In 2018, the CFPB issued an interpretive and procedural rule to clarify and implement HMDA changes made by section 104(a) of the Economic Growth, Regulatory Relief, and Consumer Protection Act (S.2155), which created a partial exemption rule that allows certain depository institutions the option of submitting a reduced amount of data to the CFPB as part of their HMDA submission.
Since then, financial institutions have had many questions about how this rule affects fair lending compliance. We’ve compiled these questions and answers below.
Please note: this blog post is NOT intended to be or replace legal advice.
Q: If we are NOT a depository institution or credit union, are we eligible for the partial exemption?
A: No, only depository institutions and credit unions are subject to the partial exemption rules. Non-depository institutions are required to report all 110 required data fields.
Q: For 500 origination partial exemption, would that include renewals with no new money when we issue a new note number?
A: As stated in the HMDA Guide – “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. In the example above, the existing obligation is being “satisfied and replaced” to the same borrower – so, the loan is HMDA reportable and would count for the originations test.
Q: Does a bank qualify for the partial exemption if it originates fewer than 500 loans, but has offices located in an MSA?
A: Yes. The partial exemption is independent of the institutional coverage test. The institutional coverage test determines who is required to report HMDA. The partial exemption applies only to what data points are to be reported.
Q: Does the 500 origination exemption only include reportable transactions? Do you count all originations or only HMDA reportable originations?
A: The partial exemption threshold applies only to those loans or lines of credit that would otherwise be reportable under HMDA.
Q: Does the 500 include only originated loans, not denials, withdrawals, etc.?
A: The 500-loan partial exemption threshold includes only loan originations (Action Code 1). Of course, you still report all action codes in your annual submission.
Q: It was mentioned that the rule applies to all 2018 HMDA data. Is this correct? I believed the CFPB interpreted the rule went into effect when the president signed the law. Does the exemption status option go back to 1/1/2018?
A: It is at the institution’s option to report all 2018 applications using the exemption codes. Reference from the Interpretive and Procedural rule – “Because data collected from January 1, 2018, to May 23, 2018, would not be reported until early in 2019, the Act relieves insured depository institutions and insured credit unions that are eligible for a partial exemption under the Act of the obligation to report certain data in 2019 that may have been collected before May 24, 2018.”
Q: How would you recommend we document the exemption of 500 or less originations in the last 2 years?
A: The partial exemption only provides for exemption of data points to be reported on the LAR, it does not exempt a financial institution from reporting HMDA data. The only exception to this is the temporary increase in the reporting exemption related to open-end lines of credit from 100 to 500 loans.
Q: I thought the 500 threshold was for how many applications were reported on the LAR the previous 2 years. Does the threshold only count originations?
A: The qualification for the partial exemption is 500 originations and does not include non-originated applications.
Q: If we sell loans to FHLB and FMAC but retain the servicing, do we need to report all fields on these loans only? We make the loan decision but use an AUS system to assist in the decision.
A: The partial exemption applies to the financial institution that reports HMDA data. There is no difference in reporting based on loans that are sold to investors.
Q: On the exemption qualifiers, we are eligible based upon the loan numbers both being under 500 in each category. Our most recent CRA evaluation is satisfactory, but the previous exam rating needed to improve. Are we eligible for the exemption?
A: Yes. The CRA exception the partial exemption requires that an institution has received a “needs to improve” rating in each of the two most recent CRA exams.
Q: We are nearing the borderline on 500 loans, how do we continue reporting if we want to – specifically using the software?
A: The partial exemption allows lenders to voluntarily report at their option. Compliance RELIEF allows you to continue collecting all data fields even if you do not wish to voluntarily report data.
Q: When considering the two preceding calendar years, do we use 2017 and 2016 originations?
A: Yes. For 2018, the preceding two calendar years to consider are 2017 and 2016.
Q: Will Compliance Relief be able to track annual HMDA submissions to alert users that the reporting institution is exempt?
A: No. Since the rule allows flexibility in voluntarily reporting any or all exempt data points for institutions that qualify for the partial exemption, Compliance RELIEF will provide the appropriate options for users. However, in future releases of Compliance RELIEF, we do plan on adding a feature that issues a warning and removes the partial exemption if you go over the 500-loan threshold.
Related: 52 HMDA Filing Questions Answered by Compliance Experts
Q: Is voluntary reporting by loan or by point? If you chose to report (example) application channel. Do you have to report that field on all loans? Or can you make the decision loan by loan?
A: Entities that qualify for the partial exemption have the option to report exempt data points on the entire LAR, a selected group of applications, or individual applications.
However, we believe that voluntary reporting of data on selected applications will open our customers to unnecessary risk (why did you report credit scores on these 100 loans and leave these 200 exempt?). Therefore, we are not providing the option to voluntarily report on selected loans until we understand if there is ever a case where it will be advantageous for our customers. The exempt data points are either on or off for all applications.
Q: It appears we could import records from one system with all the data and manually enter say commercial loans with only the required data for an exempt reporter and be ok, is that correct?
