Changes to reporting requirements under the Home Mortgage Disclosure Act have given small credit unions a bumpy ride in 2018. Many have been left to contemplate changing their internal processes and systems, as well as their product offerings, all while collecting the data and preparing to submit and disclose it to the Consumer Financial Protection Bureau in early 2019. 

Financial institutions originating less than 500 fixed-rate, first mortgages still have to report the HMDA data they have already been reporting but will not be required to report additional data points the CFPB is now requiring for those institutions that originate over 500 fixed-rate mortgages.  

Institutions that originate less than 500 HELOCs don’t have to report any HMDA data but must report all HMDA data including the newly required data if they originate over 500 HELOCs. 

“I think you need to look at it from two perspectives,” Bernie Winne, president and CEO of Boston Firefighters Credit Union and interim CEO of the Cooperative Credit Union Association, told Banker & Tradesman. “Certainly, CFPB did change the requirement as it pertains to HELOCs, but then they kind of got trumped a little bit by Sen. 2155, which came along and made both changes and put the changes into law, as opposed to simple regulation.” 

What Changed with Dodd-Frank Relief 

Congress first enacted HMDA in 1975, requiring financial institutions to report mortgage data to the public. Following the financial crisis, Dodd-Frank created the CFPB and tasked the agency with rewriting the HMDA rule. 

The CFPB did so and also required financial institutions that originate a certain amount of HELOCs and fixed-rate, first mortgages to report additional data points.  

These data points range from easy-to-report data such as the interest rate on a loan to more complex data points such as the borrower’s debt-to-income ratio and the combined loan-to-value ratio, which require additional calculations. 

Originally, financial institutions that originated over 25 fixed-rate, first mortgages were required to report both traditional HMDA data and the newly-mandated data points. Institutions that originated more than 100 HELOCs were required to report HMDA data for the first time, as well as the additional data. 

After soliciting feedback and receiving pushback on the rule, the CFPB agreed to raise the HELOC reporting threshold from 100 to 500. 

When Congress passed a Dodd-Frank relief bill, Sen. 2155, earlier this year, the law only required institutions originating less than 500 fixed-rate, first mortgages to report old HMDA data and not the additional data points. The bill also said that institutions that originate less than 500 HELOCs don’t have to report any HMDA data. 

The CFPB has determined these new rules apply to data collected or reported under HMDA on or after May 24, 2018, the date that the Dodd-Frank relief bill was enacted.  

The agency also said some insured financial institutions will be eligible for a partial exemption from collecting exempt data points on or after May 24. In addition, some institutions eligible for a partial exemption may also not be required to report certain data that may have been collected on or before May 24.  

The Challenges of Implementation 

The chaotic and constant changes in the HMDA reporting requirements put many credit unions in a tough situation. 

There were 13 credit unions in Massachusetts that originated between 100 and 500 HELOCs in 2016, according to a letter sent to the CFPB by former Congressman Michael Capuano, and another 12 that originated between 70 and 100 HELOCs. 

“Credit unions were going to be faced with the decision of, ‘are we still in the HELOC business?’ And if we are still in the HELOC business and we are going to comply, then how will we comply?” said Winne, who has been opposed to the new requirements. “It’s ironic that a CFPB rule would have forced small businesses that are extremely consumer-friendly to get out of the business.” 

The new reporting requirements make things difficult for small credit without systems in place to store or collect the new data. 

Larger financial institutions often have a mortgage origination system that is sufficient to meet the HMDA requirements, but small credit unions, according to Winne, use consumer lending platforms.  

That means these credit unions must buy a mortgage origination system or create a complex, in-house spreadsheet to collect the data on, which Winne said would be a daunting task. 

Bram Berkowitz

If a credit union has an origination system for first mortgages, Winne said it could move its HELOCs over to this system, but that might mean putting a different group of employees in charge of HELOCs. 

Needham-based Direct Federal Credit Union was one institution that has straddled the 500 HELOC threshold, and as a result, got to work on updating its systems and processes to prepare for the new regulations. 

Direct Federal originated more than 500 HELOCs in 2015, 2016 and 2017, but less than 500 in 2018, according to Amy Horan, vice president of lending at Direct Federal. 

Horan said the new HMDA regulations added thousands of dollars to Direct’s lending budget in 2018 and will result in additional investment on an ongoing basis. 

The bigger problem might have been the organizational restructuring and additional training for staff members, which included webinars, conferences and increased workloads. 

“As added protection for compliance, we created a new, full-time quality control employee designation in lending, who oversaw our procedures and workflows while prioritizing compliance with new HMDA requirements,” Horan said, adding that the new rules have also impacted customer service. “Given the personal nature of some of the questions, our originators are now faced with navigating members through the new questions without unsettling our members’ application experience.”