How do you know if your institution qualified for the HMDA small filer exemption? Read on to learn the basics of the partial exemption and learn what it means for you.
On Friday, August 31, the Consumer Financial Protection Bureau (CFPB) released their long-awaited HMDA Small Filer exemption. This Final Rule, referred to as "Partial Exemptions from the Requirements of the Home Mortgage Disclosure Act under the Economic Growth, Regulatory Relief, and Consumer Protection Act (Regulation C)," outlines the criteria for institutions that are now excluded from some HMDA reporting requirements.
When we wrote about the 5 myths of the Dodd-Frank rollback, we first touched on the idea of these partial HMDA exemptions. Here, we'll provide a deeper dive into this topic.
If you can answer "yes" to all of the following, then the 2018 HMDA partial exemption applies to you:
If your answer to all of the above questions was "yes," then you are considered a "small filer." That means you're exempt from reporting some HMDA data.
It's true that figuring out if you qualify as a small filer might be difficult. In fact, the CFPB spends the better portion of three pages on this topic.
Whether a partial exemption applies to you in a particular calendar year depends on your origination activity in each of the preceding two calendar years. In some instances, it may be impossible to determine if you qualify until just before the data collection must begin for a particular year.
You need to know the number of closed-end loans or open-ended lines of credits for which the final action was taken a year.
For example, if you're trying to figure out if you are exempted from reporting in your 2019 submission, you need to know the number of closed-end loans and open-ended lines of credits with a final action taken date in 2018 and 2017. If that number is less than 500 for both 2017 and 2018, you don't have to report the exempted data fields in 2019.
Only loans or lines that are HMDA reportable are counted towards the 500 threshold.
In short, this Final Rule outlines:
Before we get into what data is discussed in the rule, it's important to understand some of the jargon of this rule. According to the rule, a "data point" is basically a small collection of related data.
For example, there is a "property address" data point. In that data point are four different "data fields": street address, city, state and ZIP code.
That's just one example. There are a lot of different data points with multiple data fields.
(Here is a list of all of the HMDA data points from the CFPB.)
Insured depository institutions and credit unions that qualify for the partial exemption may still choose to report those exempt data points, if they want. That said, know that if you choose to report a data point, you have to report ALL of the fields therein. You can't report one data field for a particular data point without reporting all the other data fields.
Even if you're a small filer, you need to collect the following data points (and all their data fields), regardless of your exemption. Most of these data points are unchanged from prior years' submissions; they will probably look familiar to you. Here are all 22 that you still need to report:
You may notice that a few of the older data points are missing from this list of requirements. One great example is the Loan/Application Number. Please note that the Loan/Application Number was replaced by the Universal Loan Identifier requirement on Jan. 1, 2018. See below for additional details on the changes to ULI requirements.
"This HMDA Small Filer exemption is a big relief for our bank. We began the year collecting the new data, but it took additional time, resources, and skill. At least three people were spending hours on each HMDA loan application; it was just overly burdensome, with not a lot of benefits.
It’s good to know that we may finally have some regulators who relate to us as bankers!"
- Edith Stevens, Head of Risk at Heritage Bank
If you're considered a small filer for HMDA purposes, these are the 26 data points you don't need to report:
All of these data points are listed out on page 18 of the Final Rule.
When you're working on your submission, you can report these data fields and points as “Exempt” or code 1111, depending on the field. Here is the guide that lists all of the file specifications.
For access to all of the filing-related resources, you can check out the HMDA resources for filers provided by the CFPB.
Remember: collecting data is not the same as reporting it.
Based on what we've heard through the grapevine, plenty of institutions who are now eligible for the small filer exemption are planning to keep collecting this data.
If you're on the border of that threshold, or your loan volume fluctuates year-over-year, or you might be involved in a merger or acquisition that would put you over the threshold, collecting this data might be valuable for you. You may not know whether you qualify for the exemption until the very end of the year.
At a minimum, we recommend that you continue collecting credit score, rate spread, interest rate, debt-to-income (DTI), combined loan-to-value (CLTV).
This data is so valuable to fair lending and HMDA data analysis.
We strongly encourage our clients to collect all of the HMDA data they can in order to help improve the quality of their analysis and the depth of insights offered. There are a lot of benefits to compliance and beyond to having this data, such as:
Even if you choose not to report data points for which you are exempt - it is still worth it to collect at least some of these fields. Collecting them can strengthen your analysis and help you manage risks.