Home Mortgage Disclosure (Regulation C), 51731-51881 [2014-18353]

Agencies

• BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 79, Number 168 (Friday, August 29, 2014)]
[Proposed Rules]
[Pages 51731-51881]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18353]



[[Page 51731]]

Vol. 79

Friday,

No. 168

August 29, 2014

Part IV





 Bureau of Consumer Financial Protection





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12 CFR Part 1003





 Home Mortgage Disclosure (Regulation C); Proposed Rule

Federal Register / Vol. 79 , No. 168 / Friday, August 29, 2014 / 
Proposed Rules

[[Page 51732]]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1003

[Docket No. CFPB-2014-0019]
RIN 3170-AA10


Home Mortgage Disclosure (Regulation C)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Proposed rule with request for public comment.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
publishing for public comment a proposed rule amending Regulation C to 
implement amendments to the Home Mortgage Disclosure Act (HMDA) made by 
section 1094 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (Dodd-Frank Act). Consistent with section 1094 of the 
Dodd-Frank Act, the Bureau proposes to add several new reporting 
requirements and to clarify several existing requirements. The Bureau 
is also proposing changes to institutional and transactional coverage 
under Regulation C.

DATES: Comments must be received on or before October 29, 2014.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2014-
0019 or RIN 3170-AA10, by any of the following methods:
     Email: FederalRegisterComments@cfpb.gov.
     Electronic: https://www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail: Monica Jackson, Office of the Executive Secretary, 
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC 
20552.
     Hand Delivery/Courier: Monica Jackson, Office of the 
Executive Secretary, Consumer Financial Protection Bureau, 1275 First 
Street NE., Washington, DC 20002.
    Instructions: All submissions should include the agency name and 
docket number or Regulatory Information Number (RIN) for this 
rulemaking. Because paper mail in the Washington, DC area and at the 
Bureau is subject to delay, commenters are encouraged to submit 
comments electronically. In general, all comments received will be 
posted without change to https://www.regulations.gov. In addition, 
comments will be available for public inspection and copying at 1275 
First Street NE., Washington, DC 20002, on official business days 
between the hours of 10 a.m. and 5 p.m. Eastern Time. You can make an 
appointment to inspect the documents by telephoning (202) 435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or Social 
Security numbers, should not be included. Comments will not be edited 
to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: David Jacobs, Terry J. Randall, or 
James Wylie, Counsels; or Elena Grigera Babinecz, Joan Kayagil, Thomas 
J. Kearney, Amanda Quester, or Laura Stack, Senior Counsels, Office of 
Regulations, at (202) 435-7700.

SUPPLEMENTARY INFORMATION:

I. Summary of Proposed Rule

    For almost 40 years, HMDA\1\ has provided the public with 
information about how financial institutions are serving the housing 
needs of their communities. This information has helped to promote 
access to fair credit in the housing market. Section 1094 of the Dodd-
Frank Act amended HMDA to improve the utility of the HMDA data and 
revise Federal agency rulemaking and enforcement authorities.\2\ The 
Bureau views implementation of the Dodd-Frank Act changes to HMDA as an 
opportunity to assess other ways to improve upon the data collected, 
reduce unnecessary burden on financial institutions, and streamline and 
modernize the manner in which financial institutions collect and report 
HMDA data. Accordingly, the Bureau is proposing to implement the Dodd-
Frank Act amendments and to make other changes in the Bureau's 
Regulation C,\3\ which implements HMDA.
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    \1\ 12 U.S.C. 2801-2810.
    \2\ Dodd-Frank Act, Public Law 111-203, section 1094, 124 Stat. 
1376, 2097 (2010).
    \3\ 12 CFR part 1003.
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    Specifically, the Bureau is proposing several changes to revise the 
tests for determining which financial institutions and housing-related 
credit transactions are covered under HMDA. The Bureau also is 
proposing to require financial institutions to report new data points 
identified in the Dodd-Frank Act, as well as other data points that the 
Bureau believes may be necessary to carry out the purposes of HMDA. 
Further, the Bureau is proposing to better align the requirements of 
Regulation C to existing industry standards where practicable. To 
improve the quality and timeliness of HMDA data, the Bureau is 
proposing to require financial institutions with large numbers of 
reported transactions to submit their HMDA data on a quarterly, rather 
than an annual, basis. To minimize costs to HMDA reporters associated 
with making certain data available to the public, the Bureau is 
proposing that reporters may direct members of the public to a publicly 
available Web site to obtain the data. The Bureau is also proposing 
several changes to clarify and provide additional guidance on existing 
requirements of Regulation C that financial institutions and other 
stakeholders have identified as confusing or unclear. The Bureau 
solicits public comment on all issues involved with this proposal, 
including each of its specific proposals to amend Regulation C.

A. Proposed Modifications to Institutional and Transactional Coverage

    The Bureau is proposing modifications to institutional and 
transactional coverage to better achieve HMDA's purposes in light of 
current market conditions and to reduce unnecessary burden on financial 
institutions. The Bureau is proposing to adjust Regulation C's 
institutional coverage test to simplify the institutional coverage 
requirements by adopting, for all financial institutions, a uniform 
loan-volume threshold of 25 loans. Currently, Regulation C contains 
different coverage criteria for depository institutions (banks, savings 
associations, and credit unions) and nondepository institutions. 
Depository institutions that originate one first-lien home purchase 
loan or refinancing secured by a one-to-four family dwelling and that 
meet other criteria for a financial institution under Regulation C must 
collect and report HMDA data, while some nondepository institutions 
that originate as many as 99 home purchase loans, including 
refinancings of home purchase loans, annually do not have to collect 
and report HMDA data.
    Under the proposal, depository and nondepository institutions that 
meet all other criteria for a financial institution under Regulation C 
would be required to report HMDA data if they originated 25 covered 
loans, excluding open-end lines of credit, in the previous calendar 
year. The Bureau believes that this proposal would improve the quality 
of HMDA data by increasing visibility into the practices of 
nondepository institutions. In addition, the Bureau is concerned that 
the requirement for depository institutions to report even if they 
originate only one mortgage loan may impose costs not justified by the 
benefits. The proposal would relieve depository institutions that 
originate a small number of mortgage loans from

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the burden of reporting HMDA data without significantly impacting the 
data's quality for analysis at the national, community, or 
institutional level.\4\
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    \4\ The proposed modifications to institutional coverage are 
discussed in more detail below in the section-by-section analysis of 
proposed Sec.  1003.2(g).
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    The Bureau is also proposing to generally expand the types of 
transactions subject to Regulation C, while eliminating the requirement 
to report unsecured home improvement loans. Currently, Regulation C 
requires reporting of three types of loans: home purchase, home 
improvement, and refinancing. Reverse mortgages that are home purchase 
loans, home improvement loans, or refinancings are reported under 
Regulation C, but they are not separately identified and many data 
points do not currently account for the features of reverse mortgages. 
Home-equity lines of credit may be reported at financial institutions' 
option, but are not required to be reported. As a result, HMDA data 
currently contains gaps in data regarding important segments of the 
housing market.
    Under the proposal, financial institutions generally would be 
required to report all closed-end loans, open-end lines of credit, and 
reverse mortgages secured by dwellings. Unsecured home improvement 
loans would no longer be reported. Thus, financial institutions would 
no longer be required to ascertain an applicant's intended purpose for 
a dwelling-secured loan to determine if the loan is required to be 
reported under Regulation C, though they would still itemize dwelling-
secured loans by different purpose when reporting. Certain types of 
loans would continue to be excluded from Regulation C requirements, 
including loans on unimproved land and temporary financing. Reverse 
mortgages and open-end lines of credit would be identified as such to 
allow for differentiation from other loan types. Further, many of the 
data points would be modified to take account of the characteristics 
of, and to clarify reporting requirements for, different types of 
loans. The Bureau believes these proposals will yield more consistent 
and useful data and better align Regulation C with the current housing 
finance market.\5\
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    \5\ Covered loans generally are discussed in more detail below 
in the section-by-section analysis of proposed Sec.  1003.2(e). Home 
improvement loans are discussed in more detail below in the section-
by-section analysis of proposed Sec.  1003.2(i). Open-end lines of 
credit and home-equity lines of credit are discussed in more detail 
below in the section-by-section analyses of proposed Sec. Sec.  
1003.2(o), 1003.4(a)(37), 1003.4(a)(39), and 1003.4(c)(3). Reverse 
mortgages are discussed in more detail below in the section-by-
section analyses of proposed Sec. Sec.  1003.2(q) and 1003.4(a)(36).
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B. Proposed Modifications to Reportable Data Requirements

    The Bureau believes that it can make HMDA compliance and data 
submission easier for HMDA reporters by aligning, to the extent 
practicable, Regulation C requirements with existing industry standards 
for collecting and transmitting data on mortgage loans and 
applications. Therefore, the Bureau is proposing to align many of the 
HMDA data requirements with the widely-used Mortgage Industry Standards 
Maintenance Organization (MISMO) data standards for residential 
mortgages.\6\ The Bureau believes that having consistent data standards 
for both industry and regulatory use promotes regulatory compliance, 
improves regulatory clarity, market efficiency, and data utility.\7\
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    \6\ MISMO is the federally registered service mark of the 
Mortgage Industry Standards Maintenance Organization, a wholly-owned 
subsidiary of the Mortgage Bankers Association.
    \7\ The use of data standards, and the MISMO data standards in 
particular, are discussed in more detail below in part II.B.
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    The Bureau is proposing to add new data points to the reporting 
requirements established in Regulation C, as well as to modify certain 
existing data points. Some of the new data points are specifically 
identified by the Dodd-Frank Act. Others are proposed pursuant to the 
Bureau's discretionary rulemaking authority to carry out the purposes 
of HMDA by addressing data gaps. The data points that the Bureau is 
proposing to add or modify can be grouped into four broad categories:
     Information about applicants, borrowers, and the 
underwriting process, such as age, credit score, debt-to-income ratio, 
reasons for denial if the application was denied, the application 
channel, and automated underwriting system results.
     Information about the property securing the loan, such as 
construction method, property value, lien priority, the number of 
individual dwelling units in the property, and additional information 
about manufactured and multifamily housing.
     Information about the features of the loan, such as 
additional pricing information, loan term, interest rate, introductory 
rate period, non-amortizing features, and the type of loan.
     Certain unique identifiers, such as a universal loan 
identifier, property address, loan originator identifier, and a legal 
entity identifier for the financial institution.\8\
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    \8\ The data points the Bureau is proposing to add or modify are 
discussed in more detail below in the section-by-section analysis of 
proposed Sec.  1003.4(a).
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C. Proposed Modifications to Disclosure and Reporting Requirements

    Regulation C requires financial institutions to submit their HMDA 
data to the appropriate Federal agency by March 1 following the 
calendar year for which the data are compiled. The Bureau is proposing 
to require financial institutions that report large volumes of HMDA 
data to submit their data to the appropriate agency on a quarterly, 
rather than an annual basis. The Bureau believes that quarterly 
reporting would allow regulators to use the data to effectuate the 
purposes of HMDA in a more timely and effective manner, would reduce 
reporting errors and improve the quality of HMDA data, and may 
facilitate the earlier release of annual HMDA data to the public.\9\
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    \9\ Quarterly reporting is discussed in more detail below in the 
section-by-section analysis for proposed Sec.  1003.5(a).
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    The Bureau also is proposing to allow HMDA reporters to make their 
disclosure statements available by referring members of the public that 
request a disclosure statement to a publicly-available Web site. 
Currently, a financial institution is required to make its disclosure 
statement available to the public in its home offices and, in addition, 
to either make it available in certain branch offices or to post notice 
of its availability and provide it in response to a written request. 
The Bureau believes that this proposal will facilitate public access to 
HMDA data while minimizing burdens to financial institutions.\10\
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    \10\ The disclosure statement is discussed in more detail below 
in the section-by-section analysis for proposed Sec.  1003.5(b).
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D. Proposed Modifications To Clarify the Regulation

    Financial institutions and other stakeholders have, over time, 
identified aspects of Regulation C that are unclear or confusing. The 
Bureau believes that the implementation of the Dodd-Frank Act 
amendments is an opportunity to address many of these longstanding 
issues through improvements to the regulatory provisions, the 
instructions in appendix A, and the staff commentary. Examples of these 
clarifications include guidance on what types of residential structures 
are considered dwellings; the treatment of manufactured and modular 
homes and multiple properties; coverage of preapproval programs and 
temporary financing; how to report a transaction that involved multiple 
financial institutions; reporting the action taken

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on an application; and reporting the type of purchaser for a covered 
loan.\11\
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    \11\ The proposed guidance is discussed throughout the section-
by-section analysis.
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II. Background

A. HMDA's Role in the Mortgage Market

Overview of HMDA and Regulation C
    The Home Mortgage Disclosure Act (HMDA), 12 U.S.C. 2801 et seq., 
requires certain depository institutions and for-profit nondepository 
institutions to collect, report, and disclose data about originations 
and purchases of mortgage loans, as well as mortgage loan applications 
that do not result in originations (for example, applications that are 
denied or withdrawn). As originally adopted, HMDA identifies its 
purposes as providing the public and public officials with information 
to help determine whether financial institutions are serving the 
housing needs of the communities in which they are located, and to 
assist public officials in their determination of the distribution of 
public sector investments in a manner designed to improve the private 
investment environment.\12\ Congress later expanded HMDA to, among 
other things, require financial institutions to report racial 
characteristics, gender, and income information on applicants and 
borrowers.\13\ In light of these amendments, the Board of Governors of 
the Federal Reserve System (Board) subsequently recognized a third HMDA 
purpose of identifying possible discriminatory lending patterns and 
enforcing antidiscrimination statutes, which now appears with HMDA's 
other purposes in Regulation C.\14\
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    \12\ HMDA section 302(b), 12 U.S.C. 2801(b); see also 12 CFR 
1003.1(b)(1)(i)-(ii).
    \13\ Financial Institutions Reform, Recovery, and Enforcement 
Act of 1989, Public Law 101-73, section 1211 (``Fair lending 
oversight and enforcement'' section), 103 Stat. 183, 524-26 (1989).
    \14\ 54 FR 51356, 51357 (Dec. 15, 1989), codified at 12 CFR 
1003.1(b)(1).
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    The Bureau's Regulation C, 12 CFR part 1003, implements HMDA. 
Regulation C currently requires depository institutions (i.e., banks, 
savings associations, and credit unions) and for-profit nondepository 
mortgage lending institutions to submit and publicly disclose certain 
HMDA data if they meet criteria set forth in the rule. Whether a 
depository institution is required to report and publicly disclose data 
depends on its asset size, the location of its home and branch offices, 
the extent to which it engages in residential mortgage lending, and the 
extent to which the institution or its loans are federally-related. 
Whether a for-profit nondepository mortgage lending institution is 
required to report and publicly disclose data depends on its size, the 
location of its home and branch offices, including the extent of its 
business in metropolitan statistical areas (MSAs), and the extent to 
which it engages in residential mortgage lending.
    Covered financial institutions are required to report originations 
and purchases of mortgage loans (home purchase and refinancing) and 
home improvement loans, as well as loan applications that do not result 
in originations. The information reported under Regulation C currently 
includes, among other items: application date; loan or application 
type, purpose, and amount; property location and type; race, ethnicity, 
sex, and annual income of the loan applicant; action taken on the loan 
application (approved, denied, withdrawn, etc.), and date of that 
action; whether the loan is subject to the Home Ownership and Equity 
Protection Act of 1994 (HOEPA); lien status (first lien, subordinate 
lien, or unsecured); and certain loan price information.
    Financial institutions report HMDA data to their supervisory 
agencies on an application-by-application basis using a register format 
referred to as the loan application register. Institutions must make 
their loan application registers available to the public, with certain 
fields redacted to preserve applicants' and borrowers' privacy. At 
present, the Federal Financial Institutions Examination Council 
(FFIEC),\15\ on behalf of the supervisory agencies, compiles the 
reported data and prepares an individual disclosure statement for each 
institution and aggregate reports for all covered institutions in each 
metropolitan area. These disclosure statements and reports are 
available to the public. On behalf of the agencies, the FFIEC also 
annually releases a loan-level dataset containing all reported HMDA 
data for the preceding calendar year with certain fields redacted to 
protect the privacy of applicants and borrowers.
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    \15\ The FFIEC is a formal interagency body empowered to 
prescribe uniform principles, standards, and report forms for the 
Federal examination of financial institutions by the Bureau, the 
Board, the Federal Deposit Insurance Corporation (FDIC), the 
National Credit Union Administration (NCUA), and the Office of the 
Comptroller of the Currency (OCC), and to make recommendations to 
promote uniformity in the supervision of financial institutions. In 
2006, the State Liaison Committee was added to the Council as a 
voting member.
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History of HMDA's Role in the Mortgage Market
    For nearly 40 years, HMDA has provided the public with information 
about mortgage lending activity within communities throughout the 
nation. Public officials use the information available through HMDA to 
develop and allocate housing and community development investments,\16\ 
to respond to market failures when necessary,\17\ and to monitor 
whether financial institutions may be engaging in discriminatory 
lending practices.\18\ The data are used by the mortgage industry to 
inform business practices,\19\ and by

