Mortgage

Your top 10 HMDA questions answered: Part 7

How does HMDA regulation address non-delegated correspondents?

The Home Mortgage Disclosure Act deadline looms closer, but many questions still remain unanswered.

To combat this, HousingWire set to work to bring readers answers to the most asked questions as we countdown to the end of the year.

Most of the 2015 updates to HMDA take effect in January 2018.

However, lenders also have a bit more breathing room now, as regulators announced they will not be assessing any penalties for 2018 HMDA data filed in 2019.

Before reading today’s question, make sure you’re all caught up in the series by the previous parts of this series:

Part one 

Part two 

Part three 

Part four

Part five

Part six

This is part seven.

How does HMDA regulation address non-delegated correspondents when the investor underwrites all the loans? Would certain types of mortgage banks be exempt due to fewer than 25 loans originated per year? What is required for correspondent loans?

Many lenders have questioned who really needs to report HMDA data, and who are exempt. Experts walk lenders through who would be required to report under the new rule.

“The lender that underwrites the loan reports the loan on their LAR, so non-delegated correspondents would not report,” ComplianceTech told HousingWire. “Those who underwrite the loan and sell the loan, servicing released, immediately following closing will be required to report all the fields.”

“Yes, some small independent mortgage companies are exempt from reporting any HMDA data,” the company continued. “Lenders can be required to report closed-end transactions but exempt from reporting open-end transactions, or vice-versa.”

Another expert explained that a lender is only required to report HMDA data if they are making a credit decision.

“A non-delegated correspondent lender closes and funds approved loan applications, however, these loans applications are underwritten and conditioned by another financial institution,” said Vincent Urbancic, Navigant associate director of banking, insurance and capital markets. “Under HMDA, the FI making the credit decision is required to report the loan application should it result in an origination.”

“Conversely, if the loan application results in the application being disposed, then the reporting requirement coincides with the party responsible for taking the final action on the application,” Urbancic said.

Urbancic explained that “Initially, under proposed 2018 HMDA rules, if an institution originated at least 25 covered closed-end mortgages or 100 open-end lines credit in each of the previous two calendar years, it would be required to report in the current year.” However, due to concerns from industry participants, the Consumer Financial Protection Bureau revised the FI coverage requirement earlier this year on August 24th, 2017 by increasing the origination threshold for annual reporting from 100 to 500 open-end lines of credit for community banks and credit unions.

And an expert reminds lender that only one financial institution will be required to report applications and originations.

“Under HMDA, applications and originations are only reported by one financial institution,” Digital Risk Staff Attorney Meaghan James said. “The key factor in determining who reports the transaction is who made the credit decision on the loan.”

“Therefore, in the situation of non-delegated correspondents where the investor underwrites the loans, it is the investor making the credit decision, and therefore the investor will report the loan, and the correspondent does not,” James said. “This is assuming that, under applicable state law, the investor is not considered to be acting as an agent for the correspondent.”

Check back Wednesday to read part seven of this series as we count down until the end of 2017.

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