Written by Alicia Nealon, Regulatory Affairs Counsel
Happy Friday compliance community! It’s certainly been awhile since I’ve been on here, but the Compliance Team graciously decided to let me borrow the blog today. I suppose it’s my Friday treat :) With it being Friday, I thought I would try to give you all some good news by clearing up some confusion that NAFCU has heard of regarding the Consumer Financial Protection Bureau’s (CFPB) recent Regulation C proposal.
As avid readers of this blog, you may recall that at the end of July, CFPB announced a proposed rule that would make several substantive changes to the reporting requirements under the Home Mortgage Disclosure Act (HMDA). The proposal would, among other things, expand the data financial institutions are required to collect and report under Regulation C. Some of the expanded data collection and reporting is driven by Dodd-Frank, which amended HMDA to require collection of certain new data points. However, the CFPB also appears to be taking this opportunity to propose the collection of significantly more data than Dodd-Frank expressly requires. In addition to expanded data collection, the proposal includes changes to the scope of Regulation C’s coverage and generally seeks to clarify existing requirements by including more Staff Commentary.
NAFCU’s Regulatory Affairs team published a Regulatory Alert providing a detailed overview of the proposal and seeking comments from our members. As we’ve been soliciting feedback under our Regulatory Alert Survey, we’ve gotten a few questions about how the proposal would change Regulation C’s institutional coverage.
Generally speaking, whether an institution is covered by Regulation C’s data collection and reporting requirements depends on its asset size, location, and whether it is in the business of residential mortgage lending. For depository financial institutions, such as credit unions, Regulation C currently requires HMDA data reporting if they meet the following criteria:
(1) On the preceding December 31, it had assets of at least $43 million;
(2) On the preceding December 31, it had a home or branch office in an Metropolitan Statistical Area (MSA);
(3) During the previous calendar year, it originated at least one home purchase loan or refinancing of a home purchase loan secured by a first-lien on a one-to-four unit dwelling; and
(4) The institution is Federally insured or regulated, or the mortgage loan referred to in item (3) was insured, guaranteed, or supplemented by a Federal agency or intended for sale to Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation.
The proposal would not alter any of these criteria. Instead, it would add another criterion establishing a uniform loan volume threshold – the “25-loan volume test.” For credit unions, the addition of this new criterion would mean that HMDA reporting would only be required if the credit union meets the current criteria in Section 1003.2 and originated at least 25 covered loans, excluding open-end lines of credit, in the preceding calendar year. Accordingly, credit unions that do not report HMDA data now because they don’t meet the current criteria in Section 1003.2 will not be required to report HMDA data solely because they originate 25 covered loans. For example, a credit union that does not originate at least one home purchase loan secured by a first-lien on a one-to-four unit dwelling would not be subject to HMDA reporting requirements even if it originated 25 other closed-end loans. Similarly, a credit union that has less than $43million in assets would not be required to report HMDA data even if it originated 25 covered loans, excluding open-end lines of credit, in the preceding calendar year. The moral of the story is that the proposal will not remove any of the current factors that determine institutional coverage. The proposal only adds another factor that credit unions would need to meet in order to be subject to HMDA reporting requirements.
For more information on other aspects of the 600-page proposal, be sure to check out NAFCU’s Regulatory Alert and our September 2014 Compliance Monitor, which featured an article breaking down the proposal. NAFCU is also still accepting feedback from our members for our comment letter through our Regulatory Alert Survey.
NAFCU Credit Union Compliance GPS. NAFCU's 2014 Credit Union Compliance GPS is still available. This comprehensive, electronic resource translates complex regulatory language into plain English. The latest edition includes improved user-friendly search functions, including more hyperlinks and bookmarks and much more. You can purchase a copy for your credit union here!
Football and Compliance. As compliance attorneys, we know that you have a lot of headaches. This being college football season, and it being Friday, many of us are following our alma mater or our favorite team. Sometimes they give us a headache as well. While I am not a fan, I can say that it particularly hasn’t been a good week for fans of the Michigan Wolverines. For those of you who haven’t been following the saga, you can get a timeline here. Basically their fumbling of a concussion situation with their quarterback, has led to a bigger headache for their coach and their athletic director. It also probably doesn’t help that they are 2-3 after a series of embarrassing losses. The moral of the story here that can apply back to compliance is to address problems while they are small and easy to address and not let them spiral out of control.