security
interest in the covered loan as under the
terms of a more conventional warehouse
line of credit. The Bureau does not
believe that these arrangements should
require reporting under Regulation C
given the temporary nature of the
transfer and the intent of the
arrangement. Therefore, pursuant to
HMDA section 305(a) the Bureau is
incorporating an exception into
comment 4(a)–5 for such agreements so
that such activity will not be reported
under Regulation C. This exception is
necessary and proper to effectuate
HMDA’s purposes, because reporting of
these transfers in addition to reporting
of the underlying originations,
subsequent purchases, and any
repurchase at a later date may distort
HMDA data without providing
meaningful information that furthers
HMDA’s purposes. This exception will
also facilitate compliance for financial
institutions.
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obligation to record data on a quarterly
basis.
Number of Data Points
As detailed in the section 1022
discussion below, currently Regulation
C requires reporting of approximately 35
separate pieces of information, and
allows for optional reporting of three
denial reasons. The Dodd-Frank Act
amended HMDA by enhancing two
existing data points (rate spread and
application ID) and identifying 11 new
data points, which the Bureau proposed
to implement with 22 data fields. The
Bureau also proposed to require
financial institutions to report 13
additional data points not identified in
the Dodd-Frank Act, implemented with
28 data fields, and to modify and
expand some of the existing Regulation
C data fields. Also detailed in the
section 1022 discussion below, while
the Bureau estimates that the
incremental cost of each additional data
point and associated data fields is small,
the Bureau acknowledges that there are
variable costs, one-time costs, and
ongoing costs associated with the
additional data points when considered
collectively. The Bureau considered this
in developing the proposal and
proposed only those additional data
points that the Bureau believes have
sufficient value to justify the costs. As
discussed below, the Bureau is not
dramatically changing the number of the
proposed data points, either by not
adopting a substantial number of those
that were proposed or by adopting
substantially more than the number that
were proposed. The number of data
fields implementing some of the data
points has increased based on changes
the Bureau has adopted for the final
rule.
Some industry commenters stated that
the Bureau should only require data
points that were specifically defined in
the Dodd-Frank Act. Some industry
commenters also suggested removing
data points currently required under
Regulation C. Some industry
commenters stated that the Bureau
should only require certain financial
institutions to report data points not
specifically defined in the Dodd-Frank
Act, such as institutions that had been
found to be in violation of fair lending
laws, HMDA, or the CRA, or institutions
that exceed certain asset-size or loanvolume thresholds. Some industry
commenters stated that the Bureau
should conduct additional analysis on
the value of the proposed data points
before deciding whether to adopt them.
Many consumer advocate commenters
argued that the Bureau’s proposal did
not require enough information to be
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reported, and that additional
information would be required to fulfill
HMDA’s purposes. Some industry and
other commenters also suggested
additional data points. Collectively
these commenters suggested more than
45 additional data points. Some
industry commenters and consumer
advocate commenters stated that the
Bureau’s proposal was reasonable and
measured in terms of the number of data
points and made sense given the current
mortgage market.
The Bureau has analyzed the
proposed data points carefully in light
of the comments received and other
considerations and believes that the
data points adopted in this final rule
each significantly advance the purposes
of HMDA and are warranted in light of
collection burdens. Each such data
point is discussed below in the sectionby-section analysis. The Bureau has
authority to expand the data points
collected to include such other
information as it may require under
HMDA section 304(b)(5)(D) and (b)(6)(J).
As discussed below throughout the
section-by-section analysis, the Bureau
is adopting many of the data points
proposed, modifying certain data points
based on feedback received from
commenters, and not finalizing certain
proposed data points.
Regarding the comments suggesting
criteria or thresholds for reporting
additional data points, the Bureau does
not believe that it would be appropriate
to condition the reporting of such data
points on such criteria. The Bureau
believes that the data points proposed to
be reported fulfill HMDA’s purposes
and that limiting reporting of them to
only some financial institutions would
limit the usefulness of the data. Limiting
reporting of certain information to
financial institutions that had a history
of violating certain laws would
compromise the usefulness of the
HMDA data because that information
would not be available from other
financial institutions, precluding the
generating of a representative
(presumptively non-violative) sample of
the market for statistical comparison.
Limiting reporting of certain
information by asset size or loan volume
would also undermine the utility of the
HMDA data, because financial
institutions that would fall under any
threshold may have different
characteristics and lending practices
that would then not be visible through
HMDA data. Financial institutions have
different business models and
underwriting practices which can, in
part, be based on their asset size or loan
volume. Excluding certain financial
institutions would potentially exclude
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information about covered loans with
different characteristics or information
related to differences in underwriting
practices and would create data that is
not uniform. This would not only
undermine HMDA’s purposes, but limit
information available to policymakers in
considering how legal requirements
should apply to different business
models and underwriting practices.
The Bureau also considered the
additional data points suggested by
commenters. As discussed below
throughout the section-by-section
analysis, certain data points have been
modified to take into account some of
these suggestions. The Bureau is not
adopting many of these data points
because it does not believe it has
sufficient information at this time to
determine whether adding them would
serve HMDA’s purposes and be
warranted in light of collection burdens.
Others the Bureau believes would be
duplicative of, or would provide
information only marginally different
than, data points adopted in the final
rule. Because many of these comments
proposed data points similar to ones
proposed by the Bureau, the responses
to many of these comments are
discussed below in the section-bysection analysis for the data point being
finalized most relevant to those
suggestions.
4(a)(1)
4(a)(1)(i)
HMDA section 304(b)(6)(G), as
amended by Dodd-Frank Act section
1094(3)(A)(iv), authorizes the Bureau to
require a universal loan identifier, as it
may determine to be appropriate.255
Existing § 1003.4(a)(1) requires financial
institutions to report an identifying
number for each loan or loan
application reported. The current
commentary to § 1003.4(a)(1) strongly
discourages institutions from using the
applicant’s or borrower’s name or Social
Security number in the application or
loan number. The current commentary
also requires the number to be unique
within the institution, but does not
provide guidance on how institutions
should select ‘‘unique’’ identifiers. The
Bureau proposed to implement HMDA
section 304(b)(6)(G) by replacing the
current HMDA loan identifier with a
new self-assigned loan or application
identifier that would be unique
throughout the industry rather than just
within the reporting financial
institution, would be used by all
financial institutions that report the
loan or application for HMDA purposes,
255 12
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and could not be used to directly
identify the applicant or borrower. The
Bureau believes a reasonable
interpretation of ‘‘universal loan
identifier’’ in HMDA section
304(b)(6)(G) is that the identifier would
be unique within the industry. For the
reasons discussed below, the Bureau is
adopting § 1003.4(a)(1)(i) generally as
proposed requiring entities to provide a
universal loan identifier (ULI) for each
covered loan or application. The Bureau
is adding separate paragraphs to address
purchased covered loans and
applications that are reconsidered or
reinstated during the same calendar
year. In addition, as discussed below,
the Bureau is adding a paragraph
requiring a check digit as part of the
ULI.
The Bureau solicited comment on
whether the proposed changes to the
loan or application identifiers used for
HMDA reporting are appropriate. Most
industry commenters expressed concern
that the proposed ULI would introduce
unnecessary complexities in the HMDA
reporting process. Several industry
commenters stated that requiring
institutions to reinvent current loan
numbering procedures would result in
significant implementation costs
because it would require a programming
change to current operation systems,
such as an institution’s loan origination
software. Industry commenters pointed
out that most institutions assign loan
numbers based on a certain order, such
as the order the application was
received, and furthermore that creditors
may include information within the
loan number that is pertinent to the
institution’s operations. For example, an
industry commenter stated that its loan
origination software assigns numbers
randomly but uses a unique identifier
for originations and a unique identifier
for all other loans not originated. The
Bureau acknowledges that the proposed
ULI may pose operational challenges for
financial institutions. However, the
Bureau believes that the benefits that
can be gained from the use of a ULI,
including the potential ability to track
an application or loan over its life and
to help in accurately identifying lending
patterns across various markets justify
the burden associated with
implementing a ULI. Additionally, the
Bureau understands that financial
institutions need flexibility for
organizational purposes, such as the
flexibility to assign loan numbers that
include numbers that would represent
product type. With this in mind, the
Bureau proposed that the ULI would
consist of up to an additional 25
characters that follow the Legal Entity
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Identifier (LEI) to identify the covered
loan or application. The Bureau believes
that this approach provides financial
institutions with the flexibility to
accommodate organizational purposes
when assigning loan numbers, except
that the additional 25 characters must
not include any information that could
be used to directly identify the
applicant or borrower.
Currently, institutions assign
alphanumeric identifiers, with up to 25
characters, to identify a covered loan or
application. The Bureau proposed a
maximum 45-character ULI. The first 20
characters would be comprised of the
LEI followed by up to 25 characters,
which would represent the unique
sequence of characters to identify the
covered loan or application, and may be
letters, numerals, symbols, or a
combination of letters, numerals, and
symbols. A trade association
recommended that the ULI be
lengthened to 65 characters, as opposed
to the proposed 45. An industry
commenter stated that an institution
could run out of identifiers quickly with
the proposed maximum. The Bureau
believes that lengthening the proposed
ULI may benefit some institutions with
large loan volumes that may use certain
characters in the ULI to represent
business lines or branches, but, at the
same time, a ULI longer than 45
characters may be burdensome for other
financial institutions. The Bureau
believes the right balance between
flexibility and usability is a maximum
of 45 characters in the ULI, with the first
20 characters representing the LEI.
A few commenters expressed
concerns regarding the potential errors
that could arise in a loan identifier as
long as 45 characters. One commenter
stated that manual input of a 45-digit
loan identifier will likely result in typos
while another commenter suggested that
manual input would need to take place
to ensure accurate information because
there is potential room for error with a
45-character loan identifier. To address
the potential errors that could arise, an
industry commenter recommended that
the Bureau consider adding a checkdigit requirement to the ULI. A check
digit is used to validate or verify that a
sequence of numbers or characters, or
numbers and characters, are correct. A
mathematical function is applied to the
sequence of numbers or characters, or
numbers and characters, to generate the
check digit. This mathematical
methodology could then be performed
at a point in the HMDA process to
ensure that the check digit resulting
from performing the mathematical
methodology on the sequence of letters
or numerals, or letters and numerals,
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matches the check digit in the ULI.
Implementation of a check digit can
help ensure that the sequence of
characters assigned to identify the
covered loan or application are
persistent throughout the HMDA
process. For example, at the application
stage, a financial institution assigns the
ULI, which consists of the financial
institution’s LEI, a 23-character unique
sequence of letters and numerals that
identify the application, and a 2character check digit. Once the
application is complete, the file is
transferred to another division of the
financial institution where it will be
handled by other staff. To ensure that
the ULI was transferred correctly, the
mathematical function could be
performed to obtain the check digit and
ensure that it matches the check digit in
the ULI. This would ensure that the ULI
does not contain an error due to typos
or transposition of characters as a result
of manual entry or file transfer errors. If
the check digit resulting from the
performed mathematical function does
not match the check digit in the ULI,
then it would be an indication to staff
that an error in the ULI exists. Adding
a check digit requirement in the ULI
also benefits the file transfer process
between financial institutions. For
example, a file transfer process could be
initiated because the loans are sold to
another financial institution. The
financial institution that originated the
loans electronically transmits to the
financial institution that purchases the
loans the applicable information,
including the ULI, related to the loans.
Although an electronic transmission
reduces the incidence of errors, it is not
guaranteed because of the likelihood
that the institutions use different
systems to capture the data and
therefore, the financial institution that
purchased the loans may need to
implement specific software to intake
the data. In addition, unlike other
information related to the loan that can
undergo a quality control process
through the implementation of business
logic and statistical analyses, the ULI
does not contain information that would
make it possible to ensure that the ULI
transferred is valid through the
application of business logic or
statistical analyses. Therefore,
implementation of a check digit can
help ensure that the ULI was transferred
correctly.
The check-digit requirement would
enable financial institutions to quickly
identify and correct errors in the ULI,
which would ensure a valid ULI, and
therefore enhance data quality. Check
digits are currently implemented in
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certain identifiers, such as vehicle
identification numbers, which function
as a check against transcription
errors.256 The national unique health
plan identifier implemented by the U.S.
Department of Health and Human
Services also incorporates a check
digit.257 The Bureau believes that the
benefits of a check digit in the ULI
justifies the additional burden
associated with implementing a check
digit.
The Bureau is publishing in this final
rule new appendix C that includes the
methodology for generating a check
digit and instructions on how to
validate a ULI using the check digit. The
methodology is adapted from Mod 97–
10 258 in the international standard ISO/
IEC 7064, which is published by the
International Organization for
Standardization (ISO).259 ISO/IEC 7064
specifies check character systems that
can detect errors in a string of characters
that are the result of data entry or copy
errors.260 Specifically, ISO/IEC 7064
check character systems can detect
errors caused by substitution or
transposition of characters. For
example, the check digit can detect a
transposition error such as when two
adjacent numbers are transposed or
when a single character is substituted
for another. The Bureau believes that
the identification of these types of errors
will enhance data quality and reduce
burden in the long run for institutions
because the errors can be identified
early in the process. To reduce burden,
the Bureau plans to develop a tool that
financial institutions may use, at their
option, to assist with check digit
generation.
For the reasons stated above, the
Bureau adopts as final the requirement
to include a check digit to the ULI. In
order to maintain the maximum 45character ULI, the Bureau is also
modifying the maximum number of
additional characters to identify the
covered loan or application and
reducing it from the proposed 25 to 23.
Several industry commenters
suggested that the Bureau should
256 See
73 FR 23367, 23369 (Apr. 30, 2008).
77 FR 54664, 54675 (Sept. 5, 2012).
258 Mod 97–10 applies the mathematical function
modulus, which is defined by ISO as an integer
used as a divisor of an integer dividend in order to
obtain an integer remainder.
259 ISO is the world’s largest developer of
international standards and has published over
19,500 standards that cover aspects of business and
technology. ISO is comprised of national standards
bodies from 162 member countries. More
information about ISO and the standards is
available at http://www.iso.org/iso/home.html.
260 Int’l. Org. for Standards, ISO/IEC 7064:2003,
Information technology-Security techniques-Check
character systems (Feb. 15, 2003), http://
www.iso.org/iso/home.html.
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257 See
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consider using the MERS Mortgage
Identification Number (MIN) as the core
of the ULI.261 The MIN is an 18-digit
number registered on the MERS System.
The first seven digits of the 18-digit MIN
number would be the financial
institution’s identification number
assigned by MERS. The next 10 digits
would be assigned by the financial
institution and the last digit serves as a
check digit. One commenter stated that
uniqueness is important in a loan
number and that the MIN could
guarantee uniqueness because it is
registered with the MERS System. The
MIN is usually issued at origination but
may be issued at application. For the
reasons discussed below, the Bureau is
not adopting a ULI that uses the MIN as
the core.
First, a rule that prescribes the MIN as
the core would require all financial
institutions reporting HMDA data to
register with MERSCORP and obtain an
organization number assigned by
MERSCORP. This organization number
would not be able to serve the same
function as the LEI described in the
section-by-section analysis of
§ 1003.5(a)(3) below because there
would not be a way to link HMDAreporting institutions with their
corporate families using the MERS
identification number. Second, the 10digit number assigned by the institution
that would serve as the identification
number that can be used to identify and
retrieve the loan application would not
provide the same flexibility as the
maximum 23-character that the ULI
provides. Some financial institutions
may need more than 10 digits to identify
and retrieve a loan application because
certain characters in the loan number
may represent branches or business
lines. For these reasons, the Bureau is
not adopting a ULI that uses the MERS
MIN as the core.
Some industry commenters suggested
that the ULI should be identical to the
loan identification number prescribed
by the 2013 TILA–RESPA Final Rule.
That rule provides that the loan
identification number is a number that
may be used by the creditor, consumer,
and other parties to identify the
transaction.262 See Regulation Z
§ 1026.37(a)(12). Although the burden
on industry would be mitigated if the
261 The MERS System is owned and managed by
MERSCORP Holdings, Inc., an industry-owned and
privately held corporation. According to
MERSCORP, the MERS System is a national
electronic database that tracks changes in mortgage
servicing and beneficial ownership interests in
residential mortgage loans on behalf of its members.
262 See 78 FR 79730 (Dec. 31, 2013). The rule is
effective on October 3, 2015 and applies to
transactions for which the creditor or mortgage
broker receives an application on or after that date.
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Bureau required that financial
institutions use the same loan
identification number for HMDA
reporting as the loan identification
number in the TILA–RESPA
disclosures, the Bureau believes that an
application number that may meet the
TILA–RESPA standards may not be
appropriate for HMDA reporting.
Section 1026.37(a)(12) does not limit the
number of characters in the loan
application number. The lack of
limitation enables creditors to assign as
many characters in the loan application
number as they want, which could
result in compliance challenges for
users of the ULI. For example, if an
institution purchases a loan with a 60character application number assigned
by the institution that originated the
loan pursuant to § 1026.37(a)(12), the
institution that purchased the loan
would need to make updates to their
system to accommodate a 60-character
ULI in order to report the purchased
loan under HMDA if the purchasing
institution’s system was programmed to
handle ULIs with a maximum number
of 45 characters pursuant to Regulation
C. For these reasons, the Bureau is not
adopting a rule that would enable
institutions to use the TILA–RESPA
loan application number for the ULI.
The Bureau notes, however, that the
loan application number requirements
in the TILA–RESPA rule are not
necessarily incompatible with the ULI.
Therefore, a financial institution may
generate a ULI for both HMDA and
TILA–RESPA.
The Bureau also proposed that the
ULI may consist of letters, numbers,
symbols, or a combination of letters,
numbers, and symbols. While the
Bureau did not receive any comments
regarding the use of letters or numbers,
the Bureau received a comment from
industry stating that symbols may
contain embedded special characters
that could potentially result in
interference with applications or
programs that use the ULI. In addition,
certain symbols may not be recognized
by certain programs that use HMDA
data. The commenter suggested that the
Bureau should provide a list of symbols
that are permissible in the ULI or
provide a list of symbols that are not
permissible in the ULI. After
considering the comment, the Bureau
concluded that symbols in the ULI can
potentially present challenges for
financial institutions and data when
reporting or analyzing HMDA data.
Therefore, the final rule does not permit
the use of symbols, as in proposed
§ 1003.4(a)(1)(i)(B)(1). The Bureau is
adopting a final rule that provides that
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the maximum number of characters in
the ULI must be 45, with the first 20
characters representing the LEI followed
by up to 23 additional characters that
may be letters, numerals, or a
combination of both, and a 2-character
check digit.
The Bureau explained in the proposal
that the current identifier requirement
makes it difficult to track an application
or loan over its life. Commenters,
including industry, consumer
advocates, and trade associations,
supported the proposed ULI because it
would require a financial institution
that reports HMDA data and that reports
a purchased loan to report the same ULI
that was previously reported under
HMDA by the financial institution that
originated the loan. One commenter
stated that the ULI will enable a much
better understanding of how the market
works and how loans perform. Another
commenter pointed out that the ULI is
the single most useful addition for
regulators to assess what happens after
a loan is originated, from servicer
changes to secondary mortgage market
activity. Another commenter supporting
the proposed ULI argued that a ULI that
follows a loan through various
permutations may help shed light into
which racial and ethnic minority
homeowners may be disproportionately
subjected to predatory lending,
foreclosure, fraud, and underwater
mortgages.
A commenter that supported the ULI
stated that issues regarding the ULI
could arise in a transaction that involves
a purchased covered loan. Specifically,
the commenter noted that the proposal
did not specify which entity assigns the
ULI at the initial reporting of the
covered loan, particularly if a quarterly
reporter purchased the loan and reports
it prior to the annual reporter that
originated the loan. The Bureau
recognizes that the proposal may have
created confusion regarding the ULI on
purchased covered loans. To eliminate
the confusion, the Bureau is adding
§ 1003.4(a)(1)(i)(D) to address purchased
covered loans. Section 1003.4(a)(1)(i)(D)
provides that a financial institution that
reports a purchased covered loan must
use the ULI that was assigned or
previously reported for the covered
loan. For example, if a quarterly reporter
pursuant to § 1003.5(a)(1)(ii) purchases
a covered loan from a financial
institution that is an annual reporter
and that submits data annually pursuant
to § 1003.5(a)(1)(i), the quarterly
reporter that purchased the covered loan
must use the ULI that the financial
institution that is an annual reporter
assigned to the covered loan.
Additionally, the Bureau is adding
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§ 1003.4(a)(1)(i)(E) to address the option
for using the same ULI for an original
and reinstated or reconsidered
application that occur during the same
calendar year. For example, assume a
quarterly reporter pursuant to
§ 1003.5(a)(1)(ii) takes final action on an
application in the first quarter and
submits it with its first quarter
information. If in the second quarter
during the same calendar year, the
financial institution reconsiders the
application and takes final action in the
second quarter that is different from that
in the first quarter, the financial
institution may use the same ULI that
was reported in its first quarter data.
The Bureau believes that providing this
option for financial institutions will
reduce burden associated with assigning
a new ULI for a later transaction that a
financial institution considers as a
continuation of an earlier transaction.
The Bureau proposed § 1003.5(a)(3) to
require a financial institution to provide
an LEI when the financial institution
reports its data. Section 1003.5(a)(3) also
describes the issuance of the LEI. The
Bureau is adopting the requirement in
§ 1003.5(a)(3) to require a financial
institution to provide its LEI when
reporting its data, as discussed in detail
below in the section-by-section analysis
of § 1003.5(a)(3). However, the Bureau is
making a technical change and moving
the description of the issuance of the
LEI to § 1003.4(a)(1)(i)(A) for ease of
reference. See the section-by-section
analysis of § 1003.5(a)(3) below for more
information.
For these reasons and those above, the
Bureau is adopting § 1003.4(a)(1)(i)
generally as proposed, with
modifications related to symbols and
the number of characters, the issuance
of the LEI, additional clarification
related to purchased covered loans and
previously reported applications, and
the addition of the check digit
requirement.
The Bureau solicited feedback
regarding hashing as an encryption
method for the ULI. The Bureau also
solicited feedback on salting in addition
to hashing to enhance the encryption.
One industry commenter recommended
that the Bureau finalize hashing and
salting while most other industry
commenters opposed such a
requirement arguing that it would not
provide any benefit but would entail an
additional cost, including expertise and
resources. After considering the
comments, the Bureau has concluded
that the benefits of hashing and salting
would not be sufficient to justify the
costs of such requirements.
Accordingly, the Bureau is not adopting
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a requirement that the ULI must be
encrypted using a hash algorithm.
Proposed comment 4(a)(1)(i)–1
clarified the uniqueness requirement of
the ULI. The Bureau did not receive any
comments on proposed comment
4(a)(1)(i)–1, which is adopted generally
as proposed, but with technical
modifications. The Bureau did not
receive feedback on comment 4(a)(1)(i)–
2, which provided guidance on the
ULI’s privacy requirements, and is
adopted as proposed. The Bureau is also
adopting new comments 4(a)(1)(i)–3
through –5 to provide guidance and
illustrative examples for the ULI on
purchased covered loans and reinstated
or reconsidered applications, and
guidance on the check digit.
4(a)(1)(ii)
The Bureau proposed § 1003.4(a)(1)(ii)
to provide for reporting of the date the
application was received or the date
shown on the application form. For the
reasons discussed below, the Bureau is
finalizing § 1003.4(a)(1)(ii) as proposed
with minor revisions to the associated
commentary.
Some commenters requested
additional guidance on reporting
application date. Many of these
comments stated that application date is
difficult to report for commercial loans,
because the application process is much
more fluid than in consumer lending
and an application form may not be
formally completed until the end of the
application process for some
commercial loans. These concerns will
be reduced by the Bureau’s decision to
generally maintain reporting of
dwelling-secured, commercial-purpose
transactions at its current level as
discussed above in the section-bysection analysis of § 1003.3(c)(10). For
those commercial loans that will be
required to be reported, the definition of
application, combined with the ability
to rely on the date shown on the
application form, permits sufficient
flexibility for financial institutions to
report application date for commercial
loans.
A commenter suggested that instead
of reporting application date financial
institutions should report only the
month of application to ease
compliance. The Bureau believes such a
change would reduce the data’s utility.
Because interest rates can change more
rapidly than monthly, and policies or
criteria that affect the action taken on
applications can change during a
calendar month, it is important to have
a more complete application date
reporting requirement so that loans can
be grouped appropriately for analysis.
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Therefore, the Bureau is finalizing
§ 1003.4(a)(1)(ii) as proposed, and
finalizing comment 4(a)(1)(ii)–1 as
proposed with minor revisions to
provide additional guidance on
reporting application date when
multiple application forms are
processed. The Bureau received no
specific feedback on comment
4(a)(1)(ii)–2 and is finalizing it as
proposed. The Bureau is adding
additional language to comment
4(a)(1)(ii)–3 for clarity. The Bureau is
deleting comment 4(a)(ii)–4, because it
is duplicative of comment 4(a)(8)(i)–14.
4(a)(2)
HMDA section 304(b)(1) requires
financial institutions to report the
number and dollar amount of mortgage
loans which are insured under Title II
of the National Housing Act or under
Title V of the Housing Act of 1949 or
which are guaranteed under chapter 37
of Title 38. The Bureau proposed to
retain the current reporting requirement,
but incorporate the text of the statutory
provision, with conforming
modifications, directly into Regulation
C. For the reasons discussed below, the
Bureau is finalizing § 1003.4(a)(2) with
modifications to maintain consistency
with the current reporting requirement.
Commenters suggested various
changes to the requirement, including
aligning it with similar categories in
other regulations, including new
categories, or exempting certain types of
covered loans from the requirement. A
few commenters suggested adding an
additional enumeration for State
housing agency loans. Because many
loans that State housing agencies are
involved with are also insured or
guaranteed by FHA or another
government entity, the Bureau does not
believe that adding an additional
enumeration would accurately capture
State housing agency loans without
requiring financial institutions to select
multiple categories, which would add
additional burden and complexity.
Other commenters suggested aligning
to the Regulation Z § 1026.37(a)(10)(iv)
loan type categories, which would
remove the category for USDA Rural
Housing Service and Farm Service
Agency loans and combine it with State
housing agency loans under an ‘‘other’’
category. The Bureau believes that the
less burdensome approach is to
maintain the current category for USDA
Rural Housing Service and Farm Service
Agency loans and not adopt a new
category incorporating multiple types of
covered loans.
Some commenters also argued that
commercial loans should be exempted
from this requirement, or that a Small
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Business Administration enumeration
should be added. The Bureau is
adopting a reporting requirement to
identify covered loans primarily for a
business or commercial purpose as
discussed in the section-by-section
analysis of § 1003.4(a)(38) below and
therefore believes it would be largely
duplicative to add a reporting
requirement specifically for Small
Business Administration loans,
especially considering that such loans
are not specifically identified by HMDA
section 304(b)(1).
After considering the comments and
conducting additional analysis, the
Bureau is finalizing § 1003.4(a)(2) with
modifications. The Bureau is specifying
the name of the government insurer or
guarantor instead of the chapter or title
of the United States Code or statute
under which the loan is insured or
guaranteed as specified in the statutory
text to maintain consistency with
current reporting requirements provided
in appendix A to Regulation C. Federal
Housing Administration Title I loans
would be reported as FHA loans in
addition to Title II loans. Because Title
I loans include many manufactured
housing loans, the Bureau is concerned
that if the proposal were finalized as
proposed, Title I manufactured housing
loans would have been reported as
conventional loans which would not
clearly distinguish them from homeonly manufactured home loans not
insured by FHA.
4(a)(3)
Current § 1003.4(a)(3) requires
financial institutions to report the
purpose of a loan or application using
the categories home purchase, home
improvement, or refinancing. The
Bureau proposed only technical
modifications to § 1003.4(a)(3) to
conform to proposed changes in
transactional coverage and to add an
‘‘other’’ category, but sought comment
regarding whether the loan purpose
reporting requirement should be
modified with respect to home
improvement loans and cash-out
refinancings. For the reasons discussed
below, the Bureau is adopting
§ 1003.4(a)(3) with modifications to
include a cash-out refinancing category
and to make changes to the commentary
to implement this additional category
and provide instructions for reporting
covered loans with multiple purposes.
Some commenters addressed the
home improvement loan purpose
reporting requirement. One commenter
suggested that the loan purpose be
simplified to track only whether a loan
was for purchase of a dwelling or not,
as discerning a borrower’s intent can be
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difficult. Other commenters also stated
that determining home improvement
purpose can be difficult for cash-out
refinancings and other loans, and
various commenters recommended
eliminating the home improvement
purpose category. However, some
commenters supported requiring
financial institutions to identify loans
and applications with a home
improvement purpose. The Bureau
believes that the home improvement
purpose continues to be an important
indicator of home financing available
for home improvements, and therefore
is preserving that loan purpose category
in this final rule.
The Bureau solicited comment on the
utility and feasibility of requiring a
cash-out refinancing purpose, as distinct
from refinancings generally. Many
commenters stated that cash-out
refinancings do not have a standardized
definition in the industry and can vary
by loan program or financial institution.
Some commenters argued that
definitional problems would make any
reporting requirement difficult. A few
commenters argued that the most the
Bureau should require would be to
report whether the financial institution
considered the loan or application to be
a cash-out refinancing rather than trying
to establish a specific definition for
HMDA purposes alone.
Other commenters stated that
reporting of cash-out refinancings
would enhance the HMDA data by
shedding light on borrowers taking
equity out of their homes and
differentiate these refinancings from
rate-and-term refinancings in the data.
Some commenters also noted that there
is often a pricing difference between
cash-out refinancings and other
refinancings and that differentiating
them in the data would be helpful.
One commenter stated that the Bureau
should adopt an additional data point
for Regulation C indicating the amount
of cash received by the consumer at
closing. The Bureau does not believe it
would be appropriate to adopt a specific
additional data point for cash received
by the consumer at closing at this time.
The amount of cash received might not
be a true indicator of whether the loan
was considered or priced as a cash-out
refinancing, because some financial
institutions and loan programs allow for
a limited amount of cash to be received
in rate-and-term refinancings. However,
the Bureau believes that differentiating
cash-out refinancings in HMDA data
will be valuable because there are often
significant differences in rates or fees
between cash-out refinancings and rate-
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and-term refinancings.263 These
differences might not otherwise be
distinguishable in the HMDA data and
could appear to be a result of
discrimination in a fair lending analysis
if the distinction could not be controlled
for.
Therefore, pursuant to HMDA
sections 305(a) and 304(b)(6), the
Bureau is finalizing § 1003.4(a)(3) with
the addition of a cash-out refinancing
loan purpose. The Bureau believes this
addition will carry out HMDA’s
purposes, by, for example, assisting in
enforcing antidiscrimination statutes.
The Bureau is adopting new comment
4(a)(3)–2 to provide guidance on
reporting cash-out refinancings. This
comment provides that a financial
institution reports a covered loan or an
application as a cash-out refinancing if
it is a refinancing as defined by
§ 1003.2(p) and the institution
considered it to be a cash-out
refinancing in processing the
application or setting the terms under
its guidelines or an investor’s
guidelines. This comment also provides
illustrative examples.
Some commenters stated that the
Regulation C loan purpose categories
should be aligned with the loan purpose
categories in Regulation Z
§ 1026.37(a)(9). HMDA section 304(b)
requires the disclosure of home
improvement loans, which is not a loan
purpose under Regulation Z
§ 1026.37(a)(9). Further, the Bureau is
adopting a cash-out refinancing loan
purpose category for Regulation C as
discussed above, whereas Regulation Z
§ 1026.37(a)(9) contains only a
refinancing purpose. Because these
differences are important for the
purposes of Regulation C, the Bureau
does not believe that aligning
§ 1003.4(a)(3) with Regulation Z
§ 1026.37(a)(9) would be appropriate.
After considering the comments and
conducting additional analysis, the
Bureau is finalizing § 1003.4(a)(3) with
modifications to include cash-out
refinancings. Comment 4(a)(3)–1, which
is part of current Regulation C but was
not included in the proposal, is adopted
with changes to provide additional
guidance for reporting the ‘‘other’’
category. Comment 4(a)(3)–2 is
generally adopted as proposed, with
conforming changes related to the
addition of the cash-out refinancing
purpose and renumbered as 4(a)(3)–3.
263 See, for example, Fannie Mae, Loan-Level
Price Adjustment Matrix (July 1, 2015), available at
https://www.fanniemae.com/content/pricing/llpamatrix.pdf; Freddie Mac, Bulletin 2015–6 Ex. 19
Postsettlement Delivery Fees (Apr. 17, 2015),
available at http://www.freddiemac.com/
singlefamily/pdf/ex19.pdf.
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Comment 4(a)(3)–3 provides guidance
on reporting covered loans that would
qualify under multiple categories under
the § 1003.4(a)(3) reporting requirement.
The revised comment would provide
that a covered loan that is both a cashout refinancing or a refinancing and a
home improvement loan should be
reported as a cash-out refinancing or
refinancing. The Bureau believes that
this will make the cash-out refinancing
and refinancing reporting categories
more valuable by clearly identifying
loans that are considered cash-out
refinancings or refinancings whether or
not they are for home improvement.
Proposed comment 4(a)(3)–3 is adopted
with modifications related to the
addition of the cash-out refinancing
purpose and is renumbered as 4(a)(3)–
4. The Bureau is adopting new comment
4(a)(3)–5 to provide guidance on
reporting loan purpose under
Regulation C for loans with a business
or commercial purpose when such loans
are not excluded from coverage.
4(a)(4)
Current § 1003.4(a)(4) requires
financial institutions to identify
whether the application is a request for
a covered preapproval. The Bureau
proposed to continue this requirement
and proposed minor technical revisions
to the instructions in appendix A.
Comments related to preapprovals are
discussed in the section-by-section
analysis of § 1003.2(b)(2) and
§ 1003.4(a). The Bureau is finalizing
§ 1003.4(a)(4) with modifications to
clarify the requirement.
Based on additional analysis, the
Bureau is also finalizing new comment
4(a)(4)–1 to provide guidance on the
requirement and to simplify the current
reporting requirement. Currently
appendix A provides three codes for
reporting this requirement: Preapproval
requested, preapproval not requested,
and not applicable. The instructions
provide that preapproval not requested
should be used when an institution has
a preapproval program but the applicant
did not request a preapproval through
that program and that not applicable
should be used when the institution
does not have a preapproval program
and for other types of loans and
applications that are not part of the
definition of a preapproval program
under Regulation C. The Bureau has
found that it is a common error for
financial institutions to incorrectly
report not applicable instead of
preapproval not requested. The
information provided by distinguishing
these situations is of limited value, and
the Bureau believes that it will reduce
compliance burden to no longer have
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separate reporting options based on this
distinction. Comment 4(a)(4)–1 provides
that an institution complies with the
reporting requirement by reporting that
a preapproval was not requested
regardless of whether the institution has
such a program and the applicant did
not apply through that program or if the
institution does not have a preapproval
program as defined by Regulation C.
The Bureau is also finalizing new
comment 4(a)(4)–2 to provide guidance
on the scope of the reporting
requirement.
4(a)(5)
Regulation C currently requires
reporting of the property type to which
the loan or application relates as one- to
four-family dwelling (other than
manufactured housing), manufactured
housing, or multifamily dwelling. The
Bureau proposed to replace the
requirement to report property type
under § 1003.4(a)(5) with the
requirement to report the construction
method for the dwelling related to the
property identified in § 1003.4(a)(9). For
the reasons discussed below, the Bureau
is adopting § 1003.4(a)(5) with
modifications to remove the ‘‘other’’
reporting category and finalizing a new
comment providing guidance on
reporting construction method for
manufactured home communities.
Some commenters supported the
proposed changes and the treatment of
modular housing. Other commenters
argued that the current property type
reporting requirement should be
retained. A few commenters argued that
the construction method and property
type reporting requirement should be
removed entirely. The Bureau does not
agree that combining construction
method and number of units as the
current § 1003.4(a)(5) property
requirement does is appropriate, and
believes separating these concepts into
two distinct requirements will provide
data that better reflects how financial
institutions are serving the housing
needs of their communities.
The Bureau is therefore, pursuant to
HMDA sections 305(a) and 304(b)(6)(J),
finalizing § 1003.4(a)(5) generally as
proposed, but with modifications. The
Bureau believes that the modifications
will carry out HMDA’s purposes and
facilitate compliance therewith by
providing more detail regarding whether
institutions are serving the housing
needs of their communities and by
better aligning reporting to industry
standards. The Bureau is removing the
‘‘other’’ option for reporting of
construction method, because, as
discussed in the section-by-section
analysis of § 1003.2(f), the Bureau is
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finalizing the exclusion for many types
of structures (such as recreational
vehicles, houseboats, and pre-1976
mobile homes) that do not meet the
definition of a manufactured home
under § 1003.2(l). In light of this change,
the Bureau believes that an ‘‘other’’
category is unnecessary. Proposed
comment 4(a)(5)–1 is being adopted
generally as proposed, with minor
revisions for clarity. Proposed comment
4(a)(5)–2 is being adopted as proposed,
renumbered as comment 4(a)(5)–3. The
Bureau is also adopting new comment
4(a)(5)–2 to provide guidance on
reporting the construction method for
manufactured home communities. As
discussed in the supplementary
information to the proposed rule, the
FFIEC had previously provided
guidance to report the property type for
manufactured home communities as
manufactured housing.264 Based on a
review of recent HMDA data, the Bureau
believes that, while some financial
institutions are following this prior
guidance, some financial institutions
may not be. The Bureau therefore
believes it will facilitate compliance to
include a comment specifically on the
topic of reporting construction method
for covered loans secured by
manufactured home communities.
A few commenters argued that
additional information related to the
construction of the dwelling should be
reported. One trade association argued
that the age of the dwelling should be
reported in order to provide public data
about housing finance as the housing
stock ages, which would be helpful for
understanding housing demand.
Another commenter argued that
individual condominium or cooperative
units should be identified as such in
HMDA data, which would facilitate
housing research in large metropolitan
areas. While both suggested
modifications would improve the data,
the Bureau does not believe that the
benefits of these data would justify the
burden at this time. However, the
Bureau believes that with the
requirement to report property address
under § 1003.4(a)(9), it may be possible
to derive a proxy for condominium and
cooperative units from the fact that unit
numbers generally are included as part
of the property address for such units.
The Bureau may explore whether it
would be possible to include such data
in the release of HMDA data.
264 79 FR 51731, 51768 (Aug. 29, 2014); Fed. Fin.
Insts. Examination Council, CRA/HMDA Reporter,
Changes Coming to HMDA Edit Reports in 2010
(Dec. 2010), available at http://www.ffiec.gov/
hmda/pdf/10news.pdf.
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4(a)(6)
HMDA section 304(b)(2) requires the
disclosure of the number and dollar
amount of mortgage loans made to
mortgagors who did not, at the time of
execution of the mortgage, intend to
reside in the property securing the
mortgage loan. Current § 1003.4(a)(6)
requires reporting the owner occupancy
status of the property as owneroccupied as a principal dwelling, not
owner-occupied as a principal dwelling,
or not applicable. The Bureau proposed
to require financial institutions to report
whether a property will be used as a
principal residence, as a second
residence, as an investment property
with rental income, or as an investment
property without rental income. The
Bureau proposed changes to appendix A
to require distinguishing between
investment properties with rental
income and investment properties
without rental income. For the reasons
discussed below, the Bureau is
finalizing § 1003.4(a)(6) with
modifications to require reporting of
whether the property is a principal
residence, second residence, or
investment property.
Some commenters generally
supported reporting based on borrower
occupancy rather than owner
occupancy. Some commenters
supported the additional category for
second residences. Many commenters
addressed the proposed investment
property reporting requirement. Some
commenters argued that the distinction
between rental income and other
investment properties would be
burdensome and unnecessary. Some
commenters also believed the example
provided in comment 4(a)(6)–4 was
inconsistent with the general exclusion
for transitory residences in proposed
comment 2(f)–2 (final comment 2(f)–3).
Other commenters believed that the
distinction would be helpful for
research. Some commenters stated that
investment properties with rental
income would not be sufficient, that in
addition it would be important for
research to identify multi-unit dwellings
where the borrower occupies one unit
and rents the remaining units. The
Bureau believes that multi-unit owneroccupied rental properties would be
identifiable under the proposed
reporting requirement as principal
residences with more than one unit
reported under the requirements of
§ 1003.4(a)(31).
The Bureau recognizes that the
proposal’s investment property
distinction may pose compliance
challenges and is inconsistent with
some industry standards for categorizing
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occupancy. The Bureau is therefore
finalizing § 1003.4(a)(6) with
modifications. The Bureau is combining
investment properties into a single
category. The Bureau is also finalizing
comment 4(a)(6)–4 with modifications
to clarify that the example refers to a
long-term residential property and to
replace the proposed term ‘‘owner’’ with
‘‘borrower or applicant’’ for consistency
with § 1003.4(a)(6) and comments
4(a)(6)–2 and –3.
The Bureau is finalizing proposed
comment 4(a)(6)–5 regarding multiple
properties as final comment 4(a)(6)–1.
Current comment 4(a)(6)–1 also deals
with multiple properties and the Bureau
believes that the comments should be
consolidated into final comment
4(a)(6)–1.
For the reasons stated in the preamble
to the proposed rule, the Bureau
believes that the finalized reporting
requirement will provide valuable
information about owner-occupancy for
determining how financial institutions
are serving the housing needs of their
communities and the requirement as
adopted will further understanding of
how second homes and investment
properties affect housing affordability
and affect local communities.265 The
Bureau is therefore finalizing
§ 1003.4(a)(6) with modifications as
discussed above to implement section
304(b)(2) of HMDA and pursuant to its
authority under sections 305(a) and
304(b)(6)(J) of HMDA. The Bureau
believes requiring this level of detail
about residency status is a reasonable
interpretation of HMDA section
304(b)(2). Furthermore, for the reasons
265 The Bureau adopts its discussion of the
benefits of this change provided in the preamble to
the proposed rule. See 79 FR 51731 at 51768–69;
see also Deborah Halliday, You Can’t Eat the View:
The Loss of Housing Affordability in the West, The
Rural Collaborative at 9–10 (2003); Linda
Venturoni, Northwest Council of Governments, The
Economic and Social Effects of Second Homes—
Executive Summary at 4–5 (June 2004) (stating that
as the number of second homes in a community
increases, the more the local economy will shift
towards serving the needs of the second homes);
Andrew Haughwout et al., Fed. Reserve Bank of
New York, Staff Report No. 514, Real Estate
Investors, the Leverage Cycle, and the Housing
Market Crisis, at 21 (Sept. 2011); see also, e.g., Allan
Mallach, Urban Institute, Investors and Housing
Markets in Las Vegas: A Case Study, at 32–34 (2013)
(discussing that foreign real estate investors in Las
Vegas are crowding out potential domestic
purchasers); Robert D. Cruz and Ebony Johnson,
Miami-Dade Cnty. Regulatory and Economic
Resources Dept., Research Notes on Economic
Issues: Impact of Real Estate Investors on Local
Buyers, (2013) (analyzing how domestic first-time
home purchasers are at a competitive disadvantage
compared to foreign real estate investors); Kathleen
M. Howley, Bloomberg, Families Blocked by
Investors from Buying U.S. Homes (2013)
(discussing that the rise of all-cash purchases,
among other things, has prevented many potential
homeowners from purchasing homes).
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given above and in the preamble to the
proposed rule, the Bureau believes this
change is necessary and proper to
effectuate HMDA’s purposes, because
this information will help determine
whether financial institutions are
serving the housing needs of their
communities and will assist in
decisions regarding the distribution of
public sector investments.
4(a)(7)
Section 304(a) and (b) of HMDA
requires the disclosure of the dollar
amount of covered loans and
applications.266 Section 1003.4(a)(7) of
Regulation C requires financial
institutions to report the amount of the
loan or the amount applied for.
Paragraph I.A.7 in appendix A instructs
financial institutions to report loan
amount to the nearest thousand, among
other things. The Bureau proposed
§ 1003.4(a)(7), which provided that
financial institutions shall report the
amount of the covered loan or the
amount applied for and clarified how to
determine and report loan amount with
respect to various types of transactions.
In addition, the Bureau proposed to
delete the requirement to round the loan
amount to the nearest thousand, and
also proposed several technical,
conforming, and clarifying
modifications to § 1003.4(a)(7) and its
corresponding comments.
Proposed § 1003.4(a)(7)(i) provided
that for a closed-end mortgage loan,
other than a purchased loan or an
assumption, a financial institution shall
report the amount to be repaid as
disclosed on the legal obligation. The
Bureau received a few comments
regarding reporting the exact dollar
amount, rather than the loan amount
rounded to the nearest thousand. Some
industry commenters suggested that the
Bureau maintain the current rounding
requirement, explaining that the change
to reporting the exact loan amount in
dollars will have limited value and will
present an increased opportunity for
clerical errors. Other industry
commenters recommended that loan
amount be reported in ranges rather
than an exact loan amount in order to
eliminate potential reporting errors and
to better protect the privacy of
applicants.
On the other hand, a few commenters
supported the proposal to report the
exact loan amount, agreeing with the
Bureau’s proposed rationale that this
would allow for a more precise
calculation of loan-to-value ratio. One
industry commenter indicated that
reporting loan amount in dollars would
266 12
U.S.C. 2803(a), (b).
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also eliminate the potential for errors
associated with incorrect rounding.
Another industry commenter stated that
while rounding has been the standard
for reporting loan amount, it has been
known to cause problems with data
integrity.
The Bureau has considered this
feedback and determined that requiring
reporting of the exact dollar amount is
the more appropriate approach.
Reporting of the exact dollar amount
will facilitate HMDA compliance
because such information is evident on
the face of the loan documents and
financial institutions will no longer
need to make an additional calculation
required for rounding. In addition,
when coupled with § 1003.4(a)(28),
which requires a financial institution to
report the value of the property relied
on in making the credit decision, a
requirement to report the exact dollar
amount under § 1003.4(a)(7) will allow
for the calculation of loan-to-value ratio,
an important underwriting variable. A
rounded loan amount would render
these calculations less precise,
undermining their utility for data
analysis.
Proposed § 1003.4(a)(7)(i) further
provides that, for a purchased closedend mortgage loan or an assumption of
a closed-end mortgage loan, the
financial institution shall report the
unpaid principal balance at the time of
purchase or assumption. An industry
commenter indicated that reporting the
unpaid principal balance at the time of
purchase for a purchased closed-end
mortgage loan would present
operational difficulties since payments
may sometimes be in process and
reconciliation may be required and such
reconciliation would be complicated
with quarterly reporting. The Bureau
does not believe that requiring a
financial institution to report the unpaid
principal balance of a purchased closedend mortgage loan at the time of
purchase would result in significant
difficulties. Moreover, the Bureau
simply moved this existing reporting
requirement into the text of proposed
§ 1003.4(a)(7)(i), which prior to the
proposal, was found in an instruction
and comment. With respect to quarterly
reporting, those requirements are
described further below in the sectionby-section analysis of § 1003.5(a)(1). The
Bureau received no other feedback
regarding this proposed requirement.
Consequently, the Bureau is adopting
§ 1003.4(a)(7)(i) generally as proposed,
with technical and clarifying
modifications. In addition, the Bureau is
adopting new comment 4(a)(7)–5, which
clarifies the loan amount that a financial
institution reports for a closed-end
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mortgage loan as set forth in
§ 1003.4(a)(7)(i).
Proposed § 1003.4(a)(7)(ii) provides
that for an open-end line of credit,
including a purchased open-end line of
credit or an assumption of an open-end
line of credit, a financial institution
shall report the amount of credit
available to the borrower under the
terms of the plan. With respect to openend lines of credit, the Bureau proposed
to collect the full line, rather than only
the portion intended for home purchase
or improvement, as is currently
required. One commenter supported
this modification, indicating that it
would reduce burdens on financial
institutions associated with determining
the purposes of open-end lines of credit.
Another industry commenter asked the
Bureau to expressly clarify that the
requirement to report loan amount for a
home-equity line of credit is the amount
of the line of credit, regardless of any
amounts drawn. No clarification is
necessary because the commentary
provides that the loan amount that must
be reported for an open-end line of
credit is the entire amount of credit
available to the borrower under the
terms of the plan. The Bureau is
adopting § 1003.4(a)(7)(ii) generally as
proposed, with one modification to
clarify that reverse mortgage open-end
lines of credit are subject to
§ 1003.4(a)(7)(iii), discussed below. The
Bureau is also adopting new comment
4(a)(7)–6, which clarifies that for a
purchased open-end line of credit and
an assumption of an open-end line of
credit, a financial institution reports the
entire amount of credit available to the
borrower under the terms of the plan.
Regulation C is currently silent as to
how loan amount should be determined
for a reverse mortgage. Proposed
§ 1003.4(a)(7)(iii) provides that, for a
reverse mortgage, the amount of the
covered loan is the initial principal
limit, as determined pursuant to section
255 of the National Housing Act (12
U.S.C. 1715z–20) and implementing
regulations and mortgagee letters
prescribed by HUD. The Bureau
specifically solicited feedback on how
to determine loan amount for nonfederally insured reverse mortgages but
received no comments. One industry
commenter requested that the Bureau
clarify upon which basis financial
institutions should report non-federally
insured reverse mortgages. The Bureau
believes that industry is familiar with
HUD’s Home Equity Conversion
Mortgage Insurance Program and its
implementing regulations and
mortgagee letters. Applying this wellknown calculation to both federally
insured and non-federally insured
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reverse mortgages will produce more
consistent and reliable data on reverse
mortgages. Consequently, the Bureau is
adopting § 1003.4(a)(7)(iii) generally as
proposed, but with technical
modifications for clarity. In addition,
the Bureau is adopting new comment
4(a)(7)–9, which clarifies that a financial
institution reports the initial principal
limit of a non-federally insured reverse
mortgage as set forth in
§ 1003.4(a)(7)(iii).
The Bureau also proposed comments
4(a)(7)–2, –5, and –6. The Bureau
received no specific feedback regarding
these comments. Accordingly, the
Bureau is adopting these comments
generally as proposed, with several
technical amendments for clarity and
renumbered as 4(a)(7)–3, –7, and –8.
The Bureau is adopting proposed
comment 4(a)(7)–3 generally as
proposed and renumbered as 4(a)(7)–4,
but clarifies that for a multiple-purpose
loan, a financial institution reports the
entire amount of the covered loan, even
if only a part of the proceeds is intended
for home purchase, home improvement,
or refinancing. In addition, the Bureau
is adopting new comment 4(a)(7)–2,
which clarifies the loan amount that a
financial institution reports for an
application or preapproval request
approved but not accepted under
§ 1003.4(a)(7).
4(a)(8)
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4(a)(8)(i)
Current § 1003.4(a)(8) requires
reporting of the action taken on the
covered loan or application and the date
of action taken. The Bureau proposed to
revise the commentary under
§ 1003.4(a)(8) with respect to rescinded
loans, conditional approvals, and
applications received by third parties.
The Bureau proposed to require that
rescinded loans be reported as loans
approved but not accepted. In addition,
the Bureau proposed guidance on
reporting action taken for loans
involving conditional approvals and on
reporting action taken for applications
received by third parties. Comments
regarding reporting for applications
involving multiple parties are discussed
in the section-by-section analysis of
§ 1003.4(a). For the reasons discussed
below, the Bureau is adopting
§ 1003.4(a)(8) with modifications by
providing separate paragraphs for the
requirements to report action taken and
date of action taken and to incorporate
material from current appendix A into
§ 1003.4(a)(8)(i) and the associated
commentary.
The Bureau did not propose changes
to § 1003.4(a)(8). To clarify and
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streamline the regulation, and to
provide separate paragraph citations for
the action taken reporting requirement
and the action taken date reporting
requirement, the Bureau is
incorporating material from current
appendix A into new § 1003.4(a)(8)(i)
and new § 1003.4(a)(8)(ii). The Bureau is
also adopting several comments which
incorporate material previously
contained in appendix A into the
commentary in order to facilitate
compliance. These comments
4(a)(8)(i)–1 through –8 primarily
incorporate existing appendix A
material, but contain some
modifications to align with other
changes and new comments discussed
below. Because the material was
previously contained in appendix A, no
substantive change is made.
Few commenters addressed the
proposal regarding rescinded loans. One
commenter supported the proposal
because it provided a consistent
reporting rule. Another commenter
stated that the proposal would provide
consistency, but argued that the number
of rescinded loans is so small that the
change would not be worth the
regulatory compliance cost. The Bureau
believes that approved but not accepted
most accurately reflects the outcome of
a rescinded transaction, and that a
consistent reporting rule for rescinded
loans is appropriate and justifies any
compliance burden. Therefore, it is
finalizing comment 4(a)(8)–2 generally
as proposed, but with minor technical
revisions, renumbered as comment
4(a)(8)(i)–10.
Some commenters addressed the
proposal to clarify conditional
approvals in comment 4(a)(8)–5. The
proposal amended the commentary to
clarify the types of conditions that are
considered credit conditions and those
that are customary commitment or
closing conditions, and to clarify which
action taken categories should be
reported in certain circumstances
involving conditional approvals. One
industry commenter stated that the
revised commentary was helpful. A few
commenters stated that the conditional
approval rules were generally confusing
and did not reflect a financial
institution’s true credit decision in all
circumstances. The Bureau believes that
the general framework established by
the conditional approvals commentary
serves HMDA’s purposes and provides a
reasonable way for reflecting financial
institutions’ actions on covered loans
and applications. While some financial
institutions may view any type of
approval, even one with many
outstanding conditions, as an approved
loan and wish to report it as such under
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66183
Regulation C, the Bureau believes this
would be an inappropriate result for
applications that ultimately did not
result in originations and were
conditioned on underwriting or
creditworthiness conditions. The
Bureau is finalizing comment 4(a)(8)–5
as proposed, renumbered as comment
4(a)(8)(i)–13.
One commenter argued that financial
institutions should not report purchased
loans under Regulation C and cited
legislative history the commenter
believed demonstrated that Congress
intended to exclude loans purchased.
HMDA section 304(a)(1)(B) has included
a requirement to compile and make
available information about loans
‘‘purchased by that institution’’ since
HMDA was enacted in 1975.267 The
legislative history referred to by the
commenter does not address whether
purchased loans should be reported, but
rather, whether secondary market
entities that only purchase loans but do
not also originate loans should be
required to report under HMDA;
Congress ultimately enacted a
requirement for financial institutions to
report the class of purchaser of loans.268
The Bureau believes that HMDA section
304(a)(1)(B) clearly authorizes reporting
of loans purchased by financial
institutions covered by HMDA. The
Bureau is finalizing comment 4(a)(8)–3
related to purchased loan as proposed,
renumbered as comment 4(a)(8)(i)–11.
The Bureau is finalizing comment
4(a)(8)–1 with modifications for clarity,
renumbered as comment 4(a)(8)(i)–9.
The Bureau is finalizing comment
4(a)(8)–4 as proposed, renumbered as
comment 4(a)(8)(i)–12. The Bureau is
also adopting new comments 4(a)(8)(i)–
1 through 4(a)(8)(i)–8 which incorporate
material in existing appendix A with
some modifications for clarity. The
Bureau is also adding new comment
4(a)(8)(i)–15 to provide guidance on
reporting action taken when a financial
institution has provided a notice of
incompleteness followed by an adverse
action notice on the basis of
incompleteness under Regulation B.269
The comment provides that an
institution may report the action taken
as either file closed for incompleteness
or application denied in such a
circumstance.
4(a)(8)(ii)
The Bureau proposed only technical
changes and modifications to the
267 Home Mortgage Disclosure Act of 1975, Public
Law 94–200, section 304(a)(1)(B). 12 U.S.C. 2803(a).
268 H. Rept. 101–222 (1989), at 460. 12 U.S.C.
2803(h)(1)(C).
269 12 CFR 1002.9(c)(1)(i) and (ii).
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current Regulation C requirement to
report the date of action taken by a
financial institution on a covered loan
or application. The Bureau did not
receive many comments related to the
requirement to report action taken date.
Comments related generally to the
definition of application or reporting of
applications are discussed in the
section-by-section analysis of
§ 1003.2(b). The Bureau is finalizing the
requirement to report the date of action
taken as new § 1003.4(a)(8)(ii) to
provide a separate paragraph for the
requirement. The Bureau is adopting
comments 4(a)(8)–7, –8, and –9 as
proposed, renumbered as comments
4(a)(8)(ii)–4, –5, and –6. The Bureau is
also adopting new comments 4(a)(8)(ii)–
1, –2, and –3, which incorporate
existing requirements in appendix A
related to reporting of action taken date.
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4(a)(9)
The Bureau proposed to require
financial institutions to report the
address of the property securing the
covered loan, discussed below in the
section-by-section analysis of
§ 1003.4(a)(9)(i), and to continue to
require financial institutions to report
the State, MSA or MD, county, and
census tract of most reported covered
loans, discussed below in the sectionby-section analysis of § 1003.4(a)(9)(ii).
The Bureau is adopting proposed
§ 1003.4(a)(9) with the modifications
discussed below.
Covered Loans Related to Multiple
Properties
The Bureau proposed to revise
existing comments 4(a)(9)–1 and –2 to
provide a single framework clarifying
how to report a covered loan related to
multiple properties. Proposed comment
4(a)(9)–1 discussed reporting when a
covered loan relates to more than one
property but only one property secures
or would secure the loan. Proposed
comment 4(a)(9)–2 provided that if more
than one property secures or would
secure the covered loan, a financial
institution may report one of the
properties using one entry on its loan/
application register or the financial
institution may report all of the
properties using multiple entries on its
loan/application register. Proposed
comment 4(a)(9)–3 discussed reporting
multifamily properties with more than
one address.
A few commenters provided feedback
on proposed comment 4(a)(9)–2. One
consumer advocate suggested that the
Bureau should require financial
institutions to report information
concerning all of the properties securing
the loan. A few industry commenters
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took the opposite position and urged the
Bureau to require financial institutions
to report information about only one of
the properties.
After considering the comments, the
Bureau concludes that optional
reporting is not advisable because
HMDA data would provide inconsistent
information about these types of
transactions. At the same time, requiring
financial institutions to report
information about all of the properties
securing the loan is also problematic
because it would present additional
burden for financial institutions. In
addition, defining what constitutes
multiple properties may present
challenges for some multifamily
complexes, which may sit on one parcel
but have multiple addresses. For those
reasons, the final rule requires financial
institutions to report information about
only one of the properties securing the
loan.
Accordingly, the Bureau is finalizing
proposed comments 4(a)(9)–1 through
–3 with modifications to require
reporting of one property when a
covered loan is secured by more than
one property. The Bureau also proposed
technical modifications to existing
comments 4(a)(9)–4 and –5. The Bureau
received no comments on comments
4(a)(9)–4 and –5 and is finalizing them
as proposed.
4(a)(9)(i)
The Dodd-Frank Act amended HMDA
to authorize the Bureau to collect ‘‘as [it]
may determine to be appropriate, the
parcel number that corresponds to the
real property pledged or proposed to be
pledged as collateral.’’ 270 The Bureau
proposed to implement this
authorization with proposed
§ 1003.4(a)(9)(i), which provided that
financial institutions were required to
report the postal address of the physical
location of the property securing the
covered loan or, in the case of an
application, proposed to secure the
covered loan. The proposal indicated
that the Bureau anticipated that postal
address information would not be
publicly released if proposed
§ 1003.4(a)(9)(i) were finalized. The
Bureau solicited feedback on whether
collecting postal address was an
effective way to implement the DoddFrank amendment.
For the reasons discussed below, the
Bureau is adopting § 1003.4(a)(9)(i) as
proposed with the technical
modifications discussed below. The
270 HMDA
section 304(b)(6)(H) authorizes the
Bureau to include in the HMDA data collection ‘‘the
parcel number that corresponds to the real property
pledged or proposed to be pledged as collateral.’’
12 U.S.C. 2803(b)(6)(H).
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Bureau is also adopting new comments
4(a)(9)(i)–1 through –3 to clarify the
reporting requirements.
The Bureau received several
comments on proposed § 1003.4(a)(9)(i).
Several consumer advocate commenters
supported reporting postal address.271
These commenters highlighted that
postal addresses would improve the
ability to detect localized
discrimination, noting that
discrimination can occur in areas
smaller than census tracts or other
geographic boundaries. In addition,
some explained that relying on census
tracts for geographic analysis creates
challenges for longitudinal analysis of
the data because census tracts change
over time. They also noted that
collecting address in HMDA would
enable tracking of multiple liens on the
same property and thereby identifying
risks for borrowers who may be overleveraged.
Several industry commenters raised
objections to reporting postal address.
Some of these commenters suggested
that postal address would not provide
any valuable information because
census tract information provides
sufficient information to conduct fair
lending or other statistical analysis of
the property location. Other
commenters asserted that reporting
postal address would not support
HMDA’s purposes. Some industry
commenters also expressed concerns
about the burden of reporting postal
address.
In addition, many industry
commenters raised concerns about the
privacy implications of including postal
address in the HMDA data set.
Commenters expressed concerns both
about collecting the information and
about disclosing the information.
Commenters explained that address can
be used to link the financially sensitive
information included in the HMDA data
with an individual borrower.
Commenters suggested that the Bureau’s
data security systems would not
adequately protect the information from
accidental disclosure during the
transmission of the information to the
Bureau and while the information is
stored on the Bureau’s systems. Some
industry commenters noted that
information on census tract was
preferable to postal address because it
protects privacy. Most commenters
urged the Bureau not to release the
reported postal address information if
271 During the Board’s hearings, a consumer
advocate urged the Board to add information that
uniquely identifies the property related to the loan
to the HMDA data. See, e.g., Washington Hearing,
supra note 39 (remarks of Lisa Rice, Vice President,
National Fair Housing Alliance).
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collected. A consumer advocate also
urged the Bureau to consider
protections for specific populations,
such as victims of domestic violence,
when considering whether to release
address information. A few consumer
advocate commenters, on the other
hand, urged the Bureau to release
address, or point-specific information,
to trusted researchers.
The Bureau is finalizing the proposal
to collect the postal address, changed to
property address for the reasons
discussed below, of the property
securing or proposed to secure a
covered loan. Collecting property
address will enrich the HMDA data and
will support achieving HMDA’s
purposes. With these data, Federal
officials will be able to track multiple
liens on the same property. In addition,
property address will help officials
better understand access to credit and
risks to borrowers in particular
communities and better target programs
to reach vulnerable borrowers and
communities. Using these data, Federal
officials may be able to detect patterns
of geographic discrimination not
evident from census tract data, which
will assist in identifying violations of
fair lending laws. In addition, as census
tracts change over time, collecting
property address will facilitate better
longitudinal analysis of geographic
lending trends.
However, the Bureau recognizes that
collecting property address presents
some challenges. As noted in the
proposal, including property address in
the HMDA data raises privacy concerns
because property address can easily be
used to identify a borrower. The Bureau
is sensitive to the privacy implications
of including property address in the
HMDA data and has considered these
implications carefully. Although the
Bureau’s privacy analysis is ongoing, as
discussed in part II.B above, the Bureau
anticipates that property address will
not be included in the publicly released
HMDA data. Due to the significant
benefits of collecting this information,
the Bureau believes it is appropriate to
collect property address in spite of the
privacy concerns and other concerns
raised by commenters about collecting
this information.
Parcel Number
Many commenters discussed whether
postal address was an appropriate way
to implement the Dodd-Frank
authorization to collect a parcel number.
Most of these commenters, including
both industry and consumer advocate
commenters, expressed support for
using postal address to implement the
authorization to collect a parcel number.
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Commenters noted that collecting postal
address, while imperfect, is the best
available option, because it is less
burdensome to report than reporting a
local parcel number and uniquely
identifies most properties. A few
commenters specifically stated that
other alternatives discussed in the
proposal, such as geospatial coordinates
or local parcel number, present greater
reporting burdens than postal address.
Commenters also noted the current
absence of a national universal parcel
numbering system. One commenter
stated that local parcel numbers are not
used by lenders and are used solely by
professionals that manage property
records. Another commenter described
the burden associated with reporting a
local parcel number, stating that
address, unlike a local parcel number, is
stored in the same system as the other
HMDA data. Other commenters stated
that postal address would provide more
complete information than a local parcel
number for loans related to
manufactured housing because
manufactured homes located in mobile
home parks may be placed on the same
parcel but have unique property
addresses.
Some consumer advocate commenters
stated that postal address was currently
an appropriate way to collect a parcel
number, but asked the Bureau to
consider replacing postal address with a
universal parcel identifier if one is
developed in the future. In addition, one
commenter urged the collection of local
parcel numbers because of their value
for analysis at the local level. A few
commenters that represented geospatial
vendors recommended collecting both
postal address and local parcel
information. They explained that this
would allow the Bureau, using both the
reported address and local parcel
information, to establish a national
parcel database with mapping
capabilities. Some of these commenters
noted that collecting this information
would also facilitate the creation of a
national parcel numbering system.
The Bureau concludes that collecting
property address is an appropriate way
to implement the Dodd-Frank
authorization to collect a parcel number.
As noted by commenters, address is the
least burdensome way to collect
information that will uniquely identify
a property. Financial institutions
currently collect property address
during the mortgage origination and
application process if the address is
available, and store that information
with the other application and loan data
that is reported in HDMA. In addition,
most properties, including
manufactured homes, have property
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addresses. In a small number of cases,
a property address may not be available
at the time of origination for some
properties. Nonetheless, property
address is an efficient and effective way
to implement the authorization to
collect a parcel number.
Currently, no universal standard
exists for identifying a property so that
it can be linked to related mortgage data.
Parcel data are collected and maintained
by individual local governments with
limited State or Federal involvement.
Local jurisdictions do not use a standard
way to identify properties. In addition,
local parcel data are not easily linked to
the location of the property, which, as
discussed above, substantially amplifies
the usefulness of a parcel identifier.
Local parcel information would provide
some value for local analysis, but
property address also provides valuable
information at the local level. Therefore,
compared with collecting property
address, collecting a local parcel
number would substantially increase
the burden associated with reporting a
parcel identifier and would
substantially decrease the utility of the
data.
The Bureau is not at this time
pursuing commenters’ suggestions for
using Regulation C to develop a national
parcel database. The Bureau may
consider in the future whether and how
it could work with other regulators and
public officials to explore a national
parcel identification system or other
similar systems. The final rule does not
require financial institutions to collect a
local parcel number in addition to
property address. The Bureau concludes
that collecting property address strikes
the appropriate balance between
improving the data’s utility and
minimizing undue burden on data
reporters.
For the reasons discussed above, the
Bureau is implementing the Dodd-Frank
authorization to collect the ‘‘parcel
number that corresponds to the real
property pledged or proposed to be
pledged as collateral’’ by requiring
financial institutions to report the
property address of the property
securing the covered loan or, in the case
of an application, proposed to secure
the covered loan.272 As discussed above,
there is no universal parcel number
system; therefore, the Bureau believes it
is reasonable to interpret the DoddFrank Act amendment to refer to
information that uniquely identifies a
dwelling pledged or proposed to be
272 HMDA section 304(b)(6)(H) authorizes the
Bureau to include in the HMDA data collection ‘‘the
parcel number that corresponds to the real property
pledged or proposed to be pledged as collateral.’’
12 U.S.C. 2803(b)(6)(H).
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pledged as collateral. The Bureau is also
adopting § 1003.4(a)(9)(i) pursuant to
the Bureau’s HMDA section 305(a)
authority to provide for adjustments
because, for the reasons given above, the
Bureau believes the provision is
necessary and proper to effectuate
HMDA’s purposes and facilitate
compliance therewith.
Reporting Issues
Some industry commenters discussed
situations when reporting a postal
address is not possible or should not be
required. A few of these commenters
asked what to report if the property does
not have an address. Others urged the
Bureau not to require reporting of postal
address information for purchases or for
applications withdrawn or denied. The
Bureau recognizes that in some cases
address information will not be known.
Consequently, address information will
not be reported for all HMDA entries, as
indicated in new comment 4(a)(9)–3. As
discussed above, however, because
property address greatly enriches the
utility of HMDA data, financial
institutions must report property
address if the information is available.
Therefore, the Bureau is not adopting
commenters’ suggestions to exclude
certain types of entries from the
requirement to report property address.
Some commenters suggested that
Regulation C require reporting of the
physical location of the property,
instead of the mailing address, which
may be different from the physical
location of the property in some cases.
Proposed § 1003.4(a)(9) and proposed
instruction 4(a)(9)–1 directed financial
institutions to report the postal address
that corresponds to the physical
location of the property, not the mailing
address. To eliminate the confusion
about whether to report the mailing
address or the physical location of the
property, the Bureau is modifying
§ 1003.4(a)(9)(i) to replace the term
postal address, which may have been
misunderstood to mean mailing address,
with the term property address, which
is understood to refer to the physical
location of the property. In addition, the
Bureau is adopting new comment
4(a)(9)(i)–1 to clarify that the financial
institution reports the property address
of the physical location of the property.
One commenter urged revising the
requirement to include primary street
address points, sub-address points, and
geographic coordinates. The commenter
also urged the Bureau to partner with
States as they build addresses to meet
the requirements of Next Generation
9–1–1 systems. The Bureau recognizes
that in some cases, addresses may not
convey full information about a
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property’s location. These enhanced
addressing standards would enrich the
quality of the geographic information
reported in HMDA data in those cases
where address does not precisely
identify a property’s location, such as
for dwellings located on rural routes.
However, importing these standards for
HMDA reporting seems likely to result
in new burden for financial institutions
that currently collect address during the
application process but may not be
collecting the information required by
these standards. At the same time, any
benefit from using these standards in
HMDA would be limited only to a
subset of HMDA reportable transactions.
The Bureau’s judgment is that reporting
property address is less burdensome for
institutions than enhanced standards,
and will provide benefits sufficient to
justify any burden that might be
imposed on financial institutions.
Some industry commenters noted the
challenges of reporting postal address in
a standard format. To resolve those
challenges, one commenter suggested
requiring reporting the information in
the same format as the closing
disclosure. Another commenter noted
that reporting postal address would
have risks of input errors and suggested
that the Bureau allow good faith errors
for the address information. Other
commenters sought clarification about
how to report and whether
abbreviations were allowed.
In response to these comments, the
final rule clarifies institutions’ reporting
obligations to help minimize the risk of
inadvertent reporting errors.
Accordingly, new comment 4(a)(9)(i)–2
provides guidance on how to report the
property address. In addition, § 1003.6,
discussed below, addresses bona fide
errors.
Final Rule
Having considered the comments
received and for the reasons discussed
above, the Bureau is finalizing
§ 1003.4(a)(9)(i) as proposed with the
modifications discussed above. In
addition, for the reasons discussed
above, the Bureau is adopting new
comments 4(a)(9)(i)–1 through –3 to
provide illustrative examples and to
incorporate information included in
proposed instruction 4(a)(9).
4(a)(9)(ii)
Under HMDA and current Regulation
C, a financial institution is required to
report the location of the property to
which the covered loan or application
relates by MSA or MD, State, county,
and census tract if the loan is related to
a property located in an MSA or MD in
which the financial institution has a
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home or branch office and a county with
a population of more than 30,000.273 In
addition, § 1003.4(e) requires banks and
savings associations that are required to
report data on small business, small
farm, and community development
lending under regulations that
implement the CRA to collect the
location of property located outside
MSAs and MDs in which the institution
has a home or branch office or outside
of any MSA. The Bureau proposed to
renumber existing § 1003.4(a)(9) as
§ 1003.4(a)(9)(ii) and to make certain
nonsubstantive technical modifications
for clarification. The Bureau did not
propose any changes to § 1003.4(e).
The Bureau explained in the proposal
that it was exploring ways to reduce the
burden associated with reporting the
State, county, MSA, and census tract of
a property, such as operational changes
that may enable the Bureau to perform
geocoding (i.e., identifying the State,
county, MSA, and census tract of a
property) for financial institutions. The
Bureau suggested that it might create a
system where a financial institution
reports only the address and the Bureau
provides the financial institution with
the census tract, county, MSA or MD,
and State. The Bureau solicited
feedback on the potential operational
improvements.
For the reasons discussed below, the
Bureau is adopting § 1003.4(a)(9)(ii),
which requires financial institutions to
report the State, county, and census
tract of the property securing or
proposed to secure a covered loan if the
property is located in an MSA in which
the institution has a home or branch
office or if § 1003.4(e) applies. The final
rule eliminates the requirement to
report the MSA or MD of the property
securing or proposed to secure a
covered loan. The Bureau is also
adopting new comments 4(a)(9)(ii)(B)–1
and 4(a)(9)(ii)(C)–1 to provide guidance
on how to report county and census
tract information, respectively.
Many commenters provided feedback
on whether the Bureau should assume
geocoding responsibilities for reporters.
Some commenters, including a few
industry commenters and many
consumer advocate commenters,
expressed support for the Bureau
273 See § 1003.4(a)(9); HMDA section 304(a)(2).
Part I.C.3 of appendix A directs financial
institutions to enter ‘‘not applicable’’ for census
tract if the property is located in a county with a
population of 30,000 or less. A for-profit mortgagelending institution is deemed to have a branch
office in an MSA or MD if in the preceding calendar
year it received applications for, originated, or
purchased five or more home purchase loans, home
improvement loans, or refinancings related to
property located in that MSA or MD, respectively.
See § 1003.2 (definition of branch office).
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assuming geocoding responsibilities.
Many of those commenters noted that
such a change would improve the
accuracy of geocoding information.
Most industry commenters, however,
raised concerns with the Bureau
assuming geocoding responsibilities for
reporters. Some asserted that such an
operational change would not reduce
their burden because financial
institutions already have geocoding
systems in place and would continue to
use those systems even if the Bureau
assumed geocoding responsibilities.
Some of these commenters explained
that financial institutions would not
want to wait until they submit their
HMDA data to obtain the geocoding
information because they need on
demand geocoding for business
purposes such as evaluating their
lending penetration.
In addition, some commenters raised
some practical issues with the Bureau
assuming geocoding, such as developing
a system for the Bureau and financial
institutions to communicate back-andforth about geocoding results.
Commenters also stated that geocoding
would be more accurate if performed by
the financial institution because the
institution is probably more familiar
with the particular geographic area and
likely could identify errors in geocoding
more readily than the Bureau could. In
addition, industry commenters raised
concerns about whether financial
institutions would be held responsible
for the accuracy of the Bureau’s
geocoding and about whether the
Bureau would assume responsibility for
identifying the census tracts of
properties that return an error in the
Bureau’s geocoding database. A few
industry commenters asked the Bureau
to allow them to report their geocoded
information even if the Bureau decides
to take the geocoding on itself. A few
other industry commenters suggested
that instead of geocoding for financial
institutions, that the Bureau develop a
free geocoding database or tool for
financial institutions.
The Bureau has concluded that it
should not geocode for financial
institutions and instead should focus on
the best way to achieve accuracy in the
property location information reported
in HMDA. Property location data is
more likely to be accurate if the
financial institution reporting the
covered loan or application also
geocodes the property. In addition,
based on comments from financial
institutions, it appears that assuming
geocoding responsibilities for financial
institutions might not achieve the
burden reduction that the Bureau hoped
to achieve when it issued the proposal.
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Therefore, the Bureau does not plan to
pursue assuming geocoding
responsibilities in the manner discussed
in the proposal. Instead, the Bureau is
exploring other ways that it can assist
reporters with geocoding, such as
developing an improved geocoding tool
for financial institutions.
Consumer advocate commenters also
discussed the value of the currently
reported property location information
and urged the Bureau to continue to
require reporting of information by
census tract and to continue to make
that information available in the
publicly disclosed data. The Bureau is
generally retaining reporting of the
currently required property location
information because it provides
valuable information.
The Bureau believes that it can reduce
the burden of reporting by eliminating
the requirement to report the MSA or
MD in which the property is located. If
a financial institution reports the
county, the regulators can identify the
MSA or MD because MSAs and MDs are
defined at the county level. The MSA or
MD can be inserted into the publicly
available data so that the data’s utility
is preserved.
Finally, it appears that financial
institutions do not report MSA or MD
information when they have incomplete
property location information. In the
past five years, no financial institutions
have reported the MSA or MD of a
property without other property
location information.274 Therefore,
retaining this field only for cases when
the financial institution does not know
the county in which the property
securing, or proposed to secure, the
covered loan is located would also not
provide valuable information.
Therefore, the final rule eliminates the
burden of reporting this information to
facilitate compliance.
For the reasons discussed above, the
Bureau is finalizing proposed
§ 1003.4(a)(9)(ii), with modifications to
eliminate the requirement included in
proposed § 1003.4(a)(9)(ii)(C) as
discussed above.
274 It is not clear why a financial institution does
not report property location information for a
particular entry. It could be because the information
is not required, because, for example, the property
is not located in an MSA or MD in which the
institution has a home or branch office. See
§ 1003.4(a)(9). In the past five years, some financial
institutions reported the State in which the
property is located without other property location
information, which may suggest that the financial
information had incomplete information about the
location of the property.
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4(a)(10)
4(a)(10)(i)
HMDA section 304(b)(4) requires the
reporting of racial characteristics and
gender for borrowers and applicants.275
Section 1003.4(a)(10) of Regulation C
requires a financial institution to collect
the ethnicity, race, and sex of the
applicant or borrower for applications
and loan originations for each calendar
year. The Bureau proposed to renumber
this requirement as § 1003.4(a)(10)(i),
and also proposed several technical and
clarifying amendments to the
instructions in appendix A and the
associated commentary.
The Bureau’s proposal solicited
feedback regarding the challenges faced
by both applicants and financial
institutions by the data collection
instructions prescribed in appendix B
and specifically solicited comment on
ways to improve the data collection of
the ethnicity, race, and sex of applicants
and borrowers. The Bureau also
conducted a voluntary, small-scale
survey to solicit suggestions from
financial institutions on ways to
improve the process of collecting the
ethnicity, race, and sex of applicants
that may potentially relieve burden and
help increase the response rates by
applicants, in particular, for
applications received by mail, internet,
or telephone. The Bureau selected nine
financial institutions for participation in
the survey which, according to recent
HMDA data, generally exhibited
relatively high incidences of applicants
providing ethnicity, race, and sex in
applications made by mail, internet, or
telephone. The Bureau was interested to
learn what factors may have contributed
to these higher response rates and also
to identify potential improvements to
appendix B. Five financial institutions
chose to participate in the survey and
the Bureau considered their responses
as part of the HMDA rulemaking.
In response to the proposal’s
solicitation for feedback, a few industry
commenters recommended that the
Bureau remove the proposed
requirement, which currently exists
under the rule, that financial
institutions collect an applicant’s
ethnicity, race, and sex on the basis of
visual observation and surname when
an application is taken in person and
the applicant does not provide the
information. In general, these industry
commenters did not support this
collection requirement for the following
reasons. First, commenters expressed
the belief that loan originators should
275 12 U.S.C. 2803(b)(4); see also 79 FR 51731,
51775 (Aug. 29, 2014), n. 340.
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not have to guess, on the basis of visual
observation or surname, as to what is an
applicant’s ethnicity, race, and sex.
Second, commenters expressed the
belief that such guessing results in
inaccurate and unreliable data. Lastly,
commenters expressed the belief that an
applicant’s decision not to provide his
or her demographic information should
be respected and that a loan originator
should not override that decision by
being required to collect the information
on the basis of visual observation or
surname.
On the other hand, several consumer
advocate commenters provided
feedback emphasizing that data on an
applicant’s ethnicity, race, and sex is
vital to HMDA’s utility. A few of these
commenters also emphasized the need
for HMDA data to reflect whether such
demographic information was selfreported by applicants or the result of a
loan originator collecting the
information on the basis of visual
observation or surname. For example,
one commenter stated that information
on ethnicity and race is crucial for
discovering potential patterns of
discrimination and recommended that
the loan/application register include a
flag indicating whether ethnicity and
race information was provided by the
applicant, allowing independent
researchers and community advocates to
undertake important fair lending
analyses. Another commenter stated
that in order for the Bureau to better
understand whether the visual
observation or surname requirement is
producing useful information, it urged
the Bureau to require financial
institutions to report whether the
borrowers have furnished the race,
ethnicity, and sex data. Lastly, another
commenter stated that information
regarding how often borrowers refuse to
voluntarily report demographic data or
how often lenders report such
information on the basis of visual
observation or surname is not easily
found and therefore, at the very least,
the Bureau should flag applicant or
borrower versus financial institution
reporting of demographic information.
The Bureau has considered this
feedback and determined that the
appropriate approach to further
HMDA’s purposes is to continue to
require that financial institutions collect
the ethnicity, race, and sex of applicants
on the basis of visual observation and
surname when an application is taken
in person and the applicant does not
provide the information. The Bureau
agrees with both industry and consumer
advocate commenters that recognized
the importance of data on an applicant’s
or borrower’s ethnicity, race, and sex to
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the purposes of HMDA. The Bureau has
determined that removing the visual
observation or surname requirement
from the final rule would diminish the
utility of the HMDA data to further
HMDA’s purposes. The Bureau has also
determined that requiring financial
institutions to report whether the
applicant’s ethnicity, race, and sex was
collected on the basis of visual
observation or surname improves the
utility of HMDA data. Accordingly, the
Bureau is maintaining the current
requirement in appendix B that when an
applicant does not provide the
requested information for an application
taken in person, a financial institution
is required to collect the demographic
information on the basis of visual
observation or surname. In addition, the
Bureau is adopting a new requirement
in § 1003.4(a)(10)(i) of the final rule that
requires financial institutions to report
whether the applicant’s ethnicity, race,
or sex was collected on the basis of
visual observation or surname. The
Bureau is adopting new instructions and
modifications to the sample data
collection form in appendix B to capture
this new reporting requirement.
In response to the proposal’s
solicitation for feedback on ways to
improve the data collection of an
applicant’s ethnicity, race, and sex, and
in response to the Bureau’s survey
which sought, among other things,
suggestions on ways to help increase the
response rates by applicants, the Bureau
received feedback urging the Bureau to
disaggregate the ethnicity category as
well as two race categories—the Asian
category and the Native Hawaiian and
Other Pacific Islander category. Before
discussing this feedback, it is important
to first describe the data standards on
ethnicity and race issued by the Office
of Management and Budget (OMB).
The OMB has issued the standards for
the classification of Federal data on
ethnicity and race.276 OMB’s current
government-wide standards provide ‘‘a
minimum standard for maintaining,
collecting, and presenting data on race
and ethnicity for all Federal reporting
purposes. . . . The standards have been
developed to provide a common
language for uniformity and
comparability in the collection and use
of data on race and ethnicity by Federal
agencies.’’ 277 The OMB standards
provide the following minimum
categories for data on ethnicity and race:
Two minimum ethnicity categories
276 Office of Mgmt. and Budget, Revisions to the
Standards for the Classification of Federal Data on
Race and Ethnicity, 62 FR 58782–90 (Oct. 30, 1997)
[hereinafter OMB Federal Data Standards on Race
and Ethnicity].
277 See id.
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(Hispanic or Latino; Not Hispanic or
Latino) and five minimum race
categories (American Indian or Alaska
Native; Asian; Black or African
American; Native Hawaiian or Other
Pacific Islander; and White). The
categories for ethnicity and race in
existing Regulation C conform to the
OMB standards.
In addition to the minimum data
categories for ethnicity and race, the
OMB Federal Data Standards on Race
and Ethnicity provide additional key
principles. First, self-identification is
the preferred means of obtaining
information about an individual’s
ethnicity and race, except in instances
where observer identification is more
practical.278 Second, the collection of
greater detail is encouraged as long as
any collection that uses more detail is
organized in such a way that the
additional detail can be aggregated into
the minimum categories for data on
ethnicity and race. More detailed
reporting, which can be aggregated to
the minimum categories, may be used at
the agencies’ discretion. Lastly, Federal
agencies must produce as much detailed
information on ethnicity and race as
possible; however, Federal agencies
shall not present data on detailed
categories if doing so would
compromise data quality or
confidentiality standards.279
In addition to the OMB standards, it
is also important to describe the data
standards used in the 2000 and 2010
Decennial Census. The U.S. Census
Bureau (Census Bureau) collects
Hispanic origin and race information
following the OMB standards and
guidance discussed above.280 Responses
to the Hispanic origin question and race
question in the 2000 and 2010
Decennial Census were based on selfidentification.281
The OMB definition of Hispanic or
Latino origin used in the 2010 Census
refers to a person of Cuban, Mexican,
Puerto Rican, South or Central
American, or other Spanish culture or
origin regardless of race.282 Hispanic or
Latino origin can be viewed as the
heritage, nationality group, lineage, or
country of birth of the person or the
person’s parents or ancestors before
their arrival in the United States.283 The
278 See
id.
id.
280 U.S. Census Bureau, C2010BR–02, Overview of
Race and Hispanic Origin: 2010, at 2 (2011)
[hereinafter Census Bureau Overview], available at
http://www.census.gov/prod/cen2010/briefs/
c2010br-02.pdf.
281 See id.
282 See OMB Federal Data Standards on Race and
Ethnicity; Census Bureau Overview at 2.
283 See Census Bureau Overview at 2.
279 See
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2010 Census disaggregated ethnicity
into four categories (Mexican, Puerto
Rican, Cuban, Other Hispanic or Latino)
and included one area where
respondents could write-in a specific
Hispanic or Latino origin group.284 As
required by the OMB, the response
categories and the write-in answers for
the Census Bureau’s ethnicity question
can be combined to create the two
minimum OMB categories for ethnicity,
discussed above.
The OMB definitions of the race
categories used in the 2010 Census, plus
the Census Bureau’s definition of Some
Other Race, are discussed in footnote
285 below.285 For respondents who are
unable to identify with any of the five
minimum OMB race categories, OMB
approved the Census Bureau’s inclusion
of a sixth race category—Some Other
Race—on the 2000 and 2010 Census
questionnaires. The 2010 Census
disaggregated the Asian race into seven
284 See
id.
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285 ‘‘White’’
refers to a person having origins in
any of the original peoples of Europe, the Middle
East, or North Africa. It includes people who
indicated their race(s) as ‘‘White’’ or reported
entries such as Irish, German, Italian, Lebanese,
Arab, Moroccan, or Caucasian.
‘‘Black or African American’’ refers to a person
having origins in any of the Black racial groups of
Africa. It includes people who indicated their
race(s) as ‘‘Black, African Am., or Negro’’ or
reported entries such as African American, Kenyan,
Nigerian, or Haitian.
‘‘American Indian or Alaska Native’’ refers to a
person having origins in any of the original peoples
of North or South America (including Central
America) and who maintains tribal affiliation or
community attachment. The category includes
people who indicated their race(s) as ‘‘American
Indian or Alaska Native’’ or reported their enrolled
or principal tribe, such as Navajo, Blackfeet,
Inupiat, Yup’ik, or Central American Indian groups
or South American Indian groups.
‘‘Asian’’ refers to a person having origins in any
of the original peoples of the Far East, Southeast
Asia, or the Indian subcontinent, including, for
example, Cambodia, China, India, Japan, Korea,
Malaysia, Pakistan, the Philippine Islands,
Thailand, and Vietnam. It includes people who
indicated their race(s) as ‘‘Asian’’ or reported
entries such as ‘‘Asian Indian,’’ ‘‘Chinese,’’
‘‘Filipino,’’ ‘‘Korean,’’ ‘‘Japanese,’’ ‘‘Vietnamese,’’
and ‘‘Other Asian’’ or provided other detailed Asian
responses.
‘‘Native Hawaiian or Other Pacific Islander’’
refers to a person having origins in any of the
original peoples of Hawaii, Guam, Samoa, or other
Pacific Islands. It includes people who indicated
their race(s) as ‘‘Pacific Islander’’ or reported entries
such as ‘‘Native Hawaiian,’’ ‘‘Guamanian or
Chamorro,’’ ‘‘Samoan,’’ and ‘‘Other Pacific
Islander’’ or provided other detailed Pacific Islander
responses.
‘‘Some Other Race’’ includes all other responses
not included in the White, Black or African
American, American Indian or Alaska Native,
Asian, and Native Hawaiian or Other Pacific
Islander race categories described above.
Respondents reporting entries such as multiracial,
mixed, interracial, or a Hispanic or Latino group
(for example, Mexican, Puerto Rican, Cuban, or
Spanish) in response to the race question are
included in this category. See Census Bureau
Overview at 2–3.
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categories (Asian Indian, Chinese,
Filipino, Japanese, Korean, Vietnamese,
Other Asian), the Native Hawaiian and
Other Pacific Islander race into four
categories (Native Hawaiian, Guamanian
or Chamorro, Samoan, Other Pacific
Islander) and included three areas
where respondents could write-in a
specific Asian race, a specific Pacific
Islander race, and the name of his or her
enrolled or principal tribe in the
American Indian or Alaska Native
category.286 As required, the response
categories and the write-in answers for
the Census Bureau’s race question can
be combined to create the five minimum
OMB categories for race, discussed
above, plus Some Other Race.
Another Federal agency has already
begun to require more detailed data
collection on ethnicity and race as is
encouraged by the OMB and as has been
used by the Census Bureau for 15 years.
On October 31, 2011, the U.S.
Department of Health and Human
Services (HHS) published data
standards for ethnicity and race that it
now uses in its national population
health surveys undertaken pursuant to
the Affordable Care Act. These data
standards are based on the
disaggregation of the OMB standard and
the 2000 and 2010 Decennial Census
discussed above. Many of the
commenters that provided feedback on
the Bureau’s proposal, discussed below,
urged the Bureau to follow the data
collection standards being used by the
HHS and require financial institutions
to collect and report more detailed
ethnicity and race information.
In addition, the American Housing
Survey, which is a comprehensive
national housing survey sponsored by
HUD and conducted biennially by the
Census Bureau, will similarly provide
more detailed country of origin
information for the first time ever in
2015.287 According to HUD’s ‘‘Priority
Program Goals for the Asian American
and Pacific Islander Community,’’ one
of the agency’s five program goals is to
improve the data collected on Asian
American and Pacific Islander (AAPI)
communities and it is working to
disaggregate data for all major programs,
including homeownership, tenant based
rental assistance, and public housing.
HUD’s goal to disaggregate data extends
not only to the AAPI community, but
also to the Hispanic or Latino
community.288
286 See
Census Bureau Overview at 1–2.
https://www.whitehouse.gov/the-pressoffice/2015/05/12/fact-sheet-white-house-summitasian-americans-and-pacific-islanders.
288 See U.S. Dep’t. of Housing and Urban Dev.,
Priority Program Goals for the Asian American and
Pacific Islander Community, available at http://
287 See
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The Bureau received many comments
in response to its solicitation regarding
the challenges faced by both applicants
and financial institutions by the HMDA
data collection instructions regarding an
applicant’s ethnicity, race, and sex, and
on ways to improve that data collection.
The comment letters of many consumer
advocacy groups—reinforced in
subsequent communications and
outreach—recommended disaggregation
of the Asian and Native Hawaiian or
Other Pacific Islander categories. A
handful of these organizations also
recommended disaggregation of data on
the ethnicity category. These
recommendations generally align with
the 2000 and 2010 Decennial Census,
the approach that HHS has been using
since 2011 in its national population
health surveys, and the approach HUD
will be taking in all of its major
programs.
In general, these commenters urged
the Bureau to disaggregate the ethnicity
and race categories under HMDA for the
following reasons. First, commenters
stated that disaggregated data will more
accurately reflect the borrowing
experiences of various AAPI and
Hispanic or Latino communities across
the country. For example, some
commenters stated that newer
immigrants are likely to have different
experiences in the mortgage market than
earlier immigrants. In addition, since
many subpopulation groups include
limited-English proficient communities,
commenters supported disaggregated
data as a vehicle to better understanding
of lending to these vulnerable groups
and perhaps improved access to
homeownership.
Second, commenters expressed the
belief that the aggregate OMB categories
for ethnicity and race may mask
discriminatory practices that are
occurring against subpopulation groups
that fall within these aggregate
categories. For example, one consumer
advocate commenter described the
efforts made by one of its member
organizations to manually disaggregate
the HMDA data using borrowers’ last
name, census tract information in
Queens, New York, and public court
records to determine that more than 50
percent of defaults were among South
Asians in many neighborhoods. In
response, the organization assessed the
needs of this particular Asian
subpopulation group and prioritized
building a foreclosure prevention
program, which helped stabilize these
minority neighborhoods. Overall, many
commenters stated that expanding the
www.hud.gov/offices/hsg/mfh/trx/meet/
raceethnicdatacollexecorder.pdf.
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aggregate ethnicity and race categories
to include specific subpopulations will
assist regulators and the public in
determining whether discrimination
against certain subpopulations is
occurring in minority communities.
Lastly, commenters stated that the
importance of ethnicity and race data to
HMDA’s purposes is critical and as
such, the Bureau should do what it can
to encourage applicants to provide their
demographic information. These
commenters expressed the belief that
the aggregate OMB categories for
ethnicity and race are often too broad
and do not provide applicants within
subpopulation groups with the
opportunity of self-identification. One
industry participant in the Bureau’s
survey expressed a similar perspective
after speaking to several of its
originators indicating that applicants
opt to skip the ethnicity and race
questions altogether when the options
do not accurately describe their ethnic
or racial identity.
As discussed above, the OMB
encourages the collection of greater
detail beyond the two minimum
categories for ethnicity and the five
minimum categories for race, and as
such, agencies may use more detailed
reporting at their discretion so long as
any collection that uses more detail is
organized in such a way that the
additional detail can be aggregated into
the minimum categories for data on
ethnicity and race. The Bureau has
considered the feedback it received in
response to its solicitation on ways to
improve the data collection of an
applicant’s ethnicity, race, and sex
under appendix B and determined, as
discussed below, that the appropriate
approach to further HMDA’s purposes is
to build upon the OMB standards by
adding the type of granularity for
subpopulations that was used in the
2000 and 2010 Decennial Census, with
the exception that the Bureau is not
adopting the sixth race category used by
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Census—Some Other Race—which
cannot be aggregated to the five
minimum OMB categories for race.
First, the Bureau believes that
disaggregated data on applicants’
ethnicity and race will provide
meaningful data, which will further
HMDA’s purposes—in determining
whether financial institutions within a
particular market are serving the
housing needs of specific communities;
in distributing public-sector
investments so as to attract private
investment to areas or communities
where it is needed; and in identifying
possible discriminatory lending
patterns. Consumer advocates have been
urging the Bureau for years to gather
disaggregated information, which will
enable them to determine whether
institutions are filling their obligations
to serve the housing needs of the
communities and neighborhoods in
which they are located. Data on
subpopulation groups in the residential
mortgage market will substantially
advance the ability to better understand
the market for particular subgroups and
monitor access to credit.
The Bureau recognizes that
disaggregated data may not be useful in
analyzing potential discrimination
where financial institutions do not have
a sufficient number of applicants or
borrowers within particular subgroups
to permit reliable assessments of
whether unlawful discrimination may
have occurred. However, in situations in
which the numbers are sufficient to
permit such fair lending assessments,
disaggregated data on ethnicity and race
will help identify potentially
discriminatory lending patterns.
Improved data will not only assist in
identifying potentially discriminatory
practices, but will also contribute to a
better understanding of the experiences
that members within subpopulations
may share in the mortgage market.
Second, as a 21st century, data-driven
agency, the Bureau believes that its
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rules should recognize the nation’s
changing ethnic and racial diversity. By
aligning the ethnicity and race
categories in HMDA with the questions
on Hispanic origin and race used by the
Census Bureau during the last 15 years,
the Bureau is taking a step forward in
updating its data collection
requirements. Lastly, as pointed out by
commenters, disaggregation will also
encourage self-reporting by applicants
by offering, as the Census does,
categories which promote selfidentification.
The Bureau recognizes that financial
institutions may have concerns about
this change to the collection and
reporting of ethnicity and race under
HMDA. This change may increase the
burden of collection and reporting
HMDA data. Disaggregation, as
described here, may also result in
financial institutions having to expand
their data systems, update their
application forms and processes, and
provide additional training to loan
originators to ensure compliance with
the new requirements. There may also
be questions as to what the Bureau
expects of financial institutions with
respect to their compliance management
systems and challenges they may face in
conducting fair lending analyses with
the new data on ethnicity and race.
The Bureau has considered these
potential concerns, among others, and
nonetheless believes that the utility of
disaggregated HMDA data on
applicants’ ethnicity and race justifies
the potential burdens and costs.
Accordingly, the Bureau is adopting
new data standards for the collection
and reporting of ethnicity and race by
modifying the instructions in appendix
B and the sample data collection form.
As such, the final rule requires financial
institutions to use the following data
standards for the collection and
reporting of an applicant’s ethnicity and
race.
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As discussed above, with regard to the
current requirement in appendix B that
a financial institution collect an
applicant’s ethnicity, race, and sex on
the basis of visual observation or
surname when the applicant does not
provide the requested information for an
application taken in person, the Bureau
has determined that it will maintain this
requirement as is. However, the
concerns with the visual observation
and surname requirement expressed by
commenters discussed above, would
arguably be magnified due to the
difficulties loan originators would
potentially encounter in determining an
applicant’s ethnicity and race with the
expanded categories the Bureau is
finalizing. Thus, to reduce the potential
burden of this change on financial
institutions, the Bureau has determined
that, at this point in time, the
appropriate approach is to only permit
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self-identification of the disaggregated
categories. That is, only an applicant
may use the disaggregated categories to
identify his or her ethnicity or race.
When an application is taken in person
and the applicant does not provide the
information, the final rule will continue
to require loan originators to collect, on
the basis of visual observation or
surname, the minimum OMB categories
of ethnicity and race. The Bureau
believes that this approach balances the
value of disaggregated data on ethnicity
and race to further HMDA’s purposes
with the potential burdens on financial
institutions.
Accordingly, the Bureau is modifying
appendix B by adding a new instruction
to require a financial institution to
collect an applicant’s ethnicity, race,
and sex on the basis of visual
observation or surname when the
applicant does not provide the
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requested information for an application
taken in person, by selecting from the
following OMB minimum categories:
Ethnicity (Hispanic or Latino; not
Hispanic or Latino); race (American
Indian or Alaska Native; Asian; Black or
African American; Native Hawaiian or
Other Pacific Islander; White). The
Bureau is also modifying appendix B by
adding a new instruction to provide that
only an applicant may self-identify as
being of a particular Hispanic or Latino
subcategory (Mexican, Puerto Rican,
Cuban, Other Hispanic or Latino) or of
a particular Asian subcategory (Asian
Indian, Chinese, Filipino, Japanese,
Korean, Vietnamese, Other Asian) or of
a particular Native Hawaiian or Other
Pacific Islander subcategory (Native
Hawaiian, Guamanian or Chamorro,
Samoan, Other Pacific Islander) or of a
particular American Indian or Alaska
Native enrolled or principal tribe. The
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Bureau recognizes the change to the
collection and reporting of ethnicity and
race under HMDA may raise concerns
regarding applicant and borrower
privacy. See part II.B above for a
discussion of the Bureau’s approach to
protecting applicant and borrower
privacy with respect to the public
disclosure of HMDA data.
Similar to the Census questionnaire
and as outlined above in the new data
standards the Bureau is adopting for the
collection and reporting of an
applicant’s ethnicity and race, the
Bureau is modifying the sample data
collection form in appendix B to allow
an applicant to provide a particular
Hispanic or Latino origin when ‘‘Other
Hispanic or Latino’’ is selected by the
applicant, a particular Asian race when
‘‘Other Asian’’ is selected by the
applicant, a particular Other Pacific
Islander race when ‘‘Other Pacific
Islander’’ is selected by the applicant,
and lastly, the name of the enrolled or
principal tribe when the applicant
selects American Indian or Alaska
Native race. The Bureau believes that
this may encourage self-reporting by
applicants by offering, as the Census
does, an option for applicants to provide
a specific Hispanic/Latino origin and
race, which promotes self-identification
and will improve the HMDA data’s
usefulness.
In addition, in order to facilitate
compliance, the Bureau has determined
that it will limit the number of
particular racial designations of
applicants that are required to be
reported by financial institutions. The
Bureau reviewed recent Census data to
consider the occurrence of respondents
that self-identify as being of more than
one particular race. For example, the
2010 Census data shows that of the
Asian population where only Asian was
reported as the respondents’ race, only
0.11 percent of those self-identified as
being of three particular Asian races,
while only 0.02 percent self-identified
as being of seven particular Asian races.
Regulation C currently requires
financial institutions to report up to five
racial designations of an applicant. The
Bureau believes that the likelihood of
applicants self-identifying as being of
more than five particular racial
designations is low. Accordingly, the
Bureau is adopting a new instruction 9
in appendix B, which provides that a
financial institution must offer the
applicant the option of selecting more
than one particular ethnicity or race.
The new instruction provides that if an
applicant selects more than one
particular ethnicity or race, a financial
institution must report each selected
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designation, subject to the limits
described in the instruction.
With respect to ethnicity, the
instruction requires a financial
institution to report each aggregate
ethnicity category and each ethnicity
subcategory selected by the applicant. In
addition, the instruction explains that if
an applicant selects the Other Hispanic
or Latino ethnicity subcategory, the
applicant may also provide a particular
Hispanic or Latino ethnicity not listed
in the standard subcategories. In such a
case, the instruction requires a financial
institution to report both the selection of
Other Hispanic or Latino and the
additional information provided by the
applicant.
With respect to race, the instruction
requires a financial institution to report
every aggregate race category selected by
the applicant. If the applicant also
selects one or more race subcategories,
the instruction requires the financial
institution to report each race
subcategory selected by the applicant,
except that the financial institution
must not report more than a total of five
aggregate race categories and race
subcategories combined. The instruction
provides illustrative examples to
facilitate HMDA compliance. In
addition, the instruction explains that if
an applicant selects the Other Asian
race subcategory or the Other Pacific
Islander race subcategory, the applicant
may also provide a particular Other
Asian or Other Pacific Islander race not
listed in the standard subcategories. In
either such case, the instruction requires
a financial institution to report both the
selection of Other Asian or Other Pacific
Islander, as applicable, and the
additional information provided by the
applicant, subject to the five-race
maximum. In all such cases where the
applicant has selected an Other race
subcategory and also provided
additional information, for purposes of
the five-race maximum, the Other race
subcategory and additional information
provided by the applicant together
constitute only one selection. The
instruction provides an illustrative
example to facilitate compliance.
The Bureau is also modifying the
introductory paragraph in the sample
data collection form in appendix B in an
effort to improve the explanation
provided to applicants by financial
institutions as to why their demographic
information is being collected. In
response to the Bureau’s solicitation for
feedback on ways to improve the data
collection on ethnicity, race, and sex, a
few commenters stated that applicants
may be reluctant to provide their
demographic information because they
do not understand why it is being
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collected or for what purposes. For
example, an industry commenter
suggested that the language explaining
to the applicant why the information is
being requested should be in plain
language and contain less legalese in
order for an applicant to feel more
comfortable in responding to the
request. Another industry commenter
suggested that applicants who choose
not to provide their demographic
information may be concerned that by
doing so, such information may
negatively influence the credit decision
made by a financial institution. The
Bureau believes that the explanation
provided to applicants by financial
institutions should clearly state why
their demographic information is being
collected and for what purposes such
information is requested by the Federal
government. Accordingly, the Bureau is
modifying the introductory paragraph in
the sample data collection form in
appendix B to include the following
sentences: ‘‘The purpose of collecting
this information is to help ensure that
all applicants are treated fairly and that
the housing needs of communities and
neighborhoods are being fulfilled. For
residential mortgage lending, Federal
law requires that we ask applicants for
their demographic information
(ethnicity, race, and sex) in order to
monitor our compliance with equal
credit opportunity, fair housing, and
home mortgage disclosure laws.’’ The
Bureau is adopting other changes to the
introductory paragraph in the sample
data collection form to align with the
new data standards on collection and
reporting of ethnicity and race.
In order to align with the modified
introductory paragraph in the sample
data collection form, the Bureau is also
adopting new instruction 2, which
clarifies that a financial institution must
inform applicants that Federal law
requires collection of their demographic
information in order to protect
consumers and to monitor compliance
with Federal statutes that prohibit
discrimination against applicants on the
basis of ethnicity, race, and sex. The
Bureau is also modifying the title of the
sample data collection form. A few
commenters stated that ‘‘Information for
Government Monitoring Purposes’’ may
discourage applicants from providing
their demographic information. For
example, by using the words
‘‘government monitoring,’’ a few
industry commenters suggested that
applicants may view the collection of
this information as intrusive or
intimidating, as opposed to ensuring
that they are protected from
discrimination. Another industry
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commenter stated that some applicants
are not aware that Federal statutes and
regulations protect them from
discrimination and that ‘‘government
monitoring information’’ promotes a
sense among applicants that the
financial institution’s credit decision is
based, at least in part, on their
demographic information. The Bureau
has considered this feedback and
determined that the title of the sample
data collection form should be modified
in order to address the concern that the
current title may discourage applicants
from providing their demographic
information. Accordingly, the Bureau is
modifying the title of the sample data
collection form to ‘‘Demographic
Information of Applicant and CoApplicant.’’
The Bureau has determined that
modifying the introductory paragraph in
the sample data collection form and its
title, as well as adopting new
instruction 2 in appendix B, will assist
financial institutions in explaining to
applicants the purposes of collecting
their demographic information and how
the information is used. The Bureau
believes that these changes may
improve the HMDA data’s usefulness by
encouraging applicants to provide their
demographic information.
The Bureau is also modifying
instruction 1 in appendix B, which
currently provides that for applications
taken by telephone, the information in
the collection form must be stated orally
by the lender, except for that
information which pertains uniquely to
applications taken in writing. The
Bureau has received questions regarding
the meaning of the phrase ‘‘except for
that information which pertains
uniquely to applications taken in
writing.’’ The Bureau has modified this
instruction in the final rule and
provides an illustrative example, which
will address confusion regarding this
phrase.
The Bureau is also modifying the
sample data collection form by allowing
applicants to select ‘‘I do not wish to
provide this information’’ separately for
ethnicity, race, and sex. Previously, the
sample data collection form provided a
‘‘I do not wish to furnish this
information’’ box at the top of the form,
which applied to ethnicity, race, and
sex as a group. The Bureau believes that
modifying the selection to include a ‘‘I
do not wish to provide this
information’’ box following the request
for the applicant’s ethnicity, race, and
sex will allow an applicant to more
clearly articulate a decision to decline to
provide certain information but not
other information. Additional guidance
on this topic had been published in the
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FFIEC FAQs.289 The Bureau believes it
is appropriate to modify the sample data
collection form in appendix B, adapted
from the FFIEC FAQs, to improve the
collection of this information and assist
financial institutions with HMDA
compliance.
The Bureau is also proposing to add
four new instructions to appendix B to
provide additional guidance regarding
the reporting requirement under
§ 1003.4(a)(10)(i). First, the Bureau
received feedback requesting that it
clarify whether a financial institution
must report the demographic
information of a guarantor. To help
facilitate HMDA compliance, the Bureau
is adopting new instruction 4 in
appendix B, which clarifies that for
purposes of § 1003.4(a)(10)(i), if a
covered loan or application includes a
guarantor, a financial institution does
not report the guarantor’s ethnicity,
race, and sex. While the terms
‘‘applicant’’ and ‘‘borrower’’ may
include guarantors in other
regulations,290 the Bureau believes the
inclusion of information regarding the
ethnicity, race, and sex of guarantors in
the HMDA data would be unnecessarily
burdensome and potentially lead to
inconsistencies in the data.
Second, an industry commenter
pointed out that the Bureau’s proposed
instruction 4(a)(10)–2.a provides ‘‘You
need not collect or report this
information for covered loans
purchased. If you choose not to report
this information for covered loans that
you purchase, use the Codes for not
applicable.’’ However, the Bureau’s
proposed instructions 4(a)(10)(i)–2.c,
4(a)(10)(i)–3.b, 4(a)(10)(i)–4.a, and
4(a)(10)(ii)–1.d instructed financial
institutions to report the corresponding
code for ‘‘not applicable’’ for ethnicity,
race, sex, age, and income ‘‘when the
applicant or co-applicant information is
unavailable because the covered loan
has been purchased by your
institution.’’ The Bureau agrees that
these instructions do not align and has
determined that a clarification will
facilitate HMDA compliance.
Consequently, the Bureau is adopting
new instruction 6 in appendix B, which
requires that when a financial
institution purchases a covered loan and
chooses not to report the applicant’s or
co-applicant’s ethnicity, race, and sex,
the financial institution reports that the
requirement is not applicable.
289 See http://www.ffiec.gov/hmda/
faqreg.htm#threeboxes.
290 For example, Regulation B defines the term
‘‘applicant’’ to include guarantors, sureties,
endorsers, and similar parties for some purposes.
See 12 CFR 1002.2(e).
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Third, prior to the Bureau’s proposal,
financial institutions had expressed
uncertainty as to whether a trust is a
non-natural person for purposes of
HMDA. In response, the Bureau
proposed to add ‘‘trust’’ to the list of
examples in the technical instructions
in appendix A, which direct financial
institutions to report the code for ‘‘not
applicable’’ if the borrower or applicant
is not a natural person. A few
commenters supported the proposed
clarification. The Bureau has
determined that the proposed
clarification will facilitate HMDA
compliance. Consequently, the Bureau
is adopting new instruction 7, which
provides, in part, a financial institution
reports that the requirement to report
the applicant’s or co-applicant’s
ethnicity, race, and sex is not applicable
when the applicant or co-applicant is
not a natural person (for example, a
corporation, partnership, or trust). The
new instruction clarifies that for a
transaction involving a trust, a financial
institution reports that the requirement
is not applicable if the trust is the
applicant. On the other hand, if the
applicant is a natural person, and is the
beneficiary of a trust, a financial
institution reports the applicant’s
ethnicity, race, and sex.
Lastly, the Bureau is adopting new
instruction 13 in appendix B, which
clarifies how a financial institution
should report partial demographic
information provided by an applicant.
Additional guidance on this topic had
been published in the FFIEC FAQs.291
The Bureau believes it is appropriate to
include an instruction in appendix B,
adapted from the FFIEC FAQs, to assist
financial institutions with HMDA
compliance.
For the reasons discussed above, the
Bureau is adopting proposed
§ 1003.4(a)(10)(i), with the following
substantive change. The Bureau is
requiring financial institutions to report
whether the applicant’s or coapplicant’s ethnicity, race, and sex was
collected on the basis of visual
observation or surname. Consequently,
§ 1003.4(a)(10)(i) and appendix B of the
final rule require a financial institution
to collect and report the applicant’s or
co-applicant’s ethnicity, race, and sex,
and whether this information was
collected on the basis of visual
observation or surname.
In addition, for the reasons discussed
above, the Bureau is adding new
instructions, as well as modifying a few
of the current instructions, in appendix
B and the sample data collection form
291 See http://www.ffiec.gov/hmda/
faqreg.htm#collectioninfo.
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in order to facilitate compliance with
the new collection and reporting
requirements relating to an applicant’s
ethnicity, race, and sex. The Bureau is
adopting proposed comments
4(a)(10)(i)–1, –2, –3, –4, and –5 as new
instructions 8, 10, 12, 5, and 3,
respectively, in appendix B, modified to
conform to the changes the Bureau is
finalizing in § 1003.4(a)(10)(i) and to
provide additional clarity as to the data
collection requirements. In addition, as
discussed above, the Bureau is adopting
new instructions 4, 6, 7, 9, 11, and 13
in appendix B. The Bureau has modified
proposed comment 4(a)(10)(i)–1, which
directs financial institutions to refer to
appendix B for instructions on
collection of an applicant’s ethnicity,
race, and sex. By placing all of the data
collection instructions with respect to
an applicant’s ethnicity, race, and sex in
one location—appendix B—the Bureau
has streamlined the regulatory
requirements in an effort to reduce
compliance burden. The Bureau has
determined that these data collection
instructions in appendix B and the
revised sample data collection form,
discussed above, will help facilitate
HMDA compliance by providing
additional guidance regarding the
reporting requirements under
§ 1003.4(a)(10)(i).
Lastly, in order to facilitate
compliance with the new collection and
reporting requirements in
§ 1003.4(a)(10)(i) and appendix B
relating to an applicant’s ethnicity, race,
and sex, the Bureau added new
comment 4(a)(10)(i)–2 in the final rule
and provides an illustrative example.
Comment 4(a)(10)(i)–2 provides that if a
financial institution receives an
application prior to January 1, 2018, but
final action is taken on or after January
1, 2018, the financial institution
complies with § 1003.4(a)(10)(i) and (b)
if it collects the information in
accordance with the requirements in
effect at the time the information was
collected. For example, if a financial
institution receives an application on
November 15, 2017, collects the
applicant’s ethnicity, race, and sex in
accordance with the instructions in
effect on that date, and takes final action
on the application on January 5, 2018,
the financial institution has complied
with the requirements of
§ 1003.4(a)(10)(i) and (b), even though
those instructions changed after the
information was collected but before the
date of final action. However, if, in this
example, the financial institution
collected the applicant’s ethnicity, race,
and sex on or after January 1, 2018,
§ 1003.4(a)(10)(i) and (b) requires the
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financial institution to collect the
information in accordance with the
amended instructions.
4(a)(10)(ii)
Section 1094(3)(A)(i) of the DoddFrank Act amended HMDA section
304(b)(4) to require financial
institutions to report an applicant’s or
borrower’s age.292 The Bureau proposed
to implement the requirement to collect
and report age by adding this
characteristic to the information listed
in proposed § 1003.4(a)(10)(i). In light of
potential applicant and borrower
privacy concerns related to reporting
date of birth, the Bureau proposed that
financial institutions enter the age of the
applicant or borrower, as of the date of
application, in number of years as
derived from the date of birth as shown
on the application form.
The Bureau solicited feedback
regarding whether this was an
appropriate manner of collecting the age
of applicants. Many commenters
expressed concern about potential
privacy implications if the Bureau
requires financial institutions to report
an applicant’s age or if the Bureau were
to release such data to the public. As
with other proposed data points like
credit score, commenters were
concerned that if information regarding
an applicant’s or borrower’s age is made
available to the public, such information
could be coupled with other publicly
available information, such as the
security instrument and other local
records, in a way that compromises an
applicant’s or borrower’s privacy. A
national trade association commented
that by increasing the scope of HMDA
reporting, the Bureau would increase
potential privacy risks of consumers.
The commenter argued that expansive
new data elements, like age, result in an
unjustifiable privacy intrusion by
providing information that allows
someone to identify applicants and
borrowers along with a detailed picture
of their financial state. Similarly, an
industry commenter suggested that in
addition to the potential for criminal
misuse of a borrower’s financial
information, the availability of the
expanded data released under HMDA
will very likely permit marketers to
access the information which will result
in aggressive marketing that is
‘‘personalized’’ to unsophisticated and
vulnerable consumers for potentially
harmful financial products and services.
Another State trade association
recommended that the Bureau
strengthen its data protection as it
relates to the selective disclosure of
292 12
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HMDA data to third parties and
specifically recommended that the
Bureau convert actual values to ranges
or normalize values before sharing the
data with a third party. The Bureau has
considered this feedback. See part II.B
above for a discussion of the Bureau’s
approach to protecting applicant and
borrower privacy with respect to the
public disclosure of HMDA data.
In contrast, many consumer advocate
commenters stated that requiring
financial institutions to report an
applicant’s age is vital information that
allows the public to evaluate age biases
in lending, especially in conjunction
with reverse mortgages. These
commenters stated that the public needs
to know the extent of reverse mortgage
lending for various categories of older
adults to ensure that various age cohorts
are being served and are not being
abused. Another commenter stated that
an applicant’s age is an important
element for understanding patterns of
mortgage lending and noted that
mortgage underwriting standards may
contribute to disparate outcomes in
homeownership among different age
cohorts. Another commenter stated that
requiring financial institutions to report
a borrower’s age is important to ensure
that borrowers in any particular age
category are not experiencing undue
barriers to mortgage credit.
Many commenters also provided
feedback regarding the Bureau’s request
as to whether there was a less
burdensome way for financial
institutions to collect such information
for purposes of HMDA. For example,
many industry commenters
recommended that the Bureau require
financial institutions to report age as a
‘‘range of values’’ rather than an
applicant’s or borrower’s actual age. The
commenters suggested that reporting an
applicant’s age as a range of values will
eliminate a substantial number of
potential errors on financial institutions’
loan/application registers, would better
protect the privacy of applicants, and
would not compromise the integrity of
the HMDA data. Another industry
commenter generally agreed that
applicants’ age information would be
useful to users of the HMDA data when
analyzing housing trends and a financial
institution’s fair lending performance,
but recommended that the Bureau
require reporting of an applicant’s date
of birth and not the actual age of the
applicant. Another industry commenter
explained that it only requires date of
birth on its applications and not age
specifically. If the Bureau implements
the requirement to report the applicant’s
age in years, the commenter stated that
the consequence would be that
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customized loan application forms
would need to be amended to include
this additional information or
institutions would need to manually
calculate an applicant’s age, which will
significantly increase both the burden of
this reporting requirement and errors. A
few industry commenters stated that the
costs of the proposed requirement
would not be justified. Other industry
commenters stated that calculating an
applicant’s actual age will be an
unnecessary burden and an area of
potentially high error rate, and as such,
the Bureau should require reporting of
the applicant’s year of birth.
The Bureau has considered this
feedback and determined that requiring
financial institutions to report the
applicant’s actual age—and not the
applicant’s date of birth, year of birth,
or a range within which an applicant’s
age falls—is the appropriate method of
implementing HMDA section 304(b)(4)
and carrying out HMDA’s purposes. In
light of potential applicant and
borrower privacy concerns related to
reporting date of birth or year of birth,
the Bureau has determined that
requiring financial institutions to report
the applicant’s actual age is the proper
approach. The Bureau has also
determined that requiring financial
institutions to report age as a range of
values would diminish the utility of the
data to further HMDA’s purposes. By
requiring financial institutions to report
the applicant’s actual age, this
information will assist in identifying
whether financial institutions are
serving the housing needs of their
communities, identifying possible
discriminatory lending patterns, and
enforcing antidiscrimination statutes.
The Bureau recognizes that a
requirement to collect and report the
applicant’s age may impose some
burden on financial institutions and that
requiring financial institutions to
calculate the age of an applicant in
number of years by referring to the date
of birth as shown on the application
form may result in potential calculation
errors. However, the Bureau has
determined that the benefits of this
reporting requirement justify any
burdens and financial institutions will
have to manage the risk of an error in
calculating an applicant’s age to ensure
HMDA compliance.
The final rule renumbers proposed
§ 1003.4(a)(10)(i) and moves the
requirement to collect the age of the
applicant or borrower to
§ 1003.4(a)(10)(ii). The new numbering
is intended only for ease of reference
and is not a substantive change. In
addition, in order to help facilitate
HMDA compliance, the Bureau is
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moving the proposed commentary
regarding the reporting requirements for
an applicant’s and borrower’s age into
new comments. The Bureau is adopting
new comments 4(a)(10)(ii)–1, –2, –3, –4,
and –5.
The Bureau is adopting new comment
4(a)(10)(ii)–1, which explains that a
financial institution complies with
§ 1003.4(a)(10)(ii) by reporting the
applicant’s age, as of the application
date under § 1003.4(a)(1)(ii), as the
number of whole years derived from the
date of birth as shown on the
application form, and provides an
illustrative example. This requirement
aligns with the definition of age under
Regulation B.293
Similar to the requirement applicable
to an applicant’s ethnicity, race, and
sex, the Bureau is adopting new
comment 4(a)(10)(ii)–2, which clarifies
that if there are no co-applicants, a
financial institution reports that there is
no co-applicant. On the other hand, if
there is more than one co-applicant, the
financial institution reports the age only
for the first co-applicant listed on the
application form. The comment also
explains that a co-applicant may
provide the absent co-applicant’s age on
behalf of the absent co-applicant.
The Bureau is adopting new comment
4(a)(10)(ii)–3, which clarifies when a
financial institution reports that the
requirement is not applicable. Similar to
the requirement applicable to an
applicant’s ethnicity, race, and sex,
comment 4(a)(10)(ii)–3 explains that for
a covered loan that the financial
institution purchases and for which the
institution chooses not to report the
applicant’s or co-applicant’s age, the
financial institution reports that the
requirement is not applicable. In
addition, comment 4(a)(10)(ii)–4
explains that a financial institution
reports that the requirement to report
the applicant’s or co-applicant’s age is
not applicable when the applicant or coapplicant is not a natural person (for
example, a corporation, partnership, or
trust), and provides an illustrative
example.
293 The Bureau’s Regulation B requires, as part of
the application for credit, a creditor to request the
age of an applicant for credit primarily for the
purchase or refinancing of a dwelling occupied or
to be occupied by the applicant as a principal
dwelling, where the credit will be secured by the
dwelling. Regulation B § 1002.13(a)(1)(iv). Age has
been a protected category under ECOA and
Regulation B since 1976, and a creditor may not
discriminate against an applicant on the basis of age
regarding any aspect of a credit transaction,
including home mortgage lending. See Regulation B
§§ 1002.1(b), 1002.4(a)(b), 15 U.S.C. 1691(a)(1).
Under Regulation B, ‘‘age’’ refers ‘‘only to the age
of natural persons and means the number of fully
elapsed years from the date of an applicant’s birth.’’
Regulation B § 1002.2(d).
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Lastly, the Bureau received feedback
requesting that it clarify whether a
financial institution must report the
demographic information of a guarantor.
Similar to the requirement applicable to
an applicant’s ethnicity, race, and sex,
the Bureau is adopting new comment
4(a)(10)(ii)–5, which clarifies that for
purposes of § 1003.4(a)(10)(ii), if a
covered loan or application includes a
guarantor, a financial institution does
not report the guarantor’s age. These
five new comments will help facilitate
HMDA compliance by providing
guidance on the reporting requirements
regarding an applicant’s or borrower’s
age.
4(a)(10)(iii)
HMDA section 304(b)(4) requires the
reporting of income level for borrowers
and applicants. Section 1003.4(a)(10) of
Regulation C implements this
requirement by requiring collection and
reporting of the applicant’s gross annual
income relied on in processing the
application. Proposed § 1003.4(a)(10)(ii)
revised the current rule to require the
reporting of gross annual income relied
on in making the credit decision
requiring consideration of income or, if
a credit decision requiring consideration
of income was not made, the gross
annual income collected as part of the
application process. The Bureau also
proposed amendments to the
commentary and two new illustrative
comments. The Bureau is adopting
§ 1003.4(a)(10)(iii), renumbered from
proposed § 1003.4(a)(10)(ii), and
comments 4(a)(10)(iii)–1 through –10.
The Bureau received feedback on
proposed § 1003.4(a)(10)(ii) and its
commentary from a small number of
commenters. A handful of commenters,
including consumer advocates and
industry commenters, expressed
support for proposed § 1003.4(a)(10)(ii).
As information about an applicant’s or
borrower’s income provides information
about underwriting decisions and access
to credit, the Bureau believes that
collecting it is important for achieving
HMDA’s purposes: to identify possible
fair lending violations, to understand
whether financial institutions are
meeting the housing needs of their
communities, and to help policymakers
allocate public investments so as to
attract private capital. Therefore, it is
appropriate to continue to require
financial institutions to report
information about an applicant’s or
borrower’s gross annual income.