A: Yes. Compliance RELIEF will allow you to bring in the actual data for all or any of the records. The data will be available for analysis purposes AND you are able to identify all or some of the fields to be reported as exempt. However, we will provide the option for separate settings for closed-end loans or open-end loans to align with the separate tests for the partial exemption.
Q: On the exempt view, can this data be scrubbed, or should we make it exempt prior to submission?
A: The exempt view allows you to see the exempt codes, but those codes are not permanently stored. You can identify all or some of the fields to be reported as exempt at any point and finally before submission.
Q: The fields covered by the Act's partial exemptions, how are they reported? Blank or code for NA?
A: There are three different ways that exempt data will be reported: 1) Alpha numeric fields will be reported as “Exempt”, numeric fields will be reported as “1111”, and free form text fields are reported with no data (blank). NA is not an option for exempt fields.
Q: Can you enter actual data in the exempt fields, report exempt codes on the LAR, and still have access to the original data?
A: Yes. Compliance RELIEF allows you collect the actual data for the exempt data points and still report the exempt code. This allows data to be provided to examiners upon request, used for fair lending monitoring and analysis, or for other purposes.
Q: I thought if you wanted to voluntarily report one of the new expanded fields that you MUST report ALL of the fields? The gentleman on the webinar check-marked that he wants to report the reason for denial AND property value. I know we would have to report Denial Reasons because we are an OCC bank but, I thought that property address is required for geocoding.
A: The partial exemption allows a financial institution to voluntarily report all or some of the exempt data points/fields. You can capture the property address for geocoding AND still report the exempt codes. The reason the Bureau requested address was not for geocoding the census tract. It was for a part of Dodd/Frank to determine parcel numbers. No matter what, you still have geocoding requirements that match the procedures the industry has used for over two decades.
Q: If I am understanding correctly, by choosing Exempt, the information will still pull over the information from our LOS?
A: If your LOS allows that, Yes. Compliance RELIEF provides the option of collecting the exempt data points and still reporting the exempt code. This allows data to be provided to examiners upon request, used for fair lending monitoring and analysis, or for other purposes.
Q: If our LOS system has not been updated to include an exempt check box, can we import all the data fields from the LOS and utilize the exempt option on the software.
A: Yes. Compliance RELIEF provides the option to capture actual data elements AND select not to report any exempt fields or to voluntarily report some data points.
Q: If we are exempt but need to report purchases from a non-exempt institution, will we be able to report all the required points and fields for those loan records
A: If a financial institution qualifies for the partial exemption, they are not required to report the exempt data points but may voluntarily select to report some or all of the exempt data points for all transactions or a selected group of transactions.
Q: Are you suggesting that we continue to fill out ALL of the new HMDA fields in our LOS systems even though we are exempt? This would require our employees to fill in data fields that are exempt and verify the accuracy of these fields.
A: Our software provides the option to continue to collect any or all of the exempt data and still report the exempt codes on the LAR. Many of our clients have indicated that the actual data is necessary to respond to examiner requests and to perform fair lending monitoring, testing, analysis, matched pair testing, and internal audits.
Q: "Investor decisioned loans" would not include loans sold on the secondary market (e.g., Freddie) based on secondary market guidelines, right?
A: Investor decisioned loans refers to investor relationships where the financial institution is non-delegated and would not be making the credit decision on an application. In this case, it is possible that the investor may ask the financial institution to provide additional data if they are not eligible for the partial exemption.
Q: When reporting the age, do we report it by the application date, or closing time? Ex: DOB is 6/1/73 and application was received on 5/1/18 and at that time age would be 44, then the loan closed on 7/2/18 and the age would be 45 because they had their birthday between the date we received the application and the loan closing date.
A: The age of the borrowers is determined based on the application date. From HMDA Guide:
A Financial Institution reports the applicant’s age (as of the Application date) as the number of whole years derived from the date of birth shown on the Application form. 12 CFR 1003.4(a)(10)(ii); comment 4(a)(10)(ii)-1.
Q: Why don't you have all the fields exempt in the spread fields, for example the APR and lock-in date?
A: Rate Spread and term are separate reportable data points. The APR and lock-in date are not reportable data points, but are necessary for calculating rate spread. The partial exemption applies only to reportable data points – any data captured, but not reportable has not been changed.
Q: Are the denial reasons still optional for credit unions?
A: Denial reasons are subject to the partial exemption. So, if you qualify for the partial exemption, reporting denial reasons is optional for credit unions. If you do not qualify for the partial exemption, the denial reasons are required.
Q: Can you still report NA if the property is not in an MSA on your GEO fields?
A: County, Census Tract, and State data points are not subject to the partial exemption. The following options are available for reporting NA:
Q: Can we also opt to report our LEI? If we have to pay for it, might as well report it if we want, right?
A: All institutions are required to report the Legal Entity Identifier (LEI) which replaced the Respondent ID of previous years. This field does not qualify for the exemption.
Q: How should we determine the rate date for rate spread for HELOCs if it changes before closing.
A: For open-end lines of credit, Reg Z considers the rate locked for the last time at account opening.
