2018 HMDA Rules: Transition Provision Sentry Advisors

Required changes may be closer than you think Financial Services Risk Management

Most are aware that the majority of the new HMDA rules are going into effect January
1, 2018; however, some might not realize the impact of the new rules on 2017 covered
applications. Specifically, covered applications received in 2017 for which final action
is not taken until 2018. So, what does the transition provision allow and what does it
not permit? Well, there is some good news and some bad news

Good news: If on an application received in 2017 you collect the ethnicity, race
and sex (demographic information) of the applicant(s) at the time of application
Transition Provision
(or at least before January 1, 2018), the transition provision allows you to report The HMDA Rule provides a
under the current ruleseven if you action the loan/application in 2018. transition provision that
allows a financial institution to
Bad news: As in prior years, you report an application in the calendar year in which report the applicants
you take final action on the application. That means for an application received in ethnicity, race, and sex under
2017 for which final action is taken in 2018, you must collect, record, and report the Regulation C
the new and modified data points related to the application under the new HMDA requirements in effect at the
rules for everything except the ethnicity, race and sex, assuming you collected time that the Financial
the ethnicity, race and sex of the applicant(s) before January 1, 2018. If for Institution collects the
whatever reason you take action in 2018 and collect the demographic information information, not when the
at closing or at the point of non-origination (e.g., denial), you would be required to Financial Institution takes
report the ethnicity, race and sex data points under the 2018 rules (i.e., the final action on the application.
aggregated and disaggregated categories).

What to do during the transition period: Start practicing the collection of the expanded demographic information now.
The Consumer Financial Protection Bureau (CFPB) has specifically deemed it acceptable. While you wont yet report
the expanded demographic information on your 2017 HMDA loan/application register (LAR), begin collecting it through
use of the new Uniform Residential Loan Application (URLA / Fannie Mae 1003). If your institution has chosen to defer
the use of the new URLA, or does not have a supplemental demographic collection form to collect the applicants
aggregated and disaggregated ethnicity, race and sex information, then Fannie Mae and Freddie Mac have you covered.
The GSEs have published the Demographic Information Addendum to facilitate collecting the new and expanded race
and ethnicity subcategories while still using the current URLA.

We can help Select HMDA services

The 2018 HMDA Rules bring about massive changesthe Policy and Procedure Update / Review
addition of 25 new data points and the modification of 12 Training
existing ones. These changes will of course not just impact LAR Data Integrity Testing
the compliance department, but will have a ripple effect
throughout the entire organization. With more information Contact us
available via the HMDA LAR, the examiners will have more e: dru@sentryadvisory.com
insight on your institutions lending practices than ever before. c: 615 545 5833

November 2017 www.sentryadvisory.com Sentry Advisors, LLC