A few industry commenters addressed
challenges associated with reporting the
gross annual income relied on in
making the credit decision. One
commenter suggested requiring
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reporting of the income obtained from a
readily verifiable source instead of the
gross annual income relied on in
making the credit decision. Others
asked for clarification about what is
meant by gross annual income,
including whether gross annual income
requires reporting of the income that the
financial institution has verified. It is
not necessary to modify proposed
§ 1003.4(a)(10)(ii) to allow financial
institutions that rely on the verified
gross annual income to report the
verified gross annual income. Proposed
§ 1003.4(a)(10)(ii) provided flexibility
for the financial institution to report the
gross annual income that the financial
institution relied on in making the
credit decision for the loan or
application that the institution is
reporting. Under the proposal, if a
financial institution relied on the
verified gross annual income, then the
institution would report the verified
gross annual income. In addition, in
circumstances when a financial
institution did not rely on the verified
gross annual income, the financial
institution would report the gross
annual income that it relied on in
making the credit decision. The Bureau
believes that it is important to maintain
this flexibility in the final rule and
accordingly is not adopting
commenters’ suggestions to change the
requirement. However, in response to
the comments, the Bureau is modifying
proposed comment 4(a)(10)(ii)–1,
renumbered as comment 4(a)(10)(iii)–1,
to clarify that a financial institution
reports the verified gross annual income
when the financial institution relied on
the verified gross annual income in
making the credit decision.
Some industry commenters also
raised concerns about public disclosure
of this information. See part II.B above
for a discussion of the Bureau’s
approach to protecting applicant and
borrower privacy with respect to the
public disclosure of the data.
Other industry commenters urged the
Bureau to consider excluding certain
types of loans, such as multifamily
loans, business purpose loans, and
purchased loans, from the requirement
to report income in proposed
§ 1003.4(a)(10)(ii). The final rule
effectively excludes these loans from
income reporting. New comment
4(a)(10)(iii)–7 excludes loans to nonnatural persons and new comment
4(a)(10)(iii)–8 excludes those related to
multifamily dwellings from the
requirement to report income
information. New comment 4(a)(10)(iii)–
9 provides that reporting income
information is optional for purchased
loans. However, as discussed in
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comments 4(a)–3 and –4, a financial
institution that reviews an application
for a covered loan, makes a credit
decision on that application prior to
closing, and purchases the covered loan
after closing will report the covered loan
that it purchases as an origination, not
a purchase. Accordingly, in those
circumstances, the final rule requires
the financial institution to report the
gross annual income that it relied on in
making the credit decision.
Other industry commenters expressed
concerns about the proposed
requirement to report the gross annual
income collected as part of the
application process. One commenter
urged the Bureau to only require
reporting of income information if it is
relied on in making a credit decision.
Another commenter urged the Bureau to
require reporting of the most recent
verified income, instead of the income
stated by the borrower, because
institutions update income throughout
the application process to take into
account new information. Another
commenter suggested that collecting
income information that is not verified
is inconsistent with the Bureau’s 2013
ATR Final Rule, which the commenter
stated requires income to be verified.
Information concerning income on
applications when no credit decision
was made provides valuable data to
understand access to credit and
underwriting decisions. The Bureau
recognizes, however, as suggested by
commenters, that the proposal’s
description of the requirement to report
income in those circumstances created
confusion about what income
information to report. To respond to the
concerns raised by the commenters, the
Bureau is not adopting the language in
proposed § 1003.4(a)(10)(ii) that
describes reporting income on
applications when no credit decision
was made. Instead, the Bureau is
retaining the language currently used in
§ 1003.4(a)(10) to describe what to
report in that circumstance. The final
rule provides that if a credit decision is
not made, a financial institution reports
the gross annual income relied on in
processing the application for a covered
loan that requires consideration of
income. In that case, the financial
institution should report whatever
income information it was relying on
when the application was withdrawn or
closed for incompleteness, which could
include the income information
provided by the applicant initially, any
additional income information provided
by the applicant during the application
process, and any adjustments to that
information during the application
process due to the institution’s policies
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and procedures. These adjustments may
include, for example, reducing the
income amount to reflect verified
income or to eliminate types of income
not considered by the financial
institution. In addition, proposed
comment 4(a)(10)(ii)–5, finalized as
comment 4(a)(10)(iii)–5, is revised to
clarify that a financial institution is not
necessarily required to report the
income information initially provided
on the application. Rather, the financial
institution may update the income
information initially provided by the
applicant with additional information
collected from the applicant if it relies
on that additional information in
processing the application.
Another industry commenter
expressed concerns about proposed
comment 4(a)(10)(ii)–4, which
explained that an institution should not
include as income, amounts considered
in making a credit decision based on
factors that an institution relies on in
addition to income. For example, the
proposal directed financial institutions
not to include as income any amounts
derived from annuitization or depletion
of an applicant’s remaining assets. The
commenter noted that proposed
comment 4(a)(10)(ii)–4 would be
difficult to implement because lenders
would have to create new data fields to
identify and exclude annuitized income.
In addition, the commenter stated that
adopting the proposed comment would
create a distorted picture of an
applicant’s cash flow. The Bureau is
finalizing proposed comment
4(a)(10)(ii)–4, renumbered as comment
4(a)(10)(iii)–4, to focus on applicant
income as distinct from an applicant’s
assets or other resources. Although
financial institutions may rely on assets
or other resources in underwriting a
loan, including amounts other than
income, such as assets, would result in
data that is less useful and less accurate.
Therefore, it would not be appropriate
to report that information as income.
For the reasons discussed above, the
Bureau is finalizing proposed
§ 1003.4(a)(10)(ii), renumbered as
§ 1003.4(a)(10)(iii), with technical
modifications for clarification. The
Bureau is also finalizing proposed
comments 4(a)(10)(ii)–1 through –6,
renumbered as comments 4(a)(10)(iii)–1
through –6, with clarifying
modifications to provide illustrative
examples. The Bureau is also moving
proposed instruction 4(a)(10)–2.a into
new comment 4(a)(10)(iii)–9 and
proposed instruction 4(a)(10)(ii)–1 into
new comments 4(a)(10)(iii)–7, –8, and
–10.
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4(a)(11)
Current § 1003.4(a)(11) requires
financial institutions to report the type
of entity purchasing a loan that the
financial institution originates or
purchases and then sells within the
same calendar year, and provides that
this information need not be included in
quarterly updates.294 In conjunction
with the Bureau’s proposal to require
quarterly data reporting by certain
financial institutions as described
further below in the section-by-section
analysis of § 1003.5(a)(1)(ii), the Bureau
proposed to modify § 1003.4(a)(11) by
deleting the statement that the
information about the type of purchaser
need not be included in quarterly
updates. In addition, the Bureau
proposed technical modifications to
current comments 4(a)(11)–1 and –2 and
also proposed to add six new comments
to provide additional guidance
regarding the type of purchaser
reporting requirement.
The Bureau solicited feedback
regarding whether the proposed
comments were appropriate and
specifically solicited feedback regarding
whether additional clarifications would
assist financial institutions in
complying with proposed
§ 1003.4(a)(11). The Bureau received a
few comments.
With respect to the Bureau’s proposal
that the type of purchaser data be
included in quarterly reporting by
certain financial institutions, one
industry commenter stated that the
proposal did not specify how a quarterly
reporter would report a loan it
originated in one quarter and sold in
another quarter during the same year.
The Bureau proposed an instruction,
which it is adopting as new comment
4(a)(11)–9 with the following
clarifications: A financial institution
records that the requirement is not
applicable if the institution originated
or purchased a covered loan and did not
sell it during the calendar quarter for
which the institution is recording the
data; if the financial institution sells the
covered loan in a subsequent quarter of
the same calendar year, the financial
institution records the type of purchaser
on its loan/application register for the
quarter in which the covered loan was
sold; if the financial institution sells the
covered loan in a succeeding year, the
institution should not record the sale.
For clarity, the Bureau also adopts new
comment 4(a)(11)–10, which provides
that a financial institution reports that
294 12 CFR 1002.4(a)(11); see also 12 U.S.C.
2803(h)(1)(C) (authorizing regulations that ‘‘require
disclosure of the class of the purchaser of such
loans’’).
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the requirement is not applicable for
applications that were denied,
withdrawn, closed for incompleteness
or approved but not accepted by the
applicant; and for preapproval requests
that were denied or approved but not
accepted by the applicant. The new
comment also provides that a financial
institution reports that the requirement
is not applicable if the institution
originated or purchased a covered loan
and did not sell it during that same
calendar year.
The Bureau proposed comment
4(a)(11)–3, which clarifies when a
financial institution shall report the
code for ‘‘affiliate institution’’ by
providing a definition of the term
‘‘affiliate’’ and clarifying that for
purposes of proposed § 1003.4(a)(11),
the term ‘‘affiliate’’ means any company
that controls, is controlled by, or is
under common control with, another
company, as set forth in the Bank
Holding Company Act of 1956 (12
U.S.C. 1841 et seq.). One industry
commenter stated that it is difficult for
a financial institution to determine the
correct code to report for the type of
purchaser, especially when mergers,
acquisitions, and affiliates are involved
in the transaction, and recommended
that financial institutions simply report
‘‘sold’’ or ‘‘kept in portfolio’’ for this
requirement. Another industry
commenter stated that the proposed
definition of ‘‘affiliate’’ remains unclear
and urged the Bureau to align the
definition with existing regulations,
including the Secure and Fair
Enforcement of Mortgage Licensing Act
of 2008 (SAFE Act).
The Bureau considered the
recommendation to require reporting of
whether a particular loan has been
‘‘sold’’ within the same calendar year or
‘‘kept in portfolio,’’ but has determined
that requiring reporting of the type of
purchaser is the more appropriate
approach. The type of purchaser
information reported under HMDA
provides valuable information, for
example, by helping data users
understand the secondary mortgage
market. A requirement to simply report
whether a particular loan was ‘‘sold’’ or
‘‘kept in portfolio’’ would greatly
diminish the utility of this HMDA data.
In addition, the Bureau has determined
that the proposed definition of
‘‘affiliate’’ is appropriate and provides
clarity as to when a financial institution
should report that the type of purchaser
is an affiliate institution. The Bureau
considered other definitions of
‘‘affiliate’’ across various laws and
regulations and has concluded that for
purposes of reporting the type of
purchaser under HMDA, the definition
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66197
of ‘‘affiliate’’ established in the Bank
Holding Company Act is appropriate.
Appendix A to § 1003.4(a)(11) groups
‘‘life insurance company, credit union,
mortgage bank, or finance company’’
into one category when reporting type of
purchaser. The Bureau did not propose
to change this grouping. However, one
commenter recommended that
‘‘insurance companies’’ be separated
from ‘‘life insurance company, credit
union, mortgage bank, or finance
company.’’ The commenter argued that
separating insurance companies from
other types of purchasers would result
in improved data with respect to both
information about the ultimate source of
financing in the multifamily market and
information about secondary-market
financing provided by credit unions,
mortgage banks, and finance companies.
In response, the Bureau is adopting a
new modification that will permit
reporting that the purchaser type is a
life insurance company separately from
other purchaser types.
The Bureau is also modifying
proposed comment 4(a)(11)–5 by
replacing ‘‘mortgage bank’’ with
‘‘mortgage company’’ and clarifying that
for purposes of § 1003.4(a)(11), a
mortgage company means a
nondepository institution that
purchases mortgage loans and typically
originates such loans. Additional
guidance on this topic had been
published in the FFIEC FAQs.295 The
Bureau believes this clarification,
adapted from the FFIEC FAQs, will
facilitate compliance with the type of
purchaser reporting requirement.
The Bureau is adopting
§ 1003.4(a)(11) as proposed. The Bureau
is also adopting comments 4(a)(11)–1
through –8, with several technical and
clarifying modifications, and new
comments 4(a)(11)–9 and –10 to help
facilitate HMDA compliance by
providing additional guidance regarding
the type of purchaser reporting
requirement.
4(a)(12)
HMDA section 304(b)(5)(B) requires
financial institutions to report mortgage
loan information, grouped according to
measurements of ‘‘the difference
between the annual percentage rate
associated with the loan and a
benchmark rate or rates for all
loans.’’ 296 Currently, Regulation C
requires financial institutions to report
the difference between a loan’s annual
295 See http://www.ffiec.gov/hmda/
faqreg.htm#mrtgbanks.
296 Section 1094(3)(A)(iv) of the Dodd-Frank Act
amended HMDA by adding section 304(b)(5)(B),
which expanded the rate spread reporting
requirement beyond higher-priced mortgage loans.
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percentage rate (APR) and the average
prime offer rate (APOR) for a
comparable transaction, as of the date
the interest rate is set, if the difference
equals or exceeds 1.5 percentage points
for first-lien loans, or 3.5 percentage
points for subordinate-lien loans. The
Bureau proposed to implement HMDA
section 304(b)(5)(B) in § 1003.4(a)(12),
by requiring financial institutions to
report, for covered loans subject to
Regulation Z, 12 CFR part 1026, other
than purchased loans and reverse
mortgage transactions, the difference
between the covered loan’s annual
percentage rate and the average prime
offer rate for a comparable transaction as
of the date the interest rate is set. For
the reasons discussed below, the Bureau
is adopting § 1003.4(a)(12) generally as
proposed, but with a modification to
exclude assumptions.
The Bureau solicited comment on the
general utility of the revised rate spread
data and on the costs associated with
collecting and reporting. Several
industry commenters and a few trade
associations opposed the Bureau’s
proposal requiring rate spread
information. One commenter stated that
certain financial institutions should be
exempted from the rate spread reporting
requirement on covered loans and
applications. Industry commenters were
generally concerned about the burden
associated with reporting rate spread
data for more transactions than what is
currently collected and reported. In
particular, commenters pointed to the
expense or additional work required to
calculate the rate spread, such as the
need to update software. One industry
commenter stated that current systems
determine rate spread and provide a
numerical difference if the difference
exceeds a predetermined trigger. The
Bureau’s proposal that the rate spread
should be reported for all loans and not
just the ones whose rate spread exceeds
a certain threshold will require systems
updates or a manual updates, according
to the commenter. One commenter
stated that rate spread information
would not provide any meaningful data
regarding access to credit on fair terms
and another commenter stated that the
additional regulatory burden would not
be beneficial to consumers or for the
purposes of antidiscriminatory
monitoring.
As noted in the proposal, Congress
found that improved pricing
information would bring greater
transparency to the market and facilitate
enforcement of fair lending laws.297
Feedback from the Board’s 2010
Hearings suggested that requiring rate
297 H.R.
Rep. No. 111–702, at 191 (2011).
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spread information for all loans, not just
certain loans considered higher-priced,
would provide a more complete
understanding of the mortgage market
and also improve loan analyses across
various markets and communities.298
Furthermore, the proposal noted that
recent enforcement actions pursued by
the U.S. Department of Justice indicated
that price discrimination can occur even
at levels that fall below the current
higher-priced thresholds. Based on the
findings of Congress, feedback from the
Board’s 2010 Hearings, and enforcement
actions, the Bureau concluded that
requiring the rate spread for most loans
or applications by all financial
institutions will enhance the HMDA
data by providing the information that
could improve loan analyses and
therefore enable a better understanding
of the mortgage market. The Bureau
believes that such benefits will justify
any additional burden imposed by the
final rule.
Several industry commenters asked
for clarification on whether the rate
spread field will be required to be
completed on loans subject to
Regulation Z but exempted from the
higher-priced loan category in
Regulation Z § 1026.35, such as a homeequity lines of credit. The Bureau
believes that the rate spread data on
most transactions, including open-end
lines of credit, would be beneficial by
providing data to contribute to a more
complete understanding of the mortgage
market.
One industry commenter questioned
whether reporting a covered loan’s or
application’s APR would be a better
alternative than reporting rate spread
data. This commenter pointed out that
reporting APR is much less burdensome
than calculating the rate spread and
therefore less prone to errors, such as
the use of the wrong date on which to
compare APR to the APOR. In addition
to the risk of errors, the commenter
stated that requiring the financial
institution to report the rate spread
information will increase the cost of
preparing the report. A trade association
questioned why it would not be
sufficient for the APR to be reported,
which would then allow the data user
to select a benchmark of their choice for
comparison. Although reporting the
APR on the covered loan or application
298 See Atlanta Hearing, supra note 40; Chicago
Hearing, supra note 46; see also Neil Bhutta &
Glenn B. Canner, Bd. of Governors of the Fed.
Reserve Sys., 99 Fed. Reserve Bulletin 4, Mortgage
Market Conditions and Borrower Outcomes:
Evidence from the 2012 HMDA Data and Matched
HMDA-Credit Record Data, at 31–32 (Nov. 2013)
(noting that gaps in the rate spread data limit its
current usefulness for assessing fair lending
compliance).
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would reduce the burden on financial
institutions reporting the rate spread
data, based on the language in the DoddFrank Act, the Bureau believes a
reasonable interpretation of HMDA
section 304(b)(5)(B) is that financial
institutions should report the difference
between the APR and APOR. In
addition, the rate spread provides a
more accurate picture of a loan’s price
relative to the rate environment at the
time of the lender’s pricing decision
because the date the loan’s interest rate
was set is not publicly available.
A few commenters warned that rate
spread data could be misleading if
viewed out of context. For example, a
trade association commented that some
loans may have higher rate spreads but
offer special features, such as lower
down payment requirements or waiver
of an institution’s private mortgage
insurance requirement. Another
commenter suggested that users need to
be aware of the issues regarding rate
spread data and pointed out that lender
credits do not impact the APR and
therefore the rate spread will look
higher in comparison to similar loans
without lender credits. Although there
may be issues regarding rate spread
data, the Bureau believes that it would
be less burdensome on financial
institutions to calculate the difference
between APR, which is already a
calculation performed by the financial
institutions for TILA–RESPA purposes,
and APOR. The Bureau does not believe
that the additional burden of requiring
financial institutions to take into
account other factors, such as lender
credits, when calculating the APR for
the purposes of the rate spread would
outweigh any benefit provided by this
adjusted method of calculation. In
addition, the Bureau believes that a
reasonable interpretation of HMDA
section 304(b)(5)(B) is that financial
institutions should report the difference
between the APR on the loan and the
APOR for a comparable transaction.
The Bureau also solicited comment on
the scope of the rate spread reporting
requirement, including whether the
requirement should be expanded to
cover purchased loans. One trade
association agreed with the Bureau’s
proposal that reverse mortgages should
be exempted from rate spread reporting.
A few trade associations agreed with the
Bureau and commented that the rate
spread reporting requirement should not
be expanded to include purchased
loans. One trade association reasoned
this this would require a manual
retroactive process to determine the
APOR for the financial institution
reporting the purchased loan. The
Bureau recognizes the burden that
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would be imposed on the financial
institution reporting the purchased loan
to also report the rate spread and
therefore is excluding purchased
covered loans from the rate spread
reporting requirement as proposed.
One industry commenter asked the
Bureau to clarify whether rate spread
should be reported on commercial loans
that do not have an APR. The Bureau
did not propose to, and the final rule
does not, require a financial institution
to report the rate spread for commercial
loans because these loans are not
covered by Regulation Z, and therefore
creditors are not required to calculate
and disclose an APR to borrowers.
Many commenters noted that the
Bureau’s proposal contained
inconsistent rounding methodologies
across various data points, including the
rate spread, and recommended that the
Bureau provide a consistent rounding
method. The technical instructions in
current appendix A provides that the
rate spread should be reported to two
decimal places. If the rate spread figure
is more than two decimal places, the
figure should be rounded or truncated to
two decimal places. The Bureau
proposed that the rate spread should be
rounded to three decimal places. One
commenter questioned the Bureau’s
proposal to report the rate spread to
three decimal places and stated that
APR is typically disclosed to two
decimal places. The Bureau
acknowledges that the proposed
instruction may pose some challenges
for financial institutions. After
considering the feedback, the Bureau
has determined that the proposed
instruction may be unduly burdensome
on financial institutions. Consequently,
the Bureau is not adopting the proposed
instruction in the final rule.
The Bureau proposed comment
4(a)(12)–4.iii to provide guidance on the
rounding method for calculating the rate
spread for a covered loan with a term to
maturity that is not in whole years. The
proposed comment specifically
provided that when the actual loan term
is exactly halfway between two whole
years, the shorter loan term should be
used. This proposed comment was
based on guidance published in an
FFIEC FAQ.299 One commenter pointed
out that this rounding method does not
follow the typical method of rounding
up when a number is exactly halfway in
between two others. This commenter
suggested that unnecessary errors can
occur as a result of this rounding
method. The Bureau considered this
feedback and believes that the benefit of
299 See http://www.ffiec.gov/hmda/
faqreg.htm#rate.
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adopting a rounding method
inconsistent with the guidance
published in the FFIEC FAQ for this
specific calculation does not outweigh
the burden because it would require a
change in a financial institution’s
systems or processes for calculating the
rate spread for the specific scenario that
the proposed comment addresses. For
example, financial institutions may
have already instituted processes for
rounding down when a loan term is
exactly halfway between two years
based on current FFIEC guidance.
Accordingly, the Bureau is adopting
comment 4(a)(12)–4.iii as proposed.
The Bureau proposed comment
4(a)(12)–5.i to illustrate the relevant
date to use to determine the APOR if the
interest rate in the transaction is set
pursuant to a ‘‘lock-in’’ agreement
between the financial institution and
the borrower. The proposed comment
also explained that the relevant date to
use if no lock-in agreement is executed.
Several industry commenters asked the
Bureau to clarify the rate spread lock-in
date where the transaction did not
include an option to lock the loan’s rate.
The guidance provided in comment
4(a)(12)–5.i clarifies that, in a
transaction where no lock-in agreement
is executed, the relevant date to use to
determine the applicable APOR is the
date on which the financial institution
sets the rate for the final time before
closing.
Except for technical amendments to
comments 4(a)(12)–3, –4.i and .ii, and
–5.iii, the Bureau is adopting the
commentary to § 1003.4(a)(12)
substantially as proposed. In addition,
the Bureau is adopting two comments
that incorporate material contained in
proposed appendix A into the
commentary to § 1003.4(a)(12).
Comments 4(a)(12)–7 and –8 primarily
incorporate proposed appendix A
instructions and do not contain any
substantive changes.
The Bureau is making a technical
change and incorporating the exclusion
of assumptions from rate spread
reporting in § 1003.4(a)(12), which was
included in proposed appendix A and
was based on FFIEC guidance. The
Bureau believes that the utility that the
rate spread would provide on
assumptions does not justify the burden
in collecting the information. Therefore,
the Bureau is adopting § 1003.4(a)(12)
generally to require financial
institutions to report the difference
between a loan’s APR and APOR for a
comparable transaction as of the date
the interest rate is set, except for
purchased loans, reverse mortgages, and
loans that are not subject to Regulation
Z, 12 CFR part 1026, with a
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modification that excludes assumptions
from the scope of the rate spread
reporting requirement. The Bureau
believes that rate spread information on
loans that are both below and above the
threshold for higher-priced mortgage
loans will reveal greater detail about the
extent of the availability of prime
lending in all communities. Pursuant to
HMDA section 305(a), the Bureau is
excluding purchased loans, reverse
mortgages, assumptions, and loans that
are not subject to Regulation Z, 12 CFR
part 1026 from rate spread reporting to
facilitate compliance and because
information about the rate spread for
such transactions could be potentially
misleading.
4(a)(13)
Regulation C § 1003.4(a)(13) currently
requires financial institutions to report
whether a loan is subject to HOEPA, as
implemented by Regulation Z § 1026.32.
Prior to the proposal, the Bureau
received feedback suggesting that
information regarding the reason for a
loan’s HOEPA status might improve the
usefulness of the HMDA data. Pursuant
to HMDA sections 305(a) and
304(b)(5)(D), the Bureau proposed to
require financial institutions to report
for covered loans subject to HOEPA,
whether the covered loan is a high-cost
mortgage under Regulation Z
§ 1026.32(a), and the reason that the
covered loan qualifies as a high-cost
mortgage, if applicable. For the reasons
discussed below, the Bureau is adopting
§ 1003.4(a)(13) with modifications to
remove the requirement to report
information concerning the reasons for
a loan’s HOEPA status.
The Bureau solicited feedback on the
general utility of the modified data and
on the costs associated with reporting
the data. A few commenters stated that
the expanded HOEPA flag would create
an unnecessary burden. Several
industry commenters suggested
removing the HOEPA status field from
HMDA reporting. They argued that the
Bureau’s 2013 ATR Final Rule
eliminated the origination of HOEPA
loans. One financial institution stated
that the proposed HOEPA flag is either
not applicable to it or would offer little
benefit. Another commenter stated that
the HOEPA status field is unnecessary
because a user should be able to
determine using the rate spread whether
the loan’s APR meets the HOEPA
trigger. Another industry commenter
stated that the proposal would require
financial institutions to report points
and fees, final rate, and origination
charges as well as the rate spread. Data
users could use these data points to
determine whether a loan is higher-cost.
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A few commenters supported the
HOEPA flag but suggested that the
Bureau should not collect the additional
information regarding the reason(s) for
whether the loan is subject to HOEPA.
They pointed to the burden associated
with reporting the information and the
Bureau’s proposal to collect other
information about loan pricing, such as
points and fees.
An expanded HOEPA reporting
requirement would have the potential to
provide greater insight into which
specific triggers are most prevalent
among high-cost mortgages. However,
the Bureau acknowledges the
compliance burden associated with
reporting information concerning the
reasons for a loan’s HOEPA status. As
commenters pointed out, pricing
information is available in other data
fields, such as the rate spread, total
points and fees, and interest rate. The
benefits that would be provided by an
expanded HOEPA reporting
requirement does not justify the burden
associated with reporting the
information, particularly because other
HMDA data fields capture pricing
information that could be used to
determine the reason for a loan’s
HOEPA status. In response to concerns
raised by commenters regarding burden,
the Bureau will only require financial
institutions to report whether a loan is
subject to HOEPA, as implemented by
Regulation Z § 1026.32. The Bureau
believes that requiring financial
institutions to report whether a loan is
subject to HOEPA is necessary to carry
out the purposes of HMDA because an
indication of a loan’s HOEPA status will
help determine whether financial
institutions are serving the housing
needs of their communities.
Accordingly, pursuant to HMDA
sections 305(a) and 304(b)(5)(D), the
Bureau is adopting § 1003.4(a)(13) with
modifications to remove the
requirement to report information
concerning the reasons for a loan’s
HOEPA status.
In addition, the Bureau is adopting
new comment 4(a)(13)–1 to clarify when
a financial institution reports that the
HOEPA status reporting requirement is
not applicable. Comment 4(a)(13)–1
explains that a financial institution
reports that the requirement to report
the HOEPA status is not applicable if
the covered loan is not subject to the
Home Ownership and Equity Protection
Act of 1994, as implemented in
Regulation Z, 12 CFR 1026.32. Comment
4(a)(13)–1 also explains that, if an
application did not result in an
origination, a financial institution
complies with § 1003.4(a)(13) by
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reporting that the requirement is not
applicable.
4(a)(14)
Current § 1003.4(a)(14) requires
financial institutions to report the lien
status of the loan or application (first
lien, subordinate lien, or not secured by
a lien on a dwelling). The technical
instructions in current appendix A
provide that, for loans that a financial
institution originates and for
applications that do not result in an
origination, a financial institution shall
report the lien status as one of the
following: Secured by a first lien,
secured by a subordinate lien, not
secured by a lien, or not applicable
(purchased loan). The Bureau proposed
to modify § 1003.4(a)(14) to require
reporting of the priority of the lien
against the subject property that secures
or would secure the loan in order to
conform to the MISMO industry data
standard, which provides the following
enumerations: First lien, second lien,
third lien, fourth lien, or other. The
proposal also removed the current
exclusion of reporting lien status on
purchased loans.
The Bureau proposed technical
modifications to the instruction in
appendix A regarding how to enter lien
status on the loan/application register.
In addition, in order to provide clarity
on proposed § 1003.4(a)(14), the Bureau
proposed technical modifications to
comment 4(a)(14)–1 and proposed new
comment 4(a)(14)–2.
The Bureau solicited feedback
regarding whether the Bureau should
maintain the current reporting
requirement (secured by a first lien or
subordinate lien) modified to conform
to the proposed removal of unsecured
home improvement loans, or whether
financial institutions prefer to report the
actual priority of the lien against the
property (secured by a first lien, second
lien, third lien, fourth lien, or other). In
response, a consumer advocate
commenter supported the proposal to
require reporting of the priority of the
lien against the subject property and a
few industry commenters stated that
alignment with the MISMO industry
data standard would help ensure
consistency.
However, most of the commenters
that responded to this solicitation of
feedback opposed the proposal to
require reporting of the priority of the
lien against the subject property and
recommended that the Bureau continue
to require reporting the lien status of the
loan or application as either first lien or
subordinate lien. In general, industry
commenters stated that very few loans
are secured by liens beyond a second
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lien and that as a result, the additional
burden of reporting the actual lien
priority would outweigh the potential
utility of the data. For example, an
industry commenter argued that a lien
status beyond a second lien is rare and
that reporting the actual lien status will
not add much value to the HMDA data.
A State trade association suggested that
requiring financial institutions to
specify the exact lien priority of the
mortgage would result in little useful
data and yet the burden would be
excessive and unnecessary.
In addition, with respect to potential
privacy implications, a few commenters
were concerned that if information
regarding lien priority is made available
to the public, such information could be
coupled with other publicly available
information on property sales and
ownership records to compromise a
borrower’s privacy. The Bureau has
considered this feedback. See part II.B
above for a discussion of the Bureau’s
approach to protecting applicant and
borrower privacy with respect to the
public disclosure of HMDA data.
While HMDA compliance and data
submission can be made easier by
aligning the requirements of Regulation
C, to the extent practicable, to existing
industry standards for collecting and
transmitting mortgage data, the Bureau
has determined that requiring reporting
of the lien status of the loan or
application as either first lien or
subordinate lien is the appropriate
approach. Based on the comments the
Bureau received, it appears that the
burdens associated with reporting the
various enumerations (first lien, second
lien, third lien, fourth lien, and other)
may not outweigh the benefits discussed
in the Bureau’s proposal—namely,
enhanced data collected under
Regulation C and facilitating
compliance by better aligning the data
collected with industry practice.
Accordingly, the Bureau does not adopt
§ 1003.4(a)(14) as proposed but instead
maintains the current reporting
requirement (secured by a first lien or
subordinate lien) modified to conform
to the removal of non-dwelling-secured
home improvement loans, and adopts
corresponding modifications to the
proposed commentary.
The Bureau also solicited feedback on
the general utility of lien status data on
purchased loans and on the unique
costs and burdens associated with
collecting and reporting the data that
financial institutions may face as a
result of the proposal. A few industry
commenters did not support the
Bureau’s proposal to remove the current
exclusion of reporting lien status on
purchased loans. For example, one
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industry commenter suggested that such
data is not an indicator of
discriminatory lending and also that
such information is better examined on
a loan-by-loan basis by bank examiners.
Another industry commenter did not
support the proposed reporting
requirement because it would be a
regulatory burden with no particular
benefit.
While requiring financial institutions
to report the lien status of purchased
loans would add some burden on
financial institutions, the Bureau has
determined that such data will further
enhance the utility of HMDA data
overall. Given that loan terms, including
loan pricing, vary based on lien status,
and in light of the Bureau’s
determination to require reporting of
certain pricing data for purchased loans,
such as the interest rate, lender credits,
total origination charges, and total
discount points, the Bureau has
determined that requiring financial
institutions to report the lien status of
purchased loans will improve the
HMDA data’s usefulness overall. In
addition, as described in the Bureau’s
proposal, the liquidity provided by the
secondary market is a critical
component of the modern mortgage
market, and information about the types
of loans being purchased in a particular
area, and the pricing terms associated
with those purchased loans, is needed
to understand whether the housing
needs of communities are being
fulfilled. Furthermore, local and State
housing finance agency programs
facilitate the mortgage market for low- to
moderate-income borrowers, often by
offering programs to purchase or insure
loans originated by a private institution.
Since the HMDA data reported by
financial institutions does not include
the lien status of purchased loans, it is
difficult to determine the pricing
characteristics of the private secondary
market. Lien status information on
purchased loans may help public
entities, such as local and State housing
finance agencies, understand how to
complement the liquidity provided by
the secondary market in certain
communities, thereby maximizing the
effectiveness of such public programs.
Requiring that such data be reported
may assist public officials in their
determination of the distribution of
public sector investments in a manner
designed to improve the private
investment environment. Additionally,
providing lien status information to
purchasers is standard industry
practice.
For these reasons, the Bureau has
determined that data on the lien status
of purchased loans will further the
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purposes of HMDA in determining
whether financial institutions are
serving the housing needs of their
communities; in distributing publicsector investments so as to attract
private investment to areas or
communities where it is needed; and in
identifying possible discriminatory
lending patterns. Pursuant to the
Bureau’s authority under sections 305(a)
and 304(b)(6)(J) of HMDA, the Bureau is
adopting the modification to
§ 1003.4(a)(14) to require reporting of
lien status information—whether the
covered loan is a first or subordinate
lien—for purchased loans.
Lastly, in order to facilitate HMDA
compliance, the Bureau is modifying
comment 4(a)(14)–1.i to clarify that
financial institutions are required to
report lien status for covered loans they
originate and purchase and applications
that do not result in originations, which
include preapproval requests that are
approved but not accepted, preapproval
requests that are denied, applications
that are approved but not accepted,
denied, withdrawn, or closed for
incompleteness. The Bureau is also
adopting proposed comment 4(a)(14)–2,
which directs financial institutions to
comment 4(a)(9)–2 regarding
transactions involving multiple
properties with more than one property
taken as security.
4(a)(15)
Neither HMDA nor Regulation C
historically has required reporting of
information relating to an applicant’s or
borrower’s credit score. Section
1094(3)(A)(iv) of the Dodd-Frank Act
amended section 304(b) of HMDA to
require financial institutions to report
‘‘the credit score of mortgage applicants
and mortgagors, in such form as the
Bureau may prescribe.’’ 300 The Bureau
proposed § 1003.4(a)(15) to implement
this requirement.301 Except for
purchased covered loans, proposed
§ 1003.4(a)(15)(i) requires financial
institutions to report the credit score or
scores relied on in making the credit
decision and the name and version of
the scoring model used to generate each
credit score. In addition, the DoddFrank Act amendments to HMDA do not
300 12
U.S.C. 2803(b)(6)(I).
Dodd-Frank amendments to HMDA added
new provisions directing the Bureau to develop
regulations that ‘‘modify or require modification of
itemized information, for the purpose of protecting
the privacy interests of the mortgage applicants or
mortgagors, that is or will be available to the
public,’’ and identified credit score as a new data
point that may raise privacy concerns. HMDA
sections 304(h)(1)(E) and (h)(3)(A)(i). See part II.B
above for discussion of the Bureau’s approach to
protecting applicant and borrower privacy in light
of the goals of HMDA.
301 The
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66201
provide a definition of ‘‘credit score.’’
Therefore, the Bureau proposed in
§ 1003.4(a)(15)(ii) to interpret ‘‘credit
score’’ to have the same meaning as in
section 609(f)(2)(A) of the Fair Credit
Reporting Act (FCRA), 15 U.S.C.
1681g(f)(2)(A).
The Bureau also proposed instruction
4(a)(15)–1, which directed financial
institutions to enter the credit scores
relied on in making the credit decision
and proposed instruction 4(a)(15)–2,
which provided the codes that financial
institutions would use for each credit
score reported to indicate the name and
version of the scoring model used to
generate the credit score relied on in
making the credit decision.
In addition, the Bureau proposed four
comments to provide clarification on
the reporting requirement under
proposed § 1003.4(a)(15). The Bureau
proposed comment 4(a)(15)–1, which
explained that a financial institution
relies on a credit score in making the
credit decision if the credit score was a
factor in the credit decision even if it
was not a dispositive factor, and
provided an illustrative example.
Proposed comment 4(a)(15)–2 addressed
circumstances where a financial
institution obtains or creates multiple
credit scores for a single applicant or
borrower, as well as circumstances in
which a financial institution relies on
multiple scores for the applicant or
borrower in making the credit decision,
and provided illustrative examples.
Proposed comment 4(a)(15)–3 addressed
situations involving credit scores for
multiple applicants or borrowers and
provided illustrative examples. Finally,
proposed comment 4(a)(15)–4 clarified
that a financial institution complies
with proposed § 1003.4(a)(15) by
reporting ‘‘not applicable’’ when a
credit decision is not made, for
example, if a file was closed for
incompleteness or the application was
withdrawn before a credit decision was
made. Proposed comment 4(a)(15)–4
also clarified that a financial institution
complies with proposed § 1003.4(a)(15)
by reporting ‘‘not applicable’’ if it makes
a credit decision without relying on a
credit score for the applicant or
borrower.
In order to facilitate HMDA
compliance and address concerns that it
could be burdensome to identify credit
score information for purchased covered
loans, the Bureau excluded purchased
covered loans from the requirements of
proposed § 1003.4(a)(15)(i). The Bureau
solicited feedback on whether this
exclusion was appropriate and received
a few comments. A national trade
association supported the Bureau’s
proposal to exclude purchased covered
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loans from the proposed reporting
requirement under § 1003.4(a)(15)(i)
without providing further explanation.
One consumer advocate commenter did
not oppose the proposal so long as the
ULI is included in the final rule,
because it can be used to link
origination data to purchased loans.
Similarly, another consumer advocate
commenter recommended that until the
ULI is successfully implemented,
purchased loans should not be excluded
from the credit score data reporting
requirement. Finally, two other
consumer advocate commenters argued
that credit score should be reported for
purchased loans. One of these
commenters stated that the Bureau’s
proposed exclusion of purchased loans
from § 1003.4(a)(15)(i) will have the
negative effect of not requiring financial
institutions to report credit score
information even when the applicant or
borrower’s credit score is in its
possession or the institution could
easily obtain it. The commenter
suggested that any exception for
purchased loans under proposed
§ 1003.4(a)(15)(i) should be limited only
to instances where the financial
institution does not have and cannot
reasonably obtain the credit score. The
other commenter recommended that
purchasers of covered loans should use
the ULI to look up credit score
information from the HMDA data
associated with the loan’s origination, or
should request the information from the
originator if the loan was not made by
a financial institution required to report
under HMDA.
The Bureau has considered this
feedback and has determined that it
would be unduly burdensome for
financial institutions that purchase
loans to identify the credit score or
scores relied on in making the
underlying credit decision and the name
and version of the scoring model used
to generate each credit score.
Consequently, the Bureau is adopting
the exclusion of purchased covered
loans proposed under § 1003.4(a)(15)(i).
The Bureau is also adopting new
comment 4(a)(15)&6 which explains that
a financial institution complies with
§ 1003.4(a)(15) by reporting that the
requirement is not applicable when the
covered loan is a purchased covered
loan.
The Bureau solicited feedback on
whether the Bureau should require any
other related information to assist in
interpreting credit score data, such as
the date on which the credit score was
created. In response, a few consumer
advocate commenters specifically
recommended that the Bureau require
disclosure of the date on which the
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credit score was created. One
commenter pointed out that this
additional information will provide for
richer data for purposes of statistical
analysis. Other commenters stated that
credit scores are essentially analyses of
risk at a given point in time and thus the
meaning of the score is relative to the
date on which it was created, and that
the date on which the credit score was
created would allow the Bureau to
ensure that financial institutions are
treating borrowers equally when using
credit score information.
In contrast, a few industry
commenters did not support requiring
the date on which the credit score was
created arguing that such additional
data is not necessary. For example, one
industry commenter stated that while
credit scores can change, they usually
do not significantly change in a short
period of time. A national trade
association stated that additional data
related to credit score, such as the date,
should not be required because it is
superfluous information and would be
burdensome to report for financial
institutions.
The Bureau has considered the
feedback received and has determined
that requiring financial institutions to
report the date on which the credit score
was created would not add sufficient
value to the credit score information
that will be required to be reported to
warrant the additional burden placed on
financial institutions. Accordingly, a
financial institution will not be required
to report the date on which the credit
score was created under § 1003.4(a)(15).
In response to the Bureau’s
solicitation for feedback on whether it
should require any other related
information to assist in interpreting
credit score data, a few consumer
advocate commenters recommended
that the Bureau also require financial
institutions to report the name of the
credit reporting agency that provided
the underlying data to create the credit
score (i.e., Equifax, Experian, or
TransUnion). One commenter stated
that in some cases, the proposed
required disclosure of the ‘‘name and
version’’ of the credit scoring model by
a financial institution will indicate
which credit reporting agency’s data
was used. For example, the disclosure
will reveal not only that a ‘‘FICO’’ score
was used, but that a ‘‘Beacon’’ score (the
FICO 04 score based on Equifax data)
was used. However, in other cases, such
as VantageScore, the commenter stated
that the name or the version of the
credit scoring model will not indicate
which credit reporting agency’s data
was used. In order to address the latter
scenario, the commenter recommended
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that the Bureau require financial
institutions to report the credit reporting
agency whose data was used to generate
the credit score that is reported.
The Bureau has considered this
feedback and has determined that it will
not require financial institutions to
report the name of the credit reporting
agency that provided the underlying
credit score data that institutions report
under § 1003.4(a)(15). Requiring that
this additional information be reported
would add burden on financial
institutions, which the Bureau has
determined is not justified by the value
of the data.
In response to the Bureau’s general
solicitation for feedback, several
industry commenters recommended that
the Bureau require financial institutions
to report credit score as a ‘‘range of
values’’ rather than an applicant’s or
borrower’s actual credit score. The
commenters suggested that reporting
credit score as a range of values will
eliminate a substantial number of
potential errors on financial institutions’
loan/application registers, would better
protect the privacy of applicants, and
would not compromise the integrity of
the HMDA data. In contrast, one
consumer advocate commenter argued
that an applicant’s or borrower’s precise
credit score is important because
financial institutions may use different
cutoff points in their underwriting
processes which may not align with the
provided ranges. The Bureau has
considered this feedback and
determined that requiring financial
institutions to report credit score as a
range of values would diminish the
utility of the data to further HMDA’s
purposes. The Bureau has determined
that requiring financial institutions to
report the applicant’s or borrower’s
actual credit score or scores relied on in
making the credit decision is the
appropriate approach and will assist in
identifying whether financial
institutions are serving the housing
needs of their communities, identifying
possible discriminatory lending
patterns, and enforcing
antidiscrimination statutes.
The Bureau solicited feedback on
whether the proposed codes that
financial institutions would use for each
credit score reported to indicate the
name and version of the scoring model
used to generate the credit score relied
on in making the credit decision are
appropriate for reporting credit score
data, including using a free-form text
field to indicate the name and version
of the scoring model when the code for
‘‘Other credit scoring model’’ is reported
by financial institutions. The Bureau
also invited comment on any alternative
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approaches that might be used for
reporting this information.
In response, a few commenters did
not support the Bureau’s proposed
instruction 4(a)(15)–2.b, which instructs
financial institutions to provide the
name and version of the scoring model
used in a free-form text field if the credit
scoring model is one that is not listed.
One commenter recommended that the
Bureau not require a free-form text field
for credit score because the data would
be impossible to aggregate and would
cause significant confusion. As an
alternative, the commenter
recommended that the Bureau maintain
its proposal that financial institutions
report the code for ‘‘Other credit scoring
model’’ when appropriate but not
require institutions to indicate the name
and version of the scoring model in a
free-form text field. Another industry
commenter stated that free-form text
fields are illogical because they lack the
ability of being sorted and reported
accurately. This commenter also opined
that the additional staff and/or
programming that will be needed on a
government level to analyze these free
text fields is costly and not justified
when looking at the minimal impact
these fields have on the overall data
collection under HMDA.
The Bureau has considered the
concerns expressed by industry
commenters with respect to the
proposed requirement that a financial
institution enter the name and version
of the scoring model in a free-form text
field when ‘‘Other credit scoring model’’
is reported but has determined that the
utility of this data justifies the potential
burden that may be imposed by the
reporting requirement. As to the
commenters’ concern that credit scoring
model data reported in the free-form
text field would be impossible to
aggregate due to the variety of potential
names and versions of scoring model
reported, the Bureau has determined
that the data reported in the free-form
text field will be useful even if the data
cannot be aggregated.
Lastly, with respect to the
commenters’ recommendation that
requiring a financial institution to report
the corresponding code for ‘‘Other
credit scoring model’’ is sufficient and
that the Bureau should not also require
an institution to enter the name and
version of the scoring model in a freeform text field in these circumstances,
the Bureau has determined that such an
approach would hinder the utility of the
credit score data for purposes of HMDA.
When a financial institution reports
‘‘Other credit scoring model’’ in the
loan/application register without further
explanation as to what the other credit
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scoring model is, it would be difficult to
perform accurate analyses of such data
since different models are associated
with different scoring ranges and some
models may even have different ranges
depending on the version used.
Moreover, the free-form text field will
provide key information on credit
scoring models that are used by
financial institutions to underwrite a
loan but are not currently listed. For
example, the data reported in the freeform text field for ‘‘Other credit scoring
model’’ can be used to monitor those
credit scoring models or to add
commonly used, but previously
unlisted, credit scoring models to the
list. As such, the Bureau has determined
that the HMDA data’s usefulness will be
improved by requiring financial
institutions to report in a free-form text
field the name and version of the
scoring model when the institution
reports ‘‘Other credit scoring model’’ on
its loan/application register.
The Bureau invited comment on
whether it was appropriate to request
the name and version of the scoring
model under proposed
§ 1003.4(a)(15)(i). For a variety of
reasons, several industry commenters
did not support the Bureau’s proposal to
include the name and version of the
credit scoring model used to generate
the credit score relied on in making the
credit decision. In general, the
commenters stated that while they
support requiring financial institutions
to report the credit score relied on in
making the credit decision, reporting
the name and version of the credit
scoring model used to generate that
score would impose significant
regulatory and operational burden on
industry. Commenters also stated that
the Bureau had failed to provide
compelling reasons for how the
collection and reporting of this
additional credit score data ensures fair
access to credit in the residential
mortgage market. In addition,
commenters did not support the
Bureau’s proposal requiring financial
institutions to report the credit scoring
model used to generate the credit score
on the grounds that the Dodd-Frank Act
mandated that an applicant’s or
borrower’s credit score be reported, but
not additional data on the credit scoring
model.
In contrast, the vast majority of
commenters supported the Bureau’s
proposal to require financial institutions
to report not only the credit score or
scores relied on in making the credit
decision, but also the name and version
of the scoring model used to generate
each credit score. Several consumer
advocate commenters pointed out that
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66203
the name and version of the scoring
model used to generate the credit score
relied on in making the credit decision
is needed to accurately interpret the
credit score field. These commenters
stated that requiring financial
institutions to report this information is
vital because each credit scoring model
may generate different credit scores
which may confound simple
comparisons. Some industry
commenters also supported the Bureau’s
proposal. One industry commenter
stated that for purposes of fair lending
analysis, credit score information is
vital to understanding a financial
institution’s credit and pricing decision
and that without such information,
inaccurate conclusions may be reached
by users of HMDA data.
The Bureau has considered this
feedback and determined that its
proposal to require financial institutions
to report the credit score or scores relied
on in making the credit decision is the
appropriate approach and is a
reasonable interpretation of HMDA
section 304(b)(6)(I). The Bureau has also
determined that its interpretation of
HMDA section 304(b)(6)(I) to require the
name and version of the scoring model
is reasonable because, as discussed
above, this information is necessary to
understand any credit scores that will
be reported, as different models are
associated with different scoring ranges
and some models may even have
different ranges depending on the
version used.302 In addition, the
Bureau’s implementation is authorized
by HMDA sections 305(a) and
304(b)(6)(J), and is necessary and proper
to effectuate the purposes of HMDA,
because, among other reasons, the name
and version of the credit scoring model
facilitates accurate analyses of whether
financial institutions are serving the
housing needs of their communities by
providing adequate home financing to
qualified applicants. Accordingly, the
Bureau is adopting § 1003.4(a)(15)(i) as
proposed.
As discussed above, the Bureau
proposed § 1003.4(a)(15)(ii), which
provides that ‘‘credit score’’ has the
meaning set forth in 15 U.S.C.
1681g(f)(2)(A). The Bureau’s proposal
interpreted ‘‘credit score’’ to have the
same meaning as in section 609(f)(2)(A)
of the Fair Credit Reporting Act (FCRA),
15 U.S.C. 1681g(f)(2)(A). However, the
Bureau solicited feedback on whether
Regulation C should instead use a
different definition of ‘‘credit score.’’
302 For example, the range for VantageScore 3.0
scores is 300 to 850, but earlier VantageScore
models have a range of 501 to 990. See
VantageScore, How the Scores Range, http://
your.vantagescore.com/interpret_scores.
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For example, the Bureau suggested that
it could define ‘‘credit score’’ based on
the Regulation B definitions of ‘‘credit
scoring system’’ or ‘‘empirically
derived, demonstrably and statistically
sound, credit scoring system.’’ 303
Another alternative would be to
interpret credit score to mean the
probability of default, using a concept
similar to the probability of default
metric that the FDIC uses in
determining assessment rates for large
and highly complex insured depository
institutions.304
The commenters that provided
feedback on the proposed definition of
‘‘credit score’’ supported the Bureau’s
proposal to use the FCRA section
609(f)(2)(A) definition of credit score.
For example, one consumer advocate
commenter stated that it supports the
Bureau’s proposal to use the definition
of ‘‘credit score’’ set forth in the FCRA
because the definition is familiar to
industry, regulators, and other
stakeholders. Similarly, another
consumer advocate commenter stated
that it supports the definition because it
would facilitate compliance. The
Bureau has considered this feedback
and determined that the FCRA section
609(f)(2)(A) definition of ‘‘credit score’’
is the most appropriate because it
provides a general purpose definition
that is familiar to financial institutions
that are already subject to FCRA and
Regulation V requirements.
Consequently, the Bureau is adopting
§ 1003.4(a)(15)(ii) generally as proposed,
but with technical modifications for
clarity.
Lastly, many commenters expressed
concern about potential privacy
implications if the Bureau collects
credit score data or if it were to release
credit score data to the public. As with
other proposed data points like property
value, commenters were concerned that
if information regarding credit score
data is made available to the public,
such information could be coupled with
other publicly available information,
such as property sales and ownership
records, in a way that compromises a
borrower’s privacy. A State trade
303 According to Regulation B, a credit scoring
system is ‘‘a system that evaluates an applicant’s
creditworthiness mechanically, based on key
attributes of the applicant and aspects of the
transaction, and that determines, alone or in
conjunction with an evaluation of additional
information about the applicant, whether an
applicant is deemed creditworthy.’’ Regulation B
§ 1002.2(p)(1). The four-part definition of an
‘‘empirically derived, demonstrably and statistically
sound, credit scoring system’’ in Regulation B
§ 1002.2(p)(1) establishes the criteria that a credit
system must meet in order to use age as a predictive
factor. Regulation B comment 2(p)–1.
304 FDIC Assessments, Large Bank Pricing, 77 FR
66000 (Oct. 31, 2012).
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association commented that public
disclosure of credit score data creates
the ability for unscrupulous third
parties to specifically identify borrowers
and directly market to those borrowers.
The commenter suggested that these
third parties would have access to a
sufficient amount of information
disclosed through HMDA and coupled
with other information, such as public
recordation information, to give the
appearance through their marketing that
they have some connection to the
original lender. Similarly, an industry
commenter suggested that in addition to
the potential for criminal misuse of a
borrower’s financial information, the
availability of the expanded data
released under HMDA will very likely
permit marketers to access the
information which will result in
aggressive marketing that is
‘‘personalized’’ to unsophisticated and
vulnerable consumers for potentially
harmful financial products and services.
Another State trade association stated
that credit score data should not be
released to the public because collecting
and releasing credit score data could
lead to fraudsters, neighbors, marketers,
and others learning very private pieces
of information about the applicant or
borrower. Another State trade
association recommended that the
Bureau strengthen its data protection as
it relates to the selective disclosure of
HMDA data to third parties and
specifically recommended that the
Bureau convert actual values to ranges
or normalize values before sharing the
data with a third party. The Bureau has
considered this feedback. See part II.B
above for a discussion of the Bureau’s
approach to protecting applicant and
borrower privacy with respect to the
public disclosure of HMDA data.
As discussed above, the Bureau is
adopting § 1003.4(a)(15)(i) as proposed
and § 1003.4(a)(15)(ii) generally as
proposed, but with technical
modifications for clarity. The Bureau is
adopting comments 4(a)(15)–1 and –2,
as proposed. The Bureau is also
adopting comment 4(a)(15)–3 as
proposed with a clarification that in a
transaction involving two or more
applicants or borrowers for which the
financial institution obtains or creates a
single credit score, and relies on that
credit score in making the credit
decision for the transaction, the
institution complies with § 1003.4(a)(15)
by reporting that credit score for either
the applicant or first co-applicant.
With regard to a financial institution
reporting that the requirement is not
applicable, the Bureau is modifying
comment 4(a)(15)–4 by maintaining in
that comment the guidance with respect
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to transactions for which no credit
decision was made and moves the
guidance with respect to transactions for
which credit score was not relied on to
new comment 4(a)(15)–5. The Bureau
clarifies in comment 4(a)(15)–4 that if a
file was closed for incompleteness or
the application was withdrawn before a
credit decision was made, the financial
institution complies with § 1003.4(a)(15)
by reporting that the requirement is not
applicable, even if the financial
institution had obtained or created a
credit score for the applicant or coapplicant. As discussed above, the
Bureau is also adopting new comment
4(a)(15)–6, which clarifies that a
financial institution complies with
§ 1003.4(a)(15) by reporting that the
requirement is not applicable when the
covered loan is a purchased covered
loan. The Bureau is also adopting new
comment 4(a)(15)–7, which clarifies that
when the applicant and co-applicant, if
applicable, are not natural persons, a
financial institution complies with
§ 1003.4(a)(15) by reporting that the
requirement is not applicable.
4(a)(16)
Section 1003.4(c)(1) currently permits
optional reporting of the reasons for
denial of a loan application. However,
certain financial institutions supervised
by the OCC and the FDIC are required
by those agencies to report denial
reasons on their HMDA loan/
application registers.305 The Bureau
proposed § 1003.4(a)(16), which
requires mandatory reporting of denial
reasons by all financial institutions.
The Bureau proposed instruction
4(a)(16) in appendix A, which modified
the current instruction and provided
technical instructions regarding how to
enter the denial reason data on the loan/
application register. First, proposed
instruction 4(a)(16)–1 provided that a
financial institution must indicate the
principal reason(s) for denial, indicating
up to three reasons. Second, the Bureau
explained in proposed instruction
4(a)(16)–2 that, when a financial
institution denies an application for a
principal reason not included on the list
of denial reasons in appendix A, the
institution should enter the
corresponding code for ‘‘Other’’ and
also enter the principal denial reason(s)
in a free-form text field. Third, the
Bureau added a code for ‘‘not
applicable’’ and explained in proposed
instruction 4(a)(16)–3 that this code
should be used by a financial institution
if the action taken on the application
was not a denial pursuant to
§ 1003.4(a)(8), such as if the application
305 12
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was withdrawn before a credit decision
was made or the file was closed for
incompleteness. Lastly, the Bureau also
proposed to renumber current
instruction I.F.2 of appendix A as
proposed instruction 4(a)(16)–4, which
explains how a financial institution that
uses the model form for adverse action
contained in appendix C to Regulation
B (Form C–1, Sample Notice of Action
Taken and Statement of Reasons) should
report the denial reasons for purposes of
HMDA, including entering the principal
denial reason(s) in a free-form text field
when the financial institution enters the
corresponding code for ‘‘Other.’’
In addition, the Bureau proposed
comment 4(a)(16)–1 to provide clarity as
to what the Bureau requires with respect
to a financial institution reporting the
principal reason(s) for denial. The
Bureau also proposed comment
4(a)(16)–2 to align with proposed
instructions 4(a)(16)–2 and –4.
A few industry commenters did not
support the Bureau’s proposal and
recommended that reporting of denial
reasons remain optional under
Regulation C. The main reason offered
by commenters was that a mandatory
requirement to report denial reasons
would increase regulatory burden on
financial institutions. In contrast, most
consumer advocate commenters
supported the Bureau’s proposed
§ 1003.4(a)(16). For example, several
consumer advocate commenters pointed
out that different types of housing
counseling and intervention is needed
depending on the most frequent reasons
for denial. These commenters stated that
denial reason data is important to
housing counseling agencies because it
helps identify the most significant
impediments to homeownership and
provide more effective counseling. A
government commenter noted that
denial reasons will be particularly
effective for fair lending analyses.
Another consumer advocate commenter
pointed out that denial reason data will
be helpful for understanding why a
particular loan application was denied
and identifying potential barriers in
access to credit.
The Bureau has determined that
maintaining the current requirement of
optional reporting of denial reasons is
not the appropriate approach given the
value of the data in furthering HMDA’s
purposes. The reasons an application is
denied are critical to understanding a
financial institution’s credit decision
and to screen for potential violations of
antidiscrimination laws, such as ECOA
and the Fair Housing Act.306 Denial
306 15 U.S.C. 1691 et seq.; 42 U.S.C. 3601 et seq.
ECOA and Regulation B require all financial
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reasons are important for a variety of
purposes including, for example,
assisting examiners in their reviews of
denial disparities and underwriting
exceptions. The Bureau has determined
that requiring the collection of the
reasons for denial will facilitate more
efficient, and less burdensome, fair
lending examinations by the Bureau and
other financial regulatory agencies,
thereby furthering HMDA’s purpose of
assisting in identifying possible
discriminatory lending patterns and
enforcing antidiscrimination statutes.
The Bureau acknowledges that
mandatory reporting of denial reasons
will contribute to certain financial
institutions’ compliance burden.
However, the statistical value of
optionally reported data is lessened
because of the lack of standardization
across all HMDA reporters. Moreover, as
discussed above, certain financial
institutions supervised by the OCC and
the FDIC are already required by those
agencies to report denial reasons.307 A
requirement that all financial
institutions report reasons for denial of
an application is the proper approach
for purposes of HMDA. For these
reasons, pursuant to its authority under
HMDA sections 305(a) and 304(b)(6)(J),
the Bureau is finalizing the requirement
that all financial institutions report
reasons for denial of an application.
This information is necessary to carry
out HMDA’s purposes, because it will
provide more consistent and meaningful
data, which will assist in identifying
whether financial institutions are
serving the housing needs of their
communities, as well as assist in
identifying possible discriminatory
lending patterns and enforcing
antidiscrimination statutes.
The Bureau solicited feedback on the
proposed requirement that a financial
institution enter the principal denial
reason(s) in a free-form text field when
‘‘Other’’ is entered in the loan/
application register. Several
commenters did not support the
proposed requirement for a variety of
reasons, including, for example,
concerns about having sufficient space
to accurately or adequately capture the
denial reason with the limited space
available for reporting on the loan/
application register, concerns that
denial reason data reported in the freeform text field would be impossible to
aggregate due to the variety of potential
denial reasons reported, and concerns
institutions to provide applicants the reasons for
denial, or a notice of their right to receive those
denial reasons, and to maintain records of
compliance. See Regulation B §§ 1002.9 and
1002.12, 15 U.S.C. 1691(d).
307 See supra note 306.
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that such reporting would cause
significant confusion and regulatory
burden. A few industry commenters
suggested that requiring a financial
institution to report the corresponding
code for ‘‘Other’’ would be sufficient
when the institution denies an
application for a principal reason not
included on the list of denial reasons in
appendix A or on the model form for
adverse action contained in appendix C
to Regulation B. The commenters
suggested that the Bureau should not
also require an institution to enter the
principal denial reason(s) in a free-form
text field in these circumstances for the
reasons listed above.
The Bureau has considered the
concerns expressed by industry
commenters with respect to the
proposed requirement that a financial
institution enter the principal denial
reason(s) in a free-form text field when
a financial institution reports the denial
reason as ‘‘Other’’ in the loan/
application register but has determined
that the utility of this data justifies the
potential burden that may be imposed
by the reporting requirement. In
addition, with respect to the concern
that financial institutions will not have
sufficient space in the loan/application
register to accurately or adequately
capture the denial reasons, the Bureau
believes that the free-form text field will
provide institutions with sufficient
space to comply with proposed
§ 1003.4(a)(16). As explained in
proposed comment 4(a)(16)–1, the
denial reasons reported by a financial
institution must be specific and
accurately describe the principal reason
or reasons an institution denied the
application. The free-form text field will
not limit a financial institution’s ability
to comply with proposed
§ 1003.4(a)(16). As to the commenters’
concern that denial reason data reported
in the free-form text field would be
impossible to aggregate due to the
variety of potential denial reasons
reported, the Bureau has determined
that the data reported in the free-form
text field will be useful even if the data
cannot be aggregated. The Bureau also
proposed comment 4(a)(16)–2, which
provides clarification as to the proposed
requirement that a financial institution
enter the principal denial reason(s) in a
free-form text field when ‘‘Other’’ is
entered in the loan/application register.
The Bureau is finalizing this comment,
modified for additional clarity, to
address any potential confusion.
Lastly, with respect to the
commenters’ recommendation that it be
sufficient to require a financial
institution to report ‘‘Other’’ as the
denial reason and that the Bureau
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should not also require an institution to
enter the principal denial reason(s) in a
free-form text field in these
circumstances, the Bureau has
determined that such an approach
would hinder the utility of the denial
reason data for purposes of HMDA.
Many consumer advocate commenters
pointed out that transparency about
denial reasons provides the public as
well as regulators with the information
needed to better understand challenges
to access to credit. One commenter
specifically pointed out the reporting
accuracy of denial reasons will be
improved in two ways if financial
institutions are required to explain the
denial reason in the free-form text field
when the institution indicates ‘‘Other’’
as a reason for denial. First, the
commenter suggested that this reporting
requirement will prevent the misuse of
the ‘‘Other’’ category when financial
institutions report the denial reason as
‘‘Other’’ when in fact the denial reason
may more appropriately fall into one or
more of the listed denial reasons.
Without further explanation as to what
the ‘‘Other’’ denial reason actually is,
the commenter stated that it has been
impossible to tell if the financial
institution accurately reported the
denial reason. Second, the commenter
stated that the free-form text field will
provide key information on denial
reasons that are not currently listed. For
example, the denial reason data can be
used to monitor other denial reasons or
to add common, but previously
unlisted, denial reasons to the list. The
Bureau has determined that the HMDA
data’s usefulness will be improved by
requiring financial institutions to report
the principal reason(s) it denied the
application in a free-form text field
when the institution reports the denial
reason as ‘‘Other’’ in the loan/
application register.
The Bureau solicited feedback
regarding whether additional
clarifications would assist financial
institutions in complying with the
proposed requirement. A few industry
commenters pointed out that while the
proposal requires a financial institution
to report up to three principal reasons
for denial, the commenters read
Regulation B as providing that a creditor
may provide up to four principal
reasons for denial and such
inconsistency between regulations adds
to the compliance burden imposed by
the Bureau’s new mandatory reporting
requirement under proposed
§ 1003.4(a)(16). The adverse action
notification provisions of Regulation B
do not mandate that a specific number
of reasons be disclosed when a creditor
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denies an application but instead
provides that disclosure of more than
four reasons is not likely to be helpful
to the applicant.308 In light of the
feedback on the proposal and in an
effort to help facilitate compliance and
consistency between regulations, the
Bureau is modifying proposed comment
4(a)(16)–1 to provide that a financial
institution complies with § 1003.4(a)(16)
by reporting the principal reason or
reasons it denied the application,
indicating up to four reasons.
In order to help facilitate compliance
with proposed § 1003.4(a)(16), the
Bureau also adopts two new comments.
The Bureau is adopting new comment
4(a)(16)–2, which clarifies that a request
for a preapproval under a preapproval
program as defined by § 1003.2(b)(2) is
an application and therefore, if a
financial institution denies a
preapproval request, the financial
institution complies with § 1003.4(a)(16)
by reporting the reason or reasons it
denied the preapproval request. The
Bureau also adopts new comment
4(a)(16)–4, which clarifies that a
financial institution complies with
§ 1003.4(a)(16) by reporting that the
requirement is not applicable if the
action taken on the application,
pursuant to § 1003.4(a)(8), is not a
denial. For example, a financial
institution complies with § 1003.4(a)(16)
by reporting that the requirement is not
applicable if the loan is originated or
purchased by the financial institution,
or the application or preapproval
request was approved but not accepted,
or the application was withdrawn before
a credit decision was made, or the file
was closed for incompleteness.
Several commenters were also
concerned that if information regarding
denial reasons were made available to
the public, such information could be
coupled with other publicly available
information, which would result in not
only compromising a borrower’s privacy
but also potentially place consumers at
greater risk of financial harm through
unlawful marketing to consumers by
unscrupulous parties, such as identify
thieves, other scammers, or criminals.
For example, one industry commenter
suggested that ‘‘unsophisticated
consumers could be vulnerable to
aggressive marketing techniques, which
may appear even more ‘personalized’ to
308 See Regulation B § 1002.9, Supp. I., § 1002.9,
comment 9(b)(2)–1. The Bureau noted in its
proposal that ECOA and Regulation B require
creditors to provide applicants the reasons for
denial, or a notice of their right to receive those
denial reasons, and to maintain records of
compliance. See 79 FR 51731, 51775 (Aug. 29,
2014), note 381. See also 15 U.S.C. 1691(d),
Regulation B §§ 1002.9 and 1002.12.
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their situation because of the
availability of their specific financial
picture through the LAR data.’’ The
Bureau has considered this feedback.
See part II.B above for a discussion of
the Bureau’s approach to protecting
applicant and borrower privacy with
respect to the public disclosure of
HMDA data.
The Bureau is adopting
§ 1003.4(a)(16) as proposed, with minor
technical modifications. The Bureau is
adopting proposed comments 4(a)(16)–1
and 4(a)(16)–2, with several technical
and clarifying modifications, and
renumbers proposed comment 4(a)(16)–
2 as 4(a)(16)–3. In addition, as discussed
above, the Bureau is adopting new
comments 4(a)(16)–2 and –4, which will
help facilitate HMDA compliance by
providing additional guidance regarding
the denial reason reporting requirement.
4(a)(17)
Section 304(b)(5)(A) of HMDA 309
provides for reporting of ‘‘the total
points and fees payable at origination in
connection with the mortgage as
determined by the Bureau, taking into
account 15 U.S.C. 1602(aa)(4).’’ 310 The
Bureau proposed to implement this
provision through proposed
§ 1003.4(a)(17), which required financial
institutions to report the total points
and fees charged in connection with
certain mortgage loans or applications.
Proposed § 1003.4(a)(17) defined total
points and fees by reference to TILA, as
implemented by Regulation Z
§ 1026.32(b)(1) or (2). Section
1026.32(b)(1) defines ‘‘points and fees’’
for closed-end credit transactions, while
§ 1026.32(b)(2) defines ‘‘points and
fees’’ for open-end credit transactions.
Proposed § 1003.4(a)(17) would have
applied to applications for and
originations of certain closed-end
mortgage loans and open-end lines of
credit, but not to reverse mortgages or
commercial-purpose loans or lines of
credit.
The Bureau also solicited comment on
the costs and benefits of the proposed
309 Section 1094(3)(A)(iv) of the Dodd-Frank Act
amended section 304(b) of HMDA to provide for the
reporting of total points and fees.
310 15 U.S.C. 1602(aa)(4) is part of TILA. Prior to
amendments made by the Dodd-Frank Act, that
section generally defined ‘‘points and fees’’ for the
purpose of determining whether a transaction was
a high-cost mortgage. See 15 U.S.C. 1602(aa)(4).
Section 1100A of the Dodd-Frank Act redesignated
subsection 1602(aa)(4) as subsection 1602(bb)(4),
where it is currently codified. In light of that
redesignation, the Bureau interprets HMDA section
304(b)(5)(A) as directing it to take into account 15
U.S.C. 1602(bb)(4) and its implementing
regulations, as those provisions address ‘‘points and
fees’’ and because current subsection 1602(aa)(4) is
no longer relevant to a determination regarding
points and fees.
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definition of total points and fees and
on the specific charges that should be
included or excluded. Additionally, in
discussing proposed § 1003.4(a)(18), the
Bureau sought feedback on the merits of
a more inclusive measure of the cost of
a loan.
For the reasons provided below, the
Bureau is requiring financial
institutions to report the total loan costs
for any covered loan that is both subject
to the ability-to-repay section of the
Bureau’s 2013 ATR Final Rule and for
which a Closing Disclosure is required
under the Bureau’s 2013 TILA–RESPA
Final Rule. Total loan costs are
disclosed pursuant to Regulation Z
§ 1026.38(f)(4). For a covered loan that
is subject to the ability-to-repay section
of the Bureau’s 2013 ATR Final Rule but
for which a Closing Disclosure is not
required under the Bureau’s 2013 TILA–
RESPA Final Rule, financial institutions
must report the total points and fees,
unless the covered loan is a purchased
covered loan. This reporting
requirement does not apply to
applications or to covered loans not
subject to the ability-to-repay
requirements in the 2013 ATR Final
Rule, such as open-end lines of credit,
reverse mortgages, or loans or lines of
credit made primarily for business or
commercial purposes.
Commenters were divided on whether
financial institutions should be required
to report points-and-fees data. Most
consumer advocates generally
supported the proposed pricing data
points, including total points and fees.
These commenters explained that more
detailed pricing information will
improve their ability to identify
potential price discrimination and to
understand the terms on which
consumers in their communities are
being offered credit. One consumer
advocate stated that certain groups, such
as women, minorities, and borrowers of
manufactured housing loans may be
unfairly charged higher amounts of
points and fees than other borrowers.
This commenter also stated that the
total amount of points and fees was
important for determining a loan’s
status under HOEPA and the ability-torepay and qualified mortgage
requirements of Regulation Z, and that
data about points and fees would clarify
any need for further regulation.
Industry commenters, on the other
hand, generally opposed collection of
points-and-fees data. Many commenters
stated that reporting the data would be
unduly burdensome because of
uncertainty regarding the definition of
points and fees or because the total is
not required to be calculated by other
regulations. Other commenters believed
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that points-and-fees data would mislead
users or duplicate data reported
pursuant to other provisions of the
proposal. Finally, a few commenters
claimed that the data would not be
valuable for HMDA purposes.
Specifically, several industry
commenters stated that variance among
the fees and charges included in points
and fees may result in unclear data. One
commenter noted that the points-andfees calculation adjusts based on factors
unrelated to the total loan cost, such as
whether a particular charge was paid to
an affiliate of the creditor. Similarly,
other industry commenters stated that
the total amount of points and fees was
subject to factors that would prevent
effective comparison among borrowers,
such as daily market fluctuations,
differences in location, and borrower
decisionmaking.
The Bureau believes that total pointsand-fees data, as defined in proposed
§ 1003.4(a)(17), would have some value
in helping HMDA data users to
understand certain fees and charges
imposed on borrowers. However, after
considering the comments, the Bureau
concludes that other measures of loan
cost, such as total loan costs, as defined
in final § 1003.4(a)(17)(i), will be more
valuable and nuanced than points and
fees, as defined in proposed
§ 1003.4(a)(17), and will better capture
the type of information that HMDA
section 304(b)(5)(A) is intended to
cover. Total loan costs are the total
upfront costs involved in obtaining a
mortgage loan. Specifically, for covered
loans subject to the disclosure
requirements of Regulation Z
§ 1026.19(f), total loan costs are the sum
of the amounts disclosed as borrowerpaid at or before closing found on Line
D of the Closing Cost Details page of the
current Closing Disclosure, as provided
for in Regulation Z § 1026.38(f)(4). Final
§ 1002.4(a)(17)(i) requires financial
institutions to report total loan costs
because they are a more comprehensive
measure than total points and fees, as
defined in proposed § 1003.4(a)(17), and
because they better facilitate
comparisons among borrowers.
Total loan costs include all amounts
paid by the consumer to the creditor
and loan originator for originating and
extending credit, all points paid to
reduce the interest rate, all amounts
paid for third-party settlement services
for which the consumer cannot shop,
and all amounts paid for third-party
settlement services for which the
consumer can shop. However, total loan
costs omits other closing costs, such as
amounts paid to State and local
governments for taxes and government
fees, prepaids such as homeowner’s
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66207
insurance premiums, initial escrow
payments at closing, and other services
that are required or obtained in the real
estate closing by the consumer, the
seller, or another party. In other words,
this total generally represents the costs
that the financial institution imposes in
connection with the mortgage loan, and
omits costs controlled by other entities,
such as government jurisdictions.
Unlike total points and fees as defined
in proposed § 1003.4(a)(17), total loan
costs may be more easily compared
across borrowers because third-party
charges are not included or excluded
depending on various factors, such as
whether they were paid to an affiliate of
the creditor. This consistency enables
users to better compare loan costs
among borrowers and to understand the
total upfront costs that borrowers face
when obtaining mortgage loans. The
amount of total loan costs may also be
analyzed in combination with the other
pricing data points more readily than
the total points and fees. For example,
the difference between the total loan
costs and total origination charges
provides the total amount the borrower
paid for third-party services.311 Because
of the improved utility of total loan
costs, for covered loans subject to final
§ 1003.4(a)(17) for which total loan costs
are available, the final rule requires
financial institutions to report total loan
costs.
The Bureau acknowledges that total
loan costs do not include all closing
costs. For example, total loan costs omit
amounts paid to State and local
governments for taxes and government
fees, prepaids such as homeowner’s
insurance premiums, initial escrow
payments at closing, and other services
that are required or obtained in the real
estate closing by the consumer, the
seller, or another party. Many excluded
closing costs, however, are unrelated to
the cost of extending credit by the
financial institution. Because HMDA
focuses on the lending activity of
financial institutions, the Bureau has
determined that the exclusion of these
costs is proper. Total loan costs, as
provided for in the final rule, also
exclude upfront charges paid by sellers
or other third parties if these parties
were legally obligated to pay for such
costs.312 This omission would
understate the total loan costs charged
by a financial institution for covered
loans with seller-paid or other-paid
closing costs in certain situations.
However, including such costs would
require financial institutions to perform
311 Some costs, such as certain upfront mortgage
insurance premiums, would not be included.
312 See 12 CFR 1026.19(f)(1)(i).
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a calculation that they are not otherwise
performing for purposes of the Closing
Disclosure. The Bureau has determined
that avoiding requiring such
calculations by relying on the
description of total loan costs found in
Regulation Z reduces burden and
facilitates compliance.
Total loan costs are not currently
required to be calculated for certain
loans. The Bureau’s 2013 TILA–RESPA
Final Rule exempted certain loans from
the requirement to provide a Closing
Disclosure. For example, manufactured
housing loans secured by personal
property are exempt from the
requirements of the Bureau’s 2013
TILA–RESPA Final Rule. But such loans
are subject to the ability-to-repay
provision of the Bureau’s 2013 ATR
Final Rule. For these loans, final
§ 1003.4(a)(17) requires financial
institutions to report the total points
and fees, calculated pursuant to
Regulation Z § 1026.32(b)(1). Although
total points and fees as defined in final
§ 1003.4(a)(17)(ii) are a less
comprehensive and less comparable
measure of cost than total loan costs,
requiring financial institutions to
calculate the total loan costs for loans
outside of the scope of the 2013 TILA–
RESPA Final Rule would be overly
burdensome because financial
institutions would have no regulatory
definition or experience on which to
rely. Moreover, the Bureau believes that
total points and fees as defined in final
§ 1003.4(a)(17)(ii) will provide valuable
information about the upfront cost of a
loan that would otherwise be lacking
from the data. Total points and fees as
defined in final § 1003.4(a)(17)(ii)
include many of the same charges that
comprise total loan costs, albeit in a less
consistent fashion. Moreover, in some
cases loans not subject to the Closing
Disclosure requirement may be made to
vulnerable consumers. For example, the
Bureau’s research suggests that
manufactured-housing borrowers of
chattel loans are more likely to be older,
to have lower incomes, and to pay
higher prices for their loans.313 Without
points-and-fees data, users would have
no insight into the upfront costs
associated with such loans.
Regarding the commenters’ concerns
about misleading data, the final rule
includes a number of factors that will
help users put the data in their proper
context. Regarding total loan costs and
total points and fees, many of the factors
identified by commenters are reflected
313 See Bureau of Consumer Fin. Prot.,
Manufactured-Housing Consumer Finance in the
United States at 5–6 (2014), available at http://
files.consumerfinance.gov/f/201409_cfpb_report_
manufactured-housing.pdf.
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in the final rule, such as location and
product type.314 More importantly,
however, the HMDA data need not
reflect all conceivable determinants of
loan pricing to be beneficial to users.
The final rule’s pricing data will
provide important benefits that would
be lost if the Bureau were to eliminate
it entirely. For example, regulators are
able to use pricing data to efficiently
prioritize fair lending examinations.
Prioritizing examinations based on
insufficient data would result in some
financial institutions facing unnecessary
examination burden while others whose
practices warrant closer review would
not receive sufficient scrutiny. Overall,
the pricing data included in the final
rule represent a marked improvement
over the current regulation.
One trade association stated that
points-and-fees data would lead to
reduced price competition. However,
the Bureau believes, consistent with
standard economic theory, that
increased transparency regarding price
generally increases competition and
ultimately benefits consumers.
Therefore, the Bureau is not persuaded
that the commenter’s price competition
concern is a basis for not capturing
information regarding total loan costs
and points and fees, as defined in
§ 1003.4(a)(17). A more detailed
discussion of the benefits, costs, and
impacts can be found in the section
1022 discussion below.
Other industry commenters expressed
concern over the burden associated with
proposed § 1003.4(a)(17). For example,
several industry commenters pointed
out that although financial institutions
face limits on points and fees if they
wish to avoid coverage under the 2013
HOEPA Final Rule, and if they wish to
make a qualified mortgage under the
2013 ATR Final Rule, neither rule
expressly requires financial institutions
to calculate that total. One industry
commenter explained that the total
amount of points and fees was not
currently recorded electronically. Many
industry commenters cited concerns
over the uncertainty or complexity of
the definition of points and fees.
Similarly, some commenters requested
guidance on what charges to include
within the total points and fees or called
on the Bureau to supply a ‘‘standard’’
definition of the term. Some industry
commenters believed that the reporting
the total points and fees would expose
them to citations under Regulation C for
small errors.
In comparison to the proposed rule,
final § 1003.4(a)(17) substantially
314 See 12 CFR 1003.4(a)(2) (loan type); id. at
1003.4(a)(9) (location).
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reduces burden while still ensuring that
valuable data are reported. Commenters
generally stated that the calculation of
total points and fees was not completed
for all loans subject to HOEPA or the
Bureau’s 2013 ATR Final Rule, and that,
if the calculation was completed, it
involved substantial uncertainty and
complexity. For the vast majority of
covered loans subject to final
§ 1003.4(a)(17), financial institutions
will report the total loan costs. These
institutions would have already
calculated the total loan costs in order
to disclose the total to borrowers
pursuant to the 2013 TILA–RESPA Final
Rule. Therefore, the burden of reporting
for § 1003.4(a)(17) is generally limited to
loans for which financial institutions
would already have to calculate the total
loan costs. Using the same definition
across regulations was supported by
several commenters with respect to total
points and fees, and final § 1003.4(a)(17)
does so by using the existing definition
of total loan costs found in Regulation
Z.
For the narrow class of loans subject
to the ability-to-repay provision of the
Bureau’s 2013 ATR Final Rule but
which are exempt from the 2013 TILA–
RESPA Final Rule, financial institutions
must report the total points and fees as
defined in final § 1003.4(a)(17)(ii).
These loans are generally manufactured
housing loans secured by personal
property. Because such loans run a
greater risk of crossing the high-cost
mortgage thresholds than site-built
home loans, the Bureau believes that
most financial institutions would
calculate the total points and fees for
these loans for compliance with HOEPA
and other laws.315 Additionally, the
final rule does not increase burden on
these same institutions because it uses
the existing definition of ‘‘total points
and fees’’ found in Regulation Z.
The final rule also avoids increased
burden by limiting § 1003.4(a)(17) to
covered loans that are subject to the
ability-to-repay provision of the 2013
ATR Final Rule, rather than loans
subject to either the 2013 ATR Final
Rule or HOEPA. The primary effect of
this change from the proposal is to
exclude open-end lines of credit from
the scope of the reporting requirement.
The Bureau believes that such loans
typically have lower upfront charges
than comparable closed-end loans.
Additionally, many open-end lines of
315 See Bureau of Consumer Fin. Prot.,
Manufactured-Housing Consumer Finance in the
United States at 32–37 (2014), available at http://
files.consumerfinance.gov/f/201409_cfpb_report_
manufactured-housing.pdf (comparing the pricing
of manufactured home loans and site-built home
loans).
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credit feature bona fide third-party
charges that are waived on the condition
that the consumer not terminate the line
of credit sooner than 36 months after
account opening, which are excluded
from the total points and fees.316 At the
same time, such loans are less likely to
trigger high-cost mortgage status, which
makes financial institutions less likely
to complete the points-and-fees
calculation for such loans. Therefore,
the Bureau believes that on balance,
§ 1003.4(a)(17) should be limited to
covered loans that are subject to the
ability-to-repay provision of the 2013
ATR Final Rule.
Final § 1003.4(a)(17) will provide a
more consistent measure of upfront loan
costs than total points and fees as
defined in proposed § 1003.4(a)(17).
Total loan costs, combined with total
origination charges, discount points,
and lender credits, will also enable a
more detailed understanding of the
upfront costs that borrowers pay for
their loans. Accordingly, these data will
provide significant utility for fair
lending analysis and for understanding
the terms of credit being offered. With
respect to loans made to lower-income
consumers, such as some borrowers in
manufactured housing communities,
final § 1003.4(a)(17) provides
information about upfront loan costs by
adopting reporting of points and fees.
Finally, by substituting total loan costs
for most loans and limiting the reporting
of points and fees as described above,
final § 1003.4(a)(17) represents a
substantial decrease in burden from the
proposed rule. Therefore, the Bureau is
adopting final § 1003.4(a)(17), which
requires financial institutions to report,
for covered loans subject to the abilityto-repay provision of the 2013 ATR
Final Rule, the total loan costs if the
loan is subject to the disclosure
requirements in § 1026.19(f), or the total
points and fees if the loan is not subject
to the disclosure requirements in
§ 1026.19(f) and is not a purchased
covered loan.
The Bureau believes that final
§ 1003.4(a)(17) also addresses many of
the specific issues or questions that
commenters raised regarding the
proposed points-and-fees data point. For
example, several commenters asked the
Bureau for clarification or modification
of the scope of the reporting
requirement. Two industry commenters
asked the Bureau to exclude commercial
loans from the scope of proposed
§ 1003.4(a)(17), or to confirm that
commercial loans are excluded. The
final rule limits § 1003.4(a)(17) to
covered loans subject to Regulation Z
316 See
12 CFR 1026.32(b)(6)(ii).
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§ 1026.43(c), which is inapplicable to
commercial loans. Therefore, financial
institutions are not required to report
the total loan costs or the total points
and fees for commercial-purpose
transactions. The Bureau is adopting
final comment 4(a)(17)(i)–1 to clarify
that the total loan costs reporting
requirement is not applicable to covered
loans not subject to Regulation Z
§ 1026.19(f), and final comment
4(a)(17)(ii)–1 to clarify that the reporting
requirement is not applicable to covered
loans not subject to Regulation Z
§ 1026.43(c).
One industry commenter
recommended that no points and fees be
required to be reported for applications
that are not approved. This commenter
also recommended that, for applications
that have been approved by the
financial institution but not accepted by
the consumer, the total points and fees
should be considered accurate if the
amount is no less than the amount on
which the financial institution relied.
Regarding total loan costs, the Closing
Disclosure required by Regulation Z
§ 1026.19(f) is generally not provided for
applications that do not result in a
closed loan. Regarding total points and
fees, elements of points and fees have
the highest degree of uncertainty during
the application stage, which limits their
utility but increases the reporting
burden. Therefore, final § 1003.4(a)(17)
excludes applications from the scope of
the reporting requirement. Final
comments 4(a)(17)(i)–1 and 4(a)(17)(ii)–
1 explain that applications are not
subject to the requirement to report
either total loan costs or total points and
fees.
A few industry commenters suggested
that proposed § 1003.4(a)(17) be limited
to HOEPA loans and qualified
mortgages because the total points and
fees would be most readily available for
those loans. However, another industry
commenter stated that the total points
and fees were more likely to be available
for loans that exceeded the qualifiedmortgage thresholds. Finally, one
industry commenter urged the Bureau to
restrict the scope of proposed
§ 1003.4(a)(17) to loans secured by
principal dwellings to better fulfill the
purposes of HMDA.
These comments are largely addressed
by the changes the Bureau has made in
the final rule. The vast majority of
covered loans subject to the requirement
in § 1003.4(a)(17) are governed by the
scope of Regulation Z § 1026.19(f). For
these loans, final § 1003.4(a)(17)
requires no calculations that would not
otherwise be performed for purposes of
the Closing Disclosure. Accordingly,
there is no reason to exclude a
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particular subset of covered loans for
which the total loan costs are reported.
For the narrow remainder of
manufactured home loans for which
total points and fees are reported, the
risk to consumers warrants maintaining
coverage of these loans, and points and
fees are a less burdensome requirement
than applying regulatory definitions that
would not otherwise apply to these
loans. Finally, the final rule does not
exclude loans secured by secondary
dwellings from § 1003.4(a)(17) because
HMDA’s coverage is not limited to loans
secured by the borrower’s primary
residence and includes loans secured by
second homes as well as non-owneroccupied properties. Pricing data about
such dwelling-secured homes will
provide information necessary to better
understand potentially speculative
purchases of housing units similar to
those that contributed to the recent
financial crisis.
One industry commenter
recommended that the Bureau exclude
community banks from the points-andfees reporting requirement because the
calculation is burdensome and may not
be completed in all cases, and because
community banks avoided the
irresponsible lending practices that
contributed to the financial crisis.317
Another industry commenter suggested
that the Bureau require financial
institutions to report either the loan’s
annual percentage rate or the finance
charge instead of the total points and
fees. This commenter stated that total
points and fees require a manual
calculation. As explained above, final
§ 1003.4(a)(17) generally does not
require financial institutions to
calculate an amount that would not
otherwise be calculated for other
regulatory requirements or purposes.
The Bureau acknowledges that a
financial institution may have to report
points and fees for a limited set of loans
for which the institution does not
otherwise calculate the total points and
fees, such as for manufactured housing
loans secured by personal property.
However, as discussed above, the
Bureau believes that the burden of
performing such a calculation is
justified by the benefit of having some
measure of fees charged to borrowers.
Moreover, the APR and finance charge
combine both interest and fees and do
not allow users to identify the amount
of fees imposed on a borrower in
connection with a transaction.
Therefore, the final rule does not adopt
317 The Bureau notes that many community banks
will be excluded from HMDA reporting altogether
under the revised loan-volume threshold.
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the changes recommended by these
commenters.
Several industry commenters
supported the exclusion for purchased
covered loans found in proposed
§ 1003.4(a)(17). In fact, one industry
commenter recommended excluding all
data points, including pricing data, from
purchased covered loans. This
commenter explained that the ULI
would enable tracking of purchased
covered loans and believed that the
exclusion of the government-sponsored
enterprises, which purchase most of the
covered loans, would distort the data.
Conversely, a consumer advocate
recommended that the Bureau require
reporting of data for purchased covered
loans unless the purchasing entity is
unable to reasonably obtain the relevant
information from the original financial
institution. This commenter noted that
a blanket exception for purchased
covered loans would create gaps in the
HMDA data, especially if the original
financial institution was not subject to
HMDA.
The Bureau proposed to exclude
purchased loans from § 1003.4(a)(17)
because the total points and fees are not
readily available from the information
obtained from the selling entity.
Therefore, purchasing entities would be
required to calculate the total points and
fees, and might lack the information
necessary to do so. If the purchasing
financial institution required the selling
entity to calculate the total points and
fees, and the seller was not a HMDA
reporter, then the seller would face a
difficult and uncertain calculation
without the benefit of having to
otherwise report the data under HMDA.
For these reasons, the Bureau adopts
this exclusion with respect to total
points and fees, as required by final
§ 1003.4(a)(17)(ii). However, the same
reasoning does not support providing a
similar exclusion from purchased loans
with respect to total loan costs, as
required by final § 1003.4(a)(17)(i).
Unlike total points and fees, the total
loan costs are calculated for all covered
loans subject to the reporting
requirement, and are present on the
Closing Disclosure. Therefore, the
Bureau is including purchased covered
loans in the scope of final
§ 1003.4(a)(17)(ii). Final comments
4(a)(17)(i)–2 and 4(a)(17)(ii)–1 provide
guidance on the scope of the total-loancosts and total-points-and-fees reporting
requirements with respect to purchased
covered loans. One consumer advocate
asked the Bureau to clarify the scope of
proposed § 1003.4(a)(17) with respect to
covered loans ‘‘subject to’’ HOEPA or
the Bureau’s 2013 ATR Final Rule. This
commenter also urged the Bureau to
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expand § 1003.4(a)(17) to include homeequity lines of credit and reverse
mortgages because both types of loans
have been subject to abusive pricing.
Proposed § 1003.4(a)(17) would have
applied to open-end lines of credit
secured by the borrower’s principal
dwelling, but would have excluded
other open-end lines of credit and all
reverse mortgages. The Bureau believes
that the benefit of points-and-fees data
on such loans does not justify the
burden of reporting for the reasons
discussed above. Reverse mortgages are
exempt from the ability-to-repay
provisions of the 2013 ATR Final Rule
and the 2013 TILA–RESPA Final Rule.
Therefore, extending final
§ 1003.4(a)(17) to reverse mortgages
would require a calculation using a
regulatory definition that would likely
require certain modifications. The
Bureau believes that this burden does
not justify extending coverage to reverse
mortgages or open-end lines of credit.
However, the final rule will vastly
improve upon the current regulation
regarding the pricing information for
these loans, by requiring reporting of
data points such as rate spread,318
interest rate, prepayment penalty, and
nonamortizing features. Final comments
4(a)(17)(i)–1 and 4(a)(17)(ii)–1 clarify
that open-end lines of credit and reverse
mortgages are excluded from the scope
of the total-loan-costs and total-pointsand-fees reporting requirements.
Finally, many industry commenters
and consumer advocates made
comments that were broadly applicable
to the proposed pricing data points. For
example, both industry and consumer
advocate commenters urged the Bureau
to adopt alternative or additional
pricing data points. Several industry
commenters suggested that rate spread
be reported instead of the other
proposed pricing data points. These
commenters noted that financial
institutions were currently reporting the
rate spread under existing Regulation C
and believed that it made the other data
points unnecessary. Similarly, one
industry commenter proposed replacing
the pricing data points with the annual
percentage rate. The final rule does not
adopt these suggestions because neither
the rate spread nor the APR allows users
to identify and compare fees imposed
on borrowers.
Two commenters recommended that
‘‘legitimate discount points’’ be
distinguished from other disguised
charges intended to compensate the
lender or mortgage broker. One of these
commenters recommended different
318 Rate spread applies to open-end lines of credit
but not reverse mortgages. See § 1003.4(a)(12).
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data points for direct fees, yield-spread
premiums, and points that are fees.
Similarly, one consumer advocate
recommended that the Bureau require
reporting of loan originator
compensation. This commenter
explained that loan originator
compensation was a factor in disparate
pricing, is related to abusive lending
practices, and that compensation data is
necessary to monitor the
appropriateness of the Bureau’s loan
originator compensation rules.
The Bureau believes that the final
pricing data points will enable HMDA
data users to distinguish many of the
costs about which these commenters
were concerned. To the extent that
additional data points would be
necessary to perfectly address these
commenters’ concerns, the final rule
does not adopt them. The final rule
includes numerous data points related
to loan pricing that will vastly improve
the ability of users to understand and
evaluate the costs associated with
mortgage loans. More pricing data could
increase the utility of the data, but not
without imposing substantial burden on
financial institutions. For example,
many of the data points needed to
represent various fees and charges or
loan originator compensation would not
be aligned with an existing regulation or
appear consistently on any disclosure.
Another commenter urged the Bureau
to substantially expand the pricing data
required by the final rule by including
upfront costs to the lender or originator,
less fees for title and settlement
services; discount points; lender credits;
interest rate; APR; upfront fees for
settlement services; and a flag to
indicate whether a lender or real estate
agent possess an ownership interest in
the title company. This commenter
explained that the data described above
were necessary to examine numerous
issues related to loan pricing and cost,
including the existence of high title
service fees and the use of discount
points. The Bureau agrees that including
such data would provide value to users
and notes that it has adopted many of
the recommended data points in the
final rule, such as discount points,
lender credits, and interest rate. Further
expansion at this time, however, would
impose an unjustified burden on
financial institutions. For example, the
recommendations regarding the
financial institution’s ownership
interest in the title company and the
exclusion of title and settlement service
costs from the total loan costs are absent
from existing regulatory definitions,
Federal disclosure forms, and standard
industry data formats.
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One industry commenter noted that
certain pricing data points were not
applicable to open-end lines of credit,
such as total origination charges and
total discount points. This commenter
believed that this exclusion suggested
that such data are not valuable. In fact,
the exclusion of open-end lines of credit
is a consequence of the Bureau’s
decision to align the data point to the
Closing Disclosure and Regulation Z
§ 1026.38(f)(1) in order to reduce
burden. As explained in greater detail
below, these data points provide
important price information to users.
Therefore, the Bureau believes that the
scope of these data points balances the
benefit of the data with the burden of
reporting.
For the reasons provided above, the
Bureau is adopting new § 1003.4(a)(17),
which requires financial institutions to
report, for covered loans subject to
Regulation Z § 1026.43(c), one of the
following measures of loan cost: (i) If a
disclosure is provided for the covered
loan pursuant to Regulation Z, 12 CFR
1026.19(f), the amount of total loan
costs, as disclosed pursuant to
Regulation Z, 12 CFR 1026.38(f)(4), or,
(ii) if the covered loan is not subject to
the disclosure requirements in
Regulation Z, 12 CFR 1026.19(f), and is
not a purchased covered loan, the total
points and fees charged in connection
with the covered loan, expressed in
dollars and calculated in accordance
with Regulation Z, 12 CFR
1026.32(b)(1). This reporting
requirement does not apply to
applications or to covered loans not
subject to the ability-to-repay
requirements in the 2013 ATR Final
Rule, such as open-end lines of credit,
reverse mortgages, or loans or lines of
credit made primarily for business or
commercial purposes.
The Bureau is also adopting several
new comments. Final comments
4(a)(17)(i)–1 and 4(a)(17)(ii)–1 clarify
the scope of the reporting requirement.
Final comment 4(a)(17)(i)–2 explains
that purchased covered loans are not
subject to this reporting requirement if
the application was received by the
selling entity prior to the effective date
of Regulation Z § 1026.19(f). Final
comment 4(a)(17)(ii)–2 provides
guidance in situations where a financial
institution has cured a points-and-fees
overage. Final comment 4(a)(17)(i)–3
provides guidance in situations where a
financial institution has issued a revised
Closing Disclosure with a new amount
of total loan costs.
The Bureau believes that final
§ 1003.4(a)(17) satisfies Congress’s
direction to provide for reporting total
points and fees ‘‘as determined by the
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Bureau, taking into account’’ the
definition of total points and fees
provided by TILA and implemented in
Regulation Z § 1026.32(b).319 In
requiring reporting of a covered loan’s
total points and fees, Congress intended
to increase transparency regarding
mortgage lending and improve fair
lending screening.320 As defined in
proposed § 1003.4(a)(17), total points
and fees would provide information
about some of the upfront costs paid by
borrowers. Similarly, total loan costs, as
defined in final § 1003.4(a)(17), also
provide information about upfront costs
paid by borrowers. Congress recognized
the importance of the Bureau’s expertise
in deciding how to implement this
measure by expressing that it should be
defined ‘‘as determined by the Bureau.’’
The Bureau’s implementation is
consistent with that broad delegation of
discretion. The Bureau has carefully
considered the merits of both total
points and fees, as defined in Regulation
Z § 1026.32(b), and total loan costs, as
defined in Regulation Z § 1026.38(f)(4).
In proposing to require reporting of the
total points and fees, as defined in
Regulation Z § 1026.32(b), the Bureau
believed that such information would
enable users to gain deeper insight into
the terms on which different
communities are offered mortgage loans.
As explained above, after reviewing
public comments, the Bureau has
determined that total loan costs provide
greater analytical value for comparing
borrowers and understanding the cost of
loans than total points and fees as
defined in the proposal, while reducing
the burden of reporting for financial
institutions. Therefore, for certain loans,
total loan costs are more consistent with
Congress’s goals in amending HMDA
than proposed § 1003.4(a)(17). For the
reasons given above, final
§ 1003.4(a)(17) implements HMDA
section 304(b)(5)(A), and is also
authorized by the Bureau’s authority
pursuant to HMDA section 304(b)(5)(D)
to require such other information as the
Bureau may require, and by the
Bureau’s authority pursuant to HMDA
section 305(a) to provide for
adjustments and exceptions. For the
reasons given above, final
§ 1003.4(a)(17) is necessary and proper
to effectuate the purposes of and
facilitate compliance with HMDA,
because it will help identify possible
discriminatory lending patterns and
319 12
U.S.C. 2803(b)(5)(A).
Rept. 111–702 at 191 (2011) (finding that
more specific loan pricing information would
‘‘provide more transparency on underwriting
practices and patterns in mortgage lending and help
improve the oversight and enforcement of fair
lending laws.’’).
320 H.
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66211
help determine whether financial
institutions are serving the housing
needs of their communities, and
because it will significantly reduce
burden for reporting financial
institutions. Accordingly, where total
loan costs are available, final
§ 1003.4(a)(17) requires financial
institutions to report them. However, as
explained above, where total loan costs
are not available, total points and fees,
as defined in § 1003.4(a)(17)(ii), will
provide useful information that would
not otherwise be available.
4(a)(18)
Section 304(b) of HMDA permits the
disclosure of such other information as
the Bureau may require.321 Pursuant to
HMDA sections 305(a) and 304(b)(5)(D),
the Bureau proposed to require financial
institutions to report, for covered loans
subject to the disclosure requirements in
Regulation Z § 1026.19(f), the total
origination charges associated with the
covered loan. Origination charges are
those costs designated ‘‘borrower-paid’’
on Line A of the Closing Cost Details
page of the current Closing Disclosure,
as provided for in Regulation Z
§ 1026.38(f)(1). Proposed § 1003.4(a)(18)
would have applied to closed-end
covered loans and purchases of such
loans, but not to applications, open-end
lines of credit, reverse mortgages, or
commercial-purpose loans. For the
reasons provided below, the Bureau is
adopting § 1003.4(a)(18) as proposed,
with additional clarifying commentary.
Industry commenters generally
opposed the adoption of total
origination charges. Several industry
commenters believed that the total
amount of borrower-paid origination
charges provided little value, for various
reasons. Two industry commenters
asserted that the value of origination
charges was minimal because they were
influenced by factors outside of the
financial institution’s control, such as
the borrower’s decisionmaking. Many
industry commenters raised similar
objections to the proposed pricing data
in general. For example, one industry
commenter pointed out that the pricing
data were incomplete because it omitted
additional information about the
borrower’s overall relationship with the
financial institution, such as the
borrower’s loan payment history or
deposit balances. Therefore, these
commenters argued, the pricing data
points, including borrower-paid
origination charges, would mislead
users.
321 Section 1094(3)(A)(iv) of the Dodd-Frank Act
amended section 304(b) of HMDA.
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Despite the presence of other
variables that influence loan pricing,
information about origination charges
offers analytical value. First, the final
rule will capture several factors about
which commenters were concerned,
such as a borrower’s decision to trade a
higher interest rate for lower closing
costs. To the extent that financial
institutions lack the ability to
unilaterally determine every item of
borrower-paid origination charges, the
control they exercise is high relative to
many of the other elements of the
Closing Disclosure, such as taxes and
other government fees, prepaids, or the
initial escrow payment at closing.
Moreover, as stated above, the Bureau
believes that the final rule need not
provide an exhaustive representation of
every factor that might conceivably
affect loan pricing in order to benefit
users. The final rule’s pricing data
represents a marked improvement over
the existing regulation, and these
benefits would be lost if the Bureau
were to eliminate any data point that
might be influenced by the complexity
of the pricing process.
Other industry commenters pointed
out that proposed § 1003.4(a)(18)
omitted certain charges, such as
appraisal fees and items paid by the
seller. However, § 1003.4(a)(18) is
intended to capture the origination
charges paid to the financial institution
by the borrower; it is not intended to
measure the total cost of the transaction.
The Bureau is also providing for
reporting of total loan costs in final
§ 1003.4(a)(17), which will provide
some of the information about the
upfront cost of credit that commenters
believed was missing from
§ 1003.4(a)(18), such as costs associated
with appraisal and settlement services.
Regarding origination charges paid by
the seller, as with total loan costs, sellerpaid origination charges would appear
on the Closing Disclosure if the seller
were legally obligated to pay for such
costs.322 However, only the sum of
borrower-paid origination charges are
disclosed on the current Closing
Disclosure. Incorporating seller-paid
origination charges would increase
burden because financial institutions
could no longer simply report the
amount calculated under Regulation Z.
Several industry commenters argued
that proposed § 1003.4(a)(18) was
duplicative because the Bureau had also
proposed to require reporting of the
total points and fees in § 1003.4(a)(17).
These commenters stated that
origination charges were included in
total points and fees, and that, in many
322 See
12 CFR 1026.19(f)(1)(i).
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cases, the origination charges would be
identical to the total points and fees.
Although final § 1003.4(a)(17) requires
reporting of the total loan costs rather
than the total points and fees, as defined
in proposed § 1003.4(a)(17), the two
data points overlap somewhat.
However, total loan costs and borrowerpaid origination charges differ in
important respects. Total loan costs
include many additional costs that are
excluded from borrower-paid
origination charges, such as charges for
third-party settlement services. In
contrast, total origination charges
represent the costs that financial
institutions themselves are directly
imposing on borrowers. Furthermore, a
user could take the difference between
total loan costs and total origination
charges as an approximate measure of
total third-party charges. Therefore,
final § 1003.4(a)(17) and final
§ 1003.4(a)(18) are necessary to enable
users to gain a more precise
understanding of the costs associated
with a mortgage loan.
Several other industry commenters
argued that the total amount of
borrower-paid origination charges was
too burdensome to report. As mentioned
above, the Bureau has aligned
§ 1003.4(a)(18) to Regulation Z and to
the Closing Disclosure in order to
reduce burden. As with all pricing data
points aligned to the Closing Disclosure,
the calculation of origination charges
will be required only for covered loans
for which a Closing Disclosure is
required pursuant to Regulation Z
§ 1026.19(f). Loans excluded from
Regulation Z § 1026.19(f), such as openend lines of credit, reverse mortgages,
and commercial loans, are not subject to
this provision. Therefore, the burden of
reporting under § 1003.4(a)(18) is
limited to loans for which financial
institutions would already have to
calculate the total loan costs in order to
disclose them to consumers. This
alignment was supported by two
industry commenters. Because using the
definition of origination charges found
in Regulation Z reduces burden while
preserving the utility of the data, the
Bureau is adopting this definition in the
final rule. These exclusions are stated in
final comment 4(a)(18)–1, which
clarifies the scope of the reporting
requirement.
As stated in the proposal, the total
amount of borrower-paid origination
charges provides a relatively focused
measure of the charges imposed on the
borrower by the financial institution for
originating and extending credit.
Furthermore, separate identification of
borrower-paid origination charges in
addition to total discount points and
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lender credits facilitates understanding
of loan pricing because charges are often
interchangeable and may be spread
across different elements of loan
pricing. The proposed pricing data
points, including total origination
charges, will help users of HMDA data
determine whether different borrowers
are receiving fair pricing and develop a
better understanding of the ability of
borrowers in certain communities to
access credit. Therefore, the Bureau is
adopting § 1003.4(a)(18) generally as
proposed.
In response to the Bureau’s
solicitation of feedback, one consumer
advocate urged the Bureau to require the
amount listed as the ‘‘total closing
costs’’ on Line J of the current Closing
Disclosure in addition to or instead of
the total origination charges. The
commenter stated that origination
charges represent a small part of total
costs and that financial institutions
exert some control over other costs
through affiliated business
arrangements. In contrast, one industry
commenter opposed requiring total
closing costs because the commenter
believed that the number of factors
incorporated into the total closing costs
made meaningful comparisons among
borrowers impossible. The Bureau
acknowledges that total closing costs
would provide important information
about the costs required for consumers
to close on a loan, but is not adopting
a new data point for total closing costs.
As described above, the Bureau is
adopting § 1003.4(a)(17), which requires
reporting the total loan costs associated
with the covered loan. Final
§ 1003.4(a)(17) addresses many of the
concerns this commenter raised
regarding a more inclusive, consistent
measure of loan costs, and also includes
the upfront cost associated with many
third-party settlement services.
Furthermore, total closing costs, as
disclosed pursuant to Regulation Z
§ 1026.38(h)(1), include many costs
unrelated to the charges imposed by
financial institutions for extending
credit, such as taxes and other
government fees. The Bureau believes
that many of these costs can be more
accurately estimated by users than the
total loan costs, because they will be
largely determined by the jurisdiction in
which the loan was originated. Total
origination charges and total loan costs
also bear a closer relationship to the
lending practices of financial
institutions than total closing costs, and
therefore better advance the purposes of
HMDA.
For the reasons provided above,
pursuant to HMDA sections 305(a) and
304(b)(5)(D), the Bureau is adopting
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§ 1003.4(a)(18) as proposed. For the
reasons given above, data about total
origination charges will assist public
officials and members of the public in
determining whether financial
institutions are serving the housing
needs of their communities and in
identifying potentially discriminatory
lending patterns. Final § 1003.4(a)(18)
requires financial institutions to report,
for covered loans subject to the
disclosure requirements in Regulation Z
§ 1026.19(f), the total of all itemized
amounts that are designated borrowerpaid at or before closing, as disclosed
pursuant to § 1026.38(f)(1). These
charges are the total costs designated
‘‘borrower-paid’’ on Line A of the
Closing Cost Details page of the current
Closing Disclosure.
The Bureau is also adopting several
new comments. Final comment
4(a)(18)–1 clarifies the scope of the
reporting requirement. Final comment
4(a)(18)–2 explains that purchased
covered loans are not subject to this
reporting requirement if the application
was received by the selling entity prior
to the effective date of Regulation Z
§ 1026.19(f). Final comment 4(a)(18)–3
provides guidance in situations where a
financial institution has issued a revised
Closing Disclosure with a new amount
of total origination charges.
4(a)(19)
Section 304(b) of HMDA permits the
disclosure of such other information as
the Bureau may require.323 Pursuant to
HMDA sections 305(a) and 304(b)(5)(D),
the Bureau proposed to require financial
institutions to report, for covered loans
subject to the disclosure requirements in
Regulation Z § 1026.19(f), the total
discount points paid by the borrower.
Discount points are points paid to the
creditor to reduce the interest rate, and
are listed on Line A.01 of the Closing
Cost Details page of the current Closing
Disclosure, as described in Regulation Z
§ 1026.37(f)(1)(i). Proposed
§ 1003.4(a)(19) would have applied to
closed-end covered loans and purchases
of such loans, but not to applications,
open-end lines of credit, reverse
mortgages, or commercial-purpose
loans. For the reasons provided below,
the Bureau is adopting § 1003.4(a)(19)
generally as proposed, with minor
technical modifications and new
commentary for increased clarity.
Industry commenters generally
opposed the requirement to report
discount points. Some industry
commenters believed that reporting the
total discount points was unnecessary
323 Section 1094(3)(A)(iv) of the Dodd-Frank Act
amended section 304(b) of HMDA.
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or duplicative. Several of these
commenters pointed out that the
proposal also required financial
institutions to report the total points
and fees, while other commenters stated
that discount points were only
applicable to a limited class of loans
sold into the secondary market. One
industry commenter believed that rate
spread and total points and fees could
be used to reveal potential unlawful
discrimination.
Although discount points are
included in both total loan costs and
total origination charges, these data
points are not substitutes for each other.
As explained above, total loan costs and
total origination charges represent
different elements of loan cost. Discount
points are also different than the other
loan costs because they represent
charges directly related to reductions in
the interest rate and are necessary to
understand the tradeoffs between rates
and points. Other measures of pricing,
such as rate spread and total loan costs,
can be useful for comparing borrowers,
but separate reporting of discount points
will improve analysis of the value
borrowers are receiving for paying
discount points. Finally, even if
discount points are not present in every
loan, studies of loan costs and public
comments received before and after the
proposal suggest that discount points
are an important element of loan
pricing.324
Other industry commenters opposed
reporting discount points because they
believed that doing so would distort the
data or potentially mislead users. One
industry commenter noted that the
absence of information about lender
credits would make comparisons
between loans with and without lender
credits misleading. Other industry
commenters argued that comparisons
between borrowers were difficult or
impossible because of market
fluctuations, differences in product
type, and borrower decisionmaking.
In response to these comments, the
Bureau is adding a requirement for
financial institutions to report lender
credits. As explained above, however,
even though HMDA data are not
exhaustive, the data still provide
extremely valuable information for the
public and public officials that fulfills
HMDA’s purposes. Regarding the
influence of other variables, the final
rule includes several data points that
will allow users to control for several of
the factors mentioned by commenters,
including location and product type.
Indeed, not requiring reporting of
discount points might also mislead
users by limiting their ability to explain
the lower rates received by borrowers
who paid discount points.
Several industry commenters argued
that the benefit of proposed
§ 1003.4(a)(19) was unclear and
questioned whether there was any
evidence of discrimination against
borrowers through discount points. As
stated in the proposal, reporting
discount points benefits users of HMDA
data by enabling them to develop a more
detailed understanding of loan pricing.
This improved information allows for
better analyses regarding the value that
borrowers receive in exchange for
discount points, and determinations of
whether similarly situated borrowers are
receiving similar value. Existing studies
of loan costs and feedback received
prior to the proposal suggested that
discount points were a sufficiently
important element of loan pricing to
justify their inclusion in HMDA.325
Finally, one industry commenter
believed that reporting discount points
was too burdensome because the
definition was uncertain. To minimize
any burden associated with reporting
discount points, the Bureau is adopting
a definition of discount points that
aligns to Regulation Z. Loans excluded
from Regulation Z § 1026.19(f), such as
open-end lines of credit, reverse
mortgages, and commercial loans, are
not subject to final § 1003.4(a)(19).
Therefore, the burden of reporting is
limited to loans for which financial
institutions would already have to know
the amount of discount points in order
to disclose it to consumers. These
exclusions are stated in final comment
4(a)(19)–1, which clarifies the scope of
the reporting requirement. This
alignment was supported by one
industry commenter. The TILA–RESPA
integrated disclosure forms, including
the Closing Disclosure, are the subject of
considerable outreach and guidance
from the Bureau during the
implementation process. As financial
institutions become familiar with these
324 See, e.g., 79 FR 51731, 51788–89 (Aug. 29,
2014) (describing feedback received prior to the
proposal); Susan E. Woodward, A Study of Closing
Costs for FHA Mortgages, at 60–69 (2008) (report
prepared for the U.S. Dep’t. of Hous. and Urban
Dev., Office of Policy Dev. and Research)
(discussing problems with discount points on FHA
loans); David Nickerson & Marsha Courchane,
Discrimination Resulting from Overage Practices, 11
J. of Fin. Servs. Research 133 (1997).
325 See, e.g., 79 FR 51731, 51788–89 (Aug. 29,
2014) (describing feedback received prior to the
proposal); Susan E. Woodward, A Study of Closing
Costs for FHA Mortgages, at 60–69 (2008) (report
prepared for the U.S. Dep’t. of Hous. and Urban
Dev., Office of Policy Dev. and Research)
(discussing problems with discount points on FHA
loans); David Nickerson & Marsha Courchane,
Discrimination Resulting from Overage Practices, 11
J. of Fin. Servs. Research 133 (1997).
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forms, the burden of reporting should
decrease.
For the reasons provided above,
pursuant to HMDA sections 305(a) and
304(b)(5)(D), the Bureau is adopting
§ 1003.4(a)(19) generally as proposed,
with minor technical modifications.
These technical modifications clarify
that, although discount points are
described more clearly in Regulation Z
§ 1026.37(f)(1)(i), financial institutions
should report the amount found on the
Closing Disclosure, as disclosed
pursuant to Regulation Z § 1026.38(f)(1).
For the reasons given above, data about
discount points will assist public
officials and members of the public in
determining whether financial
institutions are serving the housing
needs of their communities and in
identifying potentially discriminatory
lending patterns. Final § 1003.4(a)(19)
requires financial institutions to report,
for covered loans subject to the
disclosure requirements in Regulation
Z, 12 CFR 1026.19(f), the points paid to
the creditor to reduce the interest rate,
expressed in dollars, as described in
Regulation Z, 12 CFR 1026.37(f)(1)(i),
and disclosed pursuant to Regulation Z,
12 CFR 1026.38(f)(1). For covered loans
subject to the disclosure requirements in
Regulation Z § 1026.19(f), the discount
points that financial institutions would
report are those listed on Line A.01 of
the Closing Cost Details page of the
current Closing Disclosure.
The Bureau is also adopting several
new comments. Final comment
4(a)(19)–1 clarifies the scope of the
reporting requirement. Final comment
4(a)(19)–2 explains that purchased
covered loans are not subject to this
reporting requirement if the application
was received by the selling entity prior
to the effective date of Regulation Z
§ 1026.19(f). Final comment 4(a)(19)–3
provides guidance in situations where a
financial institution has issued a revised
Closing Disclosure with a new amount
of discount points.
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4(a)(20)
Proposed 4(a)(20)
Section 304(b) of HMDA authorizes
the disclosure of such other information
as the Bureau may require.326 Pursuant
to HMDA sections 305(a) and
304(b)(5)(D), the Bureau proposed to
require financial institutions to report,
for covered loans subject to the
disclosure requirements in Regulation Z
§ 1026.19(f), other than purchased
covered loans, the risk-adjusted, prediscounted interest rate associated with
a covered loan. The risk-adjusted, pre326 Section 1094(3)(A)(iv) of the Dodd-Frank Act
amended section 304(b) of HMDA.
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discounted interest rate (RPIR) is the
rate that the borrower would have
received in the absence of any discount
points or rebates and is the same base
rate from which a financial institution
would exclude ‘‘bona fide discount
points’’ from the points-and-fees total
used to determine qualified mortgage
and high-cost mortgage status under
Regulation Z. Proposed § 1003.4(a)(20)
would have applied to closed-end
covered loans, but not to applications or
purchased covered loans, or open-end
lines of credit, reverse mortgages, or
commercial-purpose loans. For the
reasons provided below, the Bureau is
not finalizing proposed § 1003.4(a)(20).
Most consumer advocates expressed
support for the proposed pricing data
points collectively, but few commented
specifically on the RPIR. One
commenter generally stated that the
RPIR would be helpful for fair lending
analysis. Another consumer advocate
believed that, combined with the other
proposed data points, the RPIR would
better enable users to understand
pricing disparities among groups of
consumers. This consumer advocate
further urged the Bureau to expand
§ 1003.4(a)(20) to cover home-equity
lines of credit because doing so would
improve the ability of users to compare
pricing across loan types.
The Bureau agrees with commenters
that the concept of a risk-adjusted, prediscounted interest rate would have
value for fair lending purposes,
provided that such a rate was
consistently calculated. However,
public comments and additional
outreach have revealed that the rate
proposed to be reported under
§ 1003.4(a)(20) is less valuable and more
unclear than the Bureau initially
believed. Several industry commenters
cited definitional issues surrounding
proposed § 1003.4(a)(20). For example,
one commenter noted that a single loan
may have multiple rates available to the
consumer that would satisfy the
description of the RPIR. Another
commenter stated that the concept of an
RPIR existed only in the realm of
informal guidance provided by the
Bureau under Regulation Z. Similar
feedback was provided by many of the
vendors and financial institutions that
participated in additional outreach
conducted by the Bureau after the
proposal’s comment period closed.
These participants expressed different
understandings of the rate that would be
required by proposed § 1003.4(a)(20).
For example, two participants noted
that multiple rates could potentially
satisfy the requirements of the RPIR,
and that the discretion of a financial
institution was required to select a rate
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that would actually function as the prediscounted rate, if applicable, for
Regulation Z purposes. Other
participants cited lack of definitional
clarity as a factor that would add
significant burden to the proposed
reporting requirement.
Additionally, several industry
commenters questioned the benefit that
the RPIR would provide for fair lending
purposes. For example, one commenter
doubted that the RPIR would produce
any fair lending insights beyond those
made possible by the current pricing
data. As stated in the proposal, the
potential value of the RPIR comes from
its explanatory power. Pricing outcomes
are determined by many factors,
including rate-sheet inputs, loan-level
pricing adjustments, other discretionary
pricing adjustments, and consumer
decisionmaking. The RPIR would reflect
many of the pricing adjustments for
which users would have to control in
order to determine whether pricing
disparities were explained by legitimate
business considerations. Therefore,
analyzing the changes to loan pricing
that occur after a financial institution
has determined the RPIR may provide
strong evidence of potential
impermissible discrimination with a
reduced need to control for multiple
legitimate factors that influence loan
pricing.
However, the Bureau now believes
that the RPIR may not provide sufficient
value to justify the burden associated
with collecting and reporting it. The rate
described in proposed § 1003.4(a)(20) is
the base rate to which a financial
institution would apply any reduction
obtained by the payment of discount
points in determining whether those
points may be excluded as ‘‘bona fide
discount points’’ from points and fees
pursuant to Regulation Z § 1026.32(b).
This rate was originally designed to
ensure that discount points excluded
from the points-and-fees coverage tests
actually produced an appropriate
reduction in the borrower’s interest rate.
The rate was not intended to isolate
pricing adjustments necessary to
facilitate fair lending analysis.
Therefore, the Bureau believes that the
rate is less beneficial for fair lending
purposes than it initially thought. After
considering the function of the rate and
the burden associated with reporting it,
the Bureau has decided not to finalize
proposed § 1003.4(a)(20).
As part of the additional outreach, the
Bureau also sought information about
two other measures of loan pricing that
might have greater fair lending benefit
than the proposed RPIR. These
measures are the ‘‘post-LLPA rate’’ and
the ‘‘discretionary adjustment.’’ The
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post-LLPA rate is the interest rate that
reflects all the transaction-specific,
nondiscretionary pricing adjustments
dictated by the financial institution’s
standard loan pricing policy. The
discretionary adjustment is any
alteration by the financial institution of
the interest rate or points made for any
reason other than the application of the
standard loan pricing policy. However,
feedback received through the
additional outreach process suggested
that these measures would be more
burdensome to report. For example,
they may be calculated and stored less
commonly than the RPIR, and neither
currently possesses a definition in either
existing regulation or industry custom.
Therefore, at this time, the Bureau has
not identified a suitable alternative base
rate that it could substitute for the RPIR
proposed in § 1003.4(a)(20).
For the reasons provided above, the
Bureau is not finalizing proposed
§ 1003.4(a)(20).
Final 4(a)(20)
Section 304(b) of HMDA permits the
disclosure of such other information as
the Bureau may require.327 In using its
discretionary authority to propose to
require financial institutions to report
the total discount points paid by the
consumer, the Bureau also invited
comment on ‘‘whether to include any
lender credits, premiums, or rebates in
the measure of discount points.’’ 328 For
the reasons provided below, the Bureau
is adopting new § 1003.4(a)(20), which
requires financial institutions to report,
for covered loans subject to the
disclosure requirements in Regulation Z
§ 1026.19(f), the total amount of lender
credits, as disclosed pursuant to
Regulation Z § 1026.38(h)(3). Lender
credits are amounts provided to the
borrower to offset closing costs and are
disclosed under Line J of the Closing
Cost Details page of the current Closing
Disclosure. Final § 1003.4(a)(20) applies
to closed-end covered loans and
purchases of such loans, but not to
applications, open-end lines of credit,
reverse mortgages, or commercialpurpose loans.
The Bureau received several
comments in response to its solicitation
for feedback regarding lender credits.
Some industry commenters requested
clarification regarding whether such
credits would be included within any of
the proposed data points. For example,
two commenters asked how offsetting
credits associated with an interest rate
would be reported, if at all. One
327 Section 1094(3)(A)(iv) of the Dodd-Frank Act
amended section 304(b) of HMDA.
328 See 79 FR 51731, 51789 (Aug. 29, 2014).
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industry commenter believed that
information regarding lender credits
would provide no value to HMDA users.
However, other comments suggested
that data on lender credits would be
valuable even though the commenters
did not advocate for reporting of these
data. For example, one commenter
explained that without some
representation of lender credits, the
prices of loans with such offsetting
credits would appear artificially high.
The Bureau believes that lender
credits are a basic element of the cost of
the loan that should be represented in
the HMDA data. Financial institutions
often offer borrowers a credit or rebate
to offset some or all of the closing costs
associated with a loan in return for
accepting a higher interest rate. These
credits reflect trade-offs similar to those
that borrowers make between discount
points and the interest rate, and are
generally displayed as negative points
on the rate sheet. As commenters have
pointed out, without accounting for
these credits, users of HMDA data
would be unable to determine that loans
with credits or rebates were not higher
priced than similar loans without such
credits. As noted above, the final rule
cannot provide for reporting of every
factor that might conceivably influence
loan pricing. However, the Bureau finds
that lender credits should be included
because they are sufficiently important
to understanding the price of a loan.
Although the amount of lender credits
disclosed under Regulation Z
§ 1026.38(h)(3) may also include any
refunds provided for amounts that
exceed the limitations on increases in
closing costs, the Bureau believes that
an imperfect measure of lender credits
is substantially better than no measure
at all.329 Furthermore, removing such
refunds to obtain a pure measure of
lender credits would increase burden by
forcing lenders to perform a new
calculation that they would not
otherwise perform under any existing
regulation.
Two industry commenters opposed
reporting lender credits because they
would be burdensome to report.
However, the Bureau is adopting a
definition of lender credits that aligns to
Regulation Z § 1026.38(h)(3) and is
applying the final reporting requirement
only to covered loans for which a
Closing Disclosure is required. Loans
excluded from Regulation Z
§ 1026.19(f), such as open-end lines of
credit, reverse mortgages, and
329 The lender credits disclosed pursuant to
Regulation Z § 1026.38(h)(3) would also exclude
any credits attributable to specific loan costs listed
in the Closing Disclosure. See 12 CFR 1026.19(f),
comment 38(h)(3)–1.
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66215
commercial loans, are not subject to
final § 1003.4(a)(20). Therefore, the
burden of reporting is limited to loans
for which financial institutions would
already have to disclose the total
amount of lender credits. These
exclusions are stated in final comment
4(a)(20)–1, which clarifies the scope of
the reporting requirement.
For the reasons provided above,
pursuant to HMDA sections 305(a) and
304(b)(5)(D), the Bureau is adopting new
§ 1003.4(a)(20), which requires financial
institutions to report, for covered loans
subject to the disclosure requirements in
Regulation Z § 1026.19(f), the total
amount of lender credits, as disclosed
pursuant to Regulation Z
§ 1026.38(h)(3). The total amount of
lender credits appears under Line J of
the Closing Cost Details page of the
current Closing Disclosure. For the
reasons given above, data about lender
credits will assist public officials and
members of the public in determining
whether financial institutions are
serving the housing needs of their
communities and in identifying
potentially discriminatory lending
patterns.
