HMDA Flashcards
What is the purpose of HMDA?
The Home Mortgage Disclosure Act requires certain financial institutions to collect, report, and disclose information about their mortgage lending activity.
one statutory purpose of HMDA is to provide the public with information that will help show whether financial institutions are serving the housing credit needs of the communities and neighborhoods in which they are located.
A second statutory purpose is to aid public officials in distributing public sector investment so as to attract private investment to areas where it is needed.
Finally, the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) amended HMDA to require the collection and disclosure of data about applicant and borrower characteristics to assist in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes.
True or false:
HMDA is a disclosure law that prohibits specific lender activities and establishes a quota system of mortgage loans to be made in any geographic area.
False. HMDA is a disclosure law but does not require either such thing.
What is HMDA data used for? (3)
- Fair lending Examinations
- CRA examinations
- HMDA disclosures provide the public with info on home mortgage lending activities of particular reporting entities and of their communities. These disclosures are used by local, state, and federal officials to evaluate housing trends and issues and by community orgs to monitor financial institution lending patterns.
What is a financial institution?
An institution is required to comply with Regulation C only if it is a financial institution as that term is defined in Regulation C. The definition of financial institution includes both
depository financial institutions and nondepository financial institutions, as those terms are separately defined in Regulation C. 12 CFR 1003.2(g).
An institution uses these two definitions, which are outlined below, as coverage tests to determine whether it is a financial institution that is required to comply with Regulation C. For the purpose of these examination procedures, the term financial institution refers to an institution that is either a depository financial institution or a nondepository financial institution that is subject to Regulation C.
A bank, savings association, or credit union is a depository financial institution subject to reg C if it meets what coverage tests? (5)
- Asset-size threshold
- location test
- loan activity test
- federally related test
- loan volume threshold
What is the asset size threshold to be considered a depository financial institution?
On the preceding December 31, the bank, savings association, or credit union had assets in excess of the asset-size threshold published annually in the Federal Register, as included in the Official Interpretations, 12 CFR Part 1003, Comment 2(g)-2, and posted on the Bureau’s website. 12 CFR 1003.2(g)(1)(i).
The phrase “preceding December 31” refers to the December 31 immediately preceding the current calendar year. For example, in 2019, the preceding December 31 is December 31, 2018.
For data collection in 2021, the asset-size exemption threshold is $48 million. Banks, savings associations, and credit unions with assets at or below $48 million as of December 31, 2020, are exempt from collecting data for 2021.
December 31, 2022- $54 million
What is the location test to be considered a Depository financial institution?
On the preceding December 31, the bank, savings association, or credit union had a home or branch
office located in a metropolitan statistical area (MSA).
For purposes of this location test, a branch office for a bank, savings association, or credit union is an office:
(a) of the bank, savings association, or credit union
(b) that is considered a branch by the institution’s Federal or State supervisory agency.
For purposes of Regulation C, an automated teller machine or other free-standing electronic terminal is not a branch office regardless of whether the supervisory agency would consider it a branch.
What is the loan-activity test to be considered a depository financial institution?
During the preceding calendar year, the bank, savings association, or credit union 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.
What is the federally related test to be considered a depository financial institution?
The bank, savings association,
or credit union:
a. Is federally insured; or
b. Is federally regulated; or
c. Originated at least one home purchase loan or refinancing of a home purchase loan that was secured by a first lien on a one-to-four-unit dwelling and also
(i) was insured, guaranteed, or supplemented by a Federal agency or
(ii) was intended for sale to the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac).
What is the loan volume threshold to be considered a depository financial institution?
The bank, savings association, or credit union meets or exceeds either the closed-end mortgage loan or the open-end line of credit loan-volume threshold in each of the two preceding calendar years.
• A bank, savings association, or credit union that originated at least (100) 25 for 2023 closed-end mortgage loans in each of the two preceding calendar years, or originated at least 200 open-end lines of credit in each of the two preceding calendar years meets or exceeds the loan-volume threshold.
Some transactions are exempt from the count or partially exempt.
Under Regulation C, a for-profit mortgage-lending institution other than a bank, savings association, or credit union is a nondepository financial institution and subject to Regulation C if it meets what requirements? (2)
- Location Test
- loan volume thresholds
What is the location test requirement to be considered a nondepository financial institution?
The institution had a home or branch office in a metropolitan statistical area (MSA) on the preceding December 31. The phrase “preceding December 31” refers to the December 31 immediately preceding the current calendar year. For example, in 2019, the preceding December 31 is December 31, 2018.
For purposes of this location test, a branch office of a nondepository financial institution is any one of the
institution’s offices at which the institution takes from the public applications for covered loans. A nondepository financial institution is also deemed to have a branch office in an MSA or metropolitan division (MD) if, in the preceding calendar year, it received applications for, originated, or purchased five or more covered loans related to property located in that MSA or MD, even if it does not have an office in that MSA.
What are the loan volume thresholds to be considered a nondepository financial institution?
The institution meets or exceeds either the closed-end mortgage loan threshold or the open-end line of credit threshold in each of the two
preceding calendar years.
• An institution that originated at least 100 closed-end mortgage loans in each of the two preceding calendar years, or originated at least 500 open-end lines of credit in each of the two preceding calendar years meets or exceeds the loan-volume threshold.
Some transactions are exempt from the count or partially exempt.
What is the regulation C exemption based on state law?
