Pub. 10 2015-2016 Issue 5

January/February 2016 27 Extraordinary Service for Extraordinary Members. Victoria E. Stephen serves as a compliance specialist for Compliance Alliance. While receiving her Bachelor of Business Administration in Banking Finance from the McCombs School of Business, she worked in deposit and lending services. Stephen continued her interest in finance at the University of Texas School of Law by focusing on secured transactions, corporate tax, and the UCC. She is part of the Compliance Alliance hotline team, which assists C/A members with a broad range of regulatory and compliance inquiries. Compliance Alliance offers a comprehensive suite of compliance management solutions. To learn how to put them to work for your bank, call (888) 353-3933, visit www.compliancealliance.com, or email info@compliancealliance.com. T HE CONSUMER FINANCIAL PROTECTION BUREAU (CFPB) has released its long-awaited final rule amending Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The new rule significantly expands HMDA data collection and reporting requirements, adding 25 new data points and altering 14 others. The Dodd Frank Act, in part, granted the CFPB its author- ity to alter the scope of HMDA data reporting and coverage. The CFPB contends that these changes will provide a more thorough analysis of lending practices that will help detect redlining, disparate impact, and other fair lending violations. Most of the rule will not take effect until Jan. 1, 2018, which means lenders will not have to actually report the new data until March 1, 2019. The two-year implementation period hardly eases lender concerns, though, especially in light of the recent Truth in Lending Act (TILA)-Real Estate Settlement Procedures Act (RESPA) Integrated Disclosure (TRID) rules that finally took effect Oct. 3, 2015. Like TRID, the new HMDA rule will require significant loan operating systemupgrades that will likely be muchmore of a challenge to put into practice than currently expected. The CFPB submitted to industry concerns and included a one-year extension in the final rule, but the timing of this addition is important. As TRID information is part of what is to be reported under the new rule, the longer lenders take advantage of the TRID grace period, the less time they will have to make use of the HMDA extension. Is HMDA the New TRID? Victoria E. Stephen, Compliance Alliance Further, the final rule requires quarterly reporting begin - ning in 2020 for lenders that report at least 60,000 applica- tions and covered loans in the preceding year. The bureau attempted to ease some of this regulatory burden by limiting the scope of institutions covered, but the weight lifted from qualifying institutions will be more than borne by the small institutions that fail to meet the exemp- tion threshold. Starting in 2018, institutions will not be required to report if they originated fewer than 25 covered closed-endmortgage loans or 100 covered open-end lines of credit in each of the two preceding calendar years. Although the CFPB estimates this new threshold will re- duce the number of banks and credit unions required to report data by more than 20 percent, the final rule adds a new load to many already-struggling community banks in exchange. The overall compliance costs are estimated to bemore than $1.2 million for some institutions, and come at a time when resources already have been taxed coming into compliance with TRID. This undoubtedly raises the question in many lenders’ minds whether the new rules will ultimately work to improve or restrict access to credit in local communities. If these concerns weren’t enough, the bureau has yet to decide whether this new slew of information will be avail- able to the public. Just some of the new data required to be reported is the property’s address and value, and whether the applicant’s ethnicity, race, and sex were collected by visual observation or last name. As of yet, the CFPB has said it only will use a “balancing test” to determine if any of the data should be modified prior to public disclosure. In light of the vendor-driven issues that arose with TRID, it is imperative that lenders take a hands-on approach to implementation of the new rule early on. As many lenders painfully experienced in the development of the Integrated Disclosures, taking a wait-and-see approach is unlikely to pay off, and applying the new 797-page regulation is sure to be even more of a challenge than anticipated. Despite still being submerged in Loan Estimates and Clos- ing Disclosures, banks need to begin assessing current data collection capacity, identifying affected processes and staffing, and mitigating potential fair lending issues now. 