Q: One item I am hoping you will cover regarding business loans- do we enter NA or exempt?
A: For institutions that qualify for the partial exemption, the Business or Commercial Purpose data point should be reported as 1111-Exempt. There is no option for reporting Not Applicable (NA) for this data point.
Q: For Employee loans - what information is required to be reported?
A: All applicable HMDA data is required for employee loans with the exception of income This data point may be reported as Not Applicable (NA) at the option of the institution.
Q: For the fields that are unchanged by the Act do we report them the old way or the new way. Example Ethnicity Expanded or unexpanded way
A: All reportable data is required to be reported under the new rule, including disaggregated race and ethnicity.
Q: Can you please go over again when a NULI would be used instead of the ULI? Would this be used for those who are exempt?
A: Reporting a Non-Universal Loan Number (NULI) instead of the Universal Loan Identifier (ULI) is available only for lenders that qualify for the partial exemption. Exempt institutions have the option to report either the ULI or a NULI. The one requirement of using the NULI is that it must be unique for the reporting institution year-after-year.
So, if you opt to use the account / application number as the NULI, you would not be able to report the same number in subsequent years. As an option to our clients, we will give the option to append the Account number with the year to ensure the NULI is unique.
Q: Would it be acceptable to just use the loan # or application # as the "NULI"?
A: The application and/or loan number may be used for the NULI as long as the number complies with the requirements:
Q: Can you report some loans with a ULI and others with a NULI?
A: Yes. However, consideration should be given to “consistency” across all records. Ensuring that all LAR records are reported with the same numbering format will simplify file reviews, monitoring, audits, and exam processes. Our HMDA software provides a settings preference to report a ULI or a NULI for closed-end or open-end applications.
Q: If we are a small filer, can we report the ULI rather than the NULI for applications or loans?
A: Yes. Institutions that qualify for the partial exemption are permitted to voluntarily report any data point on all or selected applications.
Q: If an application is decisioned by an investor, is it not their responsibility to report? Why would we need to capture all the data if we do not report the transaction?
A: If an application is decisioned by an investor, the investor is required to report the application on their HMDA LAR. If the investor is not eligible for the partial exemption, they may require the lender accepting the application to capture and transmit data including exempt data points such as property address, application channel, mortgage loan originator NMLSR identifier, etc.
Q: If our bank is exempt and we purchase loans from a non-exempt institution, do we use the NULI or ULI and whose?
A: This scenario would follow the original rule which requires the purchasing institution to report the ULI that was assigned or previously reported by the originating institution.
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.
However, if an institution that is not eligible for the partial exemption purchases loans from an institution that qualifies for the partial exemption, they are required to assign a ULI for reporting on the LAR.
Additionally, if a financial institution that is subject to HMDA and not eligible for a partial exemption purchases a loan originated by a partially exempt institution that assigned a non-universal loan identifier rather than a ULI, the purchasing institution does not report the non-universal loan identifier previously assigned. Instead, the purchasing institution assigns its own ULI because no ULI was assigned by the institution that originated the loan.
Q: How do you define if the investor is making the credit decision? If an AUS is utilized, but the investor underwrites the loan, is the investor considered to be making the credit decision? Or does this decision making just apply to manual underwritten files? What if the investor makes the credit decision and closes the loans in their name?
A: Determining which financial institution is required to report an application for HMDA is based on which lender makes the credit decision. This means if a lender “makes a credit decision prior to loan closing or account opening.” The determination is NOT based on which lender closes the loan.
If an investor reviews and approves an application prior to closing, the investor reports the transaction as an origination and NOT a purchase and the lender that took the application does not report the application.
Q: We sell loans directly to Fannie Mae I am confused on the note "will have to capture all data for investor decisioned applications if they are non-exempt". We use DU to decision those loans and they are closed / funded by our bank and then they are sold to Fannie Mae.
A: If an application is taken by a lender that qualifies for the partial exemption, but decisioned by an investor that is NOT subject to the partial exemption – the investor will have to report all required fields. So, some of the application based data subject to the partial exemption will have to be collected and provided to the investor.
For loans “sold” to an investor, many of the required fields may be reported as Not Applicable (NA) at the option of the investor.
Q: If you originate less than 500 open-end lines of credit, are you exempt from reporting any information on those type loans?
A: Yes. If you originate less than 500 open-end lines of credit in the preceding two calendar years, you are not required to report open-end lines of credit. The threshold for collecting and reporting data about open-end lines of credit was temporarily increased to from 100 to 500 originations effective January 1, 2018.
Q: So, even if an institution does not originate 500 or more open-end lines of credit in either year, they will still need to report the 57 points but not the 110? Or is it if you don't meet three threshold you don't have to report on the ones that don't meet?
A: No. If you haven’t originated 500 or more open-end lines of credit in the last two years (2016/2017), you are not required to report ANY data on open-end lines of credit in 2018.
If you are covered under the S.2155 HMDA partial exemption, our HMDA solution can provide you with the flexibility to capture and submit exempt data for a smoother fair lending compliance process.