The Bureau is also adopting several
comments. Final comment 4(a)(20)–1
clarifies the scope of the reporting
requirement. Final comment 4(a)(20)–2
explains that purchased covered loans
are not subject to this reporting
requirement if the application was
received by the selling entity prior to
the effective date of Regulation Z
§ 1026.19(f). Final comment 4(a)(20)–3
provides guidance in situations where a
financial institution has issued a revised
Closing Disclosure with a new amount
of lender credits.
4(a)(21)
Section 304(b) of HMDA permits the
disclosure of such other information as
the Bureau may require.330 Pursuant to
HMDA sections 305(a) and 304(b)(6)(J),
the Bureau proposed to require financial
institutions to report the interest rate
that is or would be applicable to the
covered loan or application at closing or
account opening. Proposed comment
4(a)(21)–1 explained the interest rate
that financial institutions should report
for covered loans subject to certain
disclosure requirements in Regulation
Z. For the reasons provided below, the
Bureau is generally adopting
§ 1003.4(a)(21) as proposed, with minor
modifications and the addition of
commentary clarifying the reporting
obligations for applications and for
adjustable-rate transactions for which
330 Section 1094(3)(A)(iv) of the Dodd-Frank Act
amended section 304(b) of HMDA.
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the interest rate is unknown at the time
final action is taken.
Consumer groups supported the
proposed pricing data points, including
the interest rate. These commenters
stated that such information would help
identify potentially unlawful price
discrimination and better understand
the type and terms of credit offered to
different communities. For example,
one commenter noted that the interest
rate would be particularly valuable for
analyzing the impact of discount points.
Another commenter stated that the
interest rate was necessary to study the
terms of the loan. Finally, other
consumer advocate commenters noted
that the interest rate, when combined
with the other pricing variables, would
enable a more precise understanding of
the elements of loan pricing.
Industry commenters generally
opposed requiring financial institutions
to report the interest rate. Some industry
commenters argued that the interest rate
had little value or relevance, and one
industry commenter disagreed that
facilitating comparisons among
borrowers was sufficient to justify the
reporting requirement. The value of
information regarding the interest rate,
however, comes not only from
comparing the interest rates received by
borrowers but from the ability to better
understand the relationship between the
interest rate and discount points,
origination charges, and lender credits.
This more detailed understanding will
better facilitate identification of
potentially discriminatory lending
patterns and provide a more complete
picture of the credit available to
particular communities.
Several other industry commenters
argued that the interest rate was an
unnecessary data point. Most of these
commenters pointed out that the rate
spread was already reported and would
enable some analysis of loan pricing.
One industry commenter suggested that
the annual percentage rate be reported
instead of the interest rate. However,
one commenter believed that the APR
was often calculated inaccurately and
therefore supported reporting of the
interest rate.
Although the rate spread and the
interest rate are related, they are not
equivalent measures of loan pricing. As
explained in the proposal, the APR is a
measure of the cost of credit, including
both interest and certain fees, expressed
as a yearly rate, while the interest rate
is the cost of the loan expressed as a
percentage rate. The interest rate
enables users to understand the
relationship between the interest rate
and discount points, origination
charges, and lender credits more
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directly than the rate spread, because
the rate spread does not isolate the
interest rate. Second, the rate spread
and interest rate data points have
substantially different scopes. Unlike
rate spread, final § 1003.4(a)(21) applies
to both reverse mortgages and
commercial loans. Indeed,
§ 1003.4(a)(21) is one of few pricing data
points that applies to such loans.
Other industry commenters stated
that information about the interest rate
would be misleading. One industry
commenter noted that the interest rate
was influenced by factors outside of a
financial institution’s control, such as
market fluctuations and borrower
decisionmaking. Two industry
commenters believed that proposed
§ 1003.4(a)(21) would encourage
financial institutions to provide ‘‘teaser
rates’’ to create the illusion of lowerpriced loans in their HMDA data.
Although financial institutions set
interest rates based in part on market
factors that they may not control,
interest rate data are still valuable, along
with other data elements, to help further
HMDA’s purposes, including as a screen
for potential fair lending concerns. For
example, the final rule provides for
reporting information about the date,
product type, location, and certain
consumer decisions, such as the choice
to pay discount points for a lower rate
or receive lender credits in exchange for
a higher rate. Moreover, eliminating the
interest rate might also undermine the
utility of other data points. Users would
experience more difficulty
understanding the discount points and
lender credits among borrowers or
groups of borrowers. Finally, the final
rule will also provide for reporting of
the introductory rate period, which
should discourage the type of rate
manipulation about which commenters
were concerned.
One industry commenter believed
that reporting the interest rate might
allow competitors to gain insight into
confidential business information, such
as underwriting criteria. This
commenter did not explain how a
competitor would derive proprietary
information regarding its underwriting
criteria from the interest rate, and the
Bureau is aware of no reliable means of
doing so.
Several industry commenters raised
concerns over the burden of reporting
the interest rate. These commenters
pointed out that interest rates fluctuate
frequently and may be unavailable for
loans that are not originated. Similarly,
several commenters requested that the
Bureau not require financial institutions
to report the interest rate for
applications because the rate might be
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unknown. One commenter asked what
rate should be reported for an
application for which the rate has not
been locked. The Bureau notes that, for
many applications, a financial
institution may not know the interest
rate applicable to the covered loan.
However, for applications approved by
the financial institution but not
accepted by the applicant, the interest
rate would typically be available.
Accordingly, the Bureau is clarifying
that § 1003.4(a)(21) requires a financial
institution to report the interest rate
only if the application has been
approved by the financial institution but
not accepted by the borrower, or if the
financial institution reports the loan as
originated. For all other applications or
preapprovals, such as applications that
have been denied or withdrawn, or files
closed for incompleteness, a financial
institution reports that no interest rate
was applicable. The Bureau is adopting
final comment 4(a)(21)–2 to clarify the
reporting obligations in the case of
applications. This comment removes the
burden of attempting to determine the
interest rate where the rate is truly
unavailable while preserving data utility
regarding applications by providing for
reporting of the rate where the rate is
available. For applications that have
been approved but not accepted for
which the rate has not been locked,
financial institutions would report the
rate applicable at the time the
application was approved. The Bureau
is also adopting comment 4(a)(21)–3,
which states that, for adjustable-rate
covered loans or applications, if the
interest rate is unknown at the time that
the application was approved, or at
closing or account opening, a financial
institution reports the fully-indexed
rate. For purposes of § 1003.4(a)(21), the
fully-indexed rate is the index value and
margin at the time that the application
was approved, or, for covered loans, at
closing or account opening. This
comment mirrors the approach taken by
comment 4(a)(21)–1, which clarifies the
interest rate to be reported for loans
subject to the Bureau’s TILA–RESPA
Integrated Disclosure Rule.
Several industry commenters also
requested that the Bureau exclude
commercial loans, including
multifamily mortgage loans, from the
scope of § 1003.4(a)(21). Commercial
loans, these commenters explained,
typically have interest rates that are
variable and based on different indices
than consumer loans. Similarly, one
industry commenter noted that the
interest rates for multifamily mortgage
loans were based on a variety of factors
that differed among multifamily loans.
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Regarding variable interest rates, as
explained above, the Bureau is adopting
comment 4(a)(21)–3, which provides
that, for adjustable-rate covered loans or
applications, if the interest rate is
unknown at the time that the
application was approved, or at closing
or account opening, a financial
institution reports the fully-indexed rate
based on the index applicable to the
covered loan or application.
Regarding loan comparisons, the
adoption of a commercial-purpose flag
in the final rule will enable HMDA data
users to identify these loans and avoid
potentially misleading comparisons.
Information about multifamily housing
continues to be an important component
of the HMDA data. Information about
the conditions of financing for
multifamily dwellings may help public
officials in distributing public-sector
investment so as to attract private
investment to areas where it is needed.
Therefore, the Bureau is not excluding
such loans from § 1003.4(a)(21).
For the reasons provided above,
pursuant to HMDA sections 305(a) and
304(b)(6)(J), the Bureau is adopting
§ 1003.4(a)(21) generally as proposed,
with minor modifications and
additional clarifying commentary. For
the reasons given above, data about the
interest rate will assist public officials
and members of the public in
determining whether financial
institutions are serving the housing
needs of their communities and in
identifying potentially discriminatory
lending patterns. The Bureau is
adopting commentary identifying the
interest rate that should be reported for
covered loans subject to the disclosure
requirements of Regulation Z
§ 1026.19(e) or (f). The commentary also
explains that, for applications, final
§ 1003.4(a)(21) requires a financial
institution to report the interest rate
only for applications that have been
approved by the financial institution but
not accepted by the borrower. Finally,
the Bureau is adopting commentary
clarifying the interest rate to be reported
for adjustable-rate covered loans or
applications for which the initial
interest rate is unknown. Final
§ 1003.4(a)(21) applies to closed-end
covered loans, open-end lines of credit,
reverse mortgages, and commercialpurpose loans, as well as to purchases
of such loans, and applications that
have been approved by the lender but
not accepted by the borrower.
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4(a)(22)
Section 304(b) of HMDA 331 requires
reporting of the term in months of any
prepayment penalty or other fee or
charge payable upon repayment of some
portion of principal or the entire
principal in advance of scheduled
payments.332 The Bureau proposed to
implement this provision through
proposed § 1003.4(a)(22), which
required financial institutions to report
the term in months of any prepayment
penalty, as defined in Regulation Z
§ 1026.32(b)(6)(i) or (ii), as applicable.
Prepayment penalties are charges
imposed on borrowers for paying all or
part of the transaction’s principal before
the date on which the principal is due.
Proposed § 1003.4(a)(22) would have
applied to applications for, and
originations of, closed-end loans, openend lines of credit, reverse mortgages,
and commercial-purpose loans, but not
to purchases of such loans. For the
reasons provided below, the Bureau is
adopting § 1003.4(a)(22) generally as
proposed, with clarifying commentary,
but is limiting its scope to certain
covered loans or applications subject to
Regulation Z, 12 CFR part 1026. The
revised scope of the reporting
requirement excludes purchased
covered loans, as well as reverse
mortgages and loans or lines of credit
made primarily for business or
commercial purposes.
The Bureau received few comments
supporting or opposing proposed
§ 1003.4(a)(22). Two industry
commenters asserted that reporting
information about prepayment penalties
was unnecessary because regulatory
scrutiny and the requirements of
secondary market programs have
diminished their prevalence. On the
other hand, several consumer advocates
supported the improved pricing data,
including reporting of the prepayment
penalty. One consumer advocate was
particularly supportive of proposed
§ 1003.4(a)(22) because of the
importance of understanding whether
certain communities were receiving
loans with problematic features.
The final rule retains the requirement
to report data about prepayment
penalties, consistent with the DoddFrank Act amendments to HMDA. In the
lead-up to the financial crisis,
prepayment penalties were frequently
cited as a risky feature for consumers
with subprime loans. Although
prepayment penalties may be less
prevalent than they were in the years
preceding the financial crisis, their use
331 Section 1094(3)(A)(iv) of the Dodd-Frank Act
amended section 304(b) of HMDA.
332 12 U.S.C. 2803(b)(5)(C).
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may increase in the future. Prepayment
penalty data will allow for the
identification of any potential increase
in prepayment penalties when
considering how institutions are
meeting the housing needs of their
communities, and when looking for any
potentially discriminatory lending
practices.
Most industry commenters requested
certain clarifications or revisions to the
scope of the reporting requirement. One
industry commenter requested that the
final rule not require reporting of the
prepayment penalty for applications
that do not result in originations. The
Bureau is not adopting this suggestion.
Both loans and applications for loans
with prepayment penalties will provide
valuable data for HMDA’s purposes, and
commenters have not suggested that the
prepayment penalty term is more
burdensome to determine for an
application than for an originated loan.
If the loan for which a consumer
applied featured a prepayment penalty,
the financial institution would report
the term of that prepayment penalty.
Similarly, if the loan for which the
consumer applied featured no
prepayment penalty, the financial
institution would report that the
reporting requirement was not
applicable to the transaction. The
Bureau has reflected these requirements
in final comment 4(a)(22)–2. Two other
industry commenters requested
clarification regarding certain
conditionally-waived charges. Final
§ 1003.4(a)(22) defines prepayment
penalty with reference to Regulation Z
§ 1026.32(b)(6)(i) or (ii), as applicable.
The commentary to § 1026.32(b)(6)
discusses waived, bona fide third-party
charges imposed under certain
conditions and, as explained in final
comment 4(a)(22)–2, may be relied on
for purposes of § 1003.4(a)(22).
Two industry commenters asked the
Bureau to exclude commercial loans,
including multifamily loans, from the
prepayment penalty reporting
requirement. These commenters pointed
out that prepayment penalties serve
different purposes in commercial
lending. One commenter explained that
multifamily mortgage loans featured
various forms of prepayment protection,
such as lock-out features, yield
maintenance, or prepayment premiums
that were not contemplated in the
definition of prepayment penalty found
in Regulation Z § 1026.32(b)(6)(i) and
(ii). This commenter urged the Bureau
to either limit § 1003.4(a)(22) to
consumer loans or to adopt a new
definition that was relevant to the
commercial and multifamily lending
context.
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The Bureau understands that
commercial loans, particularly
multifamily mortgage loans, include
forms of prepayment protection which
have no analog in the consumer-purpose
mortgage context. For example, these
loans may feature defeasance, in which
the borrower of a multifamily mortgage
loan substitutes a new form of collateral,
such as bonds or other securities,
designed to generate sufficient cash flow
to cover future loan payments. In order
to capture these complex arrangements,
the final rule would have to include a
new definition of prepayment penalty.
A new definition that is not part of any
other existing regulation would likely
impose burden on financial institutions.
Moreover, consumer mortgage loans
with prepayment penalties were most
frequently cited as a concern in the lead
up to the financial crisis and the DoddFrank Act. The Bureau is not aware of
similar concerns about commercial
loans covered by HMDA. At this time,
the Bureau does not believe that
applying § 1003.4(a)(22) to commercial
loans would provide sufficient benefits
to justify the additional burden on
financial institutions. Therefore, the
Bureau is limiting the scope of final
§ 1003.4(a)(22) to covered loans or
applications subject to Regulation Z, 12
CFR part 1026.
For the reasons provided above, to
implement HMDA section 304(b)(5)(C),
and pursuant to HMDA section 305(a),
the Bureau is adopting § 1003.4(a)(22)
generally as proposed, but is modifying
the scope of the provision to apply to
certain covered loans and applications
subject to Regulation Z, 12 CFR part
1026. Final § 1003.4(a)(22) applies to
applications for, and originations of,
closed-end covered loans and open-end
lines of credit, but not reverse mortgages
and commercial-purpose loans. To
facilitate compliance, the Bureau is
excepting covered loans that have been
purchased by a financial institution. As
the Bureau explained in the proposal, it
does not believe that the term of a
prepayment penalty would be readily
available from the information obtained
from the selling entity.333 The Bureau is
also excepting reverse mortgages and
commercial-purpose loans, which, as
explained above, will facilitate
compliance.
Final § 1003.4(a)(22) includes
commentary clarifying the reporting
obligations of financial institutions in
certain situations. Final comment
4(a)(22)–1 clarifies the scope of the
reporting requirement. Final comment
4(a)(22)–2 provides guidance for
reporting the prepayment penalty for
333 79
FR 51731 at 51791–92.
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applications and allows financial
institutions to rely on the commentary
to the relevant sections of Regulation Z.
4(a)(23)
Proposed § 1003.4(a)(23) provided
that a financial institution must report
the ratio of the applicant’s or borrower’s
total monthly debt to the total monthly
income relied on in making the credit
decision (debt-to-income ratio).
Proposed § 1003.4(a)(23) applied to
covered loans and applications, except
for reverse mortgages. The Bureau also
proposed new comments 4(a)(23)–1
through –4. Many commenters
addressed including the debt-to-income
ratio in the HMDA data. Many
community advocate commenters
expressed support for its inclusion,
while many industry commenters raised
concerns about reporting the data. For
the reasons discussed below, the Bureau
is finalizing § 1003.4(a)(23) and
comments 4(a)(23)–1 through –4 as
proposed with technical modifications
discussed below. In addition, the
Bureau is adopting new comments
4(a)(23)–5 through –7.
Comments
Several consumer advocate
commenters expressed strong support
for proposed § 1003.4(a)(23). Many
noted that the debt-to-income ratio will
help identify problematic loans where
there may be a need for intervention.
One commenter stated that higher ratios
correspond with higher default rates
and suggested that lenders’ acceptance
of higher debt-to-income ratios in loans
originated in the mid-2000s contributed
to the high foreclosure rates after 2005.
In addition, commenters stated that the
debt-to-income ratio will enable users to
identify whether the debt-to-income
ratio is a barrier to credit and, if so,
which consumers are affected.
A consumer advocate commenter
expressed support for collecting the
debt-to-income ratio, but noted
limitations to its utility because it can
be easily manipulated. The commenter
explained that the debt-to-income ratio
may overstate a borrower’s repayment
ability because a borrower may repay an
open-end line of credit to reduce their
debt in order to qualify, but then
immediately re-draw the line. In
addition, the debt-to-income ratio may
understate a borrower’s ability to repay
because a financial institution may only
consider the minimum income to
qualify.
Many industry commenters expressed
concerns about proposed
§ 1003.4(a)(23). Many commenters
questioned the value of reporting this
information. Some noted that the data
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would be difficult to analyze because
the debt-to-income ratio is calculated
and weighted differently depending on
the loan product, financial institution,
and applicant’s circumstances. Others
stated that the data would not be
valuable for different reasons, including
that the debt-to-income ratio is not
calculated for all loans and that the
debt-to-income ratio only factors into
denial, and not into pricing decisions.
Commenters also expressed concern
that the information may be
misunderstood because the debt-toincome ratio is one of many factors in
an underwriting decision and conveys
complex information. Other
commenters objected to including this
requirement because it is not expressly
required by the Dodd-Frank
amendments to HMDA. A few
commenters asserted that collecting the
debt-to-income ratio would not support
HMDA’s purposes. Others suggested
that collecting the debt-to-income ratio
was duplicative of other information
included in the proposal, including
denial reasons.
In addition to general concerns about
the proposed requirement, some
commenters stated that reporting the
debt-to-income ratio would be too
burdensome for financial institutions.
On the other hand, some industry
commenters noted that the burden for
reporting proposed § 1003.4(a)(23)
would be low because it requires
reporting of the debt-to-income ratio
relied on by the financial institution in
making the credit decision instead of
prescribing a specific calculation.
A few industry commenters stated
that they supported reporting the debtto-income ratio relied on in making the
credit decision, rather than requiring
financial institutions to report a
calculation prescribed by the Bureau.
Other commenters urged the Bureau to
require reporting of a specific debt-toincome ratio to increase the utility of
the data.
The Bureau concludes that including
the debt-to-income ratio in the HMDA
data will provide many benefits and
further HMDA’s purposes. The debt-toincome ratio will help identify potential
patterns of discrimination. The Bureau
understands that the debt-to-income
ratio is only one factor in underwriting.
Nonetheless, the debt-to-income ratio
provides important information about
the likelihood of default and about
access to credit. Reporting debt-toincome information supplements the
denial reason field in which financial
institutions may indicate whether an
application was denied due to the debtto-income ratio. In addition to
information about whether a loan was
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denied due to the debt-to-income ratio,
reporting the debt-to-income ratio will
illuminate potential disparate treatment
of similarly situated applicants. This
information will help to better identify
discriminatory practices, better
understand whether lenders are meeting
their obligations to serve the needs of
the communities in which they operate,
and, potentially, better target programs
and investments to vulnerable
borrowers.
Requiring the financial institution to
report the debt-to-income ratio relied on
in making the credit decision would
provide these benefits even though, as
noted by industry commenters, the debtto-income ratio is calculated differently
depending on the loan product and
lender. A prescribed debt-to-income
calculation for HMDA purposes may
allow for better comparison of debt-toincome information across the data.
However, a prescribed calculation
would significantly increase the burden
associated with reporting the debt-toincome ratio. Therefore, the final rule,
like the proposal, does not require a
prescribed debt-to-income ratio
calculation for HMDA purposes, and,
instead, requires financial institutions to
report the debt-to-income ratio relied on
in making the credit decision.
Some consumer advocate commenters
urged the Bureau to collect additional
information related to the mortgage
payment-to-income ratio (front-end
debt-to-income ratio). The front-end
debt-to-income ratio differs from the
information requested by proposed
§ 1003.4(a)(23), which is commonly
referred to as the back-end debt-toincome ratio, in that it, unlike the backend debt-to-income ratio, does not
include debts other than the mortgage
debt in the debt-to-income ratio. As a
result, the front-end debt-to-income
ratio is a less complete measure of a
borrower’s ability to repay a loan and,
accordingly, is a less important factor in
underwriting decisions. In addition,
using the reported income, discussed
above in the section-by-section analysis
of § 1003.4(a)(10)(iii), and loan amount,
discussed above in the section-bysection analysis of § 1003.4(a)(7), it will
be possible to calculate that ratio, if
desired. For these reasons, the final rule
does not require financial institutions to
report the front-end debt-to-income
ratio.
Several industry commenters also
raised concerns about the privacy
implications of collecting and disclosing
the applicant or borrower’s debt-toincome ratio. See part II.B above for a
discussion of the Bureau’s approach to
protecting applicant and borrower
privacy with respect to the public
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disclosure of the data. Due to the
significant benefits of collecting this
information, the Bureau believes it is
appropriate to collect the debt-toincome ratio despite the concerns raised
by commenters about collecting this
information.
Some industry commenters urged the
Bureau to exclude certain types of
transactions (e.g., applications) or types
of financial institutions (e.g.,
community banks) from the requirement
to report the information required by
proposed § 1003.4(a)(23). In addition,
some commenters believed that the
proposal would require a financial
institution to calculate a debt-to-income
ratio for HMDA reporting purposes even
if the financial institution did not
calculate or use debt-to-income
information in its credit decisions.
Proposed § 1003.4(a)(23) does not
require reporting the debt-to-income
ratio unless the financial institution has
calculated and relied upon a debt-toincome ratio in evaluating an
application. As discussed above, the
debt-to-income ratio is an important
aspect in underwriting and reporting
this information will provide an
important insight into an institution’s
credit decision. This information is
particularly important when a financial
institution denies an application due to
the debt-to-income ratio. In addition, as
discussed above, a financial institution
is not required to report a debt-toincome ratio if it has not calculated the
debt-to-income ratio for a particular
application. The final rule does not
require financial institutions to
calculate debt-to-income ratios solely
for HMDA reporting purposes.
Therefore, the debt-to-income ratio
should be reported for applications and
originations if the ratio is calculated and
relied on by the financial institution in
making the credit decision.
Other commenters explained that the
debt-to-income information should not
be reported for loans related to
multifamily properties or loans to a trust
because financial institutions do not
calculate the debt-to-income ratio in
making a credit decision on applications
for those types of loans. Commenters
explained that financial institutions
usually consider the cash flow of the
property, such as the debt service
coverage ratio, rather than the income of
the applicant when evaluating a
multifamily loan or loan to a nonnatural person. The Bureau understands
that this cash flow analysis is different
from the debt-to-income ratio. However,
some commenters expressed uncertainty
about whether financial institutions
would be required to report the debt
service coverage ratio or other cash flow
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66219
analysis for loans to non-natural persons
or for multifamily properties. To
eliminate the confusion, the final rule
will not require the financial institution
to report the debt-to-income ratio for
such loans. New comments 4(a)(23)–5
and –6 explain that a financial
institution may report that the
requirement does not apply if the
applicant and co-applicant, if
applicable, are not natural persons and
for loans secured by, or proposed to be
secured by, multifamily dwellings.
In addition, the Bureau has excluded
purchased covered loans from the
requirements of § 1003.4(a)(23). The
Bureau does not believe that the debtto-income ratio information is as
valuable for purchased covered loans as
for applications and originations. The
debt-to-income ratio that the originating
financial institution relied on in making
the credit decision may no longer be
accurate because a borrower’s debts and
incomes may have changed since
origination. In addition, the Bureau
believes that purchasing financial
institutions may face practical
challenges in ascertaining the debt-toincome ratio that the originating
financial institution relied on in making
the credit decision because it may not
be evident on the face of the loan
documents. In light of the limited value
of the data and these practical
challenges, the Bureau is excluding
purchased covered loans from the
requirements in § 1003.4(a)(23).
However, as discussed in comments
4(a)–2 through –4, a financial institution
that reviews an application for a
covered loan, makes a credit decision on
that application prior to closing, and
purchases the covered loan after closing
will report the covered loan as an
origination, not a purchase. In that case,
the final rule requires the financial
institution to report the debt-to-income
ratio that it relied on in making the
credit decision.
Finally, an industry commenter also
asked the Bureau to explain what a
financial institution should report if it
calculates more than one ratio in
making the credit decision. The Bureau
is finalizing proposed comment
4(a)(23)–1, which addresses the
situation in which more than one ratio
is used. If a financial institution
calculated an applicant’s or borrower’s
ratio more than one time, the financial
institution reports the debt-to-income
ratio relied on in making the credit
decision.
Final Rule
Having considered the comments
received and for the reasons discussed
above, pursuant to its authority under
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sections 305(a) and 304(b)(6)(J) of
HMDA, the Bureau is finalizing
§ 1003.4(a)(23) as proposed with
technical modifications. In addition, the
Bureau is finalizing proposed comments
4(a)(23)–1 through –4, as proposed, with
the clarifying modifications discussed
above and other technical
modifications. Finally, the Bureau is
finalizing new comments 4(a)(23)–5
through –7 to clarify when a financial
institution is not required to report the
applicant’s or borrower’s debt-to-income
ratio.
In addition, proposed § 1003.4(a)(23)
excluded reverse mortgages from the
requirement to report the debt-toincome ratio. The Bureau is removing
that exclusion from the final rule. The
Bureau included that exclusion because
it understood that financial institutions
historically did not consider income or
debt-to-income information when
evaluating applications for reverse
mortgages. HUD recently changed its
guidelines for evaluating reverse
mortgages for participation in the Home
Equity Conversion Mortgage (HECM)
program, which currently accounts for
the majority of the reverse mortgage
market.334 These revised guidelines
include consideration of some income
information.335 Currently, the revised
standards do not contemplate
calculation of a debt-to-income ratio.
However, it is possible that in the future
these guidelines or other underwriting
standards applicable to reverse
mortgages may include the
consideration of a debt-to-income ratio.
Therefore, the final rule removes the
exclusion for reverse mortgages from
§ 1003.4(a)(23). The Bureau anticipates
that this information will not be
reported for most reverse mortgages
because an institution is only required
to report the debt-to-income ratio if it
relies on it in making a credit decision
and institutions do not typically rely on
a debt-to-income ratio in making a
credit decision on a reverse mortgage.
4(a)(24)
Currently, neither HMDA nor
Regulation C contains requirements
regarding loan-to-value ratio. Section
304(b) of HMDA permits the disclosure
of such other information as the Bureau
may require.336 The Bureau proposed
§ 1003.4(a)(24), which requires financial
institutions to report the ratio of the
total amount of debt secured by the
334 U.S. Dept. of Housing and Urban Dev.,
Mortgagee Letter 2014–22, HECM Fin. Assessment
and Property Charge Requirements, available at
http://portal.hud.gov/hudportal/documents/
huddoc?id=14-22ml.pdf.
335 Id. at 33.
336 See Dodd-Frank Act section 1094(3)(A)(iv).
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property to the value of the property.
The ratio of total amount of secured
debt to the value of the property
securing the debt is generally referred to
as the combined loan-to-value (CLTV)
ratio.
The Bureau proposed two different
calculations for CLTV—one calculation
for a covered loan that is a home-equity
line of credit and another calculation for
a covered loan that is not a home-equity
line of credit. Specifically, the Bureau
proposed § 1003.4(a)(24)(i), which
provides that, for a covered loan that is
a home-equity line of credit, the CLTV
ratio shall be determined by dividing
the sum of the unpaid principal balance
of the first mortgage, the full amount of
any home-equity line of credit (whether
drawn or undrawn), and the balance of
any other subordinate financing by the
property value identified in proposed
§ 1003.4(a)(28). As to a covered loan that
is not a home-equity line of credit, the
Bureau proposed § 1003.4(a)(24)(ii),
which provides that the CLTV ratio
shall be determined by dividing the
combined unpaid principal balance
amounts of the first and all subordinate
mortgages, excluding undrawn homeequity lines of credit amounts, by the
property value identified in proposed
§ 1003.4(a)(28).
In addition, the Bureau proposed
instruction 4(a)(24)–1, which directs
financial institutions to enter the CLTV
ratio applicable to the property to two
decimal places, and if the CLTV ratio is
a figure with more than two decimal
places, directs institutions to truncate
the digits beyond two decimal places.
The Bureau also proposed instruction
4(a)(24)–2, which provides technical
instructions for covered loans in which
no combined loan-to-value ratio is
calculated.
The Bureau also proposed three
comments to clarify this reporting
requirement. Proposed comment
4(a)(24)–1 clarifies that, if a financial
institution makes a credit decision
without calculating the combined loanto-value ratio, the financial institution
complies with § 1003.4(a)(24) by
reporting that no combined loan-tovalue ratio was calculated in connection
with the credit decision. Proposed
comment 4(a)(24)–2 describes the CLTV
calculation for home-equity lines of
credit proposed in § 1003.4(a)(24)(i) and
provides illustrative examples.
Proposed comment 4(a)(24)–3 describes
the CLTV calculation for transactions
that are not home-equity lines of credit
proposed in § 1003.4(a)(24)(ii) and
provides illustrative examples.
The Bureau solicited feedback
regarding whether proposed
§ 1003.4(a)(24) is appropriate generally.
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Most commenters that provided
feedback on proposed § 1003.4(a)(24)
supported the Bureau’s proposal. For
example, one consumer advocate
commenter stated that the CLTV ratio
provides the most accurate calculation
of borrower equity and is therefore most
relevant to assess the credit risk of the
loan. Another consumer advocate
commenter pointed out that CLTV ratio
data provides important information
regarding both an individual property’s
leverage and the general level of
leverage in specific geographic
locations, and noted that areas in which
many properties are highly leveraged
are especially vulnerable to changes in
economic conditions. Another
consumer advocate commenter
suggested that CLTV ratio data is vital
to determining whether particular
financial institutions are making loans
with high CLTV ratios on a census tract
level. Some industry commenters also
supported the Bureau’s proposal. For
example, as with credit score data, one
industry commenter stated that for
purposes of fair lending analysis, CLTV
is crucial to understanding a financial
institution’s credit and pricing decision
and that without such information,
inaccurate conclusions may be reached
by users of HMDA data.
In contrast, several industry
commenters opposed the Bureau’s
proposal to require reporting of CLTV.
For example, some industry
commenters stated that the proposed
requirement is an unnecessary burden
on financial institutions since loan-tovalue ratio may be calculated using the
Bureau’s proposed property value data
and the loan amount data that the
regulation already requires. These
commenters explained that while the
proposed CLTV requirement would
provide the ratio of the total amount of
debt secured by the property to the
value of the property, they believe the
additional burden placed on financial
institutions by this new reporting
requirement outweighs any added value
to data users.
The Bureau has considered this
feedback and determined that CLTV
ratio data would improve the HMDA
data’s usefulness. CLTV ratio is a
standard underwriting factor regularly
calculated by financial institutions, both
for a financial institution’s own
underwriting purposes and to satisfy
investor requirements. For a particular
transaction in which a CLTV ratio is not
calculated or considered during the
underwriting process, the Bureau is
adopting a new comment, discussed
further below, which permits financial
institutions to report that the
requirement is not applicable if the
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financial institution did not rely on the
CLTV ratio in making the credit
decision. The Bureau believes that the
CLTV ratio is an important factor both
in the determination of whether to
extend credit and for the pricing terms
upon which credit would be extended.
Consequently, the Bureau is adopting
proposed § 1003.4(a)(24), modified as
discussed further below.
The Bureau has determined to
exclude purchased covered loans from
the requirements of § 1003.4(a)(24). The
Bureau does not believe that the
combined-loan-to-value ratio
information is as valuable for purchased
covered loans as for applications and
originations. The combined-loan-tovalue ratio that the originating financial
institution relied on in making the
credit decision may no longer be
accurate, because the total amount of
debt secured by the property to the
value of the property likely has changed
since origination. In addition, the
Bureau believes that purchasing
financial institutions may face practical
challenges in ascertaining the
combined-loan-to-value ratio that the
originating financial institution relied
on in making the credit decision
because it may not be evident on the
face of the loan documents. In light of
the limited value of the data and these
practical challenges, the Bureau is
excluding purchased covered loans from
the requirements in § 1003.4(a)(24).
However, as discussed in comment
4(a)–3, a financial institution that
reviews an application for a covered
loan, makes a credit decision on that
application prior to closing, and
purchases the covered loan after closing
will report the covered loan that it
purchases as an origination, not a
purchase. In that case, the final rule
requires the financial institution to
report the combined-loan-to-value ratio
that it relied on in making the credit
decision.
The Bureau solicited feedback
regarding whether the proposed
alignment to the MISMO data standards
for CLTV is appropriate and whether the
text of this proposed requirement
should be clarified. Consistent with the
Small Business Review Panel’s
recommendation, the Bureau also
solicited feedback regarding whether it
would be less burdensome for small
financial institutions to report the
combined loan-to-value relied on in
making the credit decision, or if it
would be less burdensome to small
financial institutions for the Bureau to
adopt a specific combined loan-to-value
ratio calculation as proposed under
§ 1003.4(a)(24).
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Several commenters did not support
the Bureau’s proposal to align with the
MISMO data standards and require two
different CLTV calculations depending
on whether or not the transaction is a
home-equity line of credit. Both
consumer advocates and industry were
concerned with the proposed
requirement to calculate CLTV ratio one
way for home-equity lines of credit but
another way for non-home-equity lines
of credit. Several commenters did not
support the Bureau’s proposed CLTV
calculations under proposed
§ 1003.4(a)(24), which requires that the
full amount of a home-equity line of
credit be included in the CLTV
calculation for a covered loan that is a
home-equity line of credit, whether it is
drawn or not, but that for transactions
that are not home-equity lines of credit,
only the outstanding amount of any
home-equity line of credit should be
included. One industry commenter
noted that it calculates the CLTV ratio
for a covered loan that is not a homeequity line of credit by including the
total amount of home-equity lines of
credit (and does not exclude ‘‘undrawn’’
home-equity lines of credit as required
under the Bureau’s proposal).
One consumer advocate commenter
recommended that the transactions
should be treated identically by
requiring the full amount be included in
the CLTV calculation since the entire
amount of a home-equity line of credit
available to the borrower constitutes
potential leverage of the property in
either situation. Similarly, another
consumer advocate commenter
suggested that loan-to-value calculations
involving home-equity lines of credit
should always use the full amount of
credit available to the borrower because
the borrower has access to the full line
of credit without any additional
underwriting by the financial institution
and thus a loan-to-value calculation that
ignores the undrawn amount will be
unreliable for purposes of analysis. This
same commenter stated that the
Bureau’s desire to align with the
MISMO data standards does not justify
the adoption of inferior CLTV
measurements. Lastly, in order to
address the burden that results from
requiring different CLTV ratio
calculations based on the type of
transaction, industry commenters also
recommended that the Bureau allow for
consistent treatment of outstanding
lines of credit, regardless of the loan
type being originated.
The Bureau has considered this
feedback and acknowledges that CLTV
ratio calculations on home-equity lines
of credit may vary between financial
institutions. The Bureau has determined
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that having two different methods of
calculating CLTV—one calculation for a
covered loan that is a home-equity line
of credit and another calculation for a
covered loan that is not a home-equity
line of credit—is unduly burdensome on
financial institutions. The Bureau has
also determined that it would be less
burdensome for financial institutions to
report the CLTV relied on in making the
credit decision. Consequently, the
Bureau will not adopt § 1003.4(a)(28) as
proposed. Instead, the Bureau is
adopting a modified § 1003.4(a)(28),
which requires a financial institution to
report the ratio of the total amount of
debt secured by the property to the
value of the property relied on in
making the credit decision.
As discussed in the proposal, the
Bureau is generally concerned about the
potential burden associated with
reporting calculated data fields, such as
the CLTV ratio. Some commenters noted
that consistency in the rounding method
for all relevant HMDA data will lead to
more accurate reporting. A few industry
commenters stated that the proposal
presented a confusing rounding process
that is not intuitive and differs
depending on the data point being
reported. For example, one commenter
suggested that rather than the
requirement to truncate any digits
beyond the first two decimal places,
proposed instruction 4(a)(24)–1 should
be adjusted to read that a CLTV ratio be
rounded up if the third digit behind the
decimal is 5 or larger, and rounded
down if the digit is 4 or smaller. The
commenter stated that current
underwriting systems such as Fannie
Mae’s Desktop Underwriter use this
method and that unnecessary errors can
be expected if the CLTV instructions are
finalized as proposed.
The Bureau acknowledges that the
CLTV reporting requirement in
proposed instruction 4(a)(24)–1 may
have posed some challenges for
financial institutions. The Bureau has
considered the feedback and believes
that the proposed CLTV reporting
requirement may be unduly
burdensome on financial institutions.
Consequently, the Bureau is not
adopting the proposed CLTV reporting
requirement in the final rule.
The Bureau is adopting a modified
§ 1003.4(a)(24), which requires reporting
of the CLTV that a financial institution
relied on in making the credit decision
and excludes reporting of CLTV for
purchased covered loans. In order to
align with the new reporting
requirement, the Bureau will not adopt
comments 4(a)(24)–1, –2, and –3 as
proposed, and adopts new comments
4(a)(24)–1, –2, –3, –4, and –5.
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The Bureau is adopting new comment
4(a)(24)–1, which explains that
§ 1003.4(a)(24) requires a financial
institution to report the CLTV ratio
relied on in making the credit decision
and provides an illustrative example.
The example provides that if a financial
institution calculated a CLTV ratio
twice—once according to the financial
institution’s own requirements and once
according to the requirements of a
secondary market investor—and the
financial institution relied on the CLTV
ratio calculated according to the
secondary market investor’s
requirements in making the credit
decision, § 1003.4(a)(24) requires the
financial institution to report the CLTV
ratio calculated according to the
requirements of the secondary market
investor.
The Bureau is adopting new comment
4(a)(24)–2, which explains that a
financial institution relies on the total
amount of debt secured by the property
to the value of the property (CLTV ratio)
in making the credit decision if the
CLTV ratio was a factor in the credit
decision even if it was not a dispositive
factor. For example, if the CLTV ratio is
one of multiple factors in a financial
institution’s credit decision, the
financial institution has relied on the
CLTV ratio and complies with
§ 1003.4(a)(24) by reporting the CLTV
ratio, even if the financial institution
denies the application because one or
more underwriting requirements other
than the CLTV ratio are not satisfied.
The Bureau is adopting new comment
4(a)(24)–3, which explains that a
financial institution should report that
the requirement is not applicable for
transactions in which a credit decision
was not made and provides illustrative
examples. The comment provides that if
a file was closed for incompleteness, or
if an application was withdrawn before
a credit decision was made, a financial
institution complies with § 1003.4(a)(24)
by reporting that the requirement is not
applicable, even if the financial
institution had calculated the CLTV
ratio.
The Bureau is adopting new comment
4(a)(24)–4, which explains that a
financial institution should report that
the requirement is not applicable for
transactions in which no CLTV ratio
was relied on in making the credit
decision. The comment provides that
§ 1003.4(a)(24) does not require a
financial institution to calculate the
CLTV ratio, nor does it require a
financial institution to rely on a CLTV
ratio in making a credit decision. The
comment clarifies that if a financial
institution makes a credit decision
without relying on a CLTV ratio, the
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financial institution complies with
§ 1003.4(a)(24) by reporting that the
requirement is not applicable since no
CLTV ratio was relied on in connection
with the credit decision.
Lastly, the Bureau is adopting new
comment 4(a)(24)–5, which explains
that a financial institution complies
with § 1003.4(a)(24) by reporting that
the reporting requirement is not
applicable when the covered loan is a
purchased covered loan. The Bureau
believes that comments 4(a)(24)–1, –2,
–3, –4, and –5 will provide clarity
regarding the new reporting requirement
adopted in § 1003.4(a)(24) and will
facilitate HMDA compliance.
The Bureau believes that requiring
financial institutions to collect
information regarding CLTV ratios is
necessary to carry out HMDA’s
purposes, such as helping to ensure that
the citizens and public officials of the
United States are provided with
sufficient information to enable them to
determine whether depository
institutions are filling their obligations
to serve the housing needs of the
communities and neighborhoods in
which they are located and assist public
officials in their determination of the
distribution of public sector investments
in a manner designed to improve the
private investment environment. CLTV
ratios are a significant factor in the
underwriting process and provide
valuable insight into both the stability of
community homeownership and the
functioning of the mortgage market.
Accordingly, pursuant to its authority
under sections 305(a) and 304(b)(6)(J) of
HMDA, the Bureau is adopting
§ 1003.4(a)(24), which requires, except
for purchased covered loans, reporting
of the CLTV that a financial institution
relied on in making the credit decision.
4(a)(25)
HMDA section 304(b)(6)(D) requires,
for loans and completed applications,
that financial institutions report the
actual or proposed term in months of
the mortgage loan.337 Currently,
Regulation C does not require financial
institutions to report information
regarding the loan’s term. The Bureau
proposed to implement HMDA section
304(b)(6)(D) by requiring in
§ 1003.4(a)(25) that financial institutions
collect and report data on the number of
months until the legal obligation
matures for a covered loan or
application. For the reasons discussed
below, the Bureau is finalizing
§ 1003.4(a)(25) substantially as
proposed.
337 Dodd-Frank
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The Bureau solicited feedback on
what method of reporting loan term
would minimize the burden on small
institutions while still meeting the
Dodd-Frank Act reporting requirements
and purposes of HMDA. Several
commenters opposed the Bureau’s
proposal and suggested that reporting
the loan term, along with other
proposed data points specific to
applicant or borrower and property
characteristics, could create privacy
risks. One commenter stated that it
would be difficult to retain borrower
and lender privacy in transactions that
involve multifamily loans because there
are a limited number of transactions in
a geographic area. The Bureau has
considered this feedback. See part II.B
above for a discussion of the Bureau’s
approach to protecting applicant and
borrower privacy with respect to the
public disclosure of the HMDA data.
One commenter stated that collecting
data on the loan term is appropriate for
closed-end loans but would create
burdensome programming demands if it
became a requirement for open-end
credit. As the Bureau explained in the
proposal, the length of time a borrower
has to repay a loan is an important
feature for borrowers and creditors.
With this information, borrowers are
able to determine the amount due with
each payment, which could
significantly influence their ability to
afford the loan. Creditors, on the other
hand, can use loan term as a factor in
assessing interest rate risk, which in
turns, affects loan pricing. The Bureau
believes that the benefit of the
information that the loan term could
provide, including loan terms on openend lines of credit, justifies the burden
because this information could help
explain pricing or any other differences
that are indiscernible with current
HMDA data.
A few commenters suggested that the
loan term should be reported consistent
with the loan term disclosed under
TILA–RESPA, which provides under
Regulation Z § 1026.37(a)(8) that the
term to maturity should be disclosed in
years or months or both.338 Although
consistency with TILA–RESPA might
mitigate burden if the creditor
disclosing the loan term under TILA–
RESPA elects to disclose term to
maturity in months instead of years or
years plus the remaining months, the
Bureau believes that a reasonable
interpretation of HMDA section
304(b)(6)(D) is that financial institutions
338 See 78 FR 79730 (Dec. 31, 2013). The rule is
effective on October 3, 2015 and applies to
transactions for which the creditor or mortgage
broker receives an application on or after that date.
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should report the actual or proposed
term for a loan or application in months.
Another commenter stated that
reporting loan term can be confusing on
loans with unusual terms, such as those
with terms that are not in whole
months. Proposed comment 4(a)(25)–2
clarified that for covered loans with
non-monthly repayment schedules, the
loan term should be in months and not
include any fractional months
remaining. This guidance, for which the
Bureau did not receive any comments,
should facilitate compliance for loans
with repayment schedules that are
measured in units of time other than
months.
Several other commenters supported
the Bureau’s proposal to include the
loan term. One commenter that
supported the Bureau’s proposal stated
that it is very useful, particularly given
the risk maturity premium for longer
term loans. Moreover, researchers
would be able to examine whether a
concentration of shorter term loans can
lead to a more stable housing market.
The Bureau concludes that the
information that could be provided by
loan terms will help determine whether
financial institutions are serving the
housing needs of their communities and
assist in identifying possible
discriminatory lending patterns and
enforcing antidiscrimination statutes by
allowing information about similar
loans to be compared and analyzed
appropriately. Accordingly, to
implement HMDA section 304(b)(6)(D),
the Bureau is adopting § 1003.4(a)(25)
substantially as proposed with minor
wording changes and is also adopting as
proposed comments 4(a)(25)–1 and –2.
In addition, the Bureau is adopting a
few comments that incorporate material
contained in proposed appendix A into
the commentary to § 1003.4(a)(25)
because of the removal of appendix A as
discussed in the section-by-section
analysis of appendix A below. These
comments 4(a)(25)–3 through 4(a)(25)–5
primarily incorporate proposed
appendix A instructions that do not
contain any substantive changes from
the proposed reporting requirements.
4(a)(26)
HMDA section 304(b)(6)(B) requires
the reporting of the actual or proposed
term in months of any introductory
period after which the rate of interest
may change.339 Currently, Regulation C
does not require financial institutions to
report information regarding the
numbers of months until the first
interest rate adjustment. The Bureau
proposed to implement HMDA section
339 Dodd-Frank
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304(b)(6)(B) by requiring in
§ 1003.4(a)(26) that financial institutions
collect and report data on the number of
months until the first date the interest
rate may change after loan origination.
The Bureau also proposed that
§ 1003.4(a)(26) would apply regardless
of how the interest rate adjustment is
characterized by product type, such as
adjustable rate, step rate, or another type
of product with a ‘‘teaser’’ rate. For the
reasons discussed below, the Bureau is
adopting § 1003.4(a)(26) generally as
proposed.
The Bureau solicited feedback on
what method of reporting initial interest
rate period would minimize burden on
small financial institutions while still
meeting the Dodd-Frank Act reporting
requirements and purposes of HMDA.
Several commenters supported the
Bureau’s proposal to collect data about
introductory terms. One commenter
stated that along with other data points,
the introductory rate period will enable
accurate analyses and a full
understanding of the extent of the terms
to which residents have access to credit.
The Bureau finds these reasons
compelling in finalizing § 1003.4(a)(26).
As the Bureau explained in the
proposal, interest rate variability can be
an important feature in affordability. In
addition, having information about
introductory rates will enable better
analyses of loans and applications,
which could be used to identify possible
discriminatory lending patterns.
One commenter pointed out that the
Bureau’s proposal to report the number
of months until the first date the interest
rate may change after origination is a
measure different from Regulation Z
§ 1026.43(e)(2)(iv)(A), which measures
the interest rate change from the date
the first regular periodic payment is
due. This commenter suggested that the
measure for the introductory term for
HMDA reporting should be consistent
with the measure prescribed by
Regulation Z § 1026.43(e)(2)(iv)(A),
which relates to the underwriting of a
qualified mortgage adopted under the
Bureau’s 2013 ATR Final Rule. Section
1026.43(e)(2)(iv)(A) provides that a
qualified mortgage under § 1026.43(e)(2)
must be underwritten, taking into
account any mortgage-related
obligations, using the maximum interest
rate that may apply during the first five
years after the date on which the first
regular periodic payment will be due.
As stated in the Bureau’s 2013 ATR
Final Rule, the Bureau believes that the
approach of requiring creditors to
underwrite a loan based on the
maximum interest rate that applies
during the first five years after the first
regular periodic payment due date
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66223
provides greater protections to
consumers and is also consistent with
Regulation Z disclosure requirements
for interest rates on adjustable-rate
amortizing loans.340 The Bureau,
however, believes that a reasonable
interpretation of HMDA section
304(b)(6)(B) requires the reporting of the
number of months after a loan
origination until the first instance of an
interest rate changes or for a loan
application, the proposed number of
months until the first instance of an
interest rate change. Accordingly, the
Bureau is adopting § 1003.4(a)(26)
generally as proposed but is modifying
the scope of the provision to include
applications. The Bureau is also
adopting comments 4(a)(26)–1 and –2
generally as proposed, but with minor
modifications for clarification. In
addition, because appendix A will be
deleted as discussed in the section-bysection analysis of appendix A below,
the Bureau is adopting new comments
4(a)(26)–3 and –4 to incorporate
instructions in proposed appendix A.
New comments 4(a)(26)–3 and –4 to
incorporate proposed instructions in
appendix A. New comment 4(a)(26)–3
specifies that a financial institution
reports that the requirement to report
the introductory rate period is not
applicable when the transaction
involves a fixed rate covered loan or an
application for a fixed rate covered loan.
Similarly, new comment 4(a)(26)–4
specifies that a financial institution
reports that the requirement to report
the introductory rate period is not
applicable if the transaction involves a
purchased fixed rate covered loan.
4(a)(27)
HMDA section 304(b)(6)(C) requires
reporting of the presence of contractual
terms or proposed contractual terms that
would allow the mortgagor or applicant
to make payments other than fully
amortizing payments during any portion
of the loan term.341 Current Regulation
C does not require financial institutions
to report whether a loan allows or
would have allowed the borrower to
make payments other than fully
amortizing payments. The Bureau
believes it is reasonable to interpret
HMDA section 304(b)(6)(C) to require
reporting non-amortizing features by
identifying specific, well-defined nonamortizing loan features. Thus, the
Bureau proposed to implement HMDA
section 304(b)(6)(C) by requiring the
reporting non-amortizing features,
including balloon payments, interest
only payments, and negative
340 78
FR 6407, 6521 (Jan. 30, 2013).
Act section 1094(3)(A)(iv).
341 Dodd-Frank
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amortizations. Proposed § 1003.4(a)(27)
requires reporting balloon payments, as
defined by 12 CFR 1026.18(s)(5)(i);
interest only payments, as defined by 12
CFR 1026.18(s)(7)(iv); a contractual term
that could cause the loan to be a
negative amortization loan, as defined
by 12 CFR 1026.18(s)(7)(v); or any other
contractual term that would allow for
payments other than fully amortizing
payments, as defined by 12 CFR
1026.43(b)(2). For the reasons discussed
below, the Bureau is finalizing
§ 1003.4(a)(27) as proposed.
The Bureau solicited feedback on
what method of report non-amortizing
features would minimize the burden on
small financial institutions but still
meet the reporting requirements of the
Dodd-Frank Act and the purposes of
HMDA. Most commenters, however,
supported the proposal to collect nonamortizing features without
modification. They stated that the data
will indicate whether a high incidence
of these features, particularly in loans to
vulnerable and underserved
populations, is a cause for concern that
requires intervention. For the same
reason, the Bureau believes that the
reporting of non-amortizing features is
helpful and can provide insight into
lending activity that features these
loans. It will provide data about the
types of loans that are being made and
assist in identifying possible
discriminatory lending patterns and
enforce antidiscrimination statutes.
A few commenters did not support
the Bureau’s proposal to require the
reporting of non-amortizing features. A
financial institution commenter stated
that it does not originate loans with
risky features and opined that most
small institutions probably do not
originate such loans either. The Bureau
recognizes that loans with nonamortizing features may be rare today.
However, such features that may not be
present in certain markets today may
arise at a later time. Given the risk of
payment shock with such products, the
Bureau proposed § 1003.4(a)(27)(iv) to
ensure the data includes information
about non-amortizing products.
Furthermore, during the SBREFA
process, small entity representatives
informed the Bureau that information
regarding non-amortizing features of a
loan is currently collected by financial
institutions. Based on this information,
the Bureau concludes that at least some
small institutions originate loans that
contain non-amortizing features.
Additionally, commenters that
opposed the reporting of non-amortizing
features reasoned that such information
is not helpful and may not even be
pertinent to most underwriting and
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pricing decisions. The Bureau explained
in the proposal that non-amortizing
features were a rarity but then became
more common in the lead-up to the
mortgage crisis. These features could be
pertinent to underwriting and pricing
decisions because of the nature of the
risk they pose on the borrower. One
commenter stated that HMDA reporters
will experience confusion when
multiple loan features apply and create
difficulties in developing new products.
The proposal and the final rule address
this concern by aligning the definitions
of non-amortizing features for HMDA
purposes with existing definitions in
Regulation Z. This alignment will
facilitate compliance and reduce
potential implementation and
compliance difficulties.
Accordingly, to implement HMDA
section 304(b)(6)(C), the Bureau is
finalizing § 1003.4(a)(27) as proposed
and is making minor technical
amendments and wording changes to
the commentary to § 1003.4(a)(27). Data
about non-amortizing features will help
determine whether financial institutions
are serving the housing needs of their
communities and assist in identifying
possible discriminatory lending patterns
and enforcing antidiscrimination
statutes by allowing information about
similar loans to be compared and
analyzed appropriately.
4(a)(28)
Regulation C does not require
financial institutions to report
information regarding the value of the
property that secures or will secure the
loan. HMDA section 304(b)(6)(A)
requires the reporting of the value of the
real property pledged or proposed to be
pledged as collateral.342 The Bureau
proposed § 1003.4(a)(28), which
implements this requirement by
requiring financial institutions to report
the value of the property securing the
covered loan or, in the case of an
application, proposed to secure the
covered loan relied on in making the
credit decision. The Bureau proposed a
new technical instruction in appendix A
for reporting the property value relied
on in dollars. In addition, in order to
provide clarity on proposed
§ 1003.4(a)(28), the Bureau proposed
new illustrative comments 4(a)(28)–1
and –2.
The Bureau solicited feedback on
which property value should be
reported. Several commenters,
including both industry and consumer
advocates, supported the Bureau’s
proposal to implement the Dodd-Frank
342 Dodd-Frank Act section 1094(3)(A)(iv), 12
U.S.C. 2803(b)(6)(A).
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Act requirement regarding property
value by requiring reporting of the value
of the property relied on in making the
credit decision in dollars. Other
commenters suggested different
approaches to collecting property value.
One consumer advocate commenter
suggested that the Bureau require
financial institutions to report the
purchase price of the property in all
circumstances. Another industry
commenter suggested that financial
institutions be required to report the
final property value determined by the
loan underwriter and used in the
investment decision.
The Bureau believes that financial
institutions should report the value
relied on in making the credit decision.
Thus, if the financial institution relied
upon the purchase price in making the
credit decision, the financial institution
would report that value. If the final
property value determined by a loan
underwriter and used in the financial
institution’s investment decision is the
property value that the institution relied
on in making the credit decision, then
reporting that property valuation will
comply with § 1003.4(a)(28). To this
end, comment 4(a)(28)–1 explains, if a
financial institution relies on an
appraisal or other valuation for the
property in calculating the loan-to-value
ratio, it reports that value; if the
institution relies on the purchase price
of the property in calculating the loanto-value ratio, it reports that value.
A national trade association
commenter requested that the Bureau
clarify that if an application is
withdrawn or is closed for
incompleteness, a financial institution
may report that the requirement is not
applicable since there was no reliance
on property value in making the credit
decision. In order to help facilitate
HMDA compliance by providing
additional guidance regarding the
property value reporting requirement,
the Bureau is adopting new comment
4(a)(28)–3, which clarifies how a
financial institution complies with
§ 1003.4(a)(28) by reporting that the
requirement is not applicable for
transactions for which no credit
decision was made. New comment
4(a)(28)–3 clarifies that if a file was
closed for incompleteness or the
application was withdrawn before a
credit decision was made, the financial
institution complies with § 1003.4(a)(28)
by reporting that the requirement is not
applicable, even if the financial
institution had obtained a property
value.
Two State trade association
commenters expressed concern that
proposed § 1003.4(a)(28) compels a
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financial institution to obtain an
appraisal even when a property
valuation is not in fact required for the
underwriting process of a particular
transaction or is not required per
regulations. In order to address this
concern, the Bureau is adopting new
comment 4(a)(28)–4, which clarifies that
§ 1003.4(a)(28) does not require a
financial institution to obtain a property
valuation, nor does it require a financial
institution to rely on a property value in
making a credit decision. Comment
4(a)(28)–4 explains that if a financial
institution makes a credit decision
without relying on a property value, the
financial institution complies with
§ 1003.4(a)(28) by reporting that the
requirement is not applicable since no
property value was relied on in
connection with the credit decision.
A consumer advocate commenter
suggested that the Bureau require
reporting of property value if a
valuation was performed and even if the
property valuation was not relied on in
making the credit decision. The Bureau
is not adopting this recommendation in
the final rule. The Bureau believes that
the property value relied on will be
more useful in understanding a
financial institution’s credit decision
and other HMDA data, such as pricing
information. The proposed standard in
§ 1003.4(a)(28) requires a financial
institution to report the property value
relied on in making the credit decision.
As explained in new comments
4(a)(28)–3 and –4, if a financial
institution has not made a credit
decision or has not relied on property
value in making the credit decision, the
financial institution complies with
§ 1003.4(a)(28) by reporting that the
requirement is not applicable. The
Bureau has determined that this is the
appropriate approach for purposes of
HMDA compliance.
One State trade association
commenter recommended that property
value be reported in ranges rather than
the actual value to better protect the
privacy of applicants. While reporting
property value in ranges may address
some of the privacy concerns raised by
commenters, the Bureau has determined
that requiring reporting of the value of
the property relied on in making the
credit decision in dollars is the more
appropriate approach. When coupled
with § 1003.4(a)(7), which requires a
financial institution to report the exact
loan amount, a requirement to report the
property value relied on in dollars
under § 1003.4(a)(28) will allow the
calculation of loan-to-value ratio, an
important underwriting variable.
Reporting property value in ranges
would render these calculations less
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precise, undermining their utility for
data analysis.
A few commenters were concerned
that if information regarding property
value is made available to the public,
such information could be coupled with
other publicly available information on
property sales and ownership records to
compromise a borrower’s privacy. The
Bureau has considered this feedback.
See part II.B above for a discussion of
the Bureau’s approach to protecting
applicant and borrower privacy with
respect to the public disclosure of
HMDA data.
Several commenters, including both
industry and consumer advocates,
supported the Bureau’s proposal to
implement the Dodd-Frank Act
requirement regarding property value by
requiring reporting of the value of the
property relied on in making the credit
decision in dollars. As discussed above,
knowing the property value in addition
to loan amount allows HMDA users to
estimate the loan-to-value ratio, which
measures a borrower’s equity in the
property and is a key underwriting and
pricing criterion. In addition, requiring
financial institutions to report
information about property value will
enhance the utility of HMDA data.
Property value data will further
HMDA’s purposes by providing the
public and public officials with data to
help determine whether financial
institutions are serving the housing
needs of their communities by
providing information about the values
of properties that are being financed; it
will also assist public officials in
distributing public-sector investment so
as to attract private investment by
providing information about property
values; and it will assist in identifying
possible discriminatory lending patterns
and enforcing antidiscrimination
statutes by allowing information about
similar loans to be compared and
analyzed appropriately. Moreover, for
the reasons given in the section-bysection analysis of § 1003.4(a)(29), the
Bureau believes that implementing
HMDA through Regulation C to treat
mortgage loans secured by all
manufactured homes consistently,
regardless of legal classification under
State law, is reasonable, and is
necessary and proper to effectuate
HMDA’s purposes and facilitate
compliance therewith.
Accordingly, pursuant to its authority
under HMDA sections 305(a) and
304(b)(6)(A), the Bureau is adopting
§ 1003.4(a)(28) as proposed, with several
technical and clarifying modifications to
proposed comments 4(a)(28)–1 and –2.
In addition, as discussed above, the
Bureau is adopting new comments
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4(a)(28)–3 and –4, which will help
facilitate HMDA compliance by
providing additional guidance regarding
the property value reporting
requirement.
4(a)(29)
Section 304(b) of HMDA permits
disclosure of such other information as
the Bureau may require. The Bureau
proposed § 1003.4(a)(29), which
required that financial institutions
report whether a manufactured home is
legally classified as real property or as
personal property. For the reasons
discussed below, the Bureau is adopting
§ 1003.4(a)(29) with modifications, to
require financial institutions to report
whether a covered loan or application is
or would have been secured by a
manufactured home and land or a
manufactured home and not land.
Since 1988, Regulation C has required
reporting of home purchase and home
improvement loans and refinancings
related to manufactured homes, whether
or not the homes are considered real
property under State law.343
Manufactured homes serve vital housing
needs in communities and
neighborhoods throughout the United
States. For example, manufactured
housing is the largest unsubsidized
source of affordable homeownership in
the United States.344 Manufactured
homes also often share certain essential
financing features with nonmanufactured homes. But classifications
of manufactured homes as real or
personal property vary significantly
among States and can be ambiguous.345
Regulation C’s consistent treatment of
manufactured housing in HMDA data
has proven important to furthering
HMDA’s purposes and provided
communities and public officials with
important information about
manufactured housing lending.346 The
343 53
FR 31683, 31685 (Aug. 19, 1988).
M. Burkhart, Bringing Manufactured
Housing into the Real Estate Finance System, 37
Pepperdine Law Review 427, 428 (2010), available
at http://digitalcommons.pepperdine.edu/cgi/
viewcontent.cgi?article=1042&context=plr.
345 See James M. Milano, An Overview and
Update on Legal and Regulatory Issues in
Manufactured Housing Finance, 60 Consumer
Financial Law Quarterly Report 379, 383 (2006);
Burkhart, supra note 344, at 430.
346 Adam Rust & Peter Skillern, Community
Reinvestment Association of North Carolina, Nine
Myths of Manufactured Housing: What 2004 HMDA
Data says about a Misunderstood Sector (2006),
available at http://www.reinvestmentpartners.org/
sites/reinvestmentpartners.org/files/Myths-andRealities-of-Manufactured-Housing.pdf; Delaware
State Housing Authority, Manufactured Housing in
Delaware: A Summary of Information and Issues
(2008), available at http://www.destatehousing.
com/FormsAndInformation/Publications/manu_
homes_info.pdf.
344 Ann
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Bureau believes that the unique nature
of the manufactured home financing
market warrants additional information
reporting. Although in many respects
manufactured and site built housing are
similar, manufactured home financing
reflects certain key differences as
compared to site built home financing.
State laws treat site built homes as real
property, with financing secured by a
mortgage or deed of trust. On the other
hand State law may treat manufactured
homes as personal property or real
property depending on the
circumstances.347 Manufactured home
owners may own or rent the underlying
land, which is an additional factor in
manufactured home owners’ total
housing cost and can be relevant to
financing.348
Many consumer advocate commenters
supported the proposed requirement.
Some argued, however, that additional
information about whether the covered
loan was secured by both the
manufactured home and land or the
manufactured home alone would be
valuable in addition to the
manufactured home’s classification
under State law, to distinguish covered
loans in States where manufactured
homes may be classified as real property
even if the home is sited on leased land.
Many industry commenters opposed the
proposed requirement as burdensome.
However, one industry commenter
supported the requirement and stated
that it had been subject to a fair lending
review that would have been
unnecessary if the HMDA data had
differentiated between land-and-home
and home-only manufactured home
loans. A few industry commenters
stated that in some circumstances
financial institutions secure loans using
multiple methods to perfect a lien under
both State real property and personal
property law because of secondary
market standards or prudence.
Other commenters argued that State
law can be difficult to understand and
that the proposed requirement would
therefore be difficult to comply with
and create the risk that the financial
institution would be cited for
incorrectly stating the legal
classification. Some commenters noted
that the legal classification may change
after the closing date of the loan. Some
industry commenters argued that the
347 Milano,
supra note 345 at 380.
Apgar et al., An Examination of
Manufactured Housing Community- and AssetBuilding Strategies, at 5 (Neighborhood
Reinvestment Corporation Report to the Ford
Foundation, Working Paper No. W02–11, 2002),
available at http://www.jchs.harvard.edu/research/
publications/examination-manufactured-housingcommunity-and-asset-building-strategy.
348 William
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proposed requirement did not
accurately reflect pricing distinctions
made by manufactured housing lenders
because pricing is based primarily on
whether the security interest will cover
both the land and home or the home
only, regardless of State law
classification. One commenter stated
that the proposed requirement is
relevant only to individual
manufactured home loans, and not
loans secured by manufactured home
communities.
The Bureau understands that the
proposed requirement may pose
reporting challenges because of multiple
methods of lien perfection and the
complexity of and differences among
State laws. However, information about
manufactured home loan classification
is valuable because there are material
differences in types of manufactured
home financing related to rate, term,
origination costs, legal requirements,
and consumer protections. These
differences are discussed in the
Bureau’s white paper on Manufactured
Housing Consumer Finance in the
United States.349 Furthermore,
capturing the pricing distinction
between types of manufactured home
loans is important to facilitate fair
lending analyses. Section 1003.4(a)(29)
will provide necessary insight into this
loan data and allow it to be used to help
determine whether financial institutions
are serving the housing needs of their
communities, assist in identifying
possible discriminatory lending patterns
and enforcing antidiscrimination
statutes, and, potentially, assist public
officials in public-sector investment
determinations.350
After considering the comments,
pursuant to its authority under HMDA
section 305(a) and 304(b)(6)(J), the
Bureau is adopting § 1003.4(a)(29) with
modifications. Pursuant to its authority
under HMDA section 305(a) to provide
for adjustments for any class of
transactions, the Bureau believes that
interpreting HMDA to treat mortgage
loans secured by all manufactured
homes consistently is necessary and
proper to effectuate HMDA’s purposes
349 See Bureau of Consumer Fin. Prot.,
Manufactured-Housing Consumer Finance in the
United States (2014), available at http://
www.consumerfinance.gov/reports/manufacturedhousing-consumer-finance-in-the-u-s/; see also 79
FR 51731, 51797–98 (Aug. 29, 2014).
350 U.S. Gov’t. Accountability Office, GAO 07–
879, Federal Housing Administration: Agency
Should Assess the Effects of Proposed Changes to
the Manufactured Home Loan Program (2007),
available at http://www.gao.gov/new.items/
d07879.pdf; See Milano, supra note 345 at 383;
Burkhart, supra note 344 at 428; Washington
Hearing, supra note 39.
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and facilitate compliance therewith.351
Final § 1003.4(a)(29) requires financial
institutions to report whether the
covered loan is secured by a
manufactured home and land or a
manufactured home and not land
instead of whether the manufactured
home is legally classified as real or
personal property. The Bureau believes
that the final rule will facilitate fair
lending analyses, and will help to
explain pricing data. At the same time,
the final rule will avoid the issues
associated with reporting classification
under State law such as using multiple
methods of lien perfection. As adopted,
the requirement will also not apply to
multifamily dwellings to make clear that
covered loans secured by a
manufactured home community are not
subject to this reporting requirement.
The Bureau is adopting new comment
4(a)(29)–1 to specify that even covered
loans secured by a manufactured home
classified as real property under State
law should be reported as secured by a
manufactured home and not land if the
covered loan is also not secured by land.
The Bureau is adopting new comment
4(a)(29)–2 to specify that this reporting
requirement does not apply to loans
secured by a multifamily dwelling that
is a manufactured home community.
Proposed comment 4(a)(29)–1 is
adopted as comment 4(a)(29)–3. The
Bureau is also adopting new comment
4(a)(29)–4 to provide guidance on the
scope of the reporting requirement.
4(a)(30)
Section 304(b) of HMDA permits
disclosure of such other information as
the Bureau may require. The Bureau
proposed to require financial
institutions to collect and report
whether the applicant or borrower owns
the land on which a manufactured home
is or will be located through a direct or
indirect ownership interest or leases the
land through a paid or unpaid leasehold
interest. For the reasons discussed
below, the Bureau is finalizing
§ 1003.4(a)(30) generally as proposed
with technical modifications for clarity
and to specify that multifamily
dwellings are not subject to the
reporting requirement.
Many consumer advocate commenters
supported the proposed requirement
and stated that the information would
be valuable. In contrast, many industry
commenters opposed the proposed
requirement for several reasons. Some
industry commenters stated that the
proposed requirement is information
351 See also 79 FR 51732, 51797–98 (Aug. 29,
2014) (explaining basis for treating mortgage loans
secured by all manufactured homes consistently).
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that they currently do not verify for
loans secured by a manufactured home
and not land. Other industry
commenters stated that they do collect
some information about the land
interest of the borrower for loans
secured by a manufactured home and
not land, but that the information
reported by the applicant is often
unreliable. Other industry commenters
stated that the information is not a
factor in loan pricing and questioned
the value of the information. Some
industry commenters stated that the
proposed requirement would relate only
to individual manufactured home loans
and not loans secured by manufactured
home communities.
The Bureau believes that the proposed
requirement will provide valuable
information about the land interest of
manufactured home loan borrowers.
The information could aid in
determining whether borrowers are
obtaining loans secured by a
manufactured home and not land when
they could qualify for a loan secured by
a manufactured home and land. This
information could aid policymakers at
the local, State, and Federal level and
financial institutions in determining
how the housing needs of manufactured
home borrowers could best be served by
loan products relating to manufactured
homes and legal requirements relating
to such financing or the classification
and treatment of manufactured homes
under State law.352
After considering the comments, the
Bureau is finalizing § 1003.4(a)(30) with
technical modifications for clarity and
to specify that multifamily dwellings are
not subject to the reporting requirement.
The Bureau is finalizing comments
4(a)(30)–1, –2, and –3 generally as
proposed, with technical modifications
for clarity. The Bureau is adopting new
comment 4(a)(30)–4 to clarify that a loan
secured by a multifamily dwelling that
is a manufactured home community is
not subject to the reporting requirement.
The Bureau is adopting new comment
4(a)(30)–5 to provide guidance on direct
ownership consistent with proposed
appendix A. The Bureau is also
352 See Bureau of Consumer Fin. Prot.,
Manufactured-Housing Consumer Finance in the
United States (2014), available at http://
www.consumerfinance.gov/reports/manufacturedhousing-consumer-finance-in-the-u-s/; Consumers
Union Report, Manufactured Housing Appreciation:
Stereotypes and Data (2003), available at http://
consumersunion.org/pdf/mh/Appreciation.pdf ;
Katherine MacTavish et al., Housing Vulnerability
Among Rural Trailer-Park Households, 13
Georgetown Journal on Poverty Law and Policy 97
(2006); Sally Ward et al., Carsey Institute, Resident
Ownership in New Hampshire’s ‘‘Mobile Home
Parks:’’ A Report on Economic Outcomes, (2010),
available at http://www.rocusa.org/uploads/Carsey
%20Institute%20Reprint%202010.pdf.
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adopting new comment 4(a)(30)–6 to
provide guidance on the scope of the
reporting requirement. The Bureau is
adopting § 1003.4(a)(30) pursuant to its
authority under section 305(a) and
304(b)(6)(J) of HMDA. The Bureau finds
that § 1003.4(a)(30) is necessary to carry
out HMDA’s purposes, because it will
provide necessary insight into loan data
and allow it to be used to help
determine whether financial institutions
are serving the housing needs of their
communities, since this information can
have important implications for the
financing, long-term affordability, and
appreciation of the housing at issue.
4(a)(31)
Current Regulation C requires
financial institutions to identify
multifamily dwellings as a property
type. The Bureau proposed to add
§ 1003.4(a)(31), which requires a
financial institution to report the
number of individual dwelling units
related to the property securing the
covered loan or, in the case of an
application, proposed to secure the
covered loan. As discussed above, the
Bureau proposed to replace the current
property type reporting requirement
with construction method and to
separate the concept of the number of
units from that reporting requirement.
For the reasons discussed below, the
Bureau is adopting § 1003.4(a)(31)
generally as proposed with additional
commentary to provide clarity.
Some commenters supported the
proposed requirement and stated that it
would provide valuable information
about covered loans related to
multifamily housing and covered loans
related to one- to four-unit dwellings.
Other commenters argued that the
number of units should be reported in
ranges, such 1, 2–4, and 5 or more.
Some commenters stated that ranges
would be insufficient as they would not
permit distinguishing between small
and large multifamily dwellings or
among one- to four-unit dwellings.
Other commenters argued that no
requirement to report number of units
should be adopted and the current
property type requirement should be
retained. Some commenters stated that
they currently collect an exact total
number of units and the data would
therefore be easy to obtain, while other
commenters stated that they use ranges
and the proposed requirement would be
burdensome. Some commenters stated
that there would be compliance
difficulties in reporting total units for
certain types of properties, such as
manufactured home communities,
condominium developments, and
cooperative housing developments.
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The Bureau believes that reporting the
precise number of individual dwelling
units would be preferable to ranges. The
precise number would permit better
comparison among loans related to
dwellings with a single dwelling unit,
two- to four-unit dwellings, and
multifamily dwellings with similar
numbers of dwelling units, thus
facilitating the analysis of the housing
needs served by both small and large
multifamily dwellings. Reporting the
precise number of units will also
facilitate matching HMDA data to other
publically available data about
multifamily dwellings.
After considering the comments, the
Bureau is finalizing § 1003.4(a)(31) as
proposed pursuant to its authority
under sections 305(a) and 304(b)(6)(J) of
HMDA. Multifamily housing has always
been an essential component of the
nation’s housing stock. In the wake of
the housing crisis, multifamily housing
has taken on an increasingly important
role in communities, as families have
turned to rental housing for a variety of
reasons.353 The Bureau finds that
§ 1003.4(a)(31) will further HMDA’s
purposes by assisting in determinations
about whether financial institutions are
serving the housing needs of their
communities, and it may assist public
officials in targeting public investments.
The Bureau received no specific
feedback on comment 4(a)(31)–1, which
is adopted with modifications for
consistency with final comment 4(a)(9)–
2. In response to the requests for
clarification, the Bureau is adopting
three new comments. New comments
4(a)(31)–2, –3, and –4 provide guidance
on: Reporting the total units for a
manufactured home community;
reporting the total units for
condominium and cooperative
properties; and the information that a
financial institution may rely on in
complying with the requirement to
report total units.
4(a)(32)
The Bureau proposed to add
§ 1003.4(a)(32), which requires financial
institutions to collect and report
information on the number of
individual dwelling units in
multifamily dwellings that are incomerestricted pursuant to Federal, State, or
local affordable housing programs. The
Bureau also solicited comment on
whether additional information about
the program or type of affordable
housing would be valuable and serve
HMDA’s purposes, and about the
353 See analysis of HMDA data at 79 FR 51731,
51800 (Aug. 29, 2014). See San Francisco Hearing,
supra note 42.
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burdens associated with collecting such
information compared with the burdens
of the proposal. In addition to soliciting
feedback generally about this
requirement, the Bureau specifically
solicited comment on the following
points:
• Whether the Bureau should require
reporting of information concerning
programs targeted at specific groups
(such as seniors or persons with
disabilities);
• Whether income restrictions above
a certain threshold should be excluded
for reporting purposes (such as income
restrictions above the area median
income);
• Whether it would be appropriate to
simplify the requirement and report
only whether a multifamily dwelling
contains a number of income-restricted
units above a certain percentage
threshold;
• Whether financial institutions
should be required to report the specific
affordable housing program or
programs;
• Whether financial institutions
should be required to report the area
median income level at which units in
the multifamily dwelling are considered
affordable; and
• Whether the burden on financial
institutions may be reduced by
providing instructions or guidance
specifying that institutions only report
income-restricted dwelling units that
they considered or were aware of in
originating, purchasing, or servicing the
loan.
Many industry commenters opposed
the proposed income-restricted units
reporting requirement and stated that it
would impose new burden on many
financial institutions that do not
regularly collect this information
currently. Many consumer advocate
commenters supported the proposed
reporting requirement and stated that it
would provide valuable information on
how financial institutions are serving
the housing needs of their communities.
However, most consumer advocate
commenters argued that the proposed
requirement would not provide enough
information, and that the Bureau should
add additional reporting requirements
to gather information about the
affordability level of the incomerestricted units. Some commenters
proposed additional reporting
requirements related to multifamily
dwellings including the number of
bedrooms for the individual dwellings
units, whether the housing is targeted at
specific populations, the presence and
number of commercial tenants, the debt
service coverage ratio at the time of
origination, and whether the developer
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or owner of the housing is a missiondriven nonprofit organization.
Regarding whether housing is targeted
at specific populations, the Bureau
notes that it is providing commentary to
the definition of dwelling as discussed
above in the section-by-section analysis
of § 1003.2(f) regarding when housing
associated with related services or
medical care should be reported.
However, the Bureau does not believe it
would be appropriate to adopt a
reporting requirement regarding housing
targeted at specific populations, at this
time.
The Bureau does not have sufficient
information on the costs and benefits
associated with such a reporting
requirement and the challenges in
developing an appropriate reporting
scheme given the wide variety of
housing designated for specific
populations including persons with
disabilities and seniors. Similarly, the
Bureau is not finalizing reporting
requirements on the other specific
suggestions for multifamily dwellings at
this time because it does not have
sufficient information on the costs and
benefits associated with such reporting
requirements and the Bureau believes it
may be likely that the burdens of such
reporting would outweigh the benefits.
Consumer advocate commenters
generally stated that the Bureau should
adopt additional data points similar to
the data reporting requirements for the
GSEs’ affordable housing goals.354 One
commenter stated that income-restricted
units at 80, 100, or 120 percent of area
median income should not be
considered affordable and not reported.
Other commenters stated that financial
institutions should be permitted to rely
on information provided by the
applicant or considered during the
underwriting process to fulfill this
reporting requirement.
The Bureau believes that additional
information about income-restricted
multifamily dwellings would be
valuable, but believes any benefits
would not justify the burdens for
collecting detailed information about
the level of affordability for individual
dwelling units. The suggestion to align
HMDA reporting with the GSE
affordable housing goals would require
financial institutions to report five data
points.355 The Bureau believes that the
354 12
CFR part 1282, subpart B.
institutions would have to report the
number of dwelling units affordable at moderateincome (not in excess of 100 percent of area median
income), low-income (not in excess of 80 percent
of area median income), low-income (not in excess
of 60 percent of area median income), very lowincome (not in excess of 50 percent of area median
income), and extremely low-income (not in excess
355 Financial
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GSE affordable housing goal reporting
requirements are sufficiently distinct
from HMDA that they should not be
adopted for HMDA purposes. For
example, the HMDA reporting
requirement proposed concerns only
income-restricted dwelling units, which
would generally be identifiable from
information about the property and not
require tenant income or rent
determinations for HMDA reporting,
whereas dwelling units may qualify for
the GSE affordable housing goals based
on tenant income information compared
to area median income or on rent levels
and adopting a similar reporting
requirement for HMDA would therefore
require information related to tenant
income or rent levels that a financial
institution may not consider in all
instances when not required to do so by
GSE requirements.356 This would be
significantly more burdensome than the
requirement proposed. Furthermore, for
the GSE affordable housing goals the
GSEs themselves participate in
analyzing the data and making the
determinations, and may estimate in the
case of missing information.357 The
Bureau did not propose to participate in
making the determinations on affordable
housing in a similar way.
Some commenters stated that the
burden of imposing the GSE affordable
housing goal requirements would not be
significant because many HMDA
reporters would already be following
them for covered loans secured by
multifamily dwellings sold to the GSEs.
However, according to the 2013 HMDA
data, of the 39,861 originated loans
secured by multifamily dwellings, only
2,388 were sold to the GSEs within the
calendar year of origination. The Bureau
is concerned that many financial
institutions would not be using the GSE
affordable housing goal standards for
the majority of their HMDA-reportable
loans secured by multifamily dwellings.
Therefore, the Bureau is not adopting
the suggested reporting requirement
aligned with the GSE affordable housing
goals.
The Bureau believes that information
about the number of income-restricted
units in multifamily dwellings is
valuable and will further HMDA’s
purposes, in part by providing more
useful information about these vital
public resources, and thereby assisting
public officials in distributing publicsector investment so as to attract private
investment to areas where it is needed.
Presently the need for affordable
of 30 percent of area median income). See 12 CFR
1282.17, 12 CFR 1282.18.
356 12 CFR 1282.15(d)(1), 12 CFR 1282.15(d)(2).
357 12 CFR 1282.15(e).
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housing is much greater than the
supply.358 Although the requirement
entails additional burden for some
financial institutions, other financial
institutions that specialize in lending
related to income-restricted multifamily
housing may have lesser initial burden
associated with this requirement. By
limiting the requirement to incomerestricted units and excluding some
other forms of affordable housing
policies and programs, the rule provides
a well-defined scope of reporting that
should generally be verifiable through
property records and other sources.
After considering the comments and
conducting additional analysis,
pursuant to HMDA sections 305(a) and
304(b)(6)(J), the Bureau is finalizing
§ 1003.4(a)(32) as proposed. The Bureau
is adopting new comment 4(a)(32)–5 to
provide guidance on information that a
financial institution may rely on in
complying with the requirement to
report the number of income-restricted
units. The Bureau is adopting new
comment 4(a)(32)–6 to provide guidance
on the scope of the reporting
requirement. The Bureau is also
finalizing comments 4(a)(32)–1, –2, –3,
and –4 generally as proposed, with
modifications for clarity.
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4(a)(33)
The Bureau proposed § 1003.4(a)(33)
to implement the Dodd-Frank Act
amendment that requires financial
institutions to disclose ‘‘the channel
through which application was made,
including retail, broker, and other
relevant categories’’ for each covered
loan and application.359 Proposed
§ 1003.4(a)(33) provided that, except for
purchased covered loans, a financial
institution was required to report the
following information about the
application channel of the covered loan
or application: whether the applicant or
borrower submitted the application for
the covered loan directly to the financial
institution; and whether the obligation
arising from the covered loan was or
would have been initially payable to the
financial institution. The Bureau also
proposed illustrative commentary. The
Bureau is finalizing § 1003.4(a)(33) as
proposed and proposed comments
4(a)(33)–1 through –3 with the
modifications discussed below.
358 Harvard University Joint Ctr. for Housing
Studies, America’s Rental Housing: Evolving Market
and Needs (2013), available at http://
www.jchs.harvard.edu/sites/jchs.harvard.edu/files/
jchs_americas_rental_housing_2013_1_0.pdf.
359 Dodd-Frank Act section 1094(3), 12 U.S.C.
2803(b)(6)(E).
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Comments
Several consumer advocate
commenters expressed support for the
proposed requirement, noting the
importance of this information in
identifying risks to consumers. On the
other hand, some industry commenters
expressed concerns about proposed
§ 1003.4(a)(33). One industry
commenter explained that collecting
this information would be burdensome
because financial institutions do not
routinely capture it in the proposed
format. Another industry commenter
asked the Bureau to exempt multifamily
loans from this requirement. In
addition, a commenter asked the Bureau
to exempt community banks because all
of their originations come through the
same application channel.
Information about the application
channel of covered loans and
applications will enhance the HMDA
data. The loan terms and rates that a
financial institution offers an applicant
may depend on how the applicant
submits the application (i.e., whether
through the retail, wholesale, or
correspondent channel).360 Thus,
identifying transactions by channel may
help users to interpret loan pricing and
other information in the HMDA data. In
addition, these data will aid in
understanding whether certain channels
present particular risks for consumers.
While there is some burden associated
with collecting this information, the
Bureau understands that the burden is
minimal because the information is
readily available and easily reported in
two true-false fields. For the same
reasons, the Bureau does not believe
that it is appropriate to exclude certain
types of institutions or types of loans
from the requirement, except the
exclusion for purchased loans discussed
below.
Some commenters suggested different
approaches to collect application
channel information. One consumer
advocate commenter asked the Bureau
to collect the loan channel information
as defined by the Secure and Fair
Enforcement of Mortgage Licensing Act
(SAFE Act), Public Law 110–289, to
identify the retail, wholesale, and
correspondent channels. However,
neither the SAFE Act nor its
implementing regulations define loan
channels, so it is not possible to align
360 See,
e.g., Keith Ernst et al., Center for
Responsible Lending, Steered Wrong: Brokers,
Borrowers, and Subprime Loans (April 2008),
available at http://www.responsiblelending.org/
mortgage-lending/research-analysis/steered-wrongbrokers-borrowers-and-subprime-loans.pdf.
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66229
with loan channel definitions in that
statute. 361
In addition, the final rule will collect
sufficient information to identify the
various loan channels. The application
channels in the mortgage market can be
identified with three pieces of
information: (1) Which institution
received the application directly from
the applicant, (2) which institution
made the credit decision, and (3) the
institution to which the obligation
initially was payable. For example, the
term ‘‘retail channel’’ generally refers to
situations where the applicant submits
the application directly to the financial
institution that makes the credit
decision on the application and to
which the obligation is initially payable.
The term ‘‘wholesale channel,’’ which is
also referred to as the ‘‘broker channel,’’
generally refers to situations where the
applicant submits the application to a
mortgage broker and the broker sends
the application to a financial institution
that makes the credit decision on the
application and to which the obligation
is initially payable. The correspondent
channel includes correspondent
arrangements between two financial
institutions. A correspondent with
delegated underwriting authority
processes an application much like the
retail channel described above. The
correspondent receives the application
directly from the applicant, makes the
credit decision, closes the loan in its
name, and immediately or within a
short period of time sells the loan to
another institution. Correspondents
with nondelegated authority operate
somewhat more like a mortgage broker
in the wholesale channel. These
correspondents receive the application
from the applicant, but prior to closing
involve a third-party institution that
makes the credit decision. The
transaction generally closes in the name
of the correspondent, which
immediately or within a short period of
time sells the loan to the third-party
institution that made the credit
decision.362
Regulation C requires the institution
that makes the credit decision to report
the action taken on the application, as
discussed above in the section-bysection analysis of § 1003.4(a).
Therefore, the application channels
described above can be identified with
the information required by proposed
§ 1003.4(a)(33), which included whether
361 See 12 U.S.C. 5101 et seq.; 12 CFR part 1007;
12 CFR part 1008.
362 See generally 78 FR 11280, 11284 (Feb. 15,
2013); CFPB Examination Procedures on Mortgage
Origination (2014), http://files.consumerfinance.
gov/f/201401_cfpb_mortgage-origination-examprocedures.pdf.
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the applicant or borrower submitted the
application directly to the financial
institution that is reporting the loan and
whether the obligation was, or would
have been, initially payable to the
financial institution that is reporting the
loan.
An industry commenter suggested
that the Bureau implement the DoddFrank Act amendment by requiring
financial institutions to report whether
a broker was involved. The Bureau
believes the proposal would be less
burdensome than the suggested
approach, which would require the final
rule to define the term ‘‘broker’’ solely
for the purpose of HMDA reporting. A
broker is generally understood to refer
applicants to lenders, but a broker may
play a different role in a given
transaction depending on the business
arrangement it has with a lender or
investor. In addition, as discussed
above, the commenter’s suggested
approach would not identify other
channels, such as the correspondent
channel. Therefore, proposed
§ 1003.4(a)(33) is the preferable
approach.
An industry commenter also opposed
the exclusion of purchase loans from the
requirement to report the information
required by proposed § 1003.4(a)(33).
The commenter reasoned that it is more
efficient to collect information from
investors than from the originating
organization. The commenter also did
not believe that the information
required by § 1003.4(a)(33) would be the
same for all purchased loans reported by
a financial institution. The Bureau
continues to believe that collecting
application channel information for
purchased loans is unnecessary. Under
Regulation C, if the financial institution
reports a loan as a purchase, the
reporting institution did not make a
credit decision on the loan. See the
section-by-section analysis of
§ 1003.4(a) and comments 4(a)–2
through –4. Thus data users could
assume that most, if not all, entries
reported as purchases did not involve
an application submitted to the
purchaser and that the loan did not
close in the institution’s name.
A consumer advocate commenter
urged the Bureau to collect a unique
identifier for each loan channel in
addition to the information required by
proposed § 1003.4(a)(33). The final rule
will require financial institutions to
report the NMLS ID of the loan
originator for covered loans and
applications. See the section-by-section
analysis of § 1003.4(a)(34). The NMLS
ID will further help to identify the loan
channel.
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Direct submission of an application.
Some commenters sought clarification
about proposed § 1003.4(a)(33)(i), which
required financial institutions to
indicate whether a financial institution
submitted an application directly to the
financial institution. A commenter
suggested referencing the language used
in the SAFE Act about loan origination
activities to clarify what proposed
§ 1003.4(a)(33)(i) required. The Bureau’s
Regulations G and H, which implement
the SAFE Act, provide detailed
examples of activities that are
conducted by loan originators.363 If the
loan originator that performed loan
origination services for the application
or loan that the financial institution is
reporting was an employee of the
reporting financial institution, the
applicant likely submitted the
application directly to the financial
institution. Section 1003.4(a)(34),
discussed below, references the
definition of loan originator in the SAFE
Act, and directs financial institutions to
report the NMLS ID of the loan
originator that performed origination
activities on the covered loan or
application. Therefore, the Bureau is
modifying proposed comment 4(a)(33)–
1, renumbered as comment 4(a)(33)(i)–1
to clarify that an application was
submitted directly to the financial
institution that is reporting the covered
loan or application if the loan originator
identified pursuant to § 1003.4(a)(34)
was employed by the financial
institution when the loan originator
performed loan origination activities for
the loan or application that the financial
institution is reporting.
Another commenter suggested
clarifying whether an application is
submitted directly to the financial
institution if the application is
submitted to a credit union service
organization (CUSO) hired by the credit
union that is reporting the entry to
receive applications for covered loans
on behalf of a credit union. The Bureau
is also modifying proposed comment
4(a)(33)–1, renumbered as comment
4(a)(33)(i)–1, to illustrate how to report
whether the application was submitted
directly to the financial institution
when a CUSO or other similar agent is
involved.
Another industry commenter raised
privacy concerns about releasing to the
public the application channel
information. The Bureau appreciates
this feedback and is carefully
considering the privacy implications of
the publicly released data. See part II.B
above for a discussion of the Bureau’s
4(a)(34)
Regulation C does not require
financial institutions to report
information regarding a loan originator
identifier. HMDA section 304(b)(6)(F)
requires the reporting of, ‘‘as the Bureau
may determine to be appropriate, a
unique identifier that identifies the loan
originator as set forth in section 1503 of
the [Secure and Fair Enforcement for]
Mortgage Licensing Act of 2008’’
(S.A.F.E. Act).364 The Bureau proposed
§ 1003.4(a)(34), which implements this
requirement by requiring financial
institutions to report, for a covered loan
or application, the unique identifier
assigned by the Nationwide Mortgage
Licensing System and Registry (NMLSR
ID) for the mortgage loan originator, as
defined in Regulation G § 1007.102 or
Regulation H § 1008.23, as applicable.
In addition, the Bureau proposed
three comments. Proposed comment
4(a)(34)–1 discusses the requirement
that a financial institution report the
NMLSR ID for the mortgage loan
363 See 12 U.S.C. 5101 et seq.; 12 CFR part 1007;
12 CFR part 1008.
364 Dodd-Frank Act section 1094(3)(A)(iv), 12
U.S.C. 2803(b)(6)(F).
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approach to protecting applicant and
borrower privacy with respect to the
public disclosure of the data. Due to the
significant benefits of collecting this
information, the Bureau believes it is
appropriate to collect application
channel information despite the
concerns raised by commenters about
collecting this information. The Bureau
received no comments on proposed
comments 4(a)(33)–2 and –3.
Final Rule
For the reasons discussed above and
pursuant to its authority under HMDA
sections 304(b)(6)(E) and 305(a), the
Bureau is adopting § 1003.4(a)(33) as
proposed. This requirement is an
appropriate method of implementing
HMDA section 304(b)(6)(E) in a manner
that carries out HMDA’s purposes. To
facilitate compliance, pursuant to
HMDA 305(a), the Bureau is excepting
purchased covered loans from this
requirement. The Bureau is also
finalizing proposed comments 4(a)(33)–
1, –2, and –3, renumbered as comments
4(a)(33)(i)–1, 4(a)(33)(ii)–1, and
4(a)(33)–1, with the modifications
discussed above. The Bureau is also
adopting new comment 4(a)(33)(ii)–2 to
clarify that a financial institution may
report that § 1003.4(a)(33)(ii) is not
applicable when the institution had not
determined whether the covered loan
would have been initially payable to the
institution reporting the application
when the application was withdrawn,
denied, or closed for incompleteness.
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originator and describes the NMLSR ID.
Proposed comment 4(a)(34)–2, clarifies
that, in the event that the mortgage loan
originator is not required to obtain and
has not been assigned an NMLSR ID, a
financial institution complies with
§ 1003.4(a)(34) by reporting ‘‘NA’’ for
not applicable. Proposed comment
4(a)(34)–2 also provides an illustrative
example to clarify that if a mortgage
loan originator has been assigned an
NMLSR ID, a financial institution
complies with § 1003.4(a)(34) by
reporting the mortgage loan originator’s
NMLSR ID regardless of whether the
mortgage loan originator is required to
obtain an NMLSR ID for the particular
transaction being reported by the
financial institution. Lastly, the Bureau
proposed comment 4(a)(34)–3, which
clarifies that if more than one individual
meets the definition of a mortgage loan
originator, as defined in Regulation G,
12 CFR 1007.102, or Regulation H, 12
CFR 1008.23, for a covered loan or
application, a financial institution
complies with § 1003.4(a)(34) by
reporting the NMLSR ID of the
individual mortgage loan originator
with primary responsibility for the
transaction. The proposed comment
explains that a financial institution that
establishes and follows a reasonable,
written policy for determining which
individual mortgage loan originator has
primary responsibility for the reported
transaction complies with
§ 1003.4(a)(34).
The vast majority of commenters
supported the Bureau’s proposed
§ 1003.4(a)(34). Many consumer
advocate commenters supported the
Bureau’s proposal to include a unique
identifier for a mortgage loan originator
because this information may help
regulatory agencies and the public
identify financial institutions and loan
originators that are engaged in
problematic loan practices. Commenters
also supported the Bureau’s proposed
§ 1003.4(a)(34) because they believe the
information is critical to understanding
the residential mortgage market.
Consistent with the Small Business
Review Panel’s recommendation, the
Bureau specifically solicited comment
on whether the mortgage loan originator
unique identifier should be required for
all entries on the loan/application
register, including applications that do
not result in originations, or only for
loan originations and purchases. One
industry commenter stated without
explanation that the reporting
requirement should only apply to
originations and purchases. Another
national trade association stated,
without further explanation, that
reporting of the mortgage loan originator
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unique identifier should not be required
on applications that do not result in
originations because such data will not
provide any value and will impose
burden on industry. In contrast, another
industry commenter stated that in order
for the NMLSR ID to be useful, such
data should only be collected and
reported if the loan officer has the
authority to decide whether to approve
or deny the application. This
commenter stated that in such cases, the
NMLSR ID would need to be collected
for both originated and non-originated
applications.
The Bureau has considered this
feedback and determined it will adopt
proposed § 1003.4(a)(34), which applies
to applications, originations, and
purchased loans. The Bureau believes
the HMDA data’s usefulness will be
improved by being able to identify
individual mortgage loan originators
with primary responsibility over
applications, originations, and
purchased loans. While the Bureau
acknowledged in its proposal that a
requirement to collect and report a
mortgage loan originator unique
identifier may impose some burden on
financial institutions, the Bureau did
not receive feedback specifically
addressing the potential burden. In fact,
a State trade association commented
that reporting the mortgage loan
originator’s NMLS ID would not pose an
additional burden for its members
because it already collects and reports
this information for the mortgage Call
Report. A government commenter also
stated that this data should be readily
accessible by HMDA reporters since it
will be provided on the TILA-RESPA
integrated disclosure form.
The Bureau has determined that the
benefits gained by the information
reported under proposed § 1003.4(a)(34)
justify any potential burdens on
financial institutions. As discussed in
the Bureau’s proposal, this information
is provided on certain loan documents
pursuant to the loan originator
compensation requirements under
TILA.365 As noted by a commenter, this
information will also be provided on the
TILA-RESPA integrated disclosure
form.366 As a result, the Bureau has
determined that the NMLSR ID for the
mortgage loan originator will be readily
available to HMDA reporters at little to
no ongoing cost.
Several commenters did not support
the Bureau’s proposed § 1003.4(a)(34)
for two main reasons. This opposition is
based on concerns related to disclosure
of this information by the Bureau. First,
365 Regulation
366 Regulation
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66231
one State trade association and a few
industry commenters suggested that
review of a mortgage loan originator’s
performance should be left up to the
individual financial institution and not
be subject to public scrutiny. Second, a
few commenters stated that requiring
financial institutions to report the
NMLSR ID of the individual mortgage
loan originator would raise concerns
regarding the privacy of those mortgage
loan originators. For example, a State
trade association and another industry
commenter opposed the Bureau’s
proposed § 1003.4(a)(34) because it
believes disclosing an NMLSR ID in
connection with specific loan
transactions has the potential to violate
the financial privacy of individual
employees of a financial institution. The
commenter suggested that making this
information publicly available would
create privacy concerns for a financial
institution’s loan originator employees
by opening the door to identification of
the loan originator by name and
address. In addition, the commenter
argued that this information, combined
with other transaction specific public
information, could enable someone to
calculate an individual loan originator
employee’s commission income, sales
volume and other private financial
information. Another industry
commenter suggested that if a mortgage
loan originator can be identified in the
HMDA data, and the loan originator
originated a large volume of loans at a
financial institution that subsequently
fails for reasons unrelated to
underwriting, the loan originator may be
unable to find employment.
The Bureau has considered this
feedback. The Bureau has concluded
that it will not withhold from public
release the NMLSR ID of mortgage loan
originators for the reasons expressed by
commenters. As summarized above, the
commenters were concerned that the
public disclosure of this information
may implicate the privacy interests of
mortgage loan originators. As discussed
in part II.B above, HMDA directs the
Bureau to ‘‘modify or require
modification of itemized information,
for the purpose of protecting the privacy
interests of the mortgage applicants or
mortgagors, that is or will be available
to the public.’’ 367 The Bureau is
applying a balancing test to determine
whether and how HMDA data should be
modified prior to its disclosure to the
public in order to protect applicant and
borrower privacy while also fulfilling
HMDA’s public disclosure purposes.
The Bureau will consider NMLSR ID
367 HMDA section 304(h)(1)(E), (h)(3)(B); 12
U.S.C. 2803(h)(1)(3), (h)(3)(B).
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under this applicant and borrower
privacy balancing test. The Bureau is
implementing, in § 1003.4(a)(34), the
Dodd-Frank Act amendment to HMDA
requiring a unique identifier for
mortgage loan originators. Because the
Dodd-Frank Act explicitly amended
HMDA to add a loan originator
identifier, while at the same time
directing the Bureau to modify or
require modification of itemized
information ‘‘for the purpose of
protecting the privacy interests of the
mortgage applicants or mortgagors,’’ the
Bureau believes it is reasonable to
interpret HMDA as not requiring
modifications of itemized information to
protect the privacy interests of mortgage
loan originators, and that that
interpretation best effectuates the
purposes of HMDA.
The Bureau is finalizing the DoddFrank Act requirement for the collection
and reporting of a mortgage loan
originator unique identifier as proposed
in § 1003.4(a)(34). The Bureau believes
that this information will improve
HMDA data by, for example, identifying
an individual who has primary
responsibility in the transaction, which
will in turn enable new dimensions of
analysis, including being able to link
individual mortgage loan originators or
groups of mortgage loan originators to a
financial institution. Accordingly, the
Bureau is adopting § 1003.4(a)(34) as
proposed, with minor modification for
proposed clarity to proposed comment
4(a)(34)–2 and one substantive change
to proposed comment 4(a)(34)–3. In
order to facilitate compliance with the
new reporting requirement when
multiple mortgage loan originators are
associated with a particular covered
loan or transaction, the comment
clarifies that a financial institution
reports the NMLSR ID of the individual
mortgage loan originator with primary
responsibility for the transaction as of
the date of action taken pursuant to
§ 1003.4(a)(8)(ii). A financial institution
that establishes and follows a
reasonable, written policy for
determining which individual mortgage
loan originator has primary
responsibility for the reported
transaction as of the date of action taken
complies with § 1003.4(a)(34).
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4(a)(35)
Currently, Regulation C does not
require financial institutions to report
information regarding results received
from automated underwriting systems,
and HMDA does not expressly require
this itemization. Section 304(b) of
HMDA permits the disclosure of ‘‘such
other information as the Bureau may
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require.’’ 368 The Bureau proposed
§ 1003.4(a)(35)(i), which provides that
except for purchased covered loans, a
financial institution shall report the
name of the automated underwriting
system it used to evaluate the
application and the recommendation
generated by that automated
underwriting system. In addition, the
Bureau proposed § 1003.4(a)(35)(ii),
which defines an automated
underwriting system (AUS) as an
electronic tool developed by a
securitizer, Federal government insurer,
or guarantor that provides a
recommendation regarding whether the
application is eligible to be purchased,
insured, or guaranteed by that
securitizer, Federal government insurer,
or guarantor. The Bureau also proposed
three comments to provide clarification
on the reporting requirement regarding
AUS information under proposed
§ 1003.4(a)(35).
In order to facilitate HMDA
compliance and address concerns that it
could be burdensome for financial
institutions that purchase loans to
identify automated underwriting system
information, the Bureau excluded
purchased covered loans from the
requirements of proposed
§ 1003.4(a)(35)(i). The Bureau solicited
feedback on whether this exclusion was
appropriate and received a few
comments. One consumer advocate
commenter recommended that unless
and until the ULI is successfully
implemented, purchased loans should
not be excluded from the automated
underwriting data reporting
requirement. Another consumer
advocate commenter provided feedback
recommending that there be no
exception for reporting of AUS
information for purchased loans. This
commenter suggested that the official
interpretation of the rule should specify
that the Bureau considers it reasonable
for any institution purchasing covered
loans to negotiate a contractual
agreement requiring the seller
institution to provide all data required
by HMDA. The commenter also
suggested that if an exception for
purchased loans under proposed
§ 1003.4(a)(35)(i) remains, it should be
limited only to instances where the
financial institution does not have and
cannot reasonably obtain the AUS
information.
The Bureau has considered this
feedback and has determined that it
would be burdensome for financial
institutions that purchase loans to
identify the AUS used by the originating
368 Dodd-Frank Act section 1094(3)(A)(iv), 12
U.S.C. 2803(b)(6)(J).
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financial institution to evaluate the
application and to identify the AUS
result generated by that system.
Consequently, the Bureau is adopting
the exclusion of purchased covered
loans proposed under § 1003.4(a)(35)(i).
The Bureau is also adopting new
comment 4(a)(35)–5, which explains
that a financial institution complies
with § 1003.4(a)(35) by reporting that
the requirement is not applicable when
the covered loan is a purchased covered
loan.
In response to the Bureau’s
solicitation for feedback regarding
whether the proposed AUS
requirements are appropriate, a few
commenters recommended that the
reporting requirement under proposed
§ 1003.4(a)(35) be optional. For
example, one industry commenter
stated that reporting AUS data should
be optional, not mandatory, since many
smaller institutions do not use an
automated system to evaluate certain
loans. Another commenter stated that
financial institutions do not use an AUS
to evaluate multifamily and other
commercial mortgage finance
applications.
While the Bureau acknowledges that
proposed § 1003.4(a)(35) will contribute
to financial institutions’ compliance
burden, the Bureau has determined that
a requirement of optional reporting of
AUS data is not the appropriate
approach given the value of the data in
furthering HMDA’s purposes. As
discussed above with respect to denial
reasons under § 1003.4(a)(16), the
statistical value of optionally reported
data is lessened because of the lack of
standardization across all HMDA
reporters. A requirement that all
financial institutions report the name of
the AUS used to evaluate an application
and the result generated by that system
is the proper approach for purposes of
HMDA. Moreover, as discussed further
below, new comment 4(a)(35)–4 clarifies
that a financial institution complies
with proposed § 1003.4(a)(35) by
reporting that the requirement is not
applicable if it does not use an AUS to
evaluate the application, for example, if
it only manually underwrites an
application. In addition, as discussed
further below, in order to address the
concern that an AUS may not be used
for all the types of transactions covered
by the final rule, new comment
4(a)(35)–6 clarifies that when the
applicant and co-applicant, if
applicable, are not natural persons, a
financial institution complies with
§ 1003.4(a)(35) by reporting that the
requirement is not applicable.
In response to the Bureau’s
solicitation for feedback regarding
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whether the proposed AUS
requirements are appropriate, several
commenters expressed concern that the
Bureau’s use of the term
‘‘recommendation’’ when describing the
output from an AUS is inaccurate since
such systems do not provide a credit
decision. For example, one industry
commenter stated that AUS
recommendations are not a proxy for
underwriter discretion and that even
though an AUS recommendation can
inform the level of underwriting that is
appropriate for an application, it is not
a credit decision on that application.
Similarly, another industry commenter
stated that when a financial institution
obtains an AUS recommendation, the
loan is then typically fully underwritten
by in-house underwriters who make the
final credit decision. Another
commenter noted that the output from
an AUS does not reflect the complete
underwriting decision of a loan
application and that a financial
institution may have additional
requirements such as credit-related
overlays on top of those specified by the
AUS used by the institution to evaluate
the application.
The Bureau considered this feedback
and has determined that in order to
address the concern that ‘‘AUS
recommendation’’ incorrectly signals
that the recommendation is a credit
decision made by the AUS, the Bureau
is adopting § 1003.4(35)(i) generally as
proposed, but replaces the term
‘‘recommendation’’ with ‘‘result.’’
Accordingly, the final rule requires a
financial institution to report, except for
purchased covered loans, the name of
the automated underwriting system it
used to evaluate the application and the
result generated by that automated
underwriting system.
The Bureau solicited feedback on
whether limiting the definition of an
automated underwriting system as
proposed in § 1003.4(a)(35)(ii) to one
that is developed by a securitizer,
Federal government insurer, or
guarantor is appropriate, and whether
commentary is needed to clarify the
proposed definition or to facilitate
compliance. The Bureau’s proposed
AUS definition provided that financial
institutions would report AUS data
regarding the automated underwriting
systems of the government-sponsored
enterprises (GSEs)—the Federal
National Mortgage Association (Fannie
Mae) and the Federal Home Loan
Mortgage Corporation (Freddie Mac)—
other Federal government insurer or
guarantor systems, and the proprietary
automated underwriting systems of
securitizers. The Bureau’s proposed
AUS definition did not include the
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proprietary automated underwriting
systems developed by financial
institutions that are not securitizers, nor
the systems of third party vendors. In
response to the Bureau’s solicitation for
feedback, several commenters suggested
that the definition of AUS be expanded
to include all systems used by financial
institutions to evaluate an application.
For example, one consumer advocate
commenter stated that financial
institutions use automated underwriting
systems developed and sold by
companies that are not securitizers,
Federal government insurers or
guarantors to determine whether or not
loans will be eligible for government
guarantee, insurance programs or sale to
private investors, and that the Bureau
should require financial institutions to
report the use of and results from those
systems as well. Another industry
commenter stated that the Bureau’s
failure to cover the full range of all
platforms used by financial institutions
to make a credit decision, including
proprietary or third-party AUSs, will
necessarily produce incomplete data.
Another commenter stated that the
Bureau’s proposed AUS definition is
both under and over inclusive. The
commenter argued that the definition is
under inclusive because it excludes
from HMDA reporting requirements the
AUS name and result generated by a
system developed by an entity that is
not a securitizer, Federal government
insurer, or guarantor. The commenter
also argued that the definition is over
inclusive since it could be interpreted as
capturing other electronic tools used by
financial institutions that are designed
by the secondary market to provide an
assessment of credit risk of an applicant
or purchase eligibility of a loan, but are
not intended to replace the purpose of
an AUS.
The Bureau considered this feedback
and has determined that it will adopt
the proposed definition of AUS in
§ 1003.4(a)(35)(ii), with three
modifications. First, the Bureau added
the words ‘‘Federal government’’ in
front of guarantor to the definition of
AUS in the final rule to clarify that the
definition captures an AUS developed
by a Federal government guarantor, but
not one developed by a non-Federal
government guarantor. Second, the
Bureau added the word ‘‘originated’’ to
the definition of AUS in the final rule
to clarify that in order for an electronic
tool to meet the definition of an AUS
under § 1003.4(a)(35)(ii), the system
must provide a result regarding the
eligibility of the covered loan to be
originated, purchased, insured, or
guaranteed by the securitizer, Federal
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government insurer, or Federal
government guarantor that developed
the system being used to evaluate the
application. Third, the Bureau added
the words ‘‘the credit risk of the
applicant’’ to the definition of AUS in
the final rule to clarify that in order for
an electronic tool to meet the definition
of an AUS under § 1003.4(a)(35)(ii), the
system must also provide a result
regarding the credit risk of the
applicant.
In order to facilitate compliance, the
Bureau is also adopting new comment
4(a)(35)–2, discussed further below,
which explains the definition of AUS
and provides illustrative examples of
the reporting requirement. In addition,
the Bureau recognizes that the Federal
Housing Administration’s (FHA)
Technology Open to Approved Lenders
(TOTAL) Scorecard is different than the
automated underwriting systems
developed by Fannie Mae and Freddie
Mac. TOTAL Scorecard is a tool
developed by HUD that is used by
financial institutions to evaluate the
creditworthiness of applicants and
determine an associated risk level of a
loan’s eligibility for insurance by the
FHA. Unlike the automated
underwriting systems of the GSEs,
TOTAL Scorecard works in conjunction
with various automated underwriting
systems.369 However, if a financial
institution uses TOTAL Scorecard to
evaluate an application, the Bureau has
determined that the HMDA data’s
usefulness will be improved by
requiring the financial institution to
report that it used that system along
with the result generated by that system.
Accordingly, pursuant to its authority
under sections 305(a) and 304(b)(6)(J) of
HMDA, the Bureau is adopting
§ 1003.4(a)(35)(ii), which provides that
an automated underwriting system
means an electronic tool developed by
a securitizer, Federal government
insurer, or Federal government
guarantor that provides a result
regarding the credit risk of the applicant
and whether the covered loan is eligible
to be originated, purchased, insured, or
guaranteed by that securitizer, Federal
government insurer, or Federal
government guarantor. Notwithstanding
the concerns associated with collecting
and reporting information about
automated underwriting systems and
results, the Bureau has determined that
this information will further HMDA’s
purposes. This data will assist in
understanding a financial institution’s
underwriting decisionmaking and will
provide information that will assist in
369 See http://portal.hud.gov/hudportal/
HUD?src=/program_offices/housing/sfh/total.
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identifying potentially discriminatory
lending patterns and enforcing
antidiscrimination statutes.
As discussed above, the Bureau
solicited feedback on whether
commentary is needed to facilitate
compliance. Several commenters
provided a variety of feedback,
including concern that the proposal will
result in incomplete or inconsistent
data. One commenter noted while the
Bureau’s proposed commentary
recognizes the fact that financial
institutions often use multiple AUSs for
any given loan application, the proposal
leaves open potential inconsistencies in
how a lender chooses which AUS to
report. For example, a few commenters
noted that the ‘‘closest in time’’
standard in the proposal for reporting an
AUS name and result could result in the
HMDA data not capturing AUS data that
the financial institution actually
considered in making the credit
decision. To highlight this concern, one
commenter stated that financial
institutions may use a ‘‘waterfall
strategy’’ to evaluate applications by
which an institution runs loan
applications through one AUS first, then
takes the ‘caution’ loans from the first
system and runs them through a second
AUS. The commenter stated that the
first AUS would see a lower risk
population, while the second AUS
would see a pre-screened higher risk
population. The commenter expressed
concern that since the Bureau’s proposal
requires a financial institution to report
one AUS it used to evaluate an
application and one AUS result
generated by that system, the waterfall
approach could potentially provide
inaccurate HMDA results if not properly
understood because it might be possible
that such reporting would exclude AUS
data that actually played a role in a
financial institution’s credit decision.
Commenters noted if the Bureau is to
take a comprehensive approach to
collecting AUS data and address the
concerns related to incomplete and
inconsistent data, it should take into
account the sequential decision making
processes that financial institutions may
use when running applications through
multiple AUSs. One commenter
suggested that until the Bureau adopts
an approach that takes into account the
various differences and complexities
involved when a loan application is
evaluated using multiple AUSs, it
should reconsider requiring disclosure
of AUS data. Another commenter
recommended that the Bureau require
financial institutions to report each AUS
result (including non-securitizer
proprietary and third party systems) that
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was used in the credit decision, as well
as an indication of the relative
importance of each result to the credit
decision. Lastly, another commenter
requested clarification as to whether a
financial institution is required to report
AUS information in the circumstance
when an AUS provides a negative
result, but the institution chooses to
assume the credit risk and hold the
resulting loan in its portfolio, rather
than sell the loan to an investor.
The Bureau considered this feedback
and has determined that revisions to the
proposed commentary and additional
comments will facilitate compliance
with the reporting requirement. For
example, comment 4(a)(35)–3, discussed
further below, provides additional
clarity as to what AUS (or AUSs) and
result (or results) a financial institution
is required to report in cases when the
institution uses one or more AUSs,
which generate two or more results. In
addition, comment 4(a)(35)–1.ii
provides two illustrative examples and
explains that a financial institution that
uses an AUS, as defined in
§ 1003.4(a)(35)(ii), to evaluate an
application, must report the name of the
AUS it used to evaluate the application
and the result generated by that system,
regardless of whether the financial
institution intends to hold the covered
loan in its portfolio or sell the covered
loan.
The Bureau solicited feedback on the
proposed requirement that a financial
institution enter, in a free-form text
field, the name of the AUS used to
evaluate the application and the result
generated by that system, when ‘‘Other’’
is selected. Several industry
commenters did not support the
proposed requirement for a variety of
reasons. A few commenters
recommended removal of the free-form
text field because it would be
impossible to aggregate the data,
without further explanation. Another
commenter did not support the proposal
to include a free-form text field for
automated underwriting system
information because there is no way to
make the text input consistent among
staff and financial institutions and as
such, suggested that simply requiring a
financial institution to report ‘‘Other’’
would be appropriate and sufficient.
Lastly, another commenter stated that
free-form text fields are illogical because
they lack the ability of being sorted and
reported accurately. This commenter
also opined that the additional staff
and/or programming that will be needed
on a government level to analyze these
free text fields is costly and not justified
when looking at the minimal impact
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these fields have on the overall data
collection under HMDA.
The Bureau has considered the
concerns expressed by industry
commenters with respect to the
proposed requirement that a financial
institution enter the name of the AUS
used to evaluate the application and the
result generated by that system in a freeform text field when ‘‘Other’’ is reported
but has determined that the utility of
this data justifies the potential burden
that may be imposed by the reporting
requirement. As to the commenters’
concern that data reported in the freeform text field would be impossible to
aggregate, perhaps due to the variety of
potential AUS names and results
reported, the Bureau has determined
that the data reported in the free-form
text field will be useful even if the data
cannot be aggregated.
Lastly, with respect to a commenter’s
recommendation that requiring a
financial institution to report ‘‘Other’’ is
appropriate and sufficient and that the
Bureau should not also require an
institution to enter the name of the AUS
used to evaluate the application and the
result generated by that system in a freeform text field in these circumstances,
the Bureau has determined that such an
approach would hinder the utility of the
AUS data for purposes of HMDA. As
with the other free-form text fields the
Bureau is adopting—the name and
version of the scoring model when
‘‘Other credit scoring model’’ is reported
by financial institutions under
§ 1003.4(a)(15) and the denial reason or
reasons when ‘‘Other’’ is reported by
financial institutions under
§ 1003.4(a)(16)—the free-form text field
for AUS data will provide key
information on the automated
underwriting systems that are not listed
and the results generated by those
systems. For example, the AUS data can
be used to monitor other automated
underwriting systems that may enter the
market or to add common, but
previously unlisted, AUSs and results to
the lists. The Bureau has determined
that the HMDA data’s usefulness will be
improved by requiring financial
institutions to report the name of the
AUS used to evaluate the application
and the result generated by that system
in a free-form text field when the
institution enters ‘‘Other’’ in the loan/
application register.
The Bureau has modified proposed
comments 4(a)(35)–1, –2, which is
renumbered as –3, and –3, which is
renumbered as –5. The Bureau is also
adopting new comments 4(a)(35)–2, –4,
and –6. As discussed below, the Bureau
believes these modified and new
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comments will facilitate compliance
with the AUS reporting requirement.
The Bureau is adopting proposed
comment 4(a)(35)–1, with
modifications. Comment 4(a)(35)–1
explains that a financial institution
complies with § 1003.4(a)(35) by
reporting, except for purchased covered
loans, the name of the automated
underwriting system used by the
financial institution to evaluate the
application and the result generated by
that automated underwriting system,
and provides four scenarios to illustrate
when a financial institution reports this
information.
The Bureau is adopting new comment
4(a)(35)–2, which explains that a
financial institution must report the
information required by
§ 1003.4(a)(35)(i) if the financial
institution uses an automated
underwriting system (AUS), as defined
in § 1003.4(a)(35)(ii), to evaluate an
application. Comment 4(a)(35)–2
clarifies that in order for an AUS to be
covered by the definition in
§ 1003.4(a)(35)(ii), the system must be
an electronic tool that has been
developed by a securitizer, Federal
government insurer, or a Federal
government guarantor, and provides two
illustrative examples. In addition,
comment 4(a)(35)–2 explains that in
order for an AUS to be covered by the
definition in § 1003.4(a)(35)(ii), the
system must provide a result regarding
both the credit risk of the applicant and
the eligibility of the covered loan to be
originated, purchased, insured, or
guaranteed by the securitizer, Federal
government insurer, or Federal
government guarantor that developed
the system being used to evaluate the
application, and provides an illustrative
example. Comment 4(a)(35)–2 clarifies
that a financial institution that uses a
system that is not an AUS, as defined in
§ 1003.4(a)(35)(ii), to evaluate an
application does not report the
information required by
§ 1003.4(a)(35)(i).
The Bureau is adopting proposed
comment 4(a)(35)–2, with
modifications, and renumbered as –3.
Comment 4(a)(35)–3 sets forth the
reporting requirements under
§ 1003.4(a)(35) when multiple AUS
results are generated by one or more
AUSs. Comment 4(a)(35)–3 explains
that when a financial institution uses
one or more AUS to evaluate the
application and the system or systems
generate two or more results, the
financial institution complies with
§ 1003.4(a)(35) by reporting, except for
purchased covered loans, the name of
the AUS used by the financial
institution to evaluate the application
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and the result generated by that AUS as
determined by the principles set forth in
the comment. The comment explains
that to determine what AUS (or AUSs)
and result (or results) to report under
§ 1003.4(a)(35), a financial institution
must follow each of the principles that
is applicable to the application in
question, in the order in which they are
set forth in comment 4(a)(35)–3.
First, comment 4(a)(35)–3.i explains
that if a financial institution obtains two
or more AUS results and the AUS
generating one of those results
corresponds to the loan type reported
pursuant to § 1003.4(a)(2), the financial
institution complies with § 1003.4(a)(35)
by reporting that AUS name and result,
and provides an illustrative example.
Comment 4(a)(35)–3.i also explains that
if a financial institution obtains two or
more AUS results and more than one of
those AUS results is generated by a
system that corresponds to the loan type
reported pursuant to § 1003.4(a)(2), the
financial institution identifies which
AUS result should be reported by
following the principle set forth in
comment 4(a)(35)–3.ii.
Second, comment 4(a)(35)–3.ii
explains that if a financial institution
obtains two or more AUS results and the
AUS generating one of those results
corresponds to the purchaser, insurer, or
guarantor, if any, the financial
institution complies with § 1003.4(a)(35)
by reporting that AUS name and result,
and provides an illustrative example.
Comment 4(a)(35)–3.ii also explains that
if a financial institution obtains two or
more AUS results and more than one of
those AUS results is generated by a
system that corresponds to the
purchaser, insurer, or guarantor, if any,
the financial institution identifies which
AUS result should be reported by
following the principle set forth in
comment 4(a)(35)–3.iii.
Third, comment 4(a)(35)–3.iii
explains that if a financial institution
obtains two or more AUS results and
none of the systems generating those
results correspond to the purchaser,
insurer, or guarantor, if any, or the
financial institution is following this
principle because more than one AUS
result is generated by a system that
corresponds to either the loan type or
the purchaser, insurer, or guarantor, the
financial institution complies with
§ 1003.4(a)(35) by reporting the AUS
result generated closest in time to the
credit decision and the name of the AUS
that generated that result, and provides
illustrative examples.
Lastly, comment 4(a)(35)–3.iv
explains that if a financial institution
obtains two or more AUS results at the
same time and the principles in
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66235
comment 4(a)(35)–3.i through .iii do not
apply, the financial institution complies
with § 1003.4(a)(35) by reporting the
name of all of the AUSs used by the
financial institution to evaluate the
application and the results generated by
each of those systems, and provides an
illustrative example. In any event,
however, comment 4(a)(35)–3.iv
explains that a financial institution does
not report more than five AUSs and five
results. If more than five AUSs and five
results meet the criteria in the principle
set forth in comment 4(a)(35)–3.iv, the
financial institution complies with
§ 1003.4(a)(35) by choosing any five
among them to report. The Bureau
believes that it is reasonable to limit the
number of AUSs to five and the number
of results to five when a financial
institution meets the criteria in the
principle set forth in comment 4(a)(35)–
3.iv. The Bureau believes that the
likelihood of a financial institution
evaluating an application through more
than five AUSs at the same time is low.
Moreover, the Bureau believes that
requiring financial institutions to report
all AUSs and the results of each of those
systems, with no limitation, would be
unnecessarily burdensome.
Accordingly, as discussed above,
comment 4(a)(35)–3.iv limits the
number of AUSs and results that
financial institutions are required to
report to five each.
The Bureau is adopting proposed
comment 4(a)(35)–3, with
modifications, and renumbered as –4.
Comment 4(a)(35)–4 addresses
transactions for which an AUS was not
used to evaluate the application and
explains that § 1003.4(a)(35) does not
require a financial institution to
evaluate an application using an AUS,
as defined in § 1003.4(a)(35)(ii). For
example, if a financial institution only
manually underwrites an application
and does not use an AUS to evaluate the
application, the financial institution
complies with § 1003.4(a)(35) by
reporting that the requirement is not
applicable since an AUS was not used
to evaluate the application.
Proposed comment 4(a)(35)–3 also
addressed transactions for which no
credit decision was made by a financial
institution by explaining that if a file
was closed for incompleteness, or if an
application was withdrawn before a
credit decision was made, a financial
institution complies with § 1003.4(a)(35)
by reporting that the requirement is not
applicable. However, the Bureau has
determined that it is not adopting this
portion of proposed comment 4(a)(35)–
3. The Bureau believes that if a financial
institution uses an AUS to evaluate an
application, regardless of whether the
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file is closed for incompleteness or the
application is withdrawn before a credit
decision is made, the AUS data will
assist in understanding the financial
institution’s underwriting
decisionmaking and will provide
information that will assist in
identifying potentially discriminatory
lending patterns and enforcing
antidiscrimination statutes.
Consequently, if a financial institution
uses an AUS to evaluate an application
and the file is closed for incompleteness
and is so reported in accordance with
§ 1003.4(a)(8), a financial institution
complies with § 1003.4(a)(35) by
reporting the AUS information.
Similarly, if a financial institution uses
an AUS to evaluate an application and
the application was withdrawn by the
applicant before a credit decision was
made and is so reported in accordance
with § 1003.4(a)(8), the financial
institution complies with § 1003.4(a)(35)
by reporting the AUS information.
