Changes to the Home Mortgage Disclosure Act will become effective in just a few months, and many lenders still aren't ready. For instance, with an increased number of data points that need to be collected, the number of fields where errors can occur will double by 2018.
In October 2015, the Consumer Financial Protection Bureau published its changes to the Home Mortgage Disclosure Act.
Three major changes are coming in 2017, according to Alice Alvey, Mortgage U senior vice president, who spoke about the changes in an interview on the Lykken on Lending broadcast. These changes include:
A new reporting tool by the CFPB
“So what this means for the industry is that the CFPB is going to have much more control of the data, much higher degree of availability to conduct their own analytics with this tool,” Alvey said.
Filing a new report
“I think people keep thinking this is years out,” Alvey said. In fact, these changes are coming much sooner than many lenders think, and they will need to be ready to go with the new report by January first of 2017.
As it is right now, many lenders are still trying to understand the new rule, Alvey said.
New rules for who must file
“I don’t know if lenders are really aware that more lenders will have to file than in the past,” Alvey said.
The new rule eliminated the asset test for lenders. Whereas in the past some lenders may have been excluded from having to file because their assets were smaller, that’s no longer the case.
If lenders made the lending decision on at least 25 loans that closed in the last year then they have to file. This is a significantly lower threshold than the current level of 100 closed loans.
There will also be room for almost twice as many mistakes in these new forms that lenders must fill out. For every 100 loans, there are currently 2,700 fields where an error can occur. With the new changes, that number will increase to 5,000 fields for every 100 loans.
Those changes could affect smaller institutions the most. The National Association of Federal Credit Unions reports that "Expansion of the HMDA data set to roughly 38 data points will likely necessitate major changes in the data collection processes, policies and procedures for many credit unions. Currently, more than 20% of NAFCU survey respondents manually collect data for most HMDA data points."
However, regulators haven't outlined specific penalties for making a mistake. “It’s all about how the regulator wants to assess how you’ve been performing in past reports and what they actually find,” Alvey said.
While changes for the loan origination systems aren’t due until 2018, Alvey warns against putting off making the necessary changes. “People look at that time pocket and they say, ‘Oh I have all kinds of time.' But this new tool, that actually starts January first, means you really gotta have your act together starting 2017. We thought we had a lot of time with TRID with 21 months.”