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local communities to ensure that lenders are serving the needs of 
individual neighborhoods.\20\ To maintain the data's usefulness, HMDA 
and Regulation C have been updated and expanded over time in response 
to the changing needs of homeowners and evolution in the mortgage 
market. What is currently a critical source of nationwide home finance 
information began as a method of empowering neighborhoods by providing 
visibility into community mortgage lending practices.
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    \16\ As one example of many, in 2008 the City of Albuquerque 
used HMDA data to characterize neighborhoods as ``stable,'' ``prone 
to gentrification,'' or ``prone to disinvestment'' for purposes of 
determining the most effective use of housing grants. See City of 
Albuquerque, Five Year Consolidated Housing Plan and Workforce 
Housing Plan 100 (2008), available at https://www.cabq.gov/family/documents/ConsolidatedWorkforceHousingPlan20082012final.pdf. As 
another example, Antioch, California, monitors HMDA data, reviews it 
when selecting financial institutions for contracts and 
participation in local programs, and supports home purchase programs 
targeted to households purchasing homes in Census Tracts with low 
loan origination rates based on HMDA data. See City of Antioch, 
California, Fiscal Year 2012-2013 Action Plan 29 (2012), https://www.ci.antioch.ca.us/CitySvcs/CDBGdocs/Action%20Plan%20FY12-13.pdf. 
Similarly, Lawrence, Massachusetts, identified a need for homebuyer 
counseling and education based on HMDA data, which showed a high 
percentage of high-cost loans compared to surrounding communities. 
See City of Lawrence, Massachusetts, HUD Consolidated Plan 2010-
2015, at 68 (2010), https://www.cityoflawrence.com/Data/Sites/1/
documents/cd/
LawrenceConsolidatedPlanFinal.pdf.
    \17\ For example, under section 2301 of the Housing and Economic 
Recovery Act of 2008, Public Law 110-289, 122 Stat. 2654 (July 30, 
2008), the U.S. Department of Housing and Urban Development (HUD) 
created the Neighborhood Stabilization Program. Under this program, 
funds were provided for stabilizing communities that suffered from 
foreclosures and abandonment. The statute required HUD to swiftly 
devise a funding formula based on foreclosures, subprime loans, and 
loans in default or delinquency. HMDA data on loans, and 
particularly high-cost loans, in communities were used to develop 
the formula. See https://portal.hud.gov/hudportal/documents/
huddoc?id=DOC14172.pdf.
    \18\ See, e.g., Yana Kunichoff, Lisa Madigan Credits Reporter 
with Initiating Largest Discriminatory Lending Settlements in U.S. 
History (June 14, 2013), https://www.chicagonow.com/chicago-muckrakers/2013/06/lisa-madigan-credits-reporter-with-initiating-largest-discriminatory-lending-settlements-in-u-s-history/ (``During 
our ongoing litigation . . . the Chicago Reporter study looking at 
the HMDA data for the City of Chicago came out. . . . It was such a 
startling statistic that I said . . . we have to investigate, we 
have to find out if this is true. . . . We did an analysis of that 
data that substantiated what the Reporter had already found. . . . 
[W]e ultimately resolved those two lawsuits. They are the largest 
fair-lending settlements in our nation's history.''); Press Release, 
New York State Office of the Attorney General, Attorney General 
Cuomo Obtains Approximately $1 Million For Victims Of Greenpoint's 
Discriminatory Lending Practices (July 16, 2008), https://www.ag.ny.gov/press-release/attorney-general-cuomo-obtains-approximately-1-million-victims-greenpoints (describing settlement 
arising from review of HMDA data).
    \19\ ``I have been analyzing HMDA data for 14 years and believe 
that HMDA is an invaluable tool to understand how the mortgage 
market works in practice. Our HMDA work at [the Mortgage Bankers 
Association] helps our members reach new customers and develop 
products and underwriting tools to better serve new and established 
portions of the market.'' Home Mortgage Disclosure Act: Newly 
Collected Data and What It Means, Hearing Before the Subcomm. on 
Fin. Servs. and Consumer Credit of the H. Comm. on Fin. Servs., 
109th Cong. (2006) (oral testimony of Douglas G. Duncan, Senior Vice 
President and Chief Economist, Research and Business Development, 
Mortgage Bankers Ass'n), available at https://www.gpo.gov/fdsys/pkg/CHRG-109hhrg31528/html/CHRG-109hhrg31528.htm.
    \20\ ``In recent years . . . scores of community groups have 
used HMDA data to document the emergence and dramatic expansion of 
the subprime mortgage market and its concentration in minority 
communities.'' Home Mortgage Disclosure Act: Newly Collected Data 
and What It Means, Hearing Before the Subcomm. on Fin. Servs. and 
Consumer Credit of the H. Comm. on Fin. Servs., 109th Cong. 4 (2006) 
(written testimony of Calvin Bradford, President, Calvin Bradford 
Associates, Ltd., on behalf of the Nat'l Fair Hous. Alliance), 
available at https://archives.financialservices.house.gov/media/pdf/061306cb.pdf.
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    Community Deterioration and Access to Mortgage Credit. In the 
decades that followed World War II, the standard of living sharply 
declined in many U.S. cities as people left central cities for the 
suburbs. A significant cause of this decline was the gradual 
deterioration in the urban housing supply. Congress committed to 
improving the nation's housing stock in the Housing Act of 1949, which 
established a goal of ``a decent home and suitable living environment 
for every American family'' through development and redevelopment of 
communities and elimination of slums and blighted areas.\21\ To achieve 
this goal, Congress envisioned a partnership between private 
enterprise, governments, and local public bodies.\22\ However, during 
the 1950s, construction of new housing happened overwhelmingly outside 
the central cities.\23\
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    \21\ Housing Act of 1949, Public Law 81-171, section 2, 63 Stat. 
413 (1949).
    \22\ Id.
    \23\ The National Advisory Commission on Civil Disorders, The 
Kerner Report: The 1968 Report of the National Advisory Commission 
on Civil Disorders 467 (Pantheon Books, 1988) [hereinafter The 
Kerner Report].
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    By the 1960s, despite improvements in the housing supply throughout 
the country, there were neighborhoods and areas within many cities 
where the housing situation continued to deteriorate.\24\ During the 
1960s, several efforts were made to improve urban housing. These 
efforts included the creation of the U.S. Department of Housing and 
Urban Development (HUD) and its elevation to cabinet-level agency 
status in 1965.\25\ In addition, Congress enacted the Fair Housing Act 
of 1968, which prohibited discrimination in the sale, rental, or 
financing of housing.\26\ However, by the 1970s it was clear that the 
lack of credit in urban communities was one of the major factors 
contributing to the decline in these communities.
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    \24\ Id.
    \25\ HUD replaced the Housing and Home Finance Agency. Congress 
elevated the agency to cabinet-level status in order to more 
effectively coordinate affordable housing and urban renewal 
programs. Department of Housing and Urban Development Act, Public 
Law 89-174, section 3, 79 Stat. 667 (1965).
    \26\ Civil Rights Act of 1968, Public Law 90-284, title VIII, 82 
Stat. 73 (1968). Segregation, discrimination, and poverty had 
prevented minorities from moving to the suburbs and achieving the 
economic gains and improved housing conditions that other Americans 
had, and they disproportionately bore the burden of the 
deteriorating urban housing stock. See The Kerner Report at 467.
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    Congressional hearings revealed that many financial institutions 
were unwilling to provide mortgage loans for the purchase of homes in 
urban areas.\27\ In many cases, potential homebuyers were told by their 
financial institution that financing would not be available for an 
existing urban home, but a mortgage loan could be provided for a new 
home in the suburbs.\28\ In other cases, financial institutions were 
willing to provide mortgage loans for homes located in both urban and 
suburban areas, but the cost of credit for the urban home was 
significantly higher than that for the suburban home.\29\ As a result 
of these practices, the supply of buyers for urban homes dwindled, 
weakening the urban real estate market and contributing to a decline in 
the value of urban homes.
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    \27\ ``The Committee heard from neighborhood representatives, 
community leaders and public officials from fifteen major cities in 
which disinvestment in older neighborhoods is considered a serious 
problem.'' Comm. on Banking, Hous. and Urban Affairs, report on S. 
1281, Home Mortgage Disclosure Act of 1975, S. Rep. 94-187, at 279 
(1975).
    \28\ ``Typically, a potential buyer with a good credit rating 
attempting to purchase a sound home in an older urban neighborhood 
often meets a cool reception from local lenders. . . . Conversely, 
the same buyer finds 90 percent-30 year mortgages plentiful in the 
adjoining suburbs.'' Id. at 280.
    \29\ ``A [Milwaukee] resident was told by a loan officer that 
she could get only a 12 year mortgage because of the age of the 
property and its location. `Go west of 60th Street and then we can 
talk 20 to 25 years.' '' Id. at 283.
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    The unavailability of home improvement financing also was a 
significant problem. Financial institutions generally were unwilling to 
provide home improvement loans, which tend to be smaller and less risky 
than home purchase loans, in urban neighborhoods.\30\ Some financial 
institutions adopted policies that prohibited financing secured by 
homes beyond a certain age or other proxies for year of 
construction.\31\ As a result, urban residents were unable to obtain 
financing to maintain, repair, or remodel their homes.\32\ As these 
homes fell into disrepair, appraisers under-valued them, potential 
buyers found them less attractive, and financial institutions viewed 
them as riskier, thereby contributing to a cycle of neighborhood 
decline.\33\
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    \30\ Id. at 280.
    \31\ ``[Baltimore] lending institutions adopted policies related 
to property that eliminated a large segment of city houses on the 
market, e.g. loans not available on houses over 20 years old or 
those which are less than 18 feet wide. By the way, almost two-
thirds of [Baltimore] houses were built before 1939, and many . . . 
are row houses 12, 14, and 16 feet wide.'' Id. at 285.
    \32\ ``Home improvement loans become difficult if not impossible 
to obtain, causing housing to deteriorate prematurely. Prospective 
home buyers are encouraged to buy their home in a new suburban 
development rather than in an urban neighborhood which according to 
the lending official is on the decline. Existing homeowners begin to 
panic and sell to speculators.'' Comm. on Banking, Currency and 
Hous. Report on H.R. 10024, Depository Institutions Amendments of 
1975, H. Rep. 94-561, at 117 (1975).
    \33\ Id. ``Given the lack of money to make the necessary 
repairs, the neighborhood rapidly takes on the characteristics of a 
slum--severe property maintenance problems, high rate of 
foreclosures, housing abandonment, not to mention the attendant 
negative social and economic consequences for the area. Owner/
occupants representing good, stable families move out; absentee 
landlords and speculators move in. The prophecy fulfills itself.'' 
Id. See generally S. Rep. 94-187, at 307.
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    While these market failures were generally acknowledged and 
understood, Congress was unable to determine the extent and severity of 
the situation.\34\ Over the course of several hearings, representatives 
from industry, communities, and various Federal agencies provided wide-
ranging testimony as to the scope of the problem, and these witnesses 
generally cited a lack of reliable data as an

[[Page 51736]]

impediment to finding a solution.\35\ To address the lack of reliable 
data, Congress enacted HMDA in 1975.\36\ The Board implemented HMDA by 
promulgating Regulation C in 1976.\37\
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    \34\ With respect to home improvement loans: ``Despite intensive 
efforts to devise a way to measure rehabilitation activity, we have 
not been successful in developing a feasible system, primarily due 
to the fact that there is no known way to measure the volume or 
quality of private rehabilitation efforts.'' H. Rep. 94-561, at 115. 
With respect to home purchase loans, Congress identified 
difficulties in analyzing claims regarding disinvestment, which it 
believed ``illustrate[d] the need for reliable data, which can be 
obtained only through disclosure.'' S. Rep. 94-187, at 287.
    \35\ See H. Rep. 94-561, at 116.
    \36\ Public Law 94-200, sections 301-310, 89 Stat. 1124, 1125-28 
(1975). HMDA was originally set to expire after four years, but was 
temporarily extended several times before Congress made it permanent 
in 1988. Public Law 100-242, section 565, 101 Stat. 1815, 1945 
(1988).
    \37\ 41 FR 23931 (June 14, 1976). The Board also issued 
interpretations in 1977 to clarify two aspects of the rule. 42 FR 
19123 (Apr. 12, 1977).
---------------------------------------------------------------------------

    As originally enacted and implemented, HMDA applied to depository 
institutions with over $10,000,000 in assets that made federally 
related mortgage loans and that were located in standard metropolitan 
statistical areas.\38\ HMDA required the disclosure of the number and 
dollar amount for both home improvement loans and residential mortgage 
loans, broken down into a number of categories.\39\ Depository 
institutions were required to make their mortgage loan disclosure 
statements available to the public for copying and inspection.\40\
---------------------------------------------------------------------------

    \38\ 41 FR 23931, 23936-38 (June 14, 1976).
    \39\ Id.
    \40\ Id.
---------------------------------------------------------------------------

    Deteriorating urban housing conditions and inadequate private 
investment led Congress to enact other laws as well. These laws 
included the Housing and Community Development Act of 1974, which 
allocated funds to States and units of general local development to 
address urban conditions,\41\ and the Community Reinvestment Act of 
1977 (CRA), which was intended to ensure that depository institutions 
were meeting the credit needs of their communities.\42\ In conjunction 
with laws such as these, HMDA was intended to promote neighborhood 
stability by empowering communities through information disclosure.
---------------------------------------------------------------------------