Regulation C provides that financial institutions may apply for an exemption from coverage. Specifically, the Bureau may exempt a State-chartered or State-licensed financial institution if the Bureau determines that the financial institution is subject to a State disclosure law that contains requirements substantially similar to those imposed by Regulation C and adequate enforcement provisions. Any State-licensed or State chartered financial institution or association of such institutions may apply to the Bureau for an exemption. An exempt institution shall submit the data required by State law to its State supervisory agency. A financial institution that loses its exemption must comply with Regulation C beginning with the calendar year following the year for which it last reported data under the State disclosure law.
A financial institution is required to collect, record, and report information only for transactions that are subject to Regulation C.
What transactions are considered covered loans and how do you determine if a loan is covered?
A covered loan can be either a closed-end mortgage loan or an open-end line of credit, but an excluded transaction cannot be a covered loan.
To determine if a transaction is subject to Regulation C, a financial institution should first determine whether the loan or line of credit involved in the transaction is either a closed-end mortgage loan or an open-end line of credit.
If the loan or line of credit is neither a closed-end mortgage loan nor an open-end line of credit, the transaction does not involve a covered loan, and the financial institution is not required to report information related to the transaction. If the loan or line of credit is either a closed-end mortgage loan or an open-end line of credit, the financial institution must determine if the closed-end mortgage loan or open-end line of credit is an excluded transaction.
If the closed-end mortgage loan or the open-end line of credit is an excluded transaction, it is not a covered loan, and the financial institution is not required to report information related to the transaction. If the loan or line of credit is a closed-end mortgage loan or an open-end line of credit and is not an excluded transaction, the financial institution may be required to report information related to the transaction.
What is a closed end mortgage loan? (3)
covered loan
A closed-end mortgage loan is:
- An extension of credit;
- Secured by a lien on a dwelling; and
- Not an open-end line of credit.
What is an open end line of credit? (3)
covered loan
An open-end line of credit is:
- An extension of credit;
- Secured by a lien on a dwelling; and
- An open-end credit plan for which:
a. The lender reasonably contemplates repeated transactions;
b. The lender may impose a finance charge from time to- time on an outstanding unpaid balance; and
c. The amount of credit that may be extended to the borrower during the term of the plan (up to any limit set by the lender) is generally made available to the extent that any outstanding balance is repaid.
Financial institutions may rely on Regulation Z, 12 CFR 1026.2(a)(20), and its official commentary when determining whether a transaction is extended under a plan for which the lender reasonably contemplates repeated transactions, the lender may impose a finance charge from time-to-time on an outstanding unpaid balance, and the amount of credit that may be extended to the borrower during the term of the plan is generally made available to the extent that any outstanding
balance is repaid.
Is the following example a covered transaction?
A business-purpose transaction that is exempt from Regulation Z but is otherwise open-end credit under Regulation Z and is secured by a lien on a dwelling that is not an excluded transaction.
This would be a covered transaction.
A business-purpose transaction that is exempt from Regulation Z but is otherwise open-end credit under Regulation Z, 12 CFR 1026.2(a)(20), would be an open-end line of credit under Regulation C if it is an extension of credit secured by a lien on a dwelling and is not an excluded transaction.
What is the importance of “extension of credit” when determining if a closed end loan or open end line of credit is a covered transaction?
A closed-end loan or open-end line of credit is not a closed end mortgage loan or an open-end line of credit under Regulation C unless it involves an extension of credit.
True or false:
Individual draws on an open end line of credit are separate extensions of credit.
False. they are not separate extensions of credit.
What is an extension of credit?
Under Regulation C, an “extension of credit” generally requires a new debt obligation. Thus, for example, a loan modification where the existing debt obligation is not satisfied and replaced is not generally a covered loan (i.e., closed-end mortgage loan or open-end line of credit) under Regulation C. Except as described below, if a transaction modifies, renews, extends, or amends the terms of an existing debt obligation, but the existing debt obligation is not satisfied and replaced, the transaction is not a covered loan.
The two exceptions that an extension of credit be a new debt obligation are assumptions and New York State consolidations.
Is the following a covered loan?
Open-end LOC secured by 1-4 family dwelling that was modified, renewed, extended, or amended the terms of the existing debt obligation, but the existing debt obligation was not satisfied and replaced.
NO, if a transaction modifies, renews, extends, or amends the terms of
an existing debt obligation, but the existing debt obligation is not satisfied and replaced, the transaction is not a covered loan.
What is an assumption?
Assumptions are extensions of credit under Regulation C.
A loan assumption is a transaction in which a financial institution enters into a written agreement accepting a new borrower in place of an existing borrower as the obligor on an existing debt obligation. Regulation C clarifies that assumptions include successor-in-interest transactions in
which an individual succeeds the prior owner as the property owner and then assumes the existing debt secured by the property. Assumptions are extensions of credit even if the new borrower merely assumes the existing debt obligation and no new debt obligation is created.
What is a New York State consolidation, extension, and modification agreement?
Regulation C provides that transactions completed pursuant to a New York State consolidation, extension, and modification agreement (New York CEMA) and classified as a supplemental mortgage under New York Tax Law Section 255, such that the borrower owes reduced or no mortgage
recording taxes, is an extension of credit. However, the regulation also provides that certain transactions providing new funds that are consolidated into a New York CEMA are excluded from the HMDA reporting requirements.