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Vendors: There's still time to prepare for HMDA

Financial institutions have been under the gun to meet a fast approaching deadline to start gathering much finer-grained information about their loans and borrowers under the Home Mortgage Disclosure Act (HMDA). 

The American Bankers Association (ABA) and 50 affiliated trade groups from the states recently notified federal regulators that the banks won’t likely be ready by the Jan. 1 deadline.

regulhmdaVendors who work directly with mortgage companies to prepare for the rule change say it is true that most companies are likely not yet fully ready. That doesn’t necessarily mean that they won’t be ready at the start of next year.

“Definitely I am not getting a sense of panic,” said Laura Williamson, senior vice president of client services at Digital Risk, a large solutions provider. “The ABA has correctly observed that banks aren’t ready today. However, I do believe that they have plans [and] in five to six months from now [they will] be ready.”

The enhanced HMDA requirements are the latest change to grow out of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The federal government’s watchdog agency, the Consumer Financial Protection Bureau (CFPB), was given a free hand under the Dodd-Frank Act to expand HMDA reporting.

The CFPB rule, which was rolled out in October 2015, more than doubled the data fields from an existing 23. Now lenders will be required to gather information on new items such as the age and credit score of the borrower, the loan officer's licensing number and fine details about the cost of the loan. CFPB  also modified 20 of the existing HMDA data categories. 

All but the smallest institutions will have to comply with the new reporting requirements. The institutions will report the data to the CFPB through an online portal, which has not yet been completed.

Williamson told Scotsman Guide News that large and most mid-sized companies likely have started preparing their systems for the change. The smaller companies, particularly ones right at the threshold of an exemption, are more likely to have issues around the deadline.

“We are actually getting those calls,” Williamson said. “Those are real scenarios of smaller players not being ready, not realizing the gravity of it, and reaching out to outsource providers such as Digital Risk saying, how can you help us?”

The global risk management and compliance firm Wolters Kluwer recently conducted an informal survey of companies during a HMDA webinar, to gauge readiness. Out of 230 responses, just 14 percent indicated they were prepared for the expanded HMDA requirements, an additional 50 percent said they were somewhat prepared at this stage, and 28 percent that indicated they were not prepared.

“It is kind of all over the place,” said Barbara Boccia, senior director of the U.S. Advisory Services and Regulatory Relations Group at Wolters Kluwer. “I think most people are paying attention to this. They are feeling overwhelmed.”

Boccia said the technical hurdles are real. She said that CFPB’s modifications in reality expanded the required data points fourfold. There can now be up to 110 data points in each individual’s file. Most companies will also have to report information on home equity lines, which was once optional. She also noted that companies will be gathering the 2018 HMDA data with the expanded fields at the same time that they are preparing to report the 2017 HMDA data to the CFPB.

“Q1 is not a time that compliance officers will be taking vacations,” Boccia said. 


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