    \41\ Public Law 93-383, section 101, 88 Stat. 633 (1974) (``The 
Congress finds and declares that the Nation's cities, towns, and 
smaller urban communities face critical social, economic and 
environmental problems arising in significant measure from . . . 
inadequate public and private investment and reinvestment in housing 
. . . resulting in the growth and persistence of urban slums and 
blight and the marked deterioration of the quality of the urban 
environment.'')
    \42\ 12 U.S.C. 2901-2908. ``The [CRA] reflected the 
congressional judgment that many banks were neglecting important 
credit needs within their communities and that regulators' efforts 
were inadequate to deter banks from continuing to engage in these 
practices.'' Allen Fishbein, The Ongoing Experiment with 
``Regulation from Below:'' Expanded Reporting Requirements for HMDA 
and CRA, 3 Housing Policy Debate 601, 609 (1992).
---------------------------------------------------------------------------

    HMDA created a degree of transparency that immediately improved the 
public's understanding of the relationship between mortgage lending and 
community stability. The data enabled community groups to understand 
the magnitude of disinvestment within minority neighborhoods.\43\ 
Studies of the HMDA data by academic researchers demonstrated the 
extent to which lending disparities existed between communities.\44\ 
Public officials also relied on the HMDA data to study and analyze 
whether financial institutions were serving the credit needs of their 
communities.\45\ Even with the limited amount of data HMDA provided, 
the data's disclosure lessened the information asymmetry between 
industry and the public, which improved the ability of communities to 
monitor industry and determine whether mortgage lenders were providing 
loans in a manner that facilitated stable and sustainable 
neighborhoods.
---------------------------------------------------------------------------

    \43\ See John Goering and Ron Wienk (eds), Mortgage Lending, 
Racial Discrimination and Federal Policy 10 (1996).
    \44\ See, e.g., Ira Goldstein & Dan Urevick-Ackelburg, The 
Reinvestment Fund, Subprime Lending, Mortgage Foreclosures, and 
Race: How Far Have We Come and How Far Have We to Go? 2-3 (Ohio 
State Univ. Kirwan Institute for the Study of Race and Ethnicity 
2008), https://kirwaninstitute.osu.edu/docs/pdfs/
goldsteintrfpaper.pdf.
    \45\ See, e.g., Glen B. Canner & Joe M. Cleaver, The Community 
Reinvestment Act: A Progress Report, Fed. Reserve Bulletin, vol. 66, 
no. 2, 87-96 (Feb. 1980); Robert B. Avery & Thomas M. Buynak, 
Mortgage Redlining: Some New Evidence, 21 Fed. Reserve Bank of 
Cleveland, Economic Review 18-32 (Summer 1981).
---------------------------------------------------------------------------

    Individual Discrimination and Market Evolution. Although HMDA 
improved the public's understanding of the mortgage market, it became 
evident that critical data elements were missing. The HMDA data did not 
include information related to demand for mortgage credit or the 
creditworthiness of individual applicants.\46\ This led to many cases 
where community groups asserted that the HMDA data evidenced community 
disinvestment, but lenders countered that the data were misleading 
because they lacked information related to creditworthiness.\47\ 
Several studies conducted during the late 1970s and early 1980s used 
the HMDA data in conjunction with data obtained from surveys or through 
the examination process to analyze the relationship between community 
disinvestment and potential discrimination in mortgage lending.\48\ 
Congress also realized that the data provided were not adequate to 
fulfill HMDA's statutory goals, and encouraged agency cooperation and 
combined implementation and enforcement of various statutes with 
similar goals.\49\
---------------------------------------------------------------------------

    \46\ See George J. Benston, Fed. Reserve Bank of Boston, 
Mortgage Redlining Research: A Review and Critical Analysis 
Discussion, 12 Journal of Bank Research 144 (Oct. 1979).
    \47\ See Mark S. Sniderman, Fed. Reserve Bank of Cleveland, 
Economic Commentary: Issues in CRA Reform (Mar. 1991).
    \48\ See Harold Black, Robert L. Schweitzer, & Lewis Mandell, 
Discrimination in Mortgage Lending, 68 American Econ. Review 186, 
189 (May 1978); Robert Schafer & Helen F. Ladd, MIT-Harvard Joint 
Center for Urban Studies, Discrimination in Mortgage Lending 287-300 
(1981); Thomas A. King, New York Univ., Discrimination in Mortgage 
Lending: A Study of Three Cities 50 (1981).
    \49\ See Staff of S. Comm. on Banking, Hous., & Urban Affairs, 
95th Cong., Second Report on Enforcement of the Equal Credit 
Opportunity and Home Mortgage Disclosure Acts 2-3 (Comm. Print 1977) 
(``The committee's principal recommendation called for promulgation 
of regulations to establish . . . the requirement that lenders keep 
records indicating the race and sex of loan applications. . . . The 
committee called for a thorough periodic review by examiners of a 
lender's pattern of mortgage loans, making use of both racial and 
sex notations and the data provided under the Home Mortgage 
Disclosure Act.''). The Committee also supported development of an 
``objective test for discrimination that can be inferred from a 
comparison of the racial and economic characteristics of successful 
and unsuccessful loan applicants.'' Id. at 4.
---------------------------------------------------------------------------

    Beginning in the early 1980s, Congress made a number of significant 
changes to HMDA to expand the types of institutions covered, the data 
collected, and public access to such data. In 1980, Congress amended 
HMDA to require the newly established FFIEC to prepare and publish 
aggregate data tables for each standard MSA.\50\ The 1980 amendments 
also required the Board to prescribe a standard format for HMDA 
disclosures, which it did in 1982.\51\
---------------------------------------------------------------------------

    \50\ Housing and Community Development Act of 1980, Public Law 
96-399, section 340, 94 Stat. 1614, 1657-58 (1980).
    \51\ 47 FR 750 (Jan. 7, 1982).
---------------------------------------------------------------------------

    While HMDA was successful in helping the public understand mortgage 
lending discrimination between neighborhoods, events in the late 1980s 
shifted public attention to discrimination between individual 
applicants and borrowers. Community groups had argued that individuals 
within a particular neighborhood were experiencing discrimination 
during the mortgage lending process. These groups lacked sufficient 
evidence to prove the extent and severity of the problem, until a 
series of investigative reports supported their arguments by 
demonstrating significant racial disparities in mortgage lending 
between several neighborhoods in both Atlanta and Detroit.\52\ At the 
same time, a

[[Page 51737]]

Federal Reserve Bank of Boston study that cross-referenced HMDA data, 
census data, and individual deed transfer data confirmed that similar 
racial disparities existed in the Boston mortgage market.\53\ These 
major reports and studies confirmed the arguments advanced by community 
groups and fair housing advocates that HMDA needed to be updated to 
improve the publicly available information about lending practices.\54\
---------------------------------------------------------------------------

    \52\ See Bill Dedman, The Color of Money, Atlanta-Journal 
Constitution, May 1-4, 1988; David Everett et al., The Race for 
Money, Detroit Free Press, July 24-27, 1988; Bill Dedman, Blacks 
Turned Down for Home Loans from S&Ls Twice as Often as Whites, 
Atlanta Journal-Constitution, Jan. 22, 1989.
    \53\ ``The data show that mortgages were originated on 6.9 
percent of separately owned structures and condominiums in majority 
white neighborhoods during an average year between 1982 and 1987. 
The figure drops to 3.5 percent for majority black neighborhoods and 
to 2.7 percent for neighborhoods with populations that were more 
than 80 percent black.'' Katharine Bradbury et al., Geographic 
Patterns of Mortgage Lending in Boston, 1982-1987, New Eng. Econ. 
Rev., Sept./Oct. 1989, at 23.
    \54\ ``HMDA proponents believed that this new research provided 
the `smoking gun' needed to make the case for further changes to 
HMDA and the need for enhanced emphasis on fair lending 
enforcement.'' Ren Essene & Allen Fishbein, Harvard Univ. Joint 
Center for Hous. Studies, The Home Mortgage Disclosure Act at 
Thirty-Five: Past History, Current Issues 17 (Aug. 2010).
---------------------------------------------------------------------------

    These revelations coincided with the savings and loan crisis of the 
late 1980s, during which many depository institutions throughout the 
country failed.\55\ Concerns over mortgage lending discrimination, 
coupled with the need to respond to the savings and loan crisis, 
motivated Congress to amend HMDA significantly.\56\ In 1988, Congress 
amended HMDA to expand institutional coverage to include mortgage 
banking subsidiaries of bank holding companies and savings and loan 
holding companies, and savings and loan service corporations that 
originate or purchase mortgage loans.\57\ As amended, HMDA applied to 
depository institutions, mortgage banking subsidiaries of holding 
companies, and savings and loan service corporations with over $10 
million in assets and offices in MSAs or primary MSAs.
---------------------------------------------------------------------------

    \55\ See FDIC, History of the Eighties--Lessons for the Future: 
Volume I: An Examination of the Banking Crises of the 1980s and 
Early 1990s, at 241 (Dec. 1997), available at www.fdic.gov/bank/historical/history/vol1.html.
    \56\ See Ren Essene & Allen Fishbein, Harvard Univ. Joint Center 
for Hous. Studies, The Home Mortgage Disclosure Act at Thirty-Five: 
Past History, Current Issues 17-18 (Aug. 2010).
    \57\ Public Law 100-242, section 565, 101 Stat. 1815, 1945 
(1988); 53 FR 31683 (Aug. 19, 1988) (implementing these amendments 
and making other revisions to Regulation C).
---------------------------------------------------------------------------

    One year later, the Financial Institutions Reform, Recovery, and 
Enforcement Act of 1989 (FIRREA) fundamentally changed HMDA in several 
other ways.\58\ FIRREA amended HMDA to cover certain mortgage lenders 
that are not affiliated with depository institutions or holding 
companies.\59\ To provide greater transparency into the mortgage 
lending process, HMDA was amended to require disclosure, on a 
transaction-level basis, of data on applications received in general, 
as well as data on the race, gender, and income of individual 
applicants and borrowers.\60\ These changes marked a substantial shift 
in the statutory approach to the public disclosure of mortgage market 
data.\61\
---------------------------------------------------------------------------

    \58\ Public Law 101-73, section 1211, 103 Stat. 183, 524-26 
(1989).
    \59\ Id. The Federal Deposit Insurance Corporation Improvement 
Act of 1991 subsequently authorized the Board, in consultation with 
HUD, to develop a new exemption standard for nondepository mortgage 
lenders that is comparable to the exemption for depository 
institutions with $10 million or less in total assets. Public Law 
102-242, section 224, 105 Stat. 2236, 2307 (1991). In 1992, the 
Board adopted a standard that expanded coverage of nondepository 
institutions by providing that a nondepository mortgage lender with 
an office in an MSA would be covered if it met either an asset-size 
test or a lending activity test. 57 FR 56963 (Dec. 2, 1992).
    \60\ Public Law 101-73, section 1211, 103 Stat. 183, 524-26 
(1989); see Allen J. Fishbein, The Ongoing Experiment with 
``Regulation from Below:'' Expanded Reporting Requirements for HMDA 
and CRA, 3 Housing Policy Debate 601, 615-16 (1993).
    \61\ The Board implemented these changes in a final rule later 
that year. 54 FR 51356 (Dec. 15, 1989).
---------------------------------------------------------------------------

    This shift from aggregate to transaction-level reporting, and from 
limited to more detailed loan data, substantially increased the 
usefulness of the HMDA data. Studies conducted using the expanded HMDA 
data confirmed that, in many cases, an applicant's race alone 
influenced whether the applicant was denied credit.\62\ These studies 
led the Federal financial institution regulators to announce that the 
new HMDA data would be used to determine whether financial institutions 
were fulfilling their fair lending obligations.\63\ While the new data 
strengthened fair lending oversight and enforcement, it also had a 
powerful effect on the relationship between communities and financial 
institutions. Community groups used the data to monitor lending within 
their communities and enter into agreements with financial institutions 
to ensure that the local needs were being served in a responsible 
manner.\64\ By increasing the degree of transparency in the mortgage 
market, the FIRREA amendments to HMDA dramatically improved the 
public's understanding of how mortgage lending decisions affected both 
communities and individual applicants and borrowers.
---------------------------------------------------------------------------

    \62\ See Alicia H. Munnell, et al., Mortgage Lending in Boston: 
Interpreting the HMDA Data, American Econ. Review. Fed. Reserve Bank 
of Boston Working Paper 92-7, at 22 (1992); James H. Carr & Isaac F. 
Megbolugbe, The Federal Reserve Bank of Boston: Study on Mortgage 
Lending Revisited, 4 Journal of Housing Research 2, 277 (1993).
    \63\ See e.g., Richard D. Marisco, Shedding Some Light on 
Lending: The Effect of Expanded Disclosure Laws on Home Mortgage 
Marketing, Lending, and Discrimination in the New York Metropolitan 
Area, 27 Fordham Urb. L. J. 481, 506 (1999); Bd. of Governors of the 
Fed. Reserve Sys., Interagency Policy Statement on Fair Mortgage 
Lending Practices, Oct. 9, 1992, available at https://www.federalreserve.gov/bankinforeg/interagencystatement.htm; 
Interagency Task Force on Fair Lending Policy Statement on 
Discrimination in Lending, 73 FR 18266 (Apr. 15, 1994).
    \64\ See Adam Rust, Fed. Reserve Bank of Boston and Fed. Reserve 
Bank of San Francisco, A Principle-Based Redesign of HMDA and CRA 
Data in Revisiting the Community Reinvestment Act: Perspectives on 
the Future of the Community Reinvestment Act 179 (Feb. 2009).
---------------------------------------------------------------------------

    Market Evolution, Subprime Lending, and Its Aftermath. After the 
FIRREA amendments, three major developments prompted rapid changes in 
the mortgage industry. First, the deregulation of the banking industry 
in 1994 led to a substantial number of bank mergers and 
reorganizations.\65\ Second, the expansion of the secondary market 
increased the availability of mortgage loans while enabling lenders to 
offer new types of mortgage loans to a wider range of borrowers.\66\ 
Third, advances in mortgage lending technology enabled the mortgage 
market to move from lengthy, manual origination processes to less 
burdensome and more efficient, computerized processes.\67\ These 
developments increased the availability of mortgage loans to all 
borrowers, but they also increased the sophistication of lending 
institutions and the complexity of the mortgage lending process.
---------------------------------------------------------------------------

    \65\ See Riegle-Neal Interstate Banking and Branching Efficiency 
Act of 1994, Public Law 103-328, 108 Stat. 2338.
    \66\ See Patricia A. McCoy & Elizabeth Renuart, Harvard Univ. 
Joint Center for Hous. Studies, The Legal Infrastructure of Subprime 
and Nontraditional Home Mortgages 8-10 (Feb. 2008).
    \67\ U.S. Fin. Crisis Inquiry Comm'n, The Financial Crisis 
Inquiry Report: Final Report of the National Commission on the 
Causes of the Financial and Economic Crisis in the United States 72 
(Official Gov't ed. 2011), available at https://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf.
---------------------------------------------------------------------------

    HMDA data, coupled with amendments to the CRA, helped communities 
engage with financial institutions to address issues stemming from 
deregulation. Community groups used HMDA data to challenge proposed 
bank mergers, and many depository institutions developed lending 
programs dedicated to addressing the needs of their communities.\68\ 
However, HMDA