As discussed above, the Bureau is
adopting new comment 4(a)(35)–5,
which explains that a financial
institution complies with § 1003.4(a)(35)
by reporting that the requirement is not
applicable when the covered loan is a
purchased covered loan. Lastly, the
Bureau is adopting new comment
4(a)(35)–6, which explains that a
financial institution complies with
§ 1003.4(a)(35) by reporting that the
requirement is not applicable when the
applicant and co-applicant, if
applicable, are not natural persons. The
Bureau believes that comments 4(a)(35)–
1 through –6 will provide clarity
regarding the new reporting requirement
adopted in § 1003.4(a)(35) and will
facilitate HMDA compliance.
In response to the Bureau’s
solicitation for feedback regarding
whether the proposed AUS
requirements are appropriate, a few
commenters expressed concern about
potential privacy implications for
applicants or borrowers if the Bureau
were to release AUS data to the public.
One commenter did not support the
proposal to include AUS results because
it opined that such disclosure is in
direct conflict with laws and rules
designed to protect a consumer’s nonpublic personal information. This
commenter suggested that if AUS results
were available to the public, such
disclosure would make it easier for
hackers around the world to gain access
to personal financial data and place the
safety and welfare of citizens in
jeopardy. A national trade association
commented that unless the Bureau
establishes the appropriate safeguards
against the misuse of sensitive
consumer financial data, adding more
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sensitive and non-public information to
HMDA disclosure, such as
creditworthiness, creates considerable
privacy concerns. Lastly, another
commenter stated that the release of
AUS data, either alone or when
combined with other publicly available
sources (including loan-level data
associated with mortgage-backed
securities issuances) could increase the
risk to borrower privacy by facilitating
re-identification of borrowers.
A few commenters also expressed
concern about the disclosure of
confidential, proprietary information if
the Bureau were to release AUS data to
the public. One commenter did not
support proposed § 1003.4(a)(35)
because, it argued, lenders would be
required to disclose proprietary
information. Another commenter
expressed concern that competitor
financial institutions could use public
HMDA data to reverse engineer its
proprietary underwriting systems,
thereby harming its competitive
position in the mortgage marketplace.
Similarly, another commenter stated
that to the extent that AUS data are
available to persons outside
government, such disclosure may pose
serious risks that persons would seek to
reverse engineer proprietary and
confidential information about how an
AUS is designed and risks significant
competitive disadvantages for such
entities whose AUS information would
be collected. The commenter explained
that persons may seek to reverse
engineer the decision-making and
purchase-process used by an AUS by
analyzing the recommendations in
connection with the other HMDA data
that is disclosed to the public. The
commenter reasoned that as a result of
the volume of loan-level data reported
pursuant to HMDA, disclosure of AUS
data may well enable competitors and
other parties to seek to recreate the
criteria used by an AUS to reach
recommendations on loans. The
commenter urged the Bureau to ensure
that if AUS data are to be reported by
financial institutions, that only
regulators of financial institutions and
other government agencies responsible
for fair lending enforcement have access
to such data, and that it not be made
available to financial institutions or
others. Lastly, another commenter also
expressed concern that the release of
AUS data could facilitate reverse
engineering to reveal proprietary
information about an AUS and the
profile of loans sold to a particular
entity. The commenter stated that this
could have a significant impact on an
entity that developed an AUS by
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revealing proprietary information about
the design of the AUS as well as the
entity’s loan purchases, security
performance, and portfolio
management.
On the other hand, several
commenters recommended that AUS
data be released to the public and
supported the proposal primarily based
on the argument that such data will
assist in fair lending analyses as well as
in understanding access to credit. For
example, one consumer advocate
commenter stated that the collection
and public dissemination of AUS
information will help regulators,
policymakers, and the public to more
precisely investigate discriminatory
mortgage lending. Another consumer
advocate commenter stated that AUS
data will identify which lenders rely on
AUSs heavily as opposed to which
lenders use manual underwriting,
which it argued, can result in
responsible lending being more
accessible to populations that may have
thin credit files or less than perfect
credit. Lastly, another commenter stated
that AUS data provides important
insight into the modern underwriting
process that will help policymakers
better understand credit constraints and
the challenges to maintaining broad
access to credit.
The Bureau has considered this
feedback. It anticipates that, because
public disclosure of itemized AUS data
may raise concerns, such release may
not be warranted. However, at this time
the Bureau is not making
determinations about what HMDA data
will be publicly disclosed or the forms
of such disclosures.
4(a)(36)
Currently, neither HMDA nor
Regulation C requires a financial
institution to report whether a
reportable transaction is a reverse
mortgage. Although reverse mortgages
that are home purchase loans, home
improvement loans, or refinancings are
reported under Regulation C currently,
financial institutions are not required to
separately identify if a reported
transaction is a reverse mortgage.370
Proposed § 1003.4(a)(36) provided that a
financial institution must record
whether the covered loan is, or the
application is for, a reverse mortgage,
and whether the reverse mortgage is an
open- or closed-end transaction. The
370 The Bureau received a number of comments
from consumer advocacy groups and industry
commenters about including a reverse mortgage
transaction as a type of covered loan that must be
reported. The Bureau addresses those comments in
the section-by-section analysis of § 1003.2(q), which
defines ‘‘reverse mortgage.’’
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Bureau solicited feedback regarding
whether this proposed requirement is
appropriate, whether commentary
would help clarify or illustrate the
requirement, and any costs and burdens
associated with the proposed
requirement.371 For the reasons
discussed below, the Bureau is
finalizing in § 1003.4(a)(36) a
requirement to identify whether the
covered loan is, or the application is for,
a reverse mortgage.
Industry commenters opposed the
requirement to report whether a loan or
application is for a reverse mortgage
because reverse mortgages are a small
portion of the market. Consumer
advocates supported the requirement,
noting that data users currently cannot
identify the populations taking out
reverse mortgages. Consumer advocates
generally stated that identifying which
reported loans and lines of credit are
reverse mortgages will help illuminate
patterns of equity extraction by older
consumers.
It is important that the public and
regulators be able to identify easily
which transactions covered by
Regulation C involve reverse mortgages.
Reverse mortgages are substantively
different from other mortgages and are
subject to different underwriting
criteria.372 Including in the dataset an
indicator that readily identifies the
transaction as a reverse mortgage will
provide necessary context on the other
data reported for the same transaction.
For example, identification of a
transaction as a reverse mortgage may
help explain why certain data points are
reported as not applicable to the
transaction. As a result, financial
institutions will need to spend less time
verifying submitted data and users will
have a better context in which to
consider the data submitted, both for
that transaction and in comparison with
other transactions.
Pursuant to its authority under
sections 305(a) and 304(b)(6)(J) of
HMDA, the Bureau is finalizing in
§ 1003.4(a)(36) a requirement to identify
whether the covered loan is, or the
application is for, a reverse mortgage.
However, because the Bureau is also
adopting § 1003.4(a)(37), which will
require financial institutions to identify
whether the transaction involves an
371 Commenters did not address the cost of
finalizing the requirement to identify whether a
transaction involves a reverse mortgage. However,
the costs and benefits of all of the new and revised
data points are discussed elsewhere in the
Supplementary Information.
372 See generally CFPB Report to Congress on
Reverse Mortgages (2012), available at http://
files.consumerfinance.gov/a/assets/documents/
201206_cfpb_Reverse_Mortgage_Report.pdf.
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open-end line of credit, it is not
necessary to require financial
institutions to separately identify
whether the reverse mortgage is a
closed-end or open-end transaction.
Instead, the final rule simplifies the
reporting requirement in § 1003.4(a)(36)
to indicate only whether the transaction
involves a reverse mortgage. Data users
can use the reverse mortgage and openend line of credit indicators in
combination to determine whether a
transaction involves a reverse mortgage
and, if so, the type of reverse mortgage.
This simplification also addresses the
request of one consumer group to clarify
potentially confusing terminology used
in the proposed rule for different types
of open-end lines of credit.
4(a)(37)
Currently, neither HMDA nor
Regulation C requires a financial
institution to identify whether a
reportable transaction is an open-end
line of credit. Although dwellingsecured lines of credit currently may be
reported as home purchase loans or
home improvement loans, users of the
HMDA data cannot identify which
reported transactions involve open-end
lines of credit. Proposed § 1003.4(a)(37)
provided that a financial institution
must record whether the covered loan
is, or the application is for, an open-end
line of credit, and whether the covered
loan is, or the application is for, a homeequity line of credit. The proposed rule
defined ‘‘open-end line of credit’’ as a
new term in Regulation C, and did not
revise the current definition of homeequity line of credit. As discussed in the
section-by-section analyses of
§ 1003.2(h) and (o), the final rule deletes
the definition of ‘‘home-equity line of
credit’’ and modifies the proposed
definition of ‘‘open-end line of credit.’’
The modified definition of open-end
line of credit subsumes the current
definition of home-equity line of credit.
For the reasons discussed below, the
Bureau is finalizing in § 1003.4(a)(37) a
requirement that financial institutions
identify whether the covered loan is, or
the application is for, an open-end line
of credit, as that term is defined in the
final rule.
The Bureau solicited feedback
regarding whether the proposed
requirement to identify whether the
transaction involved an open-end credit
plan is appropriate and whether
commentary would help clarify the
requirement. Most commenters who
addressed dwelling-secured open-end
credit plans did not address this
solicitation for comment. A number of
industry participants recommended
modifying the proposal to identify the
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66237
transaction as either involving a homeequity line of credit, or not.373
Similarly, a consumer advocacy group
commented that distinguishing between
open-end lines of credit that are homeequity lines of credit and those that are
not is confusing.
Some of the concerns that
commenters raised about reporting
HMDA data on dwelling-secured openend credit plans will be mitigated by
also requiring financial institutions to
indicate whether the transaction being
reported involves an open-end line of
credit.374 Specifically, a number of
industry commenters stated that a
requirement to report data on open-end
lines of credit would likely result in
skewed data, including data that may
create an inaccurate appearance of
subprime lending. Industry trade groups
stated that commingling data on openend lines of credit with HMDA data on
closed-end mortgage loans will produce
misleading information. However,
consumer advocates commented that
having additional information about
dwelling-secured open-end credit plans
will enable communities to more fully
understand the mortgage market and
better serve vulnerable populations. One
consumer advocate commented that
open-end lines of credit should be
identified in the data, given the
difference in their underwriting relative
to closed-end loans. Another consumer
advocate commented that, without an
indication that the transaction involves
open-end credit, information on loan
term and price is less meaningful.
It is important that the public and
public officials be able to identify easily
which transactions covered by
Regulation C involve open-end lines of
credit. Open-end lines of credit are a
different credit product than closed-end
mortgage loans. Including in the dataset
an indicator that readily identifies the
transaction as an open-end line of credit
will provide the public and public
officials more context for the other data
reported for the same transaction and
will facilitate more-effective data
analysis. For example, identification of
a transaction as an open-end line of
credit may help explain why the
financial institution has reported certain
data points as being not applicable to
the transaction. As a result, financial
373 These commenters generally also favored
eliminating commercial loans from coverage under
Regulation C, which they stated would eliminate
reporting of most open-end lines of credit that are
not home-equity lines of credit under the current
definition in Regulation C. The coverage of
commercial and business loans is discussed in the
section-by-section analysis of § 1003.3(c)(10).
374 ‘‘Open-end line of credit’’ is defined in
§ 1003.2(o) of the final rule.
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institutions will need to spend less time
verifying submitted data and the public
will have a better context in which to
consider the data submitted, both for
that transaction and in comparison with
other transactions.
Therefore, pursuant to its authority
under sections 305(a) and 304(b)(6)(J) of
HMDA, the Bureau is finalizing
§ 1003.4(a)(37), which requires that
financial institutions identify whether
covered loans are, or applications are
for, an open-end line of credit. The
Bureau, however, is not finalizing the
proposal that financial institutions also
identify whether the covered loan is, or
the application is for, a home-equity
line of credit. As discussed in the
section-by-section analysis of
§ 1003.4(a)(38), the final rule also
requires financial institutions to identify
whether the covered loan is, or the
application is for, a covered loan that is,
primarily for a business or commercial
purpose. In combination, the open-end
line of credit indicator and the businessor commercial-purpose indicator can be
used to identify whether open-end
credit is for a consumer or business
purpose.375 Therefore, a separate
indicator for a consumer-purpose openend credit plan secured by a dwelling is
not necessary.376 The final rule
simplifies the reporting requirement in
§ 1003.4(a)(37) to indicate only whether
the transaction involves an open-end
line of credit. Simplifying the data point
that indicates an open-end line of credit
also addresses the request of one
consumer group to clarify potentially
confusing terminology used in the
proposed rule for several types of openend credit.
The Bureau did not propose any
comment to accompany proposed
§ 1003.4(a)(37) and commenters did not
request clarifying commentary. For
consistency and convenience, however,
the final rule adds new comment
4(a)(37)–1, which references comments
2(o)–1 and –2 for guidance on
determining whether a covered loan is,
or an application is for, an open-end
line of credit.
4(a)(38)
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Qualified Mortgage Indicator
Currently, neither HMDA nor
Regulation C contains requirements
related to whether a loan would be
considered a qualified mortgage under
375 See § 1003.2(o) for additional discussion of
consumer- and business-purpose open-end credit.
376 In addition, because open-end line of credit is
defined to be more comprehensive than homeequity line of credit, retaining both terms in
Regulation C could result in inconsistencies in
reporting the information.
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Regulation Z. Proposed § 1003.4(a)(38)
provided that a financial institution
must record whether the covered loan is
subject to the ability-to-repay provisions
of Regulation Z and whether the
covered loan is a qualified mortgage, as
described under Regulation Z.377 The
proposed rule also specified that
financial institutions report the
qualified mortgage information using a
code to indicate which type of qualified
mortgage described the covered loan.
The Bureau solicited feedback regarding
whether the proposed requirement was
appropriate, would result in more useful
data, and would impose additional
burdens or result in additional
challenges that the Bureau had not
considered in making the proposal. In
addition, the Bureau requested feedback
regarding whether modifications to the
proposed requirement would minimize
the burden of collecting information
related to a covered loan’s qualified
mortgage status. For the reasons
discussed below, the Bureau is not
finalizing proposed § 1003.4(a)(38).
The Bureau received a significant
number of comments from consumer
advocacy groups, researchers, financial
institutions, State and national trade
associations, and other industry
participants concerning proposed
§ 1003.4(a)(38). Consumer advocates
and researchers supported reporting
whether a covered loan is a qualified
mortgage. Some of these commenters
also noted that a covered loan may fit
into more than one category of qualified
mortgage and that, if finalized, the
reporting requirements should be
structured to accommodate changes in
underlying regulations (such as
sunsetting categories for qualified
mortgages). Some also recommended
that financial institutions should report
all of the categories under which a loan
can be characterized as a qualified
mortgage. A consumer advocacy group
stated that qualified mortgage status
limits liability for lenders, so these
loans should be monitored closely to
determine if that status results in more
sustainable loan terms and better loan
performance. Several consumer
advocacy and research organization
commenters identified the qualified
mortgage data as one of the most
important additions proposed and
stated that understanding exactly how
the Bureau’s qualified mortgage
regulation is affecting mortgage credit is
critical to ensuring that the Bureau’s
joint goals of access to credit and
consumer protection are both achieved.
377 The ability-to-repay provisions are in 12 CFR
1026.43. The proposed rule invoked the provisions
on qualified mortgage in § 1026.43(e) and (f).
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Industry commenters recommended
against requiring reporting of qualified
mortgage status. Some noted the same
issues as consumer advocates and
researchers had noted. In addition,
industry commenters questioned the
HMDA purpose for this data point and
asserted a potentially stigmatizing effect
for loans that are not qualified
mortgages that would be inconsistent
with Federal banking agencies’ joint
guidance and oral statements preserving
a role for non-qualified mortgage
loans.378 Financial institutions and
industry trade groups commented that
whether a loan is a qualified mortgage
is often not known at origination. For
example, one industry commenter
reported that it does not limit its
lending to qualified mortgages, so it
would be burdensome and expensive to
implement systems to track and report
qualified mortgage status. Other
industry commenters stated that
whether a loan could be a qualified
mortgage may be revealed by other data
points, when considered together,
including points and fees; rate spread;
existence of features such as negative
amortization, balloon payments, and
prepayment penalties; whether a loan is
backed by a government-sponsored
enterprise or Federal agency; automated
underwriting system results; high-cost
status; and debt-to-income ratio. A
number of industry commenters
expressed concern about the
consequences of misreporting a loan as
either a qualified mortgage or not a
qualified mortgage. Industry
commenters requested that if the Bureau
requires reporting the qualified
mortgage status of loans, it should also
add options to indicate whether a loan
is exempt from the ability-to-repay
requirements and whether the qualified
mortgage status was relevant to the
credit decision, and clarify reporting
responsibilities for repurchases of loans
misreported as qualified mortgages and
for small-creditor loans sold to a buyer
that is not a small creditor.
Coverage conditions and exemptions
applicable to the ability-to-repay
requirements mean that the reporting
requirements in the proposed rule did
378 CFPB, OCC, Bd. of Governors of the Fed.
Reserve System, FDIC, and NCUA, Interagency
Statement on Fair Lending Compliance and the
Ability-to-Repay and Qualified Mortgage Standards
Rule at 2 (2013), http://files.consumerfinance.gov/f/
201310_cfpb_guidance_qualified-mortgage-fairlending-risks.pdf. In part, the statement explains:
[C]onsistent with the statutory framework, there
are several ways to satisfy the Ability-to-Repay
Rule, including making responsibly underwritten
loans that are not Qualified Mortgages. The Bureau
does not believe that it is possible to define by rule
every instance in which a mortgage is affordable for
the borrower.
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not apply to applications or open-end
lines of credit, reverse mortgages,
extensions of credit pursuant to certain
programs, multifamily loans, or
business-purpose loans. At the time of
the proposed rule, the Bureau believed
that financial institutions would be in a
position to report the qualified mortgage
status of each covered loan in a manner
that is consistent with the regular
business practices of financial
institutions, and that such a reporting
requirement would not be unduly
burdensome. The Bureau has been
persuaded, however, that reporting the
qualified mortgage status and, as
applicable, the type of qualified
mortgage for each loan will impose
burdens identified by industry
commenters that were not intended and
would not be justified by the benefits of
this additional reporting requirement in
the HMDA data. The final rule includes
other new data that might be used to
approximate the borrower’s ability to
repay and the loan’s qualified mortgage
status with sufficient accuracy to serve
HMDA’s purposes. Financial
institutions should be able to provide
this other data readily, without having
to develop new collection mechanisms
as might be necessary to report qualified
mortgage status. In addition, the Bureau
has not changed its position that nonqualified mortgages can satisfy abilityto-repay standards. The Bureau had not
intended that a financial institution
reporting under HMDA its reasonable
belief about the qualified mortgage
status of its loans at a point in time
should be susceptible to increased
public or regulatory scrutiny based on
that classification.
Therefore, the Bureau is not finalizing
proposed § 1003.4(a)(38).
Business- or Commercial-Purpose
Indicator
Currently, neither HMDA nor
Regulation C requires a financial
institution to report whether a
reportable transaction has a business or
commercial purpose. Although
business- and commercial-purpose
transactions that are home purchase
loans, home improvement loans, or
refinancings are reported under
Regulation C currently, financial
institutions are not required to
separately identify if a reported
transaction has a business or
commercial purpose.379 In the proposed
379 The Bureau received many comments about
the coverage of business- and commercial-purpose
loans in HMDA and Regulation C. The Bureau
addresses those comments in the section-by-section
analysis of § 1003.3(c)(10), which provides an
exclusion for some business- and commercialpurpose transactions.
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rule, the Bureau expanded coverage of
business and commercial transactions,
but it did not separately propose a
specific requirement for financial
institutions to differentiate those
transactions in their reported HMDA
data.380 As discussed in the section-bysection analysis of § 1003.3(c)(10), the
final rule maintains the current
requirement that financial institutions
must report business- and commercialpurpose transactions that are home
purchase loans, home improvement
loans, or refinancings. To make the data
collected on business- and commercialpurpose transactions more useful,
§ 1003.4(a)(38) of the final rule requires
financial institutions to report whether
the covered loan or application is or
will be made primarily for a business or
commercial purpose.
Even though the final rule does not
expand the scope of coverage of
business- and commercial-purpose
loans, some of the concerns that
commenters raised about reporting
HMDA data on all business- and
commercial-purpose loans are relevant
to the current, more limited reporting
requirements.381 For example, some
industry commenters stated that mixing
data about dwelling-secured,
commercial-purpose transactions with
traditional mortgage loans would skew
the HMDA dataset and impair its
integrity for users of the data. These
concerns will be mitigated by also
requiring financial institutions to
indicate whether the transaction being
reported involves business- or
commercial-purpose credit. Including in
the dataset an indicator that readily
identifies the transaction as business- or
commercial-purpose credit will provide
the public and public officials more
context for the other data reported for
the same transaction and will facilitate
more-effective data analysis. The public
and public officials will be able to use
this information to improve their
understanding of how financial
institutions may be meeting the housing
needs of their communities and publicsector funds are being distributed. These
HMDA purposes are served by gathering
data not only about transactions to
individual consumers for consumer
purposes, but also, for example, about
380 In the proposed rule, the Bureau invited
feedback regarding whether, if commercial loans
were not exempted in the final rule, it would be
appropriate to add a loan purpose requirement
applicable to commercial loans or some other
method of uniquely identifying commercial loans in
the HMDA data. 79 FR 51731, 51767 (Aug. 29,
2014).
381 See section-by-section analysis of
§ 1003.3(c)(10).
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66239
the available stock of multifamily rental
housing in particular communities.
For the reasons discussed above and
pursuant to the Bureau’s authority
under sections 305(a) and 304(b)(6)(J) of
HMDA, § 1003.4(a)(38) of the final rule
provides that a financial institution
must identify whether the covered loan
or application is or will be made
primarily for a business or commercial
purpose.
Proposed 4(a)(39)
Section 304(b) of HMDA permits the
disclosure of such other information as
the Bureau may require.382 Pursuant to
HMDA sections 305(a) and 304(b)(5)(D),
the Bureau proposed to require financial
institutions to report, for a home-equity
line of credit and an open-end reverse
mortgage, the amount of the draw on the
covered loan, if any, made at account
opening. For the reasons given below,
the Bureau is not finalizing proposed
§ 1003.4(a)(39).
Several consumer advocates
supported the proposed requirement to
report the initial draw for an open-end
line of credit. One consumer advocate
said that such information would assist
in identifying loans where the borrower
draws an amount at or close to the
maximum amount available for the line
of credit. The commenter believed that
these loans were more properly
characterized as closed-end credit.
Another consumer advocate stated that,
for reverse mortgages, large initial draws
may be predictive of future financial
difficulties. Information regarding the
initial draw on an open-end line of
credit might provide important
information about the behavior and
degree of leverage of borrowers with
such loans.
Industry commenters, however,
almost universally opposed the initial
draw reporting requirement. Many of
these commenters believed that the
amount of the initial draw would
provide no valuable data. A few
commenters stated that the first draw
played an insignificant role in
underwriting or pricing decisions, and
other commenters noted that the
amount reflected the choice of the
borrower. Several commenters were
generally skeptical of the utility of the
information or asserted that it offered
little value for purposes of fair lending
analysis or determining whether
financial institutions were meeting the
housing needs of their communities.
The amount of the initial draw on a
home-equity line of credit or an openend reverse mortgage would provide
382 Section 1094(3)(A)(iv) of the Dodd-Frank Act
amended section 304(b) of HMDA.
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information about the leverage of
borrowers with open-end lines of credit.
The extent of leverage is important for
evaluating the potential overextension
of credit and the risk of default faced by
borrowers in certain communities. Such
information may also be used to detect
structural problems in the mortgage
market. However, the initial draw often
consists only of an amount necessary to
cover fees or charges associated with
opening the account, or to satisfy the
requirements of a particular promotion.
The Bureau believes that these data
would fail to provide the information
about borrower leverage or use of openend lines of credit that the proposal
intended to capture. Industry
commenters also stated that proposed
§ 1003.4(a)(39) would distort the HMDA
data. The Bureau understands that many
initial draws do not occur at account
opening for a variety of reasons. For
example, consumers might wait days or
even months before drawing on the line
of credit. By requiring reporting of the
draw at account opening, proposed
§ 1003.4(a)(39) would omit these draws
and therefore fail to serve its intended
purpose.
The Bureau could extend the
reporting period applicable to proposed
§ 1003.4(a)(39) in an attempt to capture
information about these loans. However,
the Bureau understands that the
necessary information often exists in
separate loan servicing systems rather
than the loan origination system. As
detailed in the section 1022 discussion
below, the Bureau recognizes that
mandatory open-end line of credit
reporting will impose a significant
operational burden on financial
institutions, largely because open-end
lines of credit are originated and
maintained on different computer
systems than traditional mortgages.
Upgrading or integrating the separate
systems used to originate and service
open-end lines of credit would
represent a similar operational burden.
Forcing such a systems change for the
purpose of collecting a single data point
would impose an unjustified burden on
financial institutions.
For the reasons provided above, the
Bureau is not finalizing proposed
§ 1003.4(a)(39).
4(b) Collection of Data on Ethnicity,
Race, Sex, Age, and Income
Section 1003.4(b)(1) of current
Regulation C requires that a financial
institution collect data about the
ethnicity, race, and sex of the applicant
or borrower as prescribed in appendix
B. Section 1003.4(b)(2) provides that the
ethnicity, race, sex, and income of an
applicant or borrower may but need not
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be collected for loans purchased by the
financial institution. The Bureau
proposed to add age to § 1003.4(b)(1)
and (b)(2), and proposed to amend
§ 1003.4(b)(1) by requiring a financial
institution to collect data about the
ethnicity, race, sex, and age of the
applicant or borrower as prescribed in
both appendices A and B. The Bureau
also proposed minor wording changes to
§ 1003.4(b)(1) and (b)(2).
Consistent with the current
requirement under the regulation,
proposed § 1003.4(b)(2) provided that
ethnicity, race, sex, and income data
may but need not be collected for loans
purchased by a financial institution.
While the proposed reporting
requirement does not require reporting
of ethnicity, race, sex, age, and income
for loans purchased by a financial
institution, the Bureau solicited
feedback on whether this exclusion is
appropriate. In particular, the Bureau
specifically solicited feedback on the
general utility of ethnicity, race, sex,
age, and income data on purchased
loans and on the unique costs and
burdens associated with collecting and
reporting the data that financial
institutions may face if the reporting
requirement were modified to no longer
permit optional reporting but instead
require reporting of this applicant and
borrower information for purchased
loans.
A few commenters opposed the
proposed optional reporting of
ethnicity, race, sex, age, and income for
loans purchased by a financial
institution. For example, one consumer
advocate stated that the proposal creates
a significant gap in the data that is
reported under HMDA and such data is
important to achieving HMDA’s goals.
The commenter noted that while it may
be possible to close this gap by using the
proposed ULI to match a purchased loan
with the data on the ethnicity, race, sex,
age, and income reported by the
originating financial institution, doing
so will be time consuming and would
require a significant effort from users of
the data. The commenter recommended
that the Bureau clarify in commentary
that the Bureau considers it reasonable
for any institution purchasing covered
loans to negotiate a contractual
agreement requiring the seller
institution to provide all data required
by HMDA. The commenter also
suggested that if the optional reporting
of the ethnicity, race, sex, age, and
income for purchased loans under
proposed § 1003.4(b)(2) remains, it
should be limited only to instances
where the financial institution does not
have and cannot reasonably obtain the
information. Another consumer
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advocate suggested that reporting of
demographic information on purchased
loans be required to enhance its
understanding of trends in the mortgage
market and how well financial
institutions are or are not serving the
communities which it represents.
Similarly, another commenter expressed
concern that an increase in the
depository institution threshold and any
delay in establishing a unique ULI will
enable the nonreporting of critical
demographic data with respect to large
numbers of purchased loans and as
such, recommended that the Bureau
extend the mandatory reporting of
ethnicity, race, sex, age, and income to
purchased loans. Lastly, another
commenter recommended that unless
and until the ULI is successfully
implemented, purchased loans should
not be excluded from this reporting
requirement.
On the other hand, the industry
commenters who addressed this aspect
of the proposal supported the current
optional reporting of ethnicity, race, sex,
age, and income data on purchased
loans. For example, one industry
commenter recommended that reporting
of this data should only be optional
because it would be an enormous
regulatory burden for community banks
to collect and report. Another
commenter stated that purchased loans
should not be subject to HMDA
reporting overall.
The Bureau is adopting § 1003.4(b)(1)
as proposed, with a few changes. First,
the Bureau deleted reference to
appendix A in § 1003.4(b)(1) since the
instructions in the final rule requiring a
financial institution to collect data
about the ethnicity, race, and sex of the
applicant or borrower are located in
appendix B. Second, the Bureau
removed age from § 1003.4(b)(1) since,
as discussed above, the instructions in
the final rule requiring a financial
institution to collect the age of an
applicant or borrower are found in
comments 4(a)(10)(ii)–1, –2, –3, –4, and
–5.
The Bureau has considered the
feedback and determined that the final
rule will continue to allow for optional
reporting of ethnicity, race, sex, and
income for loans purchased by a
financial institution. In addition, as
proposed, the final rule will also allow
optional reporting of age for loans
purchased by a financial institution.
While the Bureau recognizes the
potential utility of ethnicity, race, sex,
age, and income data on purchased
loans, it is concerned with the costs and
burdens associated with collecting and
reporting the data that financial
institutions will face if the reporting
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requirement is mandatory.
Consequently, the Bureau is adopting
§ 1003.4(b)(2) as proposed, which
provides a financial institution with the
option to collect the ethnicity, race, sex,
age, and income data for covered loans
it purchased.
4(c) Optional Data
4(c)(1)
Current § 1003.4(c)(1) provides that a
financial institution may report the
reasons it denied a loan application but
is not required to do so. As discussed
in the section-by-section analysis of
§ 1003.4(a)(16), the final rule makes
reporting of denial reasons mandatory
instead of optional. To conform to that
requirement, the final rule deletes
§ 1003.4(c)(1).
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4(c)(2)
Current § 1003.4(c)(2) provides that a
financial institution may report requests
for preapproval that are approved by the
institution but not accepted by the
applicant but is not required to do so.
The Bureau proposed to make reporting
of requests for preapprovals approved
by the financial institution but not
accepted by the applicant mandatory
under § 1003.4(a) instead of optional
under § 1003.4(c)(2). Few commenters
addressed this proposal specifically,
though as discussed above in the
section-by-section analysis of section
2(b)(2) some commenters addressed
other aspects of preapproval programs.
A few commenters questioned the value
of mandatory reporting for preapprovals
approved but not accepted. The Bureau
is finalizing the requirement to report
preapprovals approved by the financial
institution but not accepted by the
applicant because it believes that
reporting of preapprovals approved by
the financial institution but not
accepted by the applicant provides
context for denials of preapproval
requests, and improves fair lending
analysis because it allows denials to be
compared to a more complete set of
approved preapproval requests.383 To
conform to that requirement, the final
rule deletes § 1003.4(c)(2).
final rule makes reporting of open-end
lines of credit (which include homeequity lines of credit) mandatory, rather
than optional. To conform to that
modification, the final rule deletes
§ 1003.4(c)(3) and comment 4(c)(3)–1.
4(d)
Section 1003.4(d) of Regulation C
currently provides exclusions for certain
data. As discussed in the section-bysection analysis of § 1003.3(c), the
Bureau is moving those exclusions to
§ 1003.3(c). To conform to this
modification, the final rule removes and
reserves § 1003.4(d).
4(e)
For ease of reference, the Bureau is
republishing § 1003.4(e) and making
technical modifications. No substantive
change is intended.
4(f) Quarterly Recording of Data
The Bureau proposed to move the
data recording requirement in
§ 1003.4(a) to proposed § 1003.4(f) and
to make technical modifications to the
requirement. Proposed § 1003.4(f)
provided that a financial institution was
required to record 384 the data collected
pursuant to § 1003.4 on a loan/
application register within 30 calendar
days after the end of the calendar
quarter in which final action was taken
(such as origination or purchase of a
covered loan, or denial or withdrawal of
an application). The Bureau received no
comments on proposed § 1003.4(f) and
is finalizing it with technical
amendments. The Bureau is
renumbering proposed comment 4(a)–
1.iv as comment 4(f)–1 and existing
comments 4(a)–2 and –3 as comments
4(f)–2 and –3, respectively. The Bureau
is also making technical modifications
to these comments to clarify a financial
institution’s obligation to record data on
a quarterly basis.
Section 1003.5 Disclosure and Reporting
5(a) Reporting to Agency
4(c)(3)
Section 1003.4(c)(3) of Regulation C
currently provides that a financial
institution may report, but is not
required to report, home-equity lines of
credit made in whole or in part for the
purpose of home improvement or home
purchase. As discussed in the sectionby-section analysis of § 1003.2(o), the
5(a)(1)
HMDA section 304(h)(1) provides that
a financial institution shall submit its
HMDA data to the Bureau or to the
appropriate agency for the institution in
accordance with rules prescribed by the
Bureau. HMDA section 304(h)(1) also
directs the Bureau to develop
regulations, in consultation with other
appropriate agencies, that prescribe the
format for disclosures required under
HMDA section 304(b), the method for
submission of the data to the
383 The Bureau incorporates and relies on its prior
description of the importance and usefulness of this
data. See 79 FR 51731, 51809–10 (Aug. 29, 2014).
384 A financial institution’s obligation to report
data is addressed below in the section-by-section
analysis of § 1003.5(a).
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appropriate agency, and the procedures
for disclosing the information to the
public. HMDA section 304(n) also
requires that the data required to be
disclosed under HMDA section 304(b)
shall be submitted to the Bureau or to
the appropriate agency for any
institution reporting under HMDA, in
accordance with regulations prescribed
by the Bureau. HMDA section 304(c)
requires that information required to be
compiled and made available under
HMDA section 304, other than loan/
application register information under
section 304(j), must be maintained and
made available for a period of five
years.385
Currently, § 1003.5(a)(1) of Regulation
C requires that, by March 1 following
the calendar year for which data are
compiled, a financial institution must
submit its complete loan/application
register to the agency office specified in
appendix A. Section 1003.5(a)(1) also
provides that a financial institution
shall retain a copy of its complete loan/
application register for its records for at
least three years. Part II of appendix A
to Regulation C provides information
concerning where financial institutions
should submit their complete loan/
application registers. Additional
information concerning submission of
the loan/application register is found in
comments 4(a)–1.vi and –1.vii, 5(a)–1
and –2, and 5(a)–5 through –8.
Comment 5(a)–2 provides that a
financial institution that reports 25 or
fewer entries on its loan/application
register may submit the register in paper
form. The Bureau proposed several
changes to § 1003.5(a)(1).
Quarterly Reporting
The Bureau proposed that a financial
institution with a high transaction
volume report its HMDA data to the
Bureau or appropriate agency on a
quarterly, rather than an annual, basis.
Proposed § 1003.5(a)(1)(ii) required that,
within 60 calendar days after the end of
each calendar quarter, a financial
institution that reported at least 75,000
covered loans, applications, and
purchased covered loans, combined, for
the preceding calendar year would
submit its loan/application register
containing all data required to be
recorded pursuant to § 1003.4(f).386 The
385 HMDA section 304(j)(6) requires that loan/
application register information described in
HMDA section 304(j)(1) for any year shall be
maintained and made available, upon request, for
three years.
386 Currently, § 1003.4(a) requires that ‘‘all
reportable transactions shall be recorded, within
thirty calendar days after the end of the calendar
quarter in which final action is taken (such as
origination or purchase of a loan, or denial or
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Bureau’s proposal allowed for a delay in
the effective date of proposed
§ 1003.5(a)(1)(ii) and stated that the
Bureau was considering a delay of at
least one year from the effective date of
the other proposed amendments to
Regulation C.
The Bureau received several
comments on proposed
§ 1003.5(a)(1)(ii), including comments
on the threshold for coverage under the
provision and its effective date. For the
reasons discussed below, the Bureau is
adopting § 1003.5(a)(1)(ii) as proposed
with several modifications and with an
effective date of January 1, 2020. The
Bureau also is adopting new
§ 1003.6(c)(2) to provide a safe harbor to
protect financial institutions that satisfy
certain conditions from liability for
HMDA and Regulation C violations for
errors and omissions in data submitted
pursuant to § 1003.5(a)(1)(ii).
The requirement to submit data on a
quarterly basis. Consumer advocate and
researcher commenters supported the
proposal to require quarterly reporting
insofar as quarterly reporting would not
adversely impact the accuracy of annual
HMDA data released to the public and
would expedite the FFIEC’s annual
release of HMDA data.387 All but a few
industry commenters opposed the
proposal, with most comments
questioning the benefits of quarterly
reporting and raising concerns about
burdens on financial institutions subject
to the proposed quarterly reporting
requirement, the accuracy of data
submitted on a quarterly basis, and error
thresholds applicable to quarterly
submissions.
Most industry commenters asserted
that institutions subject to the proposed
quarterly reporting requirement would
expend significant additional resources
to comply with the requirement. These
comments clearly conveyed that the
need to ‘‘clean’’ HMDA data to
maximize its accuracy before
submission to regulators would be a
significant driver of the increased
operational burden associated with
quarterly reporting. Although
commenters suggested that most
financial institutions currently review
and correct their HMDA data
throughout the year the data are
withdrawal of an application), on a register in the
format prescribed in Appendix A of this part.’’ The
Bureau’s proposal moved this requirement, with
some revisions, to proposed § 1003.4(f). The Bureau
is finalizing § 1003.4(f) as proposed with technical
amendments.
387 As discussed above in part II.B, the FFIEC
currently makes available on its Web site aggregate
and loan-level HMDA data. Currently, these data
are made available in September of the year
following the calendar year in which the data were
collected.
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collected, several stated that rigorous
scrubbing typically is performed before
the data are submitted to regulators by
March 1 of the following year. A few
commenters stated that performing this
level of review four times each year
instead of one would significantly
increase costs to financial institutions
and noted that these costs could change
from quarter to quarter, depending on
volume.
Several industry commenters also
stated that HMDA data reported on a
quarterly basis would be less accurate
than data reported on an annual basis.
A few commenters argued that systemic
errors can take months to resolve and
that the current annual reporting cycle
maximizes opportunities to address
systemic issues before the HMDA data
are submitted to regulators. A few
commenters noted that the need to
‘‘update’’ quarterly data previously
submitted, whether to reflect the sale of
a loan or to correct errors or omissions,
would complicate submission for
quarterly reporters and would introduce
inaccuracies. Several commenters stated
that, even with increased resources
devoted to preparing quarterly
submissions, 60 days after the close of
the quarter would not provide sufficient
time to properly scrub quarterly data
prior to submission, especially if the
Bureau were to finalize its proposal to
require reporting of additional
transactions and data. A few
commenters expressed concern that
errors or omissions in quarterly
submissions would expose financial
institutions subject to proposed
§ 1003.5(a)(1)(ii) to increased risk of
violations under the agencies’ accuracy
requirements in determining HMDA
compliance.
Industry commenters also argued that
the significant burden of quarterly
reporting would outweigh any benefits
it might provide. Several commenters
stated that annual reporting of HMDA
data is sufficient to satisfy the purposes
of HMDA. A few commenters stated that
useful analyses cannot be performed
with quarterly data, especially for
purposes of fair lending enforcement.
One commenter argued that, because
only the largest lenders would be
reporting quarterly, quarterly data
would not provide a good ‘‘community
lending’’ picture. One commenter noted
that, with each quarter, the reduction in
delay between a reportable event and
the date it is reported that exists under
the annual reporting scheme is
decreased, and so the corresponding
benefit of quarterly reporting is
decreased. As discussed above, several
commenters stated that quarterly
reporting would decrease the accuracy
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of HMDA data submitted, not improve
it as the Bureau suggested in the
proposal. A few commenters expressed
skepticism that quarterly reporting
would significantly hasten the FFIEC’s
release of annual HMDA data, and
several commenters asserted that
quarterly reporting would provide
limited or no benefit to the public and
public officials, who would continue to
have access to HMDA data on an annual
basis only under the proposal.
The Bureau has considered the
comments received and has determined
that the benefits of quarterly reporting
by large-volume financial institutions
justify some degree of additional burden
on these financial institutions. Quarterly
reporting will provide regulators with
more timely data, which will be of
significant value for HMDA and market
monitoring purposes. Currently, HMDA
data may be reported as many as 14
months after final action is taken on an
application or loan.388 Although this
delay decreases as the year progresses
(e.g., a loan originated in December is
currently reported by March 1 of the
following year), increasing the
timeliness of HMDA data will provide
meaningful benefits to various analyses
by regulators. Timelier data will allow
regulators to determine, in much closer
to ‘‘real time,’’ whether financial
institutions are fulfilling their
obligations to serve the housing needs of
communities in which they are located.
Timelier identification of risks to local
housing markets and troublesome trends
by regulators will allow for more
effective interventions or other actions
by the agencies and other public
officials. Quarterly data will allow for
deeper and timelier analyses of the
lending activities of large volume
lenders. For example, in fair lending
examinations, quarterly reporting will
permit comparisons of recent data from
the subjects of examinations and similar
lenders. Further, timelier HMDA data
will allow the agencies to not only
better understand the market and
identify trends and shifts that may
warrant interventions, but also will
provide data that will allow the agencies
to sooner understand the impacts of
prior interventions. For example,
although the Bureau’s Ability-to-Repay
and Qualified Mortgage provisions went
into effect in January 2014, data on
loans subject to these provisions were
not reported until March 2015. Timelier
HMDA data would have enhanced the
Bureau’s understanding of the effects of
those protections.
388 A loan originated on January 2, 2015 may not
be reported until March 1, 2016.
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Further, quarterly reporting would
allow for the release of timelier data and
analysis to the public. In its proposal,
the Bureau noted that, although based
on its analysis to date it believed that
releasing HMDA data to the public on
a quarterly basis may create risks to
applicant and borrower privacy that
would not be justified by the benefits of
such release, it would evaluate options
for the agencies’ release of data or
analysis more frequently than annually.
Upon further consideration, the Bureau
has determined that useful analyses of
data submitted on a quarterly basis, or
aggregated data, could be provided to
the public in a manner that
appropriately protects applicant and
borrower privacy.389 The Bureau
intends to release analyses of HMDA
data or aggregated HMDA data to the
public more frequently than annually in
such a privacy-protective manner. As
aggregates of HMDA data collected by
all reporting institutions during a given
calendar year currently are not publicly
available until September of the
following year, the release of aggregate
quarterly data or analysis would further
the statute’s purposes and deliver a
direct disclosure benefit to the public.
The Bureau acknowledges the
concerns industry commenters raised
about burdens that could be imposed by
the proposed quarterly reporting
requirement. Based on the comments,
the Bureau understands that these
burdens would result mainly from a
requirement that quarterly submissions
achieve the degree of data accuracy the
regulators currently require in annual
submissions. To address this concern,
the Bureau is adopting a quarterly
reporting requirement, but is finalizing
§ 1003.5(a)(1)(i) and § 1003.5(a)(1)(ii)
with modifications and adopting new
§ 1003.6(c)(2) to provide that quarterly
submissions are considered preliminary
submissions and to provide a safe
harbor that protects a financial
institution that satisfies certain
389 At this time, the Bureau believes that loanlevel data should not be released to the public more
frequently than annually due to privacy concerns.
Currently, dates are redacted from the modified
loan/application register and the agencies’ annual
loan-level data release to reduce re-identification
risk created by the disclosure of loan-level data. See
55 FR 27886, 27888 (July 6, 1990) (concerning the
agencies’ decision to release loan-level data to the
public and stating that ‘‘[a]n unedited form of the
data would contain information that could be used
to identify individual loan applicants’’ and that the
data would be edited prior to public release to
remove the application identification number, the
date of application, and the date of final action).
Based on its analysis to date, the Bureau believes
that disclosure of loan-level data with more
granular date information than year of final action
would create risks to applicant and borrower
privacy that are not outweighed by the benefits of
such disclosure.
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conditions from being cited for
violations of HMDA or Regulation C for
errors and omissions in its quarterly
submissions.
Under the final rule, within 60
calendar days after the end of each
calendar quarter except the fourth
quarter,390 financial institutions subject
to § 1003.5(a)(1)(ii) will submit the
HMDA data that they are already
required to record on their loan/
application registers within 30 days
after the end of each calendar quarter.
Pursuant to new § 1003.6(c)(2), errors
and omissions in the data submitted
pursuant to § 1003.5(a)(1)(ii) will not be
considered HMDA or Regulation C
violations assuming the conditions that
currently provide a safe harbor for errors
and omissions in quarterly recorded
data are satisfied.391 By March 1 of the
following year, quarterly reporters will
submit their final annual HMDA data
pursuant to § 1003.5(a)(1)(i), which will
be subject to examination for HMDA
and Regulation C compliance and
required to satisfy the agencies’ error
thresholds. This annual submission will
contain all reportable data for the
preceding calendar year.
The Bureau is moving the certification
requirement from proposed
§ 1003.5(a)(1)(iii) into adopted
§ 1003.5(a)(1)(i) to clarify that such
certification is only required in
connection with a financial institution’s
annual data submission, and is making
other technical and conforming changes
to § 1003.5(a)(1)(i) and
§ 1003.5(a)(1)(ii).392 The final rule thus
preserves the annual reporting structure
of current Regulation C for all financial
institutions reporting under HMDA and
390 Sixty days after end of the fourth calendar
quarter coincides with March 1, the date by which
all financial institutions must submit their annual
HMDA data pursuant to § 1003.5(a)(1)(i) as
finalized. Financial institutions subject to
§ 1003.5(a)(1)(ii) will report their fourth quarter data
as part of their annual submission. In its annual
submission, a quarterly reporter will resubmit the
data previously submitted for the first three
calendar quarters of the year, including any
corrections to the data, as well as its fourth quarter
data.
391 Currently, § 1003.6(b)(3) provides that ‘‘[i]f an
institution makes a good-faith effort to record all
data concerning covered transactions fully and
accurately within thirty calendar days after the end
of each calendar quarter, and some data are
nevertheless inaccurate or incomplete, the error or
omission is not a violation of the act or this part
provided that the institution corrects or completes
the information prior to submitting the loan/
application register to its regulatory agency.’’
Modifications to this provision and new
§ 1003.6(c)(2) are discussed below in the section-bysection analysis of § 1003.6(c).
392 As discussed below, the Bureau also is
modifying the certification provision in the final
rule to clarify who may certify on behalf of a
financial institution and to provide that the
institution must certify to the completeness of the
submission as well as to its accuracy.
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66243
imposes an additional, quarterly
submission requirement on largevolume institutions only. These
additional submissions need only
consist of the data a large-volume
institution is already required to
maintain, however, significantly
limiting the burden imposed by the
quarterly reporting requirement.393
The final rule provides the benefits of
timelier data to the regulators without
requiring quarterly reporters to apply to
each quarterly submission the rigorous
scrubbing typically performed on
annual HMDA submissions. The Bureau
has considered that potential
inaccuracies in quarterly data submitted
under the final rule may decrease the
data’s utility and reliability. Although a
quarterly reporting requirement would
ideally yield timelier and highly
accurate data, the Bureau recognizes
that minimizing burdens to financial
institutions associated with quarterly
reporting may require a tradeoff
between these goals. Based on its
examination experience, the Bureau
believes that the typical degree of
accuracy in quarterly recorded HMDA
data maintained by most financial
institutions will be sufficient for the
kinds of analyses for which the Bureau
anticipates quarterly data may be
used.394 The Bureau further believes
that edit checks it is building into the
HMDA data submission tool it is
developing will decrease some types of
inaccuracies in submissions.
As an alternative to the adopted
approach, the Bureau considered
requiring semiannual reporting rather
than quarterly reporting. Under this
approach, large volume reporters would
submit their final HMDA data for the
first and second quarters of the calendar
year within 60 days after the end of the
second quarter, and their final HMDA
data for the third and fourth quarters by
March 1 of the following year. These
submissions would be subject to
examination for HMDA compliance and
the agencies’ error thresholds. This
approach would require financial
institutions subject to § 1003.5(a)(1)(ii)
to perform the more rigorous data
review described by industry
commenters only twice each year, rather
than four times, reducing burden on
393 This approach also addresses concerns raised
by a few industry commenters that sixty days is
insufficient time after the close of the quarter for a
financial institution to submit its quarterly data.
Financial institutions must already record the data
to be submitted under § 1003.5(a)(1)(ii) within
thirty days after the calendar quarter.
394 The Bureau believes that the accuracy levels
typically found in quarterly recorded data likely
result from the good-faith requirement set forth in
current § 1003.6(b)(3) and the data review that
many financial institutions perform year-round.
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these institutions compared to the
Bureau’s proposal. Further, industry
comments suggest that data submitted
on a semiannual basis may contain
fewer inaccuracies than data submitted
on a quarterly basis. This alternative
approach would not provide as timely
data to the agencies as the quarterly
reporting approach discussed above,
however, reducing the utility of the data
to the agencies as well as the disclosure
benefit to the public.
To the extent that quarterly data
contain errors and omissions, the
Bureau believes these inaccuracies are
unlikely to be significant enough to
have a negative impact on the analyses
the data will allow and that the risks of
inaccurate data are outweighed by the
benefits of timelier data. Although the
approach adopted in the final rule
reduces the likelihood that the quarterly
reporting requirement will expedite the
agencies’ release of annual HMDA data
as compared to the proposal,395 it will
nonetheless allow the Bureau to provide
a direct disclosure benefit to the public
in the form of periodic aggregate data or
analysis, as described above. Based on
the comments received, the Bureau has
determined that the approach adopted
in the final rule would limit burden on
financial institutions subject to
§ 1003.5(a)(1)(ii) and that it best
balances any burden with the benefits of
more frequent HMDA reporting.
A few commenters raised operational
questions concerning quarterly
reporting, including how financial
institutions reporting on a quarterly
basis would report updates and
corrections to previously-submitted
quarterly data and whether they would
be required to update and correct
previously-submitted data with each
quarterly submission. For example,
these commenters suggested that
quarterly reporters may be required to
395 As explained in the proposal, the Bureau
believed that the proposed quarterly reporting
requirement would reduce reporting errors and
allow it to process data throughout the year. See 79
FR 51731, 51811 (Aug. 29, 2014). The Bureau
believed that these benefits of quarterly reporting
would reduce the time currently required to edit
and process annual HMDA data, which would
expedite the release of the annual data to the
public. Because the final rule provides that data
submitted quarterly need only be preliminary data
and a quarterly reporter will resubmit all previously
submitted quarterly data with its annual
submission, the Bureau now believes that the
quarterly reporting requirement may not
significantly reduce the time needed to process the
annual data. The Bureau notes, however, that it
believes improvements to the submission process,
including a requirement that edit checks currently
performed by the processor after submission are
performed by the financial institution prior to
submission, will reduce the time needed to process
the annual HMDA data and will thus expedite the
release of the annual data to the public.
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report the same loan repeatedly
throughout the calendar year in order to
correct errors in a previous quarterly
submission or reflect the sale or
repurchase of the loan.
A quarterly reporter is required to
update a previously reported transaction
in a subsequent quarterly submission if
the new information is required to be
recorded on the loan/application
register pursuant to § 1003.4(f). Under
the final rule, a financial institution
required to comply with
§ 1003.5(a)(1)(ii) must submit, within 60
calendar days after the end of each
calendar quarter except the fourth
quarter, its quarterly loan/application
register containing all data required to
be recorded for that quarter pursuant to
§ 1003.4(f). Pursuant to § 1003.4(f), data
must be recorded on the quarterly loan/
application register within 30 calendar
days after the end of the calendar
quarter in which final action is taken
(such as origination or purchase of a
covered loan, sale of a covered loan in
the same calendar year it is originated
or purchased, or denial or withdrawal of
an application). The sale or repurchase
of a loan, if occurring in the first three
quarters of the calendar year, must be
reflected in the quarterly submission for
the quarter in which the action was
taken because it must be recorded on
the quarterly loan/application register
for that quarter pursuant to
§ 1003.4(f).396
Final § 1003.6(c)(2) provides that, if a
quarterly reporter makes a good faith
effort to report all data required to be
reported pursuant to § 1003.5(a)(1)(ii)
fully and accurately within 60 calendar
days after the end of each calendar
quarter, inaccuracies or omissions in
quarterly data submitted need not be
corrected or completed until the
financial institution submits it annual
loan/application register pursuant to
§ 1003.5(a)(1)(i). Thus, for example, if a
quarterly reporter makes a good faith
effort to report income for a particular
transaction accurately in its quarterly
submission and discovers in a
subsequent quarter that the reported
amount was incorrect, it is not required
to update the record for the transaction
until it submits its annual loan/
application register pursuant to
§ 1003.5(a)(1)(i).
The Bureau received no comments on
proposed comment 5(a)–1. The Bureau
396 See § 1003.4(f); comment 4(a)(11)–9 (where a
financial institution originates a covered loan in
one quarter and sells it in a subsequent quarter of
the same calendar year, the institution must record
the purchaser on the loan/application register for
the quarter in which the covered loan was sold);
comment 4(a)–6 (clarifying that a repurchase is
reported as a purchase).
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is adopting comment 5(a)–1 as
proposed, modified to conform to
§ 1003.5(a)(1)(ii) as finalized and to add
two new subsections clarifying how a
surviving or newly formed financial
institution’s obligation to report on a
quarterly basis under § 1003.5(a)(1)(ii) is
determined for the calendar year of the
merger or acquisition and the calendar
year after the merger or acquisition.
The Bureau received no comments on
proposed comment 5(a)–2. The Bureau
is adopting proposed comment 5(a)–2 as
modified in two ways. First, comment
5(a)–2 as adopted requires that, if the
appropriate Federal agency for a
financial institution subject to
§ 1003.5(a)(1)(ii) changes, the financial
institution must identify the new
appropriate Federal agency in its
quarterly submission pursuant to
§ 1003.5(a)(1)(ii) beginning with its
submission for the quarter of the
change, unless the change occurs during
the fourth quarter, in which case the
financial institution must identify the
new agency in its annual submission
pursuant to § 1003.5(a)(1)(i). This
change aligns the requirement for
quarterly submissions with the
requirement for annual submissions and
conforms to § 1003.5(a)(1)(ii) as
adopted. The Bureau has also modified
comment 5(a)–2 to provide illustrative
examples.
The threshold for coverage under
§ 1003.5(a)(1)(ii). The Bureau proposed
that the quarterly reporting requirement
under proposed § 1003.5(a)(1)(ii) apply
to a financial institution that reported at
least 75,000 covered loans, applications,
and purchased covered loans,
combined, for the preceding calendar
year. The Bureau received no comments
from consumer advocates on the
proposed threshold for quarterly
reporting.
The Bureau received a few industry
comments on the proposed threshold.
One industry commenter suggested that
the Bureau should impose a $10 billion
asset threshold, instead of a transactionbased threshold, to align the quarterly
reporting requirement with the Bureau’s
supervisory authority. Another industry
commenter suggested that the threshold
should be lowered to 50,000
transactions in the preceding calendar
year so as to increase the amount of
quarterly data available for analysis, and
yet another suggested that all HMDA
reporters should be required to report
on a quarterly basis to facilitate the
earlier release of the annual HMDA data
by the agencies. One industry
commenter suggested that the threshold
should include originated covered loans
only (not applications or purchased
loans), though offered no rationale for
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this recommendation. Two industry
comments stated that the Bureau’s
estimate of the number of institutions
that would be covered by the proposed
threshold was inaccurate because it did
not take into account the Bureau’s
proposal to expand transactional
coverage to include open-end lines of
credit and commercial-purpose loans.
One of these comments, submitted by
several national trade associations,
stated that the associations’ members
reported that mandatory open-end line
of credit reporting would double or
triple the number of reportable
transactions.
For the reasons described below, the
Bureau is adopting § 1003.5(a)(1)(ii)
with modifications to the proposed
threshold to exclude purchased covered
loans from the threshold calculation and
to lower the threshold from at least
75,000 transactions in the preceding
calendar year to at least 60,000
transactions in the preceding calendar
year. The Bureau has determined that it
is appropriate to exclude purchased
covered loans from the quarterly
reporting threshold due to changes to
the currently-applicable FFIEC guidance
concerning reporting of repurchased
loans that it is adopting herein.397 The
Bureau understands that loans are
repurchased under a variety of
circumstances and arrangements, some
of which are very common. The Bureau
lacks data concerning repurchase
activity sufficient to allow it to estimate
the impact of a quarterly reporting
threshold that takes repurchases into
consideration, however, and is
concerned that inclusion of repurchases
in the quarterly reporting threshold
calculation could conceivably
significantly increase the number of
financial institutions that would be
required to comply with
§ 1003.5(a)(1)(ii). Rather than excluding
only repurchased loans from the
threshold calculation, which would
require financial institutions to identify
repurchased loans in their HMDA data
and would thus add burden, the final
rule excludes all purchases from the
threshold. Institutions that are required
to submit their HMDA data on a
quarterly basis under § 1003.5(a)(1)(ii)
will include purchased covered loans in
the quarterly data they submit, but
purchased covered loans will not be
considered in determining whether a
397 The Bureau is adopting comment 4(a)–6 to
require the reporting of most repurchases as
purchased loans regardless of when the repurchase
occurs. As adopted, comment 4(a)–6 eliminates the
exception for reporting repurchases occurring in the
same calendar year as origination that currently
exists under FFIEC guidance.
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financial institution must comply with
§ 1003.5(a)(1)(ii).
Based on 2013 HMDA data, a
threshold of at least 60,000 transactions,
excluding purchases, would have
required 29 financial institutions to
report on a quarterly basis in 2014. In
2013, these 29 institutions reported
approximately 49 percent of all
transactions reported under HMDA.398
The Bureau notes that market
fluctuations may influence the number
of financial institutions that are required
to comply with § 1003.5(a)(1)(ii) from
year to year. For example, based on
preliminary HMDA data submitted for
2014, a threshold of at least 60,000
transactions, excluding purchases,
would have required only
approximately 19 financial institutions
to report on a quarterly basis in 2015.
The preliminary data suggest that these
institutions reported approximately 37
percent of all transactions reported
under HMDA for 2014. The Bureau
recognizes that the percentage of the
market reflected in quarterly reported
data may vary from year to year and has
determined that a 60,000 transaction
volume threshold should result in data
sufficient to realize the benefits of a
quarterly reporting requirement.
The Bureau believes that the
requirement to report open-end lines of
credit under the final rule is unlikely to
have a significant impact on the number
of financial institutions that must
comply with § 1003.5(a)(1)(ii). As
discussed elsewhere in this document,
the Bureau has faced challenges in
analyzing the impact of the mandatory
reporting of open-end lines of credit
required under the final rule on
financial institutions’ HMDA-reportable
transaction volume.399 Using estimates
of the number of consumer-purpose
open-end line of credit originations and
applications in 2013,400 the Bureau’s
analysis suggests that, had these
originations and applications been
required to be reported for 2013, one
additional financial institution would
have become a quarterly reporter in
2014, as compared to the number of
398 These
numbers align with those based on 2012
HMDA data and the proposed 75,000 transaction
threshold included in the Bureau’s proposal. See 79
FR 51731, 51811 (Aug. 29, 2014) (noting that, based
on 2012 HMDA data, the 75,000 transaction
threshold proposed would have required 28
financial institutions to report on a quarterly basis
in 2013 and that, in 2012, these 28 institutions
reported approximately 50 percent of all
transactions reported under HMDA).
399 See section-by-section analyses for § 1003.2(g),
(o), § 1003.3(c)(10), and part VII.
400 As discussed in part VII, these estimates are
based on 2013 HMDA data, 2013 Call Report data,
and Consumer Credit Panel data. Due to the limited
data available, these estimates rely on several
assumptions.
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66245
institutions that would have become
quarterly reporters without mandatory
reporting of open-end line of credit
originations and applications.401 Based
on these estimates as applied to 2013
HMDA data, the Bureau believes that,
although mandatory reporting of
consumer-purpose open-end lines of
credit and applications will increase
HMDA-reportable transaction volumes
for many financial institutions, and may
increase these volumes significantly for
some financial institutions, this increase
is unlikely to significantly increase the
number of financial institutions
required to comply with
§ 1003.5(a)(1)(ii). Further, the Bureau
believes that relatively few dwellingsecured, commercial-purpose open-end
lines of credit are used for home
purchase, home improvement, or
refinancing purposes.402 The Bureau
thus expects that reporting these
transactions will not significantly
increase the number of transactions
reported by financial institutions and,
accordingly, will not significantly
increase the number of financial
institutions that must comply with
§ 1003.5(a)(1)(ii).
The final rule does not base the
threshold for quarterly reporting on a
financial institution’s asset size, as
recommended by a commenter. The
central goal of the quarterly reporting
requirement is to provide the agencies
with timelier HMDA data in a quantity
sufficient to perform meaningful
analyses. A transaction-based threshold
limits the imposition of costs associated
with quarterly reporting to those
institutions with the largest transaction
volumes in order to minimize the
number of financial institutions subject
to the requirement while maximizing
the volume of data reported on a
quarterly basis. An asset-based
threshold cannot guarantee such a
relationship between the number of
affected institutions and the quantity of
data submitted on a quarterly basis.
401 This analysis assumes that these institutions
did not voluntarily report open-end line of credit
originations and applications in 2013.
402 As discussed in the section-by-section analysis
of § 1003.3(c)(10), the final rule maintains coverage
of commercial-purpose transactions generally at its
existing level. Section 1003.3(c)(10) does expand
coverage of dwelling-secured commercial-purpose
lines of credit, which are not currently reported, by
requiring them to be reported if they primarily are
for home purchase, home improvement, or
refinancing purposes, however. As discussed above,
the Bureau has faced challenges estimating
institutions’ open-end lending volume given
limitations in publicly available data sources. For
example, it is difficult to estimate commercialpurpose open-end lending volume because
available data sources do not distinguish between
consumer- and commercial-purpose lines of credit.
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Effective date of § 1003.5(a)(1)(ii). The
Bureau received no consumer advocate
comments and very few industry
comments on its request for comment as
to whether and how long it should delay
the effective date of proposed
§ 1003.5(a)(1)(ii). Industry commenters
recommended a delay of either one or
two years from the effective date of the
other amendments to Regulation C.
The Bureau is adopting an effective
date of January 1, 2020 for
§ 1003.5(a)(1)(ii). This delay is to permit
financial institutions subject to the
quarterly reporting requirement time to
implement amended Regulation C and
to allow for two annual reporting cycles
under the amended rule before quarterly
submissions are required. Financial
institutions that report for 2019 at least
60,000 covered loans and applications,
combined, excluding purchased covered
loans, must comply with
§ 1003.5(a)(1)(ii) in 2020. Financial
institutions subject to § 1003.5(a)(1)(ii)
in 2020 will first report quarterly data
under this provision by May 30, 2020.
Elimination of Paper Reporting
The Bureau proposed to delete
comment 5(a)–2, which allows a
financial institution that reports 25 or
fewer entries on its loan/application
register to submit the register in paper
form, and to clarify in proposed
§ 1003.5(a)(1) that the register must be
submitted in electronic format in
accordance with instructions in
appendix A. The Bureau received no
comments from consumer advocates on
this proposal and very few comments
from industry. One industry commenter
supported the proposal. A few industry
commenters opposed the proposal. The
majority of these commenters suggested
that the option to report on paper
should be available until the Bureau
builds an improved data submission
tool. One industry commenter argued
that it would be cost prohibitive for a
financial institution to purchase new
software to report a few transactions per
month.
For the reasons described below, the
Bureau is finalizing its proposal to
delete comment 5(a)–2. In recent years,
very few financial institutions have
submitted their loan/application
registers in paper form. Further, the
Bureau is finalizing its proposal to
exclude from the definition of financial
institution any institution that
originated less than 25 closed-end
mortgages loans and less than 100 openend lines of credit,403 so only a financial
institution that originated exactly 25
closed-end mortgage loans and received
403 See
19:37 Oct 27, 2015
Retention of Annual Loan/Application
Register in Electronic Format
Section 1003.5(a)(1) requires that a
financial institution shall retain a copy
of its complete loan/application register
for three years, but current Regulation C
is silent concerning the formats in
which the complete loan/application
register may be retained. The Bureau
proposed comment 5(a)–4 to clarify that
retention of the loan/application register
in electronic format is sufficient to
satisfy the requirements of
§ 1003.5(a)(1).
The Bureau received no consumer
advocate comments concerning
proposed comment 5(a)–4. The Bureau
received very few industry comments
concerning proposed comment 5(a)–4,
but all supported the proposal. The
Bureau adopts comment 5(a)–4 as
proposed, modified to clarify that the
obligation to retain the loan/application
register applies only to a financial
institution’s annual data submitted
pursuant to § 1003.5(a)(1)(i).
404 Section 1003.5(a)(1)(ii) is effective January 1,
2020.
§ 1003.2(g).
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no other applications would be eligible
to submit its register in paper form
under amended Regulation C were this
option to remain available. The Bureau
is developing an improved HMDA data
submission system and tools to assist
smaller financial institutions with data
entry. The Bureau is confident that
these developments will reduce even
further any need for a financial
institution to submit its HMDA data in
paper form.
As discussed in part VI below, most
of § 1003.5(a) is effective January 1,
2019 and applies to data collected and
recorded in 2018 pursuant to this final
rule.404 However, the Bureau will intake
and process HMDA data on behalf of the
agencies using the improved web-based
submission tool it is developing
beginning with financial institutions’
2017 HMDA data submission. Data
collected and recorded in 2017 pursuant
to current Regulation C will be reported
by March 1, 2018 pursuant to current
§ 1003.5(a). The final rule’s amendments
to supplement I effective January 1,
2018 generally maintain the current
commentary to § 1003.5(a) with respect
to the reporting of data collected in 2017
and reported in 2018 but, because the
improved submission tool that financial
institutions will use to submit their
2017 HMDA data will not accept loan/
application registers in paper form, the
Bureau is deleting comment 5(a)–2
effective January 1, 2018.
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Submission Procedures
As stated in its proposal, as part of its
efforts to improve and modernize
HMDA operations, the Bureau is
developing improvements to the HMDA
data submission process. The Bureau
proposed to reorganize parts I and II of
appendix A and portions of the
commentary so that instructions relating
to data submission are found in one
place in the regulation. Specifically, the
Bureau proposed to: Delete the content
of part II of appendix A and comment
5(a)–1; move the portion of comment
4(a)–1.vi concerning certification to
proposed § 1003.5(a)(1)(iii); and
incorporate the pertinent remaining
portion of comment 4(a)–1.vi and
comments 4(a)–1.vii and 5(a)–7 and –8
into proposed instructions 5(a)–2 and –3
in appendix A and delete the remaining
portions of these comments. The Bureau
proposed new instruction 5(a)–1 in
appendix A to provide procedural and
technical information concerning data
submission. The Bureau did not receive
comment on these proposals.
The Bureau noted in its proposal that,
as part of its efforts to improve and
modernize HMDA operations, it was
considering various improvements to
the HMDA data submission process.
The Bureau received a few industry
comments concerning data submission.
A few commenters urged the Bureau to
adopt a web-based submission tool that
is accessible by multiple work stations
and users within a financial institution,
rather than a downloadable tool that
would reside on a single work station.
Commenters also suggested that the tool
automatically identify and code
inapplicable fields so that, for example,
if a loan is identified on the loan/
application register as a commercialpurpose loan, all data fields not
required to be reported for commercialpurpose loans would automatically be
populated with the code for ‘‘not
applicable.’’ Finally, a few commenters
stated that the tool should be secure and
should not allow regulators access to
any data until the data is submitted by
the financial institution.
As will be described in more detail in
separately published procedures, the
Bureau is developing a Web-based
submission tool that financial
institutions will use to submit their
HMDA data to their regulators. The
Bureau anticipates that this submission
tool will be accessible from multiple
work stations and will perform edit
checks on HMDA data prior to
submission. The Bureau believes that
this submission tool will significantly
improve the data submission process.
The Bureau does not anticipate that this
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submission tool will include a data
entry function, and therefore it would
not have capacity to automatically
identify and code inapplicable fields, as
recommended by some commenters.
The Bureau believes that, at this time,
the costs of a Web-based data entry tool
outweigh the benefits such a tool could
provide. The Bureau is developing a
tool to assist smaller financial
institutions with data entry, but the
Bureau anticipates that it will not be
Web-based.
Effective January 1, 2019, the Bureau
is deleting appendix A from Regulation
C and is instead separately publishing
procedures for the submission of HMDA
data.405 The Bureau is adopting
modifications to § 1003.5(a)(1)(i) and (ii)
and new § 1003.5(a)(4) to clarify that
financial institutions submit HMDA
data to the appropriate Federal agency
for the financial institution. The Bureau
is also adopting modifications to the
certification requirement in
§ 1003.5(a)(1)(i).406 These modifications
require that a financial institution
certify to the completeness of the
HMDA data submitted as well as to their
accuracy in order to reflect the
obligation to report both accurate and
complete data, and clarify who may
certify on behalf of a financial
institution in order to align the
requirement with current practice.
As discussed in part VI below, most
of § 1003.5(a) is effective January 1,
2019 and applies to data collected and
recorded in 2018 pursuant to this final
rule.407 However, the Bureau will intake
and process HMDA data on behalf of the
agencies using the improved Web-based
submission tool it is developing
beginning with financial institutions’
2017 HMDA data submission. Data
collected and recorded in 2017 pursuant
to current Regulation C will be reported
by March 1, 2018 pursuant to current
§ 1003.5(a). The final rule’s amendments
to supplement I effective January 1,
2018 generally maintain the current
commentary to § 1003.5(a) with respect
to the reporting of data collected in 2017
and reported in 2018, but operation of
this improved submission tool requires
that current comment 5(a)–1 is deleted
405 See final § 1003.5(a)(5) (providing that
procedures for the submission of data pursuant to
§ 1003.5(a) are published on the Bureau’s Web site).
406 The Bureau proposed to move the certification
requirement from the transmittal sheet to proposed
§ 1003.5(a)(1)(iii). As discussed above, in the final
rule, the Bureau is moving the certification
requirement to § 1003.5(a)(1)(i) to clarify that the
certification is only required in connection with a
financial institution’s annual data submission
pursuant to that paragraph.
407 Section 1003.5(a)(1)(ii) is effective January 1,
2020.
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effective January 1, 2018.408 Current
comments 5(a)–3 and –4 have been
incorporated elsewhere in the final rule
as appropriate and are also deleted from
supplement I effective January 1, 2018.
In addition, part II of appendix A to
current Regulation C is revised effective
January 1, 2018 to provide updated
instructions relating to the reporting of
2017 HMDA data.
Finally, the Bureau received several
identical comments from employees of
one financial institution suggesting that
the Bureau change the date by which
annual HMDA data must be submitted
pursuant to § 1003.5(a)(1)(i) to allow
financial institutions additional time to
prepare HMDA data for submission. The
final rule retains the March 1 deadline
for submitting annual HMDA data
pursuant to § 1003.5(a)(1)(i). Postponing
this deadline would necessarily delay
the release of annual HMDA data to the
public. The Bureau has determined that
any benefits to financial institutions that
would result from additional time to
prepare HMDA data for submission are
outweighed by the costs of such an
approach to the public disclosure goals
of the statute.
5(a)(1)(iii)
The Bureau is adopting new
§ 1003.5(a)(1)(iii) to provide that, when
the last day for submission of data
prescribed under § 1003.5(a)(1) falls on
a Saturday or Sunday, a submission
shall be considered timely if it is
submitted on the next succeeding
Monday.409 This is consistent with the
approach taken by the agencies when
this situation has arisen in the past.410
5(a)(2)
The Bureau did not propose changes
or solicit feedback regarding
§ 1003.5(a)(2) in the proposal. Current
§ 1003.5(a)(2) provides that a subsidiary
of a bank or savings association shall
complete a separate loan/application
register and submit it directly or
through its parent to the agency of its
parent. The Bureau is making nonsubstantive changes to § 1003.5(a)(2) to
clarify that a financial institution that is
a subsidiary of a bank or savings
association shall complete a separate
loan/application register and submit it
408 As discussed above, comment 5(a)–2 also is
deleted effective January 1, 2018.
409 As discussed above, the certification
requirement set forth in proposed § 1003.5(a)(1)(iii)
is moved into final § 1003.5(a)(1)(i).
410 For example, in 2015, March 1 fell on a
Sunday and the reporting deadline for 2014 HMDA
data was moved to March 2. Fed. Fin. Insts.
Examination Council, CRA/HMDA Reporter,
Calendar Year 2014 Initial Submission Deadline, at
1 (Jan. 2015), available at http://www.ffiec.gov/
hmda/pdf/15news.pdf.
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directly or through its parent to the
appropriate Federal agency for its parent
at the address identified by the agency.
5(a)(3)
The Bureau proposed § 1003.5(a)(3) to
require that when an institution reports
its data, the institution shall provide
with each covered loan or application
its Legal Entity Identifier (LEI) issued by
a utility endorsed by the LEI Regulatory
Oversight Committee or a utility
endorsed or otherwise governed by the
Global LEI Foundation (GLEIF) (or any
successor of the GLEIF) after the GLEIF
assumes operational governance of the
global LEI system. Regulation C
currently requires financial institutions
to provide a Reporter’s Identification
Number (HMDA RID) in their
transmittal sheet and loan/application
register. The HMDA RID consists of an
entity identifier specified by the
financial institution’s appropriate
Federal agency combined with a code
that designates the agency. Each Federal
agency chooses the entity identifier that
its financial institutions would use in
reporting their HMDA data. Currently,
the Research Statistics Supervision and
Discount (RSSD) number is used by
institutions supervised by the Board and
depository institutions supervised by
the Bureau; the Federal Tax
Identification number is used by
nondepository institutions supervised
by agencies other than the Board; the
charter number is used by depository
institutions supervised by the National
Credit Union Administration (NCUA)
and the OCC; and the certificate number
is used by depository institutions
supervised by the FDIC. For the reasons
discussed below, the Bureau is adopting
§ 1003.5(a)(3) as proposed. The Bureau
is also incorporating material from
proposed § 1003.5(a)(2) in appendix A,
as discussed below.
The Bureau solicited feedback on
whether the LEI would be a more
appropriate entity identifier than the
current HMDA RID and also whether
other identifiers, such as the RSSD
number or Nationwide Mortgage
Licensing System & Registry identifier
(NMLSR ID), would be an appropriate
alternative to the proposed LEI. Several
commenters opposed the requirement
for financial institutions to obtain an
LEI, mostly citing the cost associated
with obtaining an LEI and the
availability of alternative identifiers.
The Bureau acknowledged in the
proposal that requiring financial
institutions to obtain an LEI would
impose some costs. However, because
the LEI system is based on a costrecovery model, the cost associated with
obtaining an LEI could decrease as the
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LEI identifier is used more widely.
Despite the cost, the Bureau believes
that the benefit of all HMDA reporters
using an LEI may justify the associated
costs. An LEI could improve the ability
to identify financial institution
reporting the data and link it to its
corporate family. Facilitating
identification of a financial institution’s
corporate family could help data users
identify possible discriminatory lending
patterns and assist in identifying market
activity and risks by related companies.
Some commenters suggested that
instead of the proposed LEI, the Bureau
should consider requiring either the
current HMDA RID, NMLSR ID, Federal
Tax Identification number, or a Bureaucreated unique identifier for entities.
These suggested alternatives may have
some merit, but they pose concerns that
would make data aggregation,
validation, and analyses difficult for
users. The current HMDA RID varies
across each Federal agency and there is
a lack of consistency in the availability
of the financial institutions corporate
information when researching a
financial institution’s corporate
information using the HMDA RID. For
example, a search using the FDIC
certificate number may only provide the
bank holding company and financial
institution affiliates, but may not
provide other corporate information.
The NMLSR ID would not pose much
additional burden on industry because
most institutions that originate loans are
already assigned unique identifier by
the NMLS. However, the NMLSR does
not contain consistent information
regarding corporate information. For
example, parent company and affiliate
information are not readily available in
the NMLS. The Federal Tax
Identification Number would also not
pose additional burden on industry
because financial institutions would
already have one. However, as the
Bureau explained in the proposal, there
is no mechanism to link nondepository
institutions identified by a Federal Tax
Identification Number to related
companies. All of the suggested
alternatives above would still result in
a lack of information to enable users to
link corporate information to the
financial institution reporting HMDA
data. Accordingly, the Bureau is
adopting § 1003.5(a)(3) to require an
institution to provide its LEI with its
submission. As mentioned in the
section-by-section analysis of
§ 1003.4(a)(1)(i), the Bureau is making a
technical change and moving proposed
§ 1003.5(a)(3)(i) and (ii) to
§ 1003.4(a)(1)(i)(A)(1) and (2) for ease of
reference.
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19:37 Oct 27, 2015
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The Bureau concludes that requiring
use of the LEI will improve the ability
to identify the legal entity that is
reporting data and to link it to its
corporate family. For these reasons,
pursuant to HMDA section 305(a), the
Bureau is adopting § 1003.5(a)(3) as
proposed. This requirement is necessary
and proper to effectuate HMDA’s
purposes and facilitate compliance
therewith. By facilitating identification,
this requirement will help data users
achieve HMDA’s objectives of
identifying whether financial
institutions are serving the housing
needs of their communities, as well as
identifying possible discriminatory
lending patterns. This requirement
could also assist in identifying market
activity and risks by related companies.
The Bureau proposed § 1003.5(a)(4) to
require a financial institution to report
its parent company, if any, when
reporting its data. Currently, Regulation
C requires financial institutions to
report their parent company, if any, in
the transmittal sheet as provided in
appendix A. Information about a
financial institution’s parent company
helps ensure that the financial
institution’s submission can be linked
with that of its corporate parent. One
commenter suggested that the name and
LEI of the parent company should be
provided by the financial institution
reporting data because financial
institutions that submit HMDA data
may be affiliated with large financial
institutions. This commenter stated that
the lack of information around parent
company affiliations can make it
difficult to accurately analyze lending
patterns. The Bureau has determined
that requiring the parent company of a
financial institution to obtain an LEI
would not be appropriate. Requiring the
parent company to obtain an LEI
specifically for HMDA purposes, except
if the parent company is also HMDA
reporter, and requiring the financial
institution to submit its parent
company’s LEI with its HMDA data
submission would be an unnecessary
additional burden because, once the LEI
is fully implemented, information
regarding parent company is expected to
become available.411 Therefore, the
411 See generally Fin. Stability Bd., A Global Legal
Entity Identifier for Financial Markets 38–39 (June
8, 2012), http://www.financialstabilityboard.org/wpcontent/uploads/r_120608.pdf?page_moved=1
(including a recommendation on LEI reference data
relating to ownership; Fin. Stability Bd., LEI
Implementation Group, Fourth Progress Notes on
the Global LEI Initiative 4 (Dec. 11, 2012), http://
www.financialstabilityboard.org/wp-content/
uploads/r_121211.pdf?page_moved=1 (noting that
the LEI Implementation Group is developing
proposals for additional reference data on the direct
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Bureau does not believe that the benefit
of requiring parent information justifies
the burden since information about
parent company most likely will be
available through an alternative source.
Accordingly, the Bureau will not require
a financial institution to provide its
parent information, including the
parent’s LEI, and therefore is
withdrawing the requirement in
proposed § 1003.5(a)(4) that a financial
institution shall identify its parent
company, if any.
The Bureau also proposed comment
5(a)–3 to explain that the parent
company to be identified by the
financial institution pursuant to
§ 1003.5(a)(3) is the entity that holds or
controls an ownership interest in the
financial institution that is greater than
50 percent. One industry commenter
suggested that the Bureau should
explain which parent should be
identified by the financial institution.
This commenter added, however, that
they do not see the benefit that
information about the parent company
would provide. As mentioned above,
once the LEI is fully implemented,
information about parent company is
expected to become available and
therefore, the Bureau will not require a
financial institution to identify its
parent. Consequently, the Bureau is
modifying comment 5(a)–3 to remove
parent company.
Additionally, the Bureau is moving
the instructions to 5(a)(2) in proposed
appendix A and is incorporating it into
§ 1003.5(a)(3) because of the removal of
appendix A from the final rule, as
explained in the section-by-section
analysis of appendix A below. Pursuant
to its authority under section HMDA
305(a), the Bureau is also adding certain
information related to the data
submission that is currently provided
on an institution’s transmittal sheet, as
illustrated in current appendix A, to
§ 1003.5(a)(3). The Bureau believes this
will aid in the analyses of HMDA data
and assist agencies in the supervision of
financial institutions.
5(a)(4)
As discussed in the section-by-section
analysis of § 1003.5(a)(3) above, the
Bureau is withdrawing proposed
§ 1003.5(a)(4). In its place, the Bureau is
adopting new § 1003.5(a)(4) to clarify
that, for purposes of § 1003.5(a),
‘‘appropriate Federal agency’’ means the
appropriate agency for the financial
institution as determined pursuant to
HMDA section 304(h)(2) or, with respect
to a financial institution subject to the
and ultimate parent(s) of legal entities and on
relationship data more generally).
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Bureau’s supervisory authority under
section 1025(a) of the Consumer
Financial Protection Act of 2010 (12
U.S.C. 5515(a)), the Bureau. This
paragraph reflects the regulatory
structure in place since the Dodd-Frank
Act became effective, as first described
in the FFIEC’s January 2012 CRA/
HMDA Bulletin.412
5(a)(5)
As described above,413 effective
January 1, 2019, the Bureau is deleting
appendix A from Regulation C and is
instead separately publishing
procedures for the submission of HMDA
data. The Bureau is adopting new
§ 1003.5(a)(5) to identify where these
procedures will be published.
5(b) Public Disclosure of Statement
Under Regulation C as originally
promulgated, the disclosure statement
was the means by which financial
institutions made available to the public
the aggregate data required to be
disclosed under HMDA section 304.414
At present, the FFIEC prepares an
individual disclosure statement for each
financial institution using the HMDA
data submitted by the institution for the
preceding calendar year.
5(b)(1)
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HMDA section 304(k) requires the
FFIEC to make available a disclosure
statement for each financial institution
required to make disclosures under
HMDA section 304.415 Section
1003.5(b)(1) of Regulation C requires
that the FFIEC prepare a disclosure
statement for each financial institution
based on the data each financial
institution submits on its loan/
application register. The Bureau
proposed to modify § 1003.5(b)(1) to
clarify that, although some financial
institutions would report on a quarterly
basis under proposed § 1003.5(a)(1)(ii),
disclosure statements for these financial
institutions would be based on all data
submitted by each institution for the
preceding calendar year. The Bureau
also proposed to replace the word
412 Fed. Fin. Insts. Examination Council, CRA/
HMDA Reporter, 2011 HMDA Panel Changes
Resulting from Dodd-Frank Act, at 1–3 (Jan. 2012),
available at http://www.ffiec.gov/hmda/pdf/
11news.pdf.
413 See section-by-section analysis of
§ 1003.5(a)(1). See also section-by-section analysis
of appendix A.
414 41 FR 23931, 23937–38 (June 14, 1976).
415 HMDA section 304(k)(1)(A) provides that a
financial institution ‘‘shall make a disclosure
statement available, upon request, to the public no
later than 3 business days after the institution
receives the statement from the Federal Financial
Institutions Examination Council.’’
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‘‘prepare’’ with ‘‘make available’’ in
§ 1003.5(b)(1).
The Bureau received no comments on
proposed § 1003.5(b)(1). Therefore, the
Bureau adopts this provision generally
as proposed, with one modification to
clarify that disclosure statements made
available in 2018 are based on a
financial institution’s annual 2017 data
submitted pursuant to current
§ 1003.5(a), and that disclosure
statements made available beginning in
2019 are based on a financial
institution’s annual data submitted
pursuant to § 1003.5(a)(1)(i), not data
submitted on a quarterly basis pursuant
to § 1003.5(a)(1)(ii).
As discussed in its proposal,416 the
Bureau believes that advances in
technology may permit, for example, the
FFIEC to produce an online tool that
would allow users of the tool to generate
disclosure statements. It is the Bureau’s
interpretation that the FFIEC’s
obligation under HMDA section 304(k)
would be satisfied if the FFIEC
produced such a tool, which in turn
would produce disclosure statements
upon request. Further, pursuant to its
authority under HMDA section 305(a),
the Bureau believes that permitting the
FFIEC to produce a tool that allows
members of the public to generate
disclosure statements is necessary and
proper to effectuate the purposes of
HMDA and to facilitate compliance
therewith.
5(b)(2)
HMDA section 304(k)(1) requires that,
in accordance with procedures
established by the Bureau, a financial
institution shall make its disclosure
statement available to the public upon
request no later than three business days
after it receives the statement from the
FFIEC. HMDA section 304(m) provides
that a financial institution shall be
deemed to have satisfied the public
availability requirements of section
304(a) if it compiles the information
required at the home office of the
institution and provides notice at the
branch locations specified in HMDA
section 304(a) that such information is
available from the home office upon
written request. Section 1003.5(b)(2) of
Regulation C requires that each financial
institution make its disclosure statement
available to the public in its home office
within three business days of receiving
it. In addition, § 1003.5(b)(3) requires
that a financial institution must either
(1) make the statement available to the
public in at least one branch office in
each other MSA and each other MD
where the institution has offices or (2)
416 79
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66249
post the address for sending written
requests for the disclosure statement in
the lobby of each branch office in each
other MSA and each other MD and
provide a copy of the disclosure
statement within 15 calendar days of
receiving a written request.
The Bureau proposed to require a
financial institution to make its
disclosure statement available to the
public by making available a notice that
clearly conveys that the disclosure
statement may be obtained on the FFIEC
Web site and that includes the FFIEC’s
Web site address. The Bureau proposed
a new comment 5(b)–3 to provide an
example of notice content that would
satisfy the requirements of proposed
§ 1003.5(b)(2). The Bureau also
proposed to modify comment 5(b)–2 to
conform to proposed § 1003.5(b)(2) and
to allow a financial institution to
provide the proposed notice in paper or
electronic form. For the reasons
discussed below, the Bureau is adopting
§ 1003.5(b)(2) as proposed with
clarifying modifications.
The Bureau received several
comments from industry concerning
proposed § 1003.5(b)(2). Most of these
comments supported the proposal.
Many industry commenters stated that
they had never or rarely received a
request for their disclosure statements.
The one consumer advocate that
commented on proposed § 1003.5(b)(2)
also supported the proposal.
Two industry commenters suggested
that, because disclosure statements are
available on the FFIEC Web site,
requiring financial institutions to
provide members of the public seeking
HMDA data with the notice under
proposed § 1003.5(b)(2) was
unnecessary and duplicative. One of
these commenters suggested that, as an
alternative to the notice required under
proposed § 1003.5(b)(2), the Bureau
should revise the posted lobby notice
required pursuant to § 1003.5(e) to
include text referring members of the
public to the FFIEC Web site to obtain
the institution’s HMDA data. Although
the final rule relieves financial
institutions of the obligation to provide
the disclosure statement directly to the
public, the Bureau has determined that
provision of the notice required under
§ 1003.5(b)(2) to a member of the public
seeking a financial institution’s
disclosure statement is necessary to
ensure that she is clearly informed of
where to obtain it. Currently, a member
of the public seeking a disclosure
statement from a financial institution
would leave the institution with the
data in hand. As amended,
§ 1003.5(b)(2) requires that the
individual take an additional step to
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obtain the data—visit the Bureau’s Web
site—but provides that she leaves the
institution with the specific information
needed to do so.
Another industry commenter opposed
the maintenance of disclosure
statements on a government Web site,
stating that it is an inefficient use of
government resources. The Bureau
disagrees. The government has played a
critical role in disseminating HMDA
data to fulfill the purposes of the statute
since 1980, when Congress amended
HMDA to require the FFIEC to
implement a system to facilitate access
to HMDA data required to be disclosed
under HMDA section 304.417 For the
reasons given in the proposal, the
Bureau concludes that the FFIEC’s use
of a Web site to publish HMDA data
satisfies this statutory obligation and
that this means of providing access to
HMDA data is necessary and proper to
effectuate HMDA’s purposes and
facilitate compliance therewith.418 The
Bureau believes that a significant
portion of HMDA data used by the
public and public officials is obtained
from the FFIEC’s Web site, rather than
directly from financial institutions.
One other industry commenter
opposed the proposal, arguing that
eliminating the option to obtain data
directly from a financial institution, and
instead requiring a member of the
public seeking a financial institution’s
disclosure statement to obtain it online,
would impose undue burden on some
members of the public. This commenter
argued that a substantial portion of the
public does not have access to the
internet or does not know how to use it.
The commenter suggested that this
population is likely largely comprised of
low-income minorities, some middleaged women, and seniors, with the
result that the Bureau’s proposal may
disproportionately impact vulnerable
groups. The commenter also asserted
that it is significantly more
inconvenient and expensive for a
member of the public seeking a
disclosure statement to locate it online,
download it, and print it than it is to
obtain a copy of a printed disclosure
statement at a financial institution’s
home or branch office.
Available data suggests that
approximately 99 percent of Americans
have access to broadband internet.419
417 HMDA section 304(f), added by Housing and
Community Development Act of 1980, Public Law
96–399, section 340, 94 Stat. 1614, 1657–58 (1980).
418 79 FR 51731, 51818 (Aug. 29, 2014).
419 Anne Neville, Nat’l. Broadband Map has
Helped Chart Broadband Evolution, Nat’l.
Telecomms. & Info. Admin. Blog (Mar. 23, 2015),
http://www.ntia.doc.gov/blog/2015/national-
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Although the Bureau recognizes that
accessing data online is not without
barriers for some members of the public
and that broadband speeds vary,420 the
Bureau believes that the vast majority of
members of the public seeking HMDA
data should be able to readily access
HMDA disclosure statements online
with minimum inconvenience, if any.
As discussed in the Bureau’s proposal,
such inconvenience is not greater than,
and is likely less than, the potential
inconvenience of receiving a disclosure
statement on a floppy disc or other
electronic data storage medium which
may be used with a personal computer,
as is expressly contemplated by HMDA
section 304(k)(1)(b). In fact, the Bureau
believes that, for most HMDA users,
accessing disclosure statements online
will be much more convenient than
contacting individual financial
institutions to request the data. Further,
because members of the public are not
currently entitled to printed disclosure
statements free of charge, § 1003.5(b)(2)
as adopted should not increase
monetary costs to members of the public
desiring a disclosure statement in
printed form.421 Although there may be
members of the public that are adversely
affected by the elimination of the right
to obtain a disclosure statement directly
from a financial institution,422 the
Bureau has determined that the burden
to financial institutions associated with
the provision of disclosure statements
directly to members of the public upon
request is not justified by any benefit to
the current disclosure statement
dissemination scheme.
The Bureau is adopting § 1003.5(b)(2)
as proposed with three modifications.
Reference to making the disclosure
statement available to the public is
eliminated in order to clarify that a
financial institution must only make the
notice described available to the public.
This paragraph is also modified to
clarify that the notice must only be
made available in branch offices
physically located in a MSA or MD.
Finally, this paragraph is modified to
reflect that the Bureau will publish the
disclosure statements on the Bureau’s
Web site. The Bureau believes it is
broadband-map-has-helped-chart-broadbandevolution.
420 Id. (noting the gap between urban and rural
areas with respect to broadband at higher speeds).
421 Under current § 1003.5(d), financial
institutions may charge a reasonable fee for any
costs incurred in providing or reproducing their
HMDA data. This provision is retained in the final
rule.
422 The Bureau notes that, under final
§ 1003.5(d)(2), a financial institution may make its
disclosure statement available to the public in
addition to, but not in lieu of, the notice required
by § 1003.5(b)(2).
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reasonable to deem that financial
institutions make disclosure statements
available, pursuant to HMDA sections
304(k)(1) and 304(m), by referring
members of the public seeking
disclosure statements to the Bureau’s
Web site, as provided under
§ 1003.5(b)(2) as adopted. Section
1003.5(b)(2) is also adopted pursuant to
the Bureau’s authority under HMDA
305(a); § 1003.5(b)(2) is necessary and
proper to effectuate the purposes of
HMDA and facilitate compliance
therewith.
The Bureau received no comments on
proposed comment 5(b)–2. Therefore,
the Bureau adopts this comment as
proposed. The Bureau received no
comments on proposed comment 5(b)–
3, and adopts this comment as proposed
with modifications to reflect that HMDA
data will be made available on the
Bureau’s Web site and that HMDA data
for other financial institutions is also
available. The Bureau did not propose
changes to current comment 5(b)–1, but
is adopting a modification to this
requirement to clarify the paragraph to
which it applies. Finally, the Bureau
adopts new comment 5(b)–4 to clarify
that a financial institution may use the
same notice to satisfy the requirements
of both § 1003.5(b)(2) and § 1003.5(c).423
The Bureau notes that § 1003.5(b) is
effective January 1, 2018 and thus
applies to the disclosure of 2017 HMDA
data. Current Regulation C applies to
requests received by financial
institutions for HMDA data for calendar
years prior to 2017.
5(c) Modified Loan/Application Register
HMDA section 304(j)(1) requires that
financial institutions make available to
the public, upon request, ‘‘loan
application register information’’ as
defined by the Bureau and in the form
required under regulations prescribed
by the Bureau. HMDA section 304(j)(2)
provides that the Bureau shall require
such deletions from the loan application
register information made available to
the public as the Bureau may determine
to be appropriate to protect any privacy
interest of any applicant and to protect
financial institutions from liability
under any Federal or State privacy law,
and identifies three fields in particular
as appropriate for deletion.424 HMDA
423 As discussed below, the Bureau is adopting
modifications to proposed § 1003.5(c) to require
that a financial institution make available to the
public a notice that clearly conveys that its
modified loan/application register may be obtained
on the Bureau’s Web site and that includes the
Bureau’s Web site address.
424 The fields identified in the statute as
appropriate for deletion are ‘‘the applicant’s name
and identification number, the date of the
application, and the date of any determination by
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section 304(j)(5) requires that the loan
application register information
described in section 304(j)(1) must be
made available as early as March 31
following the calendar year for which
the information was compiled. HMDA
section 304(j)(7) provides that the
Bureau shall make every effort to
minimize costs incurred by financial
institutions in complying with section
304(j).
Section 1003.5(c) of Regulation C
requires a financial institution to make
its loan/application register available to
the public after removing three fields to
protect applicant and borrower privacy:
the application or loan number, the date
that the application was received, and
the date action was taken. An institution
must make this ‘‘modified’’ loan/
application register publicly available
following the calendar year for which
the data are compiled by March 31 for
a request received on or before March 1,
and within 30 calendar days for a
request received after March 1.
The Bureau proposed to modify
§ 1003.5(c) to require that a financial
institution make available to the public
a modified loan/application register
showing only the data fields that
currently are released on the modified
loan/application register. For the
reasons described below, the Bureau is
not finalizing § 1003.5(c) as proposed,
and instead is adopting a requirement
that a financial institution shall make
available to the public at its home office,
and each branch office physically
located in each MSA and each MD, a
notice that clearly conveys that the
institution’s modified loan/application
register may be obtained on the Bureau’s
Web site.
The Bureau received several
comments concerning proposed
§ 1003.5(c). A large majority of industry
commenters recommended that the
agencies make the modified loan/
application register available to the
public on a public Web site, such as the
FFIEC’s Web site. Many industry
commenters specifically suggested that
Regulation C require financial
institutions to make their modified
loan/application registers available in
the same way the Bureau proposed to
require institutions to make their
disclosure statements available, i.e., by
making available a notice that clearly
conveys that the modified loan/
application register may be obtained on
the FFIEC Web site and that includes
the FFIEC’s Web site address.
Commenters argued that this approach
would reduce burden to financial
the institution with respect to such application.’’
HMDA section 304(j)(2)(B).
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institutions, eliminate risk to financial
institutions associated with deadlines
by which they must make available their
modified loan/application registers,
increase public access to modified loan/
application registers, and allow the
Bureau to modify or redact the data as
it determines necessary to protect
applicant and borrower privacy. One
industry commenter stated that, because
the modified loan/application register is
already available on the FFIEC Web site,
the requirement that financial
institutions make their modified loan/
application registers available should be
eliminated as duplicative. A few other
industry commenters stated that
financial institutions should be
permitted to post their modified loan/
application registers on their own Web
sites instead of providing them to
members of the public upon request.
With respect to the content of the
modified loan/application register, a
few industry commenters stated that
some data currently disclosed on the
modified loan/application register
create risk that individual applicants
and borrowers could be identified in the
data. A few other industry commenters
stated that public disclosure of many of
the proposed new data fields would
create risks of potential harm to
applicant and borrower privacy. A
handful of industry commenters
misunderstood the Bureau’s proposal
concerning the modified loan/
application register to provide that the
proposed new data points would never
be disclosed to the public, and some of
these commenters supported such an
approach.
Virtually all of the consumer advocate
and researcher commenters opposed the
proposal to exclude the proposed new
data fields from the modified loan/
application register. These commenters
stated that many or most of the new data
fields proposed were not likely to create
risks to applicant or borrower privacy
and should be released by March 31, not
delayed until the agencies’ later release
of loan-level data.425 Most of these
commenters also argued that, at a
minimum, the currently-released data
fields should continue to be released.
Several consumer advocate and
researcher commenters articulated the
425 The Bureau’s proposal provided that the
Bureau would include the proposed new data
fields, modified as appropriate to protect applicant
and borrower privacy, in the loan-level data release
that the FFIEC makes available on its Web site on
behalf of the agencies. See 79 FR 51731, 51816
(Aug. 29, 2014). As explained in the proposal,
whereas a financial institution must make available
its modified loan/application register as early as
March 31, the regulators’ loan-level HMDA data
currently are not released until almost six months
later, in September. Id.
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66251
benefits to HMDA purposes of many
currently-released and proposed new
data fields in arguing for the disclosure
of these data on the modified loan/
application register.
For the reasons described below, final
§ 1003.5(c) requires that a financial
institution shall make available to the
public at its home office, and each
branch office physically located in each
MSA and each MD, a notice that clearly
conveys that the institution’s modified
loan/application register may be
obtained on the Bureau’s Web site. This
approach fulfills the goals of the
Bureau’s proposal 426 and has several
additional advantages. The final rule
reduces costs to financial institutions
associated with preparing and making
available to the public the modified
loan/application register, including
costs associated with the application of
privacy protections to the data before
disclosure, and eliminates a financial
institution’s risk of missing the deadline
to make the modified loan/application
register available. It also eliminates the
risks to financial institutions associated
with errors in preparing the modified
loan/application register that could
result in the unintended disclosure of
data. In addition, this approach aligns
Regulation C’s treatment of the modified
loan/application register and the
disclosure statement, which are the only
HMDA data that the statute and
Regulation C require financial
institutions to make available to the
public.
The approach adopted in the final
rule also increases the availability of the
modified loan/application register. The
Bureau’s Web site provides one, easily
accessible location where members of
the public will be able to access all
modified loan/application registers for
all financial institutions required to
report under the statute, which furthers
the disclosure goals of the statute.427 As
426 As explained in its proposal, the Bureau
believed that its proposed approach ‘‘would avoid
creating new privacy risks or liabilities for financial
institutions in connection with the release of loanlevel data via the modified loan/application
register. It would also minimize the burden to
institutions associated with preparing their
modified loan/application registers to implement
amendments to Regulation C. The proposed
approach would allow the Bureau and the other
agencies flexibility in disclosing new data points in
the agencies’ data release, including flexibility to
adjust any privacy protections as risks evolve,
without unduly burdening financial institutions or
creating opportunities for the modified loan/
application register and the agencies’ data release
to interact in ways that might increase privacy
risk.’’ Id.
427 Under proposed § 1003.5(c), as under current
§ 1003.5(c), for example, a member of the public
that requests a financial institution’s modified loan/
application register need only be provided with a
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discussed above with respect to the
disclosure statement,428 although there
may be members of the public that are
adversely affected by the elimination of
the right to obtain a modified loan/
application register directly from a
financial institution, the Bureau has
determined that the burden to financial
institutions associated with the
provision of these data directly to
members of the public upon request is
not justified by any benefit to the
current dissemination scheme.
Finally, the approach in the final rule
allows the Bureau and the other
agencies increased flexibility in
disclosing new data fields in a manner
that appropriately protects applicant
and borrower privacy. As discussed
above,429 the Bureau’s assessment under
its balancing test of the risks to privacy
interests created by the disclosure of
HMDA data and the benefits of such
disclosure is ongoing and includes
consideration of currently-released data
points. Section 1003.5(c) as adopted
will allow decisions with respect to
what to include on the modified loan/
application register to be made in
conjunction with decisions regarding
the agencies’ loan-level data release,
providing flexibility with respect to the
agencies’ release and flexibility to
include on the modified loan/
application register the new data fields
that do not raise privacy concerns. This
approach also will allow for easier
adjustment of privacy protections
applied to disclosures of HMDA data as
risks evolve. The Bureau plans to
provide a process for the public to
provide input on the application of the
balancing test to determine the HMDA
data to be publicly disclosed both on the
modified loan/application register and
in the agencies’ release.
The final rule imposes fewer burdens
on financial institutions than a
requirement that the modified loan/
application register be made available
on financial institutions’ Web sites, as
suggested by some industry
commenters.430 The Bureau also
modified loan/application register containing data
relating to the MSA or MD for which the request
is made. Referral to the Bureau Web site would
allow that member of the public to easily view the
financial institution’s modified loan/application
registers for all available MSAs and MDs. Also, to
the extent a member of the public wanted to
compare the lending activities of financial
institutions in a particular MSA or MD, the Bureau
Web site allows her to do so all in one place, rather
than requiring her to obtain a modified loan/
application register from multiple institutions.
428 See section-by-section analysis of
§ 1003.5(b)(2).
429 See part II.B above.
430 The Bureau notes that the final rule permits
a financial institution to make available on its Web
site a copy of the institution’s modified loan/
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declines to eliminate § 1003.5(c)
altogether. As discussed above with
respect to the disclosure statement,431
although the final rule relieves financial
institutions of the obligation to provide
the modified loan/application register
directly to the public, the Bureau has
determined that provision of the notice
required under § 1003.5(c) to members
of the public seeking a financial
institution’s modified loan/application
register is necessary to ensure that they
are clearly informed of where to obtain
it.
The final rule eliminates the 30-day
period between a financial institution’s
receipt of a request for its modified
loan/application register and its
obligation to provide in response the
notice required pursuant to § 1003.5(c).
Rather than preparing a modified loan/
application register in response to a
request, as required under the current
regulation, under the final rule a
financial institution will only need to
provide a member of the public seeking
a modified loan/application register
with a simple notice. The Bureau has
determined that 30 days to provide such
a notice is unnecessary and conflicts
with the disclosure purposes of the
statute. Further, as a financial
institution’s ability to provide the notice
required under the final rule in response
to a request is not dependent on the
financial institution’s possession of the
data, as is its ability to provide the
modified loan/application register
under the current regulation, a financial
institution does not need to wait until
March 31 to provide a notice in
response to a request for its modified
loan/application register.
The Bureau believes it is reasonable to
deem that financial institutions make
available to the public loan application
register information, pursuant to HMDA
section 304(j), by referring members of
the public seeking loan application
register information to the Bureau Web
site, as provided under § 1003.5(c).
Section 1003.5(c) is also authorized
pursuant to the Bureau’s authority
under HMDA section 305(a). For the
reasons given above, the Bureau
concludes that § 1003.5(c) as adopted is
necessary and proper to effectuate
HMDA’s purposes and facilitate
compliance therewith.
The Bureau did not propose changes
to current comment 5(c)–1 but is
adopting modifications to this comment
to conform to § 1003.5(c) as finalized.
Proposed comment 5(c)–2 is adopted as
application register obtained from the Bureau’s Web
site. See § 1003.5(d)(2).
431 See section-by-section analysis of
§ 1003.5(b)(2).
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modified to provide an example of
notice content that would satisfy the
requirements of § 1003.5(c). Proposed
comment 5(c)–3 is adopted as modified
to clarify that a financial institution may
use the same notice to satisfy the
requirements of both § 1003.5(b)(2) and
§ 1003.5(c).
The Bureau notes that § 1003.5(c) is
effective January 1, 2018 and thus
applies to the disclosure of 2017 HMDA
data. Current Regulation C applies to
requests received by financial
institutions for HMDA data for calendar
years prior to 2017.
5(d) Availability of Written Notice
HMDA sections 304(c) and 304(j)(6)
set forth the time periods for which
financial institutions must maintain and
make available information required to
be disclosed under the statute. HMDA
sections 304(j)(4) and 304(k)(3) permit a
financial institution that provides its
loan/application register information or
its disclosure statement to a member of
the public to impose a reasonable fee for
any cost incurred in reproducing the
information or statement. Section
1003.5(d) of Regulation C requires that
a financial institution must make its
modified loan/application register
available to the public for a period of
three years and its disclosure statement
available to the public for a period of
five years. This section also provides
that an institution must make these
disclosures available to the public for
inspection and copying during the
hours the office is normally open to the
public for business and may impose a
reasonable fee for any cost incurred in
providing or reproducing the data.
The Bureau proposed to delete the
requirement that a financial institution
make its HMDA data available for
inspection and copying and to make
additional technical modifications to
§ 1003.5(d). The Bureau is adopting
§ 1003.5(d) as proposed with clarifying
modifications.
The Bureau received very few
comments on proposed § 1003.5(d). One
industry commenter supported the
proposal to delete the requirement that
a financial institution make its data
available for inspection and copying.
Another industry commenter
misunderstood the proposal to require
that financial institutions retain their
disclosure statements and modified
loan/application registers for the
requisite periods, and stated that the
availability of these data on the FFIEC
Web site made these requirements
duplicative and unnecessary.
The Bureau is adopting § 1003.5(d)(1)
generally as proposed, with
modifications to clarify that it requires
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a financial institution to retain the
notices concerning its disclosure
statements and modified loan/
application registers required pursuant
to § 1003.5(b)(2) and (c), not the
disclosure statements and modified
loan/application registers themselves.
The Bureau adopts § 1003.5(d)(2) as
modified to clarify that a financial
institution may make its disclosure
statement and its modified loan/
application register available to the
public in addition to, but not in lieu of,
the notices required by § 1003.5(b)(2)
and (c), and may impose a reasonable
fee for any cost associated with
providing or reproducing its disclosure
statement or modified loan/application
register.
The Bureau notes that § 1003.5(d) is
effective January 1, 2018 and thus
applies to the disclosure of 2017 HMDA
data. Current Regulation C applies to
requests received by financial
institutions for HMDA data for calendar
years prior to 2017.
5(e) Posted Notice of Availability of
Data
HMDA section 304(m) provides that a
financial institution shall be deemed to
have satisfied the public availability
requirements of HMDA section 304(a) if
it compiles its HMDA data at its home
office and provides notice at certain
branch locations that its information is
available upon written request. Section
1003.5(e) of Regulation C requires that
a financial institution post a notice
concerning the availability of its HMDA
data in the lobby of its home office and
of each branch office located in an MSA
and MD. Section 1003.5(e) also requires
that a financial institution must provide,
or the posted notice must include, the
location of the institution’s office where
its disclosure statement is available for
inspection and copying. Comment 5(e)–
1 suggests text for the posted notice
required under § 1003.5(e). Comment
5(e)–2 suggests text concerning
disclosure statements that may be
included in the posted notice to satisfy
§ 1003.5(b)(3)(ii). The Bureau proposed
clarifying and technical modifications to
§ 1003.5(e) and related comments and
modifications to conform to proposed
§ 1003.5(b)(2).
The Bureau received very few
comments on proposed § 1003.5(e). One
industry commenter supported deleting
language from § 1003.5(e) concerning
the location of the institution’s office
where its disclosure statement is
available for inspection and copying.
The Bureau adopts § 1003.5(e) as
proposed with one modification to
clarify that the required lobby notice
must clearly convey that the
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institution’s HMDA data may be
obtained on the Bureau’s Web site.
One industry commenter opposed the
proposed changes to comment 5(e)–1
concerning the suggested notice text,
stating that it was a waste of financial
institution resources to update the
posted notice to reflect that the HMDA
data include age. The addition of
language concerning age was not the
only proposed change to the suggested
notice text, however. The proposed
suggested text also updated the posted
notice to provide information about
where HMDA data could be found
online. The Bureau has determined that
inclusion of information concerning
where HMDA data can be found online
is necessary to ensure access to HMDA
data, especially as financial institutions
will no longer be required to provide
either their disclosure statements or
their modified loan/application registers
directly to the public under amended
Regulation C. The Bureau adopts
comment 5(e)–1 as proposed with
technical modifications.
5(f) Aggregation
HMDA section 310 requires the FFIEC
to compile aggregate data by census
tract for all financial institutions
reporting under HMDA and to produce
tables indicating aggregate lending
patterns for various categories of census
tracts grouped according to location, age
of housing stock, income level, and
racial characteristics. HMDA section
304(f) requires the FFIEC to implement
a system to facilitate access to data
required to be disclosed under HMDA
section 304, including arrangements for
central depositories where such data are
made available for inspection and
copying. Section 1003.5(f) of Regulation
C provides that the FFIEC will produce
reports for individual institutions and
reports of aggregate data for each MSA
and MD, showing lending patterns by
property location, age of housing stock,
and income level, sex, ethnicity, and
race, and will make these reports
available at central depositories. Section
1003.5(f) also contains information
concerning how to obtain a list of
central depositories from the FFIEC. The
Bureau proposed to modify § 1003.5(f)
to replace the word ‘‘produce’’ with
‘‘make available’’ for clarity and to
delete reference to central depositories.
The Bureau is adopting § 1003.5(f) as
proposed with minor modifications.
The Bureau received one comment
concerning proposed § 1003.5(f). This
commenter stated that disclosure of
automated underwriting system name
and result in the aggregated data, could
reveal proprietary information
concerning these systems. As discussed
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66253
above,432 at this time the Bureau is not
making determinations about what
HMDA data will be publicly disclosed
or the forms of such disclosures.
The Bureau is adopting proposed
§ 1003.5(f) with three modifications.
The final rule clarifies that the
aggregates described in this paragraph
and made available in 2018 are based on
2017 data submitted pursuant to current
§ 1003.5(a), and that the aggregates
made available beginning in 2019 are
based on data submitted on an annual
basis pursuant to § 1003.5(a)(1)(i), not
data submitted on a quarterly basis
pursuant to § 1003.5(a)(1)(ii). The
Bureau has determined that reference to
reports for individual institutions in this
paragraph is no longer necessary 433 and
is eliminating this reference in the final
rule. Finally, the Bureau has determined
that reference to the location where the
aggregate data described in this
paragraph will be made available is
unnecessary and is eliminating this
reference in the final rule.
As discussed in its proposal,434 the
Bureau believes that advances in
technology may permit, for example, the
FFIEC to produce an online tool, such
as a tabular engine, that would allow
public officials and members of the
public to generate the tables described
in HMDA section 310. It is the Bureau’s
interpretation that the obligation to
‘‘produce tables’’ set forth in HMDA
section 310 would be satisfied if the
FFIEC produced such a tool, which in
turn would produce the tables described
in HMDA section 310 on request.
Further, pursuant to HMDA section
305(a), the Bureau believes that
permitting the FFIEC to produce a tool
that allows members of the public to
generate tables described in HMDA
section 310 is necessary and proper to
effectuate the purposes of HMDA and
facilitate compliance therewith.
Section 1003.6
Enforcement
6(b) Bona Fide Errors
The Bureau did not propose to amend
§ 1003.6. HMDA section 305(b) provides
that compliance with HMDA is enforced
by the Board, FDIC, OCC, the Bureau,
NCUA, and HUD.435 Each of these
Federal agencies can rely on its own
authorities to enforce compliance with
432 See section-by-section analysis of
§ 1003.4(a)(35).
433 The FFIEC’s obligation to make available the
disclosure statements is set forth in final
§ 1003.5(b)(1).
434 79 FR 51731, 51818 (Aug. 29, 2014).
435 12 U.S.C. 2804(b). Most commenters who
addressed the enforcement and examination
practices of the Federal agencies did not specify the
particular agency to which the commenters submit
their data.
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HMDA, including the authority
conferred in HMDA section 305(b).436
Section 1003.6(a) of Regulation C
provides that a violation of HMDA or
Regulation C is subject to administrative
sanctions as provided in HMDA section
305, including the imposition of civil
money penalties.437 Regulation C
§ 1003.6(b) provides authority to find
that ‘‘bona fide errors’’ are not violations
of HMDA and Regulation C. Section
1003.6(b)(1) provides that an error in
compiling or recording loan data is not
a violation if the error was unintentional
and occurred despite the maintenance
of procedures reasonably adapted to
avoid such errors. Section 1003.6(b)(2)
provides that an incorrect entry for a
census tract number is deemed a bona
fide error, and is not a violation of
HMDA or Regulation C, if the financial
institution maintains procedures
reasonably adapted to avoid such errors.
Currently, § 1003.6(b)(3) addresses and
provides some latitude for inaccurate or
incomplete quarterly recording of data.
Although the Bureau did not propose
specific changes to § 1003.6, it sought
feedback generally about concerns
raised by the small entity
representatives during the Small
Business Review Panel process
regarding whether, in light of new
reporting requirements, it would be
appropriate to add new provisions to
§ 1003.6 to clarify compliance
expectations and address compliance
burdens or operational challenges.438
The Bureau specifically sought feedback
on whether a more precise definition of
what constitutes an error would be
helpful, whether there are ways to
improve the current methods of
calculating error rates, and whether
tolerance levels for error rates would be
appropriate. For the reasons discussed
below, the Bureau is revising current
§ 1003.6(a), (b)(1), and (b)(2), and
comment 6(b)–1, only by making
technical, nonsubstantive edits. The
Bureau is moving § 1003.6(b)(3) to new
§ 1003.6(c)(1), as discussed below.
Comments on Enforcement
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Approximately one-third of the
commenters addressed enforcement,
data errors, and administrative
resubmission requirements related to
Regulation C. Nonindustry commenters
436 HMDA
section 305(c); 12 U.S.C. 2804(c).
437 See CFPB Bulletin 2013–11 (2013), http://
files.consumerfinance.gov/f/201310_cfpb_hmda_
compliance-bulletin_fair-lending.pdf, which,
among other things, sets out factors the Bureau will
consider in determining any civil money penalty for
violations of HMDA and Regulation C.
438 The comments of the small entity
representatives were summarized in the proposed
rule. See 79 FR 51731, 51818 (Aug. 29, 2014).
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generally did not comment on
enforcement policies and error rates.
Most industry commenters that
addressed the topic identified what they
viewed as unrealistic tolerance levels as
being an issue with Regulation C
compliance and enforcement. Many
industry commenters stated that the
compliance and enforcement concerns
would likely be exacerbated by
additional data points in the final rule.
Some industry commenters expressly
recognized the importance of the
submission of accurate data, affirmed
that reporting entities are concerned
with the integrity of their data, and
acknowledged that they would
understand reasonable and fair
requirements relating to errors. Many of
the commenters stated that despite the
implementation of appropriate systems
and controls and efforts to comply with
the spirit of Regulation C, innocent
errors and human judgment errors in
interpretation and data input are
impossible to eliminate completely. A
common theme among industry
commenters was that additional data
collection and reporting requirements
mean there is a greater likelihood of
errors. A number of commenters echoed
a request that the Bureau reconsider
examination procedures and guidelines
and make adjustments to acceptable
error rates, especially in light of the
significant increase in the amount of
data that reporting entities will be
required to compile, audit, and report.
Many commenters suggested that
tolerances for errors be increased if the
final rule includes additional data
points in Regulation C. One commenter
urged the Bureau not to discount the
burden of reporting accurate data.
Others stated that data is not easy to get
right because of the number of people
involved in loan production, and that
manual audits conducted on the
additional data by compliance staff will
take significantly more time and force
reporting institutions to shift resources
or add staff. A few commenters noted
exposure to reputational risks, as well as
to administrative enforcement, that
could be associated with increased
reporting errors. A trade association
commented that reasonable tolerances
are necessary to minimize compliance
costs. A few commenters observed that
a demonstrated pattern of these types of
errors could suggest that the errors are
not inadvertent. A number of
commenters requested relief from
responsibility for errors based on: good
faith efforts; technical, de minimis
errors; distinguishing critical and
noncritical errors; inadvertent errors;
bona fide errors; immaterial errors;
distinguishing random and systemic
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errors; and distinguishing key and nonkey errors.
Multiple commenters suggested
specific data points that, in addition to
institutional and transaction coverage
changes, might contribute to a need for
increasing the current error tolerances,
including: age; income, as proposed;
denial reasons; universal loan identifier;
debt-to-income ratio; loan-to-value ratio;
AUS information; points and fees; and
data points that contain dates, dollar
amounts, and percentages. Similarly,
some commenters advocated that the
Bureau establish acceptable ranges for
the values reported for certain data
points, for reasons that include the
potential for rounding numbers
incorrectly and making errors in
calculations, and allow latitude for
entering the wrong text in data fields,
such as ‘‘N/A’’ instead of ‘‘none.’’ Other
specific recommendations included:
preclude resubmissions of data on loans
that do not constitute a material
percentage of all loans in a reporting
year in the associated metropolitan
statistical area; limit punitive actions for
reporting errors that do not lead to
findings of discrimination; adopt a
tiered evaluation of errors that is
dependent on the reasons for the errors;
excuse errors resulting from reliance on
third-party information; apply morelenient standards to new data points
initially; develop guidance and
interagency exam procedures that
support compliance; and provide a
sufficient implementation period to
adjust to new requirements.
One industry commenter
acknowledged that the Bureau may not
want to address clarifications of error
rates and tolerances through
rulemaking, at the same time expressing
concern about potential compliance
burdens for accuracy in a significantly
larger data submission. Another
commenter suggested that Regulation C
include a statement that a bona fide
unintentional error is not a violation. A
few commenters predicted that the
proposed reporting changes would
cause more financial institutions to exit
mortgage lending, with the exiting
institutions skewing small, and would
discourage new entrants to the market,
significantly decreasing the availability
of credit.
Final Rule
After considering the comments, the
Bureau has concluded that there are
more effective ways to address the
issues raised by the commenters than by
making substantive changes to
§ 1003.6(b). In reaching this conclusion,
the Bureau accepts that some errors in
data compilation and reporting are
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difficult to avoid altogether. HMDA data
are important for the public and public
officials, therefore the final rule seeks to
balance the need for accurate data and
the challenge of generating that data.
The Bureau believes that many of the
error-related issues raised by
commenters would be best addressed
through supervisory policy, rather than
regulatory language. Most of the
comments specifically or implicitly
addressed current administrative
examination procedures and guidelines
for required resubmission of data when
error levels exceed established
thresholds. Decisions regarding when to
pursue an enforcement action or other
solution for noncompliance with HMDA
or Regulation C are a matter of agency
discretion. Each of the agencies that has
authority to enforce HMDA can develop
internal procedures and guidelines for
citing a financial institution for
inaccurate data. For example, the
Bureau makes its HMDA examination
guidelines available publicly, so that
financial institutions understand, and
can develop internal processes to meet,
expectations for HMDA data
accuracy.439 The use of guidelines,
which provide a measure for application
of enforcement principles, coupled with
language in § 1003.6(b) that deems
certain errors to be excused, benefits
examiners and financial institutions,
alike. In particular, as the agencies and
financial institutions gain experience
with the new definitions, requirements,
increased number of data points,
reporting instructions, and technology,
the guidelines can be tailored, adjusted,
and applied as appropriate.
In addition, however, the final rule
addresses some of the commenters’
particular areas of concern in stating the
requirements and providing
commentary for individual data points.
For example, financial institutions are
permitted to report the information they
relied on for several data points and
have some flexibility in the format they
use to report certain data points. The
final rule provides further guidance and
examples of acceptable values in
commentary and, more generally,
addresses many common issues with
the current regulation by clarifying
various provisions in the regulations
and commentary. The Bureau also plans
to expand data submission edit checks
to improve the ability of financial
institutions to identify and fix mistaken
data before final submission to the
agencies, which could also benefit the
439 See CFPB Supervision and Examination
Manual, HMDA Resubmission Schedule and
Guidelines (2013), http://files.consumerfinance.gov/
f/201310_cfpb_hmda_resubmission-guidelines_fairlending.pdf.
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financial institutions in their internal
audit processes. Finally, the Bureau will
develop additional guidance materials
to help financial institutions understand
the final rule and avoid errors in
interpreting its requirements.
Public officials rely on the data
reported by financial institutions to
further HMDA’s purposes. In addition,
the data disclosed under HMDA provide
the public with information on the
mortgage activities of particular
reporting financial institutions and in
communities. Because HMDA data serve
these important purposes, accurate data
is essential.
The accuracy of HMDA data depends
on good operational and validation
processes. Financial institutions have
primary responsibility for these
processes; the institutions must develop
and maintain appropriate compliance
management systems that are reasonably
designed to ensure the accuracy of the
data. Examination procedures used by
the Federal regulators further assure
appropriate validation of the HMDA
data, by assessing a financial
institution’s policies, procedures,
monitoring, and corrective-action
processes.
The Bureau has concluded that it
should not establish in Regulation C
global thresholds for the number or
percentage of errors in a financial
institution’s data submission that would
trigger compliance or enforcement
action. Establishing regulatory
thresholds for errors or adding
resubmission requirements to the
regulation are not likely to lead to a
satisfactory outcome for industry or the
regulators. The current provision on
bona fide errors in § 1003.6(b), in
conjunction with agency guidelines,
provides appropriate flexibility for
regulators to exercise judgment in
assessing compliance violations.
The Bureau anticipates that the
Federal agencies enforcing HMDA will
review their enforcement approaches in
light of the significant regulatory
changes included in the final rule and
consult on any appropriate adjustments
to their policies, both during the final
rule’s implementation period and
beyond. Currently, some errors are
found and addressed in the data
submission process, using edits
developed through the FFIEC
coordination agreement, while other
errors can be identified only in
subsequent audits or examinations by
comparing HMDA data submitted to
loan files. As the Bureau collaborates
with the other HMDA enforcement
agencies on future administrative
examination and review procedures, it
will consider, and bring to the attention
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66255
of those agencies, the numerous
comments and suggestions received on
this topic during the public comment
process on the proposed rule.
The final rule makes technical,
nonsubstantive edits to current
§ 1003.6(a), (b)(1), and (b)(2) and
comment 6(b)–1, for purposes of clarity
and consistency.
6(c) Quarterly Recording and Reporting
The Bureau did not propose changes
to § 1003.6(b)(3), but is adopting
changes to this provision in connection
with the quarterly reporting requirement
finalized in § 1003.5(a)(1)(ii). Under
§ 1003.5(a)(1)(ii) as adopted, within 60
calendar days after the end of each
calendar quarter except the fourth
quarter, financial institutions subject to
§ 1003.5(a)(1)(ii) will submit the HMDA
data that they are required to record on
their loan/application registers for that
calendar quarter pursuant to § 1003.4(f).
Pursuant to new § 1003.6(c)(2), errors
and omissions in the data submitted
pursuant to § 1003.5(a)(1)(ii) will not be
considered HMDA or Regulation C
violations assuming the conditions that
currently provide a safe harbor for errors
and omissions in quarterly recorded
data are satisfied.
Currently, § 1003.6(b)(3) provides that
errors and omissions in data that a
financial institution records on its loan/
application register on a quarterly basis
as required under § 1003.4(a) are not
violations of HMDA or Regulation C if
the institution makes a good-faith effort
to record all required data fully and
accurately within thirty calendar days
after the end of each calendar quarter
and corrects or completes the data prior
to reporting the data to its regulator.
