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Blog: HMDA deadline brings familiar response

Two summers ago, the mortgage industry was faced with a looming deadline to comply with a sea-changing rule brought by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). The rule in play then was TRID, the 2015 regulation that changed the way that mortgage costs were reported to consumers.

In the weeks before the TRID start date, which was originally set to go live on Aug. 1, 2015, mortgage industry trade groups engaged in a frenzy of letter writing and lobbying to convince the Consumer Financial Protection Bureau (CFPB) to extend the deadline.

regulationThe industry wanted the bureau to delay implementation of the rule for a lengthy period, at least a year. Mortgage companies also requested a formal grace period where the CFPB wouldn’t enforce the new rules while mortgage companies and other industry participants worked the bugs out of their systems.

The industry got about half of what it asked for. The CFPB pushed the start date back to Oct. 3, 2015. The bureau never granted a formal grace period, favoring instead to take no actions against companies that showed a good-faith effort to comply.

TRID, by most accounts, has gone fairly well. Just recently within the past month, the CFPB rolled out a final rule intended to clean up many of its remaining ambiguities.

Although there is some unfinished business with TRID, this massive compliance hurdle appears to be behind the industry. Up ahead, however, another major hurdle looms.

On Jan. 1, most financial institutions that make mortgages will have to begin gathering much more fine-grained details about their borrowers and loan costs under the Home Mortgage Disclosure Act (HMDA).

Dodd-Frank gave the CFPB wide discretion to expand HMDA’s information-gathering and reporting requirements. The bureau more than doubled the information-reporting requirements by adding 25 new data fields to an existing 23. CFPB also modified 20 of the existing fields. With the new fields and modifications to the old ones, the HMDA reporting requirements have expanded by roughly fourfold. Now lenders will be required to collect information on the ages and credit scores of borrowers, the loan officers' licensing numbers and fine details about the cost of the loans. The information won’t have to be reported to the government until March 2019, however.

CFPB rolled out its final HMDA rule in October 2015, just as the industry was dealing with the first shock waves from the TRID consumer-protection regulations.

Just as with TRID, the industry says it won’t be ready in time to meet the deadline for the expanded HMDA-reporting rules.

In a letter this week to the CFPB, the American Bankers Association (ABA) and affiliated organizations from the 50 states said “banks of all sizes are gravely concerned that they will not be able to assure proper compliance by the January time frame.”

“The new HMDA rules are inherently complex and very expensive to implement,” ABA’s letter said.

As with other Dodd-Frank changes, ABA said the technical hurdles are proving to be too much to overcome by the end of the year. The trade group objects to several of the new categories — data fields that were not mandated by Dodd-Frank but were included at the discretion of the CFPB.

Aside from the operational challenge of accurately collecting the data, the industry is concerned about borrowers' privacy. All of this information will be funneled through a CFPB portal. The bureau has not yet completed the portal, or finalized how it will disclose the information to the public.

The rule itself also has been a bit of a moving target while the bureau has clarified aspects of it. This has slowed down how quickly software companies can implement and test their systems, according to the ABA. 

“We need more time, and they need more time to get their house in order,” Rod Alba, senior vice president and counsel for the ABA’s Mortgage Market Division, told Scotsman Guide News last week. 


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