[[Page 51738]]

data were not sufficient to help communities fully understand and 
address one major development that grew out of increased securitization 
and technological advances--the expansion of the subprime market. 
Between the mid-1990s and the mid-2000s, subprime lending dramatically 
increased.\69\ While subprime lending increased access to credit to 
many borrowers and in many communities, studies suggested that many 
subprime lenders offered loans in a predatory and discriminatory 
manner.\70\ Studies conducted by Federal agencies in the early 2000s 
concluded that there were significant concerns about discrimination in 
the subprime market, but that the HMDA data did not provide enough 
transparency to help communities and public officials understand the 
scope of the problem and devise effective solutions.\71\
---------------------------------------------------------------------------

    \68\ See Ben Bernanke, Chairman, Fed. Reserve Bd. (Speech), 
``The Community Reinvestment Act: Its Evolution and New 
Challenges,'' Mar. 30, 2007, available at https://www.federalreserve.gov/newsevents/speech/bernanke20070330a.htm.
    \69\ ``From essentially zero in 1993, subprime mortgage 
originations grew to $625 billion by 2005, one-fifth of total 
mortgage originations in that year, a whopping 26 percent annual 
rate of increase over the whole period.'' Edward M. Gramlich, Urban 
Institute and Fed. Reserve Bank of Kansas City, Booms and Busts: The 
Case of Subprime Mortgages 107 (Aug. 31, 2007).
    \70\ Allen Fishbein & Harold Bunce, HUD, Subprime Market Growth 
and Predatory Lending, Hous. Policy in the New Millennium 274-76 
(2000), https://www.huduser.org/publications/pdf/brd/13fishbein.pdf.
    \71\ ``While HMDA data have been a crucial tool allowing policy 
makers, regulators and the public to understand mortgage lending 
patterns, additional data not now required to be reported would more 
completely describe mortgage markets--the subprime market, in 
particular. Greater transparency in this market would promote more 
informed policy making and regulation, and may itself help to 
improve practices of lenders.'' HUD, U.S. Dep't of Treas., Curbing 
Predatory Home Mortgage Lending: A Joint Report 100 (June 2000), 
https://archives.hud.gov/reports/treasrpt.pdf.
---------------------------------------------------------------------------

    The Board responded by amending Regulation C to provide greater 
visibility into the subprime market. The Board initiated its last 
comprehensive review of Regulation C through an advance notice of 
proposed rulemaking in 1998 \72\ and notices of proposed rulemakings in 
2000 \73\ and 2002,\74\ which culminated in final rules promulgated in 
2002.\75\ Among other things, the Board's 2002 revisions to Regulation 
C:
---------------------------------------------------------------------------

    \72\ 63 FR 12329 (Mar. 12, 1998).
    \73\ 65 FR 78656 (Dec. 15, 2000).
    \74\ 67 FR 7252 (Feb. 15, 2002).
    \75\ 67 FR 7222 (Feb. 15, 2002); 67 FR 30771 (May 8, 2002); 67 
FR 43218 (June 27, 2002).
---------------------------------------------------------------------------

     Required financial institutions to report pricing 
information for higher-priced mortgage loans;
     Required financial institutions to identify loans subject 
to HOEPA;
     Required financial institutions to report denials of 
applications received through certain preapproval programs and 
permitted financial institutions to report requests for preapproval 
that were approved but not accepted;
     Expanded the coverage of nondepository financial 
institutions by adding a loan origination dollar-volume threshold of 
$25 million to the loan-percentage test;
     Required financial institutions to report whether a loan 
involves a manufactured home; and
     Required financial institutions to ask applicants their 
ethnicity, race, and sex in applications taken by telephone and conform 
the collection of data on ethnicity and race to standards established 
by the Office of Management and Budget (OMB) in 1997.
    The 2002 revisions to Regulation C focused on the data elements 
that are required rather than the institutions or transactions that are 
covered. In adopting the revisions, the Board considered changes that 
had occurred in the home mortgage market, including the growth of 
subprime lending. The revisions improved the usefulness of the HMDA 
data, especially with respect to fair lending concerns, but adding a 
limited number of loan pricing variables only modestly addressed the 
need for increased transparency in the subprime mortgage market.\76\
---------------------------------------------------------------------------

    \76\ See Patricia A. McCoy, The Home Mortgage Disclosure Act: A 
Synopsis and Recent Legislative History, 29 Journal of Real Estate 
Research, no. 4 at 388 (2007).
---------------------------------------------------------------------------

    However, discrimination was only one of the problems caused by the 
predatory practices employed by certain subprime lenders. Evidence 
demonstrated that predatory subprime lending in the late 1990s resulted 
in high rates of delinquency and foreclosure, threatening the stability 
of many communities.\77\ This threat only increased as underwriting 
standards deteriorated throughout the 2000s. But when communities 
needed more granular loan data the most, HMDA did not provide it. As a 
result, communities could not understand the magnitude of the risk to 
which they were exposed. Neither could many community groups or public 
officials, who could not afford to purchase the detailed loan datasets 
available to the financial industry.\78\
---------------------------------------------------------------------------

    \77\ ``The growing incidence of abusive practices in a segment 
of the mortgage lending market has been stripping borrowers of home 
equity and threatening families with foreclosure, destabilizing the 
very communities that are beginning to enjoy the fruits of our 
Nation's economic success.'' Allen Fishbein & Harold Bunce, HUD, 
Subprime Market Growth and Predatory Lending, Hous. Policy in the 
New Millennium 278 (2000), https://www.huduser.org/publications/pdf/brd/13fishbein.pdf. ``In the three markets with data available on 
trends in foreclosures over time, it was found that foreclosures by 
subprime lenders grew sharply during the 1990s even as foreclosures 
by other lenders declined or grew at a much more moderate pace.'' 
Harold L. Bunce et al., HUD, Subprime Foreclosures: The Smoking Gun 
of Predatory Lending? 268 (2000).
    \78\ ``HMDA is a limited data set for groups without financial 
resources to pay for better information. A set of data providers . . 
. buy loan-level home mortgage data and then repackage the data for 
consumption by other lenders, analysts, and academics. Some 
nonprofit groups buy this information, but for the most part, it is 
too expensive for them.'' Adam Rust, Fed. Reserve Bank of Boston and 
Fed. Reserve Bank of San Francisco, A Principle-Based Redesign of 
HMDA and CRA Data in Revisiting the Community Reinvestment Act: 
Perspectives on the Future of the Community Reinvestment Act 181 
(Feb. 2009), https://www.frbsf.org/community-development/files/
revisitingcra.pdf.
---------------------------------------------------------------------------

    Communities throughout the nation were devastated when the housing 
and financial markets collapsed in 2007. The financial crisis resulted 
in the loss of nearly $7 trillion in household wealth, and an 
unprecedented number of homeowners faced foreclosure.\79\ Federal, 
State, and local officials created relief programs intended to assist 
distressed homeowners, prevent a complete collapse of local housing 
markets, and to assist communities impacted by foreclosure and 
abandonment.\80\ While the crisis initially affected subprime 
borrowers, the problems eventually extended to the entire mortgage 
market.\81\ Both prime and subprime borrowers experienced high levels 
of delinquency and foreclosure, which destabilized communities across 
the country.\82\ In the wake of the unprecedented number of 
foreclosures, communities were forced to grapple with numerous 
abandoned homes, properties stripped of fixtures, and vandalism, which 
contributed to the downward spiral in neighborhood property values.\83\ 
Furthermore, although the crisis affected homeowners across the nation,

[[Page 51739]]

a disproportionate share of wealth was lost by minority and low-income 
households.\84\
---------------------------------------------------------------------------

    \79\ See The U.S. Housing Market: Current Conditions and Policy 
Conditions 1 (Fed. Reserve Bd. White Paper Jan. 4, 2012), https://www.federalreserve.gov/publications/other-reports/files/housing-white-paper-20120104.pdf.
    \80\ For example, the U.S. Department of the Treasury's Hardest 
Hit Fund provides funds for homeownership stabilization programs in 
Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, 
Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, 
Ohio, Oregon, Rhode Island, South Carolina, Tennessee, and 
Washington, DC. https://www.treasury.gov/initiatives/financial-stability/TARP-Programs/housing/hhf/Pages/Program-Purpose-and-Overview.aspx. See also supra note 17.
    \81\ See Cong. Budget Office, Options for Responding to Short-
Term Economic Weakness 21-22 (Jan. 2008), available at https://
www.cbo.gov/sites/default/files/cbofiles/ftpdocs/89xx/doc8916/01-15-
econstimulus.pdf.
    \82\ See Joint Center for Hous. Studies Harvard Univ., The State 
of the Nation's Housing 2010, at 19 (2010), https://www.jchs.harvard.edu/research/publications/state-nations-housing-2010.
    \83\ See Fed. Reserve Bank of Cleveland, Facing the Foreclosure 
Crisis in Greater Cleveland: What Happened and How Communities are 
Responding 13-14 (June 2010).
    \84\ See supra note 82.
---------------------------------------------------------------------------

    Communities and public officials used HMDA data, including the data 
on subprime lending, to identify at-risk neighborhoods and to develop 
foreclosure relief and homeownership stabilization programs.\85\ 
However, the limited data points reported under HMDA presented several 
challenges for public officials attempting to create effective and 
responsive relief programs.\86\ In some cases, cities and counties were 
able to purchase mortgage data from commercial providers to complement 
the HMDA data and obtain a more complete picture of the risks posed to 
their communities.\87\ To begin addressing the need to improve publicly 
available mortgage market data, Congress amended HMDA and the Board 
revised Regulation C shortly after the mortgage crisis began. 
Specifically, in 2008, the Board revised the rules for reporting price 
information on higher-priced mortgage loans.\88\ These revisions 
conformed Regulation C requirements to the definition of ``higher-
priced mortgage loan'' adopted by the Board under Regulation Z in July 
2008.\89\
---------------------------------------------------------------------------

    \85\ See, e.g., Hearing Before the Federal Reserve Board on 
Regulation C on Implementing the Home Mortgage Disclosure Act of 
1975 (2010) (testimony of Claudia Monterrosa, Director, Policy & 
Planning, Los Angeles Housing Department, City of Los Angeles), 
available at https://www.federalreserve.gov/communitydev/files/monterrosa.pdf. See also supra note 17.
    \86\ Id.
    \87\ For example, the Atlanta Regional Commission and the Office 
of University-Community Partnerships at Emory University used the 
HMDA data and a purchased dataset to understand the full scope of 
the properties at risk of foreclosure in the greater Atlanta area. 
See G. Thomas Kingsley et al., Urban Institute, Addressing the 
Foreclosure Crisis: Action-Oriented Research in Three Cities 17-18 
(2009), https://www.urban.org/publications/412001.html.
    \88\ 73 FR 63329 (Oct. 24, 2008).
    \89\ Id. at 63331; 73 FR 44522 (July 30, 2008).
---------------------------------------------------------------------------

    At the same time, Congress began preparing a legislative response 
to the financial crisis.\90\ In 2010, Congress amended HMDA in the 
Dodd-Frank Act, which also transferred HMDA rulemaking authority and 
other functions from the Board to the Bureau.\91\ Among other changes, 
the Dodd-Frank Act expands the scope of information relating to 
mortgage applications and loans that must be compiled, maintained, and 
reported under HMDA. New data points include the age of loan applicants 
and mortgagors, information relating to the points and fees payable at 
origination, the difference between the annual percentage rate (APR) 
associated with the loan and a benchmark rate or rates for all loans, 
the term of any prepayment penalty, the value of real property to be 
pledged as collateral, the term of the loan and of any introductory 
interest rate for the loan, the presence of contract terms allowing 
non-amortizing payments, the origination channel, and the credit scores 
of applicants and mortgagors.\92\ The Dodd-Frank Act also authorizes 
the Bureau to require, ``as [it] may determine to be appropriate,'' a 
unique identifier that identifies the loan originator, a universal loan 
identifier, and the parcel number that corresponds to the real property 
pledged or proposed to be pledged as collateral for the mortgage 
loan.\93\ The Dodd-Frank Act also provides the Bureau with the 
authority to require ``such other information as the Bureau may 
require.'' \94\
---------------------------------------------------------------------------

    \90\ See Mortgage Reform and Anti-Predatory Lending Act of 2007, 
H.R. 3915, 110th Cong.; H.R. Rep. No. 110-441 (2007); Mortgage 
Reform and Anti-Predatory Lending Act, H.R. 1728, 111th Cong. 
(2009); H.R. Rep. No. 111-94 (2009).
    \91\ Public Law 111-203, 124 Stat. 1376, 1980, 2035-38, 2097-101 
(2010). In 2010, the Board also conducted public hearings on 
potential revisions to Regulation C, which are discussed below.
    \92\ Dodd-Frank Act section 1094(3), amending HMDA section 
304(b), 12 U.S.C. 2803(b).
    \93\ Id.
    \94\ Id.
---------------------------------------------------------------------------

    While the Dodd-Frank Act added new reporting requirements that will 
increase the level of transparency in the mortgage market, many argue 
that more publicly available information is needed to help inform 
communities of lending practices that affect local economies and may 
endanger neighborhood stability.\95\ The Board convened public hearings 
in 2010 to gather feedback on how to improve the HMDA data. To ensure 
that HMDA continues to empower communities by providing transparency 
into mortgage lending practices, the Bureau believes that the HMDA data 
must be updated to address the informational shortcomings exposed by 
the financial crisis, to meet the needs of homeowners, potential 
homeowners, and neighborhoods throughout the nation, and to reflect 
changes in business practices and the technological evolution of the 
mortgage market.
---------------------------------------------------------------------------

    \95\ See part III.A for a discussion of several public hearings 
conducted by the Board in 2010, during which many participants 
requested that additional information be made publicly available 
through HMDA.
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B. Mortgage Technology and Data Standards

    As discussed above, Congress made major amendments to HMDA in the 
Dodd-Frank Act, including specifying new data points for collection and 
providing the Bureau with broad authority to, among other things, 
require the collection of other data points and change the format and 
submission requirements for HMDA reporting. The collection and 
reporting of improved loan-level mortgage data has drawn strong 
interest from both market participants and regulators in the wake of 
the financial crisis. In light of its authorities, the Bureau has 
investigated potential uses of and alignments with industry data 
standards as a means to improve the quality of HMDA data that is 
collected and reported, and to reduce the processing and compliance 
costs on financial institutions.
    Federal policy strongly favors agency use of voluntary consensus 
standards, and reliance on appropriate existing standards would allow 
the Bureau to draw on the expertise and resources of other data 
standards developers to serve the public interest.\96\ In particular, 
reliance on existing voluntary consensus standards would be consistent 
with the National Technology Transfer and Advancement Act of 1995 \97\ 
and OMB Circular A-119,\98\ which direct Federal agencies to use such 
standards in lieu of government-unique standards except where 
inconsistent with law or otherwise impractical. The Office of Financial 
Research within the U.S. Department of the Treasury has stated that, 
for the financial services market, appropriate data standards would 
provide data transparency, comparability, and quality, and also promote 
sound risk management by the industry by reducing costs, fostering 
automation, facilitating the aggregation of data from disparate 
sources, and enabling the end-to-end tracking of a financial 
transaction.\99\ As discussed further below, the Bureau believes that 
HMDA compliance and data submission can be made easier, and HMDA data 
quality improved, by aligning the requirements of Regulation C to the 
extent practicable