That is, § 1003.6(b)(3) provides a safe
harbor that protects a financial
institution that satisfies certain
conditions from being cited for
violations of HMDA or Regulation C for
errors and omissions on its quarterly
recorded loan/application register. The
Bureau is moving § 1003.6(b)(3) to new
paragraph § 1003.6(c)(1) and adding
paragraph (c)(2) to provide that a similar
safe harbor applies to data reported on
a quarterly basis pursuant to
§ 1003.5(a)(1)(ii).
The Bureau adopts § 1003.6(c).
Section 1003.6(c)(1) applies to data that
an institution records on its loan/
application register on a quarterly basis
as required under § 1003.4(f), as
finalized herein. It provides that, if a
financial institution makes a good-faith
effort to record all data required to be
recorded pursuant to § 1003.4(f) fully
and accurately within 30 calendar days
after the end of each calendar quarter,
and some data are nevertheless
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inaccurate or incomplete, the
inaccuracy or omission is not a violation
of HMDA or Regulation C provided that
the institution corrects or completes the
data prior to submitting its annual loan/
application register pursuant to
§ 1003.5(a)(1)(i). Section 1003.6(c)(2)
applies to data that an institution
reports on a quarterly basis pursuant to
§ 1003.5(a)(1)(ii). It provides that, if an
institution subject to § 1003.5(a)(1)(ii)
makes a good-faith effort to report all
data required to be reported pursuant to
§ 1003.5(a)(1)(ii) fully and accurately
within 60 calendar days after the end of
each calendar quarter, and some data
are nevertheless inaccurate or
incomplete, the inaccuracy or omission
is not a violation of HMDA or
Regulation C provided that the
institution corrects or completes the
data prior to submitting its annual loan/
application register pursuant to
§ 1003.5(a)(1)(i).
The Bureau is adopting an effective
date of January 1, 2019 for § 1003.6.
Accordingly, this section applies to
HMDA data reported beginning in 2019.
For example, compliance is enforced
pursuant to this final rule with respect
to 2018 data reported in 2019. Section
1003.6 of current Regulation C applies
to the collection and recording of
HMDA data in 2018.
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Appendix A to Part 1003 Form and
Instructions for Completion of HMDA
Loan/Application Register
Part I of appendix A to Regulation C
currently provides instructions for the
Loan/Application Register. Part II of
appendix A contains instructions
related to reporting HMDA data,
including instructions for sending
HMDA data via U.S. mail. Appendix A
also contains a form for the transmittal
sheet, a form for the loan/application
register, and a technical code sheet for
completing the loan/application
register. As discussed in many of the
section-by-section analyses above, the
Bureau is expanding the regulation text
and commentary to address the
requirements currently provided in part
I of appendix A and in the form for the
transmittal sheet. As discussed in the
section-by-section analysis of
§ 1003.5(a)(1) above, the Bureau is
eliminating paper reporting.
Furthermore, the Bureau intends to
publish procedures related to the
submission of the data required to be
reported under Regulation C, which will
replace the existing form for the loan/
application register and technical code
sheet for completing it. Thus, the
requirements and other information
currently provided in appendix A are no
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longer necessary, and the final rule
deletes appendix A.
To accomplish the transition from
reporting current to amended data, the
final rule deletes appendix A in two
stages. First, effective January 1, 2018,
the final rule adds to appendix A a new
paragraph explaining the transition
requirements for data collected in 2017
and reported in 2018. Also effective
January 1, 2018, part II of appendix A
is revised to provide updated
instructions relating to the reporting of
2017 HMDA data. Then, effective
January 1, 2019, appendix A is deleted
in its entirety, when instructions
relating to the reporting of 2017 HMDA
data will no longer be necessary.
I. Effective Date
A. Comments
In response to the proposed rule, the
Bureau received roughly a few dozen
comments concerning effective date and
implementation period. Industry
commenters, including banks and credit
unions; software providers; and trade
associations provided recommendations
on the timing for implementation. The
recommendations for the
implementation period ranged from a
minimum of at least one full calendar
year to several years. Most commenters
recommended 18 to 24 months while
several other commenters advocated for
24 to 36 months. A couple of
commenters did not suggest a specific
timing period but urged the Bureau to
allow as much time as possible.
Many commenters cited operational
challenges as a reason why ample time
is needed for implementation. These
commenters stated that systems will
need to be redesigned or replaced to
accommodate the new rules. A couple
of commenters pointed out that not all
business areas of a bank use the same
system to capture HMDA data. One
commenter, in particular, stated that if
all the proposed data fields are
finalized, then it may require data from
two or more systems. This commenter
cited the possibility of the need to
integrate data from several systems
designed for origination and servicing
for consumer, real estate, and business
transactions. One software provider that
advocated for a 36 month
implementation period stated that
software providers need time to design,
develop, and distribute software to
financial institution clients. These
clients will then need to test need the
software, implement procedural
changes, and train staff. Several
commenters indicated that policies and
procedures will need to be developed
and staff will need to be trained on
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those policies and procedures. One
commenter asked that the Bureau
consider the time it takes to interpret
the final regulation.
Several commenters pointed out that
the industry is currently focusing on
implementing the TILA–RESPA and
other mortgage rules and staff is fully
engaged in implementing those rules or
enhancing compliance programs. One
commenter stated that forcing industry
to shift or split resources between
TILA–RESPA and HMDA may affect the
ability to implement one or both rules
by their effective date.
While many commenters suggested a
specific number of months or years, a
few commenters specified January 1 as
the day that data collection should
begin regardless of the year of the
effective date. One commenter
suggested that the Bureau specify that
the effective date applies to applications
taken on or after the date the Bureau
designates. Another commenter argued
that implementing the final rule any day
of the year other than January 1 would
cause confusion for financial
institutions collection and reporting the
data, and may even possibly affect data
quality.
Several commenters noted that the
Dodd-Frank Act does not provide a
deadline for implementing amendments
to the HMDA rule, so they urged the
Bureau to use its discretionary authority
to provide adequate additional time for
compliance. One trade association
suggested that the Bureau should use its
discretionary authority and consider the
burden on small entities by providing
an extended effective date for certain
groups of entities
One trade association asked the
Bureau to provide transition rules for
applications received before the
effective date but where final action is
taken on the application after the
effective date.
The Bureau has considered the
comments, including the potential
issues that could arise as a result of an
inadequate implementation period and
industry’s focus on other recent
mortgage rulemakings, and believes that
the effective date described below
achieves the right balance between
ample time for implementation and the
need for useful HMDA data that reflects
the current housing finance market.
B. The Effective Date and
Implementation Period
In consideration of the comments and
recommendations suggested by
commenters, the final rule is effective
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January 1, 2018,440 except that:
§ 1003.2(g)(1)(v)(A) is effective January
1, 2017; § 1003.5(a)(1)(i), (a)(1)(iii), and
(a)(2) through (5) are effective January 1,
2019; § 1003.6 is effective January 1,
2019; and § 1003.5(a)(1)(ii) is effective
January 1, 2020. Section 1003.5(b) and
(f), as revised effective January 1, 2018,
are revised again on January 1, 2019.
Appendix A is revised effective January
1, 2018 and then deleted effective
January 1, 2019. Commentary to
§ 1003.5(a) and § 1003.6 in supplement
I, as revised effective January 1, 2018,
are revised again effective January 1,
2019. These exceptions to the general
effective date of January 1, 2018 are
described in further detail below.
This final rule applies to covered
loans and applications with respect to
which final action is taken beginning on
January 1, 2018. Data on these covered
loans and applications are submitted to
the appropriate Federal agency pursuant
to § 1003.5(a) beginning on January 1,
2019. For example, if a financial
institution described in 2(g) of this part
receives an application on January 1,
2018 and takes final action on that
application on March 1, 2018, data
about that application will be collected
and recorded pursuant to § 1003.4, and
submitted to the appropriate Federal
agency by March 1, 2019 pursuant to
§ 1003.5(a). Similarly, if a financial
institution described in 2(g) of this part
receives an application on December 1,
2017 and does not take final action on
that application until January 1, 2018,
data about that application would be
collected and recorded pursuant to
§ 1003.4 and submitted to the
appropriate Federal agency by March 1,
2019 pursuant to § 1003.5(a).441 The
final rule also applies to purchases that
occur on or after January 1, 2018. For
example, a financial institution
described in 2(g) of this part that
purchases a HMDA reportable loan on
February 1, 2018 would collect and
record data about that purchase
pursuant to § 1003.4, and submit the
data to the appropriate Federal agency
440 HMDA section 304(n) provides that
institutions shall not be required to report new data
under HMDA section 304(b)(5) and (6) before the
first January 1 that occurs after the end of the 9month period beginning on the date on which
regulations are issued by the Bureau in final form
with respect to such disclosures. Although the
statute permits a shorter period than the effective
date the Bureau is finalizing, the Bureau believes
that a longer period will help reduce
implementation burden on industry.
441 The Bureau understands that final action
taken on an application may not occur until a few
months after the application date. A financial
institution may receive an application at the end of
a calendar year but may not determine the final
disposition of the application until the following
calendar year.
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by March 1, 2019 pursuant to
§ 1003.5(a).
Lower-Volume Depository Institutions
The Bureau is adopting an effective
date of January 1, 2017 for
§ 1003.2(g)(1)(v)(A), which is one of the
prongs of the institutional coverage test
for depository institutions. Specifically,
this prong provides that a depository
institution must originate at least 25
closed-end mortgage loans in each of the
preceding two calendar years.
Therefore, a depository institution that
originates at least 25 closed-end
mortgage loans in each of two calendars
years and that otherwise meets all the
other criteria specified in § 1003.2(g)(1)
would be required to report HMDA data
for 2017. However, if the depository
institution originated less than 25
closed-end mortgage loans in each of
two calendars years, then it would not
be required to report HMDA data even
if it meets all other reporting criteria
specified in § 1003.2(g)(1). Similarly, if
the depository institution originated 25
closed-end mortgage loans in one
calendar year and then originated less
than 25 closed-end mortgage loans in
the subsequent calendar year, the
depository institution would not be
required to report HMDA data for 2017.
Reporting Data to the Appropriate
Federal Agency and Disclosing Data to
the Public
The Bureau is adopting an effective
date of January 1, 2019 for
§ 1003.5(a)(1)(i), (a)(1)(iii), and (a)(2)
through (a)(5), and related commentary,
which concern the submission of data
collected and recorded pursuant to this
final rule. Financial institutions will
submit data on covered loans and
applications with respect to which final
action is taken in 2018 to the
appropriate Federal agency pursuant to
these provisions by March 1, 2019.442
Data collected and recorded in 2017
pursuant to current Regulation C will be
reported by March 1, 2018 pursuant to
current § 1003.5(a). The final rule’s
amendments to supplement I effective
January 1, 2018 generally maintain the
current commentary to § 1003.5(a) with
respect to the reporting of data collected
in 2017 and reported in 2018.443
Effective January 1, 2019, commentary
to § 1003.5(a) is revised to address the
reporting of data beginning in 2019. The
442 Appendix A is deleted effective January 1,
2019, so will not apply to the submission of data
on covered loans and applications with respect to
which final action is taken in 2018.
443 As discussed further above in the section-bysection analysis of § 1003.5(a), some of the current
comments to § 1003.5(a) are removed and reserved
effective January 1, 2018.
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final rule adds to appendix A a new
paragraph explaining the transition
requirements for data collected in 2017
and reported in 2018, effective January
1, 2018. On that date, part II of appendix
A is also revised to provide updated
instructions relating to the reporting of
2017 HMDA data. Then, effective
January 1, 2019, appendix A is deleted
in its entirety, when instructions
relating to the reporting of 2017 HMDA
data will no longer be necessary.
Financial institutions will make
available to the public their 2017 HMDA
data pursuant to § 1003.5(b) through (e)
of this final rule. Financial institutions
make available to the public their
HMDA data for calendar years prior to
2017 pursuant to current Regulation C.
Quarterly Reporting
The Bureau is adopting an effective
date of January 1, 2020 for
§ 1003.5(a)(1)(ii), which concerns
quarterly reporting. This delay is to
permit financial institutions subject to
the quarterly reporting requirement time
to implement the final rule and
complete two annual reporting cycles
under the final rule before being
required to submit quarterly data. A
financial institution required to comply
with § 1003.5(a)(1)(ii) will submit its
first quarterly data to the appropriate
Federal agency by May 30, 2020. For
example, a financial institution that
reports at least 60,000 covered loans and
applications, not including purchased
covered loans, in its 2019 HMDA data
submission is required to report its 2020
HMDA data on a quarterly basis
pursuant to § 1003.5(a)(1)(ii), beginning
with the first quarterly submission due
on May 30, 2020.
Enforcement
The Bureau is adopting an effective
date of January 1, 2019 for § 1003.6,
which concerns enforcement of HMDA
and Regulation C. The amendments to
§ 1003.6 adopted in this final rule apply
to HMDA data reported beginning in
2019. Thus, current § 1003.6 applies to
data collected in 2017 and reported in
2018, and amended § 1003.6 applies to
2018 data reported in 2019.
Implementation Period
The Bureau believes that these
effective dates, which provide an
extended implementation period of over
two years, is appropriate and will
provide industry with sufficient time to
revise and update policies and
procedures; implement comprehensive
systems change; and train staff. In
addition, the implementation period
will assist in facilitating updates to the
processes of the Federal regulatory
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agencies responsible for supervising
financial institutions for compliance
with the HMDA rule.
In order to assist industry with an
efficient and effective implementation
of the rule, the Bureau intends to
provide guidance in the form of plain
language compliance guides and aids,
such as videos and reference charts;
technical specifications and
documentation; and in conducting
meetings with stakeholders to discuss
the rule and implementation issues.
mstockstill on DSK4VPTVN1PROD with RULES2
VII. Section 1022(b)(2) of the DoddFrank Act
The Bureau has considered the
potential benefits, costs, and impacts of
the final rule.444 In developing the final
rule, the Bureau has consulted with or
offered to consult with the prudential
regulators (the Board of Governors of the
Federal Reserve System, the Federal
Deposit Insurance Corporation, the
National Credit Union Administration,
and the Office of the Comptroller of the
Currency), the Department of Justice,
the Department of Housing and Urban
Development, the Federal Housing
Finance Agency, the Securities and
Exchange Commission, and the Federal
Trade Commission regarding, among
other things, consistency with any
prudential, market, or systemic
objectives administered by such
agencies.
As discussed in greater detail
elsewhere throughout this
supplementary information, in this
rulemaking the Bureau is amending
Regulation C, which implements
HMDA, and the official commentary to
the regulation, as part of the Bureau’s
implementation of the Dodd-Frank Act
amendments to HMDA regarding the
reporting and disclosure of mortgage
loan information. The amendments to
Regulation C implement section 1094 of
the Dodd-Frank Act, which made
certain amendments to HMDA.445
444 Specifically, section 1022(b)(2)(A) of the
Dodd-Frank Act calls for the Bureau to consider the
potential benefits and costs of a regulation to
consumers and covered persons, including the
potential reduction of access by consumers to
consumer financial products or services; the impact
on depository institutions and credit unions with
$10 billion or less in total assets as described in
section 1026 of the Dodd-Frank Act; and the impact
on consumers in rural areas.
445 These amendments, among other things,
require financial institutions to itemize their HMDA
data by: The age of mortgagors and mortgage
applicants; points and fees payable at origination in
connection with a mortgage; the difference between
the annual percentage rate associated with a loan
and a benchmark rate or rates for all loans; the term
in months of any prepayment penalty or other fee
or charge payable on repayment of some portion of
principal or the entire principal in advance of
scheduled payments; the value of the real property
pledged or proposed to be pledged as collateral; the
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The final rule includes additional
amendments to Regulation C to
implement the Dodd-Frank Act’s
provisions permitting reporting of, as
the Bureau may determine to be
appropriate, a unique identifier that
identifies the loan originator, a
universal loan identifier, and the parcel
number that corresponds to the property
pledged or proposed to be pledged as
collateral. The final rule also requires
financial institutions to report
additional information pursuant to
authority under sections 304(b)(5)(D)
and 304(b)(6)(J) of HMDA, which permit
the disclosure of such other information
as the Bureau may require, and section
305(a) of HMDA, which, among other
things, broadly authorizes the Bureau to
prescribe such regulations as may be
necessary to carry out HMDA’s
purposes. Certain additional data points
included in the final rule are not
specifically identified by the DoddFrank Act amendments to HMDA.446
The final rule also modifies the
regulation’s transactional and
institutional coverage. Regarding
transactional coverage, the final rule
requires financial institutions to report
activity for consumer-purpose dwellingsecured loans and lines of credit,
regardless of whether the loans or credit
lines are for home purchase, home
improvement, or refinancing.447 The
actual or proposed term in months of any
introductory period after which the rates of interest
may change; the presence of contractual terms or
proposed contractual terms that would allow the
applicant or borrower to make payments other than
fully amortizing payments during any portion of the
loan term; the actual or proposed term in months
of the mortgage; the channel through which the
mortgage application was made, including retail,
broker, and other relevant categories; and the credit
score of mortgage applicants and borrowers.
446 These additional data include: The
construction method for the dwelling related to the
subject property; mandatory reporting of the
reasons for denial of a loan application; the total
origination charges associated with the loan; the
total points paid to the lender to reduce the interest
rate of the loan; the total amount of any general
credits provided to the borrower by the lender; the
interest rate applicable at closing or account
opening; the applicant’s or borrower’s debt-toincome ratio; the ratio of the total amount of debt
secured by the property to the value of the property;
for transactions involving manufactured homes,
whether the loan or application is or would have
been secured by a manufactured home and land, or
by a manufactured home and not land; the land
property interest for loans or applications related to
manufactured housing; the total number of
individual dwelling units contained in the dwelling
related to the loan; the number of individual
dwellings units that are income-restricted pursuant
to Federal, State, or local affordable housing
programs; information related to the automated
underwriting system used in evaluating an
application; whether the loan is a reverse mortgage;
whether the loan is an open-end line of credit; and
whether the loan is primarily for a business or
commercial purpose.
447 The final rule retains reporting of commercialpurpose transactions only if they are for the
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final rule adjusts institutional coverage
to adopt loan-volume thresholds of 25
closed-end mortgage loans or 100 openend lines of credit for all financial
institutions.
Furthermore, the Bureau is modifying
the frequency of reporting for certain
financial institutions with large
numbers of transactions, and the
requirements regarding the public
availability of the HMDA disclosure
statement and the modified loan/
application register. Financial
institutions that reported at least 60,000
covered loans and applications,
excluding purchased covered loans, for
the preceding calendar year, are
required to report data quarterly to the
appropriate Federal agency for the first
three quarters of each calendar year.
Financial institutions are required to
make available to the public notices that
clearly convey that the institution’s
disclosure statement and modified loan/
application register may be obtained on
the Bureau’s Web site and that includes
the Web site address.
The Bureau is also separately
implementing several operational
enhancements and modifications
designed to reduce the burden of
reporting HMDA data. The Bureau is
working to improve the geocoding
process, creating a web-based HMDA
data submission and edit-check system,
developing a data-entry tool for small
financial institutions that currently use
Data Entry Software, and otherwise
streamlining the submission and editing
process to make it more efficient. The
Bureau is also adopting definitions of
many data points that are consistent
with existing regulations and with the
MISMO data standards for residential
mortgages.
A. Provisions To Be Analyzed
The discussion below considers the
benefits, costs, and impacts of the
following major provisions of the final
rule:
1. The scope of the institutional
coverage of the final rule.
2. The scope of the transactional
coverage of the final rule.
3. The data that financial institutions
are required to report about each
covered loan or application.
4. The modifications to disclosure and
reporting requirements.
For each major provision in the final
rule, the discussion considers the
benefits, costs, and impacts to
consumers and covered persons, and
addresses certain alternative provisions
that the Bureau considered. The
purpose of home improvement, home purchase, or
refinancing.
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discussion also addresses comments the
Bureau received on the proposed DoddFrank Act section 1022 analysis as well
as certain other comments on the
benefits or costs of provisions of the
proposed rule when doing so is helpful
to understanding the Dodd-Frank Act
section 1022 analysis. Comments that
mentioned the benefits or costs of a
provision of the proposed rule in the
context of commenting on the merits of
that provision are addressed in the
relevant section-by-section analysis,
above. In this respect, the Bureau’s
discussion under Dodd-Frank Act
section 1022 is not limited to this
discussion in part VII of the final notice.
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B. Statement of Need
1. HMDA’s Purposes and the Current
Deficiencies in Regulation C
Congress intended HMDA to provide
the public and public officials with
information to help determine whether
financial institutions are serving the
housing needs of their communities, to
target public investment to attract
private investment in communities, and
to identify possible discriminatory
lending patterns and enforce
antidiscrimination statutes. Today,
HMDA data are the preeminent data
source for regulators, researchers,
economists, industry, and advocates
analyzing the mortgage market both for
the three stated purposes of HMDA and
for general market monitoring. For
example, HMDA data are used by bank
supervisors to evaluate depository
institutions for purposes of the
Community Reinvestment Act (CRA); by
local community groups as the basis for
discussions with lenders about local
community needs; and by regulators,
community groups, and researchers to
identify disparities in mortgage lending
that may provide evidence of prohibited
discrimination. In addition, HMDA data
provide a broadly representative,
national picture of home lending that is
unavailable from any other data source.
This information permits users to
monitor market conditions and trends,
such as the supply and demand of
applications and originations. For
example, industry uses HMDA data to
identify and meet the needs of
underserved markets through
potentially profitable lending and
investment opportunities.
HMDA data include records regarding
both applications by mortgage
borrowers and the flow of funding from
lenders to borrowers. Together, these
records form a near-census of the home
mortgage market for covered loans and
applications, with rich geographical
detail (down to census tract level) and
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identification of the specific financial
institution for each transaction.
Therefore, HMDA allows users to draw
a detailed picture of the supply and
demand of mortgage credit at various
levels of geography and lender
aggregation.
Despite its extensive benefits, serious
inadequacies exist in the information
currently collected under Regulation C.
Although HMDA data can generally be
used to calculate underwriting and
pricing disparities across various
protected classes and at various levels of
analysis, the data lack key fields that
explain legitimate underwriting and
pricing decisions for mortgage loans.
Therefore, in most cases, HMDA data
alone cannot demonstrate whether
borrowers and applicants have received
nondiscriminatory treatment by
financial institutions. Additional data
points, such as credit score, AUS
results, combined loan to value ratio
(CLTV), and debt-to-income ratio (DTI),
will help users better understand the
reasons for approvals and denials of
applications and for pricing decisions
regarding originations. Similarly,
current HMDA data provide certain
information about borrowers (race,
ethnicity, sex, and income) and loans
(loan amount, purpose, loan type,
occupancy, lien status, and property
type), but they do not fully characterize
the types of loans for which consumers
are applying and do not explain why
some applications are denied. The
additional data points, such as nonamortizing features, prepayment
penalties, and loan terms, will help fill
these important information gaps.
Additionally, analysis of the cost of
credit to mortgage borrowers is
incomplete without the inclusion of key
pricing information. The current rate
spread data point requires financial
institutions to report rate spread only
for higher-priced mortgage loans.
Currently, such loans comprise roughly
5 percent of total originations. These
limited data restrict analysis of the cost
of credit to a small segment of total
mortgage originations and create severe
selection bias as changes in the market
lead to shifts in the average spread
between APR values and APOR. Adding
new pricing data fields, such as
discount points, lender credits,
origination charges, interest rate, and
total loan costs will allow users to better
understand the price that consumers
pay for mortgages and more effectively
analyze the tradeoffs between rates,
points, and fees.
HMDA also currently provides
limited information about the property
that secures or will secure the loan.
Despite being one of the most important
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characteristics for underwriting and
pricing decisions, the value of the
property securing the loan has not been
collected under the current HMDA
reporting requirements. The final rule
addresses this deficiency by providing
for reporting of the value of the property
securing the covered loan or
application. Current HMDA data also
lack certain information about the
manufactured housing segment of the
mortgage market. Manufactured housing
is an important source of housing for
many borrowers, such as low-income
and elderly borrowers, that are often
financially fragile and possibly more
vulnerable to unfair and predatory
practices.448 Multifamily financing for
both institutional and individual
borrowers serves the housing needs of
multifamily unit dwellers who are
mostly renters and many of whom face
challenges related to housing
affordability. The Bureau’s final rule
provides for reporting of the
construction method, number of
multifamily affordable units, whether a
loan is or would have been secured by
a manufactured home and land or by a
manufactured home and not land, and
the land property interest for loans or
applications for manufactured housing.
The improved data will help users to
better understand the properties for
which borrowers are receiving or being
denied credit or receiving different loan
pricing.
Finally, Regulation C’s current
transactional coverage criteria omit a
large proportion of dwelling-secured
loan products, including large segments
of the home-equity line of credit market.
In the lead-up to the financial crisis
between 2000 and 2008, the total
balance of closed- and open-end homeequity loans and lines of credit
increased by approximately 16.8 percent
annually, growing from a total of $275.5
billion to $953.5 billion. Recent research
has shown that this growth in homeequity lending was correlated with
subsequent home price depreciation, as
448 See Mark Duda & Eric S. Belsky, The Anatomy
of the Low-Income Homeownership Boom in the
1990s (Joint Ctr. for Hous. Studies of Harvard Univ.,
Low-Income Homeownership Working Paper Series
01–1, 2001) (providing evidence that manufactured
housing was an important driver of the
homeownership boom for the low-income
population in the 1990s). Manufactured housing is
also an important source of housing for the elderly.
See Robert W. Wilden, Comment on Affordable
Housing and Health Facility Needs for Seniors in
the 21st Century, Manufactured Housing and Its
Impact on Seniors (2002). For additional
information on manufactured housing, including
the market and regulatory environment, see the
Bureau’s 2014 white paper, Manufactured-housing
Consumer Finance in the U.S, available at http://
files.consumerfinance.gov/f/201409_cfpb_report_
manufactured-housing.pdf.
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2. Improving HMDA Data To Address
Market Failures
HMDA is not principally focused on
regulating the interactions between
lenders and borrowers. Instead, HMDA
requires financial institutions to report
detailed information to their Federal
supervisory agencies and to the public
about mortgage applications,
originations, and purchases at the
transaction level. Such information
provides an important public good that
illuminates the lending activities of
financial institutions and the mortgage
market in general. This increased
transparency allows members of the
public, community groups, and public
officials to better assess compliance
with various Federal laws and
regulations. In doing so, HMDA data
help correct the potential market
failures that those laws and regulations
were designed to address.
From an economics perspective, the
final rule’s improvements to HMDA
data address two market failures: (1)
The under-production of public
mortgage data by the private sector, and
(2) the information asymmetries in
credit markets.
First, HMDA data is a public good in
that it is both non-rival, meaning that it
may be used without reducing the
amount available for others, and nonexcludable, meaning that it cannot be
withheld from consumers who do not
pay for it. As with other public goods,
standard microeconomic principles
dictate that public mortgage data will be
under-produced by the private sector,
creating an outcome that is not socially
optimal. Not surprisingly, no privately
produced loan-level mortgage databases
with comprehensive national coverage
exist that are easily accessible by the
public. Private data vendors offer a few
large databases for sale that typically
contain data collected from either the
largest servicers or securitizers.
However, none of these databases match
the near-universal coverage of the
HMDA data.450 Furthermore,
commercial datasets are costly for
subscribers, creating a substantial
hurdle for community groups,
government agencies, and researchers
that wish to obtain access. Importantly,
these commercially available datasets
typically do not identify individual
lenders and therefore cannot be used to
study whether specific lenders are
meeting community needs or making
nondiscriminatory credit decisions. In
addition, all of the privately produced,
commercially available mortgage
databases that the Bureau is aware of
cover only originated loans and exclude
applications that do not result in
originations. A crucial feature of the
HMDA data is that they include
information about applications in
addition to originations and purchases.
In other words, in economic terms,
private mortgage databases only provide
information about the market outcome
resulting from the intersection of supply
and demand, while HMDA data provide
information about both the market
outcome and the demand for credit.
Thus, users can examine both supply
and demand regarding mortgage credit
and understand the reasons for
discrepancies between supply and
demand at various levels of analysis,
including by lender, geographic region,
type of product or feature, credit risk,
income, and race or ethnicity.
Second, it is well-accepted that credit
markets are characterized by
information asymmetries. Mortgage
449 Michael LaCour-Little et al., The Role of Home
Equity Lending in the Recent Mortgage Crisis, 42
Real Estate Economics 153 (2014).
450 Although limited transactions and institutions
are excluded from HMDA, these are also typically
excluded from commercial datasets.
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well as high default and foreclosure
rates among first mortgages.449 These
correlations were driven in part by
borrowers using home-equity lines of
credit to fund investment properties,
which impacted default rates when
housing prices began to fall. By
identifying home-equity lines of credit
and loan purposes, industry, members
of the public, and public officials will
be better able to identify and respond to
similar patterns in the future.
Congress recognized current
deficiencies in HMDA and responded
with the Dodd-Frank Act, which
amended HMDA and provided broader
reforms to the financial system. The
Dodd-Frank Act’s amendments to
HMDA require the collection and
reporting of several new data points,
including information about borrowers
(age and credit score), information about
loan features and pricing, and, as the
Bureau may determine to be
appropriate, unique identifiers for loans,
properties, and loan originators. It also
authorizes the Bureau to require
financial institutions to collect and
report ‘‘such other information as the
Bureau may require.’’ In doing so,
Congress sought to ensure that HMDA
data continue to be useful for
determining whether institutions are
serving the housing needs of their
communities, for identifying potentially
discriminatory lending patterns, and for
helping public officials target public
investment to attract private investment
where it is needed.
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products and transactions are highly
complex, and lenders have a significant
information advantage. Such
information asymmetry affects price and
quantity allocations and can contribute
to types of lender behavior, such as
discrimination or predatory lending,
that conflict with the best interests of
borrowers. In addition to disadvantaging
individual consumers, information
failure may also lead to herding
behavior by both lenders and
consumers, creating substantial
systemic risk to the mortgage market
and the nation’s overall financial
system. The recent mortgage crisis
provides a vivid demonstration of such
a threat to the overall safety and
stability of the housing market.
These market failures are intertwined.
Following the financial crisis, the
Bureau and other government regulators
have attempted to address misallocation
of credit, enhance consumer protection,
and stem systemic risk in the mortgage
market through rules that regulate the
business practices of financial
institutions. The final rule provides an
additional approach to solving failures
in the mortgage market: Correcting the
informational market failure. Enhanced
mortgage data provide greater
transparency about the mortgage market,
weakening the information advantage
that lenders possess relative to
borrowers, community groups, and
public officials. Greater information
enables these groups to advocate for
financial institutions to adopt fairer
practices and increases the prospect that
self-correction by financial institutions
will be rewarded. Additional
information also helps to reduce the
herding behavior of both lenders and
borrowers, reducing the systemic risk
that has been so detrimental to the
nation. In general, more information
leads to more efficient outcomes. Thus,
as a public good that reduces
information asymmetry in the mortgage
market, HMDA data are irreplaceable.
In addition to addressing the two
market failures, the final rule also meets
the compelling public need for
improved efficiency in government
operations. The new data will allow
government agencies to more effectively
assess financial institutions’ compliance
with antidiscrimination statutes,
including the Equal Credit Opportunity
Act and the Fair Housing Act. The new
data will also help to assess certain
financial institutions’ performance
under the CRA. Improved HMDA data
will also provide valuable information
that supports future market analyses
and optimal policy-making.
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C. Baseline for Consideration of Costs
and Benefits
As stated in the proposal, the Bureau
has discretion in any rulemaking to
choose an appropriate scope of
consideration for potential benefits and
costs and an appropriate baseline. The
Bureau does not believe the
amendments to HMDA in section 1094
of the Dodd-Frank Act would take effect
automatically without implementing
rules. Financial institutions are not
required to report additional data
required by section 304(b)(5) and (6) of
HMDA, as amended, ‘‘before the first
January 1 that occurs after the end of the
9-month period beginning on the date
on which regulations are issued by the
Bureau in final form with respect to
such disclosures.’’ 451 Therefore, the
Bureau believes that the requirements to
report all of the new data elements
under HMDA section 304(b)(4)–(6)
cannot become effective until the
Bureau completes a rulemaking with
respect to the reporting of such data.
Accordingly, this analysis considers the
benefits, costs, and impacts of the major
provisions of the final rule against a preDodd-Frank Act baseline, i.e., the
current state of the world before the
provisions of the Dodd-Frank Act that
amended HMDA are implemented by an
amended Regulation C. The Bureau
believes that such a baseline will also
provide the public with better
information about the benefits and costs
of the statutory amendments to HMDA.
The Bureau did not receive any
comments on the baseline used.
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D. Coverage of the Final Rule
Each provision of the final rule
applies to certain financial institutions
and requires them to report data
regarding covered loans secured by a
dwelling that they originate or purchase,
or for which they receive applications.
The final rule also requires financial
institutions to make these data available
to the public by making available brief
notices referring members of the public
seeking these data to the Bureau’s Web
site to obtain them. The provisions for
which financial institutions must report,
and what information they must report,
are described further in each section
below.
E. Basic Approach of the Bureau’s
Consideration of Benefits and Costs and
Data Limitations
This discussion relies on data that the
Bureau obtained from industry, other
regulatory agencies, and publicly
available sources, as well as public
comments contained in the record
451 HMDA
section 304(n).
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established by the proposed rule. As
discussed in detail below, the Bureau’s
ability to fully quantify the potential
costs, benefits, and impacts of the final
rule is limited in some instances by a
scarcity of necessary data.
1. Costs to Covered Persons
The final rule generally establishes
which financial institutions,
transactions, and data points are
covered under HMDA’s reporting
requirements. In order to precisely
quantify the costs to covered persons,
the Bureau would need, for both current
and future HMDA reporters,
representative data on: (1) The ongoing
operational costs that financial
institutions incur to gather and report
HMDA data; (2) one-time costs for
financial institutions to update
reporting infrastructure in response to
the final rule; and (3) the level of
complexity of financial institutions’
business models and compliance
systems. As stated in the proposal, the
Bureau does not believe that data on
HMDA reporting costs with this level of
granularity is systematically available
from any source. However, the Bureau
has made reasonable efforts to gather as
much relevant data on HMDA reporting
costs as possible. Through review of the
public comments and outreach efforts
with industry, community groups, and
other regulatory agencies, the Bureau
has obtained some information about
ongoing operational and one-time
compliance costs, and the discussion
below uses this information to quantify
certain costs of the final rule. The
Bureau believes that the discussion
constitutes the most comprehensive
assessment to date of the costs of HMDA
reporting by financial institutions.
However, the Bureau recognizes that
these calculations may not fully
quantify all costs to covered persons.
The Bureau also recognizes that these
calculations may not accurately
represent the costs of each specific
reporter, especially given the wide
variation of HMDA reporting costs
across financial institutions.
The Bureau’s process for estimating
the impact of the final rule on the cost
of compliance to covered persons
proceeds in three general stages. First,
the Bureau attempted to understand and
estimate the current cost of reporting for
financial institutions, i.e., the baseline
cost at the institution level. Second, the
Bureau evaluated the one-time costs and
ongoing operational costs that financial
institutions would incur in response to
the final rule. Part VII.F.2, below,
provides details on the Bureau’s
approach in performing these
institution-level analyses.
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The Bureau realizes that costs vary by
institution due to many factors, such as
size, operational structure, and product
complexity, and that this variance exists
on a continuum that is impossible to
fully represent. To conduct a cost
consideration that is both practical and
meaningful, the Bureau chose an
approach that focuses on three
representative tiers of financial
institutions: Low-complexity, moderatecomplexity, and high-complexity. For
each tier, the Bureau produced a
reasonable estimate of the cost of
compliance given the limitations of the
available data. Part VII.F.2, below,
provides additional details on this
approach. More elaboration of the
Bureau’s basic approach is available in
the notice accompanying the proposal,
the Small Business Review Panel
Outline of Proposals, and the Small
Business Review Panel Report.452
The third stage of the Bureau’s
consideration of costs involved
aggregating up to the market-level the
institution-level cost estimates from the
first two stages. This aggregation
required an estimate of the total number
of potentially impacted financial
institutions and a mapping of these
institutions to the three tiers described
above. The Bureau used a wide range of
data in conducting these tasks,
including current HMDA data, Call
Reports, NMLSR data and Consumer
Credit Panel data.453 These analyses
were challenging, because no single data
source provided complete coverage of
all the financial institutions that could
be impacted, and the data quality of
some sources was less than perfect. For
example, estimating the number of
HMDA reporters of closed-end mortgage
loans that will be removed from
coverage under the final rule was
relatively easier than estimating the
number of HMDA reporters that will be
added. Similarly, the Bureau faced
certain challenges in mapping the
financial institutions to the three
representative tiers, because data on the
operational complexity of each financial
452 See 79 FR 51731 (Aug. 29, 2014); Bureau of
Consumer Fin. Prot., Small Business Review Panel
for Home Mortgage Disclosure Act Rulemaking:
Outline of Proposals Under Consideration and
Alternative Considered (Feb. 7, 2014) (Outline of
Proposals), available at http://files.consumer
finance.gov/f/201402_cfpb_hmda_outline-ofproposals.pdf. Certain basic assumptions, such as
wage rate and number of data fields, were updated
after the proposed rule to reflect changes adopted
by the final rule and more recent wage data. The
Bureau also modified the tier designations for the
estimated open-end reporters as a result of a
separate open-end reporting threshold that was not
in the proposal.
453 NMLSR is a national registry of nondepository
financial institutions, including mortgage loan
originators.
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institution was very limited. Where the
Bureau is uncertain about the aggregate
impacts, it has generally provided range
estimates.
As described in greater detail below,
the Bureau received many public
comments on estimating the costs of
certain components of the HMDA
reporting process for individual
financial institutions. These comments
have been considered in revising the
estimates contained in this part. In
general, however, the comments did not
provide representative data for all
current and future HMDA reporters.
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2. Costs to Consumers
In addition to estimating the cost
impact on covered persons, the Bureau
also estimated the costs to consumers.
Following standard economic theory, in
a perfectly competitive market where
financial institutions are profit
maximizers, the affected financial
institutions would pass on to consumers
the marginal, i.e., variable, cost per
application or origination, and absorb
the one-time and increased fixed costs
of complying with the rule. Based on
this theory, the Bureau used estimates of
changes in variable costs to assess the
impact of the rule on consumers.
The Bureau received feedback
through the Small Business Review
Panel process and public comments
that, if the market permitted, some
lenders would attempt to pass on to
consumers the entire amount of the
increased cost of compliance and not
just the increase in variable costs. To the
extent that this were to occur, the
impact of the rule on consumers would
be higher than the Bureau’s estimates
based on variable costs. No data were
available to determine whether lenders
would pass on the entire increase in
compliance costs.
3. Benefits to Consumers and Covered
Persons
The Bureau also assessed the benefits
of the final rule both to consumers and
covered persons. In general, the Bureau
relied on qualitative discussions of
benefits as opposed to quantitative
estimates. The Bureau cannot readily
quantify many of the benefits to
consumers and covered persons with
precision, both because the Bureau does
not have the data to quantify all benefits
and because the Bureau is not able to
assess completely how effective the
Dodd-Frank amendments to HMDA will
be in achieving those benefits.
Congress intended for HMDA,
including the Dodd-Frank Act
amendments to the Act and the Bureau’s
rules implementing HMDA, to achieve
compelling social benefits. As explained
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elsewhere in this supplementary
information, the Bureau believes that
the final rule appropriately implements
the statutory amendments and is
necessary and proper to effectuate
HMDA’s purposes. For consumers, the
Bureau believes that the benefit of
enhanced transparency will be
substantial. For example, the final rule
will facilitate the detection and
remediation of discrimination; promote
public and private investment in certain
under-served markets, potentially
increasing access to mortgage credit;
and promote more stable and
competitive markets. As a sunshine rule
regarding data reporting and disclosure,
most of the benefits of the enhanced
rule on consumers will be realized
indirectly. Quantifying and monetizing
these benefits, however, would require
identifying all possible uses of HMDA
data, establishing causal links to the
resulting public benefits, and then
quantifying the magnitude of these
benefits. For instance, quantification
would require measuring the impact of
increased transparency on financial
institution behavior, the need for public
and private investment, the housing
needs of communities, the number of
lenders potentially engaging in
discriminatory or predatory behavior,
and the number of consumers currently
being unfairly disadvantaged and the
level of quantifiable damage from such
disadvantage. The Bureau is unaware of
data that would enable reliable
quantitative estimates of all of these
effects.
Similar issues arose in attempting to
quantify the benefits to covered persons.
For example, the Bureau believes that
the enhanced HMDA data will facilitate
improved monitoring of mortgage
markets in order to prevent major
disruptions to the financial system,
which in turn will benefit financial
institutions over the long run. Such
effects, however, are hard to quantify
because they are largely related to future
events that the final rule itself is
designed to prevent. Similarly, the
Bureau believes that the enhanced
HMDA data will provide a better
analytical basis for financial regulators
and community groups to screen and
monitor lenders for possible
discrimination. Because of limitations
in the current HMDA data fields, the
potential for false positives has been
widely cited by financial institutions in
various HMDA-related fair lending
examinations, complaints, and lawsuits.
The final rule will greatly reduce the
rate of false positives and the associated
compliance burden on financial
institutions. The Bureau believes that
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such benefits to financial institutions
could be substantial. Nevertheless,
quantifying them would require data
that are currently unavailable.
In light of these data limitations, the
discussion below generally provides a
qualitative consideration of the benefits,
costs, and impacts of the final rule.
These qualitative insights into the
benefits are based on general economic
principles, together with the limited
data available. The Bureau has made
quantitative estimates where possible.
F. Potential Benefits and Costs to
Consumers and Covered Persons
1. Overall Summary
In this part VII.F.1, the Bureau
presents a concise, high-level overview
of the benefits and costs of the final
rule. This is not intended to capture all
details and nuances that are provided
both in the rest of the analysis and in
the section-by-section analyses above
but rather to provide an overview.
Major benefits of the rule. The final
rule has a number of major benefits.
First, the amendments will improve the
usefulness of HMDA data in identifying
possible discriminatory lending patterns
and enforcing antidiscrimination
statutes. By expanding the institutional
and transactional coverage, the final
rule expands the scope of the market
that community groups and government
agencies can include in fair lending
analyses. The addition of pricing data
fields such as interest rate, discount
points, lender credits, and origination
charges improves understanding of
disparities in pricing outcomes beyond
that permitted by the current rate spread
data field. The addition of data fields
such as CLTV, credit score, DTI, and
AUS results allows for a more refined
analysis and understanding of
disparities in both underwriting and
pricing outcomes. Overall, the changes
adopted make fair lending analyses
more comprehensive and accurate. This
is especially important for the
prioritization and peer analysis or
redlining reviews that regulatory
agencies conduct for fair lending
supervision and enforcement purposes
because a consistent and clean dataset
will be available for all financial
institutions subject to HMDA reporting.
Second, the final rule will help
determine whether financial institutions
are serving the housing needs of their
communities and help public officials
target public investment to better attract
private investment, two of HMDA’s
stated purposes. The expansion of
institutional and transactional coverage
will provide additional data helpful to
the public, industry, and government in
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identifying profitable lending and
investment opportunities in
underserved communities. Similarly,
the data points related to multifamily
dwellings and manufactured housing
will reveal more information about
these segments of the market. Borrowers
who seek financing for manufactured
housing are typically more financially
vulnerable than borrowers financing
site-built homes, and may deserve closer
attention from government agencies and
community groups. Although financing
involving multifamily dwellings
reported under HMDA is typically
offered to institutional borrowers, the
ultimate constituents these loans serve
are mostly low- to mid-income renters
who live in these financed units.
Advocacy groups and government
agencies have raised concerns over
affordability issues faced by individuals
living in multifamily dwellings, who
also tend to be more financially
vulnerable than individuals living in
single-family dwellings. Overall, by
permitting a better and more
comprehensive understanding of these
markets, the rule will improve the
usefulness of HMDA data for assessing
the supply and demand of credit, and
financial institutions’ treatment of
applicants and borrowers, in these
communities.
Third, the final rule will assist in
earlier identification of trends in the
mortgage market, including the cyclical
loosening and tightening of credit.
Expanded transactional coverage,
principally through reporting of most
dwelling-secured consumer-purpose
transactions, including open-end lines
of credit, closed-end home-equity loans,
and reverse mortgages, and additional
data fields, such as amortization type,
prepayment penalty, and occupancy
type, will improve understanding of the
types of products and product
characteristics received by consumers.
Recent research has indicated that
certain product types and characteristics
may have increased the likelihood of
default and exacerbated declines in
housing values during the recent
financial crisis. These risk factors could
similarly play important roles in future
credit cycles. Therefore, the additional
transactions and data points will
improve research efforts to understand
mortgage markets, help identify new
risk factors that might increase systemic
risk to the overall economy, and provide
early warning signals of worrisome
market trends. In particular, quarterly
reporting will provide regulators with
more timely data, which will be of
significant value for HMDA and market
monitoring purposes. Timelier data will
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improve the identification of risks to
local housing markets, the analyses of
the lending activities of large volume
lenders, and the effectiveness of
interventions or other actions by the
agencies and other public officials.
Fourth, the rule will improve the
effectiveness of policy-making efforts. In
response to the recent financial crisis,
the government has generated a number
of rules and implemented a wide array
of public policy measures to address
market failures and protect consumers.
Additional data, timelier data, and
increased institutional and transactional
coverage will allow for more informed
decisions by policy makers and will
improve the consideration of benefits,
costs, and impacts for future policy
efforts, resulting in more effective
policy.
Quantifying these benefits is difficult
because the size of each particular effect
cannot be known in advance. Given the
number of mortgage transactions and
the size of the mortgage market,
however, small changes in behavior can
have substantial aggregate effects.
Major costs of the rule. The final rule
will increase ongoing operational costs
and impose one-time costs on financial
institutions. Financial institutions
conduct a variety of operational tasks to
collect the necessary data, prepare the
data for submission, conduct
compliance and audit checks, and
prepare for HMDA-related exams. These
ongoing operational costs are driven
primarily by the time spent on each task
and the wage of the relevant employee.
The Bureau estimates that current
annual operational costs of reporting
under HMDA are approximately $2,500
for a representative low-complexity
financial institution with a loan/
application register size of 50 records;
$35,600 for a representative moderatecomplexity financial institution with a
loan/application register size of 1,000
records; and $313,000 for a
representative high-complexity financial
institution with loan/application
register size of 50,000 records. This
translates into an estimated perapplication cost of approximately $51,
$36, and $6 for representative low-,
moderate-, and high-complexity
financial institutions, respectively.
Using recent survey estimates of net
income from the Mortgage Bankers
Association (MBA) 454 as a frame of
reference for these ongoing operational
costs, the average net income per
origination is approximately $2,900 for
454 These estimates come from an annual survey
conducted by the Mortgage Bankers Association
and the STRATMOR group as part of the Peer
Group Program.
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small/mid-size banks, $3,900 for
medium banks, and $2,100 for large
banks; and approximately $2,300 for
small/mid-size independent mortgage
companies, $3,000 for medium
independent mortgage companies, and
$1,900 for large independent mortgage
companies.455
The final rule will affect the
operational tasks associated with
collecting and reporting HMDA data.
More time will be required for tasks
such as transcribing and checking data,
and more resources will need to be
devoted to tasks such as internal and
external audits. The Bureau estimates
that, absent the mitigation efforts
discussed below, covered persons’
ongoing operational costs will increase
by approximately $2,600 for a
representative low-complexity financial
institution; $17,500 for a representative
moderate-complexity financial
institution; and $35,700 for a
representative high-complexity financial
institution, per year. These estimates do
not include the increases in ongoing
operational costs for financial
institutions that will be required to
report quarterly data or open-end lines
of credit. This translates into a marketlevel impact of approximately
$50,600,000 to $88,500,000 per year.
Using a 7 percent discount rate, the net
present value of this impact over five
years across the entire market is an
increase in costs of approximately
$207,400,000 to $362,900,000.
For financial institutions that will be
required to report HMDA data quarterly,
which the Bureau estimates are all highcomplexity financial institutions, the
additional ongoing operational costs
will be approximately $41,000 per
year.456 This translates into a marketlevel impact of approximately
$1,200,000 per year. Using a 7 percent
discount rate, the net present value of
this impact over five years across the
entire market is an increase in costs of
approximately $4,900,000.
For financial institutions that
originated at least 100 open-end lines of
credit in each of the two preceding years
and will be required to report
information about open-end lines of
credit, the additional ongoing
operational costs from open-end
455 The Bureau notes that these net income
estimates were reported by the Mortgage Bankers
Association and the STRATMOR group on a perorigination basis. The Bureau estimates the HMDA
operational cost per application, not per
origination.
456 The Bureau estimates there will be 29
financial institutions that will be required to report
HMDA data quarterly and that they will be highcomplexity institutions. Note that this estimate
refers to increased ongoing costs due to quarterly
reporting beyond the costs already mentioned.
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reporting will be approximately $9,500
per year for a representative lowcomplexity financial institution,
$53,000 per year for a representative
moderate-complexity financial
institution, and $288,000 per year for a
representative high-complexity financial
institution. This translates into a
market-level impact of approximately
$30,900,000 per year. Using a 7 percent
discount rate, the net present value of
this impact over five years across the
entire market is an increase in costs of
approximately $126,600,000.
Combined, the impact on ongoing
operational costs to reporters of closedend mortgage loans, open-end lines of
credit, and quarterly reporting translates
into a market-level impact of
approximately $82,600,000 to
$120,600,000 per year, without
accounting for any operational
improvements. Using a 7 percent
discount rate, the net present value of
this impact over five years across the
entire market is an increase in costs of
approximately $338,900,000 to
$494,400,000.457
Accounting for operational
improvements undertaken by the
Bureau, the estimated net increase in
ongoing operational costs will be
smaller than the above estimates. The
Bureau’s initial outreach efforts, as well
as information gathered during the
Small Business Review Panel process,
indicated that reportability questions,
regulatory clarity, geocoding, and
submission processes and edits were
significant concerns to financial
institutions. Along with modifying the
reporting requirements, the Bureau is
making operational enhancements and
modifications to address these concerns.
For example, the Bureau is working to
consolidate the outlets for assistance;
provide implementation support similar
to the support provided for the title XIV
and the TILA-RESPA Integrated
Disclosure rules; improve points of
contact for help inquiries; modify the
types of edits and when edits are
approved; develop a Web-based HMDA
data submission and edit-check system,
create a data entry tool for small
financial institutions that use Data Entry
Software; and develop approaches to
457 The market-level estimates provide lower and
upper bounds of the impact of the final rule on the
market as a whole. To convey differences in
impacts across the three representative tiers of
financial institutions, the Bureau presents
institution-level estimates for each tier and does not
aggregate up to market-level estimates for each tier.
The institution-level estimates for each tier provide
more useful and accurate estimates of differences in
impacts across the three representative financial
institutions, because they do not require the
additional assumptions used to map HMDA
reporters to tiers. See part VII.F.2, below.
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reduce geocoding burdens. All of these
enhancements will improve the
submission and processing of data,
increase clarity, and reduce reporting
burden.
Accounting for these operational
improvements, the estimated net impact
of the final rule on ongoing operational
costs for closed-end reporters will be
approximately $1,900, $7,800, and
$20,000 per year, for representative
low-, moderate-, and high-complexity
financial institutions, respectively. This
translates into a market-level impact of
approximately $26,700,000 to
$41,400,000 per year. Using a 7 percent
discount rate, the net present value of
this impact over five years across the
entire market is an increase in costs of
approximately $109,500,000 to
$169,800,000. For quarterly reporters,
which the Bureau assumes are all highcomplexity financial institutions, the
estimated net impact of the final rule on
ongoing operational costs will be
approximately an additional $31,200
per year. This translates into an
additional market-level impact of
approximately $900,000 per year. Using
a 7 percent discount rate, the net
present value of this impact over five
years across the entire market is an
increase in costs of approximately
$3,700,000. For open-end reporters, the
estimated net impact of the final rule on
ongoing operational costs will be
approximately $8,600, $43,400, and
$273,000 per year, for representative
low-, moderate-, and high-complexity
financial institutions respectively. This
translates into a market-level impact of
approximately $26,000,000 per year.
Using a 7 percent discount rate, the net
present value of this impact over five
years across the entire market is an
increase in costs of approximately
$106,600,000. Combined, with the
inclusion of the operational
improvements, the impact on ongoing
operational costs to reporters of closedend mortgage loans, open-end lines of
credit, and quarterly reporting translates
into a market-level impact of
approximately $53,600,000 to
$68,300,000 per year. Using a 7 percent
discount rate, the net present value of
this impact over five years across the
entire market is an increase in costs of
approximately $219,800,000 to
$280,100,000.
In addition to impacting ongoing
operational costs, the final rule will
impose one-time costs necessary to
modify processes in response to the new
regulatory requirements. These one-time
costs are driven primarily by updating
software systems, training staff,
updating compliance procedures and
manuals, and overall planning and
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preparation time. The Bureau estimates
that these one-time costs due to
reporting of closed-end mortgage loans
will be approximately $3,000 for lowcomplexity financial institutions,
$250,000 for moderate-complexity
financial institutions, and $800,000 for
high-complexity financial institutions.
These estimates include the impact on
financial institutions that will be
required to report quarterly data, but
exclude the impact of expanding
transactional coverage to include
mandatory reporting of open-end lines
of credit for financial institutions that
meet the open-end reporting
threshold.458
Industry commenters indicated that
many financial institutions, especially
larger and more complex institutions,
process applications for open-end lines
of credit in their consumer lending
departments using separate procedures,
policies, and data systems. In addition,
because most financial institutions do
not currently report open-end lines of
credit, many financial institutions will
have to develop completely new
reporting infrastructures to comply with
the switch to mandatory reporting. As a
result, there will be one-time costs to
create processes and systems for openend lines of credit in addition to the
one-time costs summarized above to
modify processes and systems for other
mortgage products.
The Bureau recognizes that the onetime cost of reporting open-end lines of
credit could be substantial for many
financial institutions, but lacks the data
necessary to accurately quantify it.
Although some commenters provided
feedback on the additional burden of
reporting data on these products, no
commenter provided specific estimates
of the potential one-time costs of
reporting open-end lines of credit. The
closest information was provided by one
commenter that estimated that HELOC
reporting would increase system fees by
$117,000, which is similar to the
Bureau’s estimate of a $125,000 onetime cost related to reporting open-end
lines of credit for moderately complex
financial institutions.459
For this discussion, the Bureau
assumes that if a lender will report both
closed-end mortgage loans and open458 The Bureau realizes that the impact to onetime costs varies by institution due to many factors,
such as size, operational structure, and product
complexity, and that this variance exists on a
continuum that is impossible to fully capture. As
a result, the one-time cost estimates will be high for
some financial institutions and low for others.
459 It is not clear from this comment whether the
estimate excludes open-end lines of credit for
commercial or business purposes other than
purchase, home improvement, or refinancing,
which financial institutions will not have to report.
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end lines of credit, the one-time cost of
integrating open-end lines of credit into
HMDA reporting processes will be
roughly equal to 50 percent of the onetime cost absent mandatory reporting of
such products. This estimate accounts
for the fact that reporting open-end lines
of credit will require some new systems,
extra start-up training, and new
compliance procedures and manuals,
but that some fixed, one-time costs
could be shared with closed-end lines of
business subject to Regulation C because
both have to undergo systemic changes.
This assumption is consistent with the
Bureau’s estimate that, under the openend reporting threshold, an
overwhelming majority of open-end
reporters would also be reporting
closed-end mortgage loans and
applications simultaneously, as will be
discussed below in parts VII.F.3 and
VII.F.4. The Bureau therefore estimates
that high- and moderate-complexity
financial institutions that will be
required to report open-end lines of
credit while also reporting closed-end
mortgage loans will incur additional
one-time costs of $400,000 and
$125,000, respectively, due to open-end
reporting. The Bureau believes that the
additional one-time costs of open-end
reporting will be relatively low for lowcomplexity financial institutions. The
Bureau believes that these institutions
are less reliant on information
technology systems for HMDA reporting
and that they may process open-end
lines of credit on the same system and
in the same business unit as closed-end
mortgage loans. Therefore, for lowcomplexity financial institutions, the
Bureau estimates that the additional
one-time cost created by open-end
reporting is minimal and is derived
mostly from new training and
procedures adopted for the overall
changes in the final rule. For the
estimated 24 lenders that would only
report open-end lines of credit but not
closed-end mortgage loans, because
there would be no cost sharing between
open-end and closed-end reporting, the
Bureau adopts the one-time cost
estimates for similar-sized closed-end
reporters and hence conservatively
estimates that the one-time costs for
these open-end reporters will be
approximately $3,000 for lowcomplexity financial institutions and
$250,000 for moderate-complexity
financial institutions.460
460 The Bureau estimates that none of the openend-only reporters will fall into the highcomplexity category. The Bureau also estimates that
these open-end-only reporters previously would
have been reporting under HMDA as they are
depository institutions that have closed-end
mortgage loan/application register sizes between 1
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The specific approach used to
estimate one-time costs is based on the
Bureau’s outreach efforts prior to the
proposal. Specifically, for lowcomplexity financial institutions, these
outreach efforts indicated that the cost
to update information technology
systems will be minimal, because the
processes involved in reporting are
highly manual. The estimate of one-time
training costs for low-complexity
financial institutions is based on
estimated ongoing training costs of $300
per year for staff directly responsible for
data reporting. In response to the final
rule, additional staff will require onetime training, but the intensity of this
training will be lower than ongoing
training. To capture this additional,
less-intensive training, the Bureau used
five times the annual training cost as the
estimated one-time training cost
($1,500). Training costs provide the
best-available proxy for the one-time
cost to update compliance procedures
and manuals, so the Bureau used $1,500
as an estimate of these costs as well.
Therefore, the total one-time cost
estimate for low-complexity financial
institutions is approximately $3,000 (=
$0 + $1,500 + $1,500). This estimate
varies little regardless of whether the
financial institution reports open-end
lines of credit.
For moderate-complexity financial
institutions, outreach efforts indicated
that representative costs to update
information technology, excluding
possible open-end reporting, will be
approximately $225,000. The estimate
of one-time training costs for moderatecomplexity financial institutions,
excluding possible open-end reporting,
is based on the estimated ongoing
training costs of $2,500 per year. Again,
the Bureau used five times the annual
training cost as the estimated one-time
training cost ($12,500). Training costs
provide the best-available proxy for the
one-time cost to update compliance
procedures and manuals, so the Bureau
used $12,500 as an estimate of these
costs as well. The one-time cost estimate
for a representative moderatecomplexity financial institution is
therefore approximately $250,000 (=
$225,000 + $12,500 + $12,500),
excluding the costs of reporting openend lines of credit. By including the 50
percent multiplier discussed above, the
Bureau assumes that the one-time cost
of open-end reporting by moderatecomplexity financial institutions is
$125,000. Therefore, for a representative
and 24 records. Therefore the Bureau believes that
they will be able to repurpose and modify the
existing HMDA reporting process for open-end
reporting.
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moderate-complexity financial
institution that meets both the open-end
and closed-end reporting thresholds, the
total one-time cost estimate is $375,000.
For high-complexity financial
institutions, outreach efforts indicated
that representative costs to update
information technology, excluding
open-end reporting, will be
approximately $500,000. The estimate
of one-time training costs for highcomplexity financial institutions,
excluding open-end reporting, is based
on the estimate of ongoing training costs
of $30,000 per year. Again, the Bureau
used five times the annual training cost
as the estimated one-time training cost
($150,000). Training costs provide the
best available proxy for the one-time
cost to update compliance procedures
and manuals, so the Bureau used
$150,000 as an estimate of these costs as
well. The one-time cost estimate for a
representative high-complexity financial
institution is therefore approximately
$800,000 (= $500,000 + $150,000 +
$150,000), excluding the costs of
reporting open-end lines of credit. By
including the 50 percent multiplier
discussed above, the Bureau assumes
that the one-time cost of open-end
reporting by high-complexity financial
institutions is $400,000. Therefore, for a
representative high-complexity financial
institution that meets both the open-end
and closed-end reporting thresholds, the
total one-time cost estimate is
$1,200,000.
Based on outreach discussions with
financial institutions prior to the
proposal, the Bureau also believes that
additional nondepository institutions
that currently do not report under
HMDA but will have to report closedend mortgage loans under the final rule
will incur start-up costs to develop
policies and procedures, infrastructure,
and training. These start-up costs for
closed-end reporting will be
approximately $25,000 for these
financial institutions, which the Bureau
assumes to be all tier 3 institutions. This
startup cost differs from the one-time
costs presented above, because the onetime costs mostly involve the costs from
modifying existing reporting systems for
existing HMDA reporters that will
continue to report, while the startup
cost is the cost incurred from building
an entirely new reporting system for a
new HMDA reporter.
The Bureau estimates the overall
market impact on one-time costs for
closed-end reporting to be between
$650,000,000 and $1,263,200,000; the
overall market impact on one-time costs
for open-end reporting by financial
institutions that are also closed-end
reporters to be approximately
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$61,600,000; the overall market impact
on one-time costs for open-end
reporting alone to be approximately
$3,000,000; and the start-up cost for
nondepository institutions that will
become new closed-end reporters to be
approximately $11,300,000. With these
four sets of numbers together, the
Bureau estimates the combined overall
market impact on one-time and start-up
costs of the final rule is between
$725,900,000 and $1,339,100,000. As a
frame of reference for all of these
market-level, one-time cost estimates,
the total non-interest expenses for
current HMDA reporters were
approximately $420 billion in 2012. The
upper-bound estimate of around
$1,339,100,000 is approximately 0.3
percent of the total annual non-interest
expenses.461 Because these costs are
one-time investments, financial
institutions are expected to amortize
these costs over a period of years. In this
analysis, the Bureau amortizes all costs
over five years, using a simple straightline amortization. Using a 7 percent
discount rate and a five-year
amortization window, the annualized
one-time and start-up costs estimate is
approximately between $177,000,000
and $326,600,000 per year.
Comments on the impact analysis in
the proposed rulemaking. Throughout
the Dodd-Frank Act section 1022
discussion in the proposal, the Bureau
solicited feedback about data or
methodologies that would enable it to
more precisely estimate the benefits,
costs, and impacts of the proposed
changes. For example, the Bureau
solicited data on the operational
activities and distribution of financial
institutions across the three tiers used to
estimate costs, and on the one-time cost
of reporting dwelling-secured homeequity products. The Bureau also
invited feedback on possible ways to
quantify the benefits of the proposal.
The Bureau also sought information on
what data points are applicable to
specific products, and on whether there
are any alternatives to or adjustment in
each data point that would reduce
burden on covered persons while still
meeting the purposes of HMDA.
In general, industry commenters
offered various estimates of the burden
associated with the proposal for the
particular financial institution
represented by the commenter. For
example, commenters representing
different financial institutions provided
461 The Bureau estimated the total non-interest
expense for banks, thrifts, and credit unions that
reported under HMDA based on Call Report data for
depository institutions and credit unions and
NMLSR data for nondepository institutions, all
matched with 2012 HMDA reporters.
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estimates of the increased burden on a
per-loan basis that ranged from $3 to
over $73.42, 30 minutes to 60 minutes,
and 70 to 100 percent. Other industry
commenters framed their estimated
increases in burden in terms of
additional full-time employees, and
provided estimates ranging from one to
15 employees. Other industry
commenters attempted to estimate the
overall increased cost of all aspects of
the proposal, which ranged from
$40,000 to $1,000,000. Other
commenters framed their estimates of
the overall increased costs of all aspects
of the proposal on an annual basis,
which ranged from $7,500 to $75,000
per year. One national trade association
commenter surveyed its members and
reported that implementing the data
points required by the Dodd-Frank Act
would represent one-time costs of
$9,591 and ongoing costs of $3,842 per
year, and implementing the Bureau’s
discretionary data points would
represent one-time costs of $13,955 and
ongoing costs of $4,842 per year.
Finally, several industry commenters
offered general estimates that the
burden of reporting would double,
triple, or increase exponentially. The
Bureau has reviewed these estimates
and considered the information reported
by the commenters.
Many industry commenters criticized
aspects of the proposal’s Dodd-Frank
Act section 1022 discussion. The most
common criticism was disagreement
with the accuracy of the cost estimates
contained in the proposal. Several
industry commenters pointed out that
the proposal’s cost estimates were
considerably different than the actual
costs involved in HMDA reporting by
the individual financial institution
represented by the commenter. For
example, one industry commenter
specifically questioned the $1,600
estimate for operational costs for lowcomplexity financial institutions in the
proposal. As a second example, another
commenter suggested that the estimated
cost per transaction could not be
accurate, because a small entity
representative reported that it spent an
average of three hours just on following
up with loan officers regarding missing
government monitoring information.
The Bureau notes that the current
costs of reporting data under HMDA, as
well as the impact of the final rule, are
all institution-specific. For the purpose
of the section 1022 discussion, however,
it is not possible to generate separate
estimates for each HMDA reporter. As a
meaningful alternative, the Bureau
constructed benefits, costs, and impacts
for three representative institutions. As
a result, estimates from specific
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commenters often deviated from the
Bureau’s estimates as expected.
Sometimes, however, the cost estimates
of the representative financial
institution and the cost estimates of a
particular commenter aligned. For
example, one industry commenter
described the Bureau’s estimated onetime implementation costs for moderatecomplexity financial institution as
potentially correct. Although the
estimated impacts of the proposed rule
on many institutions deviated from the
estimates the Bureau constructed for
three representative institutions, these
commenters, in general, did not disagree
with the Bureau’s methodology or
assumptions.
Other industry commenters cited
flaws with the data used to estimate the
costs and benefits of the proposal. For
example, one commenter explained that
the discussion was based on data from
current HMDA reporters and therefore
may not allow accurate estimates of the
impact on newly reporting
nondepository institutions. Another
commenter generally stated that the
discussion used insufficient quantitative
data. Scarcity of data in general, and of
quality data in particular, posed a
challenge when estimating the benefits
and costs of the final rule. This was
especially true when constructing
estimates for newly reporting financial
institutions, because it is difficult to
identify exactly which institutions
would have to report, and data on these
institutions are limited. To the extent
possible, the Bureau utilized the best
and most current data from what it
knew to be the relevant and available
data sources. No commenter identified
any additional data sources that would
have improved the Bureau’s estimates.
Nevertheless, in response to those
comments, the Bureau reanalyzed
currently available data sources to better
understand the impacts of the final rule.
For example, following the proposal and
comment period, the Bureau thoroughly
analyzed Call Reports and Consumer
Credit Panel data to better understand
the open-end line of credit market and
the impacts of requiring reporting of
these products. Details of this analysis
are included in the discussions on
institutional and transactional coverage
below.
Some industry commenters believed
that the cost estimates were internally
inconsistent or inconsistent with other
parts of the proposal. For example, one
commenter doubted that variable costs
would increase by only $0.30 per
application if the number of fields were
essentially doubling. This comment
highlights one of the many nuances of
the analysis in the proposal. The $0.30
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estimate is for a representative
moderate-complexity institution, and
captures the estimated impact on
variable operational costs of having to
report 37 additional data fields.462 As
indicated in Tables 2–4 below, the
Bureau designated five of the 18
operational tasks as variable-cost tasks,
so the $0.30 estimate only captures part
of the overall impact of increasing the
number of fields financial institutions
must report. When assessing the impact
to consumers, the Bureau focused on the
variable costs based on standard
economic theory that, under perfect
competition, institutions will pass on
increases in variable costs to consumers
but will absorb the one-time costs and
increases to fixed costs. No commenters
disagreed with the Bureau’s designation
of tasks as variable-cost or fixed-cost,
and no commenters suggested
improvements to the formulations or
assumptions the Bureau used to
construct estimates for each operational
task. Therefore, although the
representative institution estimates may
not precisely match the projected
impact for a particular institution, the
Bureau continues to believe that the
representative estimates are a
meaningful alternative to a
particularized estimate for each
institution, and has decided not to
modify its basic methodological
approach in response to this
comment.463
Many industry commenters believed
that the Bureau had not considered
certain costs associated with reporting
HMDA data. A few commenters
believed that the methodology used to
estimate costs omitted certain tasks
connected to reporting, such as the
increased time spent on examinations
and scrubbing and re-scrubbing the
data. As noted in Tables 2–4 below, the
Bureau included standard annual edits
and internal checks, as well as
examination preparation and
examination assistance as three of the
18 operational steps institutions use
when preparing and reporting HMDA
data. The Bureau discussed all 18
operational steps with small entity
representatives during the Small
Business Review Panel process and
462 The 37 additional data fields were contained
in the proposed rule. The final rule increases the
total number of additional data fields. That change
has been reflected in the Bureau’s updated impact
analyses in this final rule.
463 However, the Bureau did update some of its
basic assumptions, including wage rate and number
of data fields after the proposal to reflect the final
rule and more recent wage data. The Bureau also
modified the tier designations for estimated openend reporters as a result of a separate open-end
reporting threshold that the Bureau instituted in the
final rule in response to the public comments.
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solicited feedback on these steps, along
with formulations for estimating their
costs, in the proposed rule. Although
some institutions indicated that they
used slightly different tasks, in general,
all feedback received indicated that
these 18 operational tasks generally
reflect the steps most financial
institutions take when gathering and
reporting HMDA data.
Other commenters cited other
elements of cost that they believed
should have been included in the
discussion. One industry commenter
stated that the Bureau should consider
the opportunity cost of time spent
reporting HMDA data. Although not
explicitly stated, the current estimates
do consider the opportunity cost of the
impact of the final rule. In response to
the final rule, some current employees
will trade off profit-related activities for
HMDA-related activities. The
opportunity cost of the final rule is the
lost profit from this reallocation of staff
time. Wages are typically used as a
proxy for opportunity cost, and this is
the measure the Bureau uses to estimate
the cost of financial institutions having
to reallocate employee time to HMDArelated activities in response to the final
rule.
Two other commenters suggested that
the Bureau include the privacy costs of
the proposed rule, such as the cost
associated with data breaches. These
commenters provided no information
that would enable accurate estimates of
such costs. Because any potential data
breach is an inherent part of lenders’
operational risk associated with any
data operation, the Bureau cannot
precisely estimate its cost for the
representative institutions in its threetier approach. Financial institutions
collect and maintain significant
amounts of highly sensitive, personally
identifiable information concerning
customers in the ordinary course of
business. The Bureau understands that
substantially all of the new data to be
compiled under the final rule either are
data that HMDA reporters compile for
reasons other than HMDA or are
calculations that derive from such data,
and must be retained by financial
institutions to comply with other
applicable laws. Therefore, the Bureau
does not believe that costs related to the
risk of data breaches substantially affect
the estimates contained in this section
1022 discussion.
Several other industry commenters
stated that the Bureau did not discuss
potential competitive disadvantages that
small financial institutions might suffer
as a result of the rule, because they
would be unable to distribute the cost
of compliance among as large a
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transaction base as large financial
institutions. Several industry
commenters cited reports from Goldman
Sachs and Banking Compliance Index
figures to support claims that regulatory
burdens were disproportionally
affecting small financial institutions and
preventing low-income consumers from
accessing certain financial products.
Another industry commenter cited the
decline in HMDA reporters from 2012 to
2013 as evidence that small financial
institutions have left the market. The
Bureau presented separate impact
estimates for low-, moderate-, and highcomplexity institutions, broadly
reflecting differences in impact across
institutions of different size. For lowcomplexity institutions, which best
represent small institutions, the
estimated impact on ongoing
operational costs from reporting closedend mortgage loans, after the
operational modifications the Bureau is
making, is approximately $1,900 under
the final rule. This translates into
approximately a $38 increase in perapplication costs. Based on recent
survey estimates of net income from the
MBA, this impact represents
approximately 1.3 percent ($38/$2,900)
of net income per origination for small/
mid-size banks.464 The Bureau views
that amount as relatively small. In
addition, the Bureau has increased the
closed-end mortgage loan reporting
threshold for depository institutions
from one to 25, and instituted an openend line of credit reporting threshold of
100 to alleviate burden on small
financial institutions while still
maintaining the benefits of HMDA data.
Therefore, the Bureau concludes that
the final rule is unlikely to
competitively disadvantage small
institutions.
A few industry commenters stated
that the Dodd-Frank Act section 1022
discussion did not address the
proposal’s expanded coverage of
commercial loans. As explained above,
based on these comments and
subsequent analysis, the Bureau has
decided to maintain Regulation C’s
existing transactional coverage scheme
for commercial-purpose transactions.
The final rule will only require
reporting of applications for, and
originations of, dwelling-secured
464 According to a recent annual survey on
mortgage originators by the Mortgage Bankers
Association and the STRATMOR group as part of
the Peer Group Program, the average net income per
origination is approximately $2,900 for small/midsize banks, $3,900 for medium banks, and $2,100
for large banks; and approximately $2,300 for small/
mid-size independent mortgage companies, $3,000
for medium independent mortgage companies, and
$1,900 for large independent mortgage companies.
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commercial-purpose loans and lines of
credit if they are for home purchase,
home improvement, or refinancing
purposes. The Bureau believes the
volume of such transactions is fairly
small and that, as a result, it is
unnecessary to account separately for
the costs, benefits, and impacts of
commercial-purpose reporting under the
final rule.
Many industry commenters argued
that the degree of alignment to the
MISMO data standards would increase
burden. Several financial institutions
reported that they would need to train
their staff members in order to
understand the MISMO definitions. One
commenter suggested that use of the
MISMO data standards should be
optional because it would be
burdensome for small financial
institutions. A national trade association
commenter reported that only 22
percent of its members reported using
MISMO. These commenters have
misunderstood the implications of the
proposed MISMO utilization. The
Bureau did not propose to, and the final
rule does not require, any financial
institution to use or become familiar
with the MISMO data standards. Rather,
the rule merely recognizes that many
financial institutions are already using
the MISMO standard for collecting and
transmitting mortgage data and uses
similar definitions for certain data
points in order to reduce burden. Thus,
the rule decreases costs for those
institutions that already maintain data
points with the same definitions and
values as MISMO. Financial institutions
that are unfamiliar with MISMO may
not realize a similar reduction in cost,
and will have to report data points not
required under the current rule, but they
will not experience any increased
burden from reporting those HMDA data
points that the Bureau has defined
consistently with MISMO definitions.
These institutions will not need to learn
anything about MISMO because the
final rule itself and the associated
materials contain all the necessary
definitions and instructions for
reporting HMDA data.
One industry commenter believed
that the cost estimates should not be
amortized over five years because
financial institutions may not recover
these costs over that time period. The
Bureau presented both non-amortized
market-level estimates and market-level
estimates amortized over five years. As
noted earlier, it is not feasible to tailor
the analysis to each financial institution
subject to the rule. The Bureau believes
that these results effectively provide a
general picture of the impact of the final
rule on costs.
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Many industry commenters believed
that the proposal would likely increase
the cost of credit for consumers. Several
of these commenters cited the cost of
system modifications associated with
reporting open-end lines of credit. A
few commenters claimed that certain
small financial institutions, such as
small credit unions, small farm credit
lenders, or small banks, would be faced
with difficult choices, such as merging,
raising prices, originating fewer loans,
or exiting the market. A small number
of industry commenters stated that they
would double their origination fees as a
result of the proposed rule. A national
trade association commenter cited,
among other things, a study from several
individuals at the Mercatus Center at
George Mason University and a survey
of its members showing that small
financial institutions were decreasing
their mortgage lending activity in
response to increased regulatory
burdens. Similarly, other industry
commenters pointed to a report from
Goldman Sachs showing that higher
regulatory costs had priced some lowincome consumers out of the credit card
and mortgage markets. Following
standard economic theory, in a perfectly
competitive market where financial
institutions are profit maximizers, the
affected financial institutions would
pass on to consumers the marginal, i.e.,
variable, cost per application or
origination and would absorb the onetime and increased fixed costs of
complying with the rule. Overall, the
Bureau estimates that the final rule will
increase variable costs by $23 per
closed-end mortgage application for
representative low-complexity
institutions, $0.20 per closed-end
mortgage application for representative
moderate-complexity institutions, and
$0.10 per closed-end mortgage
application for representative highcomplexity institutions. The Bureau
estimates that the final rule will
increase variable costs by $41.50 per
open-end line of credit application for
representative low-complexity
institutions, $6.20 per open-end line of
credit application for representative
moderate-complexity institutions, and
$3 per open-end line of credit
application for representative highcomplexity institutions. These expenses
will be amortized over the life of a loan
and represent a negligible increase in
the cost of a mortgage loan. Therefore,
the Bureau does not anticipate any
material adverse effect on credit access
in the long or short term even if
financial institutions pass on these costs
to consumers.
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One national trade association
commenter asked the Bureau to
consider the indirect impact on rural
consumers and to analyze the effect of
the proposed rule combined with the
other recent mortgage rules. This
commenter noted that most of its
members lend in rural areas and cited
the Mercatus Center study mentioned
above, which explained that small
financial institutions in rural markets
were particularly burdened by recent
regulatory changes. Part VII.G.2 of the
proposed rule considered the impact of
the proposed rule on rural consumers.
Following standard economic principles
suggesting that institutions will pass on
increases in variable costs, the Bureau
estimated that the impact on consumers
in rural areas will be small. Although
some commenters suggested considering
these impacts further, no commenters
provided any specific estimates or
suggested changes to methodology that
could alter that conclusion.
Many commenters suggested that the
Bureau provide an analysis of the costs
and benefits of different alternatives,
such as additional possible loan-volume
thresholds. The Bureau has considered
several alternatives and has described
the costs and benefits of these
alternatives, to the extent permitted by
available data, in greater detail
elsewhere in this final notice. As one
example, Tables 5–7 in part VII.F.3
summarize the numbers of institutions
and applications that would be
excluded under closed-end reporting
thresholds of 25, 50, 100, 250, and 500
loans. Similarly, in response to
comments received, the Bureau
conducted additional analyses and
subsequently constructed analogous
tables showing the impact of the rule on
reporting of open-end lines of credit at
various thresholds. These estimates are
shown in Table 8.
One industry commenter claimed that
the Bureau improperly discussed
benefits outside of the statutory
purposes of HMDA. Section 1022 of the
Dodd-Frank Act, however, contains no
such limitation. Instead, the statute
directs the Bureau to consider, among
other things, the ‘‘potential benefits and
costs to consumers and covered
persons.’’465 Although the discussion of
benefits is focused on the statutory
purposes of HMDA, improved
information about the mortgage market
will have other benefits that may fall
outside of a narrow reading of the
statutory purposes. The Bureau believes
that failing to consider these benefits
would deprive the public of important
465 12
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information about the potential impacts
of the final rule.
Finally, one commenter urged the
Bureau to gather data and define clear
metrics for evaluating the success of the
rule for retrospective review. This
commenter offered several means of
evaluation, including whether changes
occur in antidiscrimination
enforcement, redlining activity, false
positive rates, access to credit, public
and private investment, or costs to
consumers. Section 1022(d) of the
Dodd-Frank Act requires the Bureau to
assess each ‘‘significant’’ rule or order
adopted by the Bureau under Federal
consumer financial law.466 This
assessment must consider the
effectiveness of the rule in meeting the
purposes and objectives of the
Consumer Financial Protection Act of
2010 and the specific goals stated by the
Bureau, and the Bureau must publish a
report of its assessment within five
years of the effective date of the rule.467
Before publishing the report of its
assessment, the Bureau must also invite
public comment regarding the
modification, expansion, or elimination
of the significant rule.468 The Bureau
believes that this rule will almost
certainly constitute a significant rule
that warrants assessment under section
1022(d) of the Dodd-Frank Act.
Therefore, it will be evaluating the
effectiveness of the rule along
dimensions similar to those proposed by
the commenter and will provide the
public with an opportunity for public
comment.
2. Methodology for Generating Cost
Estimates
Prior to the proposal, the Bureau
reviewed the current HMDA compliance
systems and activities of financial
institutions. The review used a costaccounting, case-study methodology
consisting, in part, of interviews with 20
financial institutions of various sizes,
nine vendors, and 15 governmental
agency representatives.469 These
466 12
U.S.C. 5512(d).
U.S.C. 5512(d)(1)–(2).
468 12 U.S.C. 5512(d)(3).
469 For a discussion of this methodology in the
analysis of the costs of regulatory compliance, see
Gregory Elliehausen, Bd. of Governors of the Fed.
Reserve Sys., Staff Studies Series No. 171, The Cost
of Bank Regulation: A Review of the Evidence,
(April 1998), available at http://
www.federalreserve.gov/pubs/staffstudies/1990–99/
ss171.pdf. In addition, the Bureau recently
conducted a Compliance Cost Study as an
independent analysis of the costs of regulatory
compliance. See U.S. Consumer Fin. Prot. Bureau,
Understanding the Effects of Certain Deposit
Regulations on Financial Institution’s Operations:
Findings on Relative Costs for Systems, Personnel,
and Processes at Seven Institutions (2013),
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467 12
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interviews provided the Bureau with
detailed information about current
HMDA compliance processes and
costs.470 This information showed how
financial institutions gather and report
HMDA data and provided the
foundation for the approach the Bureau
took to considering the benefits, costs,
and impacts of the final rule. The
Bureau augmented this information
through the Small Business Review
Panel process and through relevant
academic literature, publicly available
information and data sources available
through the Internet,471 historical
HMDA data, Call Report Data, NMLSR
Data, public comments contained in the
rulemaking docket established by the
proposal, and the Bureau’s expertise.
Based on the outreach described
above, the Bureau classified the
operational activities that financial
institutions currently use for HMDA
data collection and reporting into
discrete compliance ‘‘tasks.’’ This
classification consists of 18 ‘‘component
tasks,’’ which can be grouped into four
‘‘primary tasks.’’ The level of detail of
the classification is intended to facilitate
estimation of baseline costs and to
enable rigorous analysis of the impact of
the final rule across a wide range of
financial institutions. The four primary
tasks are described briefly below.
1. Data collection: transcribing data,
resolving reportability questions, and
transferring data to HMDA Management
System (HMS).
2. Reporting and resubmission:
Geocoding, standard annual edit and
internal checks, researching questions,
resolving question responses, checking
post-submission edits, filing postsubmission documents, creating
modified loan/application register,
distributing modified loan/application
register, distributing disclosure
available at http://files.consumerfinance.gov/f/
201311_cfpb_report_findings-relative-costs.pdf.
470 The financial institutions interviewed were
selected to provide variation in key characteristics
like institution type (bank, credit union,
independent mortgage bank), regulator, record
count, submission mechanism, number of
resubmissions, and other designations like whether
the financial institution was a multifamily or rural
lender. However the Bureau recognizes that this
does not constitute a random survey of financial
intuitions and the sample size might not be large
enough to capture all variations among financial
institutions.
471 Internet resources included, among others,
sites such as Jstor.org, which provides information
on published research articles; FFIEC.gov, which
provides information about HMDA, CRA, and the
financial industry in general; university Web sites,
which provide information on current research
related to mortgages, HMDA, and the financial
industry; community group Web sites, which
provide the perspective of community groups; and
trade group Web sites, which provide the
perspective of industry.
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66269
statement, and using vendor HMS
software.
3. Compliance and internal audits:
Training, internal audits, and external
audits.
4. HMDA-related exams: Examination
preparation and examination assistance.
In addition to collecting information
about operational activities and costs,
the Bureau also used outreach efforts
and the Small Business Review Panel
process to better understand the
potential one-time costs that HMDA
reporters will incur in response to the
proposed rule. Management, legal, and
compliance personnel will likely
require time to learn new reporting
requirements and assess legal and
compliance risks. Financial institutions
that use vendors for HMDA compliance
will incur one-time costs associated
with software installation,
troubleshooting, and testing. The
Bureau is aware that these activities will
take time and that the costs may vary
depending on the time available.
Financial institutions that maintain
their own reporting systems will incur
one-time costs to develop, prepare, and
implement necessary modifications to
those systems. In all cases, financial
institutions will need to update training
materials to reflect new requirements
and activities and may have certain onetime costs for providing initial training
to current employees.
The Bureau recognizes that the cost
per loan of complying with the current
requirements of HMDA, as well as the
operational and one-time impact of the
final rule, will differ by financial
institution. During the Bureau’s
outreach with financial institutions, the
Bureau identified seven key dimensions
of compliance operations that were
significant drivers of compliance costs.
These seven dimensions are: The
reporting system used; the degree of
system integration; the degree of system
automation; the compliance program;
and the tools for geocoding, performing
completeness checks, and editing. The
Bureau found that financial institutions
tended to have similar levels of
complexity in compliance operations
across all seven dimensions. For
example, if a given financial institution
had less system integration, then it
tended to use less automation and lesscomplex tools for geocoding. Financial
institutions generally did not use lesscomplex approaches on one dimension
and more-complex approaches on
another. The small entity
representatives validated this
perspective during the Small Business
Review Panel meeting.
To capture the relationships between
operational complexity and compliance
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cost, the Bureau used these seven
dimensions to define three broadly
representative financial institutions
according to the overall level of
complexity of their compliance
operations. Tier 1 denotes a
representative financial institution with
the highest level of complexity, tier 2
denotes a representative financial
institution with a moderate level of
complexity, and tier 3 denotes a
representative financial institution with
the lowest level of complexity. For each
tier, the Bureau developed a separate set
of assumptions and cost estimates. All
of these assumptions and cost estimates
apply at the institutional level.472 In the
Outline of Proposals prepared for the
Small Business Review Panel, the
Bureau provided a detailed exposition
of the analytical approach used for the
three tiers.473 Small business
representatives attending the Small
Business Review Panel did not raise
substantial objections to this three-tier
approach.
Table 1 below provides an overview
of all three representative tiers across
the seven dimensions of compliance
operations:
Tables 2–4 convey the baseline
estimates of annual ongoing operational
costs as well as the underlying formulas
used to calculate these estimates for the
18 operational tasks for the three
representative financial institutions.
The wage rate is $33 per hour, which is
the national average wage for
compliance officers based on the most
recent National Compensation Survey
from the Bureau of Labor Statistics (May
2014).474 The number of applications for
tier 3, tier 2, and tier 1 financial
institutions is 50, 1,000, and 50,000,
respectively. The Bureau used similar
breakdowns of the 18 operational tasks
for each representative financial
institution to estimate the impact of the
final rule on ongoing operational costs.
The Bureau notes that with the assumed
wage rate, number of applications, and
other key assumptions provided in the
notes following each table, readers of
this discussion may back out all
elements in the formulas provided
below using the baseline estimates for
each task in each tier.
472 The Bureau assumes that, for closed-end
reporters, the tier 1 representative financial
institution has 50,000 records, the tier 2
representative has 1,000 records, and the tier 3
representative has 50 records on the HMDA loan/
application register. All cost estimates reflect the
assumptions defining the three representative
financial institutions and reflect general
characteristics and patterns, including man-hours
spent on each of the 18 component tasks and
salaries of the personnel involved. To the extent
that an individual financial institution specializes
in a given product, or reports different numbers of
records on its loan/application register, these
representative estimates will differ from the actual
cost to that particular financial institution.
473 See U.S. Consumer Fin. Prot. Bureau, Small
Business Review Panel for Home Mortgage
Disclosure Act Rulemaking: Outline of Proposals
Under Consideration and Alternative Considered
(Feb. 7, 2014) (Outline of Proposals), available at
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BILLING CODE 4810–AM–P
http://files.consumerfinance.gov/f/201402_cfpb_
hmda_outline-of-proposals.pdf.
474 The Bureau has updated the wage rate used
throughout the impact analyses accompanying this
final rule to $33 per hour, up from $28 used in the
proposal, in order to reflect the most recent ongoing
labor costs for financial institutions. Consequently,
the baseline cost estimates in this final rule are
higher than what the Bureau presented in the
proposal.
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66271
Table 2: Baseline Cost Estimates for 18 Operational Tasks for Tier 3 Fl:rumdal Institutions
Fixed
Variable
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
Fixed
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Note: Key kimunpiOIIS in ihe.TablB
1. Hourly wage- $33, number of applicati01111 -50
2. Number of applioatiOilll with reportability questiOilll - 5
3. Number of applioatiOilll with questi01111 = 5
4. Number of applicatiOilll with contrary answeiS to questi01111 = 1
5. Number of modifled LAR.requests- 0
6. Number of disclosure statement requests= 0
7. Number of loan officers and processors= 5
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Tablt· 3: Baseline Cost l•:,timates for 180ptTational Tasks f()rTier2 Finandalln,titutions
',
:I'
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and checks)
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rc>;earchingtp cstionspcr
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d ~..:c·Jications with
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icmic,n) ~ ,·nmnberofapplr~atrc•ns with contmry
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wage) x \.;L·Jf~ :c,.>:nl .;hccking post submission
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BILLING CODE 4810–AM–C
The baseline cost assumptions and
cost estimates presented above reflect
the current world in which most openend lines of credit are not reported
under HMDA. In the final rule,
reporting of open-end lines of credit
becomes mandatory for those
institutions that meet all the other
criteria for a ‘‘financial institution’’ in
final § 1003.2(g) and originated at least
100 open-end lines of credit. The
Bureau estimated that currently only
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about 1 percent of total open-end lines
of credit secured by dwellings were
reported under HMDA. Hence, the
Bureau has assumed that the baseline
costs for open-end reporting in the
current rule are zero. The Bureau
believes that the HMDA reporting
process and ongoing operational cost
structure for reporting open-end lines of
credit under the final rule will be
fundamentally similar to closed-end
reporting. Therefore, for open-end
reporting the Bureau adopted the three-
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66273
tier approach and most of the key
assumptions used for closed-end
reporting above, with two
modifications. First, for the
representative low-complexity open-end
reporter, the Bureau assumed that the
number of open-end lines of credit
applications would be 150. This was set
to both accommodate the threshold of
100 open-end lines of credit and to
reasonably reflect the likely distribution
among the smallest open-end reporters
based on the Bureau’s estimated number
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of likely open-end reporters and their
volumes. Second, for the representative
high-complexity open-end reporter, the
Bureau assumed that the number of
open-end line of credit applications
would be 30,000. This reflects a
reasonable distribution among the
largest open-end reporters based on the
Bureau’s estimated number of likely
open-end reporters and their volumes.
The Bureau assumed that the number of
open-end line of credit applications for
the representative moderate-complexity
open-end reporter would still be 1,000,
just as for the moderate-complexity
closed-end reporter. The sections on
transactional and institutional coverage
discuss the Bureau’s approach regarding
the cost of open-end line of credit
reporting in more detail.
To this point, all estimates apply at
the level of the institution. To aggregate
institution-level information to generate
cost estimates at the market level, the
Bureau developed an approach to map
all HMDA closed-end reporters to one of
the three tiers. Because financial
institutions are arrayed along a
continuum of compliance costs that
cannot be precisely mapped to the three
representative tiers, the Bureau has
adopted a conservative strategy based
on a possible range of the number of
financial institutions in each tier. To
identify these distributions, the Bureau
relied on the Bureau’s best estimate of
the total number of closed-end reporters
and the number of total closed-end
loan/application register records under
the final rule. In particular, the Bureau
used the total number of reporters
(7,197) and the total number of loan/
application register records (16,698,000)
in the 2013 HMDA data.
As a first step, the Bureau identified
all possible tier distributions among
closed-end reporters that were
consistent with the reporter and record
counts, using the same loan/application
register sizes adopted in the
institutional-level analysis (50,000 for
tier 1 institutions; 1,000 for tier 2
institutions; and 50 for tier 3
institutions). Specifically, the Bureau
set the following two constraints: (1)
The total number of HMDA reporters in
all three tiers must sum to 7,197; and (2)
using the assumed loan/application
register size in each tier, the total
number of loan/application register
records by all reporters in all three tiers
must sum to 16,698,000. Additionally,
the Bureau imposed two constraints.
First, the Bureau classified all 184
HMDA reporters with over 10,000
records as tier 1, because the Bureau’s
investigation led it to believe that these
large financial institutions all possess a
high level of complexity in HMDA
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reporting. Second, the Bureau assumed
that at least 20 percent of financial
institutions were tier 2 and at least 20
percent were tier 3. These assumptions
helped to narrow the range of possible
combinations. The Bureau also
substituted the actual loan/application
register size of the 184 largest HMDA
reporters into the constraint for the
loan/application register size of a tier 1
financial institution, further narrowing
the range of possible combinations. The
Bureau notes that all distributions
identified are mathematically possible
based on the Bureau’s assumptions.
Second, for the subset of tier
distributions satisfying these closed-end
reporter and count constraints, the
Bureau then estimated market-level
costs associated with closed-end
reporting based on the tier-specific
assumptions and cost estimates. That is,
for a given distribution derived in the
first step, the Bureau multiplied the
institutional-level cost estimate
associated with closed-end reporting for
each tier by the number of institutions
in that tier, and then summed across all
three tiers. The distributions with the
lowest- and highest-estimated marketlevel costs provided the lower and
upper bounds for the market-level
closed-end cost estimates throughout
the consideration of the benefits and
costs. Specifically, the Bureau arrived at
two distributions for all closed-end
reporters: (1) The first distribution has
3 percent of financial institutions in tier
1, 71 percent of financial institutions in
tier 2, and 26 percent of financial
institutions in tier 3; and (2) the second
distribution has 4 percent of financial
institutions in tier 1, 28 percent of
financial institutions in tier 2, and 68
percent of financial institutions in tier 3.
These two distributions likely do not
match the state of the world exactly.
Nevertheless, for the set of assumptions
described above, these distributions
provide upper and lower bounds for the
market-level estimates of closed-end
reporting. The Bureau recognizes that
this range estimate does not permit
perfect precision in estimating the
impact of the final rule, but rather
provides ranges.
The Bureau adopted a different
strategy in assigning open-end reporters
to the 3 tiers that will be discussed in
detail in the sections on transactional
and institutional coverage.
Initial outreach efforts, as well as
information gathered during the Small
Business Review Panel process,
indicated that compliance costs for
financial institutions were impacted by
the complexity of the data field
specifications and the process of
submitting and editing HMDA data. The
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public comments the Bureau received
for the proposed rule did not present
information contrary to that conclusion.
As part of implementing the final rule,
the Bureau will be implementing several
operational improvements. For example,
the Bureau is working to consolidate the
outlets for assistance, provide
implementation support similar to the
support provided for title XIV and the
TILA–RESPA Integrated Disclosure
rules; and improving points of contact
for help inquiries. In addition, the
Bureau is improving the geocoding
process, creating a web-based
submission tool, developing a data-entry
tool for small financial institutions that
currently use Data Entry Software, and
otherwise streamlining the submission
and editing process to make it more
efficient. All of these enhancements will
clarify the data field specifications and
reduce burden. The consideration of
benefits and costs discusses how these
enhancements will affect the impact of
the final rule.
3. The Scope of the Institutional
Coverage of the Final Rule
The final rule revises the threshold
that determines which financial
institutions are required to report data
under HMDA. Specifically, depository
and nondepository institutions that
meet all the other criteria for a
‘‘financial institution’’ in final
§ 1003.2(g) 475 will only be required to
report HMDA data if they originated at
least 25 closed-end mortgage loans or at
least 100 open-end lines of credit in
each of the two preceding calendar
years. Also, certain nondepository
institutions that currently are exempt
will become HMDA reporters under the
final rule.
Based on data from Call Reports,
HMDA, and the NMLSR, the Bureau
estimates that the new threshold of 25
closed-end mortgage loans will reduce
the number of reporting depository
475 Under § 1003.2, a bank, savings association, or
credit union meets the definition of financial
institution if it satisfies all of the following criteria
in addition to the loan-volume test described above:
(1) on the preceding December 31, it had assets in
excess of the asset threshold established and
published annually by the Bureau for coverage by
the Act; (2) on the preceding December 31, it had
a home or branch office in a MSA; (3) during the
previous calendar year, it originated at least one
home purchase loan or refinancing of a home
purchase loan secured by a first-lien on a one- to
four-unit dwelling; and (4) the institution is
federally insured or regulated, or the mortgage loan
referred to in item (3) was insured, guaranteed, or
supplemented by a Federal agency or intended for
sale to the Federal National Mortgage Association
or the Federal Home Loan Mortgage Corporation. A
nondepository institution meets the definition of
financial institution if it (1) had a home or branch
office in an MSA in the preceding calendar year and
(2) satisfies the loan-volume test discussed above.
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institutions by approximately 1,400
(eliminating approximately 51,000 loan/
application register records) and will
increase the number of reporting
nondepository institutions by
approximately 75–450 (adding
approximately 30,000 loan/application
register records), for a net reduction of
950 institutions and 21,000 records.476
Based on data from Call Reports,
HMDA, and Consumer Credit Panel
data, the Bureau estimates that the new
separate threshold of 100 open-end lines
of credit will not require reporting by
any financial institutions that are not
currently reporting. The open-end
threshold will require a small number of
depository institutions, approximately
24, that will not be required to report
HMDA data on their closed-end lending
to report HMDA data on their open-end
lending. These 24 financial institutions
are current HMDA reporters but would
have been excluded under the
proposal’s coverage test because they
originate fewer than 25 closed-end
mortgage loans annually. Combined,
these 24 financial institutions will
account for approximately 60,000 loan/
application register records regarding
open-end lines of credit. The vast
majority of loan/application register
records related to open-end lines of
credit, approximately 900,000 loan/
application register entries, will come
from financial institutions that are both
open- and closed-end reporters, because
most financial institutions that will be
required to report open-end lines of
credit also will report closed-end
mortgage loans.477
476 Estimates of the number of depository
institutions that will no longer be required to report
closed-end mortgage loans under HMDA, as well as
the reduction in loan/application register volume
associated with the 25 closed-end mortgage loan
threshold can be obtained directly from current
HMDA data and are therefore relatively reliable. It
is difficult to estimate how many nondepository
institutions will become HMDA reporters under the
final rule’s closed-end reporting threshold. These
institutions are not currently HMDA reporters, so
estimating how the final rule will affect them
requires gathering, and making assumptions about,
data and information from other sources. There are
various data quality issues related to these sources,
so the estimates for nondepository institutions
should be viewed as the best-effort estimates given
the data limitations. To avoid underestimating the
costs of the final rule, the Bureau’s quantitative
estimates are based on the assumption that 450
nondepository institutions will become HMDA
reporters, which is the high end of the range.
477 The Bureau believes that few nondepositories
engage in open-end lending. Determining the exact
number of depository institutions that will be
required to report under HMDA because of the
open-end-line-of-credit reporting threshold requires
information that is not readily available. As
discussed further below, the Bureau had to rely on
certain assumptions to derive the estimated number
of depository institutions that will report open-end
lines of credit. Based on recent HMDA data, Call
Reports, credit union Call Reports, and Consumer
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Because the final rule includes both
open-end and closed-end reporting
thresholds, it is difficult to discuss the
impact on institutional coverage
without also discussing the impact on
transactional coverage. Given that the
Bureau estimates that adopting a
threshold of 100 open-end lines of
credit will affect the number of
reportable transactions more
significantly than the number of
reporting institutions, much of the
discussion relating to the open-end
reporting threshold is found in the
discussion of transactional coverage in
part VII.F.4, below. The discussion in
this part primarily addresses the
changes to institutional coverage
resulting from the closed-end reporting
threshold and open-end-only reporters
resulting from the separate open-end
reporting threshold.
Benefits to consumers. The
institutional coverage threshold related
to closed-end mortgage loans will have
several benefits to consumers. First, the
final rule will expand the coverage
among nondepository institutions for
HMDA reporting by removing the 100loan threshold applicable to
nondepository institutions in the
existing rule. Traditionally,
nondepository institutions have been
subject to less scrutiny by regulators
than depository institutions, and little is
known about the mortgage lending
behavior of nondepository institutions
that fall below the current reporting
thresholds. By illuminating this part of
the mortgage market, the final rule will
provide regulators, public officials, and
members of the public with important
information. For example, it is possible
that small nondepository institutions
are serving particular market segments
or populations that would benefit from
more oversight by public officials and
community groups. This oversight can
be enhanced only if more information is
revealed about the segments, and the
change in institutional coverage in the
final rule is designed to fill this vacuum.
To the extent that such increased data
and transparency enhances social
welfare, consumers served by these
nondepository institutions will benefit.
Similarly, expanding coverage among
nondepository institutions could
Credit Panel data, the Bureau estimates there will
be approximately 749 financial institutions that will
report open-lines of credit, including approximately
725 depositories that will also report closed-end
mortgage loans. In total they likely will report
approximately 900,000 loan/application register
records. Much of that detail is discussed in the
section on transactional coverage. Expansions or
contractions of the number of financial institutions,
or changes in product offerings and demands
between now and implementation of the final rule
may alter these estimated impacts.
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improve the processes used to identify
possible discriminatory lending patterns
and enforce antidiscrimination statutes.
Financial regulators and enforcement
agencies use HMDA data in their initial
prioritization and screening processes to
select institutions for examination or
investigation. HMDA data also provide
information that is used in fair lending
reviews of mortgage lenders for
potential violations of
antidiscrimination statutes, including
ECOA and the Fair Housing Act. This is
especially true for redlining analyses,
which compare lending patterns across
lenders within given markets. Current
deficiencies in HMDA’s institutional
coverage leave gaps in the data used by
regulators for conducting fair lending
prioritization and redlining analyses to
compare lenders or markets. Because
many depository and nondepository
institutions with similar loan volumes
are similar in other respects, excluding
some nondepository institutions with
fewer than 100 loans may weaken the
understanding of markets needed for
prioritization and redlining analyses.
Consequently, increased reporting
among nondepository institutions may
increase the ability to identify fair
lending risk.
The final rule will also improve the
ability to determine whether financial
institutions are serving the housing
needs of their communities. Information
from data sources such as the United
States Census, Call Reports, and the
NMLSR can be used to help identify the
housing needs of the communities that
lenders serve. HMDA data provide a
supply-side picture of how well each
financial institution is meeting these
housing needs. Indeed, HMDA data may
be analogized to a census of mortgage
demand and supply for covered
financial institutions. However, such
data currently paints only a partial
picture of the market served by financial
institutions with 25 to 99 closed-end
mortgage loans. The addition of
nondepository institutions with
between 25 and 99 closed-end mortgage
loan originations will provide an
improved understanding of the
mortgage markets where these financial
institutions operate, thereby enhancing
efforts to assess whether these
institutions, and financial institutions
overall, are serving the housing needs of
their communities.
Costs to consumers. The revised
threshold will not impose any direct
costs on consumers. Consumers may
bear some indirect costs if financial
institutions that will be required to
report under the final rule pass on some
or all of their costs to consumers.
Following standard microeconomic
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principles, the Bureau believes that
these institutions will pass on increased
variable costs to future mortgage
applicants but will absorb start-up costs,
one-time costs, and increased fixed
costs if financial institutions are profit
maximizers and the market is perfectly
competitive.478
The Bureau defines variable costs as
costs that depend on the number of
applications received. Based on initial
outreach efforts, the following five
operational steps affect variable costs:
Transcribing data, resolving
reportability questions, transferring data
to an HMS, geocoding, and researching
questions. The primary impact of the
final rule on these operational steps is
an increase in time spent per task.
Overall, the Bureau estimates that the
impact of the final rule on variable costs
per closed-end application is
approximately $25 for a representative
tier 3 financial institution, $0.40 for a
representative tier 2 financial
institution, and $0.10 for a
representative tier 1 financial
institution.479 The 75–450
nondepository institutions that will now
be required to report closed-end
mortgage loans and applications have
small origination volumes, so the
Bureau expects most of them to be tier
3 financial institutions. Hence, based on
microeconomics principles, the Bureau
expects that a representative
nondepository financial institution
affected by this final rule will pass on
to mortgage borrowers costs of
approximately $25 per application. This
expense will be amortized over the life
of the loan and represents a negligible
increase in the cost of a mortgage loan.
Therefore, the Bureau does not
anticipate any material adverse effect on
credit access in the long or short term
even if the additional nondepository
478 If markets are not perfectly competitive or
financial institutions are not profit maximizers,
then the costs that a financial institutions may pass
on may differ. For example, financial institutions
may attempt to pass on one-time costs and increases
in fixed costs, or they may not be able to pass on
variable costs.
479 These cost estimates do not incorporate the
impact of operational improvements. Incorporating
these additional operational changes will reduce
the estimated impact on variable costs. Therefore,
the estimates we provided are upper bound
estimates of the increase in variable costs that
financial institutions will pass on to consumers.
These estimates of the impact of the final rule on
variable costs per application show the combined
impact of all components of the final rule and
therefore differ from estimates of the impact on
variable costs presented below, which show the
impact of specific components of the final rule. In
addition, these estimates focus only on the variablecost tasks, while other estimates incorporate both
variable- and fixed-cost tasks.
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institutions that must begin reporting
pass on these costs to consumers.
During the Small Business Review
Panel process, some small entity
representatives noted that they would
attempt to pass on all increased
compliance costs associated with the
proposed rule, but that whether these
costs were passed on would depend on
the competiveness of the market in
which they operate, especially for
smaller financial institutions. In
addition, some small entity
representatives noted that they would
attempt to pass on costs through higher
fees on other products, leave geographic
or product markets, or spend less time
on customer service. Many industry
commenters echoed similar sentiments
that the proposal would likely increase
the cost of credit for consumers. A few
commenters noted that small financial
institutions in general would be
required to merge, raise prices, make
fewer loans, or exit markets. To the
extent that the market is less than
perfectly competitive and financial
institutions are able to pass on a greater
amount of these compliance costs, the
cost to consumers will be slightly larger
than the estimates described above.
Even so, the Bureau believes that the
potential costs that will be passed on to
consumers are small.
The final rule may impose additional
costs on consumers as well. Reducing
the number of depository institutions
required to report will reduce HMDA’s
overall coverage of the mortgage market.
This reduction will reduce the
usefulness of HMDA data for assessing
whether lenders are meeting the
housing needs of their communities and
highlighting opportunities for public
and private investment. This reduction
may also affect the usefulness of HMDA
for identifying possible discriminatory
lending patterns—especially for
redlining analyses, which focus on
market-level data and data on
competitors. To better understand these
potential costs, the Bureau analyzed the
characteristics of the depository
institutions that would be excluded
from reporting closed-end mortgage
loans by the 25-loan threshold, and
compared these characteristics to
depository institutions that currently
report and would not be excluded. This
type of analysis is possible because the
final rule reduces both the number of
closed-end reporting depository
institutions and the closed-end
mortgage loans that they report, and the
total universe reported under the
current regulation is known. For this
exercise, the Bureau excluded
purchased loans from its comparisons.
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Overall, the Bureau found that,
relative to depository institutions that
will continue to report under the final
rule (i.e., reporting depositories),
applications for closed-end mortgage
loans at excluded depository
institutions were more likely to be (1)
made to the depository institutions
supervised by the FDIC or NCUA (over
42 and 41 percent, respectively,
compared to 13.74 percent and 10.21
percent at reporting depositories); (2)
second-lien (over 9 percent, compared
to 2.96 percent at reporting
depositories); (3) home improvement
(over 23 percent, compared to 6.83
percent at reporting depositories); 480 (4)
non-owner-occupied (over 22 percent,
compared to 11.86 at reporting
depositories); (5) manufactured housing
or multifamily (slightly less than 4 and
5 percent, respectively, compared to
1.83 percent and 0.42 percent at
reporting depositories); (6) portfolio
loans (approximately 88 percent,
compared to roughly 33 percent at
reporting depositories); and (7) higherpriced (nearly 13 percent, compared to
2.92 percent at reporting depositories).
To the extent that these excluded loans
are different from those that remain and
these loans serve a somewhat different
group of consumers that are more
disadvantaged, the loss of those records
will impose a cost on this group of
consumers as less information may be
available to the government, community
groups, and researchers to serve their
unique needs.
Excluding small-volume depository
institutions currently reporting under
HMDA also impacts the volume of
records available for analysis at the
market level. The geographic data fields
currently in the HMDA data provide
four possible market levels: State, MSA,
county, and census tract. Overall,
analysis of these markets shows that for
most markets, a small percentage of
loan/application register records would
be lost by excluding small-volume
depository institutions for closed-end
mortgage loan reporting.481 But the lost
records are more likely to be in certain
States, territories, and MSAs. The
percentage excluded is greater than 1
percent for Alaska and Puerto Rico,
which showed the highest percentage of
480 These totals include applications for both
secured and non-dwelling-secured home
improvement loans, even though non-dwellingsecured home improvement loans will not be
reported under the final rule. To the extent that
excluded depository institutions engage in more
non-dwelling-secured home improvement lending
than reporting depositories, these numbers will
overestimate the difference in reportable home
improvement applications by the two types of
institutions under the final rule.
481 This analysis includes purchased loans.
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excluded records at 1.93 percent and
7.32 percent, respectively. Ranked by
the percentage of loan/application
register records that would be excluded
for each MSA, the 75th percentile was
0.35 percent, suggesting that for 75
percent of MSAs, excluding small
depository institutions would exclude
less than 0.35 percent of total loan/
application register records. The 95th
percentile was 1.05 percent, suggesting
that for 5 percent of MSAs, excluding
small depository institutions would
exclude more than 1.05 percent of total
loan/application register records. The
five MSAs with the most excluded
records were all in Puerto Rico. Census
tracts have smaller loan volumes than
States and MSAs, so the variation in
percentages is naturally expected to be
higher. Ranked by the percentage of
loan/application register records that
would be excluded, the 75th and 95th
percentiles for census tracts were 0.47
percent and 2.65 percent, respectively.
To the extent that government,
community groups, and researchers rely
on HMDA data relevant to these
particular markets to further social
goals, the loss of this information will
impose a cost on the consumers in these
markets.
Benefits to covered persons. The final
rule will provide some cost savings to
depository institutions that will be
excluded under the revised closed-end
mortgage loan-volume threshold. The
Bureau estimated 1,400 depository
institutions will be excluded from
reporting closed-end mortgage loans and
applications under the closed-end
reporting threshold in the final rule. The
Bureau also believes that these 1,400
depository institutions most likely
would not be subject to open-end
reporting under the open-end reporting
threshold. Therefore, these depository
institutions will no longer incur current
operational costs associated with
gathering and reporting HMDA data.
The Bureau expects most of these
depository institutions to be tier 3
financial institutions, given the small
volume of home purchase, refinance,
and home improvement mortgages they
originate. The Bureau estimates that the
current annual operational costs of
reporting under HMDA are
approximately $2,500 for representative
tier 3 financial institutions with a loan/
application register size of 50 records.
This translates into a market-level
benefit of approximately $3,500,000 (=
$2,500 * 1,400) per year. Using a 7
percent discount rate, the net present
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value of this impact savings over five
years is approximately $14,400,000.482
In addition to avoiding ongoing costs,
the 1,400 excluded depository
institutions will not incur the one-time
costs necessary to modify processes in
response to the final rule. The Bureau
estimates that these one-time costs from
reporting closed-end mortgage loans are,
on average, $3,000 for tier 3 financial
institutions. Assuming that all 1,400
depository institutions are tier 3
institutions, this yields an overall
market savings of $4,200,000. Using a 7
percent discount rate and a five-year
amortization window, the annualized
one-time savings is approximately
$17,200,000.
One-time costs to covered persons.
The estimated additional 75–450
nondepository institutions that will
have to report closed-end mortgage
loans under the final rule will incur
start-up costs to develop policies and
procedures, infrastructure, and training.
Given the relatively small origination
volume by these nondepository
institutions, the Bureau expects most of
them to be tier 3 financial institutions.
Based on outreach discussions with
financial institutions prior to the
proposal, the Bureau believes that these
start-up costs for closed-end reporting
will be approximately $25,000 for tier 3
financial institutions.483 This yields an
overall market cost of approximately
$11,250,000 (= 450 * $25,000). Using a
7 percent discount rate and a five-year
amortization window, the annualized
start-up cost is $46,100,000.
The estimated 24 financial
institutions meeting the open-end
reporting threshold but falling below the
closed-end reporting threshold will
incur one-time costs from building
reporting systems, including developing
policies and procedures, infrastructure,
and training for reporting open-end
lines of credit.484 The Bureau has
482 Note that the figures above refer to cost
savings by the newly excluded small-volume
depository institutions, assuming costs based on the
current Regulation C reporting system. With the
changes in the final rule, along with the operational
improvements that the Bureau is making, the
impact of the final rule on operational costs will be
approximately $1,900 per year for a representative
tier 3 financial institution. This translates into a
market-level savings of approximately $2,660,000 (=
$1,900 * 1,400) per year. Using a 7 percent discount
rate, the net present value of this savings over five
years is approximately $10,900,00.
483 Note this start-up cost differs from the onetime cost presented previously, because the onetime cost mostly involves the costs from modifying
an existing reporting system for an existing reporter,
while the startup cost is the cost incurred from
building an entirely new reporting system for a new
HMDA reporter.
484 The Bureau estimates that these open-endonly reporters are not technically new HMDA
reporters in the sense that they previously would
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estimated that these one-time costs will
be approximately $3,000 for lowcomplexity financial institutions,
$250,000 for moderate-complexity
financial institutions, and $800,000 for
high-complexity financial institutions.
The Bureau assumes 12 of these
institutions are tier 3 institutions and 12
are tier 2 institutions. This yields an
overall one-time cost of approximately
$3,000,000. Using a 7 percent discount
rate and a five-year amortization
window, the annualized one-time cost is
approximately $740,000 per year.
Ongoing costs to covered persons. The
estimated 75–450 nondepository
institutions that will have to report
closed-end mortgage loans under the
final rule will incur the operational
costs of gathering and reporting data.
Including both current operational costs
and the impact of the final rule, the
Bureau estimates that these operational
costs will total approximately $5,100 for
a representative tier 3 financial
institution per year, without
incorporating the Bureau’s operational
improvements. This yields an overall
market impact of approximately
$2,300,000 (= 450 * $5,100). Using a 7
percent discount rate, the net present
value of this cost over five years is
approximately $9,400,000. With
operational improvements, the Bureau
estimates that these operational costs
will total approximately $4,400 for a
representative tier 3 financial institution
per year. This yields an overall market
impact of approximately $2,000,000 (=
450 * $4,400). Using a 7 percent
discount rate, the net present value of
this cost over five years is
approximately $8,100,000.
The estimated 24 depository
institutions that will have to report
open-end lines of credit under the final
rule but not closed-end mortgage loans
will incur the operational costs of
gathering and reporting data for openend lines of credit. The Bureau
estimates that the operational costs for
depository institutions will total
approximately $8,600 per year for a
representative tier 3 open-end reporter
and $43,400 per year for a
representative tier 2 open-end reporter,
and assumes current operational cost is
equal to zero for open-end reporting.
Assuming 12 of these 24 financial
institutions are tier 3 open-end reporters
have been reporting under HMDA because they are
depository institutions that have closed-end
mortgage loan/application register sizes between 1
and 24. Therefore, the Bureau believes they will be
able to repurpose and modify the existing HMDA
reporting process for open-end reporting. The
Bureau estimates none of these open-end-only
reporters will be high-complexity financial
institutions.
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and the rest are tier 2 open-end
reporters, this yields an overall market
impact of approximately $620,000 (= 12
* $8,600 + 12 * $43,400). Using a 7
percent discount rate, the net present
value of this cost over five years is
approximately $2,600,000. These
estimates incorporate all of the Bureau’s
operational improvements.
Alternatives considered. Regarding
closed-end mortgage loans, the Bureau
considered several reporting thresholds
higher than 25 loans. The Bureau sought
to exclude financial institutions whose
data are of limited value in the HMDA
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dataset, thus ensuring that the
institutional coverage criteria do not
impair HMDA’s ability to achieve its
purposes, while also minimizing the
burden for financial institutions.
Specifically, these alternative thresholds
were evaluated according to the extent
to which they balanced several
important factors, including simplifying
the reporting regime by establishing a
uniform loan-volume threshold
applicable to both depository and
nondepository institutions; eliminating
the burden of reporting from lowvolume depository institutions while
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maintaining sufficient data for analysis
at the national, local, and institutional
levels; and increasing visibility into the
home mortgage lending practices of
nondepository institutions.
Table 5, below, provides estimates of
the coverage among depository
institutions at various closed-end
reporting thresholds. Table 6 provides
estimates of the loss of HMDA data for
certain geographic markets. Table 7
provides estimates of the coverage
among nondepository institutions at
various closed-end reporting thresholds.
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The Bureau believes that a threshold
of 25 closed-end mortgage loans reduces
burden on small depository institutions
while preserving important data about
communities and improving visibility
into the lending practices of
nondepository institutions. As shown
above in Table 5, the 25-loan threshold
will achieve a significant reduction in
burden by eliminating reporting by
more than 20 percent of depository
institutions that are currently reporting.
As described in greater detail
throughout this discussion, the Bureau
estimates that the most significant
driver of costs under HMDA is the
requirement to report, rather than any
specific aspect of reporting, such as the
number or complexity of required data
fields or the number of entries. For
example, the estimated annual ongoing
costs of reporting closed-end mortgage
loans under the final rule are estimated
to be approximately $4,400 for a
representative tier 3 financial
institution, accounting for the Bureau’s
operational improvements. About
$2,300 of this annual ongoing cost is
comprised of fixed costs. As a
comparison, each required data field
accounts for approximately $42 of this
annual ongoing cost. Thus, a threshold
of 25 closed-end mortgage loans
provides a meaningful reduction in
burden by reducing the number of
depository institution reporters.
Higher thresholds would further
reduce burden but would produce data
losses that would undermine the
benefits provided by HMDA data. One
of the most substantial impacts of any
low loan-volume threshold is that it
reduces information about lending at
the community level, including
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information about vulnerable consumers
and the origination activities of smaller
lenders. Public officials, community
advocates, and researchers rely on
HMDA data to analyze access to credit
at the neighborhood level and to target
programs to assist underserved
communities and consumers. For
example, Lawrence, Massachusetts
identified a need for homebuyer
counseling and education based on
HMDA data, which showed a high
percentage of high-cost loans in the area
compared to surrounding
communities.485 Similarly, HMDA data
helped bring to light discriminatory
lending patterns in Chicago
485 See City of Lawrence, Massachusetts, HUD
Consolidated Plan 2010–2015, at 68 (2010), http://
www.cityoflawrence.com/Data/Sites/1/documents/
cd/Lawrence_Consolidated_Plan_Final.pdf.
Similarly, in 2008 the City of Albuquerque used
HMDA data to characterize neighborhoods as
‘‘stable,’’ ‘‘prone to gentrification,’’ or ‘‘prone to
disinvestment’’ for purposes of determining the
most effective use of housing grants. See City of
Albuquerque, Five Year Consolidated Housing Plan
and Workforce Housing Plan 100 (2008), available
at http://www.cabq.gov/family/documents/
ConsolidatedWorkforceHousingPlan20082012
final.pdf. As another example, Antioch, California,
monitors HMDA data, reviews it when selecting
financial institutions for contracts and participation
in local programs, and supports home purchase
programs targeted to households purchasing homes
in Census Tracts with low loan origination rates
based on HMDA data. See City of Antioch,
California, Fiscal Year 2012–2013 Action Plan 29
(2012), http://www.ci.antioch.ca.us/CitySvcs/
CDBGdocs/Action%20Plan%20FY12-13.pdf. See,
e.g., Dara D. Mendez et al., Institutional Racism and
Pregnancy Health: Using Home Mortgage Disclosure
Act Data to Develop an Index for Mortgage
Discrimination at the Community Level, 126 Pub.
Health Reports (1974–) Supp. 3, 102–114 (Sept./
Oct. 2011) (using HMDA data to analyze
discrimination against pregnant women in redlined
neighborhoods), available at http://
www.publichealthreports.org/issueopen.cfm?
articleID=2732.
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neighborhoods, resulting in a large
discriminatory lending settlement.486 In
addition, researchers and consumer
advocates analyze HMDA data at the
census-tract level to identify patterns of
discrimination at a national level.487
Higher closed-end loan-volume
thresholds would eliminate data about
more communities and consumers. At a
closed-end reporting threshold of 100,
according to 2013 HMDA data, the
number of census tracts that would lose
20 percent of reported data would
increase by almost eight times over the
number under a closed-end reporting
threshold of 25 loans. The number of
affected low- to-moderate-income tracts
would increase six times over the
number at the 25-loan level.
486 See, e.g., Yana Kunichoff, Lisa Madigan
Credits Reporter with Initiating Largest
Discriminatory Lending Settlements in U.S. History
(June 14, 2013), http://www.chicagonow.com/
chicago-muckrakers/2013/06/lisa-madigan-creditsreporter-with-initiating-largest-discriminatorylending-settlements-in-u-s-history/ (‘‘During our
ongoing litigation . . . the Chicago Reporter study
looking at the HMDA data for the City of Chicago
came out . . . It was such a startling statistic that
I said . . . we have to investigate, we have to find
out if this is true . . . We did an analysis of that
data that substantiated what the Reporter had
already found . . . [W]e ultimately resolved those
two lawsuits. They are the largest fair-lending
settlements in our nation’s history.’’)
487 See, e.g., California Reinvestment Coalition, et
al., Paying More for the American Dream VI: Racial
Disparities in FHA/VA Lending, at http://www.
woodstockinst.org/research/paying-more-americandream-vi-racial-disparities-fhava-lending. Likewise,
researchers have analyzed GSE purchases in census
tracts designated as underserved by HUD using
HMDA data. James E. Pearce, Fannie Mae and
Freddie Mac Mortgage Purchases in Low-Income
and High-Minority Neighborhoods: 1994–96,
Cityscape: A Journal of Policy Development and
Research (2001), available at http://www.huduser.
org/periodicals/cityscpe/vol5num3/pearce.pdf.
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The Bureau also believes that it is
important to increase visibility into
nondepository institutions’ activity
given the lack of available data about
lower-volume nondepository
institutions’ mortgage lending practices.
A uniform closed-end reporting
threshold of fewer than 100 loans
annually will expand nondepository
institution coverage, because the current
test requires reporting by all
nondepository institutions that meet the
other applicable criteria and originate
100 loans annually.488 Any closed-end
reporting threshold set at 100 loans
would not provide any enhanced insight
into nondepository institution lending,
and a threshold above 100 closed-end
mortgage loans would decrease
visibility into nondepository
institutions’ practices and hamper the
ability of HMDA users to monitor risks
posed to consumers by those
institutions. The threshold of 25 closedend mortgage loans, however, achieves
a significant expansion of
nondepository institution coverage,
with up to a 40 percent increase in the
number of reporting institutions.
The Bureau’s proposal did not
include an open-end line of credit
threshold for institutional coverage.
Under the Bureau’s proposal, an
institution that met the 25 closed-end
mortgage loan threshold (and the other
criteria for institutional coverage) would
have been required to report all of its
open-end lines of credit, even if its
open-end lending volume was very low.
On the other hand, institutions that did
not meet the 25 closed-end mortgage
loan threshold but that had significant
open-end lending volume would not
have been HMDA reporters. As noted,
the Bureau received a large number of
comments expressing concerns related
to the burden of reporting under this
threshold. In response to these concerns
and in an attempt to reduce reporting by
financial institutions that have
originated at least 25 closed-end
mortgage loans but only a very small
number of open-end lines of credit, the
final rule adopts a separate open-end
reporting threshold. A financial
institution will be required to report
open-end lines of credit only if its openend origination volume exceeds this
threshold.
