Burton Embry burton@mcpaoa.org 801-596-8707 x1000201

HMDA Changes – Operational Fundamentals Presenters: Lisa Klika Carol Carson Chief Compliance Officer Chief Compliance Officer Guild Mortgage Company Plaza Home Mortgage, Inc.

HMDA Changes – Operational Fundamentals Revised and enhanced HMDA rules published October 15, 2015; most reporting changes effective for 2018 business Includes revisions (new data fields) mandated by Dodd-Frank Act Includes additional requirements (new data fields) imposed by the CFPB Currently optional reporting of HELOCs and Denial Reasons will become mandatory Posted lobby notice regarding modified LAR data refers requestor to CFPB; lender will no longer need to provide 2017 data to be filed under new process: all filed with CFPB; all data in pipe delimited text file format

HMDA Changes – Operational Fundamentals Impact of Trump Regulatory Freeze Trump Administration issued memo in January to freeze regulatory activity Independent agencies do not appear to be covered by freeze CFPB is an independent agency Per MBA, CFPB is evaluating memo and whether it applies

Lender Identification = Legal Entity Identifier (“LEI”) HMDA Changes – Operational Fundamentals Lender Identification = Legal Entity Identifier (“LEI”) Each lender must obtain its unique LEI: Obtain from Global Markets Entity Identifier Utility → go to GMEIUtility.org Complete online application Pay $219 fee Need corporate information Unique Loan Identifier = 45 character length (“ULI”) LEI (20 characters) Loan number (23 characters) Check digit (2 characters)

HMDA Changes – Operational Fundamentals The Loan Application Register (LAR) will expand from current 39 data elements to 110 data elements for the reporting year starting 2018. Among other new reportable items, new elements referencing the TRID CD. Here are just some of the new details: Lender Credits (Section J) AUS identification Origination Charges (Section A) Property address Discount Points (Section A) Lines of credit will be included (Reverse) Total Loan Costs (Section D) DTI/LTV ratios Drill-down for ethnicities Borrower credit score Loan terms (maturity, interest rate, intro rate period)

Determining Loan Amount HMDA Changes – Operational Fundamentals Determining Loan Amount Different transactions require different values for reporting loan amount: • Closed-End Loans: Closed Loans – Amount to be repaid on legal obligation Counter Offer – Amount of counter offer if accepted, else amount applied for Approved Not Accepted or Preapproval Request Approved Not Accepted – Amount approved for Denied, Withdrawn, Closed for Incompleteness – Amount applied for Multi-Purpose – Entire amount (entire amount on Home Improvement even if only portion is being used for improvements) • Purchased Loans – Unpaid Principal Balance at purchase • Assumed Loans – Unpaid Principal Balance at assumption • Open-End Line of Credit – Entire amount of credit available • Reverse Mortgage – Initial Principal Limit

Reconciling Loan Purpose HMDA Changes – Operational Fundamentals Reconciling Loan Purpose

“Relied-Upon” Factors HMDA Changes – Operational Fundamentals “Relied-Upon” Factors

LOS Challenges System readiness Review of LOS Integrations HMDA Changes – Operational Fundamentals LOS Challenges System readiness When will system(s) begin capturing the necessary data elements Contingency plan for applications with missing HMDA data Ensuring LOS flexibility to capture and report multiple races, and sub-ethnicities Review of LOS Integrations Lack of integration can create reporting inaccuracies AUS Decision, Credit Report Companies LOS Business Rule Updates E.g., ability to select both male and female genders for a single individual Mistakes from the increased flexibility in reporting Test LOS HMDA download for accuracy & formatting E.g., age reported should be as of application date

HMDA Processing Vendor HMDA Changes – Operational Fundamentals HMDA Processing Vendor Regular Communication Including with LOS Vendor & IT Folks Test, Test, Test Application Considerations Website Applications Updates to collect new GMI data Test online app/LOS integration Training Loan Officers & Support Staff Interview process is complicated by requirements for sub-race & sub-ethnicity categories, age, etc. Pipeline Management 2017/2018 transitional considerations

The confluence of HMDA and the new URLA HMDA Changes – Operational Fundamentals The confluence of HMDA and the new URLA Fannie and Freddie have unveiled the new 1003 form Initially planned effective date was January 1, 2018, to coincide with and complement HMDA effective date for most data-reporting enhancements Now effective date TBD However, Fannie and Freddie have produced and made available now a new Addendum to the 1003, on which lenders may capture the expanded demographic information CFPB has itself developed a form to capture expanded demographic information

HMDA Changes – Operational Fundamentals Less Wiggle Room: With new underwriting fields and fees & charges to be included, more robust attention to analysis for fair lending purposes. Previous and current HMDA data did not include this info, and lenders were in positions to more easily defend underwriting decisions. Under new rules, expect more second guessing and lenders even more on the defensive. Privacy & Security Concerns: With more exact property information, it would not be difficult to identify specific borrowers and have access via the HMDA data to NPPI, including credit scores, DTI, etc. Focus on security of export/import transmissions from third party service providers Concern for security of data held by the CFPB from sophisticated hackers (e.g., DNC, HUD, FBI, IRS – all in 2016)

BE PREPARED! Technology: Employees: HMDA Changes – Operational Fundamentals BE PREPARED! Technology: Engage and coordinate with your LOS, HMDA Reporting, Online Application vendors and internal IT Dept. to make sure they are on track; demand a timetable Perform gap analysis against HMDA rule Population & accuracy testing Ask for sample/prototype input screens LOS vendor to test first UAT testing early and often Employees: Determine who will have access to input and change data Will you require second reviewer for data integrity check Start now to draft your P&Ps Start now to prepare training modules Involve your IT department now

THANK YOU!