[[Page 51740]]

with existing industry standards for collecting and transmitting 
mortgage data.
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    \96\ See Administrative Conference of the United States 
Recommendation 2011-5 (adopted December 8, 2011), at 1.
    \97\ National Technology Transfer and Advancement Act, Public 
Law 104-113 (1996), 110 Stat. 775, 783, 15 U.S.C. 272 note.
    \98\ ``Federal Participation in the Development and Use of 
Voluntary Consensus Standards and in Conformity Assessment 
Activities,'' https://www.whitehouse.gov/omb/circularsa119/. 
OMB Circular A-119 defines ``voluntary consensus standards'' to mean 
standards created by organizations whose processes provide 
attributes of openness, balance, due process, an appeal, and 
decisionmaking by general agreement.
    \99\ See Dept. of Treas. Off. of Fin. Research, 2012 Annual 
Report to Congress, ``Chapter 5: Promoting Data Standards,'' 107, 
https://www.treasury.gov/initiatives/wsr/ofr/Documents/
OFRAnnualReport071912Final.pdf.
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    Currently, HMDA data are submitted in the loan application register 
format, consistent with the instructions in appendix A to Regulation 
C.\100\ The data points reported on each loan application register 
entry are defined by Regulation C, its appendices, and commentary.\101\ 
Financial institutions also seek further information in other 
materials.\102\ Financial institutions submit the data in an 
electronic, machine-readable format that conforms to the loan 
application register format, except for financial institutions that 
report 25 or fewer entries, which may submit their loan application 
register entries in paper format.\103\
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    \100\ 12 CFR part 1003, App. A.
    \101\ 12 CFR part 1003.
    \102\ E.g., FFIEC, A Guide to HMDA Reporting: Getting it Right!; 
FFIEC, Home Mortgage Disclosure Act Regulatory and Interpretive FAQs 
[hereinafter FFIEC FAQs], available at https://www.ffiec.gov/hmda/.
    \103\ Comment 5(a)-2.
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    Financial institutions maintain records of mortgage loan 
applications and originations in many forms and in many systems outside 
of those used for HMDA reporting. In many cases, these systems use or 
define data points in ways that differ from Regulation C requirements. 
As a result, those systems are not directly compatible with the HMDA 
loan application register format, so that financial institutions have 
to use additional software and modify data in existing systems in order 
to submit HMDA data in the proper format.
    The Bureau believes that the burden associated with Regulation C 
compliance and data submission can be reduced by aligning the 
requirements of Regulation C to the extent practicable with existing 
industry standards for collecting and transmitting data on mortgage 
loans and applications. The Bureau believes that promoting consistent 
data standards for both industry and regulatory use has benefits for 
market efficiency, market understanding, market oversight, and improved 
data quality.\104\ In light of these considerations, the Bureau is 
proposing to align the HMDA data requirements, to the extent 
practicable, with the widely used Mortgage Industry Standards 
Maintenance Organization (MISMO) standards for residential mortgages, 
including the Uniform Loan Delivery Dataset (ULDD) that is used in the 
delivery of loans to the Federal National Mortgage Association (Fannie 
Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) 
(collectively, the government-sponsored entities (GSEs)).
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    \104\ The Department of Treasury's Office of Financial Research 
has identified the lack of consistent data standards as a key source 
of risk during the recent financial crisis, and has noted the 
benefits of consistent data standards for both industry and 
regulators. Supra note 99.
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    MISMO, a wholly owned non-profit subsidiary of the Mortgage Bankers 
Association, has developed an extensive set of data standards for 
electronic delivery of loan-level mortgage data.\105\ MISMO's mission 
includes: ``Fostering an open process to develop, promote, and maintain 
voluntary electronic commerce procedures and standards for the mortgage 
industry.'' \106\ As part of MISMO's standardization efforts, it has 
developed an XML architecture for mortgage data and a data dictionary 
to provide data point names, definitions, and enumerations.\107\ The 
mortgage industry has been increasingly adopting the MISMO data 
standard since its inception and this development has spurred the 
interest of Federal regulators in MISMO as well.
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    \105\ MISMO is an all-volunteer non-profit organization governed 
by a committee elected from its more than 150 subscribers, which 
include mortgage bankers, lenders, servicers, vendors, service 
providers, and the GSEs. See https://www.mismo.org/AboutMISMO.
    \106\ About MISMO, https://www.mismo.org/AboutMISMO.
    \107\ XML is an open standard developed, maintained, and updated 
by the World Wide Web Consortium. See https://www.w3.org/standards/xml/ xml/. An enumeration is a value associated with the defined data 
point. An example in the current HMDA data is the enumeration for 
``loan originated'' within the data point of ``action taken.''
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    When the Federal Housing Finance Agency (FHFA) assumed oversight of 
the GSEs, it mandated that they align to the MISMO data standard. The 
FHFA directed the GSEs to develop a Uniform Mortgage Data Program 
(UMDP) to enhance the accuracy and quality of mortgage loan data 
delivery to each GSE.\108\ A key component of the UMDP is the ULDD, 
which refers to MISMO to identify the data points and the data delivery 
format required in connection with the delivery of single-family loans 
to each GSE.\109\ As of July 23, 2012, all loans delivered to the GSEs 
have been required to meet ULDD requirements. Given that a majority of 
mortgages originated in 2013 conformed to GSE guidelines--and that a 
large segment of the market sells at least some of their originated 
loans to the GSEs directly or indirectly--a significant portion of the 
market is already operating in accordance with the MISMO data 
standard.\110\
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    \108\ Federal Housing Finance Agency, Fannie Mae and Freddie Mac 
Launch Joint Effort to Improve Loan and Appraisal Data Collection 
(May 24, 2010), available at https://fhfa.gov/Media/PublicAffairs/Pages/Fannie-Mae-and-Freddie-Mac-Launch-Joint-Effort-to-Improve-Loan-and-Appraisal-Data-Collection.aspx.
    \109\ See Fannie Mae, Uniform Loan Delivery Dataset, https://www.fanniemae.com/singlefamily/uniform-loan-delivery-dataset-uldd; 
Freddie Mac, Uniform Loan Delivery Dataset, https://
www.freddiemac.com/singlefamily/sell/uniformdelivery.html.
    \110\ See Inside Mortgage Fin., Mortgage Originations by 
Product, Inside Mortgage Finance Newsletter, Issue 2014:04 (Jan. 31, 
2014).
---------------------------------------------------------------------------

    The Bureau recognizes that not every mortgage industry member would 
support alignment of the HMDA data requirements with MISMO/ULDD data 
standards--particularly small financial institutions that do not sell 
loans to the GSEs or that conduct only portfolio lending. Financial 
institutions that do not currently use the MISMO/ULDD data standards 
may have reservations about the alignment of the HMDA data requirements 
with such industry standards. However, the Bureau believes that the 
efficiencies achieved by aligning HMDA data with widely used industry 
data standards justify potential burdens and that the efficiencies will 
grow over time. Aligning with MISMO/ULDD data standards means relying 
on uniform data standards that are already familiar to financial 
institutions and data vendors. A HMDA reporter or data vendor using 
MISMO for business purposes would be able to use the same standard for 
its HMDA submission, thereby reducing the resources required to 
translate data into a different standard, such as the particular 
government standards currently used only for purposes of HMDA 
compliance. In addition, the Bureau believes that grounding HMDA in the 
common vocabulary and data standards of the industry will continue to 
reduce burdens should the need arise to modify Regulation C in the 
future. Alignment with MISMO/ULDD is also consistent with the policies 
discussed above that encourage use of voluntary consensus standards by 
Federal agencies.

C. Applicant and Borrower Privacy

    As discussed above, HMDA's purposes are to provide the public and 
public officials with sufficient information to enable them to 
determine whether institutions are serving the housing needs of the 
communities and neighborhoods in which they are located, to assist 
public officials in distributing public sector investments in a manner 
designed to improve the private investment environment, and to assist 
in identifying possible discriminatory lending patterns and enforcing 
antidiscrimination statutes. Today, HMDA data are the preeminent data 
source for regulators, researchers, economists, industry, and advocates

[[Page 51741]]

analyzing the mortgage market both for HMDA's purposes and for general 
market monitoring. In implementing HMDA to effectuate its purposes, the 
appropriate protection of applicant and borrower privacy in light of 
the goals of the statute is a significant priority for the Bureau. The 
Bureau is mindful that privacy concerns may arise both when financial 
institutions compile and report data to the Bureau and other agencies 
and when HMDA data are disclosed to the public. The Bureau has 
considered both types of potential concerns in developing this 
proposal, and it continues to assess the implications for applicant and 
borrower privacy of the public disclosure of HMDA data both by 
financial institutions and by Federal agencies.
Compiling and Reporting of HMDA Data
    Financial institutions collect various types of information from 
consumers in the course of processing loan applications. To promote 
HMDA's goals, HMDA and Regulation C require financial institutions to 
compile and report to the Bureau and other agencies some of this 
information and other information obtained or generated concerning the 
application or loan. As discussed above, the Dodd-Frank Act both 
expanded the scope of information that financial institutions must 
compile and report and authorized the Bureau to require financial 
institutions to compile and report additional data. The Bureau has 
considered applicant and borrower privacy in developing its proposal to 
implement the Dodd-Frank amendments and otherwise amend Regulation C. 
The Bureau's proposals are intended to ensure that data compiled and 
reported by financial institutions fulfill HMDA's purposes while 
appropriately protecting applicant and borrower privacy.
    During the Small Business Review Panel process,\111\ some small 
entity representatives expressed concerns about the privacy 
implications of reporting certain current and proposed HMDA data.\112\ 
Several small entity representatives suggested that applicant and 
borrower age and credit score, two new data points added to HMDA by the 
Dodd-Frank Act, should be reported to the Bureau and other appropriate 
agencies in ranges, rather than exact values, to mitigate privacy 
concerns.\113\ The Small Business Review Panel recommended that the 
Bureau evaluate ways to address any privacy risks that may be created 
by the reporting of HMDA data to the Bureau and other agencies.\114\ 
Consistent with this recommendation, the Bureau's consideration of 
applicant and borrower privacy in developing this proposal has included 
consideration of the format in which current and proposed HMDA data 
should be reported. The Bureau's proposal simultaneously seeks to 
address any potential privacy risks that may be created by the 
reporting of HMDA data to the Bureau and other agencies to ensure that 
the data are reported in a format that is useful in fulfilling HMDA's 
purposes, that avoids imposing undue burden on financial institutions 
or increasing the risk of errors in reporting; and that aligns to the 
extent practicable with existing industry standards for collecting and 
transmitting mortgage data. The Bureau seeks comment on alternatives to 
addressing any potential risks to privacy interests created by the 
reporting of HMDA data to the Bureau and other agencies, including the 
impact of such alternatives on the utility of the data, on burden to 
financial institutions and risks of errors in reporting, and on 
alignment with existing industry standards for transmitting mortgage 
data. As discussed below, the Bureau's assessment of any potential 
risks to privacy interests created by the public disclosure of HMDA 
data is ongoing.
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    \111\ The Small Business Regulatory Enforcement Fairness Act of 
1996 (SBREFA), as amended by section 1100G(a) of the Dodd-Frank Act, 
requires the Bureau to convene a Small Business Review Panel before 
proposing a rule that may have a substantial economic impact on a 
significant number of small entities. See Public Law 104-121, tit. 
II, 110 Stat. 847, 857 (1996) (as amended by Public Law 110-28, 
section 8302 (2007)). As discussed in part III.C below, the Bureau 
convened a Small Business Review Panel concerning this proposal in 
February 2014.
    \112\ Final Report of the Small Business Review Panel on the 
CFPB's Proposals Under Consideration for the Home Mortgage 
Disclosure Act (HMDA) Rulemaking (Apr. 24, 2014) [hereinafter Small 
Business Review Panel Report], https://files.consumerfinance.gov/f/
201407cfpbreporthmdasbrefa.pdf 
at 24 (loans made to financial institutions' employees), 26 (loan 
originator identifier, parcel identifier), 27-28 (age, credit score, 
debt-to-income ratio), 30-31 (property value, total points and fees, 
interest rate), 35 (data disclosed on the modified loan application 
register), 41 (combined loan-to-value).
    \113\ See Small Business Review Panel Report at 27, 40. Small 
entity representatives suggested that age could be reported in 
ranges (e.g., 20-49, 50-62, and 63 and up). Id. at 27.
    \114\ See Small Business Review Panel Report at 40.
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    The Bureau also has received feedback from industry expressing 
concern about the security of the data to be reported under this 
proposal during its submission. As part of its efforts to improve and 
modernize HMDA operations, the Bureau is considering various 
improvements to the HMDA data submission process, including further 
advancing encryption if necessary to protect the security of HMDA data 
to be reported under this proposal.
Disclosures of HMDA Data
    As discussed above, HMDA is a disclosure statute. To fulfill HMDA's 
purposes, the types of data a financial institution is required to 
compile and report under HMDA and Regulation C have been expanded since 
the statute's enactment in 1975, and the formats in which HMDA data 
have been disclosed to the public also have evolved. At present, HMDA 
and Regulation C require data to be made available to the public in 
both aggregate and loan-level formats. First, each financial 
institution must make its ``modified'' loan application register 
available to the public, with three fields deleted to protect applicant 
and borrower privacy.\115\ Each financial institution must also make 
available a disclosure statement prepared by the FFIEC that shows the 
financial institution's HMDA data in aggregate form.\116\ In addition, 
the FFIEC makes available disclosure statements for each financial 
institution\117\ as well as aggregate reports for each MSA and 
metropolitan division (MD) showing lending patterns by certain property 
and applicant characteristics.\118\ Since 1991, on behalf of the 
agencies receiving HMDA data, the FFIEC also has released annually a 
loan-level dataset containing all reported HMDA data for the preceding 
calendar year. To reduce the possibility that data users could identify 
particular applicants or borrowers in these data, the same three fields 
that are deleted from the modified loan application register that 
financial institutions make available are deleted from this 
release.\119\
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    \115\ Section 1003.5(c); HMDA section 304(j)(2)(B). Section 
1003.5(c) requires that, before making its loan application register 
available to the public, a financial institution must delete three 
fields to protect applicant and borrower privacy: Application or 
loan number, the date that the application was received, and the 
date action was taken.
    \116\ Section 1003.5(b); HMDA section 304(k).
    \117\ Section 1003.5(f); HMDA section 304(f).
    \118\ Section 1003.5(f); HMDA section 310.
    \119\ The agencies first released loan-level HMDA data in 
October 1991. In announcing that the loan-level data submitted to 
the agencies on the loan application register would be made 
available to the public, the FFIEC noted that ``[a]n unedited form 
of the data would contain information that could be used to identify 
individual loan applicants'' and that the data would be edited prior 
to public release to remove the application identification number, 
the date of application, and the date of final action. 55 FR 27886, 
27888 (July 6, 1990).
---------------------------------------------------------------------------

    The Dodd-Frank Act amendments to HMDA added new section 
304(h)(1)(E), which directs the Bureau to develop regulations, in 
consultation with other appropriate agencies, that ``modify or