When setting this separate threshold,
the Bureau considered several
alternatives to the final threshold of 100
open-end lines of credit. In doing so, the
Bureau sought to exclude financial
institutions whose data are of limited
value while ensuring that the
institutional coverage criteria for
mandatory reporting of open-end lines
of credit do not impair HMDA’s ability
to achieve its purposes. Specifically,
these alternative thresholds were
evaluated according to the extent to
which they balanced several important
factors, including limiting the number
of open-end reporters in general,
limiting the number of small-volume
open-end reporters whose data are of
limited use in particular, and limiting
the number of open-end reporters that
would not have reported closed-end
mortgage loans under HMDA, while
maintaining sufficient data for analysis
with adequate market coverage.
Table 8, below, provides estimates of
the coverage among depository
institutions at various open-end
reporting thresholds. It is the Bureau’s
belief that most nondepository
institutions do not originate dwellingsecured open-end lines of credit. The
Bureau notes that no single data source
accurately reports the number of
originations of open-end lines of credit,
as that term is defined in the final rule.
The Bureau had to use multiple data
sources, including credit union Call
Reports, Call Reports for banks and
thrifts, HMDA data, and Consumer
Credit Panel data, in order to develop
estimates about open-end originations
for currently reporting depository
institutions.489
The first row under the heading
corresponds to the estimated coverage
under the proposed rule where any
financial institution that satisfied the
proposed 25-closed-end mortgage loan
threshold 490 would have reported open-
end lines of credit. The other rows
correspond to various other thresholds
the Bureau considered for an
independent open-end reporting
threshold.
The Bureau believes that a threshold
of 100 open-end lines of credit reduces
burden on financial institutions while
preserving important coverage and
visibility into the market for dwellingsecured lines of credit. As shown above
488 In addition, nondepository institutions that
originate fewer than 100 applicable loans annually
are required to report if they have assets of at least
$10 million and meet the other criteria. See 12 CFR
1003.2 (definition of financial institution).
489 For this exercise, the Bureau limits its analysis
to current HMDA reporters, because it believes that
those depository institutions would be the ones
who would have met all other HMDA reporting
requirements, such as location and asset tests, as
well as origination of at least one home purchase
loan or refinancing of a home purchase loan,
secured by a first lien on a one- to four-unit
dwelling. In general, credit union Call Reports
provide the number of originations of open-end
lines of credit secured by real estate but exclude
lines of credit in the first lien status and may have
included business loans that will be excluded from
HMDA reporting according to the final rule. Call
Reports for banks and thrifts report only the balance
of the home-equity lines of credit at the end of
reporting period but not the number of originations
in the period.
490 For this analysis, the Bureau has not
considered reverse mortgages that are structured as
open-end lines of credit. Reverse mortgages cannot
be identified within the current HMDA data. It is
the Bureau’s belief that most reverse mortgages
currently are not reported under HMDA.
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in Table 8, compared to the proposal,
the open-end reporting threshold
reduces the number of open-end
reporters by almost 3,400, while
reducing the market coverage by only
about 6 percent. Other thresholds may
have more imbalanced effects on either
reporting burden or market coverage.
For example, at a threshold of 25 openend lines of credit, the projected market
coverage by reporting institutions will
only increase by 5 percent compared to
the coverage level at a threshold of 100
open-end lines of credit, but almost
1,000 additional institutions would be
burdened by reporting requirements. On
the other hand, while a threshold of
1,000 open-end lines of credit would
substantially reduce the number of
reporting institutions, it would only
cover about two-thirds of the total
market. It is also worth noting that, at
a threshold of 100 open-end lines of
credit, almost all open-end reporters
will also report closed-end mortgage
loans.491 The Bureau believes that
sharing of reporting and compliance
resources within the same financial
institution for both closed-end and
open-end reporting will help reduce
reporting costs.
The Bureau also considered
exempting certain small financial
institutions, such as those defined as
‘‘small entities’’ as described in part
VIII, below, from the reporting
requirements of the final rule. As
described above, however, excluding
small financial institutions would
undermine both the utility of HMDA
data for analysis at the local level and
the benefits that HMDA provides to
communities. Thus, removing these
institutions would deprive users of
important data about communities and
vulnerable consumers.
Finally, the Bureau considered a
tiered reporting regime under which
smaller financial institutions would be
exempt from reporting some or all of the
data points not identified by the DoddFrank Act. Tiered reporting would
preserve some information about
availability of credit in particular
communities and to vulnerable
consumers while relieving some burden.
Tiered reporting presents a number of
problems, however. First, because under
a tiered reporting regime smaller
financial institutions would not report
all or some of the HMDA data points,
tiered reporting would prevent
communities and users of HMDA data
491 Note that, while the Bureau estimates there
will be 24 financial institutions that will report
open-end lines of credit but not report closed-end
mortgage loans, that number (24) is well within the
margin of error and thus may be close to zero due
to the uncertainty of the raw estimation.
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from learning important information
about the lending and underwriting
practices of smaller financial
institutions, which may differ from
those of larger institutions. Second, as
discussed above, the primary driver of
HMDA costs is establishing and
maintaining systems to collect and
report data, not the costs associated
with collecting and reporting a
particular data field. Therefore, tiered
reporting would reduce the costs of lowvolume depository institutions
somewhat, but not significantly.
4. The Scope of the Transactional
Coverage of the Final Rule
The final rule requires financial
institutions generally to report all
dwelling-secured, consumer-purpose
closed-end loans and open-end lines of
credit, as well as commercial-purpose
loans and lines of credit made for home
purchase, home improvement, or
refinancing purposes.492 The final rule
eliminates home improvement loans not
secured by a dwelling from the
reporting requirements, while
consumer-purpose closed-end mortgage
loans, open-end lines of credit, and
reverse mortgages will now be reported
regardless of whether they were for
home purchase, home improvement, or
refinancing. Commercial-purpose
closed-end loans will continue to be
reported only if the purpose is for home
purchase, home improvement, or
refinancing. Commercial-purpose openend lines of credit with home purchase,
home improvement, or refinancing
purposes must now be reported. Finally,
for preapproval requests that are
approved but not accepted, reporting
will change from optional to mandatory.
Benefits to consumers. The revisions
to Regulation C’s transactional coverage
will benefit consumers by providing a
more complete picture of the dwellingsecured lending market. The additional
transactions required to be reported will
improve market monitoring, and will
potentially aid in identifying and
tempering future financial crises. Using
open-end lines of credit and closed-end
home-equity loans as an example, in the
lead up to the financial crisis between
2000 and 2008, the balance of homeequity lending increased by
approximately 16.8 percent annually,
moving from $275.5 billion to $953.5
492 A financial institution reports data on
dwelling-secured, closed-end mortgage loans only if
it originated at least 25 closed-end mortgage loans
in each of the two preceding calendar years and
also met all the other reporting criteria. Similarly,
a financial institution reports data on dwellingsecured, open-end lines of credit only if it
originated at least 100 open-end lines of credit in
each of the two preceding calendar years and also
met all the other reporting criteria.
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billion in total.493 Various researchers
have pointed out that rapidly expanding
lending activities in home-equity lines
of credit and home-equity loans
contributed to the housing bubble as
borrowers and lenders both vigorously
took on high leverage. Additional
research has shown that the growth in
home-equity lending was correlated
with subsequent home price
depreciation, as well as high default and
foreclosure rates among first
mortgages.494 Researchers have argued
that these correlations were driven in
part by consumers using open-end lines
of credit to fund investment properties,
which impacted default rates when
housing prices began to fall. Researchers
have also shown evidence that
distressed homeowners with closed-end
subordinate-lien mortgage loans
encountered several challenges when
seeking assistance from public and
private mortgage relief programs.495
Data on these loans might have helped
public officials improve the
effectiveness of these relief programs.
However, because HMDA does not
currently cover all home-equity loans,
and most financial institutions choose
not to report home-equity lines of credit,
this substantial market is almost
completely missing from the HMDA
data. Based on information from HUD
and Moody’s Analytics (May 2013),
HMDA data currently include only
approximately 1 percent of all open-end
lines of credit and 35 percent of closedend home-equity loan originations. Data
identifying the presence and purpose of
home-equity lending may enable
government, industry, and the public to
avert similar scenarios in the future.
Changes to transactional coverage will
also improve the ability of government,
researchers, and community groups to
determine whether financial institutions
are serving the housing needs of their
communities. Home equity has long
been the most important form of
household savings and consumers often
resort to tapping their home equity for
various purposes. The optional
reporting of open-end lines of credit,
and limited coverage of closed-end
493 Michael LaCour-Little et al., The Role of Home
Equity Lending in the Recent Mortgage Crisis, 42
Real Estate Economics 153 (2014).
494 See Atif Mian & Amir Sufi, House Prices,
Home Equity-Based Borrowing, and the U.S.
Household Leverage Crisis, 101 Am. Econ. Rev.
2132, 2154 (Aug. 2011); Donghoon Lee et al., Fed.
Reserve Bank of New York, Staff Report No. 569,
A New Look at Second Liens, at 11 (Aug. 2012);
Michael LaCour-Little et al., The Role of Home
Equity Lending in the Recent Mortgage Crisis, 42
Real Estate Economics 153 (2014).
495 See Vicki Been et al., Furman Ctr. for Real
Estate and Urban Policy, Essay: Sticky Seconds—
The Problems Second Liens Pose to the Resolution
of Distressed Mortgages, at 13–18 (Aug. 2012).
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home-equity lending and reverse
mortgages under the current Regulation
C, provide an incomplete picture of
whether financial institutions are
serving the housing needs of their
communities. The changes to
transactional coverage will significantly
close this gap.
Additionally, the changes to
transactional coverage in the final rule
will benefit consumers by improving
fair lending analyses. Regulators,
community groups, and researchers use
HMDA data to identify disparities in
mortgage lending based on race,
ethnicity, and sex. These analyses are
used for prioritization and scoping
purposes to select the institutions, and
parts of institutions, to review. As
discussed above, a substantial amount
of open-end lines of credit and closedend home-equity loans are not reported.
The extent of reverse mortgage reporting
under HMDA is unknown because the
existing data provide no way to
distinguish reverse mortgages from
other loans, but the Bureau believes that
a substantial number of reverse
mortgages are not reported. Because a
substantial amount of these transactions
are not reported, it is not possible
during prioritization analyses to
develop a clear assessment of the fair
lending risk to consumers of these
specific products. In addition, all of
these products may have unique
underwriting and pricing guidelines
that would merit separate analyses. It is
not currently possible to identify these
products in HMDA, however, so most
fair lending analyses that use HMDA
data combine these products and other
products with potentially different
underwriting and pricing standards.
These shortcomings reduce the
reliability of risk assessment analyses,
limiting the ability to identify
consumers that might have been
subjected to illegal discrimination.
Requiring reporting of all reverse
mortgages also benefits consumers
through improved fair lending analysis
focused on age discrimination. Reverse
mortgages are a special mortgage
product designed to satisfy the later-life
consumption needs of seniors by
leveraging their home equity while
permitting them to maintain
homeownership. During its 2013 fiscal
year, HUD endorsed 60,091 home-equity
conversion mortgages (HECMs), which
counted for almost all of the reverse
mortgage market. Various stakeholders
and advocates have called for better data
about the reverse mortgage market based
on concerns about potential abuse of
vulnerable seniors. Mandatory reporting
of reverse mortgages will provide public
officials, community organizations, and
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members of the public with more
information to assist consumers age 62
or older. This change is consistent with
Congress’s decision to include age as a
new data point in the Dodd-Frank Act,
which the Bureau believes signaled an
intention to strengthen protections for
seniors.
Mandatory reporting of preapproval
requests that are approved but not
accepted will also benefit consumers
through improved fair lending analyses.
Currently, data about preapproval
requests that are approved but not
accepted are optionally reported. Thus,
these data are largely absent from the
HMDA data that regulators and
community groups analyze. Including
these preapproval requests will improve
fair lending analyses by providing for a
more accurate comparison between
those applications that satisfy a
financial institution’s underwriting
criteria and those that are reported as
either originated or approved but not
accepted, and those that are reported as
denials.
The changes to transactional coverage
in the final rule also improve the ability
of public officials to distribute publicsector investment so as to attract private
investment to areas where it is needed.
HMDA data provide a broadly
representative picture of home lending
in the nation unavailable from any other
data source. Open-end lines of credit
and closed-end home-equity loans are
important forms of lending that are
considered in evaluations under the
CRA. Expanded reporting of open-end
lines of credit, closed-end home-equity
loans, and reverse mortgages will
improve HMDA’s coverage of mortgage
markets, which in turn will enhance the
HMDA data’s usefulness in identifying
areas in need of public and private
investment and thereby benefit
consumers.
Finally, expanded reporting of homeequity lending will reduce the chance of
regulatory gaming by financial
institutions. To the extent that open-end
lines of credit and closed-end homeequity loans are largely interchangeable
for customers applying for credit for a
given purpose, lenders could, under
current Regulation C reporting
requirements, intentionally recommend
consumer-purpose open-end lines of
credit as substitutes for closed-end
home-equity loans to avoid reporting of
home-equity loans. Expanded reporting
of both closed-end home-equity loans
and open-end lines of credit will
mitigate such misaligned incentives and
ultimately benefit consumers by closing
the data reporting gap.
Costs to consumers. The final rule
eliminates reporting of home
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improvement loans not secured by a
dwelling (i.e., whether unsecured or
secured by non-dwelling collateral),
which reduces the data available to
analysts. This, in turn, imposes a cost
on consumers. The Bureau estimates
that financial institutions reported
approximately 340,000 non-dwellingsecured home-improvement loans under
HMDA during 2013. This comprised 2.4
percent of the total record volume.
Under the final rule, regulators,
community groups, and researchers will
not be able to use HMDA data to assess
fair lending risks for this product, which
will reduce the likelihood of identifying
consumers who are potentially
disadvantaged when taking out nondwelling-secured home improvement
loans. In addition, it is possible that the
general loss of data may negatively
affect research in other unexpected
ways and thus negatively impact
consumers. However, commenters did
not state that they or others have used
HMDA data about non-dwelling-secured
home-improvement loans to further
HMDA’s purposes, and the Bureau does
not believe HMDA data on such loans
is widely used for those purposes.
The increased transactional coverage
will not impose any direct costs on
consumers. However, consumers may
bear some indirect costs of increased
transactional coverage if financial
institutions pass on some or all of the
costs imposed on them by reporting
additional transactions. Following
microeconomic principles, the Bureau
believes that financial institutions will
absorb one-time costs and increased
fixed costs but will pass on increased
variable costs to future mortgage
applicants. The Bureau estimates that
the final rule’s changes to transactional
coverage regarding open-end lines of
credit will increase variable costs per
open-end line of credit application by
approximately $41.50 for a
representative tier 3 open-end reporter,
$6.20 for a representative tier 2 openend reporter, and $3 for a representative
tier 1 open-end reporter.496 Thus, the
Bureau expects that a representative tier
3 financial institution covered by the
final rule will pass on to borrowers of
open-end lines of credit $41.50 per
496 These cost estimates incorporate all the
required data fields in the final rule and the
operational improvements the Bureau is
developing. This differs from cost impacts regarding
data points presented in part VII.F.5, which
normally isolate one change by, for example, not
counting operational improvements. This is because
the Bureau assumes that the overwhelming majority
of open-end-line-of-credit reporting will be new and
hence the baseline cost would be zero and the
number of data fields as well as operational details
in the baseline scenarios for open-end reporting
would be inapplicable.
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application; a representative tier 2
financial institution will pass on $6.20
per open-end application; and a
representative tier 1 financial institution
will pass on $3 per open-end
application. This expense will be
amortized over the life of the loan and
represents a negligible increase in the
cost of a mortgage loan. Therefore, the
Bureau does not anticipate a material
adverse effect on credit access in the
long or short term if financial
institutions pass on to consumers the
costs of reporting open-end lines of
credit under the transactional coverage
adopted in the final rule.
During the Small Business Review
Panel process, some small entity
representatives noted that they would
attempt to pass on all increased
compliance costs associated with the
proposed rule, but that this would be
difficult in the current market where
profit margins for mortgages are tight,
especially for smaller financial
institutions. In addition, some small
entity representatives noted that they
would attempt to pass on costs through
higher fees on other products offered,
leave geographic or product markets, or
spend less time on customer service.
Similarly, several industry commenters
stated that the rule would increase costs
to consumers or force small financial
institutions to consider merging, raising
prices, originating fewer loans, or
exiting the market. As discussed above,
the Bureau believes that any costs
passed on to consumers will be
amortized over the life of a loan and
represent a negligible increase in the
cost of a mortgage loan. Therefore, the
Bureau does not anticipate any material
adverse effect on credit access in the
long or short term even if financial
institutions pass on these costs to
consumers.
Benefits to covered persons. The final
rule eliminates reporting of nondwelling-secured home improvement
loans, which will reduce costs to
covered persons. Using HMDA data, as
well as information from interviews of
financial institutions, the Bureau
estimates that each year, on average, tier
3, tier 2, and tier 1 financial institutions
receive approximately 1, 20, and 900
applications for non-dwelling-secured
home improvement loans, respectively.
Excluding those average numbers of
non-dwelling-secured home
improvement loans from reporting will
reduce annual operational costs by
approximately $43 for a representative
tier 3 financial institution, $128 for a
representative tier 2 financial
institution, and $2,740 for a
representative tier 1 financial
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institution.497 This translates into a
market-level savings of approximately
$1,090,000 to $1,150,000 per year. Using
a 7 percent discount rate, the net
present value of this impact over five
years will be a reduction in cost of
approximately $4,500,000 to $4,700,000.
The final rule’s expanded
transactional coverage will improve the
prioritization process used to identify
institutions at higher risk of fair lending
violations. This will reduce the false
positives that occur when inadequate
information causes lenders with low fair
lending risk to be initially misidentified
as high risk. Additional information on
these products will explain some of
these false positives, so that
examination resources are used more
efficiently and that lenders with low fair
lending risk receive a reduced level of
regulatory scrutiny.
One-time costs to covered persons.
The Bureau believes that the greatest
one-time cost to covered persons from
the final rule’s changes to transactional
coverage will come from the
requirement to report open-end lines of
credit. Based on outreach efforts and
comments received, the Bureau believes
that many financial institutions process
applications for open-end lines of credit
on separate data platforms and data
systems in different business units than
home-purchase and refinance
mortgages. Financial institutions not
currently reporting open-end lines of
credit will incur one-time costs to
develop reporting capabilities for these
business lines and products. Financial
institutions, whether they use vendors
for HMDA compliance or develop
software internally, will incur one-time
costs to prepare, develop, implement,
integrate, troubleshoot, and test new
systems for open-end reporting.
Management, operations, legal, and
compliance personnel in these business
lines will likely require time to learn the
new reporting requirements and to
assess legal and compliance risks.
Financial institutions will need to
update training materials to reflect new
requirements and may incur certain
one-time costs for providing initial
training to current employees. The
Bureau is aware that these activities will
take time and that the costs may be
sensitive to the time available for them.
The Bureau also believes that financial
institutions that will report both openend lines of credit and closed-end
mortgage loans, which comprise the
overwhelming majority of open-end
reporters, could share one-time costs
related to open-end and closed-end
497 These estimates do not include potential cost
savings from operational improvements.
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reporting. The degree of such cost
sharing likely will vary based on
operational complexities.
The Bureau expects these one-time
costs to be smaller for financial
institutions that are less complex and
less likely to have separate business
lines with separate data platforms and
data systems for open-end lines of
credit. These entities use less complex
reporting processes, so more tasks are
manual rather than automated, and new
requirements may involve greater use of
established processes. As a result,
compliance will likely require
straightforward changes in systems and
workplace practices and therefore
impose relatively low one-time costs. In
estimating the impact of the
transactional coverage changes for
representative tier 3 open-end reporters
that will also report closed-end
mortgage loans, the Bureau assumes that
the one-time cost of open-end reporting
is minimal and already absorbed into
the one-time cost of closed-end
reporting because most of these
straightforward changes would have
occurred anyway due to the modified
closed-end reporting requirements. For
representative tier 3 open-end reporters
that will not report closed-end mortgage
loans, because the one-time cost from
open-end reporting cannot be absorbed
into the one-time costs of closed-end
reporting, the Bureau believes that such
costs can be proxied by the overall
estimate of the one-time costs that the
tier 3 closed-end reporters will incur,
absent expanded reporting of open-end
lines of credit. Thus, the Bureau
estimates that the changes to
transactional coverage in the final rule
will impose average one-time costs of
$3,000 for tier 3 open-end reporters.
For more complex financial
institutions that meet the open-end
reporting threshold, the Bureau expects
the one-time costs imposed by the
change in transactional coverage in the
final rule to be relatively large. To
estimate these one-time costs, the
Bureau views the business lines
responsible for open-end lines of credit
in moderate-to-high complexity
institutions as a second business line
that has to modify its reporting
infrastructure in response to the final
rule. Industry stated this view of
additional costs in comments on the
proposed rule. However, very few
financial institutions or trade
associations provided the Bureau with
specific estimates of the one-time cost
associated with this change. In outreach
conducted before the proposed rule,
some industry participants generally
stated that the one-time cost of reporting
open-end lines of credit could be twice
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as much as the one-time cost of adapting
to other parts of the final rule, but did
not provide any further detail. One
commenter stated that the Bureau’s
estimated one-time implementation
costs for moderate-complexity financial
institutions were potentially correct.
The Bureau estimates that, excluding
open-end-line-of-credit reporting, the
final rule will impose average one-time
costs of $250,000 for tier 2 financial
institutions and $800,000 for tier 1
financial institutions. The Bureau
assumes that for tier 1 and tier 2 openend reporters that will also report
closed-end mortgage loans, which form
the majority of the projected open-end
reporting tier 1 and tier 2 institutions,
the one-time cost of integrating openend lines of credit into HMDA reporting
processes will be roughly equal to 50
percent of the one-time costs absent
expanded reporting of such products.
This estimate accounts for the fact that
some new systems may have to be built
to facilitate reporting for these lines of
business but that some fixed, one-time
costs could be shared with lines of
business currently subject to Regulation
C, because both have to undergo
systemic changes. Using these general
estimates for open-end reporting tier 1
and tier 2 institutions that will also
report closed-end mortgage loans,
therefore, the Bureau estimates one-time
costs of $125,000 and $400,000 for
business lines responsible for open-end
lines of credit.
On the other hand, for representative
tier 2 open-end reporters that will not
report closed-end mortgage loans,
because such cost sharing between
open-end and closed-end reporting is
not possible, the Bureau proxies for the
one-time costs associated with open-end
reporting by using the overall estimate
of the one-time costs that the tier 2
closed-end reporter will incur in
response to the final rule absent
expanded reporting of open-end lines of
credit. Thus, the Bureau estimates that
the changes to transactional coverage in
the final rule will impose average onetime costs of $250,000 for tier 2 openend reporters that will not report closedend mortgage loans under the final rule.
The Bureau does not project any tier 1
financial institutions that will report
open-end lines of credit but not closedend mortgage loans under the final rule.
Under the final rule, the open-end
reporting threshold is set separately
from the closed-end reporting threshold.
A financial institution can report openend lines of credit only, closed-end
mortgage loans only, or both. For openend reporters, the Bureau estimates that
749 financial institutions will meet the
threshold for reporting data on open-
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end lines of credit, including 24 that
will report open-end lines of credit only
but not closed-end mortgage loans and
725 that will report open-end and
closed-end simultaneously. Coupled
with the fact that lenders often process
open-end lines of credit in business
lines separate from closed-end mortgage
loans, for the purpose of transactional
and institutional coverage analyses, the
Bureau has adopted an approach that
treats these open-end reporters as if they
were separate entities distinct from their
closed-end mortgage units.498
As with closed-end mortgage loan
reporting, the Bureau realizes that costs
for open-end reporting vary by
institutions due to many factors, such as
size, operational structure, and product
complexity, and that this variance exists
on a continuum that is impossible to
fully represent. Nevertheless, the
Bureau believes that the HMDA
reporting process and ongoing
operational cost structure for open-end
reporters will be fundamentally similar
to closed-end reporting. To conduct a
cost consideration that is both practical
and meaningful for open-end reporting,
the Bureau therefore adopts the same
three-tier approach and most of the key
assumptions used for closed-end
reporting, with two modifications. First,
for representative low-complexity openend reporters, the Bureau assumed that
the number of open-end line of credit
applications would be 150. This was set
to both accommodate the open-end
reporting threshold of 100 open-end
lines of credit and to reflect a reasonable
distribution among the smallest openend reporters, based on the Bureau’s
estimated number of likely open-end
reporters and their volumes. Second, for
representative high-complexity openend reporters, the Bureau assumed that
the number of open-end line of credit
applications would be 30,000. This
reflects a reasonable distribution among
the largest open-end lines of credit
based on the Bureau’s estimated number
of likely open-end reporters and their
volumes. The Bureau assumed that the
number of open-end line of credit
applications for the representative
moderate-complexity open-end reporter
would still be 1,000, just as for the
moderate-complexity closed-end
reporter.
For open-end reporters, the Bureau
has adopted 2 cutoffs based on the
estimated open-end line of credit
498 The Bureau estimates that under the final rule
almost all open-end reporters would have some
business activity in closed-mortgage arena, even if
a handful of them will not be reporting closed-end
mortgage loans under the final rule due to their low
closed-end mortgage origination volume (below 25
but greater than zero).
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volume. Specifically, the Bureau
assumes the lenders that originate fewer
than 200 but more than 100 open-end
lines of credit are tier 3 (lowcomplexity) open-end reporters; lenders
that originate between 200 and 7,000
open-lines of credit are tier 2 (moderatecomplexity) open-end reporters; and
lenders that originate more than 7,000
open-end lines of credit are tier 1 (highcomplexity) open-end reporters. These
cutoffs were chosen to match the overall
market size in terms of the estimated
number of open-end reporters (724) and
the estimated number of records
(approximately 900,000). Under such
assumptions, the Bureau assigns 13 of
the possible open-end reporters to tier 1,
463 to tier 2, and 273 to tier 3. Roughly
2 percent of these institutions are in tier
1, 62 percent are in tier 2, and 36
percent are in tier 3. This is close to the
high-end distribution of closed-end
reporters in which 3 percent are in tier
1, 71 percent are in tier 2, and 26
percent are in tier 3. Dividing open-endonly reporters from open-end reporters
that will also report closed-end
mortgage loans, the Bureau estimates
that among 24 likely reporters that will
report only open-end lines of credit,
there are 12 tier 2 open-end reporters,
12 tier 3 open-end reporters, and no tier
1 open-end reporters; among 725 likely
reporters that will report both open-end
lines of credit and closed-end mortgage
loans, there are 13 tier 1 open-end
reporters, 451 tier 2 open-end reporters,
and 261 tier 3 open-end reporters.
The baseline cost assumptions and
cost estimates presented above reflect
the current world in which most openend lines of credit are not reported
under HMDA. In the final rule,
reporting open-end lines of credit
becomes mandatory for those
institutions that meet all the other
criteria for a ‘‘financial institution’’ in
final § 1003.2(g) and originate at least
100 open-end lines of credit. The
Bureau estimated that currently only
about 1 percent of total open-end lines
of credit secured by dwellings were
reported under HMDA. Hence the
Bureau has assumed that the baseline
cost for open-end-line-of-credit
reporting in the current rule is zero.
By using the one-time cost estimates
due to open-end reporting for
representative open-end reporters that
are in different tiers and that either
report only open-end lines of credit or
both open-end lines of credit and
closed-end mortgage loans, multiplied
by the number of open-end reporters of
each corresponding type, the Bureau
estimates that the total one-time cost
due to open-end reporting for open-end
reporters that will report both open-end
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lines of credit and closed-end mortgage
loans is approximately $61,600,000 (that
is: Tier 1 $400,000 * 13 + Tier 2
$125,000 * 451 + Tier 3 $0 * 261); the
total one-time cost due to open-end
reporting for open-end reporters that
will report only open-end lines of credit
is approximately $3,000,000 (that is:
Tier 1 $400,000 * 0 + Tier 2 $250,000
* 12 + Tier 3 $3,000 * 12). Combined,
the one-time costs due to open-end
reporting for all open-end reporters are
estimated to be approximately
$64,600,000. Using a 7 percent discount
rate and a five-year amortization
window, the annualized one-time cost
due to changes in transactional coverage
is approximately $15,800,000 per year.
As a frame of reference for these marketlevel, one-time cost estimates due to
open-end reporting, the total noninterest expenses of current HMDA
reporters were approximately $420
billion in 2012. The one-time cost
estimate of $64,600,000 is about 0.15
percent of the total annual non-interest
expenses.499 Because these costs are
one-time investments, financial
institutions are expected to amortize
these costs over a period of years.
For mandatory reporting of
preapproval requests that are approved
but not accepted, the Bureau believes
that the primary impact will be on
ongoing operational costs rather than on
one-time costs. Financial institutions
are currently required to report whether
a preapproval was requested for home
purchase loans, and whether the
preapproval was approved (if accepted)
or denied, so the infrastructure to report
preapproval information is already in
place. Expanding mandatory reporting
to all outcomes of the preapproval
process therefore primarily impacts the
ongoing, operational tasks required to
gather information and data on
additional reportable transactions.
Ongoing costs to covered persons. The
changes to transactional coverage in the
final rule will require financial
institutions that meet the open-end
threshold and other criteria to report
open-end lines of credit, thereby
increasing the ongoing operational costs
of those financial institutions for HMDA
reporting. As stated above, for the
purpose of transactional coverage
analyses, the Bureau treats these openend reporters as if they were separate
entities distinct from their closed-end
mortgage units. The Bureau assumes
that the operational costs of open-end
499 The Bureau estimated the total non-interest
expense for banks, thrifts and credit unions that
reported to HMDA based on Call Report data for
depository institutions and credit unions, and
NMLSR data for nondepository institutions, all
matched with 2012 HMDA reporters.
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reporting vary across 3 different openend reporting complexity tiers, but
whether an open-end reporter also
reports closed-end mortgage loans does
not affect its operational costs on the
open-end side. The Bureau estimates
that for a representative tier 1 open-end
reporter with 30,000 open-end loan/
application register records, the ongoing
operational cost of open-end reporting is
about $273,000 per year, or
approximately $9 per record per year.
For a representative tier 2 open-end
reporter with 1,000 open-end loan/
application register records, the ongoing
operational cost of open-end reporting is
about $43,400 per year, or
approximately $43 per record per year.
For a representative tier 3 open-end
reporter with 150 open-end loan/
application register records, the ongoing
operational cost of open-end reporting is
about $8,600 per year, or approximately
$57 per record per year. Based on
information from HUD and Moody’s
Analytics (May 2013), HMDA data
currently include only approximately 1
percent of all open-end lines of credit.
Therefore, the Bureau assumes that the
ongoing operational cost associated with
open-end reporting is practically zero.
Therefore, the estimated ongoing
operational costs for open-end reporting
under the final rule represent the entire
impact on operational costs due to the
open-end transactional coverage change.
These cost estimates incorporate all the
required data fields in the final rule and
the Bureau’s operational improvements.
Based on the estimate that 13 openend reporters are in tier 1, 463 are in tier
2, and 273 are in tier 3, the Bureau
estimates that the total impact on
ongoing operational costs due to openend reporting is approximately
$26,000,000 per year ($273,000 * 13 +
$43,400 * 463 + $8,600 * 273). Using a
7 percent discount rate, the net present
value of this cost over five years is
approximately $106,600,000.
The final rule also modifies
transactional coverage by requiring
reporting of closed-end home-equity
loans, reverse mortgages, and
preapproval requests that have been
approved but not accepted. To estimate
the impact on ongoing operational costs
due to these changes, the Bureau
allocates these transactions among the
three representative closed-end lenders
proportionately to the lender’s loan/
application register size. The Bureau
estimated that, on average, tier 3
financial institutions with 50 records
receive approximately one application
for closed-end home-equity loans; no
applications for reverse mortgages; and
no preapproval requests that were
approved but not accepted. The Bureau
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estimated that, on average, tier 2
financial institutions with 1,000 records
receive an estimated 15 applications for
closed-end home-equity loans; no
applications for reverse mortgages; and
five preapproval requests that were
approved but not accepted. And the
Bureau estimated that, on average, tier
1 financial institutions with 50,000
records receive an estimated 700
applications for closed-end home-equity
loans; five applications for reverse
mortgages; and 245 preapproval
requests that were approved but not
accepted.
Reporting data for these additional
loans will increase operational costs by
approximately $43, $128, and $2,890
per year for representative tier 3, tier 2,
and tier 1 financial institutions,
respectively, without accounting for
operational improvements. Using the
two tier distributions discussed
previously, this translates into a marketlevel cost of approximately $1,130,000
to $1,180,000 per year. Using a 7
percent discount rate, the net present
value of this cost over five years is
approximately $4,600,000 to $4,800,000.
Considering operational improvements,
operational costs will increase by
approximately $42, $125, and $2,880
per year, for the representative entities
in tier 3, tier 2, and tier 1, respectively.
This translates into a market-level cost
of approximately $1,120,000 to
$1,160,000 per year. Using a 7 percent
discount rate, the net present value of
this cost over five years is
approximately $4,600,000 to $4,800,000.
Alternatives considered. The Bureau
considered excluding preapprovals from
reporting requirements. Based on a
review of historical HMDA data, the
Bureau estimates that on average tier 3
financial institutions receive one
request for a preapproval per year, tier
2 financial institutions receive 15
requests per year, and tier 1 financial
institutions receive 700 requests per
year. The estimated reduction in the
operational cost of reporting data for
these preapprovals is approximately
$43, $96, and $2,100 per year, for
representative tier 3, tier 2, and tier 1
financial institutions, respectively,
without accounting for savings from
operational improvements. This
translates into a market-level impact of
approximately $880,000 to $890,000 per
year. Using a 7 percent discount rate,
the net present value of this savings
over five years is approximately
$3,600,000 to $3,700,000.
Including the operational
improvements reduces the estimated
operational costs of reporting data for
preapprovals by approximately $41,
$94, and $2,100 per year for
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representative tier 3, tier 2, and tier 1
financial institutions, respectively. This
translates into a market-level savings of
approximately $870,000 to $880,000 per
year. Using a 7 percent discount rate,
the net present value of this savings
over five years is $3,560,000 to
$3,610,000.
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5. The Data That Financial Institutions
are Required to Report About Each Loan
or Application
For each application, originated loan,
or purchased loan submitted as part of
a financial institution’s loan/application
register, Regulation C currently requires
reporting of 35 separate pieces of
information, and allows for optional
reporting of three denial reasons.500
Throughout this part VII.F.5, the Bureau
uses the term ‘‘data point’’ to refer to
each piece of information to be reported
and ‘‘data field’’ to refer to the actual
entries on the loan/application register
necessary to report the required data
points. For example, currently race is
one data point with ten data fields (five
for primary applicant race and five for
co-applicant race). The Dodd-Frank Act
amended HMDA by enhancing two
existing data points (rate spread and
application ID) and identifying 11 new
data points.501 As part of this
rulemaking, the Bureau
comprehensively reviewed all current
data points in Regulation C, carefully
examined each data point specifically
mentioned in the Dodd-Frank Act, and
considered proposals to collect other
appropriate data points to fill gaps
where additional information could be
useful to better understand the HMDA
data.502
The revisions include improvements
and technical revisions to current
Regulation C data requirements; the
implementation as required or
500 The 35 pieces of information are respondent
ID, agency code, application number, application
date, loan type, property type, purpose, occupancy,
loan amount, preapprovals, action, action date,
MSA, State, county, census tract, applicant
ethnicity, applicant sex, five applicant race data
fields, co-applicant ethnicity, co-applicant sex, five
co-applicant race data fields, income, purchaser,
rate spread, HOEPA status, and lien status.
501 These 11 data points consist of total points
and fees, prepayment penalty term, introductory
interest rate term, non-amortizing features, loan
term, application channel, loan originator ID,
property value, parcel number, age, and credit
score.
502 A financial institution’s loan/application
register is also accompanied by a transmittal sheet
that contains data about the submission, such as the
number of entries, the address of the financial
institution, and the appropriate Federal agency. The
final rule does not change these requirements,
except that financial institutions that report data
quarterly will identify the relevant quarter and year,
and the reporter’s identification number is being
replaced by the Legal Entity Identifier, discussed
below.
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appropriate of the categories of
information specifically identified in
the Dodd-Frank Act; and the addition of
other data points that fill existing
informational gaps and will further the
purposes of HMDA. One important
consideration during the Bureau’s
rulemaking process that informs this
discussion of benefits, costs, and
impacts was alignment of data fields to
existing regulations or industry data
standards. In order to develop this
alignment, the Bureau analyzed each
data point currently included in
Regulation C, each new data point
identified in the Dodd- Frank Act, and
each additional data point the Bureau
considered during the rulemaking
process, to determine whether
analogous data existed in the Uniform
Loan Delivery Dataset (ULDD) (first
preference) or the larger Mortgage
Industry Standards Maintenance
Organization (MISMO) data dictionary
(second preference). In each instance,
before the Bureau considered aligning to
one of these external data standards, the
MISMO/ULDD definition needed to be
adequate to meet the objectives of
HMDA and Regulation C. In some
instances, even when analogous data
existed in ULDD or MISMO, the Bureau
decided to adopt data point definitions
different than ULDD or MISMO when
other considerations outweighed the
benefit of alignment. For data points
that could not be aligned with MISMO/
ULDD, the Bureau aligned these data
points with definitions provided by
other regulations if appropriate, or used
completely new definitions.
Current HMDA data points. Currently,
financial institutions are required to
collect and report information for 35
data fields, and have the option of
reporting three additional fields
conveying denial reasons. Considering
only the current 35 mandatory fields,
the final rule will increase the number
of required fields by 12. Reporting of
denial reasons is changing from optional
to mandatory and reporters will have
the option of reporting four denial
reasons instead of three. This change
will add four required data fields. A
fifth additional data field captures
number of total units, which along with
construction method is replacing
property type, as the current ‘‘property
type’’ data field will be replaced by two
fields (number of units and construction
method), both of which are in MISMO
and ULDD. Disaggregation of ethnicity
increases the total number of ethnicity
data fields that are reportable by eight,
from two to ten. Currently, applicants
and co-applicants each choose either
Hispanic/Latino or not Hispanic/Latino.
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Going forward, applicants and coapplicants will continue to have the
option of choosing Hispanic/Latino or
not Hispanic/Latino, but will also have
the option of choosing Mexican, Puerto
Rican, Cuban, or Other Hispanic/Latino.
Applicants will not be limited on the
number of ethnic groups they can
choose, and HMDA reporters must
report all ethnicities applicants report.
Therefore, both the primary applicant
and co-applicant can choose up to five
ethnicities, for a total of ten data fields,
or a net increase of eight data fields. On
the other hand, disaggregation of race
will not increase the total number of
race data fields, because the final rule
limits the total number of race fields
that can be reported for each applicant/
co-applicant to five, the same as the
current level. Specifically, currently
applicants and co-applicants can each
choose up to five racial groups
(American Indian or Alaska Native,
Asian, Black or African American,
Native Hawaiian or Other Pacific
Islander, and White). Going forward, the
list that applicants and co-applicants
can choose from will be expanded to
include Asian Indian, Chinese, Filipino,
Japanese, Korean, Vietnamese, Other
Asian, Native Hawaiian, Guamanian or
Chamorro, Samoan, or Other Pacific
Islander. Finally, financial institutions
will no longer have to report MSA/MD,
because these data can be easily
obtained from information already
provided about the relevant State and
county. Adding 13 data fields and losing
one yields a net increase of 12 data
fields.
In addition to adding 12 data fields,
the final rule will also change the
information reported for 19 current
HMDA data fields. These revisions
address changes required by the DoddFrank Act, align current HMDA fields
with industry data standards, and close
information gaps. Specifically, to
address changes required by the DoddFrank Act, the financial institution’s
identifier will be replaced by a Legal
Entity Identifier, application ID will be
replaced by a unique, robust ID number,
and rate spread will be required for
most covered loans subject to
Regulation Z. Occupancy will be revised
to convey principal residence, second
residence, or investment property, and
property type will be replaced by
number of total units and construction
method. Finally, to close information
gaps, loan amount will be reported in
dollars instead of thousands of dollars;
additional ‘‘other’’ and ‘‘cash-out
refinance’’ categories will be added to
loan purpose; and the current ethnicity
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and race fields will contain more
granular ethnicity and racial categories.
Current HMDA data points—benefits
to consumers. The Bureau believes that
the revisions to the current HMDA data
fields, which increase the amount of
information included in HMDA, will
improve current processes used to
identify possible discriminatory lending
patterns and enforce antidiscrimination
statutes. The following discussion
provides several examples of how the
revised existing data fields will
ultimately benefit consumers by
facilitating enhanced fair lending
analyses. The section-by-section
analyses in part V, above, provide more
detailed exposition on each of the
enhanced data points.
As one example, the reason for denial
is an important data point used to
understand underwriting decisions and
focus fair lending reviews. Currently,
Regulation C permits optional reporting
of the reasons for denial of a loan
application. Mandatory reporting of this
information, combined with enhanced
or additional data points commonly
used to make underwriting decisions,
will provide more consistent and
meaningful data. These improved data
can improve the ability to identify both
discriminatory lending patterns in
underwriting decisions and consumers
who have been unfairly disadvantaged.
In addition, denial reasons, combined
with careful analysis of key
underwriting data fields, could help
reduce the false positive rate of fair
lending prioritization analyses, leading
to better targeting of fair lending
reviews. This will further improve the
likelihood of identifying customers who
were truly unfairly disadvantaged and
merit restitution.
Additionally, rate spread is currently
the only quantitative pricing measure in
HMDA, and is only available for
originated loans meeting or exceeding
the higher-priced mortgage loan
thresholds for first- and subordinate-lien
loans. Expanding reporting of rate
spread to all covered loans subject to
Regulation Z, except assumptions,
purchased loans and reverse mortgage
transactions, greatly enhances HMDA’s
usefulness for analyzing fair lending
risk in pricing decisions. This change
will also reduce the false positive rate
observed during fair lending
prioritization analyses so that the
resources of regulators and financial
institutions are used more efficiently.
Together with additional pricing
measures included in the final rule, this
information will also greatly enhance
the understanding of the costs of credit
that consumers face.
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The disaggregated racial and ethnic
categories will provide meaningful data
for advancing HMDA’s purposes. In
particular, a significant benefit of
disaggregated HMDA data is that it
could allow non-regulators, such as
researchers and community groups, the
opportunity to augment the fair lending
work that regulatory agencies conduct.
These groups could focus on areas and
risks that regulatory agencies may not
choose to examine.
The revisions to the occupancy and
property type data fields provide a
fourth example of benefit for fair
lending analyses. The final rule revises
data regarding occupancy status by
requiring separate itemization of second
residences and investment properties,
and revises data regarding property type
by replacing this field with construction
method and the number of units. These
revisions will allow more accurate
accounting of the differences in
underwriting and pricing policies that
financial institutions apply. This will
improve analyses of outcomes and
hence reduce false positive rates in
current fair lending prioritization
processes used by regulatory agencies.
Improved prioritization will further
improve the likelihood of identifying
customers who were truly unfairly
disadvantaged and merit restitution.
The Bureau also believes that the
revisions to the current HMDA data
fields, which increase the amount of
information included in the HMDA
dataset, will improve the ability to
assess whether financial institutions are
meeting the housing needs of their
communities and assist public officials
in making decisions about public-sector
investments. The denial reason data
fields will provide greater
understanding of why credit is denied
to specific applicants, the expanded rate
spread data point will provide
additional information about the
affordability of the credit offered, and
the revised occupancy and property
type data fields will provide additional
insight into more detailed property and
product markets. Additionally, the
revisions to the occupancy status data
field will provide finer gradients by
separately identifying second homes
and investment properties, which will
help identify trends involving
potentially speculative purchases of
housing units similar to those that
contributed to the recent financial crisis.
Recent research suggests that
speculative purchases by investors were
one driver of the recent housing bubble
and subsequent financial crisis.503
503 See Andrew Haughwout et al., Fed. Reserve
Bank of New York, Staff Report No. 514, Real Estate
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These impacts may be especially
relevant for areas that are experiencing
sharp increases in investor purchases.
Thus, information related to second
homes and investment properties may
help communities and local officials
develop policies tailored to the unique
characteristics associated with these
separate segments of the mortgage
market.
Finally, revisions to the property type
data field will be of particular interest
in the wake of the housing crisis as
families have increasingly turned to
rental housing. Greater detail about
multifamily housing finance may
provide additional information about
whether financial institutions are
serving the housing needs of their
communities.
Current HMDA data points—costs to
consumers. The revisions to the current
HMDA data fields will not impose any
direct costs on consumers. However,
consumers may bear some indirect costs
if financial institutions pass on some or
all of the costs imposed on them by the
final rule. Following microeconomic
principles, the Bureau believes that
financial institutions will pass on
increased variable costs to future
mortgage applicants but will absorb onetime costs and increased fixed costs if
markets are perfectly competitive and
financial institutions are profit
maximizers. The impact of the changes
in the final rule to the 19 current HMDA
data fields will affect only one-time
costs and fixed costs, as financial
institutions modify their infrastructure
to incorporate the final data field
specifications. The revision to current
HMDA data fields that impacts variable
cost is the net addition of 12 data fields.
To estimate the impact on variable
cost of a net increase of 12 additional
data fields, the Bureau treated the four
denial reason data fields as new data
fields, the additional property type field
as a new data field that aligns with
MISMO/ULDD, the 8 additional
ethnicity fields as new data fields, and
the MSA/MD data field as an existing
data field to be dropped that aligns with
MISMO/ULDD. The Bureau estimates
that the impact of this component of the
final rule on variable costs per
application is approximately $10 for a
representative tier 3 financial
institution, $0.31 for a representative
tier 2 financial institution, and $0.03 for
a representative tier 1 financial
institution.504 This expense will be
Investors, the Leverage Cycle, and the Housing
Market Crisis, (Sept. 2011).
504 These estimates are for financial institutions
that meet the threshold for reporting closed-end
mortgage loans, but not for reporting of open-end
lines of credit or quarterly reporting.
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amortized over the life of the loan and
represents a negligible increase in the
cost of a mortgage loan. Therefore, the
Bureau does not anticipate any material
adverse effect on credit access in the
long or short term if financial
institutions pass on these costs to
consumers.
During the Small Business Review
Panel process, some small entity
representatives noted that they would
attempt to pass on all increased
compliance costs associated with the
final rule, but that this would be
difficult in the current market where
profit margins for mortgages are tight. In
addition, some small entity
representatives noted that they would
attempt to pass on costs through higher
fees on other products offered, leave
geographic or product markets, or spend
less time on customer service. Many
comments to the proposed rule echoed
similar sentiments that the proposal
would likely increase the cost of credit
for consumers. Several commenters
cited increased costs associated with
reporting additional data fields. A few
commenters noted that small financial
institutions in general would be
required to merge, raise prices, originate
fewer loans, or exit markets. As
discussed above, the Bureau believes
that any costs passed on to consumers
will be amortized over the life of a loan
and represent a negligible increase in
the cost of a mortgage loan. Therefore,
the Bureau does not anticipate any
material adverse effect on credit access
in the long or short term even if
financial institutions pass on these costs
to consumers.
Current HMDA data points—benefits
to covered persons. One primary benefit
of the revisions to the current HMDA
data points in the final rule is the
improved alignment between the HMDA
data standards and the data standards
that many financial institutions already
maintain.505 For example, the current
HMDA definitions for occupancy status
and property type are not directly
compatible with the records of mortgage
loan applications that most financial
institutions store in their loan
origination systems. This may have
created extra burden on the financial
institutions that had to use additional
software to modify data in existing
systems in order to record and submit
HMDA data.
The Bureau believes that aligning the
requirements of Regulation C to existing
505 The final rule eliminates required reporting of
the MSA/MD data field. Although the exclusion of
this data field creates a benefit to covered persons,
it is not considered explicitly here, because on net,
the revisions to current HMDA fields in the final
rule add 12 data fields.
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industry standards for collecting and
transmitting data on mortgage loans and
applications will reduce the burden
associated with Regulation C
compliance and data submission for
some institutions. In addition,
promoting consistent data standards for
both industry and regulatory use has
benefits for market efficiency, market
understanding, and market oversight.
The efficiencies achieved by such
alignment should grow over time, as the
industry moves toward common data
standard platforms.
For example, many financial
institutions already separately identify
second residence and investment
properties in their underwriting process
and loan origination system (LOS).
Separate enumeration of these
occupancy types is also present in
MISMO/ULDD. Therefore, aligning to
industry standards will reduce burden
for financial institutions by maintaining
the same definition for HMDA reporting
that financial institutions use in the
ordinary course of business. Smaller,
less-complex financial institutions will
experience fewer potential benefits,
because these institutions rely more on
manual reporting processes and are
more likely to originate portfolio loans
where MISMO/ULDD may have not
been adopted.
Among current HMDA data fields,
property type and occupancy will be
modified to align with MISMO/ULDD.
The primary benefit of this alignment
will be to reduce costs for training and
researching questions. The Bureau
estimates that this alignment will
reduce operational costs by
approximately $120, $1,100, and
$10,200 per year for representative tier
3, 2, and 1 financial institutions,
respectively.506 This translates into a
market-level impact of $5,700,000 to
$7,900,000 per year. Using a 7 percent
discount rate, the net present value of
this savings over five years is
$23,300,000 to $32,200,000. With the
inclusion of operational improvements,
the estimated reduction in operational
costs is approximately $120, $1,000, and
$10,100 per year for representative tier
3, tier 2, and tier 1 financial institutions,
respectively.507 This translates into a
market-level savings of $5,600,000 to
$7,700,000 per year. The net present
506 These estimates are for financial institutions
that meet the threshold for reporting closed-end
mortgage loans, but not for reporting of open-end
lines of credit or quarterly reporting, and do not
include potential cost savings from operational
improvements and additional help sources.
507 These estimates are for financial institutions
that meet the threshold for reporting closed-end
mortgage loans, but not for reporting of open-end
lines of credit or quarterly reporting.
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value of this savings over five years is
$23,000,000 to $31,700,000.
Current HMDA data points—ongoing
costs to covered persons. Specific to the
current set of HMDA data points, the
final rule increases the number of data
fields by 12 on net, and alters the
information provided for 19 other fields.
The cost impact of these changes on
covered persons will vary by data field.
For example, some data fields may
depend on multiple sub-components or
information from multiple platforms. To
capture these potential differences, the
Bureau estimated different costs
depending on whether a data field is
aligned with ULDD, MISMO, another
regulation, or is a completely new data
field.
The four denial reason fields are new
data fields not aligned with MISMO,
ULDD or another regulation; number of
units, which along with construction
method replaces property type, is
aligned with ULDD; the eight additional
ethnicity data fields are not aligned with
MISMO, ULDD or another regulation;
and MSA/MD, which is being excluded,
is also aligned with ULDD.508 This net
increase of 12 data fields increases the
costs of transcribing data, transferring
data to HMS, researching questions,
checking post-submission edits,
training, exam assistance, conducting
annual edits/checks, and conducting
external audits. The Bureau estimates
that this component of the final rule
will increase operational costs by
approximately $460, $3,100, and $8,000
per year for representative tier 3, tier 2,
and tier 1 financial institutions,
respectively.509
Number of units will be a new data
field that all financial institutions will
be required to report, and MSA/MD is
an existing data field that will no longer
be required. Although the three current
denial reasons are considered new data
fields, operationally, they will only be
new data fields for reporters currently
choosing not to report them, or
currently not being required by their
regulator to report them. In the 2013
HMDA data, approximately 30 percent
of HMDA reporters did not provide
denial reasons, and approximately 25
percent of all denials did not have data
508 Although some institutions are required by
their regulator to report denial reasons, Regulation
C does not currently require reporting of denial
reasons, so the Bureau treated these data fields as
new data fields. The cost estimates discussed below
are adjusted to reflect that some institutions already
report these data fields.
509 These estimates are for financial institutions
that meet the threshold for reporting closed-end
mortgage loans, but not for reporting of open-end
lines of credit or quarterly reporting, and do not
include potential cost savings from operational
improvements and additional help sources.
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regarding the reason for denial. Further
analysis reveals that, compared to other
HMDA reporters, HMDA reporters
currently providing data regarding
denial reasons had larger loan/
application registers and reported
almost twice as many denials.
Therefore, requiring mandatory
reporting of denial reasons will only
impact about 30 percent of reporters,
and these reporters will likely be
smaller institutions. The additional
denial reason and the eight additional
ethnicity data fields are all new data
fields all financial institutions will have
to report. Taking all of this into
consideration, the Bureau estimates the
market-level cost of increasing the
number of current HMDA data fields by
12 on net in the final rule to be between
$8,900,000 and $15,200,000. Using a 7
percent discount rate, the net present
value of the cost increase over five years
is $36,500,000 to $62,100,000.
Considering operational
improvements, the final rule will
increase operational costs by
approximately $400, $2,100, and $6,500
per year for representative tier 3, tier 2,
and tier 1 financial institutions,
respectively.510 This translates into a
market-level cost of between $6,700,000
and $10,800,000. Using a 7 percent
discount rate, the net present value over
five years will be a cost increase of
$27,500,000 to $44,100,000.
The primary cost impact of modifying
19 existing data fields, two of which
align with ULDD, will be the occurrence
of one-time costs to modify current
reporting policies and procedures,
update software systems, and conduct
training and planning. These cost
impacts will generally be addressed in
the discussion of one-time costs below.
The one exception is the requirement
that financial institutions obtain and
report an LEI instead of the current
reporter’s ID. The Bureau estimates that
the one-time cost of acquiring an LEI is
approximately $200 with an ongoing
cost of approximately $100 per year.
This translates into an estimated
market-level impact of $1,400,000 in
one-time costs and an increase of
$720,000 in ongoing costs per year. For
one-time costs, using a 7 percent
discount rate and five-year amortization
window, the annualized cost is
$351,000. For ongoing costs, using a 7
percent discount rate, the net present
value over five years is an increase in
costs of approximately $3,000,000.
510 These estimates are for financial institutions
that meet the threshold for reporting closed-end
mortgage loans, but not for reporting of open-end
lines of credit or quarterly reporting.
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Current HMDA data points—
alternatives considered. Apart from the
revisions discussed above, the Bureau
considered requiring a detailed
enumeration of the subordinate lien
category. This change to lien status was
included in the proposal because the
Bureau believed that more detailed
enumeration would provide useful
information for analysis and would
reduce the reporting burden by making
the definition of lien status consistent
with MISMO. Following numerous
commenters that pointed out that very
few loans would have third or higher
liens and that more granularity would
actually increase rather than reduce
reporting burden, the Bureau decided to
maintain the definition of lien status
currently in HMDA. To the extent that
changes were adopted for any
individual current data point, the costs
and benefits of that decision are
addressed in the section-by-section
analysis of the relevant provision above.
New HMDA data points. The final
rule requires financial institutions to
report 50 additional data fields under
HMDA. This number does not include
unique loan ID, rate spread, number of
units, or construction method, each of
which replaces a data field currently
reported under HMDA. The Dodd-Frank
Act explicitly identified 13 additional
data points. Excluding unique loan ID
and rate spread, which replace data
fields currently reported under HMDA,
the remaining 11 Dodd-Frank Actidentified data points translate into 22
new data fields financial institutions
will have to report on their loan/
application registers. To fill information
and data gaps, the Bureau is adopting 13
data points, which translates into an
additional 28 new data fields financial
institutions will have to report on their
loan/application register. For these 50
additional data fields, 19 are aligned
with ULDD, 12 are aligned with
MISMO, and one is aligned with
another regulation. The remaining 18
data fields are not in MISMO or ULDD,
or aligned with another regulation.511
New HMDA data points—benefits to
consumers. The additional data points
will have several benefits to consumers.
First, the additional fields will improve
the usefulness of HMDA data for
analyzing mortgage markets by
regulators and the public. For example,
data points such as non-amortizing
features, term of introductory interest
511 Some data fields were aligned with multiple
sources. For the consideration of costs and benefits,
the Bureau assigned each data field to one source.
The following hierarchy was used for data fields
aligned to multiple sources: (1) ULDD, (2) MISMO,
(3) another regulation, and (4) not aligned to
another source.
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rate, prepayment penalty term, and the
open-end line of credit indicator are
related to certain high-risk lending
concerns, and reporting this information
will enable a better understanding of the
types of products and features
consumers are receiving. Recent
research has indicated that each of these
products and product characteristics
have increased likelihoods of default
and foreclosure and may have
exacerbated the recent housing crisis. In
addition to being better able to identify
some of the risk factors that played a
role in the recent financial crisis, the
new HMDA data points on pricing and
underwriting will improve current
research efforts to understand mortgage
markets. All of these enhancements will
allow for improved monitoring of trends
in mortgage markets and help identify
and prevent problems that could
potentially harm consumers and society
overall.
Second, the additional data points
will help improve current policy efforts
designed to address various market
failures. As discussed previously, the
mortgage market is characterized by
information asymmetry, and this
inherent deficiency was made apparent
during the financial crisis. In response
to the recent financial crisis, the
government has pursued a number of
policies aimed at regulating the market
and protecting consumers. The
additional data points will help inform
future policy-making efforts by
improving consideration of the benefits
and costs associated with various
choices, resulting in more effective
policies. As an example, many recent
regulations have limited the types of
risky mortgage products that lenders can
make to borrowers without fully
considering borrowers’ ability to repay.
New data fields on non-amortizing
features, term of introductory interest
rate, prepayment penalty term, and
debt-to-income ratio can assist future
assessment of the effectiveness of such
regulations and facilitate adjustments
when needed.
Third, the additional data points will
help determine whether financial
institutions are serving the housing
needs of their communities and help
public officials target public investment
to better attract private investment. For
example, the data points related to
manufactured housing will reveal more
information about this segment of the
market. Borrowers in manufactured
housing are typically more financially
vulnerable than borrowers in site-built
housing and may deserve closer
attention from government agencies and
community groups. Similarly, the data
points related to multifamily dwellings
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will reveal more information about this
segment of the market, which mostly
serves low- to moderate-income renters
who live in these financed units.
Advocacy groups and government
agencies have raised concerns over
affordability issues faced by individuals
living in multifamily dwellings, who
also tend to be more financially
vulnerable. Overall, by permitting a
better and more comprehensive
understanding of these markets, the
final rule will improve the usefulness of
HMDA data for assessing the supply and
demand of credit, and financial
institutions’ treatment of applicants and
borrowers in these communities.
Fourth, the Bureau believes that the
additional data points will improve
current processes used to identify
possible discriminatory lending patterns
and enforce antidiscrimination statutes.
Financial regulators and enforcement
agencies use HMDA data in their initial
prioritization and screening processes to
select institutions for examination and
as the base dataset during fair lending
reviews. The additional data will allow
for improved segmentation during these
analyses, so that applications are
compared to other applications for
similar products. For example,
underwriting and pricing policies often
differ for open-end lines of credit,
closed-end home-equity loans, reverse
mortgages, and products with different
amortization types. Currently, these
products are all combined during
prioritization and screening analyses.
With additional data fields identifying
these products, separate analyses can be
conducted for each product, which will
more accurately reflect outcomes for
consumers. As a second example,
pricing often differs across delivery
channels, because pricing policies and
processing differ, and because
intermediaries, such as mortgage
brokers, add an additional layer to the
complexity of mortgage pricing. The
addition of the origination channel data
point will permit the separation of
originations for pricing analyses,
allowing for a better understanding of
the drivers of pricing outcomes.
Improved segmentation improves the
accuracy of fair lending analyses, which
improves the usefulness of HMDA to
identify potentially disadvantaged
consumers.
Additionally, the new HMDA data
points on pricing will greatly improve
the usefulness of HMDA data for
assessing pricing outcomes during fair
lending analyses. Currently, the rate
spread data field is the only quantitative
pricing measure included in the HMDA
data. This data field includes rate
spread data only for higher-priced
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mortgage loans, which currently
comprise less than 5 percent of
originated loans in the HMDA data.
Thus, the usefulness of this data field is
highly limited in today’s environment,
and for the foreseeable future. In
addition, mortgage products and pricing
structure are inherently complex. The
rate spread data are based on the APR.
APR alone, though a useful summary
measure that is commonly recognizable
to borrowers, fails to capture all of the
underlying complexities that go into
mortgage pricing. Adding discount
points, lender credits, and interest rate
will provide a much clearer
understanding of the trade-offs between
rates and points that are the foundation
of mortgage pricing. The total loan costs,
lender credits, and origination charge
data fields will provide a deeper
understanding of fees, which form the
third component of mortgage pricing.
Furthermore, many of the new HMDA
data points capture legitimate factors
that financial institutions use in
underwriting and pricing that are
currently lacking in the HMDA data,
which will help regulators and
government enforcement agencies to
better understand disparities in
outcomes. Many, if not all, lenders
consider data points such as credit
score, CLTV, DTI, and AUS results
when either underwriting or pricing
mortgage applications. The addition of
these types of data points will help
users understand patterns in
underwriting and pricing outcomes and
thus better assess the fair lending risk
presented by those outcomes.
Finally, the addition of the age data
field will allow users to analyze
outcomes for different age groups during
fair lending analyses. Although
consumers are protected against
discrimination on the basis of age by
ECOA and Regulation B, HMDA data
currently lack a direct means of
measuring the age of applicants. This
limits the ability of government agencies
and community groups to monitor and
enforce violations of ECOA and
Regulation B prohibitions against age
discrimination in mortgage markets.
Older individuals, in particular, are
potentially at a higher risk of age
discrimination, as well as unfair,
deceptive, or abusive acts or practices.
These data are especially important as
an increased number of baby boomers
enter retirement. The addition of the age
data field will allow users to identify
potential differential treatment of older
Americans for various mortgage
products. For example, reverse
mortgages are designed to serve senior
consumers and are priced based on age
factors, providing an illustration of the
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importance of adding this data field to
the HMDA data. Age data might also
help inform housing policies designed
to assist seniors in maintaining or
obtaining home ownership, and
building or utilizing home equity for
improved social welfare.
The new HMDA data fields will
reduce the false positive rates that occur
when inadequate information causes
regulators and enforcement agencies to
initially misidentify financial
institutions with low fair lending risk as
having a high risk of fair lending
violations. Better alignment between the
degrees of regulatory scrutiny and fair
lending risk will increase the likelihood
of identifying any instances where
consumers are being illegally
disadvantaged, thereby ultimately
benefitting consumers.
New HMDA data points—costs to
consumers. The addition of 50 data
fields will not impose any direct costs
on consumers. However, consumers
may bear some indirect costs if financial
institutions pass on some or all of the
costs imposed on them by the final rule.
Following microeconomic principles,
the Bureau believes that financial
institutions will pass on increased
variable costs to future mortgage
applicants, but will absorb one-time
costs and increased fixed costs if
markets are perfectly competitive and
financial institutions are profit
maximizers. The Bureau estimates that
the impact of the additional 50 data
fields on variable costs per application
is approximately $22 for a
representative tier 3 financial
institution, $0.62 for a representative
tier 2 financial institution, and $0.05 for
a representative tier 1 financial
institution.512 This expense will be
amortized over the life of the loan and
represents a small increase in the cost
of a mortgage loan. Therefore, the
Bureau does not anticipate any material
adverse effect on credit access in the
long or short term if financial
institutions pass on these costs to
consumers.
During the Small Business Review
Panel process, some small entity
representatives noted that they would
attempt to pass on all increased
compliance costs associated with the
final rule, but that this would be
difficult in the current market where
profit margins for mortgages are tight. In
addition, some small entity
representatives noted that they would
attempt to pass on costs through higher
512 These estimates are for financial institutions
that meet the threshold for reporting closed-end
mortgage loans, and not for reporting of open-end
lines of credit or quarterly reporting.
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fees on other products offered, leave
geographic or product markets, or spend
less time on customer service. Many
comments to the proposed rule echoed
similar sentiments that the proposal
would likely increase the cost of credit
for consumers. As discussed above, the
Bureau believes that any costs passed on
to consumers will be amortized over the
life of a loan and represent a negligible
increase in the cost of a mortgage loan.
Therefore, the Bureau does not
anticipate any material adverse effect on
credit access in the long or short term
even if financial institutions pass on
these costs to consumers.
New HMDA data points—benefits to
covered persons. The Bureau believes
that the additional data points will
improve current processes used to
identify possible discriminatory lending
patterns, which could reduce the
burden of financial institutions subject
to fair lending examinations or
investigations. Financial regulators and
enforcement agencies use HMDA data in
their initial prioritization and screening
processes to select institutions for
examination or investigation, and as the
base dataset during fair lending reviews.
During prioritization analyses, the
additional data points will provide
information about the legitimate factors
used in underwriting and pricing that
are currently lacking in the HMDA data,
helping government agencies better
understand disparities in outcomes.
They will also allow for improved
segmentation, so that applications are
compared to other applications for
similar products. Finally, the additional
data points on pricing measures will
greatly enhance screening analyses of
pricing decisions. All of these
improvements will reduce false
positives resulting from inadequate
information. Examination resources will
be used more efficiently, so that lenders
at low risk of fair lending violations
receive a reduced level of regulatory
scrutiny.
New HMDA data points—one-time
costs to covered persons. The new data
points included in the final rule will
impose one-time costs on HMDA
reporters. Management, operations,
legal, and compliance personnel will
likely require time to learn the new
reporting requirements and assess legal
and compliance risks. Financial
institutions that use vendors for HMDA
compliance will incur one-time costs
associated with software installation,
troubleshooting, and testing. The
Bureau is aware that these activities will
take time and that the costs may be
sensitive to the time available for them.
Financial institutions that maintain
their own reporting systems will incur
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one-time costs to develop, prepare, and
implement the necessary modifications
to those systems. In all cases, financial
institutions will need to update training
materials to reflect new requirements
and may incur certain one-time costs for
providing initial training to current
employees. The Bureau expects these
one-time costs to be relatively small for
less complex financial institutions.
These entities use less complex
reporting processes, so the tasks
involved are more manual than
automated and new requirements may
involve greater use of established
processes. As a result, compliance will
likely require straightforward changes in
systems and workplace practices and
therefore impose relatively low one-time
costs.
The Bureau estimates the additional
reporting requirements will impose on
average estimated one-time costs of
$3,000 for tier 3 financial institutions,
$250,000 for tier 2 financial institutions,
and $800,000 for tier 1 financial
institutions without considering the
expansion of transactional coverage to
include expanded reporting of open-end
lines of credit, closed-end home-equity
loans, and reverse mortgages.513
Including the estimated one-time costs
to modify processes and systems for
these expanded reporting requirements,
the Bureau estimates that the total onetime costs will be $3,000 for tier 3
institutions, $375,000 for tier 2
institutions, and $1,200,000 for tier 1
institutions. In total, this yields an
overall market impact between
$725,900,000 and $1,339,100,000. Using
a 7 percent discount rate and a five-year
amortization window, the annualized
one-time cost is $177,000,000 to
$326,600,000. As a frame of reference
for these market-level, one-time cost
estimates, the total non-interest
expenses of current HMDA reporters
were approximately $420 billion in
2012. The upper bound estimate of
$1,339,100,000 is approximately 0.3
percent of the total annual non-interest
expenses.514 Because these costs are
one-time investments, financial
513 The Bureau realizes that the impact of onetime costs varies by institution due to many factors,
such as size, operational structure, and product
complexity, and that this variance exists on a
continuum that is impossible to fully capture. As
a result, the one-time cost estimates will be high for
some financial institutions, and low for others.
514 The Bureau estimated the total non-interest
expense for banks, thrifts and credit unions that
reported to HMDA based on Call Report and NCUA
Call Report data for depository institutions and
credit unions, and NMLS data for nondepository
institutions, all matched with 2012 HMDA
reporters.
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institutions are expected to amortize
these costs over a period of years.
New HMDA data points—ongoing
costs to covered persons. The final rule
requires financial institutions to report
50 additional data fields. Adding these
additional data fields increases the cost
of many operational steps required to
report data, including transcribing data,
transferring data to HMS, conducting
annual edits/checks, and conducting
external audits. The Bureau estimates
that the impact of the additional 50 data
fields on annual operational costs is
approximately $2,400 for a
representative tier 3 financial
institution, $15,800 for a representative
tier 2 financial institution, and $38,600
for a representative tier 1 financial
institution.515 This translates into a
market-level cost of $54,600,000 to
$92,900,000 per year. Using a 7 percent
discount rate, the net present value of
this cost over five years is $224,000,000
to $381,000,000. Considering
operational improvements, the
estimated increase in the operational
cost of reporting these 50 additional
data fields is approximately $2,100,
$10,900, and $31,000 per year for
representative tier 3, tier 2, and tier 1
financial institutions, respectively. This
translates into a market-level cost of
$41,000,000 to $66,100,000 per year.
The net present value of this impact
over five years will be a cost increase of
$168,100,000 to $271,100,000.
New HMDA data points—alternatives
considered. To the extent that changes
were adopted for any individual data
point not identified by the Dodd-Frank
Act, the costs and benefits of that
decision are addressed in the sectionby-section analysis of the relevant
provision above. Assessing the
regulation as a whole, however, the
Bureau considered removing some or all
of the discretionary data points. As
explained in greater detail in the
section-by-section analysis above, the
Bureau believes that the final rule
balances the benefits of improved data
with the burden of reporting. Removing
the discretionary data points would
deprive communities, researchers, and
public officials of important data
beneficial to identifying potentially
unlawful discriminatory lending
patterns, targeting public investment,
and determining whether financial
institutions are serving the housing
needs of their communities. For
example, information regarding
origination charges, discount points,
515 These estimates are for financial institutions
that meet the threshold for reporting closed-end
mortgage loans, but not for reporting of open-end
lines of credit or quarterly reporting.
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interest rate, and lender credits will
provide a much clearer understanding
of the trade-offs between fees, rates, and
points that are the foundation of
mortgage pricing and the cost of housing
transactions. Eliminating the
discretionary data points would also
increase false positives and inefficiency
in evaluating the lending activity of
financial institutions. As explained
above, many of the additional data
points capture factors that financial
institutions use in underwriting and
pricing that are currently lacking in the
HMDA data, such as CLTV, DTI, and
AUS results. On the burden side, the
primary driver of HMDA costs is
establishing and maintaining systems to
collect and report data, not the costs
associated with collecting and reporting
a particular data field. Therefore,
removing discretionary data points
would cause a significant loss of data
that would not be justified by the
relatively small reduction in burden.
6. The Modifications to Disclosure and
Reporting Requirements
The final rule will make several
changes to the disclosure and reporting
requirements under Regulation C. The
first change concerns the modified loan/
application register and the disclosure
statement that a financial institution
must make available to the public.
Regulation C currently requires that a
financial institution must make its
‘‘modified’’ loan/application register
available to the public after removing
three fields to protect applicant and
borrower privacy: The application or
loan ID, the date that the application
was received, and the date that action
was taken. Regulation C also requires
financial institutions to make available
to the public their disclosure
statements, which are a series of tables
describing an institution’s HMDA data
for the previous calendar year. The final
rule requires financial institutions to
make their modified loan/application
registers and disclosure statements
available to the public by making
available brief notices referring
members of the public seeking these
data products to the Bureau’s Web site
to obtain them.
Second, the Bureau is requiring that a
financial institution that reported for the
preceding calendar year at least 60,000
covered loans and applications,
excluding purchased covered loans,
submit its HMDA data for the first three
quarters of the calendar year on a
quarterly basis in addition to submitting
its HMDA data for the entire calendar
year on an annual basis. Based on 2013
HMDA data, 29 financial institutions
reported at least 60,000 covered loans
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and applications, excluding purchased
covered loans, in 2013, which
comprised approximately 50 percent of
the market. Although this estimate does
not include the expansion of reporting
of open-end lines of credit, the Bureau
has determined that the requirement to
report these products under the final
rule is unlikely to have a significant
impact on the number of financial
institutions that would be required to
report quarterly. Errors or omissions in
the data that such financial institutions
report on a quarterly basis will not be
considered violations of HMDA or
Regulation C if the financial institution
makes a good-faith effort to report all
required data fully and accurately
within sixty calendar days after the end
of each calendar quarter and corrects or
completes the data prior to submitting
its annual loan/application register.
Finally, the final rule will eliminate
the option for financial institutions with
25 or fewer entries to submit the loan/
application register in paper format.
Benefits to consumers. The final rule
eliminates the option of paper reporting
for financial institutions reporting 25 or
fewer records, and provides that
financial institutions shall make their
disclosure statements available to the
public through a notice that clearly
conveys that the disclosure statement
may be obtained on the Bureau’s Web
site. These provisions will have little
direct benefit to most consumers
because they do not significantly change
the substance, collection, or release of
the information required to be reported.
However, the requirement that
financial institutions make their
modified loan/application registers
available to the public by making
available a brief notice referring
members of the public to the Bureau’s
Web site will generally benefit some
consumers. This provision will increase
the availability of modified loan/
application registers by providing one
easily accessible location where
members of the public will be able to
access all modified loan/application
registers for all financial institutions
required to report under the statute.
Although this benefit is limited
somewhat by the fact that the modified
loan/application register is currently
available for download in the agencies’
release made available on the FFIEC
Web site, the agencies’ release is
typically not available until almost six
months after the modified loan/
application register must be made
available.
Quarterly reporting by large volume
financial institutions may have a
number of benefits to consumers.
Currently, there is significant delay
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between the time that final action is
taken on an application and the time
information about the application or
loan is reported to regulators pursuant
to Regulation C. This time delay ranges
from two months if the date of final
action occurs during December to 14
months if the date of final action occurs
during January of the reporting year.
The Bureau believes that timelier data
will improve the ability of the regulators
to identify current trends in mortgage
markets, detect early warning signs of
future housing finance crises, and
determine, in much closer to ‘‘real
time,’’ whether financial institutions are
fulfilling their obligations to serve the
housing needs of communities in which
they are located, whether opportunities
exist for public investment to attract
private investment in communities, and
whether there are possible
discriminatory lending patterns. Also,
timelier identification of risks and
troublesome trends in mortgage markets
by the Bureau and the appropriate
agencies will allow for more effective
interventions by public officials.
Finally, the Bureau intends to release
aggregate quarterly data or analysis to
the public more frequently than
annually, which would improve the
ability of members of the public to use
the data in a timely manner.
Costs to consumers. The adopted
changes requiring financial institutions
to make their disclosure statements and
modified loan/application registers
available to the public by providing
brief notices referring members of the
public to the Bureau’s Web site, to
eliminate the option of paper reporting
for financial institutions reporting 25 or
fewer records, and to require quarterly
reporting by financial institutions that
reported at least 60,000 covered loans or
applications, excluding purchased
covered loans, in the preceding year
will impose only minimal direct costs
on consumers. Permitting financial
institutions to make their disclosure
statements and modified loan/
application register data available to the
public through notices that clearly
convey that the disclosure statements
and modified loan/application register
data may be obtained on the Bureau’s
Web site will require consumers to
obtain these disclosure statements
online. Given the prevalence of internet
access and the ease of using the
Bureau’s Web site, the Bureau believes
these adopted changes will impose
minimal direct costs on consumers. Any
potential costs to consumers of
obtaining disclosure statements and
modified loan/application register data
online are likely no greater than the
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costs of obtaining disclosure statements
and modified loan/application register
data from the physical offices of
financial institutions, or from a floppy
disk or other electronic data storage
medium that may be used with a
personal computer, as contemplated by
HMDA section 304(k)(1)(b).
However, consumers may bear some
indirect costs of the changes in the final
rule if financial institutions pass on
some or all of their increased costs to
consumers. Following microeconomic
principles, the Bureau believes that
financial institutions will pass on
increased variable costs to future loan
applicants but will absorb one-time
costs and increased fixed costs if
financial institutions are profit
maximizers and the market is perfectly
competitive. The Bureau defines
variable costs as costs that depend on
the number of applications received.
Based on initial outreach efforts, five of
the 18 operational tasks are variable cost
tasks: Transcribing data, resolving
reportability questions, transferring data
to an HMS, geocoding, and researching
questions.
The Bureau believes that the four
changes discussed in this section will
have either no, or only a minimal, effect
on these variable cost tasks. Quarterly
reporting, as well as the requirements
that financial institutions make their
disclosure statements and modified
loan/application registers available to
the public by making available a brief
notice referring members of the public
to the Bureau’s Web site, will not
impact any variable-cost operational
steps. Hence, these three revisions in
the final rule will not lead financial
institutions to pass through some of the
incremental costs to consumers in a
perfectly competitive market with
profit-maximizing financial institutions.
Eliminating the option of paper
reporting for financial institutions may
increase transcription costs for financial
institutions that currently qualify for
this option and report HMDA data in
paper form. However, given the closedend and open-end reporting thresholds,
very few, if any, financial institutions
would meet the threshold for paper
reporting. Given these factors, the
Bureau estimates that the impact of this
cost is negligible.
Benefits to covered persons. The
Bureau believes that eliminating the
option of paper reporting and requiring
quarterly reporting for certain financial
institutions will provide little direct
benefit to covered persons. However,
the requirement that financial
institutions make their modified loan/
application registers available to the
public by providing a brief notice
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referring members of the public to the
Bureau’s Web site will benefit covered
persons. This provision reduces costs to
financial institutions associated with
preparing and making available to the
public the modified loan/application
register and eliminates a financial
institution’s risk of missing the deadline
to make it available. It also eliminates
the risks to financial institutions making
errors in preparing the modified loan/
application register that could result in
the unintended disclosure of data.
Initial outreach efforts indicated that
tier 3 financial institutions rarely
receive requests for modified loan/
application register data. However,
some tier 3 financial institutions
indicated that they nevertheless prepare
the data in preparation for requests. The
Bureau has represented this cost as
equivalent to preparing one modified
loan/application register dataset each
year. The Bureau estimates that
representative tier 2 and tier 1 financial
institutions receive three and 15
requests for modified loan/application
register data each year, respectively.
Based on these estimated volumes, the
Bureau estimates that this revision in
the final rule will reduce ongoing
operational costs by approximately $130
per year for a representative tier 3
financial institution, approximately
$310 per year for a representative tier 2
financial institution, and approximately
$770 per year for a representative tier 1
financial institution. This translates into
a market-level reduction in cost of
approximately $1,500,000 to $2,000,000
per year. Using a 7 percent discount
rate, the net present value of this
savings over five years is $6,100,000 to
$8,200,000.
Similarly, permitting a financial
institution to make its disclosure
statements available to the public
through a notice that clearly conveys
that the disclosure statement may be
obtained on the Bureau’s Web site will
free financial institutions from having to
download and print their disclosure
statements in order to provide them to
requesters. Initial outreach efforts
indicated that tier 3 financial
institutions rarely receive requests for
disclosure statements. However, some
tier 3 financial institutions indicated
that they nevertheless download and
print a disclosure statement in
preparation for requests. The Bureau has
represented this cost as equivalent to
receiving one request for a disclosure
statement each year. The Bureau
estimates that on average tier 2 and tier
1 financial institutions receive three and
15 requests for disclosure statements
each year, respectively. Based on these
estimated volumes, the Bureau
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estimates that this change will reduce
ongoing operational costs by
approximately $15 per year for a
representative tier 3 financial
institution, approximately $50 per year
for a representative tier 2 financial
institution, and approximately $250 per
year for a representative tier 1 financial
institution. This translates into a
market-level reduction in cost of
approximately $250,000 to $333,000 per
year. Using a 7 percent discount rate,
the net present value of this savings
over five years is $1,015,000 to
$1,366,000.
One-time costs to covered persons.
The Bureau believes that the provisions
requiring financial institutions to make
their disclosure statements and
modified loan/application registers
available to the public by providing
brief notices referring members of the
public to the Bureau’s Web site will
require a one-time cost to create the
notice. However the Bureau believes
that the one-time cost to create these
notices will be negligible. Similarly, the
Bureau believes that the revisions in the
final rule to require quarterly reporting
by large volume financial institutions,
and to eliminate the option of paper
reporting, will not impose any
significant one-time costs on covered
persons.
Ongoing costs to covered persons. The
Bureau believes that the provisions
requiring financial institutions to make
their disclosure statements and
modified loan/application registers
available to the public by providing
brief notices referring members of the
public to the Bureau’s Web site will not
increase ongoing costs to covered
persons. Eliminating the option of paper
reporting for financial institutions
reporting 25 or fewer records may
increase transcription costs for financial
institutions that currently maintain all
HMDA data in paper form. However, as
discussed above, the Bureau believes
that the number of financial institutions
that do this is very low, especially given
changes to the institutional coverage
criteria, planned improvements to the
data submission process and the small
size of the loan/application register at
issue (25 or fewer records). Therefore,
the Bureau estimates that the impact of
this cost is negligible.
Quarterly reporting will increase
ongoing costs to covered persons, as
costs will increase for annual edits and
internal checks, checking postsubmission edits, filing post-submission
edits, internal audits, and external
audits. The Bureau estimates that this
change will increase ongoing
operational costs by approximately
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$31,000 per year for a representative tier
1 financial institution.516
Based on 2013 HMDA data, 29
financial institutions reported at least
60,000 covered loan and applications,
combined, excluding purchased covered
loans, in 2013, which is substantially
larger than the average loan/application
register sizes of the representative tier 3
institutions (50 records), tier 2
institutions (1,000 records), and is also
above the loan/application register size
of the representative tier 1 institutions
(50,000) assumed by the Bureau.
Therefore, the Bureau believes that it is
reasonable to regard all of these
institutions as tier 1 HMDA reporters.
This yields an estimated market cost of
$899,000 (= 29 * $31,000). Using a 7
percent discount rate, the net present
value of this impact over five years will
be approximately an increase in costs of
$3,700,000.
G. Potential Specific Impacts of the
Final Rule
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1. Depository Institutions and Credit
Unions With $10 Billion or Less in Total
Assets, as Described in Section 1026
As discussed above, the final rule
makes certain changes to the
institutional and transactional coverage
of Regulation C and modifies the
disclosure and reporting requirements.
The Bureau believes that the benefits of
these revisions for depository
institutions and credit unions with $10
billion or less in total assets will be
similar to the benefits to creditors as a
whole, as discussed above. The only
potential difference would be the
benefits of aligning current and new
HMDA data points to industry
standards, which will likely create
higher benefits for larger institutions.
Regarding costs, other than as noted
here, the Bureau also believes that the
impact of the final rule on the
depository institutions and credit
unions with $10 billion or less in total
assets will be similar to the impact for
creditors as a whole. The primary
difference in the impact on these
institutions is likely to come from
differences in the level of complexity of
operations, compliance systems, and
software of these institutions. The three
516 The Bureau also estimates that this change
will increase ongoing operational costs by
approximately $800 and $5,000 per year for
representative tier 3 and 2 institutions, respectively,
were these institutions required to report quarterly.
However, since the Bureau believes that all the
financial institutions subject to quarterly reporting
under the final rule will be tier 1 institutions, the
estimates for tier 3 and tier 2 institutions have been
excluded. These estimates are for financial
institutions that meet the threshold for reporting
closed-end mortgage loans, but not for reporting of
open-end lines of credit.
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representative lender types, which the
Bureau analyzed when considering the
benefits, costs and impacts of the final
rule, incorporate differences in
complexity and infrastructure across
financial institutions, and the effect of
these differences on impacts of the final
rule.
Based on Call Report data for
December 2013, 13,454 of 13,565
depository institutions and credit
unions had $10 billion or less in total
assets. Based on 2013 HMDA data, and
the reporting requirement for closed-end
mortgage loans in the final rule,
approximately 4,800 of these depository
institutions and credit unions would be
required to report data on closed-end
mortgage loans. Six of the estimated 29
institutions that would have been
required to report on a quarterly basis in
2014 had the final rule been in effect
were depository institutions or credit
unions with $10 billion or less in total
assets. Given their large loan/
application register volumes, all of these
institutions are assumed to be tier 1
institutions. Finally, approximately 749
institutions will meet the threshold for
open-end lines of credit and be required
to report data on these products. The
Bureau estimates that 660 of these
institutions are depository institutions
and credit unions with $10 billion or
less in total assets. Under all of these
assumptions, the Bureau estimates that
the market-level impact of the final rule
on operational costs for depository
institutions and credit unions with $10
billion or less in total assets will be a
cost of between $27,600,000 and
$44,500,000. Using a discount rate of 7
percent, the net present value of this
cost over five years is between
$113,000,000 and $182,500,000.
Regarding one-time costs, the Bureau
estimates that the market-level impact of
the final rule for depository institutions
and credit unions with $10 billion or
less in total assets is between
$637,200,000 and $1,252,300,000. Using
a 7 percent discount rate and a five-year
amortization window, the annualized
one-time cost is between $155,400,000
and $305,400,000.
2. Impact of the Provisions in the Final
Rule on Consumers in Rural Areas
The Bureau believes that the
provisions in the final rule will not
impose direct costs to consumers in
rural areas. However, as with all
consumers, consumers in rural areas
may bear some indirect costs of the final
rule. This will occur if financial
institutions serving rural areas are
HMDA reporters and if these
institutions pass on some or all of the
cost increase to consumers.
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Recent research suggests that financial
institutions that primarily serve rural
areas are generally not HMDA
reporters.517 The Housing Assistance
Council (HAC) suggests that the asset
and geographic coverage criteria
disproportionately exempt small lenders
operating in rural communities. For
example, HAC uses 2009 Call Report
data to show that approximately 700
FDIC-insured lending institutions had
assets totaling less than the HMDA
institutional coverage threshold and
were headquartered in rural
communities. These institutions, which
would not be HMDA reporters, may
represent one of the few sources of
credit for many rural areas. Research by
economists at the Federal Reserve Board
also suggests that HMDA’s coverage of
rural areas is limited, especially areas
further from MSAs.518 If a large portion
of the rural housing market is serviced
by financial institutions that are not
HMDA reporters, any indirect impact of
the changes on consumers in rural areas
will be limited, as the changes directly
involve none of those financial
institutions.
Although some research suggests that
HMDA currently does not cover a
significant number of financial
institutions serving the rural housing
market, HMDA data do contain
information for some covered loans
involving properties in rural areas.
These data can be used to estimate the
number of HMDA reporters servicing
rural areas, and the number of
consumers in rural areas that might
potentially be affected by the changes to
Regulation C. For this analysis, the
Bureau uses non-MSA areas as a proxy
for rural areas, with the understanding
that portions of MSAs and non-MSAs
may contain urban and rural territory
and populations. In 2013, 5,678 HMDA
reporters reported applications,
originations, or purchased loans for
property located in geographic areas
outside of an MSA.519 This count
517 See Keith Wiley, Housing Assistance Council,
What Are We Missing? HMDA Asset-Excluded
Filers, (2011), available at http://
www.ruralhome.org/storage/documents/
smallbanklending.pdf; Lance George and Keith
Wiley, Housing Assistance Council, Improving
HMDA: A Need to Better Understand Rural
Mortgage Markets, (2010), available at http://
www.ruralhome.org/storage/documents/
notehmdasm.pdf.
518 Robert B. Avery, Kenneth P. Brevoort, and
Glenn B. Canner, Opportunities and Issues in Using
HMDA Data, 29 J. of Real Estate Research 352
(2007), available at http://pages.jh.edu/jrer/papers/
pdf/past/vol29n04/02.351_380.pdf.
519 These counts exclude preapproval requests
that were denied or approved but not accepted,
because geographic information is typically not
available for these transactions.
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provides some sense of the number of
financial institutions that could
potentially pass on impacts of the final
rule to consumers in rural areas.520 In
total, these 5,678 financial institutions
reported 1,989,000 applications,
originations, or purchased loans for
properties in non-MSA areas. This
number provides some sense of the
number of consumers in rural areas that
could potentially be impacted indirectly
by the changes in the final rule. In
general, individual financial institutions
report small numbers of closed-end
mortgage loans from non-MSAs, as
approximately 70 percent reported
fewer than 100 closed-end mortgage
loans from non-MSAs.
Following microeconomic principles,
the Bureau believes that financial
institutions will pass on increased
variable costs to future mortgage
applicants but will absorb one-time
costs and increased fixed costs if
financial institutions are profit
maximizers and the market is perfectly
competitive.521 The Bureau defines
variable costs as costs that depend on
the number of applications received.
Based on initial outreach efforts, the
following five operational steps affect
variable costs: Transcribing data,
resolving reportability questions,
transferring data to an HMS, geocoding,
and researching questions. The primary
impact of the final rule on these
operational steps is an increase in time
spent per task. Overall, the Bureau
estimates that the impact of the final
rule on variable costs per application is
$23 for a representative tier 3 financial
institution, $0.20 for a representative
tier 2 financial institution, and $0.10 for
a representative tier 1 financial
institution.522 The 5,678 financial
institutions that served rural areas
would attempt to pass these variable
costs on to all future mortgage
customers, including the estimated 2
million consumers from rural areas.
520 These counts do not include the estimated 750
or so financial institutions that will be required to
report open-end lines of credit, or the estimated 75–
450 nondepository institutions that will be required
to report due to the coverage threshold being
reduced from 100 to 25. In both instances, data
required to estimate how many of these institutions
serve rural areas is limited. To the extent that some
do serve rural areas, the numbers presented will be
underestimates.
521 If markets are not perfectly competitive or
financial institutions are not profit maximizers then
what financial institutions pass on may differ. For
example, they may attempt to pass on one-time
costs and increases in fixed costs, or they may not
be able to pass on variable costs.
522 These cost estimates do not incorporate the
impact of operational improvements and additional
help sources. These estimates are for financial
institutions that meet the threshold for reporting
closed-end mortgage loans, but not for reporting of
open-end lines of credit or quarterly reporting.
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Amortized over the life of the loan, this
expense would represent a negligible
increase in the cost of a mortgage loan.
Therefore, the Bureau does not
anticipate any material adverse effect on
credit access in the long or short term
even if these financial institutions pass
on these costs to consumers.
During the Small Business Review
Panel process, some small entity
representatives noted that they would
attempt to pass on all increased
compliance costs associated with the
final rule, but that this would depend
upon the competiveness of the market
in which they operate, especially for
smaller financial institutions. In
addition, some small entity
representatives noted that they would
attempt to pass on costs through higher
fees on other products, exit geographic
or product markets, or spend less time
on customer service. The similar
concern was echoed by some industry
comments to the proposal. To the extent
that the market is less than perfectly
competitive and the lenders are able to
pass on a greater amount of these
compliance costs, the costs to
consumers will be slightly larger than
the estimates described above.
Nevertheless, the Bureau believes that
the potential costs that will be passed
on to consumers are small.
On the benefit side, the expanded
institutional and transactional coverage,
and reporting requirements may
indirectly benefit consumers in rural
areas to the extent that HMDA reporters
serve these areas. Specifically, the
revisions in the final rule will provide
the public and public officials with
information to help determine whether
financial institutions are serving the
housing needs of rural communities, to
target public investment to attract
private investment in rural
communities, and to identify possible
discriminatory lending patterns and
enforce antidiscrimination statutes.
Given the differences between rural
and non-rural markets in structure,
demand, supply, and competition level,
consumers in rural areas may
experience benefits and costs from the
final rule that are different than those
experienced by consumers in general.
To the extent that the impacts of the
final rule on creditors differ by type of
creditor, this may affect the costs and
benefits of the final rule on consumers
in rural areas. The Bureau solicited
feedback regarding the impact of the
proposed rule on consumers in rural
areas. One national trade association
commenter cited a study from several
individuals at the Mercatus Center at
George Mason University that found
compliance burden had increased for
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over 90 percent of community banks
surveyed, and that banks in rural areas
were particularly impacted. This survey
focused on the overall burden of all
recent regulation, and did not focus on
the burden specific to HMDA.
Therefore, the Bureau was unable to
determine how much of the increased
cost to attribute to the final HMDA rule
and has not revised the estimates
contained in this part based on the
particular study cited by the
commenter.
III. Final Regulatory Flexibility Act
Analysis
The Regulatory Flexibility Act (RFA)
generally requires an agency to conduct
an initial regulatory flexibility analysis
(IRFA) and a final regulatory flexibility
analysis (FRFA) of any rule for which
notice-and-comment procedures are
required by 5 U.S.C. 553.523 These
analyses must describe the impact of the
rule on small entities.524 An IRFA or
FRFA is not required if the agency
certifies that the rule will not have a
significant economic impact on a
substantial number of small entities.525
The Bureau is also subject to certain
additional procedures under the RFA
involving the convening of a panel to
consult with small business
representatives prior to proposing a rule
for which an IRFA is required.526
In the proposal, the Bureau did not
certify that the proposed rule would not
have a significant economic impact on
a substantial number of small entities
within the meaning of the RFA.
Accordingly, the Bureau convened and
chaired a Small Business Review Panel
under the Small Business Regulatory
Enforcement Fairness Act (SBREFA) to
consider the impact of the proposed rule
on small entities that would be subject
to that rule and to obtain feedback from
representatives of such small entities.
The 2014 HMDA Proposal preamble
included detailed information on the
Small Business Review Panel. The
Panel’s advice and recommendations
523 5
U.S.C. 601 et. seq.
purposes of assessing the impacts of the
final rule on small entities, ‘‘small entities’’ is
defined in the RFA to include small businesses,
small not-for-profit organizations, and small
government jurisdictions. 5 U.S.C. 601(6). A ‘‘small
business’’ is determined by application of Small
Business Administration regulations and reference
to the North American Industry Classification
System (NAICS) classifications and size standards.
5 U.S.C. 601(3). A ‘‘small organization’’ is any ‘‘notfor-profit enterprise which is independently owned
and operated and is not dominant in its field.’’ 5
U.S.C. 601(4). A ‘‘small governmental jurisdiction’’
is the government of a city, county, town, township,
village, school district, or special district with a
population of less than 50,000. 5 U.S.C. 601(5).
525 5 U.S.C. 605(b).
526 5 U.S.C. 609.
524 For
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are found in the Small Business Review
Panel Final Report 527 and were
discussed in the section-by-section
analysis of the proposed rule. The 2014
HMDA Proposal also contained an IFRA
pursuant to section 603 of the RFA. In
this IRFA, the Bureau solicited
comment on any costs, recordkeeping
requirements, compliance requirements,
or changes in operating procedures
arising from the application of the
proposed rule to small businesses;
comment regarding any Federal rules
that would duplicate, overlap, or
conflict with the proposed rule; and
comment on alternative means of
compliance for small entities.
Comments addressing individual
provisions of the final rule are
addressed in the section-by-section
analysis above. Comments addressing
the impact on small entities are
discussed below. Many of these
comments implicated individual
provisions of the final rule or the
Bureau’s Dodd-Frank Act section 1022
discussion, and are also addressed in
those parts.
Based on the comments received, and
for the reasons stated below, the Bureau
believes the final rule will have a
significant economic impact on a
substantial number of small entities.
Accordingly, the Bureau has prepared
the following final regulatory flexibility
analysis pursuant to section 604 of the
RFA.
A. Statement of the Need for, and
Objectives of, the Rule
The Bureau is publishing the final
rule to implement section 1094 of the
Dodd-Frank Act, which amended
HMDA to improve the utility of the
HMDA data.528 HMDA was intended to
provide the public with information that
can be used to help determine whether
financial institutions are serving the
housing needs of their communities, to
assist public officials in distributing
public-sector investment so as to attract
private investment, and to assist in
identifying possible discriminatory
lending patterns and enforcing
antidiscrimination statutes. Historically,
HMDA has been implemented by the
Board through Regulation C, 12 CFR
part 203. In 2011, the Bureau
established a new Regulation C, 12 CFR
part 1003, substantially duplicating the
Board’s Regulation C, making only non527 See Final Report of the Small Business Review
Panel on the CFPB’s Proposals Under Consideration
for the Home Mortgage Disclosure Act (HMDA)
Rulemaking (April 24, 2014), http://
files.consumerfinance.gov/f/201407_cfpb_report_
hmda_sbrefa.pdf.
528 Dodd-Frank Act, Public Law 111–203, section
1094, 124 Stat. 1376, 2097 (2010).
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substantive, technical, formatting, and
stylistic changes. Congress has
periodically modified HMDA, and the
Board routinely updated Regulation C,
in order to ensure that the data
continued to fulfill HMDA’s purposes.
In 2010, Congress responded to the
mortgage crisis by passing the DoddFrank Act, which enacted changes to
HMDA, as well as directing reforms to
the mortgage market and the broader
financial system. In addition to
transferring rulemaking authority for
HMDA from the Board to the Bureau,
section 1094 of the Dodd-Frank Act,
among other things, directed the Bureau
to implement changes requiring the
collection and reporting of several new
data points, and authorized the Bureau
to require financial institutions to
collect and report such other
information as the Bureau may require.
A full discussion of the reasons for
the final rule may be found in parts V
and VII, above. Briefly, the rule
addresses the market failures caused by
the underproduction of public mortgage
data and the information asymmetries in
credit markets through improved
institutional and transactional coverage
and additional information about
underwriting, pricing, and property
characteristics. The final rule will
improve the ability of regulators,
industry, advocates, researchers, and
economists to assess housing needs,
public investment, possible
discrimination, and market trends.
B. Statement of the Significant Issues
Raised by the Public Comments in
Response to the IRFA, a Statement of
the Assessment of the Agency of Such
Issues, and a Statement of Any Changes
Made as a Result of Such Comments
In accordance with section 603(a) of
the RFA, the Bureau prepared an IRFA.
In the IRFA, the Bureau estimated the
possible compliance costs for small
entities with respect to each major
component of the rule against a prestatute baseline. The Bureau requested
comment on the IRFA.
Very few commenters specifically
addressed the IRFA. Comments that
repeated the same issues raised by the
Office of Advocacy of the U.S. Small
Business Administration are addressed
in part VIII.C, below. Other comments
related to small financial institutions are
discussed here. As discussed in the
section 1022 analysis in part VII above,
several commenters addressed the
impact of the proposed rule on small
financial institutions. Several industry
commenters stated that the proposed
rule would create a competitive
disadvantage for small financial
institutions. For example, these
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commenters noted that larger financial
institutions would be able to distribute
the cost of compliance across a larger
transaction base. Several industry
commenters cited reports from Goldman
Sachs and Banking Compliance Index
figures to support claims that regulatory
burdens were disproportionally
affecting small financial institutions and
preventing low income consumers from
accessing certain financial products.
Another industry commenter cited the
decline in HMDA reporters from 2012 to
2013 as evidence that small financial
institutions have left the market.
The Bureau presented separate impact
estimates for low-, moderate-, and highcomplexity institutions, broadly
reflecting differences in impact across
institutions of different size, and has
recognized that on average the smaller
institution will incur slightly higher
compliance costs per HMDA record due
to the final rule than larger institutions.
However, the magnitude of such impact
on a per application basis is fairly small.
Specifically, for low-complexity
institutions, which best represent small
institutions, the estimated impact on
operational costs, after the operational
modifications the Bureau is making, is
approximately $1,900 per year.529 This
translates into approximately a $38
increase in per application costs. Based
on recent survey estimates of net
income from the MBA, this impact
represents approximately 1.3 percent
($38/$2,900) of net income per
origination for mid/medium sized
banks, which the Bureau views as
relatively small. Therefore, the Bureau
concludes that the final rule will have
little impact on any competitive
disadvantage faced by small
institutions.
Other industry commenters believed
that the proposal would likely increase
the cost of credit for consumers. Several
of these commenters cited the cost of
systems modifications associated with
reporting home-equity lines of credit. A
few commenters claimed that certain
small financial institutions, such as
small credit unions, small farm credit
lenders, or small banks, would be faced
with difficult choices, such as merging,
raising prices, originating fewer loans,
or exiting the market. A small number
of industry commenters stated that they
would double their origination fees as a
result of the proposed rule. A national
trade association commenter cited,
among other things, a study from several
individuals at the Mercatus Center at
529 This estimate applies to financial institutions
that meet the threshold for reporting closed-end
mortgage loans, but not for reporting of open-end
lines of creditor quarterly reporting.
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George Mason University and a survey
of its members showing that small
financial institutions were decreasing
their mortgage lending activity in
response to increased regulatory
burdens. Similarly, other industry
commenters pointed to a report from
Goldman Sachs showing that higher
regulatory costs had priced some lowincome consumers out of the credit card
and mortgage markets. Following
standard economic theory, in a perfectly
competitive market where financial
institutions are profit maximizers, the
affected financial institutions would
pass on to consumers the marginal, i.e.,
variable, cost per application or
origination and would absorb the onetime and increased fixed costs of
complying with the rule. Overall, the
Bureau estimates that the final rule will
increase variable costs by $23 per
application for representative tier 3
institutions, $0.20 per application for
representative tier 2 institutions, and
$0.10 per application for representative
tier 1 institutions.530 These expenses
will be amortized over the life of a loan
and represent a negligible increase in
the cost of a mortgage loan. Therefore,
the Bureau does not anticipate any
material adverse effect on credit access
in the long or short term even if
institutions pass on these costs to
consumers.
Several industry commenters
explained that expanding the rule to
include commercial-purpose
transactions would increase the cost of
business credit. These commenters
stated that financial institutions would
be less willing to take the dwelling of
a borrower as collateral, which would
decrease the availability of credit.
However, as explained above, the
Bureau is specifically exempting certain
commercial-purpose transactions from
the scope of the final rule so that
coverage of commercial-purpose
transactions is generally maintained at
its existing level.531 Accordingly, the
Bureau expects that the final rule will
not have a significant impact on the
availability of commercial credit.
Other industry commenters believed
that any utilization of the MISMO data
standards would burden small entities.
These commenters stated that small
530 These estimates apply to financial institutions
that meet the threshold for reporting closed-end
mortgage loans, but not for reporting of open-end
lines of credit or quarterly reporting.
531 The revisions to the final rule will require
reporting of commercial-purpose lines of credit for
the purposes of home purchase, home
improvement, or refinancing. Reporting of these
loans is not currently required, therefore it is
possible that the coverage of commercial-purpose
loans will increase slightly, but the Bureau believes
that the impact will be minimal.
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financial institutions would have to
incur training costs to familiarize
themselves with MISMO. One national
trade association commenter reported
that only 22 percent of community
banks use MISMO. These commenters
believe that MISMO alignment should
be optional for small financial
institutions. As explained above, the
Bureau believes that these commenters
have misunderstood the implications of
the proposed MISMO alignment. The
Bureau did not propose to, and the final
rule does not, require any financial
institution to use or become familiar
with the MISMO data standards. Rather,
the rule merely recognizes that many
financial institutions are already using
the MISMO standard for collecting and
transmitting mortgage data, and has
utilized similar definitions for certain
data points in order to reduce burden.
Thus, the rule decreases cost for those
institutions that are familiar with
MISMO. Financial institutions that are
unfamiliar with MISMO may not realize
a similar reduction in cost, but they will
not experience any increased burden
from the utilization of MISMO
definitions because the final rule itself
and the associated materials contain all
of the necessary definitions and
instructions for reporting HMDA data.
Several industry commenters believed
that the Bureau had ignored the
comments of the small entity
representatives that participated in the
Small Business Review Panel or had
simply solicited feedback in response to
their suggestions. As noted in the IRFA,
the small entity representatives made
several comments at the SBREFA Panel.
Many of these suggestions have been
reflected in the final rule. For example,
the Bureau heard from small entity
representatives that they rarely, if ever,
receive requests for their modified loan/
application registers, and the Small
Business Review Panel recommended
that the Bureau consider whether there
is a continued need for small
institutions to make their modified
loan/application registers available. The
final rule provides that financial
institutions shall make available to the
public a notice that clearly conveys that
the institution’s modified loan/
application register may be obtained on
the Bureau’s Web site. This approach
relieves small financial institutions of
the obligation to provide the modified
loan/application register to the public
directly. Additionally, several small
entity representatives expressed concern
over the operational difficulties of
geocoding and the data submission
process in general. The Bureau is
making operational enhancements and
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modifications to address these concerns.
For example, the Bureau is working to
provide implementation support similar
to the support provided for the title XIV
and TILA–RESPA Integrated Disclosure
rules. The Bureau is also improving the
geocoding process, creating a web-based
HMDA data submission and edit-check
system, developing a data-entry tool for
small financial institutions that
currently use Data Entry Software, and
otherwise streamlining the submission
and editing process to make it more
efficient. All of these enhancements will
improve the submission and processing
of data, increase clarity, and reduce
reporting burden. Finally, small entity
representatives requested a two-year
look-back period in the loan-volume
threshold. The final rule includes a twoyear look-back period. Under the final
rule, a financial institution that does not
meet the loan-volume thresholds
established in the final rule and that
experiences an unusual and unexpected
high origination volume in one year will
not be required to begin HMDA
reporting unless and until the higher
origination volume continues for a
second year in a row.
In addition to modifying the proposed
rule in direct response to suggestions
from small entity representatives that
participated in the Small Business
Review Panel, the Bureau also modified
the proposed rule based on responses to
the Bureau’s requests for feedback that
were prompted by the small entity
representatives. As one example, the
proposed change in transactional
coverage to a dwelling-secured basis
would have extensively expanded
reporting of commercial-purpose loans
and lines of credit. In response to
comments received about the cost
impact of this proposal, the Bureau
decided to maintain Regulation C’s
existing purpose-based coverage test for
commercial-purpose transactions,
which maintains coverage of
commercial-purpose lending generally
at existing levels. Similarly, the
proposed change in transactional
coverage to a dwelling-secured basis
would have extensively expanded
reporting of consumer-purpose openend lines of credit. In response to
comments received about the cost
impact of this proposal, especially about
the one-time costs of constructing the
infrastructure to report data from a
separate business line, the Bureau
decided to adopt a separate loan-volume
reporting threshold of 100 open-end
lines of credit. This threshold will
reduce reporting burden for small
entities.
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C. Response to the Chief Counsel for
Advocacy of the Small Business
Administration and Statement of Any
Change Made in the Final Rule as a
Result of the Comments
The SBA Office of Advocacy
(Advocacy) provided a formal comment
letter to the Bureau in response to the
2014 HMDA Proposal. Among other
things, this letter expressed concern
about the following issues: The
expanded transactional coverage of the
proposal, the analysis of the different
loan-volume thresholds suggested by
the small entity representatives, the
requirement to report the discretionary
data points, and the requirement to
maintain modified loan/application
registers.
First, Advocacy expressed concern
over the expanded transactional
coverage of the proposed rule. The
proposed rule would have covered all
dwelling-secured closed-end mortgage
loans, open-end lines of credit, and
reverse mortgages. Advocacy supported
the Bureau’s decision to eliminate
reporting of non-dwelling-secured home
improvement loans. However, Advocacy
noted that reporting additional
transactions was burdensome for small
financial institutions and believed that
the new transactions might cause
certain small financial institutions to
become HMDA reporters for the first
time. Advocacy urged the Bureau not to
adopt the expanded transactional
coverage.
As described in greater detail in parts
V and VII above, the Bureau considered
the benefits and costs of the final rule’s
transactional coverage criteria. With
respect to commercial-purpose
transactions, the Bureau has decided to
withdraw most of the expanded
coverage of commercial-purpose loans.
The Bureau is now limiting reporting of
commercial-purpose loans and lines of
credit to those for home purchase, home
improvement, or refinancing purposes
only. The Bureau is adopting the
proposed expansion to consumerpurpose open-end lines of credit and
reverse mortgages. Information about
these types of transactions serves an
important role in fulfilling HMDA’s
purposes. For example, among other
things, data about reverse mortgages
will help determine how the housing
needs of seniors are being met, while
data about open-end lines of credit will
help assess housing-related credit being
offered in particular communities.
Regarding the impact of the new
transactions on the loan-volume
threshold, the Bureau notes that the 25loan threshold includes only closed-end
mortgage loans. The final rule institutes
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a separate reporting threshold of 100
open-end lines of credit for institutional
coverage. As shown in Table 8 in part
VII.F.3, above, compared to the
proposal, this separate open-end
reporting threshold will achieve a
significant reduction in burden by
eliminating the number of institutions
that would be required to report data
concerning their open-end lines of
credit, if any, by almost 3,400, most
which are likely small financial
institutions. The Bureau further
estimates that the open-end reporting
threshold will require no additional
financial institutions to report HMDA
data, as compared to the current rule,
because it is the Bureau’s belief that
nondepository institutions commonly
are not engaged in dwelling-secured
open-end-line-of-credit lending, and the
depository institutions and credit
unions that will report open-end lines of
credit will still be subject to all other
reporting requirements and hence can
only come from current HMDA
reporters.532 Therefore, the Bureau
believes that the additional types of
transactions required by the final rule
will not impose a significant burden on
small financial institutions or
dramatically expand the institutional
coverage of the rule.
Second, Advocacy believed that the
loan-volume threshold was too low.
Advocacy also expressed concern over
the Bureau’s consideration of alternative
loan-volume thresholds. Advocacy
stated that the 25-loan threshold would
exclude approximately 70,000 records
from depository institutions and include
approximately 30,000 records from
nondepository institutions. According
to Advocacy, assuming that all excluded
institutions were small entities, the
proposal would exclude 21 percent of
small entities. Finally, Advocacy urged
the Bureau to provide a full analysis of
the possible loan-volume thresholds
suggested by the small entity
representatives.
Throughout this rulemaking, the
Bureau considered several higher loanvolume thresholds. These thresholds
were evaluated based on their impact on
the goals of the rulemaking, which
include simplifying the reporting regime
by establishing a uniform loan-volume
threshold applicable to both depository
and nondepository institutions;
532 The Bureau estimates under the final rule,
about 24 depository institutions and credit unions
will report open-end lines of credit but not closedend mortgage loans. However, even these future
open-end-only reporters are not new to HMDA
reporting, as they are currently reporting under
HMDA but likely will stop reporting closed-end
mortgage loans given their closed-end loan volumes
fall below the 25-loan closed-end threshold.
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eliminating the burden of reporting from
low-volume depository institutions
while maintaining sufficient data for
analysis at the national, local, and
institutional levels; and increasing
visibility into the home mortgage
lending practices of nondepository
institutions.
As described in parts V and VII.F.3,
above, the 25-loan threshold for closedend mortgage loans appropriately
balances multiple competing interests
and advances the goals of the
rulemaking. The Bureau believes that
the threshold reduces burden on small
financial institutions while preserving
important data about communities and
increasing visibility into the lending
practices of nondepository institutions.
The 25-loan threshold will achieve a
significant reduction in burden by
eliminating reporting by about 20
percent of depository institutions that
are currently reporting. As described in
greater detail throughout this
discussion, the Bureau estimates that
the most significant driver of costs
under HMDA is fixed costs associated
with the requirement to report, rather
than the variable costs associated with
any specific aspect of reporting, such as
the number or complexity of required
data fields or the number of entries. For
example, the estimated annual ongoing
cost of reporting under the rule is
approximately $4,400 for a
representative tier 3 financial institution
after accounting for operational
improvements. Just over $2,300 of this
annual ongoing cost is composed of
fixed costs. As a comparison, each
required data field accounts for
approximately $43 of this annual
ongoing cost. Thus, the 25-loan
threshold for closed-end mortgage loans
provides a meaningful reduction in
burden.
Higher thresholds would further
reduce burden but would produce data
losses that would undermine the
benefits provided by HMDA data. One
of the most substantial impacts of any
loan-volume threshold is the
information that it provides about
lending at the community level,
including information about vulnerable
consumers and the origination activities
of smaller lenders. Public officials,
community advocates, and researchers
rely on HMDA data to analyze access to
credit at the neighborhood-level and to
target programs to assist underserved
communities and consumers. For
example, Lawrence, Massachusetts
identified a need for homebuyer
counseling and education based on
HMDA data, which showed a high
percentage of high-cost loans compared
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to surrounding communities.533
Similarly, HMDA data helped bring to
light discriminatory lending patterns in
Chicago neighborhoods, resulting in a
large discriminatory lending
settlement.534 In addition, researchers
and consumer advocates analyze HMDA
data at the census tract level to identify
patterns of discrimination at a national
level.535 Higher loan-volume thresholds
would affect data about more
communities and consumers. At a loanvolume threshold set at 100, according
to 2013 HMDA data, the number of
census tracts that would lose 20 percent
of reported data would increase by
almost eight times over the number with
533 See City of Lawrence, HUD Consolidated Plan
2010–2015, at 68 (2010), available at http://
www.cityoflawrence.com/Data/Sites/1/documents/
cd/Lawrence_Consolidated_Plan_Final.pdf.
Similarly, in 2008 the City of Albuquerque used
HMDA data to characterize neighborhoods as
‘‘stable,’’ ‘‘prone to gentrification,’’ or ‘‘prone to
disinvestment’’ for purposes of determining the
most effective use of housing grants. See City of
Albuquerque, Five Year Consolidated Housing Plan
and Workforce Housing Plan, at 100 (2008),
available at http://www.cabq.gov/family/
documents/ConsolidatedWorkforce
HousingPlan20082012final.pdf. As another
example, Antioch, California, monitors HMDA data,
reviews it when selecting financial institutions for
contracts and participation in local programs, and
supports home purchase programs targeted to
households purchasing homes in Census Tracts
with low loan origination rates based on HMDA
data. See City of Antioch, Fiscal Year 2012–2013
Action Plan, at 29 (2012), available at http://
www.ci.antioch.ca.us/CitySvcs/CDBGdocs/
Action%20Plan%20FY12-13.pdf. See, e.g., Dara D.
Mendez et al., Institutional Racism and Pregnancy
Health: Using Home Mortgage Disclosure Act Data
to Develop an Index for Mortgage Discrimination at
the Community Level, 126 Pub. Health Reports
(1974-) Supp. 3, 102–114 (Sept/Oct. 2011) (using
HMDA data to analyze discrimination against
pregnant women in redlined neighborhoods),
available at http://www.publichealthreports.org/
issueopen.cfm?articleID=2732.
534 See, e.g., Yana Kunichoff, Lisa Madigan
Credits Reporter with Initiating Largest
Discriminatory Lending Settlements in U.S. History
(June 14, 2013), http://www.chicagonow.com/
chicago-muckrakers/2013/06/lisa-madigan-creditsreporter-with-initiating-largest-discriminatorylending-settlements-in-u-s-history/ (‘‘During our
ongoing litigation . . . the Chicago Reporter study
looking at the HMDA data for the City of Chicago
came out . . . It was such a startling statistic that
I said . . . we have to investigate, we have to find
out if this is true . . . We did an analysis of that
data that substantiated what the Reporter had
already found . . . [W]e ultimately resolved those
two lawsuits. They are the largest fair-lending
settlements in our nation’s history.’’)
535 See, e.g., California Reinvestment Coalition, et
al, Paying More for the American Dream VI: Racial
Disparities in FHA/VA Lending, at http://
www.woodstockinst.org/research/paying-moreamerican-dream-vi-racial-disparities-fhava-lending.
Likewise, researchers have analyzed GSE purchases
in census tracts designated as underserved by HUD
using HMDA data. James E. Pearce, Fannie Mae and
Freddie Mac Mortgage Purchases in Low-Income
and High-Minority Neighborhoods: 1994–96,
Cityscape: A Journal of Policy Development and
Research (2001), available at http://
www.huduser.org/periodicals/cityscpe/vol5num3/
pearce.pdf.
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a threshold set at 25 loans. The number
of affected LMI tracts would increase
more than six times over the number at
the 25-loan level. Tables 5–8 in part
VII.F.3 provide additional information
about how different reporting thresholds
affect the number of financial
institutions that would be required to
report closed-end mortgage loans, as
well as open-end lines of credit.
Additionally, the Bureau believes that
it is important to increase visibility into
nondepository institutions’ practices
due to the lack of adequate data
regarding their lending activity.
Uniform loan-volume thresholds of
fewer than 100 loans annually will
expand nondepository institution
coverage, because the current test
requires reporting by all nondepository
institutions that meet the other
applicable criteria and originate 100
loans annually.536 Therefore, any
threshold set at 100 loans would not
provide any enhanced insight into
nondepository institution lending and a
threshold above 100 loans would
actually decrease visibility into
nondepository institutions’ practices
and hamper the ability of HMDA users
to monitor risks posed to consumers by
those institutions. The 25-loan volume
threshold, however, achieves a
significant expansion of nondepository
institution coverage, with about a 40
percent increase in the number of
reporting institutions.
Third, Advocacy stated that most
small entities were concerned about the
additional proposed data points that
were not required by the Dodd-Frank
Act. Advocacy believed that complying
with the discretionary reporting
requirements would impose additional
expenses on small entities and might
subject them to penalties for reporting
errors. Therefore, Advocacy
recommended that the Bureau exempt
small entities from the reporting
requirements regarding data points not
mandated by the Dodd-Frank Act.
The Bureau considered exempting
smaller financial institutions from the
requirement to report some or all of the
discretionary data points. As described
above, however, because under a tiered
reporting regime smaller financial
institutions would not report all or some
of the HMDA data points, tiered
reporting would prevent communities
and users of HMDA data from learning
important information about the lending
and underwriting practices of smaller
financial institutions, which may differ
536 In addition, nondepository institutions that
originate fewer than 100 applicable loans annually
are required to report if they have assets of at least
$10 million and meet the other criteria. See 12 CFR
1003.2 (definition of financial institution).
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from those of larger institutions.
Second, as discussed above, the primary
driver of HMDA costs is establishing
and maintaining systems to collect and
report data, not the costs associated
with collecting and reporting a
particular data field. Therefore, tiered
reporting would reduce the costs of lowvolume depository institutions
somewhat, but not significantly.
Finally, Advocacy argued that
requiring small entities to maintain
modified loan/application registers was
unduly burdensome because these
institutions reported rarely being asked
to provide such information to the
public. Advocacy recommended
removing small entities from this
requirement. The Bureau generally
agrees with these recommendations. As
explained above, the final rule provides
that financial institutions shall make
available to the public a notice that
clearly conveys that the institution’s
modified loan/application register may
be obtained on the Bureau’s Web site.
This approach relieves all financial
institutions, including small entities, of
the obligation to provide the modified
loan/application register to the public
directly. The Bureau is also finalizing its
proposal to provide that financial
institutions shall make available to the
public a notice that clearly conveys that
the institution’s disclosure statements
may be obtained on the Bureau’s Web
site. This approach relieves all financial
institutions, including small entities, of
such burdens.
D. Description of and Estimate of the
Number of Small Entities to Which the
Rule Will Apply or an Explanation of
Why No Such Estimate Is Available
As discussed in the proposal and
Small Business Review Panel Report, for
purposes of assessing the impacts of the
final rule on small entities, ‘‘small
entities’’ is defined in the RFA to
include small businesses, small not-forprofit organizations, and small
government jurisdictions.537 A ‘‘small
business’’ is determined by application
of Small Business Administration
regulations and reference to the North
American Industry Classification
System (NAICS) classifications and size
standards.538 A ‘‘small organization’’ is
any ‘‘not-for-profit enterprise which is
independently owned and operated and
is not dominant in its field.’’ 539 A
‘‘small governmental jurisdiction’’ is the
government of a city, county, town,
township, village, school district, or
537 5
U.S.C. 601(6).
U.S.C. 601(3).
539 5 U.S.C. 601(4).
538 5
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special district with a population of less
than 50,000.540
The following table provides the
Bureau’s estimate of the number and
types of entities that may be affected by
the final rule under consideration:
E. Projected Reporting, Recordkeeping,
and Other Compliance Requirements of
the Rule, Including an Estimate of the
Classes of Small Entities Which Will Be
Subject to the Requirement and the
Type of Professional Skills Necessary for
the Preparation of the Report
FFIEC from data submitted by the
institutions, available to the public
upon request.544
The final rule modifies current
reporting requirements and imposes
new reporting requirements by requiring
financial institutions to report
additional information required by the
Dodd-Frank Act, as well as certain
information determined by the Bureau
to be necessary and proper to effectuate
HMDA’s purposes. The rule also
modifies the scope of the institutional
and transactional coverage thresholds.
In addition, under the final rule,
financial institutions will make
available to the public notices that
clearly convey that the institution’s
disclosure statement and modified loan/
application register may be obtained on
the Bureau’s Web site. Finally, financial
institutions that reported at least 60,000
covered loans and applications,
combined, excluding purchased loans,
in the preceding calendar year will be
required to report HMDA data on a
quarterly basis to the appropriate
Federal agency. These data will only be
considered preliminary submissions,
and the final rule provides a safe harbor
that protects, in certain circumstances, a
financial institution from being cited for
violations of HMDA or Regulation C for
errors and omissions in its quarterly
submissions. The section-by-section
analysis of the final rule in part V,
above, discusses all of the additional
required data points and the scope of
the final rule in greater detail.
1. Reporting Requirements
HMDA requires financial institutions
to report certain information related to
covered loans to the Bureau or to the
appropriate Federal agency.541 Under
Regulation C, all reportable transactions
must be recorded on a loan/application
register within 30 calendar days 542 after
the end of the calendar quarter in which
final action is taken. Currently, financial
institutions must disclose to the public
upon request a modified version of the
loan/application register submitted to
regulators.543 Financial institutions
must also make their disclosure
statements, which are prepared by the
540 5
U.S.C. 601(5).
U.S.C. 2803(h)(1).
542 12
541 12
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CFR 1003.5(c).
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2. Recordkeeping Requirements
HMDA currently requires financial
institutions to compile and maintain
information related to transactions
involving covered loans. HMDA section
304(c) requires that information
required to be compiled and made
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available under HMDA section 304,
other than loan/application register
information required under section
304(j), must be maintained and made
available for a period of five years.
HMDA section 304(j)(6) requires that
loan/application register information for
any year shall be maintained and made
available, upon request, for three years.
Regulation C requires that all reportable
transactions be recorded on a loan/
application register within thirty
calendar days after the end of the
calendar quarter in which final action is
taken.545 Regulation C further specifies
that a financial institution shall retain a
copy of its submitted loan/application
register for its records for at least three
years.546
The final rule will not modify the
recordkeeping periods for financial
institutions. The rule might, however,
indirectly require additional
recordkeeping in that it will require
financial institutions to maintain
additional information as a result of the
expanded reporting requirements
described above. However, the final rule
reduces the amount of recordkeeping in
other ways. Specifically, although the
final rule does not eliminate the
requirement that financial institutions
retain a copy of their loan/application
registers, the final rule does provide that
financial institutions shall retain the
notices concerning their disclosure
statements and modified loan/
application registers, not the disclosure
statements or modified loan/application
registers themselves, which may lessen
the recordkeeping burden.
Benefits to small entities. HMDA is a
data reporting statute, so all provisions
of the final rule affect reporting
requirements. Overall, the final rule has
several potential benefits for small
entities. A summary of these benefits is
provided here, and more detailed
discussions of these benefits are
provided in the section 1022 discussion
in part VII, above. First, the revision to
the institutional coverage criteria, which
imposes a 25-loan threshold for closedend mortgage loans, will benefit
depository institutions that are not
significantly involved in originating
dwelling-secured closed-end mortgage
loans. The Bureau expects that most of
these depository institutions are small
entities. These depository institutions
will no longer have to report closed-end
mortgage loans under HMDA. The
Bureau also estimates that most of the
depository institutions with closed-end
mortgage loan originations falling below
the threshold will originate fewer than
545 12
546 12
CFR 1003.4(a).
CFR 1003.5(a).
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100 open-end lines of credit, and thus
not be required to report such
transactions under HMDA. Therefore,
they will no longer have to incur onetime costs, or any current or increased
operational costs, imposed by the final
rule.
