Home Mortgage Disclosure Act

Joseph L. Barloon Skadden, Arps, Slate, Meagher & Flom LLP

MBA Legal Issues and Regulatory Compliance Conference September 25, 2011

Overview
Home Mortgage Disclosure Act (HMDA) (12 U.S.C. 2801, et seq.; 12 C.F.R. Part 203) Highly technical statute for the reporting of mortgage lending data. Information used by regulators to monitor, among other things, fair lending practices of mortgage originators. Dodd-Frank amends HMDA to require collection of additional data.
Amendments to HMDA became effective on July 21, although the new Consumer Financial Protection Bureau (CFPB) must issue regulations.

Overview of the Home Mortgage Disclosure Act (12 U.S.C. 2801, et seq.)
Requires covered institutions to collect and disclose data relating to mortgage applications and loans. Three main purposes of HMDA: Provide the public and government officials with information showing whether financial institutions are serving housing needs. Help public officials target investments to promote private investments in neighborhoods. Provide data that assist in identifying discriminatory lending patterns and enforcing anti-discrimination statutes. HMDA is implemented through Regulation C (12 C.F.R. Part 203).

What Is a Covered Institution?

HMDA reporting obligations apply to banks, credit unions, savings associations, and other for-profit lending institutions that meet certain asset-size, volume, and other

criteria. The coverage criteria vary for depository institutions versus non-depository institutions. See 12 C.F.R. 203.2(e).
8,124 institutions reported HMDA data for 2009, including: 3,925 commercial banks; 2,017 credit unions; 879 savings institutions; and 1,303 mortgage companies (914 of which were not affiliated with a banking institution).

Data Collection and Reporting Obligations (12 C.F.R. 203.4-203.5)

Covered institutions must compile and disclose on a calendaryear basis information about applications for, originations of, and purchases of home purchase loans, home improvement loans, and refinancings.

Information must be recorded on the Loan/Application Register (HMDA-LAR).

Covered institutions must update the HMDA-LAR at least quarterly within 30 days after the end of the calendar quarter in which final action is taken.

The HMDA-LAR must be submitted by March 1 and then must be available to the public upon request by March 31.
A covered institution must make available to the public a disclosure statement prepared by the FFIEC within 3 days after it is provided by the FFIEC.

If an institution later determines that its HMDA-LAR was inaccurate, it should review applicable agency guidance to determine if resubmission is required.
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Data Collection and Reporting Obligations (12 C.F.R. 203.4-203.5)

Examples of information to be reported: Loan purpose; Whether the application is a request for preapproval and whether it resulted in a denial or in an origination; Property type; Owner-occupancy status; Amount of the loan or the amount applied for; Type of action taken, and the date; Ethnicity, race, and sex of the applicant or borrower, and the gross annual income relied on in processing the application.

Data Collection and Reporting Obligations (12 C.F.R. 203.4-203.5)

Dodd-Frank expands the list of required information to include: Credit score, borrowers age, term of prepayment penalty, value of collateral, period of introductory interest rate, interest-only or negative amortization information, loan term, channel of origination, and total points and fees information.

Bureau can also require:

S.A.F.E. Mortgage Licensing Act loan originator identifier Universal loan identifier Parcel number of collateral
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Data Collection and Reporting Obligations (12 C.F.R. 203.4-203.5)

Rate Spread and HOEPA Status As of 2004, covered institutions must report APR spreads on certain loans. Effective as of October 1, 2009, covered institutions must report the spread between an APR and a survey-based estimate of APRs currently offered if the spread is equal to or greater than:
1.5 points for first-lien secured loans; 3.5 points for subordinate liens.

Lenders also must report whether the loan is a high cost mortgage subject to the Home Ownership and Equity Protection Act. Dodd-Frank amends both the rate spread reporting requirement and HOEPA status calculations. Requires reporting of the difference between the annual percentage rate associated with a loan and a benchmark rate or rates for all loans.
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How HMDA Data Is Used

Regulators frequently analyze HMDA data to identify potential discriminatory lending patterns, including with respect to: Underwriting; Loan pricing generally and APR specifically; Exercise of discretion by underwriters, loan officers or brokers; Redlining Community groups, the media and potential litigants also request HMDA data directly from financial institutions for the same purpose. HMDA data is released to the public in aggregated form. The FFIEC has prepared a booklet with additional information called A Guide to HMDA Reporting: Getting it Right!
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HMDA Enforcement
Violations of HMDA can lead to enforcement orders and significant civil money penalties. In March 2010, Citibank agreed to pay a $1.25 million fine for failing to report 91,127 mortgage loans. Penalties commonly assessed for institutions with repeat errors. Regulatory agencies issued several Orders to Pay during 2010 and 2011 relating to HMDA violations.

The Act provides exemptions for bona fide errors.

An error in compiling or recording loan data is not a violation of the act if the error was unintentional and occurred despite the maintenance of procedures reasonably adopted to avoid such errors.

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For additional information, contact:

Joseph L. Barloon Skadden, Arps, Slate, Meagher & Flom LLP (202) 371-7322

jbarloon@skadden.com

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