[[Page 51742]]

require modification of itemized information, for the purpose of 
protecting the privacy interests of the mortgage applicants or 
mortgagors, that is or will be available to the public.'' Section 
304(h)(3)(B), also added by the Dodd-Frank Act, directs the Bureau to 
``prescribe standards for any modification under paragraph (1)(E) to 
effectuate the purposes of [HMDA], in light of the privacy interests of 
mortgage applicants or mortgagors. Where necessary to protect the 
privacy interests of mortgage applicants or mortgagors, the Bureau 
shall provide for the disclosure of information . . . in aggregate or 
other reasonably modified form, in order to effectuate the purposes of 
[HMDA].'' \120\
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    \120\ Section 304(h)(3)(A) provides that a modification under 
section 304(h)(1)(E) shall apply to information concerning ``(i) 
credit score data . . . in a manner that is consistent with the 
purpose described in paragraph (1)(E); and (ii) age or any other 
category of data described in paragraph (5) or (6) of subsection 
(b), as the Bureau determines to be necessary to satisfy the purpose 
described in paragraph (1)(E), and in a manner consistent with that 
purpose.''
---------------------------------------------------------------------------

    The Bureau interprets HMDA, as amended by these provisions, to call 
for the use of a balancing test to determine whether and how HMDA data 
should be modified prior to its public release in order to protect 
applicant and borrower privacy while also fulfilling the public 
disclosure purposes of the statute.\121\ This proposed rule only 
addresses financial institutions' disclosures of HMDA data to the 
public; it does not address the FFIEC's release of HMDA data. The 
Bureau, in consultation with other appropriate agencies, will use the 
balancing test to evaluate potential privacy risks created by HMDA data 
made available to the public by both financial institutions and the 
FFIEC, including the loan-level data that the FFIEC currently makes 
available on behalf of the Bureau and other agencies. The Bureau 
intends to provide a process for the public to provide input on the 
application of the balancing test to the data currently made available 
by the FFIEC at a later date.
---------------------------------------------------------------------------

    \121\ Section 1022(c)(8) of the Dodd-Frank Act provides that, 
``[i]n collecting information from any person, publicly releasing 
information held by the Bureau, or requiring covered persons to 
publicly report information, the Bureau shall take steps to ensure 
that'' certain information is not ``made public under this title.'' 
The Bureau interprets ``under this title'' to not include data made 
public pursuant to HMDA and Regulation C.
---------------------------------------------------------------------------

    Using the balancing test to evaluate particular HMDA data points, 
individually and in combination, and various options for providing 
access to HMDA data, the Bureau will balance the importance of 
releasing the data to accomplish HMDA's public disclosure purposes 
against the potential harm to an applicant or borrower's privacy 
interest that may result from the release of the data without 
modification. Modifications the Bureau may consider where warranted 
include various disclosure limitation techniques, such as techniques 
aimed at masking the precise value of data points,\122\ aggregation, 
redaction, use restrictions, query-based systems, and a restricted 
access program.\123\ The Bureau understands that the diverse 
populations of HMDA data users have different data needs, including 
with respect to the granularity of data, and recognizes that mitigating 
privacy risks in data disclosed to the public may decrease the data's 
utility to its users. The Bureau interprets HMDA, as amended by the 
Dodd-Frank Act, to require that public HMDA data be modified only when 
the release of the unmodified data creates risks to applicant and 
borrower privacy interests that are not justified by the benefits of 
such release to the public for the statutory purposes. The Bureau 
believes that privacy interests arise where the data's disclosure may 
both substantially facilitate the identification of an applicant or 
borrower and disclose information about the applicant or borrower that 
is not otherwise public and may be harmful or sensitive.
---------------------------------------------------------------------------

    \122\ Examples of disclosure techniques that may mitigate 
privacy concerns include binning, coarsening, perturbing, and top- 
and bottom-coding. Data binning, for example, is a technique wherein 
the original data value (for example, a number reported to the 
agencies on the loan application register) is placed in an interval, 
or bin, and is then represented by the value of that bin. Binning 
allows data to be shown clustered into ranges rather than as precise 
values.
    \123\ A restricted access program could allow access to privacy-
sensitive information, otherwise unavailable to the general public, 
for research purposes.
---------------------------------------------------------------------------

    The Bureau believes that its interpretation of HMDA to call for the 
use of the balancing test described herein best effectuates the 
purposes of the statute. HMDA's purposes are to provide the public and 
public officials with sufficient information to enable them to 
determine whether institutions are serving the housing needs of the 
communities and neighborhoods in which they are located, to assist 
public officials in distributing public sector investments in a manner 
designed to improve the private investment environment, and to assist 
in identifying possible discriminatory lending patterns and enforcing 
antidiscrimination statutes. The Bureau believes that access to loan-
level HMDA data, in particular, enhances the use of HMDA data by 
members of the public and public officials and thus best effectuates 
HMDA's purposes.\124\ At the same time, the Dodd-Frank Act amendments 
and the Bureau's proposals would require that financial institutions 
report on the loan application register submitted to the Bureau and 
other agencies additional data points that may raise potential privacy 
concerns if made available to the public.\125\ The Bureau believes that 
the balancing test described above provides for the appropriate 
protection of applicant and borrower privacy in light of the public 
disclosure goals of the statute.
---------------------------------------------------------------------------

    \124\ The Bureau agrees with the 1990 findings of the FFIEC 
agencies that ``the release of the raw [loan-level] data is 
consistent with the congressional intent to maximize the utilization 
of'' the HMDA data. 55 FR 27886, 27888 (July 6, 1990). The 
importance of loan-level data to HMDA's purposes is also reflected 
in Congress's use of the term ``loan application register 
information'' in HMDA section 304(j) to describe the data financial 
institutions must make available to the public upon request. At the 
time HMDA was amended to add section 304(j), the term ``loan/
application register'' was used in Regulation C to describe the 
loan-by-loan, register format for reporting HMDA data to the 
agencies. Section 304(j)(2)(A), as originally adopted, provided 
that, subject to deletions to protect privacy, ``the loan 
application register information described in paragraph (1) may be 
disclosed by a depository institution without editing or compilation 
and in the format in which such information is maintained by the 
institution.'' Housing and Community Development Act of 1992, Public 
Law 102-550, section 932(a), 106 Stat. 3672, 3889 (1992).
    \125\ Congress specifically identified credit score and age as 
new data points that may raise privacy concerns. See HMDA section 
304(h)(3)(A).
---------------------------------------------------------------------------

    During the Small Business Review Panel process, some small entity 
representatives expressed concerns about the privacy implications of 
certain current and proposed HMDA data.\126\ The Small Business Review 
Panel recommended that the Bureau evaluate ways to address any privacy 
risks that may be created by the disclosure of HMDA data.\127\ The 
Bureau's analysis under the balancing test concerning whether and how 
HMDA data should be modified prior to public release is ongoing. The 
Bureau also continues to investigate available strategies and 
techniques to protect applicant and borrower privacy, where warranted, 
while preserving the data's utility for HMDA's purposes. The Bureau 
solicits feedback on the balancing test described herein, including 
whether other interpretations of HMDA section 304(h)(1)(E) and (h)(3) 
would better effectuate HMDA's purposes. As discussed below in the 
section-by-section analysis of proposed Sec.  1003.5(c), in order to 
avoid creating new privacy risks and imposing burdens on financial 
institutions, the Bureau is proposing

[[Page 51743]]

that financial institutions release on the modified loan application 
register only those data fields that are currently released, and is 
seeking comment on any privacy risks created by and disclosure benefits 
of those data fields. As noted above, the Bureau intends to provide a 
process for the public to provide input on the application of the 
balancing test for purposes of the data made available to the public by 
the FFIEC, including the loan-level data it currently makes available 
on behalf of the Bureau and other agencies, and on any proposed 
modifications to such data, at a later date.
---------------------------------------------------------------------------

    \126\ See supra note 112.
    \127\ See Small Business Review Panel Report at 40.
---------------------------------------------------------------------------

III. Outreach

    In 2010, when the Board had rulemaking authority over HMDA, the 
Board conducted a series of public hearings that elicited feedback on 
improvements to Regulation C. After the rulemaking authority for HMDA 
was transferred to the Bureau, the Bureau conducted outreach on 
implementing the Dodd-Frank Act amendments to HMDA and other potential 
changes to Regulation C by soliciting comments in Federal Register 
notices and by meeting with a variety of stakeholders, including trade 
associations, financial institutions, community groups, and other 
Federal agencies. The Bureau also convened a Small Business Review 
Panel to obtain feedback from small financial institutions as well as 
the general public. To prepare this proposal, the Bureau considered 
both the comments presented to the Board during its public hearings and 
feedback provided to the Bureau during its outreach.

A. The Board's 2010 Public Hearings

    In 2010, the Board convened public hearings on potential revisions 
to Regulation C (the Board's 2010 Hearings).\128\ The Board began the 
reassessment of HMDA in the aftermath of the financial crisis, as 
Congress was considering the legislation that later became the Dodd-
Frank Act. The Board stated that there were three purposes of the 
hearings: (1) To provide information that would assist the Board in its 
review of Regulation C, (2) to help assess the need for additional 
data, and (3) to identify emerging issues in the mortgage market that 
could warrant additional research.\129\ Representatives from community 
organizations, consumer advocates, industry, academia, State and 
Federal agencies, and others participated in the hearings. The Board 
did not commence a rulemaking to consider any of the feedback provided 
during the hearings before HMDA rulemaking authority was transferred to 
the Bureau.
---------------------------------------------------------------------------

    \128\ See 75 FR 35030 (June 21, 2010).
    \129\ Id.
---------------------------------------------------------------------------

Institutional Coverage
    The Board identified institutional coverage as one of the topics 
for discussion at the hearings. Participants addressed whether the 
Board should require reporting from additional types of institutions, 
whether certain types of institutions should be exempt from reporting, 
and whether any other changes should be made to the rules for 
determining which types of institutions must report data. For example, 
representatives from Federal agencies, lenders, and consumer advocates 
urged the Board to adopt a consistent minimum loan threshold across all 
types of institutions, including banks, savings associations, credit 
unions, and nondepository institutions.\130\ In particular, industry 
representatives noted the limited value derived from data reported by 
lower-volume depository institutions.\131\ Industry and community 
advocate representatives also asserted that loan volume, rather than 
asset size, should trigger reporting, particularly for nondepository 
lenders because they tend to have a different capital structure than 
banks, savings associations, and credit unions.\132\ Participants also 
urged the Board to expand coverage of nondepository institutions.\133\ 
In addition, participants commented that the coverage scheme for 
nondepository institutions was too complex and should be 
simplified.\134\
---------------------------------------------------------------------------

    \130\ Transcript, Fed. Reserve Board Public Hearing on Potential 
Revisions to the Home Mortgage Disclosure Act, Washington DC, Sept. 
24, 2010 [hereinafter Washington Hearing], (remarks of Faith 
Schwartz, Senior Advisory, HOPE Now Alliance at Washington, DC 
hearing) (``I think everyone should have the burden of reporting 
that has any meaningful originations out there . . . .''), https://
www.federalreserve.gov/communitydev/files/
fulltranscriptboard20100924.pdf ; id. 
(remarks of Josh Silver, Vice President of Research and Policy, 
National Community Reinvestment Coalition) (``[I]n terms of your 
threshold, it is very confusing because you have depository 
institutions that have different thresholds and nondepository 
institutions . . . I suggested just make it the same for everybody. 
If you make more than [50 reportable loans under HMDA], you 
disclose. . . . So that's a threshold I would propose across the 
board for nondepository institutions and depository 
institutions.'').
    \131\ See, e.g., Transcript, Fed. Reserve Board Public Hearing 
on Potential Revisions to the Home Mortgage Disclosure Act, Atlanta, 
Georgia, July 15, 2010 [hereinafter Atlanta Hearing], https://
www.federalreserve.gov/communitydev/files/
fulltranscriptatlanta20100715.pdf.
    \132\ See, e.g., id. (remarks of Faith Anderson, Vice President 
and General Counsel, American Airlines Federal Credit Union) (``[A]n 
exemption from HMDA reporting should be based on the volume of 
mortgage loans that are given. Exemptions should not be based on the 
asset size of a financial institution.'').
    \133\ See, e.g., Transcript Fed. Reserve Board Public Hearing on 
Potential Revisions to the Home Mortgage Disclosure Act, San 
Francisco, California, Aug. 5, 2010 [hereinafter San Francisco 
Hearing], https://www.federalreserve.gov/communitydev/files/
fulltranscriptsf20100805.pdf; Washington 
Hearing, supra note 130; Atlanta Hearing, supra note 131.
    \134\ See, e.g., Washington Hearing, supra note 130.
---------------------------------------------------------------------------

Data Elements
    The Board solicited feedback on ways to improve the quality and 
usefulness of HMDA data, including whether any data elements should be 
added, modified, or deleted. Participants provided suggestions about 
ways to improve the utility of HMDA data. Participants discussed 
modifications to the data fields currently collected in Regulation C 
that may clarify reporting requirements and improve the usefulness of 
HMDA data. For example, participants urged the Board to augment the 
information collected concerning multifamily properties \135\ and 
manufactured housing \136\ and to expand the reporting of rate spread 
to all originations.\137\ Participants also urged the Board to clarify 
specific reporting requirements, such as how to report modular homes 
\138\ and conditional approvals.\139\ Participants discussed the 
reluctance of applicants to provide demographic information, such as 
race and ethnicity, and the challenges financial institutions face in 
collecting the information.\140\
---------------------------------------------------------------------------

    \135\ See, e.g., San Francisco Hearing, supra note 133; 
Washington Hearing, supra note 130.
    \136\ See, e.g., id.
    \137\ See, e.g., Atlanta Hearing, supra note 131; Transcript, 
Fed. Reserve Board Public Hearing on Potential Revisions to the Home 
Mortgage Disclosure Act, Chicago, Illinois, Sept. 16, 2010 
[hereinafter Chicago Hearing], https://www.federalreserve.gov/
communitydev/files/
fulltranscriptchicago20100916.pdf; id. 
(remarks of Professor Jim Campen, University of Massachusetts).
    \138\ See, e.g., Atlanta Hearing, supra note 131.
    \139\ See, e.g., Washington Hearing, supra note 130.
    \140\ See, e.g., Atlanta Hearing, supra note 131; San Francisco 
Hearing, supra note 133; Chicago Hearing, supra note 137.
---------------------------------------------------------------------------

    In addition, participants commented on data fields that could be 
added to the data collected under HMDA to improve its utility. For 
example, participants suggested collecting information regarding points 
and fees, including prepayment penalties,\141\ information concerning 
the relationship of the loan amount to the value of the property 
securing the loan,\142\ and information concerning whether an 
application was submitted through a mortgage broker.\143\
---------------------------------------------------------------------------

    \141\ See, e.g., San Francisco Hearing, supra note 133; Chicago 
Hearing, supra note 137.
    \142\ See, .e.g., Atlanta Hearing, supra note 131; San Francisco 
Hearing, supra note 133; Chicago Hearing, supra note 137; Washington 
Hearing, supra note 130.
    \143\ See, e.g., Chicago Hearing, supra note 137.