Second, the Bureau adopted revisions
to transactional coverage criteria that
benefit small entities. As one example,
the final rule eliminates reporting of
non-dwelling-secured home
improvement loans. This change
reduces reporting burden to small
entities to the extent that these entities
offer such loans. As a second example,
the overall change in transactional
coverage to a dwelling-secured basis in
the proposed rule extensively expanded
reporting of commercial-purpose loans
and lines. In response to comments
received about the cost impact of this
proposal, some of which came from
small entities, the Bureau decided to
retain Regulation C’s existing purposebased coverage test for commercialpurpose transactions, which maintains
coverage of commercial-purpose lending
generally at existing levels.
Third, the expanded transactional
coverage provisions, combined with the
additional data points being adopted,
will improve the prioritization process
that regulators and enforcement
agencies use to identify institutions
with higher fair lending risk. During
prioritization analyses, the additional
transactions and data points will allow
for improved segmentation, so that
applications are compared to other
applications for similar products. In
addition, the data points will add
legitimate factors used in underwriting
and pricing that are currently lacking in
the HMDA data, helping regulators and
government enforcement agencies better
understand disparities in outcomes.
These improvements will reduce false
positives that occur when inadequate
information causes lenders with low fair
lending risk to be initially misidentified
as high-risk. This reduction in false
positives will improve allocation of
examination resources so that lenders
with low fair lending risk receive a
reduced level of regulatory scrutiny. For
small entities currently receiving
regulatory oversight, this could greatly
reduce the burden from fair lending
examinations and enforcement actions.
Fourth, utilizing industry data
standards may provide a benefit to some
small entities, especially those
originating and selling loans to the
GSEs. The Bureau believes that
promoting consistent data standards for
both industry and regulatory use has
benefits for market efficiency, market
understanding, and market oversight.
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The efficiencies achieved by aligning
HMDA data with widely used industry
data standards should grow over time.
Specific to small entities, outreach
efforts have determined that aligning
HMDA with industry data standards
will reduce costs for training and
researching questions.
Fifth, and finally, the additional fields
will improve the usefulness of HMDA
data for analyzing mortgage markets by
the regulators and the public. For
instance, data points such as nonamortizing features, introductory
interest rate, and prepayment penalty
term that are commonly related to
higher risk lending will provide a better
understanding of the types of products
and features consumers are receiving.
This will allow for improved monitoring
of trends in mortgage markets and help
identify problems that could potentially
harm consumers and society overall.
Lowering the likelihood of future
financial crises benefits all financial
institutions, including small entities.
Costs to small entities. Overall, the
final rule has several potential costs for
small entities. A summary of these costs
is provided here, and more detailed
discussions of these costs are provided
in the section 1022 analysis in part VII,
above. First, the adopted revision to the
coverage criteria raises the closed-end
mortgage loan reporting threshold for
depository institutions from one to 25
loans and lowers the reporting threshold
for nondepository institutions from 100
to 25 loans. Based on 2012 HMDA and
NMLSR data, the Bureau estimates that
an additional 75–450 nondepository
institutions will be required to report as
a result of this revision. The Bureau
expects most of the affected
nondepository institutions to be small
entities. The additional nondepository
institutions that will now be required to
report under HMDA will incur one-time
start-up costs to develop the necessary
reporting infrastructure, as well as the
ongoing operational costs to report.
Second, for financial institutions
subject to the final rule, the adopted
revisions to transactional coverage will
require reporting of open-end lines of
credit, and require reporting of all
closed-end home-equity loans and
reverse mortgages. To the extent that
small entities offer these products, these
additional reporting requirements will
increase operational costs as costs
increase, for example, to transcribe data,
resolve reportability questions, transfer
data to HMS, and research questions.
Third, the final rule adds additional
data points identified by the DoddFrank Act and that the Bureau believes
are necessary to close information gaps.
As part of this final rule, the Bureau is
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aligning all current and final data points
to industry data standards to the extent
practicable. The additional data points
will increase ongoing operational costs,
and impose one-time costs as small
entities modify reporting infrastructure
to incorporate additional fields. The
transition to industry data standards
will offset this cost slightly through
reduced costs of researching questions
and training.
3. Estimate of the Classes of Small
Entities That Will Be Subject to the
Requirement and the Type of
Professional Skills Necessary for the
Preparation of the Report or Record
Section 603(a)(5) of the RFA requires
an estimate of the classes of small
entities that will be subject to the
requirement. The classes of small
entities that will be subject to the
reporting, recordkeeping, and
compliance requirements of the final
rule are the same classes of small
entities that are identified in part VIII.D,
above.
Type of professional skills required.
Section 604(a)(5) of the RFA also
requires an estimate of the type of
professional skills necessary for the
preparation of the reports or records
required by the rule. The recordkeeping
and compliance requirements of the
final rule that will affect small entities
are summarized above.
Based on outreach with financial
institutions, vendors, and governmental
agency representatives, the Bureau
classified the operational activities that
financial institutions currently use for
HMDA data collection and reporting
into 18 operational ‘‘tasks’’ which can
be further grouped into four ‘‘primary
tasks.’’ These are:
1. Data collection: Transcribing data,
resolving reportability questions, and
transferring data to an HMS.
2. Reporting and resubmission:
Geocoding, standard annual edit and
internal checks, researching questions,
resolving question responses, checking
post-submission edits, filing postsubmission documents, creating
modified loan/application register,
distributing modified loan/application
register, distributing disclosure
statement, and using vendor HMS
software.
3. Compliance and internal audits:
Training, internal audits, and external
audits.
4. HMDA-related exams: Examination
preparation and examination assistance.
All of these tasks are related to the
preparation of reports or records and
most of them are performed by
compliance personnel in the
compliance department of financial
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institutions. For some financial
institutions, however, the data intake
and transcription stage could involve
loan officers or processors whose
primary function is to obtain or process
loan applications. For example, the loan
officers would take in government
monitoring information from the
applicants and input that information
into the reporting system. However, the
Bureau believes that such roles
generally do not require any additional
professional skills related to
recordkeeping or other compliance
requirements of this final rule that are
not otherwise required during the
ordinary course of business for small
entities.
The type of professional skills
required for compliance varies
depending on the particular task
involved. For example, data
transcription requires data entry skills.
Transferring data to an HMS and using
vendor HMS software requires
knowledge of computer systems and the
ability to use them. Researching and
resolving reportability questions
requires a more complex understanding
of the regulatory requirements and the
details of the relevant line of business.
Geocoding requires skills in using
geocoding software, web systems, or, in
cases where geocoding is difficult,
knowledge of the local area in which the
property is located. Standard annual
editing, internal checks, and postsubmission editing require knowledge
of the relevant data systems, data
formats, and HMDA regulatory
requirements in addition to skills in
quality control and assurance. Filing
post-submission documents, creating
modified loan/application registers, and
distributing modified loan/application
registers and disclosure statements
require skills in information creation,
dissemination, and communication.
Training, internal audits, and external
audits require communications skills,
teaching skills, and regulatory
knowledge. HMDA-related examination
preparation and examination assistance
involve knowledge of regulatory
requirements, the relevant line of
business, and the relevant data systems.
Tables 2–4 in part VII.F.2 provide
detailed estimates of the costs of
conducting each of these operational
tasks.
The Standard Occupational
Classification (SOC) code has
compliance officers listed under code
13–1041. The Bureau believes that most
of the skills required for preparation of
the reports or records related to this
final rule are the skills required for job
functions performed in this occupation.
However, the Bureau recognizes that
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66303
under this general occupational code
there is a high level of heterogeneity in
the type of skills required as well as the
corresponding labor costs incurred by
the financial institutions performing
these functions.
During the Small Business Review
Panel process, some small entity
representatives noted that, due to the
small size of their institutions, they do
not have separate compliance
departments exclusively dedicated to
HMDA compliance. Their HMDA
compliance personnel are often engaged
in other corporate compliance
functions. To the extent that the
compliance personnel of a small entity
are divided between HMDA compliance
and other functions, the skills required
for those personnel may differ from the
skills required for fully-dedicated
HMDA compliance personnel. For
instance, some small entity
representatives noted that high-level
corporate officers such as CEOs and
senior vice presidents could be directly
involved in some HMDA tasks.
The Bureau acknowledges the
possibility that certain aspects of the
final rule may require some small
entities to hire additional compliance
staff. The Bureau has no evidence that
such additional staff will possess a
qualitatively different set of professional
skills than small entity staff employed
currently for HMDA purposes. It is
possible, however, that compliance with
the final rule may emphasize certain
skills. For example, additional data
points may increase demand for skills
involved in researching questions,
standard annual editing, and postsubmission editing. On the other hand,
the Bureau is making operational
enhancements and modifications to
alleviate some of the compliance
burden. For example, the Bureau is
working to provide implementation
support similar to the support provided
for the title XIV and TILA–RESPA
Integrated Disclosure rules. The Bureau
is also improving the geocoding process,
creating a web-based HMDA data
submission and edit-check system,
developing a data-entry tool for small
financial institutions that currently use
Data Entry Software, and otherwise
streamlining the submission and editing
process to make it more efficient. Such
enhancements may also change the
relative composition of HMDA
compliance personnel and the skills
involved in recording and reporting
data. Nevertheless, the Bureau believes
that compliance will still involve the
general set of skills identified above.
The recordkeeping and reporting
requirements associated with the final
rule will also involve skills for
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information technology system
development, integration, and
maintenance. Financial institutions
often use an HMS for HMDA purposes.
An HMS could be developed by the
institution internally or purchased from
a third-party vendor. Under the final
rule, the Bureau anticipates that most of
these systems will need substantial
updates to comply with the new
requirements. It is possible that other
systems used by financial institutions,
such as loan origination systems, might
also need modification to be compatible
with the updated HMS. The
professional skills required for this onetime updating will be related to software
development, testing, system
engineering, information technology
project management, budgeting, and
operations.
Based on feedback from the small
entity representatives, many small
business HMDA reporters rely on FFIEC
DES tools and do not use a dedicated
HMS. The Bureau is working to create
a web-based HMDA data submission
and edit-check system and develop a
data-entry tool for small financial
institutions that currently use DES that
will allow financial institutions to use
the software from multiple terminals in
different branches and might reduce the
required information technology
implementation cost for small financial
institutions.
F. Description of the Steps the Agency
Has Taken To Minimize the Significant
Economic Impact on Small Entities
The Bureau understands that the new
provisions will impose a cost on small
entities, and has attempted to mitigate
the burden consistent with statutory
objectives. The Bureau has adopted a
number of modifications to particular
provisions designed to reduce burden,
which are described in the section-bysection analysis and the section 1022
analysis in parts V and VII, above.
Several of the more significant burdenreducing steps reflected in the final rule
are also described here.
First, by raising the loan-volume
threshold applicable to closed-end
mortgage loans to 25 loans for
depository institutions and adopting a
threshold of 100 open-end lines of
credit, the Bureau has provided
substantial relief to small entities falling
below these thresholds. As described in
greater detail throughout this
discussion, the Bureau estimates that
the most significant driver of costs
under HMDA is fixed costs associated
with the requirement to report, rather
than the variable costs associated with
any specific aspect of reporting, such as
the number or complexity of required
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data fields or the number of entries. For
example, the estimated annual ongoing
cost of reporting under the rule is
approximately $4,400 for a
representative tier 3 financial
institution. Just over $2,300 of this
annual ongoing cost is composed of
fixed costs. As a comparison, each
required data field accounts for
approximately $43 of this annual
ongoing cost. Thus, the closed-end
reporting threshold provides a
meaningful reduction in burden.
Second, the Bureau is providing that
financial institutions shall make
available to the public notices that
clearly convey that the institutions’
disclosure statements and modified
loan/application registers may be
obtained on the Bureau’s Web site. This
approach relieves all financial
institutions, including small entities, of
the obligation to provide the disclosure
statement and modified loan/
application register to the public
directly. It also eliminates the risks to
financial institutions from missing the
publication deadline and from errors in
preparing the modified loan/application
register that could result in the
unintended disclosure of data. The
Bureau believes that these aspects of the
final rule will be beneficial to small
entities.
Third, the Bureau adopted revisions
to transactional coverage criteria that
benefit small entities. As one example,
the final rule eliminates reporting of
non-dwelling-secured home
improvement loans. This change
reduces reporting burden to small
entities to the extent that these entities
offer such loans. As a second example,
the overall change of transactional
coverage to a dwelling-secured basis in
the proposed rule would have
extensively expanded reporting of
commercial-purpose loans and lines of
credit. In response to comments
received about the cost impact of this
proposal, some of which came from
small entities, the Bureau decided to
maintain Regulation C’s existing
purpose-based coverage test for
commercial-purpose transactions,
which maintains coverage of
commercial-purpose transactions
generally at existing levels.
Fourth, and finally, the Bureau is
making operational enhancements and
modifications to improve the data
submission process. For example, the
Bureau is working to provide
implementation support similar to the
support provided for title XIV and
TILA–RESPA Integrated Disclosure
rules. The Bureau is also improving the
geocoding process, creating a web-based
HMDA data submission and edit-check
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system, developing a data-entry tool for
small financial institutions that
currently use Data Entry Software, and
otherwise streamlining the submission
and editing process to make it more
efficient. All of these enhancements will
improve the submission and processing
of data, increase clarity, and reduce
reporting burden.
The section-by-section analysis,
section 1022 analysis, and response to
the comments from the Chief Counsel
for Advocacy of the Small Business
Administration, above, discuss the steps
that the Bureau has considered and
rejected, including adopting a higher
loan-volume threshold and exempting
small entities from the discretionary
reporting requirements or from the
reporting requirements altogether.
G. Description of the Steps the Agency
Has Taken To Minimize Any Additional
Cost of Credit for Small Entities
Section 603(d) of the RFA requires the
Bureau to consult with small entities
regarding the potential impact of the
proposed rule on the cost of credit for
small entities and related matters.547 To
satisfy these statutory requirements, the
Bureau provided notification to the
Chief Counsel for Advocacy of the SBA
in December 2013 that the Bureau
would collect the advice and
recommendations of the same small
entity representatives identified in
consultation with the Chief Counsel for
Advocacy of the SBA through the Small
Business Review Panel outreach
concerning any projected impact of the
proposed rule on the cost of credit for
small entities, as well as any significant
alternatives to the proposed rule which
accomplish the stated objectives of
applicable statutes and which minimize
any increase in the cost of credit for
small entities.548 The Bureau sought to
collect the advice and recommendations
of the small entity representatives
during the Panel Outreach Meeting
regarding these issues because, as small
financial service providers, the small
entity representatives could provide
valuable input on any such impact
related to the proposed rule.549
Following the Small Business Review
Panel and as stated in the proposal, the
Bureau believed that the rule would
have a minimal impact on the cost of
business credit. The small entity
representatives had few comments on
547 5
U.S.C. 603(d).
5 U.S.C. 603(d)(2). The Bureau provided
this notification as part of the notification and other
information provided to the Chief Counsel for
Advocacy of the SBA with respect to the Small
Business Review Panel outreach pursuant to RFA
section 609(b)(1).
549 See 5 U.S.C. 603(d)(2)(B).
548 See
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the impact on the cost of business
credit, but a few representatives noted
that they would likely have to pass
additional costs on to business
customers. The Bureau noted that the
proposed rule would cover certain
dwelling-secured loans used for
business purposes. As explained above,
the final rule does not adopt the
proposed expansion of reporting for
commercial transactions. The final rule
generally requires reporting of
consumer-purpose mortgage loans, and
exempts loans for a business or
commercial purpose unless the loan is
a home improvement loan, a home
purchase loan, or a refinancing.
Maintaining coverage of commercial
loans at its current level will minimize
the impact of the cost of credit for small
entities. The Bureau expects any such
increase to be minimal.
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IV. Paperwork Reduction Act
Under the Paperwork Reduction Act
of 1995 (PRA),550 Federal agencies are
generally required to seek approval from
the Office of Management and Budget
(OMB) for information collection
requirements prior to implementation.
Further, the Bureau may not conduct or
sponsor a collection of information
unless OMB approves the collection
under the PRA and displays a currently
valid OMB control number.
Notwithstanding any other provision of
law, no person is required to comply
with, or is subject to penalty for failure
to comply with, a collection of
information if the collection instrument
does not display a currently valid OMB
control number. The information
collection requirements contained in
Regulation C are currently approved by
OMB under OMB control number 3170–
0008.
On August 29, 2014, notice of the
proposed rule was published in the
Federal Register. The Bureau invited
comment on: (1) Whether the proposed
collection of information is necessary
for the proper performance of the
Bureau’s functions, including whether
the information has practical utility; (2)
the accuracy of the Bureau’s estimate of
the burden of the proposed information
collection; (3) ways to enhance the
quality, utility, and clarity of the
information to be collected; and (4)
ways to minimize the burden of
information collection on respondents,
including through the use of automated
collection techniques or other forms of
information technology. The comment
period for the proposal expired on
October 29, 2014.
The Bureau received almost no
comments specifically addressing the
PRA notice. One industry commenter
noted that the proposal’s total estimated
burden of 4,700,000 hours per year, if
divided evenly among all respondents,
was 752 hours, or the equivalent to a
full-time employee working 19 weeks.
The commenter was concerned with the
amount of burden represented by this
figure. As the commenter
acknowledged, 4,700,000 hours
represented the total estimated burden
hours imposed by the entire rule, not
just the amended provisions, for all
persons associated with all HMDA
reporters. For any individual financial
institution, the estimated burden hours
may be far less than the 752-hour
estimate derived by the commenter. For
example, the Bureau estimates that the
total annual burden of all reporting,
recordkeeping, and third-party
disclosure requirements for a tier 3
financial institution is approximately
134 hours per year.
As described below, the final rule
amends the information collection
requirements contained in Regulation
C.551 The information collection
requirements currently contained in
Regulation C remain in effect and are
approved by OMB under OMB control
number 3170–0008. This final rule
contains information collection
requirements that have not been
approved by the OMB and, therefore,
are not effective until OMB approval is
obtained. The revised information
collection requirements are contained in
§§ 1003.4 and 1003.5 of the final rule.
The Bureau will publish a separate
notice in the Federal Register
announcing OMB’s action on these
submissions, which will include the
OMB control number and expiration
date.
The title of this information collection
is Home Mortgage Disclosure
(Regulation C). The frequency of
response is annually, quarterly, and onoccasion. The Bureau’s regulation will
require financial institutions that meet
certain thresholds to maintain data
about originations and purchases of
mortgage loans, as well as mortgage loan
applications that do not result in
originations, to update the information
quarterly, and to report the information
annually or quarterly. Financial
institutions must also make certain
information available to the public upon
request.
The information collection
requirements in this final rule will be
mandatory.552 Certain data fields will be
551 12
550 44
U.S.C. 3501 et seq.
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CFR part 1003.
12 U.S.C. 2801 et seq.
removed or modified before they are
made available to the public, as required
by the statute and regulation. These
removals or modifications will be
determined through the Bureau’s
assessment under its balancing test of
the benefits and risks created by the
disclosure of loan-level HMDA data.
The non-removed and unmodified data
will be made publicly available and are
not considered confidential. Data not
made publicly available are considered
confidential under the Bureau’s
confidentiality regulations, 12 CFR part
1070 et seq., and the Freedom of
Information Act.553 The likely
respondents will be financial
institutions—specifically banks, savings
associations, or credit unions
(depository institutions), and for-profit
mortgage-lending institutions
(nondepository institutions)—that meet
the tests for coverage under Regulation
C. These respondents will be required
under the rule to maintain, disclose to
the public, and report to Federal
agencies, information regarding covered
loans and applications for covered
loans.
For the purposes of this PRA analysis,
the Bureau estimates that, under the
final rule, approximately 1,400
depository institutions that currently
report HMDA data will no longer be
required to report, and that
approximately 75–450 nondepository
institutions that currently do not report
HMDA data will now be required to
report. In 2013, approximately 7,200
financial institutions reported data
under HMDA. The adopted coverage
changes will reduce the number of
reporters by an estimated 950 reporters
for an estimated total of approximately
6,250. Under the final rule, the Bureau
generally will account for the
paperwork burden for all respondents
under Regulation C. Using the Bureau’s
burden estimation methodology, which
projects the estimated burden on several
types of representative respondents to
the entire market, the Bureau believes
the total estimated industry burden for
the approximately 6,250 respondents 554
subject to the rule will be approximately
8,300,000 hours per year.555 The Bureau
553 5
U.S.C. 552(b)(6).
count of 6,250 is constructed as the
number of HMDA reporters in 2013 (7,200) less the
estimated 1,400 depository institutions that will no
longer have to report under the adopted coverage
rules plus the additional 75–450 estimated
nondepository institutions that will have to begin
reporting under the adopted coverage rules.
555 The Bureau estimates that, for all HMDA
reporters, the burden hours will be approximately
6,851,000 to 9,779,000 hours per year. 8,300,000 is
approximately the mid-point of this estimated
range. These burden hour estimates include
554 The
552 See
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expects that the amount of time required
to implement each revision of the final
rule for a given institution may vary
based on the size, complexity, and
practices of the respondent.
In 2013, a total of 145 financial
institutions reported HMDA data to the
Bureau. Currently, only depository
institutions with over $10 billion in
assets and their affiliates report their
HMDA data to the Bureau. Using 2013
loan/application register sizes as a
proxy to assign these 145 financial
institutions into tiers yields 84, 39, and
22 tier 1, 2, and 3 financial institutions,
respectively.556 The Bureau estimates
that the current time burden for the
Bureau reporters is approximately
690,000 hours per year. Eighteen of
these 145 institutions reported over
60,000 HMDA loan/application register
records and will therefore be required to
report data quarterly. An estimated 74 of
these 145 institutions would exceed the
open-end reporting threshold of 100
open-end lines of credit. Including the
modifications to the information
collection requirements contained in the
final rule, and the operations
modernization measures, the Bureau
estimates that the burden for annual and
quarterly Bureau reporters will be
1,089,000 and 300,000 hours per year,
respectively, for a total estimated
burden hours of 1,389,000 per year. This
represents an increase of approximately
699,000 burden hours over the
estimated burden under the current
rule.
A. Information Collection
Requirements 557
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The Bureau believes that the
following aspects of the final rule are
information collection requirements
under the PRA: (1) The requirement that
financial institutions maintain copies of
their submitted annual loan/application
register information for three years and
record information regarding reportable
transactions for the first three quarters
of the calendar year on a quarterly basis;
(2) the requirement that financial
institutions report HMDA data
annually—and, in the case of financial
institutions that reported for the
preceding calendar year at least 60,000
covered loans and applications,
combined, excluding purchased covered
reporting of closed-end mortgage loans, open-end
lines of credit, and quarterly reporting.
556 The Bureau’s estimation methodology is fully
described in the section 1022 analysis in part VII,
above.
557 A detailed analysis of the burdens and costs
described in this part can be found in the
Paperwork Reduction Act Supporting Statement
that corresponds to this final rule. The Supporting
Statement is available at www.reginfo.gov.
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loans, for the first three quarters of the
calendar year on a quarterly basis—to
the appropriate Federal agency; and (3)
the requirement that financial
institutions provide notices that clearly
convey that disclosure statements and
modified loan/application registers may
be obtained on the Bureau’s Web site
and maintain notices of availability of
modified loan/application registers for
three years and notices of availability of
disclosure statements for five years.
1. Recordkeeping Requirements
Financial institutions are required to
maintain a copy of both the submitted
annual loan/application register and a
notice of its availability for three years.
However, financial institutions no
longer have to maintain the modified
loan/application register. Similarly,
financial institutions are required to
maintain the notice of availability of
their disclosure statements for five
years, but no longer have to maintain
the disclosure statements themselves.
Therefore, the final rule includes
changes that both increase and decrease
the documentation or non-data-specific
information that financial institutions
will have to maintain. The Bureau
believes that the net impact of these
changes on recordkeeping requirements
is minimal. In addition to recordkeeping
requirements related to the loan/
application register and disclosure
statements, the rule increases the
number of data fields, and possibly the
number of records, that financial
institutions are required to gather and
report. The Bureau estimates that the
current time burden of reporting for
Bureau reporters is approximately
296,000 hours per year. The Bureau
estimates that, with the final
amendments and the operations
modernization, the time burden for
annual and quarterly Bureau reporters
will be approximately 417,000 and
112,000 hours per year, respectively, for
a total estimate of approximately
529,000 burden hours per year. This
represents an increase of approximately
233,000 burden hours over the
estimated burden under the current
rule.
2. Reporting Requirements
HMDA is a data reporting statute, so
most provisions of the rule affect
reporting requirements, as described
above. Specifically, financial
institutions are required annually to
report HMDA data to the Bureau or to
the appropriate Federal agency,558 and
all reportable transactions must be
recorded on a loan/application register
558 12
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Frm 00180
Fmt 4701
within 30 calendar days559 after the end
of the calendar quarter in which final
action is taken. Additionally, financial
institutions that reported for the
preceding calendar year at least 60,000
covered loans and applications,
combined, excluding purchased covered
loans, will be required to report HMDA
data for the first three quarters of the
calendar year on a quarterly basis to the
Bureau or the appropriate Federal
agency.
The Bureau estimates that the current
time burden of reporting for Bureau
reporters is approximately 391,000
hours per year. The Bureau estimates
that, with the final amendments and the
operations modernization, the time
burden for annual and quarterly Bureau
reporters will be approximately 671,000
and 188,000 hours per year,
respectively, for a total estimate of
approximately 859,000 burden hours
per year. This represents an increase of
approximately 468,000 burden hours
over the estimated burden under the
current rule.
3. Disclosure Requirements
The final rule modifies Regulation C’s
requirements for financial institutions to
disclose information to the public.
Under the final rule, a financial
institution will no longer be required to
make available to the public the
modified loan/application register itself
but must instead make available a notice
informing the public that the
institution’s modified loan/application
register may be obtained on the Bureau’s
Web site. Additionally, the final rule
will require financial institutions to
make available to the public their
disclosure statements by making
available a notice that clearly conveys
that the disclosure statement may be
obtained on the Bureau’s Web site and
that includes the Bureau’s Web site
address.
The Bureau estimates that the current
time burden of disclosure for Bureau
reporters is approximately 2,700 hours
per year. The Bureau estimates that,
with the final amendments and the
operations modernization, the time
burden for annual and quarterly Bureau
reporters will be approximately 360 and
100 hours per year, respectively, for a
total estimate of approximately 460
burden hours per year. This represents
a decrease of approximately 2,240
burden hours from the estimated burden
under the current rule. Burden hours
have fallen here because financial
institutions will no longer have to make
their modified loan/application register
559 12
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4. One-Time Costs Associated With the
Adopted Information Collections
Financial institutions’ management,
legal, and compliance personnel will
likely take time to learn new reporting
requirements and assess legal and
compliance risks. Financial institutions
that use vendors for HMDA compliance
will incur one-time costs associated
with software installation,
troubleshooting, and testing. The
Bureau is aware that these activities will
require time and that the costs may be
sensitive to the time available for them.
Financial institutions that maintain
their own reporting systems will incur
one-time costs to develop, prepare, and
implement necessary modifications to
those systems. In all cases, financial
institutions will need to update training
materials to reflect new requirements
and activities and may incur certain
one-time costs for providing initial
training to current employees.
For current HMDA reporters, the
Bureau estimates that the final rule will
impose average one-time costs of $3,000
for tier 3 financial institutions, $250,000
for tier 2 financial institutions, and
560 The Bureau realizes that the impact to onetime costs varies by institution due to many factors,
such as size, operational structure, and product
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$800,000 for tier 1 financial institutions
without considering the expansion of
transactional coverage to include
additional open-end lines of credit and
reverse mortgages.560 Including the
estimated one-time costs to modify
processes and systems for home-equity
products, the Bureau estimates that the
total one-time costs will be $3,000 for
tier 3 institutions, $375,000 for tier 2
institutions, and $1,200,000 for tier 1
institutions. This yields an overall
estimated market impact of between
$725,900,000 and $1,339,000,000. Using
a 7 percent discount rate and a five-year
amortization window, the annualized
one-time, additional cost is
$177,000,000 to $326,600,000.
The revisions to the institutional
coverage criteria will require an
estimated 75–450 nondepository
institutions that are currently not
reporting under HMDA to begin
reporting. These nondepository
institutions will incur start-up costs to
develop policies and procedures,
infrastructure, and training. Based on
outreach discussions with financial
institutions prior to the proposal, the
Bureau believes that these start-up costs
will be approximately $25,000 for tier 3
financial institutions. Although
origination volumes for these 75–450
nondepository institutions are slightly
higher, the Bureau still expects most of
these nondepository institutions to be
tier 3 financial institutions. Under this
assumption, the estimated overall
market cost will be $11,300,000 (= 450
* $25,000).
complexity, and that this variance exists on a
continuum that is impossible to fully capture. As
a result, the one-time cost estimates will be high for
some financial institutions and low for others.
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B. Summary of Burden Hours
The tables below summarize the
estimated annual burdens under
Regulation C associated with the
information collections described above
for Bureau reporters and all HMDA
reporters, respectively. The tables
combine all three aspects of information
collection: Reporting, recordkeeping,
and disclosure requirements. The
Paperwork Reduction Act Supporting
Statement that corresponds with this
final rule provides more information as
to how these estimates were derived and
further detail regarding the burden
hours associated with each information
collection. The first table presents
burden hour estimates for financial
institutions that report HMDA data to
the Bureau, and the second table
provides information for all HMDA
reporters.
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or disclosure statements available to the
public.
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Authority and Issuance
For the reasons set forth above, the
Bureau amends Regulation C, 12 CFR
part 1003, as set forth below:
3. Effective January 1, 2017, § 1003.2
is amended by revising paragraph (1)(iii)
and adding paragraph (1)(v) to the
definition of ‘‘financial institution’’ to
read as follows:
■
PART 1003—HOME MORTGAGE
DISCLOSURE (REGULATION C)
1. The authority citation for part 1003
continues to read as follows:
■
Authority: 12 U.S.C. 2803, 2804, 2805,
5512, 5581.
2. Effective January 1, 2018, § 1003.1
is amended by revising paragraph (c) to
read as follows:
■
§ 1003.1
Authority, purpose, and scope.
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*
*
*
*
*
(c) Scope. This part applies to
financial institutions as defined in
§ 1003.2(g). This part requires a
financial institution to submit data to
the appropriate Federal agency for the
financial institution as defined in
§ 1003.5(a)(4), and to disclose certain
data to the public, about covered loans
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§ 1003.2
Definitions.
*
*
*
*
*
Financial institution means:
(1) * * *
(iii) In the preceding calendar year,
originated at least one home purchase
loan (excluding temporary financing
such as a construction loan) or
refinancing of a home purchase loan,
secured by a first lien on a one- to fourfamily dwelling;
*
*
*
*
*
(v) In each of the two preceding
calendar years, originated at least 25
home purchase loans, including
refinancings of home purchase loans,
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that are not excluded from this part
pursuant to § 1003.4(d); and
*
*
*
*
*
■ 4. Effective January 1, 2018, § 1003.2
is revised to read as follows:
§ 1003.2
Definitions.
In this part:
(a) Act means the Home Mortgage
Disclosure Act (HMDA) (12 U.S.C. 2801
et seq.), as amended.
(b) Application—(1) In general.
Application means an oral or written
request for a covered loan that is made
in accordance with procedures used by
a financial institution for the type of
credit requested.
(2) Preapproval programs. A request
for preapproval for a home purchase
loan, other than a home purchase loan
that will be an open-end line of credit,
a reverse mortgage, or secured by a
multifamily dwelling, is an application
under this section if the request is
reviewed under a program in which the
financial institution, after a
comprehensive analysis of the
creditworthiness of the applicant, issues
a written commitment to the applicant
valid for a designated period of time to
extend a home purchase loan up to a
specified amount. The written
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ER28OC15.010
for which the financial institution
receives applications, or that it
originates or purchases, and that are
secured by a dwelling located in a State
of the United States of America, the
District of Columbia, or the
Commonwealth of Puerto Rico.
List of Subjects in 12 CFR Part 1003
Banks, Banking, Credit unions,
Mortgages, National banks, Savings
associations, Reporting and
recordkeeping requirements.
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Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Rules and Regulations
commitment may not be subject to
conditions other than:
(i) Conditions that require the
identification of a suitable property;
(ii) Conditions that require that no
material change has occurred in the
applicant’s financial condition or
creditworthiness prior to closing; and
(iii) Limited conditions that are not
related to the financial condition or
creditworthiness of the applicant that
the financial institution ordinarily
attaches to a traditional home mortgage
application.
(c) Branch office means:
(1) Any office of a bank, savings
association, or credit union that is
considered a branch by the Federal or
State supervisory agency applicable to
that institution, excluding automated
teller machines and other free-standing
electronic terminals; and
(2) Any office of a for-profit mortgagelending institution (other than a bank,
savings association, or credit union) that
takes applications from the public for
covered loans. A for-profit mortgagelending institution (other than a bank,
savings association, or credit union) is
also deemed to have a branch office in
an MSA or in an MD, if, in the
preceding calendar year, it received
applications for, originated, or
purchased five or more covered loans
related to property located in that MSA
or MD, respectively.
(d) Closed-end mortgage loan means
an extension of credit that is secured by
a lien on a dwelling and that is not an
open-end line of credit under paragraph
(o) of this section.
(e) Covered loan means a closed-end
mortgage loan or an open-end line of
credit that is not an excluded
transaction under § 1003.3(c).
(f) Dwelling means a residential
structure, whether or not attached to
real property. The term includes but is
not limited to a detached home, an
individual condominium or cooperative
unit, a manufactured home or other
factory-built home, or a multifamily
residential structure or community.
(g) Financial institution means a
depository financial institution or a
nondepository financial institution,
where:
(1) Depository financial institution
means a bank, savings association, or
credit union that:
(i) On the preceding December 31 had
assets in excess of the asset threshold
established and published annually by
the Bureau for coverage by the Act,
based on the year-to-year change in the
average of the Consumer Price Index for
Urban Wage Earners and Clerical
Workers, not seasonally adjusted, for
each twelve month period ending in
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19:37 Oct 27, 2015
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November, with rounding to the nearest
million;
(ii) On the preceding December 31,
had a home or branch office in an MSA;
(iii) In the preceding calendar year,
originated at least one home purchase
loan or refinancing of a home purchase
loan, secured by a first lien on a one- to
four-unit dwelling;
(iv) Meets one or more of the
following two criteria:
(A) The institution is federally
insured or regulated; or
(B) Any loan referred to in paragraph
(g)(1)(iii) of this section was insured,
guaranteed, or supplemented by a
Federal agency, or was intended by the
institution for sale to the Federal
National Mortgage Association or the
Federal Home Loan Mortgage
Corporation; and
(v) Meets at least one of the following
criteria:
(A) In each of the two preceding
calendar years, originated at least 25
closed-end mortgage loans that are not
excluded from this part pursuant to
§ 1003.3(c)(1) through (10); or
(B) In each of the two preceding
calendar years, originated at least 100
open-end lines of credit that are not
excluded from this part pursuant to
§ 1003.3(c)(1) through (10); and
(2) Nondepository financial
institution means a for-profit mortgagelending institution (other than a bank,
savings association, or credit union)
that:
(i) On the preceding December 31,
had a home or branch office in an MSA;
and
(ii) Meets at least one of the following
criteria:
(A) In each of the two preceding
calendar years, originated at least 25
closed-end mortgage loans that are not
excluded from this part pursuant to
§ 1003.3(c)(1) through (10); or
(B) In each of the two preceding
calendar years, originated at least 100
open-end lines of credit that are not
excluded from this part pursuant to
§ 1003.3(c)(1) through (10).
(h) [Reserved]
(i) Home improvement loan means a
closed-end mortgage loan or an openend line of credit that is for the purpose,
in whole or in part, of repairing,
rehabilitating, remodeling, or improving
a dwelling or the real property on which
the dwelling is located.
(j) Home purchase loan means a
closed-end mortgage loan or an openend line of credit that is for the purpose,
in whole or in part, of purchasing a
dwelling.
(k) Loan/Application Register means
both the record of information required
to be collected pursuant to § 1003.4 and
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66309
the record submitted annually or
quarterly, as applicable, pursuant to
§ 1003.5(a).
(l) Manufactured home means any
residential structure as defined under
regulations of the U.S. Department of
Housing and Urban Development
establishing manufactured home
construction and safety standards (24
CFR 3280.2). For purposes of
§ 1003.4(a)(5), the term also includes a
multifamily dwelling that is a
manufactured home community.
(m) Metropolitan Statistical Area
(MSA) and Metropolitan Division (MD).
(1) Metropolitan Statistical Area or MSA
means a Metropolitan Statistical Area as
defined by the U.S. Office of
Management and Budget.
(2) Metropolitan Division (MD) means
a Metropolitan Division of an MSA, as
defined by the U.S. Office of
Management and Budget.
(n) Multifamily dwelling means a
dwelling, regardless of construction
method, that contains five or more
individual dwelling units.
(o) Open-end line of credit means an
extension of credit that:
(1) Is secured by a lien on a dwelling;
and
(2) Is an open-end credit plan as
defined in Regulation Z, 12 CFR
1026.2(a)(20), but without regard to
whether the credit is consumer credit,
as defined in § 1026.2(a)(12), is
extended by a creditor, as defined in
§ 1026.2(a)(17), or is extended to a
consumer, as defined in § 1026.2(a)(11).
(p) Refinancing means a closed-end
mortgage loan or an open-end line of
credit in which a new, dwelling-secured
debt obligation satisfies and replaces an
existing, dwelling-secured debt
obligation by the same borrower.
(q) Reverse mortgage means a closedend mortgage loan or an open-end line
of credit that is a reverse mortgage
transaction as defined in Regulation Z,
12 CFR 1026.33(a), but without regard to
whether the security interest is created
in a principal dwelling.
■ 5. Effective January 1, 2018, § 1003.3
is amended by revising the heading and
adding paragraph (c) to read as follows:
§ 1003.3 Exempt institutions and excluded
transactions.
*
*
*
*
*
(c) Excluded transactions. The
requirements of this part do not apply
to:
(1) A closed-end mortgage loan or
open-end line of credit originated or
purchased by a financial institution
acting in a fiduciary capacity;
(2) A closed-end mortgage loan or
open-end line of credit secured by a lien
on unimproved land;
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(3) Temporary financing;
(4) The purchase of an interest in a
pool of closed-end mortgage loans or
open-end lines of credit;
(5) The purchase solely of the right to
service closed-end mortgage loans or
open-end lines of credit;
(6) The purchase of closed-end
mortgage loans or open-end lines of
credit as part of a merger or acquisition,
or as part of the acquisition of all of the
assets and liabilities of a branch office
as defined in § 1003.2(c);
(7) A closed-end mortgage loan or
open-end line of credit, or an
application for a closed-end mortgage
loan or open-end line of credit, for
which the total dollar amount is less
than $500;
(8) The purchase of a partial interest
in a closed-end mortgage loan or openend line of credit;
(9) A closed-end mortgage loan or
open-end line of credit used primarily
for agricultural purposes;
(10) A closed-end mortgage loan or
open-end line of credit that is or will be
made primarily for a business or
commercial purpose, unless the closedend mortgage loan or open-end line of
credit is a home improvement loan
under § 1003.2(i), a home purchase loan
under § 1003.2(j), or a refinancing under
§ 1003.2(p);
(11) A closed-end mortgage loan, if
the financial institution originated fewer
than 25 closed-end mortgage loans in
each of the two preceding calendar
years; or
(12) An open-end line of credit, if the
financial institution originated fewer
than 100 open-end lines of credit in
each of the two preceding calendar
years.
■ 6. Effective January 1, 2018, § 1003.4
is revised to read as follows:
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§ 1003.4
Compilation of reportable data.
(a) Data format and itemization. A
financial institution shall collect data
regarding applications for covered loans
that it receives, covered loans that it
originates, and covered loans that it
purchases for each calendar year. A
financial institution shall collect data
regarding requests under a preapproval
program, as defined in § 1003.2(b)(2),
only if the preapproval request is
denied, is approved by the financial
institution but not accepted by the
applicant, or results in the origination of
a home purchase loan. The data
collected shall include the following
items:
(1)(i) A universal loan identifier (ULI)
for the covered loan or application that
can be used to identify and retrieve the
covered loan or application file. Except
for a purchased covered loan or
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19:37 Oct 27, 2015
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application described in paragraphs
(a)(1)(i)(D) and (E) of this section, the
financial institution shall assign and
report a ULI that:
(A) Begins with the financial
institution’s Legal Entity Identifier (LEI)
that is issued by:
(1) A utility endorsed by the LEI
Regulatory Oversight Committee; or
(2) A utility endorsed or otherwise
governed by the Global LEI Foundation
(GLEIF) (or any successor of the GLEIF)
after the GLEIF assumes operational
governance of the global LEI system.
(B) Follows the LEI with up to 23
additional characters to identify the
covered loan or application, which:
(1) May be letters, numerals, or a
combination of letters and numerals;
(2) Must be unique within the
financial institution; and
(3) Must not include any information
that could be used to directly identify
the applicant or borrower; and
(C) Ends with a two-character check
digit, as prescribed in appendix C to this
part.
(D) For a purchased covered loan that
any financial institution has previously
assigned or reported with a ULI under
this part, the financial institution that
purchases the covered loan must use the
ULI that was assigned or previously
reported for the covered loan.
(E) For an application that was
previously reported with a ULI under
this part and that results in an
origination during the same calendar
year that is reported in a subsequent
reporting period pursuant to
§ 1003.5(a)(1)(ii), the financial
institution may report the same ULI for
the origination that was previously
reported for the application.
(ii) Except for purchased covered
loans, the date the application was
received or the date shown on the
application form.
(2) Whether the covered loan is, or in
the case of an application would have
been, insured by the Federal Housing
Administration, guaranteed by the
Veterans Administration, or guaranteed
by the Rural Housing Service or the
Farm Service Agency.
(3) Whether the covered loan is, or the
application is for, a home purchase
loan, a home improvement loan, a
refinancing, a cash-out refinancing, or
for a purpose other than home purchase,
home improvement, refinancing, or
cash-out refinancing.
(4) Whether the application or
covered loan involved a request for a
preapproval of a home purchase loan
under a preapproval program.
(5) Whether the construction method
for the dwelling related to the property
identified in paragraph (a)(9) of this
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Fmt 4701
Sfmt 4700
section is site-built or a manufactured
home.
(6) Whether the property identified in
paragraph (a)(9) of this section is or will
be used by the applicant or borrower as
a principal residence, as a second
residence, or as an investment property.
(7) The amount of the covered loan or
the amount applied for, as applicable.
(i) For a closed-end mortgage loan,
other than a purchased loan, an
assumption, or a reverse mortgage, the
amount to be repaid as disclosed on the
legal obligation. For a purchased closedend mortgage loan or an assumption of
a closed-end mortgage loan, the unpaid
principal balance at the time of
purchase or assumption.
(ii) For an open-end line of credit,
other than a reverse mortgage open-end
line of credit, the amount of credit
available to the borrower under the
terms of the plan.
(iii) For a reverse mortgage, the initial
principal limit, as determined pursuant
to section 255 of the National Housing
Act (12 U.S.C. 1715z–20) and
implementing regulations and
mortgagee letters issued by the U.S.
Department of Housing and Urban
Development.
(8) The following information about
the financial institution’s action:
(i) The action taken by the financial
institution, recorded as one of the
following:
(A) Whether a covered loan was
originated or purchased;
(B) Whether an application for a
covered loan that did not result in the
origination of a covered loan was
approved but not accepted, denied,
withdrawn by the applicant, or closed
for incompleteness; and
(C) Whether a preapproval request
that did not result in the origination of
a home purchase loan was denied or
approved but not accepted.
(ii) The date of the action taken by the
financial institution.
(9) The following information about
the location of the property securing the
covered loan or, in the case of an
application, proposed to secure the
covered loan:
(i) The property address; and
(ii) If the property is located in an
MSA or MD in which the financial
institution has a home or branch office,
or if the institution is subject to
paragraph (e) of this section, the
location of the property by:
(A) State;
(B) County; and
(C) Census tract if the property is
located in a county with a population of
more than 30,000 according to the most
recent decennial census conducted by
the U.S. Census Bureau.
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(10) The following information about
the applicant or borrower:
(i) Ethnicity, race, and sex, and
whether this information was collected
on the basis of visual observation or
surname;
(ii) Age; and
(iii) Except for covered loans or
applications for which the credit
decision did not consider or would not
have considered income, the gross
annual income relied on in making the
credit decision or, if a credit decision
was not made, the gross annual income
relied on in processing the application.
(11) The type of entity purchasing a
covered loan that the financial
institution originates or purchases and
then sells within the same calendar
year.
(12)(i) For covered loans subject to
Regulation Z, 12 CFR part 1026, other
than assumptions, purchased covered
loans, and reverse mortgages, the
difference between the covered loan’s
annual percentage rate and the average
prime offer rate for a comparable
transaction as of the date the interest
rate is set.
(ii) ‘‘Average prime offer rate’’ means
an annual percentage rate that is derived
from average interest rates, points, and
other loan pricing terms currently
offered to consumers by a representative
sample of creditors for mortgage loans
that have low-risk pricing
characteristics. The Bureau publishes
average prime offer rates for a broad
range of types of transactions in tables
updated at least weekly, as well as the
methodology the Bureau uses to derive
these rates.
(13) For covered loans subject to the
Home Ownership and Equity Protection
Act of 1994, as implemented in
Regulation Z, 12 CFR 1026.32, whether
the covered loan is a high-cost mortgage
under Regulation Z, 12 CFR 1026.32(a).
(14) The lien status (first or
subordinate lien) of the property
identified under paragraph (a)(9) of this
section.
(15)(i) Except for purchased covered
loans, the credit score or scores relied
on in making the credit decision and the
name and version of the scoring model
used to generate each credit score.
(ii) For purposes of this paragraph
(a)(15), ‘‘credit score’’ has the meaning
set forth in 15 U.S.C. 1681g(f)(2)(A).
(16) The principal reason or reasons
the financial institution denied the
application, if applicable.
(17) For covered loans subject to
Regulation Z, 12 CFR 1026.43(c), the
following information:
(i) If a disclosure is provided for the
covered loan pursuant to Regulation Z,
12 CFR 1026.19(f), the amount of total
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loan costs, as disclosed pursuant to
Regulation Z, 12 CFR 1026.38(f)(4); or
(ii) If the covered loan is not subject
to the disclosure requirements in
Regulation Z, 12 CFR 1026.19(f), and is
not a purchased covered loan, the total
points and fees charged in connection
with the covered loan, expressed in
dollars and calculated pursuant to
Regulation Z, 12 CFR 1026.32(b)(1).
(18) For covered loans subject to the
disclosure requirements in Regulation
Z, 12 CFR 1026.19(f), the total of all
itemized amounts that are designated
borrower-paid at or before closing, as
disclosed pursuant to Regulation Z, 12
CFR 1026.38(f)(1).
(19) For covered loans subject to the
disclosure requirements in Regulation
Z, 12 CFR 1026.19(f), the points paid to
the creditor to reduce the interest rate,
expressed in dollars, as described in
Regulation Z, 12 CFR 1026.37(f)(1)(i),
and disclosed pursuant to Regulation Z,
12 CFR 1026.38(f)(1).
(20) For covered loans subject to the
disclosure requirements in Regulation
Z, 12 CFR 1026.19(f), the amount of
lender credits, as disclosed pursuant to
Regulation Z, 12 CFR 1026.38(h)(3).
(21) The interest rate applicable to the
approved application, or to the covered
loan at closing or account opening.
(22) For covered loans or applications
subject to Regulation Z, 12 CFR part
1026, other than reverse mortgages or
purchased covered loans, the term in
months of any prepayment penalty, as
defined in Regulation Z, 12 CFR
1026.32(b)(6)(i) or (ii), as applicable.
(23) Except for purchased covered
loans, the ratio of the applicant’s or
borrower’s total monthly debt to the
total monthly income relied on in
making the credit decision.
(24) Except for purchased covered
loans, the ratio of the total amount of
debt secured by the property to the
value of the property relied on in
making the credit decision.
(25) The scheduled number of months
after which the legal obligation will
mature or terminate or would have
matured or terminated.
(26) The number of months, or
proposed number of months in the case
of an application, until the first date the
interest rate may change after closing or
account opening.
(27) Whether the contractual terms
include or would have included any of
the following:
(i) A balloon payment as defined in
Regulation Z, 12 CFR 1026.18(s)(5)(i);
(ii) Interest-only payments as defined
in Regulation Z, 12 CFR
1026.18(s)(7)(iv);
(iii) A contractual term that would
cause the covered loan to be a negative
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amortization loan as defined in
Regulation Z, 12 CFR 1026.18(s)(7)(v);
or
(iv) Any other contractual term that
would allow for payments other than
fully amortizing payments, as defined in
Regulation Z, 12 CFR 1026.43(b)(2),
during the loan term, other than the
contractual terms described in this
paragraph (a)(27)(i), (ii), and (iii).
(28) The value of the property
securing the covered loan or, in the case
of an application, proposed to secure
the covered loan relied on in making the
credit decision.
(29) If the dwelling related to the
property identified in paragraph (a)(9) of
this section is a manufactured home and
not a multifamily dwelling, whether the
covered loan is, or in the case of an
application would have been, secured
by a manufactured home and land, or by
a manufactured home and not land.
(30) If the dwelling related to the
property identified in paragraph (a)(9) of
this section is a manufactured home and
not a multifamily dwelling, whether the
applicant or borrower:
(i) Owns the land on which it is or
will be located or, in the case of an
application, did or would have owned
the land on which it would have been
located, through a direct or indirect
ownership interest; or
(ii) Leases or, in the case of an
application, leases or would have leased
the land through a paid or unpaid
leasehold.
(31) The number of individual
dwelling units related to the property
securing the covered loan or, in the case
of an application, proposed to secure
the covered loan.
(32) If the property securing the
covered loan or, in the case of an
application, proposed to secure the
covered loan includes a multifamily
dwelling, the number of individual
dwelling units related to the property
that are income-restricted pursuant to
Federal, State, or local affordable
housing programs.
(33) Except for purchased covered
loans, the following information about
the application channel of the covered
loan or application:
(i) Whether the applicant or borrower
submitted the application for the
covered loan directly to the financial
institution; and
(ii) Whether the obligation arising
from the covered loan was, or in the
case of an application, would have been
initially payable to the financial
institution.
(34) For a covered loan or application,
the unique identifier assigned by the
Nationwide Mortgage Licensing System
and Registry for the mortgage loan
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originator, as defined in Regulation G,
12 CFR 1007.102, or Regulation H, 12
CFR 1008.23, as applicable.
(35)(i) Except for purchased covered
loans, the name of the automated
underwriting system used by the
financial institution to evaluate the
application and the result generated by
that automated underwriting system.
(ii) For purposes of this paragraph
(a)(35), an ‘‘automated underwriting
system’’ means an electronic tool
developed by a securitizer, Federal
government insurer, or Federal
government guarantor that provides a
result regarding the credit risk of the
applicant and whether the covered loan
is eligible to be originated, purchased,
insured, or guaranteed by that
securitizer, Federal government insurer,
or Federal government guarantor.
(36) Whether the covered loan is, or
the application is for, a reverse
mortgage.
(37) Whether the covered loan is, or
the application is for, an open-end line
of credit.
(38) Whether the covered loan is, or
the application is for a covered loan that
will be, made primarily for a business
or commercial purpose.
(b) Collection of data on ethnicity,
race, sex, age, and income. (1) A
financial institution shall collect data
about the ethnicity, race, and sex of the
applicant or borrower as prescribed in
appendix B to this part.
(2) Ethnicity, race, sex, age, and
income data may but need not be
collected for covered loans purchased
by a financial institution.
(c)–(d) [Reserved]
(e) Data reporting for banks and
savings associations that are required to
report data on small business, small
farm, and community development
lending under CRA. Banks and savings
associations that are required to report
data on small business, small farm, and
community development lending under
regulations that implement the
Community Reinvestment Act of 1977
(12 U.S.C. 2901 et seq.) shall also collect
the information required by paragraph
4(a)(9) of this section for property
located outside MSAs and MDs in
which the institution has a home or
branch office, or outside any MSA.
(f) Quarterly recording of data. A
financial institution shall record the
data collected pursuant to this section
on a loan/application register within 30
calendar days after the end of the
calendar quarter in which final action is
taken (such as origination or purchase of
a covered loan, sale of a covered loan in
the same calendar year it is originated
or purchased, or denial or withdrawal of
an application).
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7. Effective January 1, 2018, § 1003.5
is amended by revising paragraphs (b)
through (f) to read as follows:
■
§ 1003.5
Disclosure and reporting.
*
*
*
*
*
(b) Disclosure statement. (1) The
Federal Financial Institutions
Examination Council (FFIEC) will make
available a disclosure statement based
on the data each financial institution
submits for the preceding calendar year
pursuant to paragraph (a) of this section.
(2) No later than three business days
after receiving notice from the FFIEC
that a financial institution’s disclosure
statement is available, the financial
institution shall make available to the
public upon request at its home office,
and each branch office physically
located in each MSA and each MD, a
written notice that clearly conveys that
the institution’s disclosure statement
may be obtained on the Bureau’s Web
site at www.consumerfinance.gov/hmda.
(c) Modified loan/application register.
(1) A financial institution shall make
available to the public upon request at
its home office, and each branch office
physically located in each MSA and
each MD, a written notice that clearly
conveys that the institution’s loan/
application register, as modified by the
Bureau to protect applicant and
borrower privacy, may be obtained on
the Bureau’s Web site at
www.consumerfinance.gov/hmda.
(2) A financial institution shall make
available the notice required by
paragraph (c)(1) of this section following
the calendar year for which the data are
collected.
(d) Availability of written notices. (1)
A financial institution shall make the
notice required by paragraph (c) of this
section available to the public for a
period of three years and the notice
required by paragraph (b)(2) of this
section available to the public for a
period of five years. An institution shall
make these notices available during the
hours the office is normally open to the
public for business.
(2) A financial institution may make
available to the public, at its discretion
and in addition to the written notices
required by paragraphs (b)(2) or (c)(1) of
this section, as applicable, its disclosure
statement or its loan/application
register, as modified by the Bureau to
protect applicant and borrower privacy.
A financial institution may impose a
reasonable fee for any cost incurred in
providing or reproducing these data.
(e) Posted notice of availability of
data. A financial institution shall post a
general notice about the availability of
its HMDA data in the lobby of its home
office and of each branch office
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physically located in each MSA and
each MD. This notice must clearly
convey that the institution’s HMDA data
is available on the Bureau’s Web site at
www.consumerfinance.gov/hmda.
(f) Aggregated data. Using data
submitted by financial institutions
pursuant to paragraph (a) of this section,
the FFIEC will make available aggregate
data for each MSA and MD, showing
lending patterns by property location,
age of housing stock, and income level,
sex, ethnicity, and race.
■ 8. Effective January 1, 2019, § 1003.5
is revised to read as follows:
§ 1003.5
Disclosure and reporting.
(a) Reporting to agency. (1)(i) Annual
reporting. By March 1 following the
calendar year for which data are
collected and recorded as required by
§ 1003.4, a financial institution shall
submit its annual loan/application
register in electronic format to the
appropriate Federal agency at the
address identified by such agency. An
authorized representative of the
financial institution with knowledge of
the data submitted shall certify to the
accuracy and completeness of data
submitted pursuant to this paragraph
(a)(1)(i). The financial institution shall
retain a copy of its annual loan/
application register submitted pursuant
to this paragraph (a)(1)(i) for its records
for at least three years.
(ii) [Reserved]
(iii) When the last day for submission
of data prescribed under this paragraph
(a)(1) falls on a Saturday or Sunday, a
submission shall be considered timely if
it is submitted on the next succeeding
Monday.
(2) A financial institution that is a
subsidiary of a bank or savings
association shall complete a separate
loan/application register. The subsidiary
shall submit the loan/application
register, directly or through its parent, to
the appropriate Federal agency for the
subsidiary’s parent at the address
identified by the agency.
(3) A financial institution shall
provide with its submission:
(i) Its name;
(ii) The calendar year the data
submission covers pursuant to
paragraph (a)(1)(i) of this section or
calendar quarter and year the data
submission covers pursuant to
paragraph (a)(1)(ii) of this section;
(iii) The name and contact
information of a person who may be
contacted with questions about the
institution’s submission;
(iv) Its appropriate Federal agency;
(v) The total number of entries
contained in the submission;
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(vi) Its Federal Taxpayer
Identification number; and
(vii) Its Legal Entity Identifier (LEI) as
described in § 1003.4(a)(1)(i)(A).
(4) For purposes of paragraph (a) of
this section, ‘‘appropriate Federal
agency’’ means the appropriate agency
for the financial institution as
determined pursuant to section
304(h)(2) of the Home Mortgage
Disclosure Act (12 U.S.C. 2803(h)(2)) or,
with respect to a financial institution
subject to the Bureau’s supervisory
authority under section 1025(a) of the
Consumer Financial Protection Act of
2010 (12 U.S.C. 5515(a)), the Bureau.
(5) Procedures for the submission of
data pursuant to paragraph (a) of this
section are available at
www.consumerfinance.gov/hmda.
(b) Disclosure statement. (1) The
Federal Financial Institutions
Examination Council (FFIEC) will make
available a disclosure statement based
on the data each financial institution
submits for the preceding calendar year
pursuant to paragraph (a)(1)(i) of this
section.
(2) No later than three business days
after receiving notice from the FFIEC
that a financial institution’s disclosure
statement is available, the financial
institution shall make available to the
public upon request at its home office,
and each branch office physically
located in each MSA and each MD, a
written notice that clearly conveys that
the institution’s disclosure statement
may be obtained on the Bureau’s Web
site at www.consumerfinance.gov/hmda.
(c) Modified loan/application register.
(1) A financial institution shall make
available to the public upon request at
its home office, and each branch office
physically located in each MSA and
each MD, a written notice that clearly
conveys that the institution’s loan/
application register, as modified by the
Bureau to protect applicant and
borrower privacy, may be obtained on
the Bureau’s Web site at
www.consumerfinance.gov/hmda.
(2) A financial institution shall make
available the notice required by
paragraph (c)(1) of this section following
the calendar year for which the data are
collected.
(d) Availability of written notices. (1)
A financial institution shall make the
notice required by paragraph (c) of this
section available to the public for a
period of three years and the notice
required by paragraph (b)(2) of this
section available to the public for a
period of five years. An institution shall
make these notices available during the
hours the office is normally open to the
public for business.
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(2) A financial institution may make
available to the public, at its discretion
and in addition to the written notices
required by paragraphs (b)(2) or (c)(1) of
this section, as applicable, its disclosure
statement or its loan/application
register, as modified by the Bureau to
protect applicant and borrower privacy.
A financial institution may impose a
reasonable fee for any cost incurred in
providing or reproducing these data.
(e) Posted notice of availability of
data. A financial institution shall post a
general notice about the availability of
its HMDA data in the lobby of its home
office and of each branch office
physically located in each MSA and
each MD. This notice must clearly
convey that the institution’s HMDA data
is available on the Bureau’s Web site at
www.consumerfinance.gov/hmda.
(f) Aggregated data. Using data
submitted by financial institutions
pursuant to paragraph (a)(1)(i) of this
section, the FFIEC will make available
aggregate data for each MSA and MD,
showing lending patterns by property
location, age of housing stock, and
income level, sex, ethnicity, and race.
■ 9. Effective January 1, 2020, § 1003.5
is amended by adding paragraph
(a)(1)(ii) to read as follows:
§ 1003.5
Disclosure and reporting.
(a) * * *
(1) * * *
(ii) Quarterly reporting. Within 60
calendar days after the end of each
calendar quarter except the fourth
quarter, a financial institution that
reported for the preceding calendar year
at least 60,000 covered loans and
applications, combined, excluding
purchased covered loans, shall submit
to the appropriate Federal agency its
loan/application register containing all
data required to be recorded for that
quarter pursuant to § 1003.4(f). The
financial institution shall submit its
quarterly loan/application register
pursuant to this paragraph (a)(1)(ii) in
electronic format at the address
identified by the appropriate Federal
agency for the institution.
*
*
*
*
*
■ 10. Effective January 1, 2019, § 1003.6
is revised to read as follows:
§ 1003.6
Enforcement.
(a) Administrative enforcement. A
violation of the Act or this part is
subject to administrative sanctions as
provided in section 305 of the Act (12
U.S.C. 2804), including the imposition
of civil money penalties, where
applicable. Compliance is enforced by
the agencies listed in section 305 of the
Act.
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66313
(b) Bona fide errors. (1) An error in
compiling or recording data for a
covered loan or application is not a
violation of the Act or this part if the
error was unintentional and occurred
despite the maintenance of procedures
reasonably adapted to avoid such an
error.
(2) An incorrect entry for a census
tract number is deemed a bona fide
error, and is not a violation of the Act
or this part, provided that the financial
institution maintains procedures
reasonably adapted to avoid such an
error.
(c) Quarterly recording and reporting.
(1) If a financial institution makes a
good-faith effort to record all data
required to be recorded pursuant to
§ 1003.4(f) fully and accurately within
30 calendar days after the end of each
calendar quarter, and some data are
nevertheless inaccurate or incomplete,
the inaccuracy or omission is not a
violation of the Act or this part provided
that the institution corrects or completes
the data prior to submitting its annual
loan/application register pursuant to
§ 1003.5(a)(1)(i).
(2) If a financial institution required
to comply with § 1003.5(a)(1)(ii) makes
a good-faith effort to report all data
required to be reported pursuant to
§ 1003.5(a)(1)(ii) fully and accurately
within 60 calendar days after the end of
each calendar quarter, and some data
are nevertheless inaccurate or
incomplete, the inaccuracy or omission
is not a violation of the Act or this part
provided that the institution corrects or
completes the data prior to submitting
its annual loan/application register
pursuant to § 1003.5(a)(1)(i).
■ 11. Effective January 1, 2018, in
Appendix A to Part 1003:
■ a. New subheading Transition
Requirements for Data Collected in 2017
and Submitted in 2018 and paragraph 1
under that subheading are added
immediately after the ‘‘Paperwork
Reduction Act Notice’’ paragraph.
■ b. Paragraphs II.A and B are revised,
and paragraph II.C is added.
The additions and revisions read as
follows:
Appendix A to Part 1003—Form and
Instructions for Completion of HMDA
Loan/Application Register
Paperwork Reduction Act Notice
*
*
*
*
*
Transition Requirements for Data Collected
in 2017 and Submitted in 2018
1. The instructions for completion of the
loan/application register in part I of this
appendix applies to data collected during the
2017 calendar year and reported in 2018. Part
I of this appendix does not apply to data
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collected pursuant to the amendments to
Regulation C effective January 1, 2018.
*
*
*
*
*
II. Appropriate Federal Agencies for HMDA
Reporting
A. A financial institution shall submit its
loan/application register in electronic format
to the appropriate Federal agency at the
address identified by such agency. The
appropriate Federal agency for a financial
institution is determined pursuant to section
304(h)(2) of the Home Mortgage Disclosure
Act (12 U.S.C. 2803(h)(2)) or, with respect to
a financial institution subject to the Bureau’s
supervisory authority under section 1025(a)
of the Consumer Financial Protection Act of
2010 (12 U.S.C. 5515(a)), is the Bureau.
B. Procedures for the submission of the
loan/application register are available at
www.consumerfinance.gov/hmda.
C. An authorized representative of the
financial institution with knowledge of the
data submitted shall certify to the accuracy
and completeness of the data submitted.
*
*
*
*
*
Appendix A to Part 1003—[Removed
and Reserved]
12. Effective January 1, 2019,
Appendix A to Part 1003 is removed
and reserved.
■ 13. Effective January 1, 2018,
Appendix B to Part 1003 is revised to
read as follows:
■
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Appendix B to Part 1003—Form and
Instructions for Data Collection on
Ethnicity, Race, and Sex
You may list questions regarding the
ethnicity, race, and sex of the applicant on
your loan application form, or on a separate
form that refers to the application. (See the
sample data collection form below for model
language.)
1. You must ask the applicant for this
information (but you cannot require the
applicant to provide it) whether the
application is taken in person, by mail or
telephone, or on the internet. For
applications taken by telephone, you must
state the information in the collection form
orally, except for that information which
pertains uniquely to applications taken in
writing, for example, the italicized language
in the sample data collection form.
2. Inform the applicant that Federal law
requires this information to be collected in
order to protect consumers and to monitor
compliance with Federal statutes that
prohibit discrimination against applicants on
these bases. Inform the applicant that if the
information is not provided where the
application is taken in person, you are
required to note the information on the basis
of visual observation or surname.
3. If you accept an application through
electronic media with a video component,
you must treat the application as taken in
person. If you accept an application through
electronic media without a video component
(for example, facsimile), you must treat the
application as accepted by mail.
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4. For purposes of § 1003.4(a)(10)(i), if a
covered loan or application includes a
guarantor, you do not report the guarantor’s
ethnicity, race, and sex.
5. If there are no co-applicants, you must
report that there is no co-applicant. If there
is more than one co-applicant, you must
provide the ethnicity, race, and sex only for
the first co-applicant listed on the collection
form. A co-applicant may provide an absent
co-applicant’s ethnicity, race, and sex on
behalf of the absent co-applicant. If the
information is not provided for an absent coapplicant, you must report ‘‘information not
provided by applicant in mail, internet, or
telephone application’’ for the absent coapplicant.
6. When you purchase a covered loan and
you choose not to report the applicant’s or
co-applicant’s ethnicity, race, and sex, you
must report that the requirement is not
applicable.
7. You must report that the requirement to
report the applicant’s or co-applicant’s
ethnicity, race, and sex is not applicable
when the applicant or co-applicant is not a
natural person (for example, a corporation,
partnership, or trust). For example, for a
transaction involving a trust, you must report
that the requirement to report the applicant’s
ethnicity, race, and sex is not applicable if
the trust is the applicant. On the other hand,
if the applicant is a natural person, and is the
beneficiary of a trust, you must report the
applicant’s ethnicity, race, and sex.
8. You must report the ethnicity, race, and
sex of an applicant as provided by the
applicant. For example, if an applicant
selects the ‘‘Mexican’’ box the institution
reports ‘‘Mexican’’ for the ethnicity of the
applicant. If an applicant selects the ‘‘Asian’’
box the institution reports ‘‘Asian’’ for the
race of the applicant. Only an applicant may
self-identify as being of a particular Hispanic
or Latino subcategory (Mexican, Puerto
Rican, Cuban, Other Hispanic or Latino) or of
a particular Asian subcategory (Asian Indian,
Chinese, Filipino, Japanese, Korean,
Vietnamese, Other Asian) or of a particular
Native Hawaiian or Other Pacific Islander
subcategory (Native Hawaiian, Guamanian or
Chamorro, Samoan, Other Pacific Islander) or
of a particular American Indian or Alaska
Native enrolled or principal tribe.
9. You must offer the applicant the option
of selecting more than one ethnicity or race.
If an applicant selects more than one
ethnicity or race, you must report each
selected designation, subject to the limits
described below.
i. Ethnicity—Aggregate categories and
subcategories. There are two aggregate
ethnicity categories: Hispanic or Latino; and
Not Hispanic or Latino. If an applicant
selects Hispanic or Latino, the applicant may
also select up to four ethnicity subcategories:
Mexican; Puerto Rican; Cuban; and Other
Hispanic or Latino. You must report each
aggregate ethnicity category and each
ethnicity subcategory selected by the
applicant.
ii. Ethnicity—Other subcategories. If an
applicant selects the Other Hispanic or
Latino ethnicity subcategory, the applicant
may also provide a particular Hispanic or
Latino ethnicity not listed in the standard
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subcategories. In such a case, you must report
both the selection of Other Hispanic or
Latino and the additional information
provided by the applicant.
iii. Race—Aggregate categories and
subcategories. There are five aggregate race
categories: American Indian or Alaska
Native; Asian; Black or African American;
Native Hawaiian or Other Pacific Islander;
and White. The Asian and the Native
Hawaiian or Other Pacific Islander aggregate
categories have seven and four subcategories,
respectively. The Asian race subcategories
are: Asian Indian; Chinese, Filipino;
Japanese; Korean; Vietnamese; and Other
Asian. The Native Hawaiian or Other Pacific
Islander race subcategories are: Native
Hawaiian; Guamanian or Chamorro; Samoan;
and Other Pacific Islander. You must report
every aggregate race category selected by the
applicant. If the applicant also selects one or
more race subcategories, you must report
each race subcategory selected by the
applicant, except that you must not report
more than a total of five aggregate race
categories and race subcategories combined.
For example, if the applicant selects all five
aggregate race categories and also selects
some race subcategories, you report only the
five aggregate race categories. On the other
hand, if the applicant selects the White,
Asian, and Native Hawaiian or Other Pacific
Islander aggregate race categories, and the
applicant also selects the Korean,
Vietnamese, and Samoan race subcategories,
you must report White, Asian, Native
Hawaiian or Other Pacific Islander, and any
two, at your option, of the three race
subcategories selected by the applicant. In
this example, you must report White, Asian,
and Native Hawaiian or Other Pacific
Islander, and in addition you must report (at
your option) either Korean and Vietnamese,
Korean and Samoan, or Vietnamese and
Samoan. To determine how to report an
Other race subcategory for purposes of the
five-race maximum, see paragraph 9.iv
below.
iv. Race—Other subcategories. If an
applicant selects the Other Asian race
subcategory or the Other Pacific Islander race
subcategory, the applicant may also provide
a particular Other Asian or Other Pacific
Islander race not listed in the standard
subcategories. In either such case, you must
report both the selection of Other Asian or
Other Pacific Islander, as applicable, and the
additional information provided by the
applicant, subject to the five-race maximum.
In all such cases where the applicant has
selected an Other race subcategory and also
provided additional information, for
purposes of the maximum of five reportable
race categories and race subcategories
combined set forth above, the Other race
subcategory and additional information
provided by the applicant together constitute
only one selection. Thus, using the same
facts in the example offered in paragraph 9.iii
above, if the applicant also selected Other
Asian and entered ‘‘Thai’’ in the space
provided, Other Asian and Thai are
considered one selection. You must report
any two (at your option) of the four race
subcategories selected by the applicant,
Korean, Vietnamese, Other Asian-Thai, and
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Samoan, in addition to the three aggregate
race categories selected by the applicant.
10. If the applicant chooses not to provide
the information for an application taken in
person, note this fact on the collection form
and then collect the applicant’s ethnicity,
race, and sex on the basis of visual
observation or surname. You must report
whether the applicant’s ethnicity, race, and
sex was collected on the basis of visual
observation or surname. When you collect an
applicant’s ethnicity, race, and sex on the
basis of visual observation or surname, you
must select from the following aggregate
categories: Ethnicity (Hispanic or Latino; not
Hispanic or Latino); race (American Indian or
Alaska Native; Asian; Black or African
American; Native Hawaiian or Other Pacific
Islander; White); sex (male; female).
11. If the applicant declines to answer
these questions by checking the ‘‘I do not
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19:37 Oct 27, 2015
Jkt 238001
wish to provide this information’’ box on an
application that is taken by mail or on the
internet, or declines to provide this
information by stating orally that he or she
does not wish to provide this information on
an application that is taken by telephone, you
must report ‘‘information not provided by
applicant in mail, internet, or telephone
application.’’
12. If the applicant begins an application
by mail, internet, or telephone, and does not
provide the requested information on the
application but does not check or select the
‘‘I do not wish to provide this information’’
box on the application, and the applicant
meets in person with you to complete the
application, you must request the applicant’s
ethnicity, race, and sex. If the applicant does
not provide the requested information during
the in-person meeting, you must collect the
information on the basis of visual observation
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66315
or surname. If the meeting occurs after the
application process is complete, for example,
at closing or account opening, you are not
required to obtain the applicant’s ethnicity,
race, and sex.
13. When an applicant provides the
requested information for some but not all
fields, you report the information that was
provided by the applicant, whether partial or
complete. If an applicant provides partial or
complete information on ethnicity, race, and
sex and also checks the ‘‘I do not wish to
provide this information’’ box on an
application that is taken by mail or on the
internet, or makes that selection when
applying by telephone, you must report the
information on ethnicity, race, and sex that
was provided by the applicant.
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Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Rules and Regulations
SAMPLE DATA COLLECTION FORM
DEMOGRAPHIC INFORMATION OF APPUCANT AND CQ..APPLICANT
The PIII'POM' r;A cdlet:ling 11111 infomullion is to help -ure that
all applic:.nis mo tr.at.d fairly and 111111 the housing ne.OS r;A
comm.Jnllies and neighborhoods are being fullllfed. For
residential mortgage lending, Federal law requires that we ask
applloants for their damogaphlc Information (a1hnic!ty, raoe, and
sex) In order to monitor our comptiencewith equal credit
oppenunlty, fair housing, and horne mortgage disclosure taws.
You are not required to provide this information, but are
enoourag~ to do so. You may select one or mer. 'Hispanic or
Latino" origins, and one or more designations for 'Race:
The taw !lfovidn thlll we may not diSQiiminat. on the buis of
this information, or on whether you choose to provide H.
However, if you choose not to provide the Information and you
have madelhisappfica!ion In person, Federal regulations require
us to note your a1hnicHy, race, and sex on the basis of\llsuaJ
obseJVation or surname. If you do not l!deh to provide some or all
of lhis Information, please check below.
Applicant:
eo.Appllcant:
l!dmlclty:
o Hispanic or Latil'lo- Check one or mere
o Mexican
o Puerto Rioan
o Cuban
o Other Hispanic or Latino- Print origin, ll:tr exa,_,
Alpntfnean, Cobm!llen, Dominican, Nlcsraguan,
Sel\ladoren,
end so on:
l!lhnlclty:
o HISj)lll ic or Latino
Sjl&rd,
a
Mexloan
o Puerto Rioan
OCuban
o Other Hilplllic or Latino- Prfnr origin, for exaJ11!)1e,
Argentinean, ColombJan, Domlnlclln, Nicaraguan,
Selwdorlln.
sjT em/
so on:
111111111
IIIII!!
l!llllllll
o Not Hispanic or Llll!no
a 1do not wish to provide this Information
1111111
o Not Hispanic or Latino
Race: Check one or more
Race:
a Amelioan Indian or Alaska Native -
Print name of61!1011ed
ortttfrlbe:
I I
o Asian
I I I I I I I I I I I I I I I
o Asian !ndan
o Chinese
o
I do not wish to pr2014
19:37 Oct 27, 2015
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the International Standard ISO/IEC
7064:2003, which is published by the
International Organization for
Standardization (ISO).
©ISO. This material is reproduced from
ISO/IEC 7064:2003 with permission of the
American National Standards Institute
(ANSI) on behalf of ISO. All rights reserved.
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Was the race of the applicant eollact~ on the basis
otvlluat ob$eM~IIon or1umame?
Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Rules and Regulations
Generating A Check Digit
Step 1: Starting with the leftmost character
in the string that consists of the combination
of the Legal Entity Identifier (LEI) pursuant
to § 1003.4(a)(1)(i)(A) and the additional
characters identifying the covered loan or
application pursuant to § 1003.4(a)(1)(i)(B),
replace each alphabetic character with
numbers in accordance with Table I below to
obtain all numeric values in the string.
Table I—Alphabetic To Numeric Conversion
Table
The alphabetic characters are not casesensitive and each letter, whether it is
capitalized or in lower-case, is equal to the
same value as each letter illustrates in the
conversion table. For example, A and a are
each equal to 10.
A = 10
B = 11
C = 12
D = 13
E = 14
F = 15
G = 16
H = 17
I = 18
J = 19
K = 20
L = 21
M = 22
N = 23
O = 24
P = 25
Q = 26
R = 27
S = 28
T = 29
U = 30
V = 31
W = 32
X = 33
Y = 34
Z = 35
Step 2: After converting the combined
string of characters to all numeric values,
append two zeros to the rightmost positions.
Step 3: Apply the mathematical function
mod=(n,97) where n= the number obtained in
step 2 above and 97 is the divisor.
Alternatively, to calculate without using
the modulus operator, divide the numbers in
step 2 above by 97. Truncate the remainder
to three digits and multiply it by .97. Round
the result to the nearest whole number.
Step 4: Subtract the result in step 3 from
98. If the result is one digit, add a leading 0
to make it two digits.
Step 5: The two digits in the result from
step 4 is the check digit. Append the
resulting check digit to the rightmost position
in the combined string of characters
described in step 1 above to generate the ULI.
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Example
Validating A ULI
To determine whether the ULI
contains a transcription error using the
check digit calculation, the procedures
are described below.
Step 1: Starting with the leftmost
character in the ULI, replace each
alphabetic character with numbers in
accordance with Table I above to obtain
all numeric values in the string.
Step 2: Apply the mathematical
function mod=(n,97) where n=the
number obtained in step 1 above and 97
is the divisor.
Step 3: If the result is 1, the ULI does
not contain transcription errors.
Example
For example, the ULI assigned to a covered
loan is 10Bx939c5543TqA1144M999143X38.
Step 1: Starting with the leftmost character
in the ULI, replace each alphabetic character
with numbers in accordance with Table I
above to obtain all numeric values in the
string. The result is 10113393912554329261
01144229991433338.
Step 2: Apply the mathematical function
mod=(n,97) where n is the number obtained
in step 1 above and 97 is the divisor.
Step 3: The result is 1. The ULI does not
contain transcription errors.
15. Effective January 1, 2018,
Supplement I to Part 1003 is revised to
read as follows:
■
For example, assume the LEI for a financial
institution is 10Bx939c5543TqA1144M and
the financial institution assigned the
following string of characters to identify the
covered loan: 999143X. The combined string
of characters is 10Bx939c5543TqA1144M
999143X.
Step 1: Starting with the leftmost character
in the combined string of characters, replace
each alphabetic character with numbers in
accordance with Table I above to obtain all
numeric values in the string. The result is
10113393912554329261011442299914333.
Step 2: Append two zeros to the rightmost
positions in the combined string. The result
is 101133939125543292610114422999143
3300.
Step 3: Apply the mathematical function
mod=(n,97) where n= the number obtained in
step 2 above and 97 is the divisor. The result
is 60.
Alternatively, to calculate without using
the modulus operator, divide the numbers in
step 2 above by 97. The result is 1042617929
129312294946332267952920.6185567010
30928. Truncate the remainder to three
VerDate Sep<11>2014
digits, which is .618, and multiply it by .97.
The result is 59.946. Round this result to the
nearest whole number, which is 60.
Step 4: Subtract the result in step 3 from
98. The result is 38.
Step 5: The two digits in the result from
step 4 is the check digit. Append the check
digit to the rightmost positions in the
combined string of characters that consists of
the LEI and the string of characters assigned
by the financial institution to identify the
covered loan to obtain the ULI. In this
example, the ULI would be 10Bx939c55
43TqA1144M999143X38.
19:37 Oct 27, 2015
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Supplement I to Part 1003—Official
Interpretations
Introduction
1. Status. The commentary in this
supplement is the vehicle by which the
Bureau of Consumer Financial Protection
issues formal interpretations of Regulation C
(12 CFR part 1003).
Section 1003.2—Definitions
2(b) Application
1. Consistency with Regulation B. Bureau
interpretations that appear in the official
commentary to Regulation B (Equal Credit
Opportunity Act, 12 CFR part 1002,
Supplement I) are generally applicable to the
definition of application under Regulation C.
However, under Regulation C the definition
of an application does not include
prequalification requests.
2. Prequalification. A prequalification
request is a request by a prospective loan
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66317
applicant (other than a request for
preapproval) for a preliminary determination
on whether the prospective loan applicant
would likely qualify for credit under an
institution’s standards, or for a determination
on the amount of credit for which the
prospective applicant would likely qualify.
Some institutions evaluate prequalification
requests through a procedure that is separate
from the institution’s normal loan
application process; others use the same
process. In either case, Regulation C does not
require an institution to report
prequalification requests on the loan/
application register, even though these
requests may constitute applications under
Regulation B for purposes of adverse action
notices.
3. Requests for preapproval. To be a
preapproval program as defined in
§ 1003.2(b)(2), the written commitment
issued under the program must result from a
comprehensive review of the
creditworthiness of the applicant, including
such verification of income, resources, and
other matters as is typically done by the
institution as part of its normal credit
evaluation program. In addition to conditions
involving the identification of a suitable
property and verification that no material
change has occurred in the applicant’s
financial condition or creditworthiness, the
written commitment may be subject only to
other conditions (unrelated to the financial
condition or creditworthiness of the
applicant) that the lender ordinarily attaches
to a traditional home mortgage application
approval. These conditions are limited to
conditions such as requiring an acceptable
title insurance binder or a certificate
indicating clear termite inspection, and, in
the case where the applicant plans to use the
proceeds from the sale of the applicant’s
present home to purchase a new home, a
settlement statement showing adequate
proceeds from the sale of the present home.
Regardless of its name, a program that
satisfies the definition of a preapproval
program in § 1003.2(b)(2) is a preapproval
program for purposes of Regulation C.
Conversely, a program that a financial
institution describes as a ‘‘preapproval
program’’ that does not satisfy the
requirements of § 1003.2(b)(2) is not a
preapproval program for purposes of
Regulation C. If a financial institution does
not regularly use the procedures specified in
§ 1003.2(b)(2), but instead considers requests
for preapprovals on an ad hoc basis, the
financial institution need not treat ad hoc
requests as part of a preapproval program for
purposes of Regulation C. A financial
institution should, however, be generally
consistent in following uniform procedures
for considering such ad hoc requests.
2(c) Branch Office
Paragraph 2(c)(1)
1. Credit unions. For purposes of
Regulation C, a ‘‘branch’’ of a credit union is
any office where member accounts are
established or loans are made, whether or not
the office has been approved as a branch by
a Federal or State agency. (See 12 U.S.C.
1752.)
2. Bank, savings association, or credit
unions. A branch office of a bank, savings
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Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Rules and Regulations
association, or credit union does not include
a loan-production office if the loanproduction office is not considered a branch
by the Federal or State supervisory authority
applicable to that institution. A branch office
also does not include the office of an affiliate
or of a third party, such as a third-party
broker.
Paragraph 2(c)(2)
1. General. A branch office of a for-profit
mortgage lending institution, other than a
bank savings association or credit union,
does not include the office of an affiliate or
of a third party, such as a third-party broker.
2(d) Closed-end Mortgage Loan
1. Dwelling-secured. Section 1003.2(d)
defines a closed-end mortgage loan as an
extension of credit that is secured by a lien
on a dwelling and that is not an open-end
line of credit under § 1003.2(o). Thus, for
example, a loan to purchase a dwelling and
secured only by a personal guarantee is not
a closed-end mortgage loan because it is not
dwelling-secured.
2. Extension of credit. Under § 1003.2(d), a
dwelling-secured loan is not a closed-end
mortgage loan unless it involves an extension
of credit. Thus, some transactions completed
pursuant to installment sales contracts, such
as some land contracts, are not closed-end
mortgage loans because no credit is extended.
For example, if a land contract provides that,
upon default, the contract terminates, all
previous payments will be treated as rent,
and the borrower is under no obligation to
make further payments, the transaction is not
a closed-end mortgage loan. In general,
extension of credit under § 1003.2(d) refers to
the granting of credit only pursuant to a new
debt obligation. Thus, except as described in
comments 2(d)–2.i and .ii, if a transaction
modifies, renews, extends, or amends the
terms of an existing debt obligation, but the
existing debt obligation is not satisfied and
replaced, the transaction is not a closed-end
mortgage loan under § 1003.2(d) because
there has been no new extension of credit.
The phrase extension of credit thus is
defined differently under Regulation C than
under Regulation B, 12 CFR part 1002.
i. Assumptions. For purposes of Regulation
C, an assumption is a transaction in which
an institution enters into a written agreement
accepting a new borrower in place of an
existing borrower as the obligor on an
existing debt obligation. For purposes of
Regulation C, assumptions include successorin-interest transactions, in which an
individual succeeds the prior owner as the
property owner and then assumes the
existing debt secured by the property. Under
§ 1003.2(d), assumptions are extensions of
credit even if the new borrower merely
assumes the existing debt obligation and no
new debt obligation is created. See also
comment 2(j)–5.
ii. New York State consolidation,
extension, and modification agreements. A
transaction completed pursuant to a New
York State consolidation, extension, and
modification agreement and classified as a
supplemental mortgage under New York Tax
Law section 255, such that the borrower owes
reduced or no mortgage recording taxes, is an
extension of credit under § 1003.2(d).
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19:37 Oct 27, 2015
Jkt 238001
Comments 2(i)–1, 2(j)–5, and 2(p)–2 clarify
whether such transactions are home
improvement loans, home purchase loans, or
refinancings, respectively.
2(f) Dwelling
1. General. The definition of a dwelling is
not limited to the principal or other
residence of the applicant or borrower, and
thus includes vacation or second homes and
investment properties.
2. Multifamily residential structures and
communities. A dwelling also includes a
multifamily residential structure or
community such as an apartment,
condominium, cooperative building or
complex, or a manufactured home
community. A loan related to a manufactured
home community is secured by a dwelling
for purposes of § 1003.2(f) even if it is not
secured by any individual manufactured
homes, but only by the land that constitutes
the manufactured home community
including sites for manufactured homes.
However, a loan related to a multifamily
residential structure or community that is not
a manufactured home community is not
secured by a dwelling for purposes of
§ 1003.2(f) if it is not secured by any
individual dwelling units and is, for
example, instead secured only by property
that only includes common areas, or is
secured only by an assignment of rents or
dues.
3. Exclusions. Recreational vehicles,
including boats, campers, travel trailers, and
park model recreational vehicles, are not
considered dwellings for purposes of
§ 1003.2(f), regardless of whether they are
used as residences. Houseboats, floating
homes, and mobile homes constructed before
June 15, 1976, are also excluded, regardless
of whether they are used as residences. Also
excluded are transitory residences such as
hotels, hospitals, college dormitories, and
recreational vehicle parks, and structures
originally designed as dwellings but used
exclusively for commercial purposes, such as
homes converted to daycare facilities or
professional offices.
4. Mixed-use properties. A property used
for both residential and commercial
purposes, such as a building containing
apartment units and retail space, is a
dwelling if the property’s primary use is
residential. An institution may use any
reasonable standard to determine the primary
use of the property, such as by square footage
or by the income generated. An institution
may select the standard to apply on a caseby-case basis.
5. Properties with service and medical
components. For purposes of § 1003.2(f), a
property used for both long-term housing and
to provide related services, such as assisted
living for senior citizens or supportive
housing for persons with disabilities, is a
dwelling and does not have a non-residential
purpose merely because the property is used
for both housing and to provide services.
However, transitory residences that are used
to provide such services are not dwellings.
See comment 2(f)–3. Properties that are used
to provide medical care, such as skilled
nursing, rehabilitation, or long-term medical
care, also are not dwellings. See comment
2(f)–3. If a property that is used for both long-
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term housing and to provide related services
also is used to provide medical care, the
property is a dwelling if its primary use is
residential. An institution may use any
reasonable standard to determine the
property’s primary use, such as by square
footage, income generated, or number of beds
or units allocated for each use. An institution
may select the standard to apply on a caseby-case basis.
2(g) Financial Institution
1. Preceding calendar year and preceding
December 31. The definition of financial
institution refers both to the preceding
calendar year and the preceding December
31. These terms refer to the calendar year and
the December 31 preceding the current
calendar year. For example, in 2019, the
preceding calendar year is 2018 and the
preceding December 31 is December 31,
2018. Accordingly, in 2019, Financial
Institution A satisfies the asset-size threshold
described in § 1003.2(g)(1)(i) if its assets
exceeded the threshold specified in comment
2(g)–2 on December 31, 2018. Likewise, in
2020, Financial Institution A does not meet
the loan-volume test described in
§ 1003.2(g)(1)(v)(A) if it originated fewer than
25 closed-end mortgage loans during either
2018 or 2019.
2. [Reserved]
3. Merger or acquisition—coverage of
surviving or newly formed institution. After
a merger or acquisition, the surviving or
newly formed institution is a financial
institution under § 1003.2(g) if it, considering
the combined assets, location, and lending
activity of the surviving or newly formed
institution and the merged or acquired
institutions or acquired branches, satisfies
the criteria included in § 1003.2(g). For
example, A and B merge. The surviving or
newly formed institution meets the loan
threshold described in § 1003.2(g)(1)(v)(B) if
the surviving or newly formed institution, A,
and B originated a combined total of at least
100 open-end lines of credit in each of the
two preceding calendar years. Likewise, the
surviving or newly formed institution meets
the asset-size threshold in § 1003.2(g)(1)(i) if
its assets and the combined assets of A and
B on December 31 of the preceding calendar
year exceeded the threshold described in
§ 1003.2(g)(1)(i). Comment 2(g)–4 discusses a
financial institution’s responsibilities during
the calendar year of a merger.
4. Merger or acquisition—coverage for
calendar year of merger or acquisition. The
scenarios described below illustrate a
financial institution’s responsibilities for the
calendar year of a merger or acquisition. For
purposes of these illustrations, a ‘‘covered
institution’’ means a financial institution, as
defined in § 1003.2(g), that is not exempt
from reporting under § 1003.3(a), and ‘‘an
institution that is not covered’’ means either
an institution that is not a financial
institution, as defined in § 1003.2(g), or an
institution that is exempt from reporting
under § 1003.3(a).
i. Two institutions that are not covered
merge. The surviving or newly formed
institution meets all of the requirements
necessary to be a covered institution. No data
collection is required for the calendar year of
the merger (even though the merger creates
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an institution that meets all of the
requirements necessary to be a covered
institution). When a branch office of an
institution that is not covered is acquired by
another institution that is not covered, and
the acquisition results in a covered
institution, no data collection is required for
the calendar year of the acquisition.
ii. A covered institution and an institution
that is not covered merge. The covered
institution is the surviving institution, or a
new covered institution is formed. For the
calendar year of the merger, data collection
is required for covered loans and
applications handled in the offices of the
merged institution that was previously
covered and is optional for covered loans and
applications handled in offices of the merged
institution that was previously not covered.
When a covered institution acquires a branch
office of an institution that is not covered,
data collection is optional for covered loans
and applications handled by the acquired
branch office for the calendar year of the
acquisition.
iii. A covered institution and an institution
that is not covered merge. The institution
that is not covered is the surviving
institution, or a new institution that is not
covered is formed. For the calendar year of
the merger, data collection is required for
covered loans and applications handled in
offices of the previously covered institution
that took place prior to the merger. After the
merger date, data collection is optional for
covered loans and applications handled in
the offices of the institution that was
previously covered. When an institution
remains not covered after acquiring a branch
office of a covered institution, data collection
is required for transactions of the acquired
branch office that take place prior to the
acquisition. Data collection by the acquired
branch office is optional for transactions
taking place in the remainder of the calendar
year after the acquisition.
iv. Two covered institutions merge. The
surviving or newly formed institution is a
covered institution. Data collection is
required for the entire calendar year of the
merger. The surviving or newly formed
institution files either a consolidated
submission or separate submissions for that
calendar year. When a covered institution
acquires a branch office of a covered
institution, data collection is required for the
entire calendar year of the merger. Data for
the acquired branch office may be submitted
by either institution.
5. Originations. Whether an institution is a
financial institution depends in part on
whether the institution originated at least 25
closed-end mortgage loans in each of the two
preceding calendar years or at least 100 openend lines of credit in each of the two
preceding calendar years. Comments 4(a)–2
through –4 discuss whether activities with
respect to a particular closed-end mortgage
loan or open-end line of credit constitute an
origination for purposes of § 1003.2(g).
6. Branches of foreign banks—treated as
banks. A Federal branch or a State-licensed
or insured branch of a foreign bank that
meets the definition of a ‘‘bank’’ under
section 3(a)(1) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(a)) is a bank
for the purposes of § 1003.2(g).
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7. Branches and offices of foreign banks
and other entities—treated as nondepository
financial institutions. A Federal agency,
State-licensed agency, State-licensed
uninsured branch of a foreign bank,
commercial lending company owned or
controlled by a foreign bank, or entity
operating under section 25 or 25A of the
Federal Reserve Act, 12 U.S.C. 601 and 611
(Edge Act and agreement corporations) may
not meet the definition of ‘‘bank’’ under the
Federal Deposit Insurance Act and may
thereby fail to satisfy the definition of a
depository financial institution under
§ 1003.2(g)(1). An entity is nonetheless a
financial institution if it meets the definition
of nondepository financial institution under
§ 1003.2(g)(2).
2(i) Home Improvement Loan
1. General. Section 1003.2(i) defines a
home improvement loan as a closed-end
mortgage loan or an open-end line of credit
that is for the purpose, in whole or in part,
of repairing, rehabilitating, remodeling, or
improving a dwelling or the real property on
which the dwelling is located. For example,
a closed-end mortgage loan obtained to repair
a dwelling by replacing a roof is a home
improvement loan under § 1003.2(i). A loan
or line of credit is a home improvement loan
even if only a part of the purpose is for
repairing, rehabilitating, remodeling, or
improving a dwelling. For example, an openend line of credit obtained in part to remodel
a kitchen and in part to pay college tuition
is a home improvement loan under
§ 1003.2(i). Similarly, for example, a loan that
is completed pursuant to a New York State
consolidation, extension, and modification
agreement and that is classified as a
supplemental mortgage under New York Tax
Law section 255, such that the borrower owes
reduced or no mortgage recording taxes, is a
home improvement loan if any of the loan’s
funds are for home improvement purposes.
See also comment 2(d)–2.ii.
2. Improvements to real property. Home
improvements include improvements both to
a dwelling and to the real property on which
the dwelling is located (for example,
installation of a swimming pool, construction
of a garage, or landscaping).
3. Commercial and other loans. A home
improvement loan may include a closed-end
mortgage loan or an open-end line of credit
originated outside an institution’s residential
mortgage lending division, such as a loan or
line of credit to improve an apartment
building originated in the commercial loan
department.
4. Mixed-use property. A closed-end
mortgage loan or an open-end line of credit
to improve a dwelling used for residential
and commercial purposes (for example, a
building containing apartment units and
retail space), or the real property on which
such a dwelling is located, is a home
improvement loan if the loan’s proceeds are
used either to improve the entire property
(for example, to replace the heating system),
or if the proceeds are used primarily to
improve the residential portion of the
property. An institution may use any
reasonable standard to determine the primary
use of the loan proceeds. An institution may
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select the standard to apply on a case-by-case
basis.
5. Multiple-purpose loans. A closed-end
mortgage loan or an open-end line of credit
may be used for multiple purposes. For
example, a closed-end mortgage loan that is
a home improvement loan under § 1003.2(i)
may also be a refinancing under § 1003.2(p)
if the transaction is a cash-out refinancing
and the funds will be used to improve a
home. Such a transaction is a multiplepurpose loan. Comment 4(a)(3)–3 provides
details about how to report multiple-purpose
covered loans.
6. Statement of borrower. In determining
whether a closed-end mortgage loan or an
open-end line of credit, or an application for
a closed-end mortgage loan or an open-end
line of credit, is for home improvement
purposes, an institution may rely on the
applicant’s or borrower’s stated purpose(s)
for the loan or line of credit at the time the
application is received or the credit decision
is made. An institution need not confirm that
the borrower actually uses any of the funds
for the stated purpose(s).
2(j) Home Purchase Loan
1. Multiple properties. A home purchase
loan includes a closed-end mortgage loan or
an open-end line of credit secured by one
dwelling and used to purchase another
dwelling. For example, if a person obtains a
home-equity loan or a reverse mortgage
secured by dwelling A to purchase dwelling
B, the home-equity loan or the reverse
mortgage is a home purchase loan under
§ 1003.2(j).
2. Commercial and other loans. A home
purchase loan may include a closed-end
mortgage loan or an open-end line of credit
originated outside an institution’s residential
mortgage lending division, such as a loan or
line of credit to purchase an apartment
building originated in the commercial loan
department.
3. Construction and permanent financing.
A home purchase loan includes both a
combined construction/permanent loan and
the permanent financing that replaces a
construction-only loan. A home purchase
loan does not include a construction-only
loan that is designed to be replaced by
permanent financing at a later time, which is
excluded from Regulation C as temporary
financing under § 1003.3(c)(3). Comment
3(c)(3)–1 provides additional details about
transactions that are excluded as temporary
financing.
4. Second mortgages that finance the
downpayments on first mortgages. If an
institution making a first mortgage loan to a
home purchaser also makes a second
mortgage loan or line of credit to the same
purchaser to finance part or all of the home
purchaser’s downpayment, both the first
mortgage loan and the second mortgage loan
or line of credit are home purchase loans.
5. Assumptions. Under § 1003.2(j), an
assumption is a home purchase loan when an
institution enters into a written agreement
accepting a new borrower as the obligor on
an existing obligation to finance the new
borrower’s purchase of the dwelling securing
the existing obligation, if the resulting
obligation is a closed-end mortgage loan or
an open-end line of credit. A transaction in
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which borrower B finances the purchase of
borrower A’s dwelling by assuming borrower
A’s existing debt obligation and that is
completed pursuant to a New York State
consolidation, extension, and modification
agreement and is classified as a supplemental
mortgage under New York Tax Law section
255, such that the borrower owes reduced or
no mortgage recording taxes, is an
assumption and a home purchase loan. See
comment 2(d)–2.ii. On the other hand, a
transaction in which borrower B, a successorin-interest, assumes borrower A’s existing
debt obligation only after acquiring title to
borrower A’s dwelling is not a home
purchase loan because borrower B did not
assume the debt obligation for the purpose of
purchasing a dwelling. See § 1003.4(a)(3) and
comment 4(a)(3)–4 for guidance about how to
report covered loans that are not home
improvement loans, home purchase loans, or
refinancings.
6. Multiple-purpose loans. A closed-end
mortgage loan or an open-end line of credit
may be used for multiple purposes. For
example, a closed-end mortgage loan that is
a home purchase loan under § 1003.2(j) may
also be a home improvement loan under
§ 1003.2(i) and a refinancing under
§ 1003.2(p) if the transaction is a cash-out
refinancing and the funds will be used to
purchase and improve a dwelling. Such a
transaction is a multiple-purpose loan.
Comment 4(a)(3)–3 provides details about
how to report multiple-purpose covered
loans.
2(l) Manufactured Home
1. Definition of a manufactured home. The
definition in § 1003.2(l) refers to the Federal
building code for manufactured housing
established by the U.S. Department of
Housing and Urban Development (HUD) (24
CFR part 3280.2). Modular or other factorybuilt homes that do not meet the HUD code
standards are not manufactured homes for
purposes of § 1003.2(l). Recreational vehicles
are excluded from the HUD code standards
pursuant to 24 CFR 3282.8(g) and are also
excluded from the definition of dwelling for
purposes of § 1003.2(f). See comment 2(f)–3.
2. Identification. A manufactured home
will generally bear a data plate affixed in a
permanent manner near the main electrical
panel or other readily accessible and visible
location noting its compliance with the
Federal Manufactured Home Construction
and Safety Standards in force at the time of
manufacture and providing other information
about its manufacture pursuant to 24 CFR
3280.5. A manufactured home will generally
also bear a HUD Certification Label pursuant
to 24 CFR 3280.11.
2(m) Metropolitan Statistical Area (MD) or
Metropolitan Division (MD).
1. Use of terms ‘‘Metropolitan Statistical
Area (MSA)’’ and ‘‘Metropolitan Division
(MD).’’ The U.S. Office of Management and
Budget (OMB) defines Metropolitan
Statistical Areas (MSAs) and Metropolitan
Divisions (MDs) to provide nationally
consistent definitions for collecting,
tabulating, and publishing Federal statistics
for a set of geographic areas. For all purposes
under Regulation C, if an MSA is divided by
OMB into MDs, the appropriate geographic
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unit to be used is the MD; if an MSA is not
so divided by OMB into MDs, the appropriate
geographic unit to be used is the MSA.
2(n) Multifamily Dwelling
1. Multifamily residential structures. The
definition of dwelling in § 1003.2(f) includes
multifamily residential structures and the
corresponding commentary provides
guidance on when such residential structures
are included in that definition. See
comments 2(f)–2 through –5.
2. Special reporting requirements for
multifamily dwellings. The definition of
multifamily dwelling in § 1003.2(n) includes
a dwelling, regardless of construction
method, that contains five or more individual
dwelling units. Covered loans secured by a
multifamily dwelling are subject to
additional reporting requirements under
§ 1003.4(a)(32), but are not subject to
reporting requirements under § 1003.4(a)(4),
(10)(iii), (23), (29), or (30).
2(o) Open-End Line of Credit
1. General. Section 1003.2(o) defines an
open-end line of credit as an extension of
credit that is secured by a lien on a dwelling
and that is an open-end credit plan as
defined in Regulation Z, 12 CFR
1026.2(a)(20), but without regard to whether
the credit is consumer credit, as defined in
§ 1026.2(a)(12), is extended by a creditor, as
defined in § 1026.2(a)(17), or is extended to
a consumer, as defined in § 1026.2(a)(11).
Aside from these distinctions, institutions
may rely on 12 CFR 1026.2(a)(20) and its
related commentary in determining whether
a transaction is an open-end line of credit
under § 1003.2(o). For example, assume a
business-purpose transaction that is exempt
from Regulation Z pursuant to § 1026.3(a)(1)
but that otherwise is open-end credit under
Regulation Z § 1026.2(a)(20). The businesspurpose transaction is an open-end line of
credit under Regulation C, provided the other
requirements of § 1003.2(o) are met.
Similarly, assume a transaction in which the
person extending open-end credit is a
financial institution under § 1003.2(g) but is
not a creditor under Regulation Z,
§ 1026.2(a)(17). In this example, the
transaction is an open-end line of credit
under Regulation C, provided the other
requirements of § 1003.2(o) are met.
2. Extension of credit. Extension of credit
has the same meaning under § 1003.2(o) as
under § 1003.2(d) and comment 2(d)–2. Thus,
for example, a renewal of an open-end line
of credit is not an extension of credit under
§ 1003.2(o) and is not covered by Regulation
C unless the existing debt obligation is
satisfied and replaced. Likewise, under
§ 1003.2(o), each draw on an open-end line
of credit is not an extension of credit.
2(p) Refinancing
1. General. Section 1003.2(p) defines a
refinancing as a closed-end mortgage loan or
an open-end line of credit in which a new,
dwelling-secured debt obligation satisfies
and replaces an existing, dwelling-secured
debt obligation by the same borrower. Except
as described in comment 2(p)–2, whether a
refinancing has occurred is determined by
reference to whether, based on the parties’
contract and applicable law, the original debt
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obligation has been satisfied or replaced by
a new debt obligation. Whether the original
lien is satisfied is irrelevant. For example:
i. A new closed-end mortgage loan that
satisfies and replaces one or more existing
closed-end mortgage loans is a refinancing
under § 1003.2(p).
ii. A new open-end line of credit that
satisfies and replaces an existing closed-end
mortgage loan is a refinancing under
§ 1003.2(p).
iii. Except as described in comment 2(p)–
2, a new debt obligation that renews or
modifies the terms of, but that does not
satisfy and replace, an existing debt
obligation, is not a refinancing under
§ 1003.2(p).
2. New York State consolidation,
extension, and modification agreements.
Where a transaction is completed pursuant to
a New York State consolidation, extension,
and modification agreement and is classified
as a supplemental mortgage under New York
Tax Law section§ 255, such that the borrower
owes reduced or no mortgage recording taxes,
and where, but for the agreement, the
transaction would have met the definition of
a refinancing under § 1003.2(p), the
transaction is considered a refinancing under
§ 1003.2(p). See also comment 2(d)–2.ii.
3. Existing debt obligation. A closed-end
mortgage loan or an open-end line of credit
that satisfies and replaces one or more
existing debt obligations is not a refinancing
under § 1003.2(p) unless the existing debt
obligation (or obligations) also was secured
by a dwelling. For example, assume that a
borrower has an existing $30,000 closed-end
mortgage loan and obtains a new $50,000
closed-end mortgage loan that satisfies and
replaces the existing $30,000 loan. The new
$50,000 loan is a refinancing under
§ 1003.2(p). However, if the borrower obtains
a new $50,000 closed-end mortgage loan that
satisfies and replaces an existing $30,000
loan secured only by a personal guarantee,
the new $50,000 loan is not a refinancing
under § 1003.2(p). See § 1003.4(a)(3) and
related commentary for guidance about how
to report the loan purpose of such
transactions, if they are not otherwise
excluded under § 1003.3(c).
4. Same borrower. Section 1003.2(p)
provides that, even if all of the other
requirements of § 1003.2(p) are met, a closedend mortgage loan or an open-end line of
credit is not a refinancing unless the same
borrower undertakes both the existing and
the new obligation(s). Under § 1003.2(p), the
‘‘same borrower’’ undertakes both the
existing and the new obligation(s) even if
only one borrower is the same on both
obligations. For example, assume that an
existing closed-end mortgage loan (obligation
X) is satisfied and replaced by a new closedend mortgage loan (obligation Y). If
borrowers A and B both are obligated on
obligation X, and only borrower B is
obligated on obligation Y, then obligation Y
is a refinancing under § 1003.2(p), assuming
the other requirements of § 1003.2(p) are met,
because borrower B is obligated on both
transactions. On the other hand, if only
borrower A is obligated on obligation X, and
only borrower B is obligated on obligation Y,
then obligation Y is not a refinancing under
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§ 1003.2(p). For example, assume that two
spouses are divorcing. If both spouses are
obligated on obligation X, but only one
spouse is obligated on obligation Y, then
obligation Y is a refinancing under
§ 1003.2(p), assuming the other requirements
of § 1003.2(p) are met. On the other hand, if
only spouse A is obligated on obligation X,
and only spouse B is obligated on obligation
Y, then obligation Y is not a refinancing
under § 1003.2(p). See § 1003.4(a)(3) and
related commentary for guidance about how
to report the loan purpose of such
transactions, if they are not otherwise
excluded under § 1003.3(c).
5. Two or more debt obligations. Section
1003.2(p) provides that, to be a refinancing,
a new debt obligation must satisfy and
replace an existing debt obligation. Where
two or more new obligations replace an
existing obligation, each new obligation is a
refinancing if, taken together, the new
obligations satisfy the existing obligation.
Similarly, where one new obligation replaces
two or more existing obligations, the new
obligation is a refinancing if it satisfies each
of the existing obligations.
6. Multiple-purpose loans. A closed-end
mortgage loan or an open-end line of credit
may be used for multiple purposes. For
example, a closed-end mortgage loan that is
a refinancing under § 1003.2(p) may also be
a home improvement loan under § 1003.2(i)
and be used for other purposes if the
refinancing is a cash-out refinancing and the
funds will be used both for home
improvement and to pay college tuition.
Such a transaction is a multiple-purpose
loan. Comment 4(a)(3)–3 provides details
about how to report multiple-purpose
covered loans.
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Section 1003.3—Exempt Institutions and
Excluded Transactions
3(c) Excluded Transactions
Paragraph 3(c)(1)
1. Financial institution acting in a
fiduciary capacity. Section 1003.3(c)(1)
provides that a closed-end mortgage loan or
an open-end line of credit originated or
purchased by a financial institution acting in
a fiduciary capacity is an excluded
transaction. A financial institution acts in a
fiduciary capacity if, for example, the
financial institution acts as a trustee.
Paragraph 3(c)(2)
1. Loan or line of credit secured by a lien
on unimproved land. Section 1003.3(c)(2)
provides that a closed-end mortgage loan or
an open-end line of credit secured by a lien
on unimproved land is an excluded
transaction. A loan or line of credit is secured
by a lien on unimproved land if the loan or
line of credit is secured by vacant or
unimproved property, unless the institution
knows, based on information that it receives
from the applicant or borrower at the time
the application is received or the credit
decision is made, that the proceeds of that
loan or credit line will be used within two
years after closing or account opening to
construct a dwelling on, or to purchase a
dwelling to be placed on, the land. A loan
or line of credit that is not excludable under
§ 1003.3(c)(2) nevertheless may be excluded,
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for example, as temporary financing under
§ 1003.3(c)(3).
Paragraph 3(c)(3)
1. Temporary financing. Section
1003.3(c)(3) provides that closed-end
mortgage loans or open-end lines of credit
obtained for temporary financing are
excluded transactions. A loan or line of
credit is considered temporary financing and
excluded under § 1003.3(c)(3) if the loan or
line of credit is designed to be replaced by
permanent financing at a later time. For
example:
i. Lender A extends credit in the form of
a bridge or swing loan to finance a borrower’s
down payment on a home purchase. The
borrower pays off the bridge or swing loan
with funds from the sale of his or her existing
home and obtains permanent financing for
his or her new home from Lender A. The
bridge or swing loan is excluded as
temporary financing under § 1003.3(c)(3).
ii. Lender A extends credit to finance
construction of a dwelling. A new extension
of credit for permanent financing for the
dwelling will be obtained, either from Lender
A or from another lender, and either through
a refinancing of the initial construction loan
or a separate loan. The initial construction
loan is excluded as temporary financing
under § 1003.3(c)(3).
iii. Assume the same scenario as in
comment 3(c)(3)–1.ii, except that the initial
construction loan is, or may be, renewed one
or more times before the permanent financing
is made. The initial construction loan,
including any renewal thereof, is excluded as
temporary financing under § 1003.3(c)(3).
iv. Lender A extends credit to finance
construction of a dwelling. The loan
automatically will convert to permanent
financing with Lender A once the
construction phase is complete. Under
§ 1003.3(c)(3), the loan is not designed to be
replaced by permanent financing and
therefore the temporary financing exclusion
does not apply. See also comment 2(j)–3.
v. Lender A originates a loan with a ninemonth term to enable an investor to purchase
a home, renovate it, and re-sell it before the
term expires. Under § 1003.3(c)(3), the loan is
not designed to be replaced by permanent
financing and therefore the temporary
financing exclusion does not apply. Such a
transaction is not temporary financing under
§ 1003.3(c)(3) merely because its term is
short.
Paragraph 3(c)(4)
1. Purchase of an interest in a pool of
loans. Section 1003.3(c)(4) provides that the
purchase of an interest in a pool of closedend mortgage loans or open-end lines of
credit is an excluded transaction. The
purchase of an interest in a pool of loans or
lines of credit includes, for example,
mortgage-participation certificates, mortgagebacked securities, or real estate mortgage
investment conduits.
Paragraph 3(c)(6)
1. Mergers and acquisitions. Section
1003.3(c)(6) provides that the purchase of
closed-end mortgage loans or open-end lines
of credit as part of a merger or acquisition,
or as part of the acquisition of all of the assets
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and liabilities of a branch office, are excluded
transactions. If a financial institution
acquires loans or lines of credit in bulk from
another institution (for example, from the
receiver for a failed institution), but no
merger or acquisition of an institution, or
acquisition of a branch office, is involved and
no other exclusion applies, the acquired
loans or lines of credit are covered loans and
are reported as described in comment 4(a)–
1.iii.
Paragraph 3(c)(8)
1. Partial interest. Section 1003.3(c)(8)
provides that the purchase of a partial
interest in a closed-end mortgage loan or an
open-end line of credit is an excluded
transaction. If an institution acquires only a
partial interest in a loan or line of credit, the
institution does not report the transaction
even if the institution participated in the
underwriting and origination of the loan or
line of credit. If an institution acquires a 100
percent interest in a loan or line of credit, the
transaction is not excluded under
§ 1003.3(c)(8).
Paragraph 3(c)(9)
1. Loan or line of credit used primarily for
agricultural purposes. Section 1003.3(c)(9)
provides that an institution does not report
a closed-end mortgage loan or an open-end
line of credit used primarily for agricultural
purposes. A loan or line of credit is used
primarily for agricultural purposes if its
funds will be used primarily for agricultural
purposes, or if the loan or line of credit is
secured by a dwelling that is located on real
property that is used primarily for
agricultural purposes (e.g., a farm). An
institution may refer to comment 3(a)–8 in
the official interpretations of Regulation Z, 12
CFR part 1026, supplement I, for guidance on
what is an agricultural purpose. An
institution may use any reasonable standard
to determine the primary use of the property.
An institution may select the standard to
apply on a case-by-case basis.
Paragraph 3(c)(10)
1. General. Section 1003.3(c)(10) provides
a special rule for reporting a closed-end
mortgage loan or an open-end line of credit
that is or will be made primarily for a
business or commercial purpose. If an
institution determines that a closed-end
mortgage loan or an open-end line of credit
primarily is for a business or commercial
purpose, then the loan or line of credit is a
covered loan only if it is a home
improvement loan under § 1003.2(i), a home
purchase loan under § 1003.2(j), or a
refinancing under § 1003.2(p) and no other
exclusion applies. Section 1003.3(c)(10) does
not categorically exclude all business- or
commercial-purpose loans and lines of credit
from coverage.
2. Primary purpose. An institution must
determine in each case if a closed-end
mortgage loan or an open-end line of credit
primarily is for a business or commercial
purpose. If a closed-end mortgage loan or an
open-end line of credit is deemed to be
primarily for a business, commercial, or
organizational purpose under Regulation Z,
12 CFR 1026.3(a) and its related commentary,
then the loan or line of credit also is deemed
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to be primarily for a business or commercial
purpose under § 1003.3(c)(10).
3. Examples—covered business- or
commercial-purpose transactions. The
following are examples of closed-end
mortgage loans and open-end lines of credit
that are not excluded from reporting under
§ 1003.3(c)(10), because they primarily are for
a business or commercial purpose, but they
also meet the definition of a home
improvement loan under § 1003.2(i), a home
purchase loan under § 1003.2(j), or a
refinancing under § 1003.2(p):
i. A closed-end mortgage loan or an openend line of credit to purchase or to improve
a multifamily dwelling or a single-family
investment property, or a refinancing of a
closed-end mortgage loan or an open-end line
of credit secured by a multifamily dwelling
or a single-family investment property;
ii. A closed-end mortgage loan or an openend line of credit to improve an office, for
example a doctor’s office, that is located in
a dwelling; and
iii. A closed-end mortgage loan or an openend line of credit to a corporation, if the
funds from the loan or line of credit will be
used to purchase or to improve a dwelling,
or if the transaction is a refinancing.
4. Examples—excluded business- or
commercial-purpose transactions. The
following are examples of closed-end
mortgage loans and open-end lines of credit
that are not covered loans because they
primarily are for a business or commercial
purpose, but they do not meet the definition
of a home improvement loan under
§ 1003.2(i), a home purchase loan under
§ 1003.2(j), or a refinancing under
§ 1003.2(p):
i. A closed-end mortgage loan or an openend line of credit whose funds will be used
primarily to improve or expand a business,
for example to renovate a family restaurant
that is not located in a dwelling, or to
purchase a warehouse, business equipment,
or inventory;
ii. A closed-end mortgage loan or an openend line of credit to a corporation whose
funds will be used primarily for business
purposes, such as to purchase inventory; and
iii. A closed-end mortgage loan or an openend line of credit whose funds will be used
primarily for business or commercial
purposes other than home purchase, home
improvement, or refinancing, even if the loan
or line of credit is cross-collateralized by a
covered loan.
Paragraph 3(c)(11)
1. General. Section 1003.3(c)(11) provides
that a closed-end mortgage loan is an
excluded transaction if a financial institution
originated fewer than 25 closed-end mortgage
loans in each of the two preceding calendar
years. For example, assume that a bank is a
financial institution in 2022 under
§ 1003.2(g) because it originated 200 openend lines of credit in 2020, 250 open-end
lines of credit in 2021, and met all of the
other requirements under § 1003.2(g)(1). Also
assume that the bank originated 10 and 20
closed-end mortgage loans in 2020 and 2021,
respectively. The open-end lines of credit
that the bank originated, or for which it
received applications, during 2022 are
covered loans and must be reported, unless
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they otherwise are excluded transactions
under § 1003.3(c). However, the closed-end
mortgage loans that the bank originated, or
for which it received applications, during
2022 are excluded transactions under
§ 1003.3(c)(11) and need not be reported. See
comments 4(a)–2 through –4 for guidance
about the activities that constitute an
origination.
Paragraph 3(c)(12)
1. General. Section 1003.3(c)(12) provides
that an open-end line of credit is an excluded
transaction if a financial institution
originated fewer than 100 open-end lines of
credit in each of the two preceding calendar
years. For example, assume that a bank is a
financial institution in 2022 under
§ 1003.2(g) because it originated 50 closedend mortgage loans in 2020, 75 closed-end
mortgage loans in 2021, and met all of the
other requirements under § 1003.2(g)(1). Also
assume that the bank originated 75 and 85
open-end lines of credit in 2020 and 2021,
respectively. The closed-end mortgage loans
that the bank originated, or for which it
received applications, during 2022 are
covered loans and must be reported, unless
they otherwise are excluded transactions
under § 1003.3(c). However, the open-end
lines of credit that the bank originated, or for
which it received applications, during 2022
are excluded transactions under
§ 1003.3(c)(12) and need not be reported. See
comments 4(a)–2 through –4 for guidance
about the activities that constitute an
origination.
Section 1003.4—Compilation of Reportable
Data
4(a) Data Format and Itemization
1. General. Section 1003.4(a) describes a
financial institution’s obligation to collect
data on applications it received, on covered
loans that it originated, and on covered loans
that it purchased during the calendar year
covered by the loan/application register.
i. A financial institution reports these data
even if the covered loans were subsequently
sold by the institution.
ii. A financial institution reports data for
applications that did not result in an
origination but on which actions were taken–
for example, an application that the
institution denied, that it approved but that
was not accepted, that it closed for
incompleteness, or that the applicant
withdrew during the calendar year covered
by the loan/application register. A financial
institution is required to report data
regarding requests under a preapproval
program (as defined in § 1003.2(b)(2)) only if
the preapproval request is denied, results in
the origination of a home purchase loan, or
was approved but not accepted.
iii. If a financial institution acquires
covered loans in bulk from another
institution (for example, from the receiver for
a failed institution), but no merger or
acquisition of an institution, or acquisition of
a branch office, is involved, the acquiring
financial institution reports the covered loans
as purchased loans.
iv. A financial institution reports the data
for an application on the loan/application
register for the calendar year during which
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the application was acted upon even if the
institution received the application in a
previous calendar year.
2. Originations and applications involving
more than one institution. Section 1003.4(a)
requires a financial institution to collect
certain information regarding applications for
covered loans that it receives and regarding
covered loans that it originates. The
following provides guidance on how to
report originations and applications
involving more than one institution. The
discussion below assumes that all of the
parties are financial institutions as defined
by § 1003.2(g). The same principles apply if
any of the parties is not a financial
institution. Comment 4(a)–3 provides
examples of transactions involving more than
one institution, and comment 4(a)–4
discusses how to report actions taken by
agents.
i. Only one financial institution reports
each originated covered loan as an
origination. If more than one institution was
involved in the origination of a covered loan,
the financial institution that made the credit
decision approving the application before
closing or account opening reports the loan
as an origination. It is not relevant whether
the loan closed or, in the case of an
application, would have closed in the
institution’s name. If more than one
institution approved an application prior to
closing or account opening and one of those
institutions purchased the loan after closing,
the institution that purchased the loan after
closing reports the loan as an origination. If
a financial institution reports a transaction as
an origination, it reports all of the
information required for originations, even if
the covered loan was not initially payable to
the financial institution that is reporting the
covered loan as an origination.
ii. In the case of an application for a
covered loan that did not result in an
origination, a financial institution reports the
action it took on that application if it made
a credit decision on the application or was
reviewing the application when the
application was withdrawn or closed for
incompleteness. It is not relevant whether the
financial institution received the application
from the applicant or from another
institution, such as a broker, or whether
another financial institution also reviewed
and reported an action taken on the same
application.
3. Examples—originations and
applications involving more than one
institution. The following scenarios illustrate
how an institution reports a particular
application or covered loan. The illustrations
assume that all of the parties are financial
institutions as defined by § 1003.2(g).
However, the same principles apply if any of
the parties is not a financial institution.
i. Financial Institution A received an
application for a covered loan from an
applicant and forwarded that application to
Financial Institution B. Financial Institution
B reviewed the application and approved the
loan prior to closing. The loan closed in
Financial Institution A’s name. Financial
Institution B purchased the loan from
Financial Institution A after closing.
Financial Institution B was not acting as
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Financial Institution A’s agent. Since
Financial Institution B made the credit
decision prior to closing, Financial
Institution B reports the transaction as an
origination, not as a purchase. Financial
Institution A does not report the transaction.
ii. Financial Institution A received an
application for a covered loan from an
applicant and forwarded that application to
Financial Institution B. Financial Institution
B reviewed the application before the loan
would have closed, but the application did
not result in an origination because Financial
Institution B denied the application.
Financial Institution B was not acting as
Financial Institution A’s agent. Since
Financial Institution B made the credit
decision, Financial Institution B reports the
application as a denial. Financial Institution
A does not report the application. If, under
the same facts, the application was
withdrawn before Financial Institution B
made a credit decision, Financial Institution
B would report the application as withdrawn
and Financial Institution A would not report
the application.
iii. Financial Institution A received an
application for a covered loan from an
applicant and approved the application
before closing the loan in its name. Financial
Institution A was not acting as Financial
Institution B’s agent. Financial Institution B
purchased the covered loan from Financial
Institution A. Financial Institution B did not
review the application before closing.
Financial Institution A reports the loan as an
origination. Financial Institution B reports
the loan as a purchase.
iv. Financial Institution A received an
application for a covered loan from an
applicant. If approved, the loan would have
closed in Financial Institution B’s name.
Financial Institution A denied the
application without sending it to Financial
Institution B for approval. Financial
Institution A was not acting as Financial
Institution B’s agent. Since Financial
Institution A made the credit decision before
the loan would have closed, Financial
Institution A reports the application.
Financial Institution B does not report the
application.
v. Financial Institution A reviewed an
application and made the credit decision to
approve a covered loan using the
underwriting criteria provided by a third
party (e.g., another financial institution,
Fannie Mae, or Freddie Mac). The third party
did not review the application and did not
make a credit decision prior to closing.
Financial Institution A was not acting as the
third party’s agent. Financial Institution A
reports the application or origination. If the
third party purchased the loan and is subject
to Regulation C, the third party reports the
loan as a purchase whether or not the third
party reviewed the loan after closing. Assume
the same facts, except that Financial
Institution A approved the application, and
the applicant chose not to accept the loan
from Financial Institution A. Financial
Institution A reports the application as
approved but not accepted and the third
party, assuming the third party is subject to
Regulation C, does not report the application.
vi. Financial Institution A reviewed and
made the credit decision on an application
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based on the criteria of a third-party insurer
or guarantor (for example, a government or
private insurer or guarantor). Financial
Institution A reports the action taken on the
application.
vii. Financial Institution A received an
application for a covered loan and forwarded
it to Financial Institutions B and C. Financial
Institution A made a credit decision, acting
as Financial Institution D’s agent, and
approved the application. The applicant did
not accept the loan from Financial Institution
D. Financial Institution D reports the
application as approved but not accepted.
Financial Institution A does not report the
application. Financial Institution B made a
credit decision, approving the application,
the applicant accepted the offer of credit
from Financial Institution B, and credit was
extended. Financial Institution B reports the
origination. Financial Institution C made a
credit decision and denied the application.
Financial Institution C reports the
application as denied.
4. Agents. If a financial institution made
the credit decision on a covered loan or
application through the actions of an agent,
the institution reports the application or
origination. State law determines whether
one party is the agent of another. For
example, acting as Financial Institution A’s
agent, Financial Institution B approved an
application prior to closing and a covered
loan was originated. Financial Institution A
reports the loan as an origination.
