Search::

 
 
 

What’s New

SUMMARY

The Home Mortgage Disclosure Act (HMDA), as implemented by the Federal Reserve Board’s Regulation C, has been revised in several areas. All of the changes affect applications or loans where final action is taken on or after Jan. 1, 2004. The amendments to the regulation were made after a comprehensive review by the Federal Reserve Board. The goals of the review included:

  • responding to technological and other changes in the mortgage market;
  • improving the quality and utility of data;
  • minimizing undue lender burden; and
  • clarifying and simplifying Regulation C.

A review of the regulation began in 1998 and culminated in a final rule in 2002.

The Regulation C changes discussed in this web site were originally set to take effect Jan. 1, 2003. However, based on input from industry consumer groups, the date was postponed to Jan. 1, 2004. The Federal Reserve Board believed that some HMDA reporters, especially the larger reporters, would not be able to fully implement the new rules by Jan. 1, 2003, without jeopardizing the quality and usefulness of the data and without incurring substantial implementation costs that could be avoided by postponement.

Although the effective date of the majority of the Regulation C changes was delayed until Jan. 1, 2004, two provisions of the amendments took effect on Jan. 1, 2003. Effective on that date, lenders were required to begin asking for government monitoring (sex and race) information on phone applications. Second, lenders were required to use census tract numbers and corresponding metropolitan areas from the U.S. Census Bureau’s Census 2000.

Some of the changes to Regulation C have been under consideration for several years. For example, the reporting of requests for the preapproval of a loan had been previously excluded from HMDA reporting because of concerns about how to differentiate between preapprovals and prequalifications. Those concerns have been resolved and with the increase in preapproval programs offered by lenders, the utility of the data outweighs the previous concerns.

The mortgage marketplace has changed significantly since HMDA was enacted, and the marketplace continues to evolve. One area of substantial growth has occurred in the subprime lending market. Along with this growth, there have been increased variations in loan pricing, generally related to assessment of credit risk. Based on these changes, the obtaining of loan-pricing data has become critical to addressing fair-lending concerns about loan pricing and to gaining a better understanding of the mortgage market, including the subprime market. In light of these changes, the Board believes that the collection of loan pricing data is necessary to fulfill the statutory requirements of HMDA and to ensure the continued utility of the HMDA data.

To address these concerns, Regulation C is being revised to require lenders to report loan-pricing data, specifically rate spread information and Home Ownership Equity Protection Act (HOEPA) status.

REGULATORY CHANGES

Based on the amendments to Regulation C, the information required to be collected and reported in the HMDA loan/application register (LAR) has been expanded and, therefore, the format of the register has been revised. Here are highlights of the more significant provisions which impact data collection:

  • A $35 million loan volume test for non depository lenders has been added to the current loan percentage test to ensure coverage of companies that are both in the business of mortgage lending and non-mortgage lending.
  • As indicated above, Regulation C now requires that lenders collect and report information on preapproval requests, but Regulation C continues to exclude prequalification requests.
  • Manufactured home has been added as a required reporting option under property type.
  • The classification test for reporting home improvement loans has been eliminated for dwelling-secured loans, and the definition of “refinancing” has been changed.
  • Applicant information has been significantly updated to include ethnicity as a separate field, and racial characteristics have been revised to comply with current OMB guidance.
  • As discussed in the summary above, information regarding the pricing of loan data is now required under Regulation C. Lenders must report the rate spread between a loan’s APR and the yield on Treasury securities with a comparable maturity when the spread exceeds certain thresholds. The rate spread is to be reported – not the APR.
  • Regulation C has been amended to require lenders to report whether a loan is covered by HOEPA, which is implemented by Regulation Z. HOEPA transactions involve mortgages that are deemed high-cost based on either the APR or the fees and points charged on the loan.
  • The loan/application register has been revised to include lien status for applications and loan originations.

The consequences for noncompliance with Regulation C will remain unchanged—resubmission of data and the possible imposition of civil money penalties for repeated submission of erroneous data. However, all of the new data fields required by the amendments are considered “key” or “critical fields.” The regulatory agencies have not raised the tolerance level for errors in critical fields. Consequently, lenders will be required to comply with the existing standards for data accuracy, despite the increase in the number of fields of critical data.

back to top