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[[Page 51744]]

B. Early Stakeholder Outreach

    Title X of the Dodd-Frank Act established the Bureau and, on July 
21, 2011, transferred rulemaking authority under HMDA from the Board to 
the Bureau. As discussed below, the Dodd-Frank Act also amended HMDA to 
add additional data points and make other statutory changes. However, 
pursuant to section 1094(3)(F) of the Dodd-Frank Act, financial 
institutions are not required to report new data under paragraphs (5) 
or (6) of HMDA subsection (b) until after the Bureau publishes final 
regulations with respect to such disclosures.
    On May 31, 2011, the Bureau published a notice for public comment 
providing a preliminary list of rules that would be enforced by the 
Bureau upon the designated transfer date.\144\ The list included 
Regulation C and invited public comment on the list. On July 21, 2011, 
the Bureau published the final list of rules, which included Regulation 
C.\145\ The Bureau received general comments requesting the Bureau not 
to impose duplicative regulatory burdens, that it take into account 
differences between regulated entities in rulemaking, and that it 
involve stakeholders in the Bureau's rulemaking process.
---------------------------------------------------------------------------

    \144\ 76 FR 31222 (May 31, 2011).
    \145\ 76 FR 43570 (Jul. 21, 2011).
---------------------------------------------------------------------------

    Since the Bureau's inception and its assumption of authority over 
Federal consumer financial laws, it has tried to be responsive to those 
early comments regarding regulatory burden, differences in regulated 
entities, and outreach to stakeholders in its rulemaking process. 
Building on the feedback received during the Board's 2010 Hearings, the 
Bureau has conducted outreach and obtained significant feedback on the 
Dodd-Frank amendments and other potential changes to Regulation C 
through Federal Register notices and meetings with stakeholders. The 
Bureau met with various stakeholders during the proposal development 
process through in-person meetings and conference calls, and solicited 
feedback through correspondence.
    On December 5, 2011, the Bureau published a request for information 
in the Federal Register seeking feedback on regulations that it had 
inherited from other agencies (the Bureau's 2011 Streamlining 
Proposal).\146\ In the Bureau's 2011 Streamlining Proposal, the Bureau 
stated that it believed there may be opportunities to streamline 
inherited regulations by updating, modifying, or eliminating outdated, 
unduly burdensome, or unnecessary provisions.\147\ The Bureau solicited 
general feedback on such opportunities. The Bureau noted that, under 
current Regulation C, a depository institution that did not ordinarily 
originate home purchase loans, but that occasionally refinanced a home 
purchase loan to accommodate a customer, would be required to report 
under Regulation C. The Bureau solicited feedback on whether small 
numbers of refinancings should not trigger Regulation C coverage.\148\ 
The Bureau's 2011 Streamlining Proposal provided for an initial comment 
period and a reply period to allow commenters to respond to each 
other's comments.\149\ The initial comment period closed March 5, 2012 
and the reply period closed June 4, 2012.\150\
---------------------------------------------------------------------------

    \146\ 76 FR 75825 (Dec. 5, 2011).
    \147\ Id.
    \148\ 76 FR 75825, 75828.
    \149\ 76 FR 75825.
    \150\ The reply period was initially scheduled to close on April 
3, 2012, but was later extended to June 4, 2012 in response to a 
request from industry trade associations and consumer advocates. 77 
FR 14700 (Mar. 13, 2012).
---------------------------------------------------------------------------

    The Bureau received comments regarding its specific solicitation 
for feedback, as well as general suggestions for streamlining 
Regulation C. Comments were received from consumer advocates, fair 
housing advocates, financial institutions, State bank supervisory 
organizations, State industry trade associations, and national industry 
trade associations. Comments from consumer and fair housing advocates 
generally focused on adding additional data and types of covered loans, 
and generally opposed any exemptions or reporting thresholds for 
Regulation C on the basis that the data are critical for fair lending 
enforcement and determining if community housing needs are being met. 
Other comments focused on various potential streamlining changes to 
Regulation C including establishing loan-volume or asset reporting 
thresholds, exempting some types of loans from coverage or adding 
others, making definitions consistent with other regulations, tiered 
reporting requirements, consolidating guidance sources, and clarifying 
certain definitions and reporting issues.
    On December 19, 2011 the Bureau published an interim final rule 
establishing Regulation C in 12 CFR part 1003, implementing the 
assumption of HMDA authority from the Board (the Bureau's 2011 
Regulation C Restatement).\151\ The Bureau's 2011 Regulation C 
Restatement substantially duplicated the Board's Regulation C and made 
only non-substantive, technical, formatting, and stylistic changes. The 
Bureau also solicited comment through that notice on any technical 
issues and any provisions that are outdated, unduly burdensome, or 
unnecessary. The Bureau received a few comments from financial 
institutions, State industry trade associations, and national industry 
trade associations. The comments focused on aligning Regulation C 
definitions with other regulations, providing a tolerance for 
enforcement actions based on low error rates in reported data, and 
establishing a loan-volume threshold.
---------------------------------------------------------------------------

    \151\ 76 FR 78465 (Dec. 19, 2011).
---------------------------------------------------------------------------

    In an effort to better understand existing and emerging industry 
data standards and whether Regulation C could be aligned with them, the 
Bureau met with staff from MISMO regarding the MISMO residential 
reference model dataset and staff from the GSEs regarding ULDD. In an 
effort to better understand financial institutions' internal HMDA 
compliance processes and compliance costs, the Bureau, through 
arrangements with a national industry trade association, met with 
community banks to obtain feedback. The Bureau also met with consumer 
and fair housing advocates and industry trade associations to 
understand their concerns with current HMDA data, current Regulation C, 
and possible changes to Regulation C.

C. Small Business Review Panel

    In February 2014, the Bureau convened a Small Business Review Panel 
(Panel) with the Chief Counsel for Advocacy of the Small Business 
Administration (SBA) and the Administrator of the Office of Information 
and Regulatory Affairs with the Office of Management and Budget 
(OMB).\152\ As part of this process, the Bureau prepared an outline of 
proposals under consideration and the alternatives considered (Small 
Business Review Panel Outline), which the Bureau posted on its Web site 
for review by the small financial institutions participating in the 
panel process, as well as the general public.\153\
---------------------------------------------------------------------------

    \152\ Supra note 111.
    \153\ Press Release, CFPB Takes Steps to Improve Information 
About Access to Credit in the Mortgage Market (Feb. 7, 2014) https://www.consumerfinance.gov/newsroom/cfpb-takes-steps-to-improve-information-about-access-to-credit-in-the-mortgage-market/. The 
Bureau also gathered feedback on the Small Business Review Panel 
Outline from other stakeholders and members of the public, and from 
the Bureau's Consumer Advisory Board and Community Bank Advisory 
Council.
---------------------------------------------------------------------------

    Prior to formally convening, the Panel participated in 
teleconferences with small groups of the small entity representatives 
to introduce to the materials and to obtain feedback. The

[[Page 51745]]

Panel conducted a full-day outreach meeting with the small entity 
representatives in March 2014 in Washington, DC. The Panel gathered 
information from the small entity representatives and made findings and 
recommendations regarding the potential compliance costs and other 
impacts of the proposed rule on those entities. Those findings and 
recommendations are set forth in the Small Business Review Panel 
Report, which will be made part of the administrative record in this 
rulemaking.\154\ The Bureau has carefully considered these findings and 
recommendations in preparing this proposal and addresses certain 
specific examples below.
---------------------------------------------------------------------------

    \154\ Supra note 111.
---------------------------------------------------------------------------

IV. Legal Authority

    The Bureau is issuing this proposed rule pursuant to its authority 
under the Dodd-Frank Act and HMDA. Section 1061 of the Dodd-Frank Act 
transferred to the Bureau the ``consumer financial protection 
functions'' previously vested in certain other Federal agencies, 
including the Board.\155\ The term ``consumer financial protection 
function'' is defined to include ``all authority to prescribe rules or 
issue orders or guidelines pursuant to any Federal consumer financial 
law, including performing appropriate functions to promulgate and 
review such rules, orders, and guidelines.'' \156\ Section 1022(b)(1) 
of the Dodd-Frank Act authorizes the Bureau's Director to prescribe 
rules ``as may be necessary or appropriate to enable the Bureau to 
administer and carry out the purposes and objectives of the Federal 
consumer financial laws, and to prevent evasions thereof.'' \157\ Both 
HMDA and title X of the Dodd-Frank Act are Federal consumer financial 
laws.\158\
---------------------------------------------------------------------------

    \155\ 12 U.S.C. 5581. Section 1094 of the Dodd-Frank Act also 
replaced the term ``Board'' with ``Bureau'' in most places in HMDA. 
12 U.S.C. 2803 et seq.
    \156\ 12 U.S.C. 5581(a)(1)(A).
    \157\ 12 U.S.C. 5512(b)(1).
    \158\ Dodd-Frank Act section 1002(14), 12 U.S.C. 5481(14) 
(defining ``Federal consumer financial law'' to include the 
``enumerated consumer laws'' and the provisions of title X of the 
Dodd-Frank Act); Dodd-Frank Act section 1002(12), 12 U.S.C. 5481(12) 
(defining ``enumerated consumer laws'' to include HMDA).
---------------------------------------------------------------------------

    HMDA section 305(a) broadly authorizes the Bureau to prescribe such 
regulations as may be necessary to carry out HMDA's purposes.\159\ 
These regulations can include ``classifications, differentiations, or 
other provisions, and may provide for such adjustments and exceptions 
for any class of transactions, as in the judgment of the Bureau are 
necessary and proper to effectuate the purposes of [HMDA], and prevent 
circumvention or evasion thereof, or to facilitate compliance 
therewith.'' \160\
---------------------------------------------------------------------------

    \159\ 12 U.S.C. 2804(a).
    \160\ Id.
---------------------------------------------------------------------------

    A number of HMDA provisions specify that covered institutions must 
compile and make their HMDA data publicly available ``in accordance 
with regulations of the Bureau'' and ``in such formats as the Bureau 
may require.'' \161\ HMDA section 304(j)(1) authorizes the Bureau to 
issue regulations to define the loan application register information 
that HMDA reporters must make available to the public upon request and 
to specify the form required for such disclosures.\162\ HMDA section 
304(j)(2)(B) provides that ``[t]he Bureau shall require, by regulation, 
such deletions as the Bureau may determine to be appropriate to 
protect--(i) any privacy interest of any applicant . . . ; and (ii) a 
depository institution from liability under any Federal or State 
privacy law.'' \163\ HMDA section 304(j)(7) also directs the Bureau to 
make every effort in prescribing regulations under the subsection to 
minimize the costs incurred by a depository institution in complying 
with the subsection and regulations.\164\
---------------------------------------------------------------------------

    \161\ See, e.g., HMDA section 304(a)(1), (j)(2)(A), (j)(3), 
(m)(2), 12 U.S.C. 2803(a)(1), (j)(2)(A), (j)(3), (m)(2); see also 
HMDA section 304(b)(6)(I), 12 U.S.C. 2803(b)(6)(I) (requiring 
covered institutions to use ``such form as the Bureau may 
prescribe'' in reporting credit scores of mortgage applicants and 
mortgagors). HMDA section 304(k)(1) also requires depository 
institutions covered by HMDA to make disclosure statements available 
``[i]n accordance with procedures established by the Bureau pursuant 
to this section.'' 12 U.S.C. 2803(k)(1).
    \162\ 12 U.S.C. 2803(j)(1).
    \163\ 12 U.S.C. 2803(j)(2)(B).
    \164\ 12 U.S.C. 2803(j)(7).
---------------------------------------------------------------------------

    HMDA section 304(e) directs the Bureau to prescribe a standard 
format for HMDA disclosures required under HMDA section 304.\165\ As 
amended by the Dodd-Frank Act, HMDA section 304(h)(1) requires HMDA 
data to be submitted to the Bureau or to the appropriate agency for the 
reporting financial institution ``in accordance with rules prescribed 
by the Bureau.'' \166\ HMDA section 304(h)(1) also directs the Bureau, 
in consultation with other appropriate agencies, to develop regulations 
after notice and comment that:
---------------------------------------------------------------------------

    \165\ 12 U.S.C. 2803(e).
    \166\ 12 U.S.C. 2803(h)(1); see also HMDA section 304(n), 12 
U.S.C. 2803(n) (discussing submission to the Bureau or the 
appropriate agency ``in accordance with regulations prescribed by 
the Bureau''). For purposes of HMDA section 304(h), HMDA section 
304(h)(2) defines the appropriate agencies for different categories 
of financial institutions. The agencies are the Federal banking 
agencies, the FDIC, the NCUA, and the Secretary of HUD. 12 U.S.C. 
2803(h)(2).
---------------------------------------------------------------------------

    (A) prescribe the format for such disclosures, the method for 
submission of the data to the appropriate agency, and the procedures 
for disclosing the information to the public;
    (B) require the collection of data required to be disclosed under 
[HMDA section 304(b)] with respect to loans sold by each institution 
reporting under this title;
    (C) require disclosure of the class of the purchaser of such loans;
    (D) permit any reporting institution to submit in writing to the 
Bureau or to the appropriate agency such additional data or 
explanations as it deems relevant to the decision to originate or 
purchase mortgage loans; and
    (E) modify or require modification of itemized information, for the 
purpose of protecting the privacy interests of the mortgage applicants 
or mortgagors, that is or will be available to the public.\167\ HMDA 
also authorizes the Bureau to issue regulations relating to the timing 
of HMDA disclosures.\168\

    \167\ 12 U.S.C. 2803(h)(1). The Dodd-Frank Act also added new 
HMDA section 304(h)(3), which directs the Bureau to prescribe 
standards for any modification pursuant to HMDA section 
304(h)(1)(E), to effectuate HMDA's purposes, in light of the privacy 
interests of mortgage applicants or mortgagors. 12 U.S.C. 
2803(h)(1)(E), 2803(h)(3).
    \168\ HMDA section 304(l)(2)(A), 12 U.S.C. 2803(l)(2)(A) 
(setting maximum disclosure periods except as provided under other 
HMDA subsections and regulations prescribed by the Bureau); HMDA 
section 304(n), 12 U.S.C. 2803(n).
---------------------------------------------------------------------------

    As amended by the Dodd-Frank Act, HMDA section 304 requires 
itemization of specified categories of information and ``such other 
information as the Bureau may require.'' \169\ Specifically, HMDA 
section 304(b)(5)(D) requires reporting of ``such other information as 
the Bureau may require'' for mortgage loans, and section 304(b)(6)(J) 
requires reporting of ``such other information as the Bureau may 
require'' for mortgage loans and applications. HMDA section 304 also 
identifies certain data points that are to be included in the 
itemization ``as the Bureau may determine to be appropriate.'' \170\ It 
provides that age and other categories of data shall be modified prior 
to release ``as the Bureau determines to be necessary'' to satisfy the 
statutory purpose of protecting the privacy interests of the mortgage 
applicants or mortgagors.\171\
---------------------------------------------------------------------------

    \169\ HMDA section 304(b)(5)(D), (b)(6)(J), 12 U.S.C. 
2803(b)(5)(D), (b)(6)(J).
    \170\ HMDA section 304(b)(6)(F), (G), (H), 12 U.S.C. 
2803(b)(6)(F), (G), (H).
    \171\ HMDA section 304(h)(3)(A)(ii), 12 U.S.C. 
2803(h)(3)(A)(ii).
---------------------------------------------------------------------------

    The Dodd-Frank Act amendments to HMDA also authorize the Bureau's

[[Page 51746]]

Director to develop or assist in the improvement of methods of matching 
addresses and census tracts to facilitate HMDA compliance by depository 
institutions in as economical a manner as possible.\172\ The Bureau, in 
consultation with the Secretary of HUD, may also exempt for-profit 
mortgage-lending institutions that are comparable within their 
respective industries to a bank, savings association, or credit union 
that has total assets of $10,000,000 or less.\173\
---------------------------------------------------------------------------

    \172\ HMDA section 307(a), 12 U.S.C. 2806(a) (authorizing the 
Bureau's Director to utilize, contract with, act through, or 
compensate any person or agency to carry out this subsection).
    \173\ HMDA section 309(a), 12 U.S.C. 2808(a).
---------------------------------------------------------------------------

    In preparing this notice of proposed rulemaking, the Bureau has 
considered the proposed changes below in light of its legal authority 
under HMDA and the Dodd-Frank Act. The Bureau has determined that each 
of the changes proposed below is consistent with the purposes of HMDA 
and is authorized by one or more of the sources of statutory authority 
identified in this part.