5. Purchased loans. i. A financial
institution is required to collect data
regarding covered loans it purchases. For
purposes of § 1003.4(a), a purchase includes
a repurchase of a covered loan, regardless of
whether the institution chose to repurchase
the covered loan or was required to
repurchase the covered loan because of a
contractual obligation and regardless of
whether the repurchase occurs within the
same calendar year that the covered loan was
originated or in a different calendar year. For
example, assume that Financial Institution A
originates or purchases a covered loan and
then sells it to Financial Institution B, who
later requires Financial Institution A to
repurchase the covered loan pursuant to the
relevant contractual obligations. Financial
Institution B reports the purchase from
Financial Institution A, assuming it is a
financial institution as defined under
§ 1003.2(g). Financial Institution A reports
the repurchase from Financial Institution B
as a purchase.
ii. In contrast, for purposes of § 1003.4(a),
a purchase does not include a temporary
transfer of a covered loan to an interim
funder or warehouse creditor as part of an
interim funding agreement under which the
originating financial institution is obligated
to repurchase the covered loan for sale to a
subsequent investor. Such agreements, often
referred to as ‘‘repurchase agreements,’’ are
sometimes employed as functional
equivalents of warehouse lines of credit.
Under these agreements, the interim funder
or warehouse creditor acquires legal title to
the covered loan, subject to an obligation of
the originating institution to repurchase at a
future date, rather than taking a security
interest in the covered loan as under the
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terms of a more conventional warehouse line
of credit. To illustrate, assume Financial
Institution A has an interim funding
agreement with Financial Institution B to
enable Financial Institution B to originate
loans. Assume further that Financial
Institution B originates a covered loan and
that, pursuant to this agreement, Financial
Institution A takes a temporary transfer of the
covered loan until Financial Institution B
arranges for the sale of the covered loan to
a subsequent investor and that Financial
Institution B repurchases the covered loan to
enable it to complete the sale to the
subsequent investor (alternatively, Financial
Institution A may transfer the covered loan
directly to the subsequent investor at
Financial Institution B’s direction, pursuant
to the interim funding agreement). The
subsequent investor could be, for example, a
financial institution or other entity that
intends to hold the loan in portfolio, a GSE
or other securitizer, or a financial institution
or other entity that intends to package and
sell multiple loans to a GSE or other
securitizer. In this example, the temporary
transfer of the covered loan from Financial
Institution B to Financial Institution A is not
a purchase, and any subsequent transfer back
to Financial Institution B for delivery to the
subsequent investor is not a purchase, for
purposes of § 1003.4(a). Financial Institution
B reports the origination of the covered loan
as well as its sale to the subsequent investor.
If the subsequent investor is a financial
institution under § 1003.2(g), it reports a
purchase of the covered loan pursuant to
§ 1003.4(a), regardless of whether it acquired
the covered loan from Financial Institution B
or directly from Financial Institution A.
Paragraph 4(a)(1)(i)
1. ULI—uniqueness. Section
1003.4(a)(1)(i)(B)(2) requires a financial
institution that assigns a universal loan
identifier (ULI) to each covered loan or
application (except as provided in
§ 1003.4(a)(1)(i)(D) and (E)) to ensure that the
character sequence it assigns is unique
within the institution and used only for the
covered loan or application. A financial
institution should assign only one ULI to any
particular covered loan or application, and
each ULI should correspond to a single
application and ensuing loan in the case that
the application is approved and a loan is
originated. A financial institution may use a
ULI that was reported previously to refer
only to the same loan or application for
which the ULI was used previously or a loan
that ensues from an application for which the
ULI was used previously. A financial
institution may not report an application for
a covered loan in 2030 using the same ULI
that was reported for a covered loan that was
originated in 2020. Similarly, refinancings or
applications for refinancing should be
assigned a different ULI than the loan that is
being refinanced. A financial institution with
multiple branches must ensure that its
branches do not use the same ULI to refer to
multiple covered loans or applications.
2. ULI—privacy. Section
1003.4(a)(1)(i)(B)(3) prohibits a financial
institution from including information that
could be used to directly identify the
applicant or borrower in the identifier that it
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assigns for the application or covered loan of
the applicant or borrower. Information that
could be used to directly identify the
applicant or borrower includes, but is not
limited to, the applicant’s or borrower’s
name, date of birth, Social Security number,
official government-issued driver’s license or
identification number, alien registration
number, government passport number, or
employer or taxpayer identification number.
3. ULI—purchased covered loan. If a
financial institution has previously reported
a covered loan with a ULI under this part, a
financial institution that purchases that
covered loan must use the ULI that was
previously reported under this part. For
example, if a loan origination was previously
reported under this part with a ULI, the
financial institution that purchases the
covered loan would report the purchase of
the covered loan using the same ULI. A
financial institution that purchases a covered
loan must use the ULI that was assigned by
the financial institution that originated the
covered loan. For example, if a financial
institution that submits an annual loan/
application register pursuant to
§ 1003.5(a)(1)(i) originates a covered loan that
is purchased by a financial institution that
submits a quarterly loan/application register
pursuant to § 1003.5(a)(1)(ii), the financial
institution that purchased the covered loan
must use the ULI that was assigned by the
financial institution that originated the
covered loan. A financial institution that
purchases a covered loan assigns a ULI and
records and submits it in its loan/application
register pursuant to § 1003.5(a)(1)(i) or (ii),
whichever is applicable, if the covered loan
was not assigned a ULI by the financial
institution that originated the loan because,
for example, the loan was originated prior to
January 1, 2018.
4. ULI—reinstated or reconsidered
application. A financial institution may, at
its option, use a ULI previously reported
under this part if, during the same calendar
year, an applicant asks the institution to
reinstate a counteroffer that the applicant
previously did not accept or asks the
financial institution to reconsider an
application that was previously denied,
withdrawn, or closed for incompleteness. For
example, if a financial institution reports a
denied application in its second-quarter 2020
data submission, pursuant to
§ 1003.5(a)(1)(ii), but then reconsiders the
application, which results in an origination
in the third quarter of 2020, the financial
institution may report the origination in its
third-quarter 2020 data submission using the
same ULI that was reported for the denied
application in its second-quarter 2020 data
submission, so long as the financial
institution treats the transaction as a
continuation of the application. However, a
financial institution may not use a ULI
previously reported if it reinstates or
reconsiders an application that occurred and
was reported in a prior calendar year. For
example, if a financial institution reports a
denied application in its fourth-quarter 2020
data submission, pursuant to
§ 1003.5(a)(1)(ii), but then reconsiders the
application resulting in an origination in the
first quarter of 2021, the financial institution
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reports a denied application under the
original ULI in its fourth-quarter 2020 data
submission and an approved application
with a different ULI in its first-quarter 2021
data submission, pursuant to
§ 1003.5(a)(1)(ii).
5. ULI—check digit. Section
1003.(4)(a)(1)(i)(C) requires that the two rightmost characters in the ULI represent the
check digit. Appendix C prescribes the
requirements for generating a check digit and
validating a ULI.
Paragraph 4(a)(1)(ii)
1. Application date—consistency. Section
1003.4(a)(1)(ii) requires that, in reporting the
date of application, a financial institution
report the date it received the application, as
defined under § 1003.2(b), or the date shown
on the application form. Although a financial
institution need not choose the same
approach for its entire HMDA submission, it
should be generally consistent (such as by
routinely using one approach within a
particular division of the institution or for a
category of loans). If the financial institution
chooses to report the date shown on the
application form and the institution retains
multiple versions of the application form, the
institution reports the date shown on the first
application form satisfying the application
definition provided under § 1003.2(b).
2. Application date—indirect application.
For an application that was not submitted
directly to the financial institution, the
institution may report the date the
application was received by the party that
initially received the application, the date the
application was received by the institution,
or the date shown on the application form.
Although an institution need not choose the
same approach for its entire HMDA
submission, it should be generally consistent
(such as by routinely using one approach
within a particular division of the institution
or for a category of loans).
3. Application date—reinstated
application. If, within the same calendar
year, an applicant asks a financial institution
to reinstate a counteroffer that the applicant
previously did not accept (or asks the
institution to reconsider an application that
was denied, withdrawn, or closed for
incompleteness), the institution may treat
that request as the continuation of the earlier
transaction using the same ULI or as a new
transaction with a new ULI. If the institution
treats the request for reinstatement or
reconsideration as a new transaction, it
reports the date of the request as the
application date. If the institution does not
treat the request for reinstatement or
reconsideration as a new transaction, it
reports the original application date.
Paragraph 4(a)(2)
1. Loan type—general. If a covered loan is
not, or in the case of an application would
not have been, insured by the Federal
Housing Administration, guaranteed by the
Veterans Administration, or guaranteed by
the Rural Housing Service or the Farm
Service Agency, an institution complies with
§ 1003.4(a)(2) by reporting the covered loan
as not insured or guaranteed by the Federal
Housing Administration, Veterans
Administration, Rural Housing Service, or
Farm Service Agency.
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Paragraph 4(a)(3)
1. Purpose—statement of applicant. A
financial institution may rely on the oral or
written statement of an applicant regarding
the proposed use of covered loan proceeds.
For example, a lender could use a check-box
or a purpose line on a loan application to
determine whether the applicant intends to
use covered loan proceeds for home
improvement purposes. If an applicant
provides no statement as to the proposed use
of covered loan proceeds and the covered
loan is not a home purchase loan, cash-out
refinancing, or refinancing, a financial
institution reports the covered loan as for a
purpose other than home purchase, home
improvement, refinancing, or cash-out
refinancing for purposes of § 1003.4(a)(3).
2. Purpose—refinancing and cash-out
refinancing. Section 1003.4(a)(3) requires a
financial institution to report whether a
covered loan is, or an application is for, a
refinancing or a cash-out refinancing. A
financial institution reports a covered loan or
an application as a cash-out refinancing if it
is a refinancing as defined by § 1003.2(p) and
the institution considered it to be a cash-out
refinancing in processing the application or
setting the terms (such as the interest rate or
origination charges) under its guidelines or
an investor’s guidelines. For example:
i. Assume a financial institution considers
an application for a loan product to be a
cash-out refinancing under an investor’s
guidelines because of the amount of cash
received by the borrower at closing or
account opening. Assume also that under the
investor’s guidelines, the applicant qualifies
for the loan product and the financial
institution approves the application,
originates the covered loan, and sets the
terms of the covered loan consistent with the
loan product. In this example, the financial
institution would report the covered loan as
a cash-out refinancing for purposes of
§ 1003.4(a)(3).
ii. Assume a financial institution does not
consider an application for a covered loan to
be a cash-out refinancing under its own
guidelines because the amount of cash
received by the borrower does not exceed a
certain threshold. Assume also that the
institution approves the application,
originates the covered loan, and sets the
terms of the covered loan consistent with its
own guidelines applicable to refinancings
other than cash-out refinancings. In this
example, the financial institution would
report the covered loan as a refinancing for
purposes of § 1003.4(a)(3).
iii. Assume a financial institution does not
distinguish between a cash-out refinancing
and a refinancing under its own guidelines,
and sets the terms of all refinancings without
regard to the amount of cash received by the
borrower at closing or account opening, and
does not offer loan products under investor
guidelines. In this example, the financial
institution reports all covered loans and
applications for covered loans that are
defined by § 1003.2(p) as refinancings for
purposes of § 1003.4(a)(3).
3. Purpose—multiple-purpose loan.
Section 1003.4(a)(3) requires a financial
institution to report the purpose of a covered
loan or application. If a covered loan is a
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home purchase loan as well as a home
improvement loan, a refinancing, or a cashout refinancing, an institution complies with
§ 1003.4(a)(3) by reporting the loan as a home
purchase loan. If a covered loan is a home
improvement loan as well as a refinancing or
cash-out refinancing, but the covered loan is
not a home purchase loan, an institution
complies with § 1003.4(a)(3) by reporting the
covered loan as a refinancing or a cash-out
refinancing, as appropriate. If a covered loan
is a refinancing or cash-out refinancing as
well as for another purpose, such as for the
purpose of paying educational expenses, but
the covered loan is not a home purchase
loan, an institution complies with
§ 1003.4(a)(3) by reporting the covered loan
as a refinancing or a cash-out refinancing, as
appropriate. See comment 4(a)(3)–2. If a
covered loan is a home improvement loan as
well as for another purpose, but the covered
loan is not a home purchase loan, a
refinancing, or cash-out refinancing, an
institution complies with § 1003.4(a)(3) by
reporting the covered loan as a home
improvement loan. See comment 2(i)–1.
4. Purpose—other. If a covered loan is not,
or an application is not for, a home purchase
loan, a home improvement loan, a
refinancing, or a cash-out refinancing, a
financial institution complies with
§ 1003.4(a)(3) by reporting the covered loan
or application as for a purpose other than
home purchase, home improvement,
refinancing, or cash-out refinancing. For
example, if a covered loan is for the purpose
of paying educational expenses, the financial
institution complies with § 1003.4(a)(3) by
reporting the covered loan as for a purpose
other than home purchase, home
improvement, refinancing, or cash-out
refinancing. Section 1003.4(a)(3) also
requires an institution to report a covered
loan or application as for a purpose other
than home purchase, home improvement,
refinancing, or cash-out refinancing if it is a
refinancing but, under the terms of the
agreement, the financial institution was
unconditionally obligated to refinance the
obligation subject to conditions within the
borrower’s control.
5. Purpose—business or commercial
purpose loans. If a covered loan primarily is
for a business or commercial purpose as
described in § 1003.3(c)(10) and comment
3(c)(10)–2 and is a home purchase loan,
home improvement loan, or a refinancing,
§ 1003.4(a)(3) requires the financial
institution to report the applicable loan
purpose. If a loan primarily is for a business
or commercial purpose but is not a home
purchase loan, home improvement loan, or a
refinancing, the loan is an excluded
transaction under § 1003.3(c)(10).
Paragraph 4(a)(4)
1. Request under a preapproval program.
Section 1003.4(a)(4) requires a financial
institution to report whether an application
or covered loan involved a request for a
preapproval of a home purchase loan under
a preapproval program as defined by
§ 1003.2(b)(2). If an application or covered
loan did not involve a request for a
preapproval of a home purchase loan under
a preapproval program as defined by
§ 1003.2(b)(2), a financial institution
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complies with § 1003.4(a)(4) by reporting that
the application or covered loan did not
involve such a request, regardless of whether
the institution has such a program and the
applicant did not apply through that program
or the institution does not have a preapproval
program as defined by § 1003.2(b)(2).
2. Scope of requirement. A financial
institution reports that the application or
covered loan did not involve a preapproval
request for a purchased covered loan; an
application or covered loan for any purpose
other than a home purchase loan; an
application for a home purchase loan or a
covered loan that is a home purchase loan
secured by a multifamily dwelling; an
application or covered loan that is an openend line of credit or a reverse mortgage; or
an application that is denied, withdrawn by
the applicant, or closed for incompleteness.
Paragraph 4(a)(5)
1. Modular homes and prefabricated
components. Covered loans or applications
related to modular homes should be reported
with a construction method of site-built,
regardless of whether they are on-frame or
off-frame modular homes. Modular homes
comply with local or other recognized
buildings codes rather than standards
established by the National Manufactured
Housing Construction and Safety Standards
Act, 42 U.S.C. 5401 et seq. Modular homes
are not required to have HUD Certification
Labels under 24 CFR 3280.11 or data plates
under 24 CFR 3280.5. Modular homes may
have a certification from a State licensing
agency that documents compliance with
State or other applicable building codes. Onframe modular homes are constructed on
permanent metal chassis similar to those
used in manufactured homes. The chassis are
not removed on site and are secured to the
foundation. Off-frame modular homes
typically have floor construction similar to
the construction of other site-built homes,
and the construction typically includes
wooden floor joists and does not include
permanent metal chassis. Dwellings built
using prefabricated components assembled at
the dwelling’s permanent site should also be
reported with a construction method of sitebuilt.
2. Multifamily dwelling. For a covered loan
or an application for a covered loan related
to a multifamily dwelling, the financial
institution should report the construction
method as site-built unless the multifamily
dwelling is a manufactured home
community, in which case the financial
institution should report the construction
method as manufactured home.
3. Multiple properties. See comment
4(a)(9)–2 regarding transactions involving
multiple properties with more than one
property taken as security.
Paragraph 4(a)(6)
1. Multiple properties. See comment
4(a)(9)–2 regarding transactions involving
multiple properties with more than one
property taken as security.
2. Principal residence. Section 1003.4(a)(6)
requires a financial institution to identify
whether the property to which the covered
loan or application relates is or will be used
as a residence that the applicant or borrower
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physically occupies and uses, or will occupy
and use, as his or her principal residence. For
purposes of § 1003.4(a)(6), an applicant or
borrower can have only one principal
residence at a time. Thus, a vacation or other
second home would not be a principal
residence. However, if an applicant or
borrower buys or builds a new dwelling that
will become the applicant’s or borrower’s
principal residence within a year or upon the
completion of construction, the new dwelling
is considered the principal residence for
purposes of applying this definition to a
particular transaction.
3. Second residences. Section 1003.4(a)(6)
requires a financial institution to identify
whether the property to which the loan or
application relates is or will be used as a
second residence. For purposes of
§ 1003.4(a)(6), a property is a second
residence of an applicant or borrower if the
property is or will be occupied by the
applicant or borrower for a portion of the
year and is not the applicant’s or borrower’s
principal residence. For example, if a person
purchases a property, occupies the property
for a portion of the year, and rents the
property for the remainder of the year, the
property is a second residence for purposes
of § 1003.4(a)(6). Similarly, if a couple
occupies a property near their place of
employment on weekdays, but the couple
returns to their principal residence on
weekends, the property near the couple’s
place of employment is a second residence
for purposes of § 1003.4(a)(6).
4. Investment properties. Section
1003.4(a)(6) requires a financial institution to
identify whether the property to which the
covered loan or application relates is or will
be used as an investment property. For
purposes of § 1003.4(a)(6), a property is an
investment property if the borrower does not,
or the applicant will not, occupy the
property. For example, if a person purchases
a property, does not occupy the property, and
generates income by renting the property, the
property is an investment property for
purposes of § 1003.4(a)(6). Similarly, if a
person purchases a property, does not
occupy the property, and does not generate
income by renting the property, but intends
to generate income by selling the property,
the property is an investment property for
purposes of § 1003.4(a)(6). Section
1003.4(a)(6) requires a financial institution to
identify a property as an investment property
if the borrower or applicant does not or will
not occupy the property, even if the borrower
or applicant does not consider the property
as owned for investment purposes. For
example, if a corporation purchases a
property that is a dwelling under § 1003.2(f),
that it does not occupy, but that is for the
long-term residential use of its employees,
the property is an investment property for
purposes of § 1003.4(a)(6), even if the
corporation considers the property as owned
for business purposes rather than investment
purposes, does not generate income by
renting the property, and does not intend to
generate income by selling the property at
some point in time. If the property is for
transitory use by employees, the property
would not be considered a dwelling under
§ 1003.2(f). See comment 2(f)–3.
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5. Purchased covered loans. For purchased
covered loans, a financial institution may
report principal residence unless the loan
documents or application indicate that the
property will not be occupied as a principal
residence.
Paragraph 4(a)(7)
1. Covered loan amount—counteroffer. If
an applicant accepts a counteroffer for an
amount different from the amount for which
the applicant applied, the financial
institution reports the covered loan amount
granted. If an applicant does not accept a
counteroffer or fails to respond, the
institution reports the amount initially
requested.
2. Covered loan amount—application
approved but not accepted or preapproval
request approved but not accepted. A
financial institution reports the covered loan
amount that was approved.
3. Covered loan amount—preapproval
request denied, application denied, closed
for incompleteness or withdrawn. For a
preapproval request that was denied, and for
an application that was denied, closed for
incompleteness, or withdrawn, a financial
institution reports the amount for which the
applicant applied.
4. Covered loan amount—multiple-purpose
loan. A financial institution reports the entire
amount of the covered loan, even if only a
part of the proceeds is intended for home
purchase, home improvement, or refinancing.
5. Covered loan amount—closed-end
mortgage loan. For a closed-end mortgage
loan, other than a purchased loan, an
assumption, or a reverse mortgage, a financial
institution reports the amount to be repaid as
disclosed on the legal obligation. For a
purchased closed-end mortgage loan or an
assumption of a closed-end mortgage loan, a
financial institution reports the unpaid
principal balance at the time of purchase or
assumption.
6. Covered loan amount—open-end line of
credit. For an open-end line of credit, a
financial institution reports the entire
amount of credit available to the borrower
under the terms of the open-end plan,
including a purchased open-end line of
credit and an assumption of an open-end line
of credit, but not for a reverse mortgage openend line of credit.
7. Covered loan amount—refinancing. For
a refinancing, a financial institution reports
the amount of credit extended under the
terms of the new debt obligation.
8. Covered loan amount—home
improvement loan. A financial institution
reports the entire amount of a home
improvement loan, even if only a part of the
proceeds is intended for home improvement.
9. Covered loan amount—non-federally
insured reverse mortgage. A financial
institution reports the initial principal limit
of a non-federally insured reverse mortgage
as set forth in § 1003.4(a)(7)(iii).
Paragraph 4(a)(8)(i)
1. Action taken—covered loan originated.
A financial institution reports that the
covered loan was originated if the financial
institution made a credit decision approving
the application before closing or account
opening and that credit decision results in an
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extension of credit. The same is true for an
application that began as a request for a
preapproval that subsequently results in a
covered loan being originated. See comments
4(a)–2 through –4 for guidance on
transactions in which more than one
institution is involved.
2. Action taken—covered loan purchased.
A financial institution reports that the
covered loan was purchased if the covered
loan was purchased by the financial
institution after closing or account opening
and the financial institution did not make a
credit decision on the application prior to
closing or account opening, or if the financial
institution did make a credit decision on the
application prior to closing or account
opening, but is repurchasing the loan from
another entity that the loan was sold to. See
comment 4(a)–5. See comments 4(a)–2
through –4 for guidance on transactions in
which more than one financial institution is
involved.
3. Action taken—application approved but
not accepted. A financial institution reports
application approved but not accepted if the
financial institution made a credit decision
approving the application before closing or
account opening, subject solely to
outstanding conditions that are customary
commitment or closing conditions, but the
applicant or the party that initially received
the application fails to respond to the
financial institution’s approval within the
specified time, or the closed-end mortgage
loan was not otherwise consummated or the
account was not otherwise opened. See
comment 4(a)(8)(i)–13.
4. Action taken—application denied. A
financial institution reports that the
application was denied if it made a credit
decision denying the application before an
applicant withdraws the application or the
file is closed for incompleteness. See
comments 4(a)–2 through –4 for guidance on
transactions in which more than one
institution is involved.
5. Action taken—application withdrawn. A
financial institution reports that the
application was withdrawn when the
application is expressly withdrawn by the
applicant before the financial institution
makes a credit decision denying the
application, before the financial institution
makes a credit decision approving the
application, or before the file is closed for
incompleteness. A financial institution also
reports application withdrawn if the
financial institution provides a conditional
approval specifying underwriting or
creditworthiness conditions, pursuant to
comment 4(a)(8)(i)–13, and the application is
expressly withdrawn by the applicant before
the applicant satisfies all specified
underwriting or creditworthiness conditions.
A preapproval request that is withdrawn is
not reportable under HMDA. See § 1003.4(a).
6. Action taken—file closed for
incompleteness. A financial institution
reports that the file was closed for
incompleteness if the financial institution
sent a written notice of incompleteness under
Regulation B, 12 CFR 1002.9(c)(2), and the
applicant did not respond to the request for
additional information within the period of
time specified in the notice before the
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applicant satisfies all underwriting or
creditworthiness conditions. See comment
4(a)(8)(i)–13. If a financial institution then
provides a notification of adverse action on
the basis of incompleteness under Regulation
B, 12 CFR 1002.9(c)(i), the financial
institution may report the action taken as
either file closed for incompleteness or
application denied. A preapproval request
that is closed for incompleteness is not
reportable under HMDA. See § 1003.4(a).
7. Action taken—preapproval request
denied. A financial institution reports that
the preapproval request was denied if the
application was a request for a preapproval
under a preapproval program as defined in
§ 1003.2(b)(2) and the institution made a
credit decision denying the preapproval
request.
8. Action taken—preapproval request
approved but not accepted. A financial
institution reports that the preapproval
request was approved but not accepted if the
application was a request for a preapproval
under a preapproval program as defined in
§ 1003.2(b)(2) and the institution made a
credit decision approving the preapproval
request but the application did not result in
a covered loan originated by the financial
institution.
9. Action taken—counteroffers. If a
financial institution makes a counteroffer to
lend on terms different from the applicant’s
initial request (for example, for a shorter loan
maturity, with a different interest rate, or in
a different amount) and the applicant does
not accept the counteroffer or fails to
respond, the institution reports the action
taken as a denial on the original terms
requested by the applicant. If the applicant
accepts, the financial institution reports the
action taken as covered loan originated.
10. Action taken—rescinded transactions.
If a borrower rescinds a transaction after
closing and before a financial institution is
required to submit its loan/application
register containing the information for the
transaction under § 1003.5(a), the institution
reports the transaction as an application that
was approved but not accepted.
11. Action taken—purchased covered
loans. An institution reports the covered
loans that it purchased during the calendar
year. An institution does not report the
covered loans that it declined to purchase,
unless, as discussed in comments 4(a)–2
through –4, the institution reviewed the
application prior to closing, in which case it
reports the application or covered loan
according to comments 4(a)–2 through –4.
12. Action taken—repurchased covered
loans. See comment 4(a)–5 regarding
reporting requirements when a covered loan
is repurchased by the originating financial
institution.
13. Action taken—conditional approvals. If
an institution issues an approval other than
a commitment pursuant to a preapproval
program as defined under § 1003.2(b)(2), and
that approval is subject to the applicant
meeting certain conditions, the institution
reports the action taken as provided below
dependent on whether the conditions are
solely customary commitment or closing
conditions or if the conditions include any
underwriting or creditworthiness conditions.
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i. Action taken examples. If the approval
is conditioned on satisfying underwriting or
creditworthiness conditions and they are not
met, the institution reports the action taken
as a denial. If, however, the conditions
involve submitting additional information
about underwriting or creditworthiness that
the institution needs to make the credit
decision, and the institution has sent a
written notice of incompleteness under
Regulation B, 12 CFR 1002.9(c)(2), and the
applicant did not respond within the period
of time specified in the notice, the institution
reports the action taken as file closed for
incompleteness. See comment 4(a)(8)(i)–6. If
the conditions are solely customary
commitment or closing conditions and the
conditions are not met, the institution reports
the action taken as approved but not
accepted. If all the conditions (underwriting,
creditworthiness, or customary commitment
or closing conditions) are satisfied and the
institution agrees to extend credit but the
covered loan is not originated, the institution
reports the action taken as application
approved but not accepted. If the applicant
expressly withdraws before satisfying all
underwriting or creditworthiness conditions
and before the institution denies the
application or closes the file for
incompleteness, the institution reports the
action taken as application withdrawn. If all
underwriting and creditworthiness
conditions have been met, and the
outstanding conditions are solely customary
commitment or closing conditions and the
applicant expressly withdraws before the
covered loan is originated, the institution
reports the action taken as application
approved but not accepted.
ii. Customary commitment or closing
conditions. Customary commitment or
closing conditions include, for example: a
clear-title requirement, an acceptable
property survey, acceptable title insurance
binder, clear termite inspection, a
subordination agreement from another
lienholder, and, where the applicant plans to
use the proceeds from the sale of one home
to purchase another, a settlement statement
showing adequate proceeds from the sale.
iii. Underwriting or creditworthiness
conditions. Underwriting or creditworthiness
conditions include, for example: conditions
that constitute a counter-offer, such as a
demand for a higher down-payment;
satisfactory debt-to-income or loan-to-value
ratios, a determination of need for private
mortgage insurance, or a satisfactory
appraisal requirement; or verification or
confirmation, in whatever form the
institution requires, that the applicant meets
underwriting conditions concerning
applicant creditworthiness, including
documentation or verification of income or
assets.
14. Action taken—pending applications.
An institution does not report any covered
loan application still pending at the end of
the calendar year; it reports that application
on its loan/application register for the year in
which final action is taken.
Paragraph 4(a)(8)(ii)
1. Action taken date—general. A financial
institution reports the date of the action
taken.
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2. Action taken date—applications denied
and files closed for incompleteness. For
applications, including requests for a
preapproval, that are denied or for files
closed for incompleteness, the financial
institution reports either the date the action
was taken or the date the notice was sent to
the applicant.
3. Action taken date—application
withdrawn. For applications withdrawn, the
financial institution may report the date the
express withdrawal was received or the date
shown on the notification form in the case of
a written withdrawal.
4. Action taken date—approved but not
accepted. For a covered loan approved by an
institution but not accepted by the applicant,
the institution reports any reasonable date,
such as the approval date, the deadline for
accepting the offer, or the date the file was
closed. Although an institution need not
choose the same approach for its entire
HMDA submission, it should be generally
consistent (such as by routinely using one
approach within a particular division of the
institution or for a category of covered loans).
5. Action taken date—originations. For
covered loan originations, including a
preapproval request that leads to an
origination by the financial institution, an
institution generally reports the closing or
account opening date. For covered loan
originations that an institution acquires from
a party that initially received the application,
the institution reports either the closing or
account opening date, or the date the
institution acquired the covered loan from
the party that initially received the
application. If the disbursement of funds
takes place on a date later than the closing
or account opening date, the institution may
use the date of initial disbursement. For a
construction/permanent covered loan, the
institution reports either the closing or
account opening date, or the date the covered
loan converts to the permanent financing.
Although an institution need not choose the
same approach for its entire HMDA
submission, it should be generally consistent
(such as by routinely using one approach
within a particular division of the institution
or for a category of covered loans).
Notwithstanding this flexibility regarding the
use of the closing or account opening date in
connection with reporting the date action
was taken, the institution must report the
origination as occurring in the year in which
the origination goes to closing or the account
is opened.
6. Action taken date—loan purchased. For
covered loans purchased, a financial
institution reports the date of purchase.
Paragraph 4(a)(9)
1. Multiple properties with one property
taken as security. If a covered loan is related
to more than one property, but only one
property is taken as security (or, in the case
of an application, proposed to be taken as
security), a financial institution reports the
information required by § 1003.4(a)(9) for the
property taken as or proposed to be taken as
security. A financial institution does not
report the information required by
§ 1003.4(a)(9) for the property or properties
related to the loan that are not taken as or
proposed to be taken as security. For
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example, if a covered loan is secured by
property A, and the proceeds are used to
purchase or rehabilitate (or to refinance home
purchase or home improvement loans related
to) property B, the institution reports the
information required by § 1003.4(a)(9) for
property A and does not report the
information required by § 1003.4(a)(9) for
property B.
2. Multiple properties with more than one
property taken as security. If more than one
property is taken or, in the case of an
application, proposed to be taken as security
for a single covered loan, a financial
institution reports the covered loan or
application in a single entry on its loan/
application register and provides the
information required by § 1003.4(a)(9) for one
of the properties taken as security that
contains a dwelling. A financial institution
does not report information about the other
properties taken as security. If an institution
is required to report specific information
about the property identified in
§ 1003.4(a)(9), the institution reports the
information that relates to the property
identified in § 1003.4(a)(9). For example,
Financial Institution A originated a covered
loan that is secured by both property A and
property B, each of which contains a
dwelling. Financial Institution A reports the
loan as one entry on its loan/application
register, reporting the information required
by § 1003.4(a)(9) for either property A or
property B. If Financial Institution A elects
to report the information required by
§ 1003.4(a)(9) about property A, Financial
Institution A also reports the information
required by § 1003.4(a)(5), (6), (14), (29), and
(30) related to property A. For aspects of the
entries that do not refer to the property
identified in § 1003.4(a)(9) (i.e., § 1003.4(a)(1)
through (4), (7), (8), (10) through (13), (15)
through (28), (31) through (38)), Financial
Institution A reports the information
applicable to the covered loan or application
and not information that relates only to the
property identified in § 1003.4(a)(9).
3. Multifamily dwellings. A single
multifamily dwelling may have more than
one postal address. For example, three
apartment buildings, each with a different
street address, comprise a single multifamily
dwelling that secures a covered loan. For the
purposes of § 1003.4(a)(9), a financial
institution reports the information required
by § 1003.4(a)(9) in the same manner
described in comment 4(a)(9)–2.
4. Loans purchased from another
institution. The requirement to report the
property location information required by
§ 1003.4(a)(9) applies not only to applications
and originations but also to purchased
covered loans.
5. Manufactured home. If the site of a
manufactured home has not been identified,
a financial institution complies by reporting
that the information required by
§ 1003.4(a)(9) is not applicable.
Paragraph 4(a)(9)(i)
1. General. Section 1003.4(a)(9)(i) requires
a financial institution to report the property
address of the location of the property
securing a covered loan or, in the case of an
application, proposed to secure a covered
loan. The address should correspond to the
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property identified on the legal obligation
related to the covered loan. For applications
that did not result in an origination, the
address should correspond to the location of
the property proposed to secure the loan as
identified by the applicant. For example,
assume a loan is secured by a property
located at 123 Main Street, and the
applicant’s or borrower’s mailing address is
a post office box. The financial institution
should not report the post office box, and
should report 123 Main Street.
2. Property address—format. A financial
institution complies with the requirements in
§ 1003.4(a)(9)(i) by reporting the following
information about the physical location of
the property securing the loan.
i. Street address. When reporting the street
address of the property, a financial
institution complies by including, as
applicable, the primary address number, the
predirectional, the street name, street
prefixes and/or suffixes, the postdirectional,
the secondary address identifier, and the
secondary address, as applicable. For
example, 100 N Main ST Apt 1.
ii. City name. A financial institution
complies by reporting the name of the city in
which the property is located.
iii. State name. A financial institution
complies by reporting the two letter State
code for the State in which the property is
located, using the U.S. Postal Service official
State abbreviations.
iv. Zip Code. A financial institution
complies by reporting the five or nine digit
Zip Code in which the property is located.
3. Property address—not applicable. A
financial institution complies with
§ 1003.4(a)(9)(i) by indicating that the
requirement is not applicable if the property
address of the property securing the covered
loan is not known. For example, if the
property did not have a property address at
closing or if the applicant did not provide the
property address of the property to the
financial institution before the application
was denied, withdrawn, or closed for
incompleteness, the financial institution
complies with § 1003.4(a)(9)(i) by indicating
that the requirement is not applicable.
Paragraph 4(a)(9)(ii)(B)
1. General. A financial institution complies
by reporting the five-digit Federal
Information Processing Standards (FIPS)
numerical county code.
Paragraph 4(a)(9)(ii)(C)
1. General. Census tract numbers are
defined by the U.S. Census Bureau. A
financial institution complies with
§ 1003.4(a)(9)(ii)(C) if it uses the boundaries
and codes in effect on January 1 of the
calendar year covered by the loan/
application register that it is reporting.
Paragraph 4(a)(10)(i)
1. Applicant data—general. Refer to
appendix B to this part for instructions on
collection of an applicant’s ethnicity, race,
and sex.
2. Transition rule for applicant data
collected prior to January 1, 2018. If a
financial institution receives an application
prior to January 1, 2018, but final action is
taken on or after January 1, 2018, the
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financial institution complies with
§ 1003.4(a)(10)(i) and (b) if it collects the
information in accordance with the
requirements in effect at the time the
information was collected. For example, if a
financial institution receives an application
on November 15, 2017, collects the
applicant’s ethnicity, race, and sex in
accordance with the instructions in effect on
that date, and takes final action on the
application on January 5, 2018, the financial
institution has complied with the
requirements of § 1003.4(a)(10)(i) and (b),
even though those instructions changed after
the information was collected but before the
date of final action. However, if, in this
example, the financial institution collected
the applicant’s ethnicity, race, and sex on or
after January 1, 2018, § 1003.4(a)(10)(i) and
(b) requires the financial institution to collect
the information in accordance with the
amended instructions.
Paragraph 4(a)(10)(ii)
1. Applicant data—completion by financial
institution. A financial institution complies
with § 1003.4(a)(10)(ii) by reporting the
applicant’s age, as of the application date
under § 1003.4(a)(1)(ii), as the number of
whole years derived from the date of birth as
shown on the application form. For example,
if an applicant provides a date of birth of 01/
15/1970 on the application form that the
financial institution receives on 01/14/2015,
the institution reports 44 as the applicant’s
age.
2. Applicant data—co-applicant. If there
are no co-applicants, the financial institution
reports that there is no co-applicant. If there
is more than one co-applicant, the financial
institution reports the age only for the first
co-applicant listed on the application form.
A co-applicant may provide an absent coapplicant’s age on behalf of the absent coapplicant.
3. Applicant data—purchased loan. A
financial institution complies with
§ 1003.4(a)(10)(ii) by reporting that the
requirement is not applicable when reporting
a purchased loan for which the institution
chooses not to report the income.
4. Applicant data—non-natural person. A
financial institution complies with
§ 1003.4(a)(10)(ii) by reporting that the
requirement is not applicable if the applicant
or co-applicant is not a natural person (for
example, a corporation, partnership, or trust).
For example, for a transaction involving a
trust, a financial institution reports that the
requirement to report the applicant’s age is
not applicable if the trust is the applicant. On
the other hand, if the applicant is a natural
person, and is the beneficiary of a trust, a
financial institution reports the applicant’s
age.
5. Applicant data—guarantor. For
purposes of § 1003.4(a)(10)(ii), if a covered
loan or application includes a guarantor, a
financial institution does not report the
guarantor’s age.
Paragraph 4(a)(10)(iii)
1. Income data—income relied on. When a
financial institution evaluates income as part
of a credit decision, it reports the gross
annual income relied on in making the credit
decision. For example, if an institution relies
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on an applicant’s salary to compute a debtto-income ratio but also relies on the
applicant’s annual bonus to evaluate
creditworthiness, the institution reports the
salary and the bonus to the extent relied
upon. If an institution relies on only a
portion of an applicant’s income in its
determination, it does not report that portion
of income not relied on. For example, if an
institution, pursuant to lender and investor
guidelines, does not rely on an applicant’s
commission income because it has been
earned for less than 12 months, the
institution does not include the applicant’s
commission income in the income reported.
Likewise, if an institution relies on the
verified gross income of the applicant in
making the credit decision, then the
institution reports the verified gross income.
Similarly, if an institution relies on the
income of a cosigner to evaluate
creditworthiness, the institution includes the
cosigner’s income to the extent relied upon.
An institution, however, does not include the
income of a guarantor who is only
secondarily liable.
2. Income data—co-applicant. If two
persons jointly apply for a covered loan and
both list income on the application, but the
financial institution relies on the income of
only one applicant in evaluating
creditworthiness, the institution reports only
the income relied on.
3. Income data—loan to employee. A
financial institution complies with
§ 1003.4(a)(10)(iii) by reporting that the
requirement is not applicable for a covered
loan to, or an application from, its employee
to protect the employee’s privacy, even
though the institution relied on the
employee’s income in making the credit
decision.
4. Income data—assets. A financial
institution does not include as income
amounts considered in making a credit
decision based on factors that an institution
relies on in addition to income, such as
amounts derived from annuitization or
depletion of an applicant’s remaining assets.
5. Income data—credit decision not made.
Section 1003.4(a)(10)(iii) requires a financial
institution to report the gross annual income
relied on in processing the application if a
credit decision was not made. For example,
assume an institution received an application
that included an applicant’s self-reported
income, but the application was withdrawn
before a credit decision that would have
considered income was made. The financial
institution reports the income information
relied on in processing the application at the
time that the application was withdrawn or
the file was closed for incompleteness.
6. Income data—credit decision not
requiring consideration of income. A
financial institution complies with
§ 1003.4(a)(10)(iii) by reporting that the
requirement is not applicable if the
application did not or would not have
required a credit decision that considered
income under the financial institution’s
policies and procedures. For example, if the
financial institution’s policies and
procedures do not consider income for a
streamlined refinance program, the
institution reports that the requirement is not
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applicable, even if the institution received
income information from the applicant.
7. Income data—non-natural person. A
financial institution reports that the
requirement is not applicable when the
applicant or co-applicant is not a natural
person (e.g., a corporation, partnership, or
trust). For example, for a transaction
involving a trust, a financial institution
reports that the requirement to report income
data is not applicable if the trust is the
applicant. On the other hand, if the applicant
is a natural person, and is the beneficiary of
a trust, a financial institution is required to
report the information described in
§ 1003.4(a)(10)(iii).
8. Income data—multifamily properties. A
financial institution complies with
§ 1003.4(a)(10)(iii) by reporting that the
requirement is not applicable when the
covered loan is secured by, or application is
proposed to be secured by, a multifamily
dwelling.
9. Income data—purchased loans. A
financial institution complies with
§ 1003.4(a)(10)(iii) by reporting that the
requirement is not applicable when reporting
a purchased covered loan for which the
institution chooses not to report the income.
10. Income data—rounding. A financial
institution complies by reporting the dollar
amount of the income in thousands, rounded
to the nearest thousand ($500 rounds up to
the next $1,000). For example, $35,500 is
reported as 36.
Paragraph 4(a)(11)
1. Type of purchaser—loan-participation
interests sold to more than one entity. A
financial institution that originates a covered
loan, and then sells it to more than one
entity, reports the ‘‘type of purchaser’’ based
on the entity purchasing the greatest interest,
if any. For purposes of § 1003.4(a)(11), if a
financial institution sells some interest or
interests in a covered loan but retains a
majority interest in that loan, it does not
report the sale.
2. Type of purchaser—swapped covered
loans. Covered loans ‘‘swapped’’ for
mortgage-backed securities are to be treated
as sales; the purchaser is the entity receiving
the covered loans that are swapped.
3. Type of purchaser—affiliate institution.
For purposes of complying with
§ 1003.4(a)(11), the term ‘‘affiliate’’ means
any company that controls, is controlled by,
or is under common control with, another
company, as set forth in the Bank Holding
Company Act of 1956 (12 U.S.C. 1841 et
seq.).
4. Type of purchaser—private
securitizations. A financial institution that
knows or reasonably believes that the
covered loan it is selling will be securitized
by the entity purchasing the covered loan,
other than by one of the governmentsponsored enterprises, reports the purchasing
entity type as a private securitizer regardless
of the type or affiliation of the purchasing
entity. Knowledge or reasonable belief could,
for example, be based on the purchase
agreement or other related documents, the
financial institution’s previous transactions
with the purchaser, or the purchaser’s role as
a securitizer (such as an investment bank). If
a financial institution selling a covered loan
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does not know or reasonably believe that the
purchaser will securitize the loan, and the
seller knows that the purchaser frequently
holds or disposes of loans by means other
than securitization, then the financial
institution should report the covered loan as
purchased by, as appropriate, a commercial
bank, savings bank, savings association, life
insurance company, credit union, mortgage
company, finance company, affiliate
institution, or other type of purchaser.
5. Type of purchaser—mortgage company.
For purposes of complying with
§ 1003.4(a)(11), a mortgage company means a
nondepository institution that purchases
covered loans and typically originates such
loans. A mortgage company might be an
affiliate or a subsidiary of a bank holding
company or thrift holding company, or it
might be an independent mortgage company.
Regardless, a financial institution reports the
purchasing entity type as a mortgage
company, unless the mortgage company is an
affiliate of the seller institution, in which
case the seller institution should report the
loan as purchased by an affiliate institution.
6. Purchases by subsidiaries. A financial
institution that sells a covered loan to its
subsidiary that is a commercial bank, savings
bank, or savings association, should report
the covered loan as purchased by a
commercial bank, savings bank, or savings
association. A financial institution that sells
a covered loan to its subsidiary that is a life
insurance company, should report the
covered loan as purchased by a life insurance
company. A financial institution that sells a
covered loan to its subsidiary that is a credit
union, mortgage company, or finance
company, should report the covered loan as
purchased by a credit union, mortgage
company, or finance company. If the
subsidiary that purchases the covered loan is
not a commercial bank, savings bank, savings
association, life insurance company, credit
union, mortgage company, or finance
company, the seller institution should report
the loan as purchased by other type of
purchaser. The financial institution should
report the covered loan as purchased by an
affiliate institution when the subsidiary is an
affiliate of the seller institution.
7. Type of purchaser—bank holding
company or thrift holding company. When a
financial institution sells a covered loan to a
bank holding company or thrift holding
company (rather than to one of its
subsidiaries), it should report the loan as
purchased by other type of purchaser, unless
the bank holding company or thrift holding
company is an affiliate of the seller
institution, in which case the seller
institution should report the loan as
purchased by an affiliate institution.
8. Repurchased covered loans. See
comment 4(a)–5 regarding reporting
requirements when a covered loan is
repurchased by the originating financial
institution.
9. Type of purchaser—quarterly recording.
For purposes of recording the type of
purchaser within 30 calendar days after the
end of the calendar quarter pursuant to
§ 1003.4(f), a financial institution records that
the requirement is not applicable if the
institution originated or purchased a covered
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loan and did not sell it during the calendar
quarter for which the institution is recording
the data. If the financial institution sells the
covered loan in a subsequent quarter of the
same calendar year, the financial institution
records the type of purchaser on its loan/
application register for the quarter in which
the covered loan was sold. If a financial
institution sells the covered loan in a
succeeding year, the financial institution
should not record the sale.
10. Type of purchaser—not applicable. A
financial institution reports that the
requirement is not applicable for applications
that were denied, withdrawn, closed for
incompleteness or approved but not accepted
by the applicant; and for preapproval
requests that were denied or approved but
not accepted by the applicant. A financial
institution also reports that the requirement
is not applicable if the institution originated
or purchased a covered loan and did not sell
it during that same calendar year.
Paragraph 4(a)(12)
1. Average prime offer rate. Average prime
offer rates are annual percentage rates
derived from average interest rates, points,
and other loan pricing terms offered to
borrowers by a representative sample of
lenders for mortgage loans that have low-risk
pricing characteristics. Other pricing terms
include commonly used indices, margins,
and initial fixed-rate periods for variable-rate
transactions. Relevant pricing characteristics
include a consumer’s credit history and
transaction characteristics such as the loanto-value ratio, owner-occupant status, and
purpose of the transaction. To obtain average
prime offer rates, the Bureau uses a survey
of lenders that both meets the criteria of
§ 1003.4(a)(12)(ii) and provides pricing terms
for at least two types of variable-rate
transactions and at least two types of nonvariable-rate transactions. An example of
such a survey is the Freddie Mac Primary
Mortgage Market Survey®.
2. Bureau tables. The Bureau publishes on
the FFIEC’s Web site (http://www.ffiec.gov/
hmda), in tables entitled ‘‘Average Prime
Offer Rates-Fixed’’ and ‘‘Average Prime Offer
Rates-Adjustable,’’ current and historic
average prime offer rates for a wide variety
of closed-end transaction types. The Bureau
calculates an annual percentage rate,
consistent with Regulation Z (see 12 CFR
1026.22 and part 1026, appendix J), for each
transaction type for which pricing terms are
available from the survey described in
comment 4(a)(12)–1. The Bureau uses loan
pricing terms available in the survey and
other information to estimate annual
percentage rates for other types of
transactions for which direct survey data are
not available. The Bureau publishes on the
FFIEC’s Web site the methodology it uses to
arrive at these estimates. A financial
institution may either use the average prime
offer rates published by the Bureau or may
determine average prime offer rates itself by
employing the methodology published on the
FFIEC Web site. A financial institution that
determines average prime offer rates itself,
however, is responsible for correctly
determining the rates in accordance with the
published methodology.
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3. Rate spread calculation—annual
percentage rate. The requirements of
§ 1003.4(a)(12)(i) refer to the covered loan’s
annual percentage rate. A financial
institution complies with § 1003.4(a)(12)(i)
by relying on the annual percentage rate for
the covered loan, as calculated and disclosed
pursuant to Regulation Z, 12 CFR 1026.18 or
1026.38 (for closed-end mortgage loans) or
1026.40 (for open-end credit lines of credit),
as applicable.
4. Rate spread calculation—comparable
transaction. The rate spread calculation in
§ 1003.4(a)(12)(i) is defined by reference to a
comparable transaction, which is determined
according to the covered loan’s amortization
type (i.e., fixed- or variable-rate) and loan
term. For covered loans that are open-end
lines of credit, § 1003.4(a)(12)(i) requires a
financial institution to identify the most
closely comparable closed-end transaction.
The tables of average prime offer rates
published by the Bureau (see comment
4(a)(12)–2) provide additional detail about
how to identify the comparable transaction.
i. Fixed-rate transactions. For fixed-rate
covered loans, the term for identifying the
comparable transaction is the transaction’s
maturity (i.e., the period until the last
payment will be due under the closed-end
mortgage loan contract or open-end line of
credit agreement). If an open-end credit plan
has a fixed rate but no definite plan length,
a financial institution complies with
§ 1003.4(a)(12)(i) by using a 30-year fixed-rate
loan as the most closely comparable closedend transaction. Financial institutions may
refer to the table on the FFIEC Web site
entitled ‘‘Average Prime Offer Rates-Fixed’’
when identifying a comparable fixed-rate
transaction.
ii. Variable-rate transactions. For variablerate covered loans, the term for identifying
the comparable transaction is the initial,
fixed-rate period (i.e., the period until the
first scheduled rate adjustment). For
example, five years is the relevant term for
a variable-rate transaction with a five-year,
fixed-rate introductory period that is
amortized over thirty years. Financial
institutions may refer to the table on the
FFIEC Web site entitled ‘‘Average Prime
Offer Rates-Variable’’ when identifying a
comparable variable-rate transaction. If an
open-end line of credit has a variable rate
and an optional, fixed-rate feature, a financial
institution uses the rate table for variable-rate
transactions.
iii. Term not in whole years. When a
covered loan’s term to maturity (or, for a
variable-rate transaction, the initial fixed-rate
period) is not in whole years, the financial
institution uses the number of whole years
closest to the actual loan term or, if the actual
loan term is exactly halfway between two
whole years, by using the shorter loan term.
For example, for a loan term of ten years and
three months, the relevant term is ten years;
for a loan term of ten years and nine months,
the relevant term is 11 years; for a loan term
of ten years and six months, the relevant term
is ten years. If a loan term includes an odd
number of days, in addition to an odd
number of months, the financial institution
rounds to the nearest whole month, or
rounds down if the number of odd days is
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exactly halfway between two months. The
financial institution rounds to one year any
covered loan with a term shorter than six
months, including variable-rate covered
loans with no initial, fixed-rate periods. For
example, if an open-end covered loan has a
rate that varies according to an index plus a
margin, with no introductory, fixed-rate
period, the transaction term is one year.
iv. Amortization period longer than loan
term. If the amortization period of a covered
loan is longer than the term of the transaction
to maturity, § 1003.4(a)(12)(i) requires a
financial institution to use the loan term to
determine the applicable average prime offer
rate. For example, assume a financial
institution originates a closed-end, fixed-rate
loan that has a term to maturity of five years
and a thirty-year amortization period that
results in a balloon payment. The financial
institution complies with § 1003.4(a)(12)(i)
by using the five-year loan term.
5. Rate-set date. The relevant date to use
to determine the average prime offer rate for
a comparable transaction is the date on
which the covered loan’s interest rate was set
by the financial institution for the final time
before closing or account opening.
i. Rate-lock agreement. If an interest rate is
set pursuant to a ‘‘lock-in’’ agreement
between the financial institution and the
borrower, then the date on which the
agreement fixes the interest rate is the date
the rate was set. Except as provided in
comment 4(a)(12)–5.ii, if a rate is reset after
a lock-in agreement is executed (for example,
because the borrower exercises a float-down
option or the agreement expires), then the
relevant date is the date the financial
institution exercises discretion in setting the
rate for the final time before closing or
account opening. The same rule applies
when a rate-lock agreement is extended and
the rate is reset at the same rate, regardless
of whether market rates have increased,
decreased, or remained the same since the
initial rate was set. If no lock-in agreement
is executed, then the relevant date is the date
on which the institution sets the rate for the
final time before closing or account opening.
ii. Change in loan program. If a financial
institution issues a rate-lock commitment
under one loan program, the borrower
subsequently changes to another program
that is subject to different pricing terms, and
the financial institution changes the rate
promised to the borrower under the rate-lock
commitment accordingly, the rate-set date is
the date of the program change. However, if
the financial institution changes the
promised rate to the rate that would have
been available to the borrower under the new
program on the date of the original rate-lock
commitment, then that is the date the rate is
set, provided the financial institution
consistently follows that practice in all such
cases or the original rate-lock agreement so
provided. For example, assume that a
borrower locks a rate of 2.5 percent on June
1 for a 30-year, variable-rate loan with a 5year, fixed-rate introductory period. On June
15, the borrower decides to switch to a 30year, fixed-rate loan, and the rate available to
the borrower for that product on June 15 is
4.0 percent. On June 1, the 30-year, fixed-rate
loan would have been available to the
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borrower at a rate of 3.5 percent. If the
financial institution offers the borrower the
3.5 percent rate (i.e., the rate that would have
been available to the borrower for the fixedrate product on June 1, the date of the
original rate-lock) because the original
agreement so provided or because the
financial institution consistently follows that
practice for borrowers who change loan
programs, then the financial institution
should use June 1 as the rate-set date. In all
other cases, the financial institution should
use June 15 as the rate-set date.
iii. Brokered loans. When a financial
institution has reporting responsibility for an
application for a covered loan that it received
from a broker, as discussed in comment 4(a)–
4 (e.g., because the financial institution
makes a credit decision prior to closing or
account opening), the rate-set date is the last
date the financial institution set the rate with
the broker, not the date the broker set the
borrower’s rate.
6. Compare the annual percentage rate to
the average prime offer rate. Section
1003.4(a)(12)(i) requires a financial
institution to compare the covered loan’s
annual percentage rate to the most recently
available average prime offer rate that was in
effect for the comparable transaction as of the
rate-set date. For purposes of
§ 1003.4(a)(12)(i), the most recently available
rate means the average prime offer rate set
forth in the applicable table with the most
recent effective date as of the date the interest
rate was set. However, § 1003.4(a)(12)(i) does
not permit a financial institution to use an
average prime offer rate before its effective
date.
7. Rate spread—not applicable. If the
covered loan is an assumption, reverse
mortgage, a purchased loan, or is not subject
to Regulation Z, 12 CFR part 1026, a financial
institution complies with § 1003.4(a)(12) by
reporting that the requirement is not
applicable. If the application did not result
in an origination for a reason other than the
application was approved but not accepted
by the applicant, a financial institution
complies with § 1003.4(a)(12) by reporting
that the requirement is not applicable.
8. Application approved but not accepted
or preapproval request approved but not
accepted. In the case of an application
approved but not accepted or a preapproval
request that was approved but not accepted,
§ 1003.4(a)(12) requires a financial institution
to report the applicable rate spread.
Paragraph 4(a)(13)
1. HOEPA status—not applicable. If the
covered loan is not subject to the Home
Ownership and Equity Protection Act of
1994, as implemented in Regulation Z, 12
CFR 1026.32, a financial institution complies
with § 1003.4(a)(13) by reporting that the
requirement is not applicable. If an
application did not result in an origination,
a financial institution complies with
§ 1003.4(a)(13) by reporting that the
requirement is not applicable.
Paragraph 4(a)(14)
1. Determining lien status for applications
and covered loans originated and purchased.
i. Financial institutions are required to report
lien status for covered loans they originate
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and purchase and applications that do not
result in originations (preapproval requests
that are approved but not accepted,
preapproval requests that are denied,
applications that are approved but not
accepted, denied, withdrawn, or closed for
incompleteness). For covered loans
purchased by a financial institution, lien
status is determined by reference to the best
information readily available to the financial
institution at the time of purchase. For
covered loans that a financial institution
originates and applications that do not result
in originations, lien status is determined by
reference to the best information readily
available to the financial institution at the
time final action is taken and to the financial
institution’s own procedures. Thus, financial
institutions may rely on the title search they
routinely perform as part of their
underwriting procedures—for example, for
home purchase loans. Regulation C does not
require financial institutions to perform title
searches solely to comply with HMDA
reporting requirements. Financial institutions
may rely on other information that is readily
available to them at the time final action is
taken and that they reasonably believe is
accurate, such as the applicant’s statement on
the application or the applicant’s credit
report. For example, where the applicant
indicates on the application that there is a
mortgage on the property or where the
applicant’s credit report shows that the
applicant has a mortgage—and that mortgage
will not be paid off as part of the
transaction—the financial institution may
assume that the loan it originates is secured
by a subordinate lien. If the same application
did not result in an origination—for example,
because the application was denied or
withdrawn—the financial institution would
report the application as an application for a
subordinate-lien loan.
ii. Financial institutions may also consider
their established procedures when
determining lien status for applications that
do not result in originations. For example,
assume an applicant applies to a financial
institution to refinance a $100,000 first
mortgage; the applicant also has an open-end
line of credit for $20,000. If the financial
institution’s practice in such a case is to
ensure that it will have first-lien position—
through a subordination agreement with the
holder of the lien securing the open-end line
of credit—then the financial institution
should report the application as an
application for a first-lien covered loan.
2. Multiple properties. See comment
4(a)(9)–2 regarding transactions involving
multiple properties with more than one
property taken as security.
Paragraph 4(a)(15)
1. Credit score—relied on. Except for
purchased covered loans, § 1003.4(a)(15)
requires a financial institution to report the
credit score or scores relied on in making the
credit decision and information about the
scoring model used to generate each score. A
financial institution relies on a credit score
in making the credit decision if the credit
score was a factor in the credit decision even
if it was not a dispositive factor. For example,
if a credit score is one of multiple factors in
a financial institution’s credit decision, the
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financial institution has relied on the credit
score even if the financial institution denies
the application because one or more
underwriting requirements other than the
credit score are not satisfied.
2. Credit score—multiple credit scores.
When a financial institution obtains or
creates two or more credit scores for a single
applicant or borrower but relies on only one
score in making the credit decision (for
example, by relying on the lowest, highest,
most recent, or average of all of the scores),
the financial institution complies with
§ 1003.4(a)(15) by reporting that credit score
and information about the scoring model
used. When a financial institution obtains or
creates two or more credit scores for an
applicant or borrower and relies on multiple
scores for the applicant or borrower in
making the credit decision (for example, by
relying on a scoring grid that considers each
of the scores obtained or created for the
applicant or borrower without combining the
scores into a composite score), § 1003.4(a)(15)
requires the financial institution to report
one of the credit scores for the applicant or
borrower that was relied on in making the
credit decision. In choosing which credit
score to report in this circumstance, a
financial institution need not use the same
approach for its entire HMDA submission,
but it should be generally consistent (such as
by routinely using one approach within a
particular division of the institution or for a
category of covered loans). In instances such
as these, the financial institution should
report the name and version of the credit
scoring model for the score reported.
3. Credit score—multiple applicants or
borrowers. In a transaction involving two or
more applicants or borrowers for which the
financial institution obtains or creates a
single credit score, and relies on that credit
score in making the credit decision for the
transaction, the institution complies with
§ 1003.4(a)(15) by reporting that credit score
for either the applicant or first co-applicant.
Otherwise, a financial institution complies
with § 1003.4(a)(15) by reporting a credit
score for the applicant that it relied on in
making the credit decision, if any, and a
credit score for the first co-applicant that it
relied on in making the credit decision, if
any. To illustrate, assume a transaction
involves one applicant and one co-applicant
and that the financial institution obtains or
creates two credit scores for the applicant
and two credit scores for the co-applicant.
Assume further that the financial institution
relies on the lowest, highest, most recent, or
average of all of the credit scores obtained or
created to make the credit decision for the
transaction. The financial institution
complies with § 1003.4(a)(15) by reporting
that credit score and information about the
scoring model used. Alternatively, assume a
transaction involves one applicant and one
co-applicant and that the financial institution
obtains or creates three credit scores for the
applicant and three credit scores for the coapplicant. Assume further that the financial
institution relies on the middle credit score
for the applicant and the middle credit score
for the co-applicant to make the credit
decision for the transaction. The financial
institution complies with § 1003.4(a)(15) by
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reporting both the middle score for the
applicant and the middle score for the coapplicant.
4. Transactions for which no credit
decision was made. If a file was closed for
incompleteness or the application was
withdrawn before a credit decision was
made, the financial institution complies with
§ 1003.4(a)(15) by reporting that the
requirement is not applicable, even if the
financial institution had obtained or created
a credit score for the applicant or coapplicant. For example, if a file is closed for
incompleteness and is so reported in
accordance with § 1003.4(a)(8), the financial
institution complies with § 1003.4(a)(15) by
reporting that the requirement is not
applicable, even if the financial institution
had obtained or created a credit score for the
applicant or co-applicant. Similarly, if an
application was withdrawn by the applicant
before a credit decision was made and is so
reported in accordance with § 1003.4(a)(8),
the financial institution complies with
§ 1003.4(a)(15) by reporting that the
requirement is not applicable, even if the
financial institution had obtained or created
a credit score for the applicant or coapplicant.
5. Transactions for which no credit score
was relied on. If a financial institution makes
a credit decision without relying on a credit
score for the applicant or borrower, the
financial institution complies with
§ 1003.4(a)(15) by reporting that the
requirement is not applicable.
6. Purchased covered loan. A financial
institution complies with § 1003.4(a)(15) by
reporting that the requirement is not
applicable when the covered loan is a
purchased covered loan.
7. Non-natural person. When the applicant
and co-applicant, if applicable, are not
natural persons, a financial institution
complies with § 1003.4(a)(15) by reporting
that the requirement is not applicable.
Paragraph 4(a)(16)
1. Reason for denial—general. A financial
institution complies with § 1003.4(a)(16) by
reporting the principal reason or reasons it
denied the application, indicating up to four
reasons. The financial institution should
report only the principal reason or reasons it
denied the application, even if there are
fewer than four reasons. For example, if a
financial institution denies the application
because of the applicant’s credit history and
debt-to-income ratio, the financial institution
need only report these two principal reasons.
The reasons reported must be specific and
accurately describe the principal reason or
reasons the financial institution denied the
application.
2. Reason for denial—preapproval request
denied. Section 1003.4(a)(16) requires a
financial institution to report the principal
reason or reasons it denied the application.
A request for a preapproval under a
preapproval program as defined by
§ 1003.2(b)(2) is an application. If a financial
institution denies a preapproval request, the
financial institution complies with
§ 1003.4(a)(16) by reporting the reason or
reasons it denied the preapproval request.
3. Reason for denial—adverse action model
form or similar form. If a financial institution
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chooses to provide the applicant the reason
or reasons it denied the application using the
model form contained in appendix C to
Regulation B (Form C–1, Sample Notice of
Action Taken and Statement of Reasons) or
a similar form, § 1003.4(a)(16) requires the
financial institution to report the reason or
reasons that were specified on the form by
the financial institution, which includes
reporting the ‘‘Other’’ reason or reasons that
were specified on the form by the financial
institution, if applicable. If a financial
institution chooses to provide a disclosure of
the applicant’s right to a statement of specific
reasons using the model form contained in
appendix C to Regulation B (Form C–5,
Sample Disclosure of Right to Request
Specific Reasons for Credit Denial) or a
similar form, or chooses to provide the denial
reason or reasons orally under Regulation B,
12 CFR 1002.9(a)(2)(ii), the financial
institution complies with § 1003.4(a)(16) by
entering the principal reason or reasons it
denied the application.
4. Reason for denial—not applicable. A
financial institution complies with
§ 1003.4(a)(16) by reporting that the
requirement is not applicable if the action
taken on the application, pursuant to
§ 1003.4(a)(8), is not a denial. For example,
a financial institution complies with
§ 1003.4(a)(16) by reporting that the
requirement is not applicable if the loan is
originated or purchased by the financial
institution, or the application or preapproval
request was approved but not accepted, or
the application was withdrawn before a
credit decision was made, or the file was
closed for incompleteness.
Paragraph 4(a)(17)(i)
1. Total loan costs—not applicable. Section
1003.4(a)(17)(i) does not require financial
institutions to report the total loan costs for
applications, or for transactions not subject to
Regulation Z, 12 CFR 1026.43(c), and 12 CFR
1026.19(f), such as open-end lines of credit,
reverse mortgages, or loans or lines of credit
made primarily for business or commercial
purposes. In these cases, a financial
institution complies with § 1003.4(a)(17)(i)
by reporting that the requirement is not
applicable to the transaction.
2. Purchased loans—applications received
prior to the integrated disclosure effective
date. For purchased covered loans subject to
this reporting requirement for which
applications were received by the selling
entity prior to the effective date of Regulation
Z, 12 CFR 1026.19(f), a financial institution
complies with § 1003.4(a)(17)(i) by reporting
that the requirement is not applicable to the
transaction.
3. Revised disclosures. If the amount of
total loan costs changes because a financial
institution provides a revised version of the
disclosures required under Regulation Z, 12
CFR 1026.19(f), pursuant to Regulation Z, 12
CFR 1026.19(f)(2), the financial institution
complies with § 1003.4(a)(17)(i) by reporting
the revised amount, provided that the revised
disclosure was provided to the borrower
during the same reporting period in which
closing occurred. For example, in the case of
a financial institution’s quarterly submission
made pursuant to § 1003.5(a)(1)(ii), if the
financial institution provides a corrected
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disclosure to reflect a refund made pursuant
to Regulation Z, 12 CFR 1026.19(f)(2)(v), the
financial institution reports the corrected
amount of total loan costs only if the
corrected disclosure was provided prior to
the end of the quarter in which closing
occurred. The financial institution does not
report the corrected amount of total loan
costs in its quarterly submission if the
corrected disclosure was provided after the
end of the quarter, even if the corrected
disclosure was provided prior to the deadline
for timely submission of the financial
institution’s quarterly data. However, the
financial institution reports the corrected
amount of total loan costs on its annual loan/
application register.
Paragraph 4(a)(17)(ii)
1. Total points and fees—not applicable.
Section 1003.4(a)(17)(ii) does not require
financial institutions to report the total
points and fees for transactions not subject to
Regulation Z, 12 CFR 1026.43(c), such as
open-end lines of credit, reverse mortgages,
or loans or lines of credit made primarily for
business or commercial purposes, or for
applications or purchased covered loans. In
these cases, a financial institution complies
with § 1003.4(a)(17)(ii) by reporting that the
requirement is not applicable to the
transaction.
2. Total points and fees cure mechanism.
For covered loans subject to this reporting
requirement, if a financial institution
determines that the transaction’s total points
and fees exceeded the applicable limit and
cures the overage pursuant to Regulation Z,
12 CFR 1026.43(e)(3)(iii) and (iv), a financial
institution complies with § 1003.4(a)(17)(ii)
by reporting the correct amount of total
points and fees, provided that the cure was
effected during the same reporting period in
which closing occurred. For example, in the
case of a financial institution’s quarterly
submission, the financial institution reports
the revised amount of total points and fees
only if it cured the overage prior to the end
of the quarter in which closing occurred. The
financial institution does not report the
revised amount of total points and fees in its
quarterly submission if it cured the overage
after the end of the quarter, even if the cure
was effected prior to the deadline for timely
submission of the financial institution’s
quarterly data. However, the financial
institution reports the revised amount of total
points and fees on its annual loan/
application register.
Paragraph 4(a)(18)
1. Origination charges—not applicable.
Section 1003.4(a)(18) does not require
financial institutions to report the total
borrower-paid origination charges for
applications, or for transactions not subject to
Regulation Z, 12 CFR 1026.19(f), such as
open-end lines of credit, reverse mortgages,
or loans or lines of credit made primarily for
business or commercial purposes. In these
cases, a financial institution complies with
§ 1003.4(a)(18) by reporting that the
requirement is not applicable to the
transaction.
2. Purchased loans—applications received
prior to the integrated disclosure effective
date. For purchased covered loans subject to
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this reporting requirement for which
applications were received by the selling
entity prior to the effective date of Regulation
Z, 12 CFR 1026.19(f), a financial institution
complies with § 1003.4(a)(18) by reporting
that the requirement is not applicable to the
transaction.
3. Revised disclosures. If the total amount
of borrower-paid origination charges changes
because a financial institution provides a
revised version of the disclosures required
under Regulation Z, 12 CFR 1026.19(f),
pursuant to Regulation Z, 12 CFR
1026.19(f)(2), the financial institution
complies with § 1003.4(a)(18) by reporting
the revised amount, provided that the revised
disclosure was provided to the borrower
during the same reporting period in which
closing occurred. For example, in the case of
a financial institution’s quarterly submission
made pursuant to § 1003.5(a)(1)(ii), if the
financial institution provides a corrected
disclosure to reflect a refund made pursuant
to Regulation Z, 12 CFR 1026.19(f)(2)(v), the
financial institution reports the corrected
amount of origination charges only if the
corrected disclosure was provided prior to
the end of the quarter in which closing
occurred. The financial institution does not
report the corrected amount of origination
charges in its quarterly submission if the
corrected disclosure was provided after the
end of the quarter, even if the corrected
disclosure was provided prior to the deadline
for timely submission of the financial
institution’s quarterly data. However, the
financial institution reports the corrected
amount of origination charges on its annual
loan/application register.
Paragraph 4(a)(19)
1. Discount points—not applicable. Section
1003.4(a)(19) does not require financial
institutions to report the discount points for
applications, or for transactions not subject to
Regulation Z, 12 CFR 1026.19(f), such as
open-end lines of credit, reverse mortgages,
or loans or lines of credit made primarily for
business or commercial purposes. In these
cases, a financial institution complies with
§ 1003.4(a)(19) by reporting that the
requirement is not applicable to the
transaction.
2. Purchased loans—applications received
prior to the integrated disclosure effective
date. For purchased covered loans subject to
this reporting requirement for which
applications were received by the selling
entity prior to the effective date of Regulation
Z, 12 CFR 1026.19(f), a financial institution
complies with § 1003.4(a)(19) by reporting
that the requirement is not applicable to the
transaction.
3. Revised disclosures. If the amount of
discount points changes because a financial
institution provides a revised version of the
disclosures required under Regulation Z, 12
CFR 1026.19(f), pursuant to Regulation Z, 12
CFR 1026.19(f)(2), the financial institution
complies with § 1003.4(a)(19) by reporting
the revised amount, provided that the revised
disclosure was provided to the borrower
during the same reporting period in which
closing occurred. For example, in the case of
a financial institution’s quarterly submission
made pursuant to § 1003.5(a)(ii), if the
financial institution provides a corrected
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disclosure to reflect a refund made pursuant
to Regulation Z, 12 CFR 1026.19(f)(2)(v), the
financial institution reports the corrected
amount of discount points only if the
corrected disclosure was provided prior to
the end of the quarter in which closing
occurred. The financial institution does not
report the corrected amount of discount
points in its quarterly submission if the
corrected disclosure was provided after the
end of the quarter, even if the corrected
disclosure was provided prior to the deadline
for timely submission of the financial
institution’s quarterly data. However, the
financial institution reports the corrected
amount of discount points on its annual
loan/application register.
Paragraph 4(a)(20)
1. Lender credits—not applicable. Section
1003.4(a)(20) does not require financial
institutions to report lender credits for
applications, or for transactions not subject to
Regulation Z, 12 CFR 1026.19(f), such as
open-end lines of credit, reverse mortgages,
or loans or lines of credit made primarily for
business or commercial purposes. In these
cases, a financial institution complies with
§ 1003.4(a)(20) by reporting that the
requirement is not applicable to the
transaction.
2. Purchased loans—applications received
prior to the integrated disclosure effective
date. For purchased covered loans subject to
this reporting requirement for which
applications were received by the selling
entity prior to the effective date of Regulation
Z, 12 CFR 1026.19(f), a financial institution
complies with § 1003.4(a)(20) by reporting
that the requirement is not applicable to the
transaction.
3. Revised disclosures. If the amount of
lender credits changes because a financial
institution provides a revised version of the
disclosures required under Regulation Z, 12
CFR 1026.19(f), pursuant to Regulation Z, 12
CFR 1026.19(f)(2), the financial institution
complies with § 1003.4(a)(20) by reporting
the revised amount, provided that the revised
disclosure was provided to the borrower
during the same reporting period in which
closing occurred. For example, in the case of
a financial institution’s quarterly submission
made pursuant to § 1003.5(a)(1)(ii), if the
financial institution provides a corrected
disclosure to reflect a refund made pursuant
to Regulation Z, 12 CFR 1026.19(f)(2)(v), the
financial institution reports the corrected
amount of lender credits only if the corrected
disclosure was provided prior to the end of
the quarter in which closing occurred. The
financial institution does not report the
corrected amount of lender credits in its
quarterly submission if the corrected
disclosure was provided after the end of the
quarter, even if the corrected disclosure was
provided prior to the deadline for timely
submission of the financial institution’s
quarterly data. However, the financial
institution reports the corrected amount of
lender credits on its annual loan/application
register.
Paragraph 4(a)(21)
1. Interest rate—disclosures. Section
1003.4(a)(21) requires a financial institution
to identify the interest rate applicable to the
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approved application, or to the covered loan
at closing or account opening. For covered
loans or applications subject to the disclosure
requirements of Regulation Z, 12 CFR
1026.19(e) or (f), a financial institution
complies with § 1003.4(a)(21) by reporting
the interest rate disclosed on the applicable
disclosure. For covered loans for which
disclosures were provided pursuant to both
12 CFR 1026.19(e) and 12 CFR 1026.19(f), a
financial institution reports the interest rate
disclosed pursuant to 12 CFR 1026.19(f). A
financial institution may rely on the
definitions and commentary to the sections
of Regulation Z relevant to the disclosure of
the interest rate pursuant to 12 CFR
1026.19(e) or 12 CFR 1026.19(f).
2. Applications. In the case of an
application, § 1003.4(a)(21) requires a
financial institution to report the applicable
interest rate only if the application has been
approved by the financial institution but not
accepted by the borrower. In such cases, a
financial institution reports the interest rate
applicable at the time that the application
was approved by the financial institution. A
financial institution may report the interest
rate appearing on the disclosure provided
pursuant to 12 CFR 1026.19(e) or (f) if such
disclosure accurately reflects the interest rate
at the time the application was approved. For
applications that have been denied or
withdrawn, or files closed for
incompleteness, a financial institution
reports that no interest rate was applicable to
the application.
3. Adjustable rate—interest rate unknown.
Except as provided in comment 4(a)(21)–1,
for adjustable-rate covered loans or
applications, if the interest rate is unknown
at the time that the application was
approved, or at closing or account opening,
a financial institution reports the fullyindexed rate based on the index applicable
to the covered loan or application. For
purposes of § 1003.4(a)(21), the fully-indexed
rate is the index value and margin at the time
that the application was approved, or, for
covered loans, at closing or account opening.
Paragraph 4(a)(22)
1. Prepayment penalty term—not
applicable. Section 1003.4(a)(22) does not
require financial institutions to report the
term of any prepayment penalty for
transactions not subject to Regulation Z, 12
CFR part 1026, such as loans or lines of
credit made primarily for business or
commercial purposes, or for reverse
mortgages or purchased covered loans. In
these cases, a financial institution complies
with § 1003.4(a)(22) by reporting that the
requirement is not applicable to the
transaction.
2. Transactions for which no prepayment
penalty exists. For covered loans or
applications that have no prepayment
penalty, a financial institution complies with
§ 1003.4(a)(22) by reporting that the
requirement is not applicable to the
transaction. A financial institution may rely
on the definitions and commentary to
Regulation Z, 12 CFR 1026.32(b)(6)(i) or (ii)
in determining whether the terms of a
transaction contain a prepayment penalty.
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Paragraph 4(a)(23)
1. General. For covered loans that are not
purchased covered loans, § 1003.4(a)(23)
requires a financial institution to report the
ratio of the applicant’s or borrower’s total
monthly debt to total monthly income (debtto-income ratio) relied on in making the
credit decision. For example, if a financial
institution calculated the applicant’s or
borrower’s debt-to-income ratio twice—once
according to the financial institution’s own
requirements and once according to the
requirements of a secondary market
investor—and the financial institution relied
on the debt-to-income ratio calculated
according to the secondary market investor’s
requirements in making the credit decision,
§ 1003.4(a)(23) requires the financial
institution to report the debt-to-income ratio
calculated according to the requirements of
the secondary market investor.
2. Transactions for which a debt-to-income
ratio was one of multiple factors. A financial
institution relies on the ratio of the
applicant’s or borrower’s total monthly debt
to total monthly income (debt-to-income
ratio) in making the credit decision if the
debt-to-income ratio was a factor in the credit
decision even if it was not a dispositive
factor. For example, if the debt-to-income
ratio was one of multiple factors in a
financial institution’s credit decision, the
financial institution has relied on the debtto-income ratio and complies with
§ 1003.4(a)(23) by reporting the debt-toincome ratio, even if the financial institution
denied the application because one or more
underwriting requirements other than the
debt-to-income ratio were not satisfied.
3. Transactions for which no credit
decision was made. If a file was closed for
incompleteness, or if an application was
withdrawn before a credit decision was
made, a financial institution complies with
§ 1003.4(a)(23) by reporting that the
requirement is not applicable, even if the
financial institution had calculated the ratio
of the applicant’s total monthly debt to total
monthly income (debt-to-income ratio). For
example, if a file was closed for
incompleteness and was so reported in
accordance with § 1003.4(a)(8), the financial
institution complies with § 1003.4(a)(23) by
reporting that the requirement is not
applicable, even if the financial institution
had calculated the applicant’s debt-to-income
ratio. Similarly, if an application was
withdrawn by the applicant before a credit
decision was made, the financial institution
complies with § 1003.4(a)(23) by reporting
that the requirement is not applicable, even
if the financial institution had calculated the
applicant’s debt-to-income ratio.
4. Transactions for which no debt-toincome ratio was relied on. Section
1003.4(a)(23) does not require a financial
institution to calculate the ratio of an
applicant’s or borrower’s total monthly debt
to total monthly income (debt-to-income
ratio), nor does it require a financial
institution to rely on an applicant’s or
borrower’s debt-to-income ratio in making a
credit decision. If a financial institution
made a credit decision without relying on the
applicant’s or borrower’s debt-to-income
ratio, the financial institution complies with
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§ 1003.4(a)(23) by reporting that the
requirement is not applicable since no debtto-income ratio was relied on in connection
with the credit decision.
5. Non-natural person. A financial
institution complies with § 1003.4(a)(23) by
reporting that the requirement is not
applicable when the applicant and coapplicant, if applicable, are not natural
persons.
6. Multifamily dwellings. A financial
institution complies with § 1003.4(a)(23) by
reporting that the requirement is not
applicable for a covered loan secured by, or
an application proposed to be secured by, a
multifamily dwelling.
7. Purchased covered loans. A financial
institution complies with § 1003.4(a)(23) by
reporting that the requirement is not
applicable when reporting a purchased
covered loan.
Paragraph 4(a)(24)
1. General. Section 1003.4(a)(24) requires a
financial institution to report, except for
purchased covered loans, the ratio of the total
amount of debt secured by the property to the
value of the property (combined loan-tovalue ratio) relied on in making the credit
decision. For example, if a financial
institution calculated a combined loan-tovalue ratio twice—once according to the
financial institution’s own requirements and
once according to the requirements of a
secondary market investor—and the financial
institution relied on the combined loan-tovalue ratio calculated according to the
secondary market investor’s requirements in
making the credit decision, § 1003.4(a)(24)
requires the financial institution to report the
combined loan-to-value ratio calculated
according to the requirements of the
secondary market investor.
2. Transactions for which a combined loanto-value ratio was one of multiple factors. A
financial institution relies on the total
amount of debt secured by the property to the
value of the property (combined loan-tovalue ratio) in making the credit decision if
the combined loan-to-value ratio was a factor
in the credit decision even if it was not a
dispositive factor. For example, if the
combined loan-to-value ratio is one of
multiple factors in a financial institution’s
credit decision, the financial institution has
relied on the combined loan-to-value ratio
and complies with § 1003.4(a)(24) by
reporting the combined loan-to-value ratio,
even if the financial institution denies the
application because one or more
underwriting requirements other than the
combined loan-to-value ratio are not
satisfied.
3. Transactions for which no credit
decision was made. If a file was closed for
incompleteness, or if an application was
withdrawn before a credit decision was
made, a financial institution complies with
§ 1003.4(a)(24) by reporting that the
requirement is not applicable, even if the
financial institution had calculated the ratio
of the total amount of debt secured by the
property to the value of the property
(combined loan-to-value ratio). For example,
if a file is closed for incompleteness and is
so reported in accordance with § 1003.4(a)(8),
the financial institution complies with
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§ 1003.4(a)(24) by reporting that the
requirement is not applicable, even if the
financial institution had calculated a
combined loan-to-value ratio. Similarly, if an
application was withdrawn by the applicant
before a credit decision was made and is so
reported in accordance with § 1003.4(a)(8),
the financial institution complies with
§ 1003.4(a)(24) by reporting that the
requirement is not applicable, even if the
financial institution had calculated a
combined loan-to-value ratio.
4. Transactions for which no combined
loan-to-value ratio was relied on. Section
1003.4(a)(24) does not require a financial
institution to calculate the ratio of the total
amount of debt secured by the property to the
value of the property (combined loan-tovalue ratio), nor does it require a financial
institution to rely on a combined loan-tovalue ratio in making a credit decision. If a
financial institution makes a credit decision
without relying on a combined loan-to-value
ratio, the financial institution complies with
§ 1003.4(a)(24) by reporting that the
requirement is not applicable since no
combined loan-to-value ratio was relied on in
making the credit decision.
5. Purchased covered loan. A financial
institution complies with § 1003.4(a)(24) by
reporting that the requirement is not
applicable when the covered loan is a
purchased covered loan.
Paragraph 4(a)(25)
1. Amortization and maturity. For a fully
amortizing covered loan, the number of
months after which the legal obligation
matures is the number of months in the
amortization schedule, ending with the final
payment. Some covered loans do not fully
amortize during the maturity term, such as
covered loans with a balloon payment; such
loans should still be reported using the
maturity term rather than the amortization
term, even in the case of covered loans that
mature before fully amortizing but have reset
options. For example, a 30-year fully
amortizing covered loan would be reported
with a term of ‘‘360,’’ while a five year
balloon covered loan would be reported with
a loan term of ‘‘60.’’
2. Non-monthly repayment periods. If a
covered loan or application includes a
schedule with repayment periods measured
in a unit of time other than months, the
financial institution should report the
covered loan or application term using an
equivalent number of whole months without
regard for any remainder.
3. Purchased loans. For a covered loan that
was purchased, a financial institution reports
the number of months after which the legal
obligation matures as measured from the
covered loan’s origination.
4. Open-end line of credit. For an open-end
line of credit with a definite term, a financial
institution reports the number of months
from origination until the account
termination date, including both the draw
and repayment period.
5. Loan or application without a definite
term. For a covered loan or application
without a definite term, such as a reverse
mortgage, a financial institution complies
with § 1003.4(a)(25) by reporting that the
requirement is not applicable.
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Paragraph 4(a)(26)
1. Types of introductory rates. Section
1003.4(a)(26) requires a financial institution
to report the number of months, or proposed
number of months in the case of an
application, from closing or account opening
until the first date the interest rate may
change. For example, assume an open-end
line of credit contains an introductory or
‘‘teaser’’ interest rate for two months after the
date of account opening, after which the
interest rate may adjust. In this example, the
financial institution complies with
§ 1003.4(a)(26) by reporting the number of
months as ‘‘2.’’ Section 1003.4(a)(26) requires
a financial institution to report the number
of months based on when the first interest
rate adjustment may occur, even if an interest
rate adjustment is not required to occur at
that time and even if the rates that will apply,
or the periods for which they will apply, are
not known at closing or account opening. For
example, if a closed-end mortgage loan with
a 30-year term has an adjustable-rate product
with an introductory interest rate for the first
60 months, after which the interest rate is
permitted, but not required to vary, according
to the terms of an index rate, the financial
institution complies with § 1003.4(a)(26) by
reporting the number of months as ‘‘60.’’
Similarly, if a closed-end mortgage loan with
a 30-year term is a step-rate product with an
introductory interest rate for the first 24
months, after which the interest rate will
increase to a different known interest rate for
the next 36 months, the financial institution
complies with § 1003.4(a)(26) by reporting
the number of months as ‘‘24.’’
2. Preferred rates. Section 1003.4(a)(26)
does not require reporting of introductory
interest rate periods based on preferred rates
unless the terms of the legal obligation
provide that the preferred rate will expire at
a certain defined date. Preferred rates include
terms of the legal obligation that provide that
the initial underlying rate is fixed but that it
may increase or decrease upon the
occurrence of some future event, such as an
employee leaving the employ of the financial
institution, the borrower closing an existing
deposit account with the financial
institution, or the borrower revoking an
election to make automated payments. In
these cases, because it is not known at the
time of closing or account opening whether
the future event will occur, and if so, when
it will occur, § 1003.4(a)(26) does not require
reporting of an introductory interest rate
period.
3. Loan or application with a fixed rate. A
financial institution complies with
§ 1003.4(a)(26) by reporting that the
requirement is not applicable for a covered
loan with a fixed rate or an application for
a covered loan with a fixed rate.
4. Purchased loan. A financial institution
complies with § 1003.4(a)(26) by reporting
that requirement is not applicable when the
covered loan is a purchased covered loan
with a fixed rate.
Paragraph 4(a)(27)
1. General. Section 1003.4(a)(27) requires
reporting of contractual features that would
allow payments other than fully amortizing
payments. Section 1003.4(a)(27) defines the
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contractual features by reference to
Regulation Z, 12 CFR part 1026, but without
regard to whether the covered loan is
consumer credit, as defined in
§ 1026.2(a)(12), is extended by a creditor, as
defined in § 1026.2(a)(17), or is extended to
a consumer, as defined in § 1026.2(a)(11),
and without regard to whether the property
is a dwelling as defined in § 1026.2(a)(19).
For example, assume that a financial
institution originates a business-purpose
transaction that is exempt from Regulation Z
pursuant to 12 CFR 1026.3(a)(1), to finance
the purchase of a multifamily dwelling, and
that there is a balloon payment, as defined
by Regulation Z, 12 CFR 1026.18(s)(5)(i), at
the end of the loan term. The multifamily
dwelling is a dwelling under § 1003.2(f), but
not under Regulation Z, 12 CFR
1026.2(a)(19). In this example, the financial
institution should report the businesspurpose transaction as having a balloon
payment under § 1003.4(a)(27)(i), assuming
the other requirements of this part are met.
Aside from these distinctions, financial
institutions may rely on the definitions and
related commentary provided in the
appropriate sections of Regulation Z
referenced in § 1003.4(a)(27) of this part in
determining whether the contractual feature
should be reported.
Paragraph 4(a)(28).
1. General. A financial institution reports
the property value relied on in making the
credit decision. For example, if the
institution relies on an appraisal or other
valuation for the property in calculating the
loan-to-value ratio, it reports that value; if the
institution relies on the purchase price of the
property in calculating the loan-to-value
ratio, it reports that value.
2. Multiple property values. When a
financial institution obtains two or more
valuations of the property securing or
proposed to secure the covered loan, the
financial institution complies with
§ 1003.4(a)(28) by reporting the value relied
on in making the credit decision. For
example, when a financial institution obtains
an appraisal, an automated valuation model
report, and a broker price opinion with
different values for the property, it reports
the value relied on in making the credit
decision. Section § 1003.4(a)(28) does not
require a financial institution to use a
particular property valuation method, but
instead requires a financial institution to
report the valuation relied on in making the
credit decision.
3. Transactions for which no credit
decision was made. If a file was closed for
incompleteness or the application was
withdrawn before a credit decision was
made, the financial institution complies with
§ 1003.4(a)(28) by reporting that the
requirement is not applicable, even if the
financial institution had obtained a property
value. For example, if a file is closed for
incompleteness and is so reported in
accordance with § 1003.4(a)(8), the financial
institution complies with § 1003.4(a)(28) by
reporting that the requirement is not
applicable, even if the financial institution
had obtained a property value. Similarly, if
an application was withdrawn by the
applicant before a credit decision was made
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and is so reported in accordance with
§ 1003.4(a)(8), the financial institution
complies with § 1003.4(a)(28) by reporting
that the requirement is not applicable, even
if the financial institution had obtained a
property value.
4. Transactions for which no property
value was relied on. Section 1003.4(a)(28)
does not require a financial institution to
obtain a property valuation, nor does it
require a financial institution to rely on a
property value in making a credit decision.
If a financial institution makes a credit
decision without relying on a property value,
the financial institution complies with
§ 1003.4(a)(28) by reporting that the
requirement is not applicable since no
property value was relied on in making the
credit decision.
Paragraph 4(a)(29)
1. Classification under State law. A
financial institution should report a covered
loan that is or would have been secured only
by a manufactured home but not the land on
which it is sited as secured by a
manufactured home and not land, even if the
manufactured home is considered real
property under applicable State law.
2. Manufactured home community. A
manufactured home community that is a
multifamily dwelling is not considered a
manufactured home for purposes of
§ 1003.4(a)(29).
3. Multiple properties. See comment
4(a)(9)–2 regarding transactions involving
multiple properties with more than one
property taken as security.
4. Scope of requirement. A financial
institution reports that the requirement is not
applicable for a covered loan where the
dwelling related to the property identified in
§ 1003.4(a)(9) is not a manufactured home.
Paragraph 4(a)(30)
1. Indirect land ownership. Indirect land
ownership can occur when the applicant or
borrower is or will be a member of a residentowned community structured as a housing
cooperative in which the occupants own an
entity that holds the underlying land of the
manufactured home community. In such
communities, the applicant or borrower may
still have a lease and pay rent for the lot on
which his or her manufactured home is or
will be located, but the property interest type
for such an arrangement should be reported
as indirect ownership if the applicant is or
will be a member of the cooperative that
owns the underlying land of the
manufactured home community. If an
applicant resides or will reside in such a
community but is not a member, the property
interest type should be reported as a paid
leasehold.
2. Leasehold interest. A leasehold interest
could be formalized in a lease with a defined
term and specified rent payments, or could
arise as a tenancy at will through permission
of a land owner without any written, formal
arrangement. For example, assume a
borrower will locate the manufactured home
in a manufactured home community, has a
written lease for a lot in that park, and the
lease specifies rent payments. In this
example, a financial institution complies
with § 1003.4(a)(30) by reporting a paid
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leasehold. However, if instead the borrower
will locate the manufactured home on land
owned by a family member without a written
lease and with no agreement as to rent
payments, a financial institution complies
with § 1003.4(a)(30) by reporting an unpaid
leasehold.
3. Multiple properties. See comment
4(a)(9)–2 regarding transactions involving
multiple properties with more than one
property taken as security.
4. Manufactured home community. A
manufactured home community that is a
multifamily dwelling is not considered a
manufactured home for purposes of
§ 1003.4(a)(30).
5. Direct ownership. An applicant or
borrower has a direct ownership interest in
the land on which the dwelling is or is to be
located when it has a more than possessory
real property ownership interest in the land
such as fee simple ownership.
6. Scope of requirement. A financial
institution reports that the requirement is not
applicable for a covered loan where the
dwelling related to the property identified in
§ 1003.4(a)(9) is not a manufactured home.
Paragraph 4(a)(31)
1. Multiple properties. See comment
4(a)(9)–2 regarding transactions involving
multiple properties with more than one
property taken as security.
2. Manufactured home community. For an
application or covered loan secured by a
manufactured home community, the
financial institution should include in the
number of individual dwelling units the total
number of manufactured home sites that
secure the loan and are available for
occupancy, regardless of whether the sites
are currently occupied or have manufactured
homes currently attached. A financial
institution may include in the number of
individual dwelling units other units such as
recreational vehicle pads, manager
apartments, rental apartments, site-built
homes or other rentable space that are
ancillary to the operation of the secured
property if it considers such units under its
underwriting guidelines or the guidelines of
an investor, or if it tracks the number of such
units for its own internal purposes. For a
loan secured by a single manufactured home
that is or will be located in a manufactured
home community, the financial institution
should report one individual dwelling unit.
3. Condominium and cooperative projects.
For a covered loan secured by a
condominium or cooperative property, the
financial institution reports the total number
of individual dwelling units securing the
covered loan or proposed to secure the
covered loan in the case of an application.
For example:
i. Assume that a loan is secured by the
entirety of a cooperative property. The
financial institution would report the number
of individual dwelling units in the
cooperative property.
ii. Assume that a covered loan is secured
by 30 individual dwelling units in a
condominium property that contains 100
individual dwelling units and that the loan
is not exempt from Regulation C under
§ 1003.3(c)(3). The financial institution
reports 30 individual dwelling units.
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4. Best information available. A financial
institution may rely on the best information
readily available to the financial institution
at the time final action is taken and on the
financial institution’s own procedures in
reporting the information required by
§ 1003.4(a)(31). Information readily available
could include, for example, information
provided by an applicant that the financial
institution reasonably believes, information
contained in a property valuation or
inspection, or information obtained from
public records.
Paragraph 4(a)(32)
1. Affordable housing income restrictions.
For purposes of § 1003.4(a)(32), affordable
housing income-restricted units are
individual dwelling units that have
restrictions based on the income level of
occupants pursuant to restrictive covenants
encumbering the property. Such income
levels are frequently expressed as a
percentage of area median income by
household size as established by the U.S.
Department of Housing and Urban
Development or another agency responsible
for implementing the applicable affordable
housing program. Such restrictions are
frequently part of compliance with programs
that provide public funds, special tax
treatment, or density bonuses to encourage
development or preservation of affordable
housing. Such restrictions are frequently
evidenced by a use agreement, regulatory
agreement, land use restriction agreement,
housing assistance payments contract, or
similar agreement. Rent control or rent
stabilization laws, and the acceptance by the
owner or manager of a multifamily dwelling
of Housing Choice Vouchers (24 CFR part
982) or other similar forms of portable
housing assistance that are tied to an
occupant and not an individual dwelling
unit, are not affordable housing incomerestricted dwelling units for purposes of
§ 1003.4(a)(32).
2. Federal affordable housing sources.
Examples of Federal programs and funding
sources that may result in individual
dwelling units that are reportable under
§ 1003.4(a)(32) include, but are not limited
to:
i. Affordable housing programs pursuant to
Section 8 of the United States Housing Act
of 1937 (42 U.S.C. 1437f);
ii. Public housing (42 U.S.C. 1437a(b)(6));
iii. The HOME Investment Partnerships
program (24 CFR part 92);
iv. The Community Development Block
Grant program (24 CFR part 570);
v. Multifamily tax subsidy project funding
through tax-exempt bonds or tax credits (26
U.S.C. 42; 26 U.S.C. 142(d));
vi. Project-based vouchers (24 CFR part
983);
vii. Federal Home Loan Bank affordable
housing program funding (12 CFR part 1291);
and
viii. Rural Housing Service multifamily
housing loans and grants (7 CFR part 3560).
3. State and local government affordable
housing sources. Examples of State and local
sources that may result in individual
dwelling units that are reportable under
§ 1003.4(a)(32) include, but are not limited
to: State or local administration of Federal
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funds or programs; State or local funding
programs for affordable housing or rental
assistance, including programs operated by
independent public authorities; inclusionary
zoning laws; and tax abatement or tax
increment financing contingent on affordable
housing requirements.
4. Multiple properties. See comment
4(a)(9)–2 regarding transactions involving
multiple properties with more than one
property taken as security.
5. Best information available. A financial
institution may rely on the best information
readily available to the financial institution
at the time final action is taken and on the
financial institution’s own procedures in
reporting the information required by
§ 1003.4(a)(32). Information readily available
could include, for example, information
provided by an applicant that the financial
institution reasonably believes, information
contained in a property valuation or
inspection, or information obtained from
public records.
6. Scope of requirement. A financial
institution reports that the requirement is not
applicable if the property securing the
covered loan or, in the case of an application,
proposed to secure the covered loan is not a
multifamily dwelling.
Paragraph 4(a)(33)
1. Agents. If a financial institution is
reporting actions taken by its agent consistent
with comment 4(a)–4, the agent is not
considered the financial institution for the
purposes of § 1003.4(a)(33). For example,
assume that an applicant submitted an
application to Financial Institution A, and
Financial Institution A made the credit
decision acting as Financial Institution B’s
agent under State law. A covered loan was
originated and the obligation arising from a
covered loan was initially payable to
Financial Institution A. Financial Institution
B purchased the loan. Financial Institution B
reports the origination and not the purchase,
and indicates that the application was not
submitted directly to the financial institution
and that the transaction was not initially
payable to the financial institution.
Paragraph 4(a)(33)(i)
1. General. Section 4(a)(33)(i) requires a
financial institution to indicate whether the
applicant or borrower submitted the
application directly to the financial
institution that is reporting the covered loan
or application. The following scenarios
demonstrate whether an application was
submitted directly to the financial institution
that is reporting the covered loan or
application.
i. The application was submitted directly
to the financial institution if the mortgage
loan originator identified pursuant to
§ 1003.4(a)(34) was an employee of the
reporting financial institution when the
originator performed the origination
activities for the covered loan or application
that is being reported.
ii. The application was also submitted
directly to the financial institution reporting
the covered loan or application if the
reporting financial institution directed the
applicant to a third-party agent (e.g., a credit
union service organization) that performed
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loan origination activities on behalf of the
financial institution and did not assist the
applicant with applying for covered loans
with other institutions.
iii. If an applicant contacted and
completed an application with a broker or
correspondent that forwarded the application
to a financial institution for approval, an
application was not submitted to the
financial institution.
Paragraph 4(a)(33)(ii)
1. General. Section 1003.4(a)(33)(ii)
requires financial institutions to report
whether the obligation arising from a covered
loan was or, in the case of an application,
would have been initially payable to the
institution. An obligation is initially payable
to the institution if the obligation is initially
payable either on the face of the note or
contract to the financial institution that is
reporting the covered loan or application. For
example, if a financial institution reported an
origination of a covered loan that it approved
prior to closing, that closed in the name of
a third-party, such as a correspondent lender,
and that the financial institution purchased
after closing, the covered loan was not
initially payable to the financial institution.
2. Applications. A financial institution
complies with § 1003.4(a)(33)(ii) by reporting
that the requirement is not applicable if the
institution had not determined whether the
covered loan would have been initially
payable to the institution reporting the
application when the application was
withdrawn, denied, or closed for
incompleteness.
Paragraph 4(a)(34)
1. NMLSR ID. Section 1003.4(a)(34)
requires a financial institution to report the
Nationwide Mortgage Licensing System and
Registry unique identifier (NMLSR ID) for the
mortgage loan originator, as defined in
Regulation G, 12 CFR 1007.102, or Regulation
H, 12 CFR 1008.23, as applicable. The
NMLSR ID is a unique number or other
identifier generally assigned to individuals
registered or licensed through NMLSR to
provide loan originating services. For more
information, see the Secure and Fair
Enforcement for Mortgage Licensing Act of
2008, title V of the Housing and Economic
Recovery Act of 2008 (S.A.F.E. Act), 12
U.S.C. 5101 et seq., and its implementing
regulations (12 CFR part 1007 and 12 CFR
part 1008).
2. Mortgage loan originator without
NMLSR ID. An NMLSR ID for the mortgage
loan originator is not required by
§ 1003.4(a)(34) to be reported by a financial
institution if the mortgage loan originator is
not required to obtain and has not been
assigned an NMLSR ID. For example, certain
individual mortgage loan originators may not
be required to obtain an NMLSR ID for the
particular transaction being reported by the
financial institution, such as a commercial
loan. However, some mortgage loan
originators may have obtained an NMLSR ID
even if they are not required to obtain one
for that particular transaction. If a mortgage
loan originator has been assigned an NMLSR
ID, a financial institution complies with
§ 1003.4(a)(34) by reporting the mortgage
loan originator’s NMLSR ID regardless of
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whether the mortgage loan originator is
required to obtain an NMLSR ID for the
particular transaction being reported by the
financial institution. In the event that the
mortgage loan originator is not required to
obtain and has not been assigned an NMLSR
ID, a financial institution complies with
§ 1003.4(a)(34) by reporting that the
requirement is not applicable.
3. Multiple mortgage loan originators. If
more than one individual associated with a
covered loan or application meets the
definition of a mortgage loan originator, as
defined in Regulation G, 12 CFR 1007.102, or
Regulation H, 12 CFR 1008.23, a financial
institution complies with § 1003.4(a)(34) by
reporting the NMLSR ID of the individual
mortgage loan originator with primary
responsibility for the transaction as of the
date of action taken pursuant to
§ 1003.4(a)(8)(ii). A financial institution that
establishes and follows a reasonable, written
policy for determining which individual
mortgage loan originator has primary
responsibility for the reported transaction as
of the date of action taken complies with
§ 1003.4(a)(34).
Paragraph 4(a)(35)
1. Automated underwriting system data—
general. A financial institution complies with
§ 1003.4(a)(35) by reporting, except for
purchased covered loans, the name of the
automated underwriting system (AUS) used
by the financial institution to evaluate the
application and the result generated by that
AUS. The following scenarios illustrate when
a financial institution reports the name of the
AUS used by the financial institution to
evaluate the application and the result
generated by that AUS.
i. A financial institution that uses an AUS,
as defined in § 1003.4(a)(35)(ii), to evaluate
an application, must report the name of the
AUS used by the financial institution to
evaluate the application and the result
generated by that system, regardless of
whether the AUS was used in its
underwriting process. For example, if a
financial institution uses an AUS to evaluate
an application prior to submitting the
application through its underwriting process,
the financial institution complies with
§ 1003.4(a)(35) by reporting the name of the
AUS it used to evaluate the application and
the result generated by that system.
ii. A financial institution that uses an AUS,
as defined in § 1003.4(a)(35)(ii), to evaluate
an application, must report the name of the
AUS it used to evaluate the application and
the result generated by that system,
regardless of whether the financial institution
intends to hold the covered loan in its
portfolio or sell the covered loan. For
example, if a financial institution uses an
AUS developed by a securitizer to evaluate
an application and intends to sell the covered
loan to that securitizer but ultimately does
not sell the covered loan and instead holds
the covered loan in its portfolio, the financial
institution complies with § 1003.4(a)(35) by
reporting the name of the securitizer’s AUS
that the institution used to evaluate the
application and the result generated by that
system. Similarly, if a financial institution
uses an AUS developed by a securitizer to
evaluate an application to determine whether
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to originate the covered loan but does not
intend to sell the covered loan to that
securitizer and instead holds the covered
loan in its portfolio, the financial institution
complies with § 1003.4(a)(35) by reporting
the name of the securitizer’s AUS that the
institution used to evaluate the application
and the result generated by that system.
iii. A financial institution that uses an
AUS, as defined in § 1003.4(a)(35)(ii), that is
developed by a securitizer to evaluate an
application, must report the name of the AUS
it used to evaluate the application and the
result generated by that system, regardless of
whether the securitizer intends to hold the
covered loan it purchased from the financial
institution in its portfolio or securitize the
covered loan. For example, if a financial
institution uses an AUS developed by a
securitizer to evaluate an application and the
financial institution sells the covered loan to
that securitizer but the securitizer holds the
covered loan it purchased in its portfolio, the
financial institution complies with
§ 1003.4(a)(35) by reporting the name of the
securitizer’s AUS that the institution used to
evaluate the application and the result
generated by that system.
iv. A financial institution, which is also a
securitizer, that uses its own AUS, as defined
in § 1003.4(a)(35)(ii), to evaluate an
application, must report the name of the AUS
it used to evaluate the application and the
result generated by that system, regardless of
whether the financial institution intends to
hold the covered loan it originates in its
portfolio, purchase the covered loan, or
securitize the covered loan. For example, if
a financial institution, which is also a
securitizer, has developed its own AUS and
uses that AUS to evaluate an application that
it intends to originate and hold in its
portfolio and not purchase or securitize the
covered loan, the financial institution
complies with § 1003.4(a)(35) by reporting
the name of its AUS that it used to evaluate
the application and the result generated by
that system.
2. Definition of automated underwriting
system. A financial institution must report
the information required by § 1003.4(a)(35)(i)
if the financial institution uses an automated
underwriting system (AUS), as defined in
§ 1003.4(a)(35)(ii), to evaluate an application.
In order for an AUS to be covered by the
definition in § 1003.4(a)(35)(ii), the system
must be an electronic tool that has been
developed by a securitizer, Federal
government insurer, or a Federal government
guarantor. For example, if a financial
institution has developed its own proprietary
system that it uses to evaluate an application
and the financial institution is also a
securitizer, then the financial institution
complies with § 1003.4(a)(35) by reporting
the name of that system and the result
generated by that system. On the other hand,
if a financial institution has developed its
own proprietary system that it uses to
evaluate an application but the financial
institution is not a securitizer, then the
financial institution is not required by
§ 1003.4(a)(35) to report the use of that
system and the result generated by that
system. In addition, in order for an AUS to
be covered by the definition in
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§ 1003.4(a)(35)(ii), the system must provide a
result regarding both the credit risk of the
applicant and the eligibility of the covered
loan to be originated, purchased, insured, or
guaranteed by the securitizer, Federal
government insurer, or Federal government
guarantor that developed the system being
used to evaluate the application. For
example, if a system is an electronic tool that
provides a determination of the eligibility of
the covered loan to be originated, purchased,
insured, or guaranteed by the securitizer,
Federal government insurer, or Federal
government guarantor that developed the
system being used by a financial institution
to evaluate the application, but the system
does not also provide an assessment of the
creditworthiness of the applicant—such as,
an evaluation of the applicant’s income, debt,
and credit history—then that system does not
qualify as an AUS, as defined in
§ 1003.4(a)(35)(ii). A financial institution that
uses a system that is not an AUS, as defined
in § 1003.4(a)(35)(ii), to evaluate an
application does not report the information
required by § 1003.4(a)(35)(i).
3. Reporting automated underwriting
system data—multiple results. When a
financial institution uses one or more
automated underwriting systems (AUS) to
evaluate the application and the system or
systems generate two or more results, the
financial institution complies with
§ 1003.4(a)(35) by reporting, except for
purchased covered loans, the name of the
AUS used by the financial institution to
evaluate the application and the result
generated by that AUS as determined by the
following principles. To determine what
AUS (or AUSs) and result (or results) to
report under § 1003.4(a)(35), a financial
institution follows each of the principles that
is applicable to the application in question,
in the order in which they are set forth
below.
i. If a financial institution obtains two or
more AUS results and the AUS generating
one of those results corresponds to the loan
type reported pursuant to § 1003.4(a)(2), the
financial institution complies with
§ 1003.4(a)(35) by reporting that AUS name
and result. For example, if a financial
institution evaluates an application using the
Federal Housing Administration’s (FHA)
Technology Open to Approved Lenders
(TOTAL) Scorecard and subsequently
evaluates the application with an AUS used
to determine eligibility for a non-FHA loan,
but ultimately originates an FHA loan, the
financial institution complies with
§ 1003.4(a)(35) by reporting TOTAL
Scorecard and the result generated by that
system. If a financial institution obtains two
or more AUS results and more than one of
those AUS results is generated by a system
that corresponds to the loan type reported
pursuant to § 1003.4(a)(2), the financial
institution identifies which AUS result
should be reported by following the principle
set forth below in comment 4(a)(35)–3.ii.
ii. If a financial institution obtains two or
more AUS results and the AUS generating
one of those results corresponds to the
purchaser, insurer, or guarantor, if any, the
financial institution complies with
§ 1003.4(a)(35) by reporting that AUS name
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and result. For example, if a financial
institution evaluates an application with the
AUS of Securitizer A and subsequently
evaluates the application with the AUS of
Securitizer B, but the financial institution
ultimately originates a covered loan that it
sells within the same calendar year to
Securitizer A, the financial institution
complies with § 1003.4(a)(35) by reporting
the name of Securitizer A’s AUS and the
result generated by that system. If a financial
institution obtains two or more AUS results
and more than one of those AUS results is
generated by a system that corresponds to the
purchaser, insurer, or guarantor, if any, the
financial institution identifies which AUS
result should be reported by following the
principle set forth below in comment
4(a)(35)–3.iii.
iii. If a financial institution obtains two or
more AUS results and none of the systems
generating those results correspond to the
purchaser, insurer, or guarantor, if any, or the
financial institution is following this
principle because more than one AUS result
is generated by a system that corresponds to
either the loan type or the purchaser, insurer,
or guarantor, the financial institution
complies with § 1003.4(a)(35) by reporting
the AUS result generated closest in time to
the credit decision and the name of the AUS
that generated that result. For example, if a
financial institution evaluates an application
with the AUS of Securitizer A, subsequently
again evaluates the application with
Securitizer A’s AUS, the financial institution
complies with § 1003.4(a)(35) by reporting
the name of Securitizer A’s AUS and the
second AUS result. Similarly, if a financial
institution obtains a result from an AUS that
requires the financial institution to
underwrite the loan manually, but the
financial institution subsequently processes
the application through a different AUS that
also generates a result, the financial
institution complies with § 1003.4(a)(35) by
reporting the name of the second AUS that
it used to evaluate the application and the
AUS result generated by that system.
iv. If a financial institution obtains two or
more AUS results at the same time and the
principles in comment 4(a)(35)–3.i through
.iii do not apply, the financial institution
complies with § 1003.4(a)(35) by reporting
the name of all of the AUSs used by the
financial institution to evaluate the
application and the results generated by each
of those systems. For example, if a financial
institution simultaneously evaluates an
application with the AUS of Securitizer A
and the AUS of Securitizer B, the financial
institution complies with § 1003.4(a)(35) by
reporting the name of both Securitizer A’s
AUS and Securitizer B’s AUS and the results
generated by each of those systems. In any
event, however, the financial institution does
not report more than five AUSs and five
results. If more than five AUSs and five
results meet the criteria in this principle, the
financial institution complies with
§ 1003.4(a)(35) by choosing any five among
them to report.
4. Transactions for which an automated
underwriting system was not used to evaluate
the application. Section 1003.4(a)(35) does
not require a financial institution to evaluate
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an application using an automated
underwriting system (AUS), as defined in
§ 1003.4(a)(35)(ii). For example, if a financial
institution only manually underwrites an
application and does not use an AUS to
evaluate the application, the financial
institution complies with § 1003.4(a)(35) by
reporting that the requirement is not
applicable since an AUS was not used to
evaluate the application.
5. Purchased covered loan. A financial
institution complies with § 1003.4(a)(35) by
reporting that the requirement is not
applicable when the covered loan is a
purchased covered loan.
6. Non-natural person. When the applicant
and co-applicant, if applicable, are not
natural persons, a financial institution
complies with § 1003.4(a)(35) by reporting
that the requirement is not applicable.
Paragraph 4(a)(37)
1. Open-end line of credit. Section
1003.4(a)(37) requires a financial institution
to identify whether the covered loan or the
application is for an open-end line of credit.
See comments 2(o)–1 and –2 for a discussion
of open-end line of credit and extension of
credit.
Paragraph 4(a)(38)
1. Primary purpose. Section 1003.4(a)(38)
requires a financial institution to identify
whether the covered loan is, or the
application is for a covered loan that will be,
made primarily for a business or commercial
purpose. See comment 3(c)(10)–2 for a
discussion of how to determine the primary
purpose of the transaction and the standard
applicable to financial institution’s
determination of the primary purpose of the
transaction. See comments 3(c)(10)–3 and –4
for examples of excluded and reportable
business- or commercial-purpose
transactions.
4(f) Quarterly Recording of Data
1. General. Section 1003.4(f) requires a
financial institution to record the data
collected pursuant to § 1003.4 on a loan/
application register within 30 calendar days
after the end of the calendar quarter in which
final action is taken. Section 1003.4(f) does
not require a financial institution to record
data on a single loan/application register on
a quarterly basis. Rather, for purposes of
§ 1003.4(f), a financial institution may record
data on a single loan/application register or
separately for different branches or different
loan types (such as home purchase or home
improvement loans, or loans on multifamily
dwellings).
2. Agency requirements. Certain State or
Federal regulations may require a financial
institution to record its data more frequently
than is required under Regulation C.
3. Form of quarterly records. A financial
institution may maintain the records required
by § 1003.4(f) in electronic or any other
format, provided the institution can make the
information available to its regulatory agency
in a timely manner upon request.
Section 1003.5—Disclosure and Reporting
5(a) Reporting to Agency
1. [Reserved]
2. [Reserved]
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3. [Reserved]
4. [Reserved]
5. Change in appropriate Federal agency.
If the appropriate Federal agency for a
covered institution changes (as a
consequence of a merger or a change in the
institution’s charter, for example), the
institution must report data to the new
appropriate Federal agency beginning with
the year of the change.
6. Subsidiaries. An institution is a
subsidiary of a bank or savings association
(for purposes of reporting HMDA data to the
same agency as the parent) if the bank or
savings association holds or controls an
ownership interest that is greater than 50
percent of the institution.
7. Transmittal sheet—additional data
submissions. If an additional data submission
becomes necessary (for example, because the
institution discovers that data were omitted
from the initial submission, or because
revisions are called for), that submission
must be accompanied by a transmittal sheet.
8. Transmittal sheet—revisions or
deletions. If a data submission involves
revisions or deletions of previously
submitted data, it must state the total of all
line entries contained in that submission,
including both those representing revisions
or deletions of previously submitted entries,
and those that are being resubmitted
unchanged or are being submitted for the first
time. Depository institutions must provide a
list of the MSAs or Metropolitan Divisions in
which they have home or branch offices.
5(b) Disclosure Statement
1. Business day. For purposes of
§ 1003.5(b), a business day is any calendar
day other than a Saturday, Sunday, or legal
public holiday.
2. Format of notice. A financial institution
may make the written notice required under
§ 1003.5(b)(2) available in paper or electronic
form.
3. Notice—suggested text. A financial
institution may use any text that meets the
requirements of § 1003.5(b)(2). The following
language is suggested but is not required:
Home Mortgage Disclosure Act Notice
The HMDA data about our residential
mortgage lending are available online for
review. The data show geographic
distribution of loans and applications;
ethnicity, race, sex, age, and income of
applicants and borrowers; and information
about loan approvals and denials. These
data are available online at the Consumer
Financial Protection Bureau’s Web site
(www.consumerfinance.gov/hmda). HMDA
data for many other financial institutions are
also available at this Web site.
4. Combined notice. A financial institution
may use the same notice to satisfy the
requirements of both § 1003.5(b)(2) and
§ 1003.5(c).
5(c) Modified loan/application Register
1. Format of notice. A financial institution
may make the written notice required under
§ 1003.5(c)(1) available in paper or electronic
form.
2. Notice—suggested text. A financial
institution may use any text that meets the
requirements of § 1003.5(c)(1). The following
language is suggested but is not required:
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Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Rules and Regulations
Home Mortgage Disclosure Act Notice
The HMDA data about our residential
mortgage lending are available online for
review. The data show geographic
distribution of loans and applications;
ethnicity, race, sex, age, and income of
applicants and borrowers; and information
about loan approvals and denials. These
data are available online at the Consumer
Financial Protection Bureau’s Web site
(www.consumerfinance.gov/hmda). HMDA
data for many other financial institutions are
also available at this Web site.
3. Combined notice. A financial institution
may use the same notice to satisfy the
requirements of both § 1003.5(c) and
§ 1003.5(b)(2).
5(e) Posted Notice of Availability of Data
1. Posted notice—suggested text. A
financial institution may post any text that
meets the requirements of § 1003.5(e). The
Bureau or other appropriate Federal agency
for a financial institution may provide a
notice that the institution can post to inform
the public of the availability of its HMDA
data, or an institution may create its own
notice. The following language is suggested
but is not required:
Home Mortgage Disclosure Act Notice
The HMDA data about our residential
mortgage lending are available online for
review. The data show geographic
distribution of loans and applications;
ethnicity, race, sex, age, and income of
applicants and borrowers; and information
about loan approvals and denials. HMDA
data for many other financial institutions are
also available online. For more information,
visit the Consumer Financial Protection
Bureau’s Web site
(www.consumerfinance.gov/hmda).
Section 1003.6—Enforcement
6(b) Bona Fide Errors
1. Bona fide error—information from third
parties. An institution that obtains the
property-location information for
applications and loans from third parties
(such as appraisers or vendors of
‘‘geocoding’’ services) is responsible for
ensuring that the information reported on its
HMDA/LAR is correct.
16. Effective January 1, 2019, in
Supplement I to Part 1003:
a. Under the heading Section 1003.5—
Disclosure and Reporting, under the
subheading 5(a) Reporting to Agency,
paragraphs 1, 2, 3, and 4 are added,
paragraph 5 is revised, and paragraphs
6, 7, and 8 are removed;
b. Under the heading Section
1003.6—Enforcement, under the
subheading 6(b) Bona Fide Errors,
paragraph 1 is revised.
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■
The additions and revisions read as
follows:
Supplement I to Part 1003—Official
Interpretations
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Section 1003.5—Disclosure and Reporting
5(a) Reporting to Agency
1. Quarterly reporting—coverage. i. Section
1003.5(a)(1)(ii) requires that, within 60
calendar days after the end of each calendar
quarter except the fourth quarter, a financial
institution that reported for the preceding
calendar year at least 60,000 covered loans
and applications, combined, excluding
purchased covered loans, must submit its
loan/application register containing all data
required to be recorded for that quarter
pursuant to § 1003.4(f). For example, if for
calendar year 2019 Financial Institution A
reports 60,000 covered loans, excluding
purchased covered loans, it must comply
with § 1003.5(a)(1)(ii) in calendar year 2020.
Similarly, if for calendar year 2019 Financial
Institution A reports 20,000 applications and
40,000 covered loans, combined, excluding
purchased covered loans, it must comply
with § 1003.5(a)(1)(ii) in calendar year 2020.
If for calendar year 2020 Financial Institution
A reports fewer than 60,000 covered loans
and applications, combined, excluding
purchased covered loans, it is not required to
comply with § 1003.5(a)(1)(ii) in calendar
year 2021.
ii. In the calendar year of a merger or
acquisition, the surviving or newly formed
financial institution is required to comply
with § 1003.5(a)(1)(ii), effective the date of
the merger or acquisition, if a combined total
of at least 60,000 covered loans and
applications, combined, excluding purchased
covered loans, is reported for the preceding
calendar year by or for the surviving or newly
formed financial institution and each
financial institution or branch office merged
or acquired. For example, Financial
Institution A and Financial Institution B
merge to form Financial Institution C in
2020. Financial Institution A reports 40,000
covered loans and applications, combined,
excluding purchased covered loans, for 2019.
Financial Institution B reports 21,000
covered loans and applications, combined,
excluding purchased covered loans, for 2019.
Financial Institution C is required to comply
with § 1003.5(a)(1)(ii) effective the date of the
merger. Similarly, for example, Financial
Institution A acquires a branch office of
Financial Institution B in 2020. Financial
Institution A reports 58,000 covered loans
and applications, combined, excluding
purchased covered loans, for 2019. Financial
Institution B reports 3,000 covered loans and
applications, combined, excluding purchased
covered loans, for 2019 for the branch office
acquired by Financial Institution A.
Financial Institution A is required to comply
with § 1003.5(a)(1)(ii) in 2020 effective the
date of the branch acquisition.
iii. In the calendar year following a merger
or acquisition, the surviving or newly formed
financial institution is required to comply
with § 1003.5(a)(1)(ii) if a combined total of
at least 60,000 covered loans and
applications, combined, excluding purchased
covered loans, is reported for the preceding
calendar year by or for the surviving or newly
formed financial institution and each
financial institution or branch office merged
or acquired. For example, Financial
Institution A and Financial Institution B
merge to form Financial Institution C in
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66339
2019. Financial Institution C reports 21,000
covered loans and applications, combined,
excluding purchased covered loans, each for
Financial Institution A, B, and C for 2019, for
a combined total of 63,000 covered loans and
applications reported, excluding purchased
covered loans. Financial Institution C is
required to comply with § 1003.5(a)(1)(ii) in
2020. Similarly, for example, Financial
Institution A acquires a branch office of
Financial Institution B in 2019. Financial
Institution A reports 58,000 covered loans
and applications, combined, excluding
purchased covered loans, for 2019. Financial
Institution A or B reports 3,000 covered loans
and applications, combined, excluding
purchased covered loans, for 2019 for the
branch office acquired by Financial
Institution A. Financial Institution A is
required to comply with § 1003.5(a)(1)(ii) in
2020.
2. Change in appropriate Federal agency.
If the appropriate Federal agency for a
financial institution changes (as a
consequence of a merger or a change in the
institution’s charter, for example), the
institution must identify its new appropriate
Federal agency in its annual submission of
data pursuant to § 1003.5(a)(1)(i) for the year
of the change. For example, if an institution’s
appropriate Federal agency changes in
February 2018, it must identify its new
appropriate Federal agency beginning with
the annual submission of its 2018 data by
March 1, 2019 pursuant to § 1003.5(a)(1)(i).
For an institution required to comply with
§ 1003.5(a)(1)(ii), the institution also must
identify its new appropriate Federal agency
in its quarterly submission of data pursuant
to § 1003.5(a)(1)(ii) beginning with its
submission for the quarter of the change,
unless the change occurs during the fourth
quarter. For example, if the appropriate
Federal agency for an institution required to
comply with § 1003.5(a)(1)(ii) changes during
February 2020, the institution must identify
its new appropriate Federal agency beginning
with its quarterly submission pursuant to
§ 1003.5(a)(1)(ii) for the first quarter of 2020.
If the appropriate Federal agency for an
institution required to comply with
§ 1003.5(a)(1)(ii) changes during December
2020, the institution must identify its new
appropriate Federal agency beginning with
the annual submission of its 2020 data by
March 1, 2021 pursuant to § 1003.5(a)(1)(i).
3. Subsidiaries. A financial institution is a
subsidiary of a bank or savings association
(for purposes of reporting HMDA data to the
same agency as the parent) if the bank or
savings association holds or controls an
ownership interest in the institution that is
greater than 50 percent.
4. Retention. A financial institution may
satisfy the requirement under § 1003.5(a)(1)(i)
that it retain a copy of its submitted annual
loan/application register for three years by
retaining a copy of the annual loan/
application register in either electronic or
paper form.
5. Federal Taxpayer Identification Number.
Section 1003.5(a)(3) requires a financial
institution to provide its Federal Taxpayer
Identification Number with its data
submission. If a financial institution obtains
a new Federal Taxpayer Identification
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Federal Register / Vol. 80, No. 208 / Wednesday, October 28, 2015 / Rules and Regulations
Number, it should provide the new number
in its subsequent data submission. For
example, if two financial institutions that
previously reported HMDA data under this
part merge and the surviving institution
retained its Legal Entity Identifier but
obtained a new Federal Taxpayer
Identification Number, then the surviving
institution should report the new Federal
Taxpayer Identification Number with its
HMDA data submission.
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Section 1003.6—Enforcement
6(b) Bona Fide Errors
1. Information from third parties. Section
1003.6(b) provides that an error in compiling
or recording data for a covered loan or
application is not a violation of the Act or
this part if the error was unintentional and
occurred despite the maintenance of
procedures reasonably adapted to avoid such
an error. A financial institution that obtains
the required data, such as property-location
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information, from third parties is responsible
for ensuring that the information reported
pursuant to § 1003.5 is correct.
Dated: October 13, 2015.
Richard Cordray,
Director, Bureau of Consumer Financial
Protection.
[FR Doc. 2015–26607 Filed 10–27–15; 8:45 am]
BILLING CODE 4810–AM–P
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| File Type | application/pdf |
| File Modified | 2018-02-27 |
| File Created | 2018-02-27 |