V. Section-by-Section Analysis

Section 1003.1 Authority, Purpose, and Scope

1(c) Scope
    As discussed further in the section-by-section analysis of proposed 
Sec.  1003.2(d), 2(g), and 2(o) the Bureau proposes substantive 
modifications to Regulation C's transactional and institutional 
coverage. The Bureau proposes technical changes to Sec.  1003.1(c) to 
conform to those substantive changes.
Institutional Coverage
    As discussed in detail below in the section-by-section analysis of 
proposed Sec.  1003.2(g), the Bureau proposes to adjust Regulation C's 
institutional coverage to adopt a uniform loan volume threshold of 25 
covered loans, excluding open-end lines of credit, applicable to all 
financial institutions (25-loan volume test). Under the proposal, 
depository and nondepository institutions that meet all of the other 
applicable criteria for a ``financial institution'' would be required 
to report HMDA data if they originated at least 25 covered loans, 
excluding open-end lines of credit, in the previous calendar year. The 
Bureau believes that this proposal would improve the quality of HMDA 
data by increasing visibility into the practices of nondepository 
institutions. In addition, the proposal would appropriately relieve 
institutions that originate a small number of mortgage loans from the 
burden of reporting HMDA data without impacting the quality of HMDA 
data. Furthermore, the proposed 25-loan volume test would simplify the 
reporting regime by providing a consistent loan volume benchmark across 
all financial institutions.
Transactional Coverage
    As discussed below, the Bureau is proposing to expand the types of 
transactions for which covered financial institutions must report data 
under Regulation C by including all mortgage loans, reverse mortgages, 
and lines of credit secured by a dwelling within the transactional 
scope of the regulation. Regulation C currently determines 
transactional coverage according to the purpose of the loan; if a 
covered financial institution receives an application or originates or 
purchases a loan that is, among other things, for the purchase of a 
home, home improvement, or refinancing, the financial institution must 
collect and report data on the application or loan. As discussed below 
in the section-by-section analysis to Sec.  1003.2(d), the Bureau is 
proposing to expand transactional coverage to include all mortgage 
loans secured by a dwelling, regardless of the purpose of the loan. 
This proposed modification includes several types of transactions that 
are not currently covered by Regulation C, including home-equity loans 
and commercial loans that are secured by a dwelling but do not satisfy 
the current purpose-based transactional coverage test. In addition, as 
discussed below in the section-by-section analysis to Sec.  1003.2(o), 
the Bureau is proposing to expand transactional coverage to include all 
dwelling-secured lines of credit, regardless of the purpose of the line 
of credit. This proposed modification includes all home-equity lines of 
credit, which are currently reported at the option of a financial 
institution if the purpose-based test is satisfied, as well as 
commercial lines of credit secured by a dwelling. Finally, as discussed 
below in the section-by-section analysis to Sec.  1003.2(q), the Bureau 
is proposing to expand transactional coverage to include all reverse 
mortgages secured by a dwelling, regardless of the purpose of the 
reverse mortgage. This proposed modification includes all reverse 
mortgages, many of which do not satisfy the current purpose-based 
transactional coverage test, and therefore are not currently reported 
under Regulation C. The Bureau believes that these modifications would 
simplify the regulation, improve the quality and usefulness of the HMDA 
data, and align with current business practices, among other things. 
See the section-by-section analysis to these sections below for a 
detailed discussion of these proposed modifications.
    In addition, to reduce burden created by redundancy in Regulation 
C, the Bureau proposes a modest reorganization of Regulation C. For the 
reasons discussed in the section-by-section analysis below, the Bureau 
proposes to move and consolidate comments 1(c)-2 through 1(c)-9.

Section 1003.2 Definitions

    Section 1003.2 of Regulation C sets forth definitions that are used 
in the regulation. As discussed below, the Bureau proposes substantive 
changes to several of these current definitions. In addition to these 
proposed substantive changes, the Bureau proposes technical revisions 
to Sec.  1003.2 to enumerate the terms defined therein. The Bureau 
believes that these proposed technical revisions will facilitate 
compliance with Regulation C by making defined terms easier to locate 
and cross-reference in the regulation and its commentary and 
appendices. The Bureau includes in this proposal enumerations only for 
those definitions that it proposes to add or revise. The Bureau intends 
to provide enumerations for all definitions in Sec.  1003.2, including 
the defined terms not addressed in this proposal, when the Bureau 
finalizes this proposal.
2(b) Application
2(b)(1) In General
    Section 303(4) of HMDA defines a completed application as an 
application in which the creditor has received the information that is 
regularly obtained in evaluating applications for the amount and type 
of credit requested. Regulation C defines an application as an oral or 
written request for a home purchase loan, a home improvement loan, or a 
refinancing that is made in accordance with procedures used by a 
financial institution for the type of credit requested.
    As discussed in the section-by-section analysis of proposed Sec.  
1003.2(e) the Bureau is proposing to require financial institutions to 
report activity only for dwelling-secured loans, regardless of whether 
the loans are for home purchase, home improvement, or refinancing. The 
Bureau is proposing to make technical corrections and minor wording 
changes to conform the definition of application to the proposed 
changes in transactional coverage.
    The Bureau is not proposing other changes to the definition of 
application at this time. When the Bureau's 2011

[[Page 51747]]

Regulation C Restatement was published, industry trade associations 
asked the Bureau to align key definitions among various regulations, 
including the definition of application. The commenters noted the 
difference between the definition of application in Regulation C and 
Regulation X, for example. The Bureau responded to similar comments in 
the Bureau's 2013 TILA-RESPA Final Rule.\174\ During the Small Business 
Review Panel process, small entity representatives also suggested that 
the Regulation C definition of application be aligned with the 
definition used in the Bureau's 2013 TILA-RESPA Final Rule.\175\ As 
discussed in the Bureau's 2013 TILA-RESPA Final Rule, the definition in 
that rule serves a different purpose from the definition in Regulation 
C, and the Bureau did not expand that definition to regulations that 
implement ECOA, FCRA, and HMDA.\176\ Consistent with the Bureau's 
determination in the TILA-RESPA rulemaking, the Bureau is not proposing 
to align the Regulation C definition with the definition adopted in the 
Bureau's 2013 TILA-RESPA Final Rule. While the Bureau is not proposing 
to make any changes to the Regulation C definition for alignment 
purposes at this time, the Bureau will continue to consider the 
comments received on this topic as it evaluates further follow up to 
the Bureau's 2011 Streamlining Notice and other comments received. The 
proposal revises comments Application-1 and Application-2 to make 
technical and minor wording changes.
---------------------------------------------------------------------------

    \174\ 78 FR 79730, 79767 (Dec. 31, 2013).
    \175\ See Small Business Review Panel Report at 87, 95.
    \176\ 78 FR 79767 (Dec. 31, 2013).
---------------------------------------------------------------------------

2(b)(2) Preapproval Programs
    Regulation C incorporates certain requests under preapproval 
programs into the definition of application under Sec.  1003.2. 
Requests for preapprovals may provide more complete data on the 
availability of home financing and be useful as a fair lending 
screening device.\177\ Such programs are only covered if they involve a 
comprehensive analysis of the creditworthiness of the applicant and 
include a written commitment for up to a specific amount, subject only 
to certain limited conditions.\178\ Institutions must report requests 
reviewed under covered preapproval programs that were denied or that 
resulted in originations (with a specific enumeration that preapproval 
was requested). Institutions may, at their option, report covered 
preapprovals that were approved but not accepted. The FFIEC has 
published some additional guidance on preapprovals in the form of 
frequently asked questions (FFIEC FAQs).\179\
---------------------------------------------------------------------------

    \177\ 67 FR 7222, 7224 (Feb. 15, 2002).
    \178\ Section 1003.2 (definition of preapproval programs).
    \179\ FFIEC FAQs.
---------------------------------------------------------------------------

    The Bureau is proposing to make minor wording changes to the 
definition of a preapproval program under Sec.  1003.2(b)(2) and 
technical and clarifying changes to comment Application-3. The Bureau 
is proposing to delete language in the definition related to a 
certification of a clear termite inspection because it duplicates 
language in the commentary. The proposal adds language adapted from the 
FFIEC FAQs to the comment Application-3. This language specifies that a 
program that meets the definition in Sec.  1003.2(b)(2) is a 
preapproval program for purposes of Regulation C regardless of its 
name, and that a program described as a ``preapproval program'' that 
does not meet the definition in Sec.  1003.2(b)(2) is not a preapproval 
program for purposes of Regulation C. The language also specifies that 
an institution need not treat ad hoc requests for preapprovals as part 
of a preapproval program for purposes of Regulation C, but also notes 
that institutions should be generally consistent in procedures for 
considering such requests.
    During the Small Business Review Panel process, small entity 
representatives expressed concern about reporting preapprovals and 
determining whether certain requests are reportable as preapprovals. 
The Small Business Review Panel recommended that the Bureau 
specifically solicit public comment on whether clarification on the 
coverage of preapprovals is needed and, if so, how the coverage of 
preapprovals should be determined in light of HMDA's purposes.\180\ 
When the Bureau's 2011 Regulation C Restatement was published, some 
commenters requested additional guidance on preapproval programs and 
others requested that the Bureau eliminate the requirement to report 
activity under covered preapproval programs. The Bureau believes that 
preapproval data are valuable for HMDA's fair lending purpose, as it 
permits visibility into how applicants are treated in an early stage of 
the lending process. The Bureau is not proposing to eliminate reporting 
of covered preapproval programs, and, as discussed below in the 
section-by-section analysis of proposed Sec.  1003.4(c)(2), is 
proposing to require reporting of preapproval requests that are 
approved by a financial institution but not accepted by an applicant. 
However, the Bureau notes that, as discussed above, the proposal does 
incorporate additional guidance into comment Application-3 regarding 
preapproval programs. Consistent with the recommendation of the Small 
Business Review Panel, the Bureau solicits feedback on whether 
additional clarification on the coverage of preapprovals is needed and, 
if so, how the coverage of preapprovals should be determined in light 
of HMDA's purposes.
---------------------------------------------------------------------------

    \180\ Small Business Review Panel Report at 38.
---------------------------------------------------------------------------

2(c) Branch Office
    Section 1003.2 currently provides a definition of branch office, 
which includes separate definitions for branches of (1) banks, savings 
associations, and credit unions and (2) for-profit mortgage-lending 
institutions (other than banks, savings associations, and credit 
unions). The Bureau proposes technical and nonsubstantive modifications 
to the definition of branch office and to comments Branch Office-2 and 
-3, renumbered as comments 2(c)-2 and -3, respectively, to clarify the 
definition and to conform to technical changes that the Bureau is 
proposing throughout Regulation C. The Bureau solicits feedback on 
whether the proposed modifications are appropriate generally.
2(d) Closed-End Mortgage Loan
    HMDA section 303(2) defines a ``mortgage loan'' as a loan which is 
secured by residential real property or a home improvement loan. The 
Board interpreted HMDA section 303(2) to refer to three types of loans: 
Home purchase loans, home improvement loans, and refinancings. As a 
result, Regulation C currently does not apply to mortgage loans that do 
not fall under one of these definitions, such as a loan secured by a 
dwelling that is used for business expenses, but is not considered a 
refinancing under Sec.  1003.2. For the reasons discussed below, the 
Bureau is proposing a new definition for ``closed-end mortgage loans,'' 
which would include all dwelling-secured loans that are not currently 
covered by Regulation C, regardless of the purpose of the loan.
    In the original implementation of Regulation C, the Board's 
proposed scope included all loans secured by real property.\181\ 
However, the Board subsequently decided to adopt a narrower scope based 
on the purpose of the loan.\182\ At that time, the Board reasoned that 
focusing on the purpose of the loan would provide more useful

[[Page 51748]]

data.\183\ While this approach was successful for some time, the Bureau 
believes that it now may be appropriate to include all dwelling-secured 
loans. Research indicates that closed-end home-equity lending was a 
significant factor in the financial crisis.\184\ In the years leading 
up to the crisis, closed-end home-equity loans were often provided to 
non-prime borrowers, many of whom defaulted after the crisis 
began.\185\ Thus, data on these closed-end mortgage loans may have 
helped the public better understand the risks posed to local housing 
markets. Furthermore, distressed homeowners with closed-end 
subordinate-lien mortgage loans encountered several challenges when 
seeking assistance from public and private mortgage relief 
programs.\186\ Data on these loans may have helped public officials 
improve the effectiveness of these relief programs.
---------------------------------------------------------------------------

    \181\ See 41 FR 13619, 13620 (Mar. 31, 1976).
    \182\ See 41 FR 23931, 23932 (June 14, 1976).
    \183\ ``There was general agreement among depository 
institutions and consumer and public interest groups that inclusion 
of mortgage loans unrelated to housing needs would distort the data 
from the standpoint of the purposes of the Act . . . . The Board 
believes that repeated references to in the legislative history of 
the Act to `homeownership and home repair' support a narrower 
definition of mortgage loan than was proposed.'' Id.
    \184\ ``A significant part of the default crisis is driven by 
existing homeowners borrowing heavily against the rising value of 
their house.'' Atif Mian & Amir Sufi, House Prices, Home Equity-
Based Borrowing, and the U.S. Household Leverage Crisis, 101 a.m. 
Econ. Rev. 2132, p. 2154 (Aug. 2011).
    \185\ ``The largest share of [closed-end second-lien] mortgages 
went to borrowers with relatively low quality non-prime mortgages. 
The large growth of [closed-end second-lien] mortgages in 2006 to 
2007 primarily went to borrowers with non-prime first liens that 
would eventually default at very high rates.'' Donghoon Lee, et al., 
A New Look at Second Liens, Fed. Reserve Bank of New York Staff 
Report No. 569, at 11 (Aug. 2012).
    \186\ See Vicki Been, et al., Furman Center for Real Estate & 
Urban Policy, Essay: Sticky Seconds--The Problems Second Liens Pose 
to the Resolution of Distressed Mortgages, 13-18 (Aug. 2012).
---------------------------------------------------------------------------

    For these reasons, the Bureau believes that including dwelling-
secured loans that are not currently covered by Regulation C may 
provide valuable information to the public and to public officials. 
Accordingly, the Bureau is proposing Sec.  1003.2(d), which defines a 
``closed-end mortgage loan'' as a debt obligation secured by a lien on 
a dwelling that is not an open-end line of credit under Sec.  
1003.2(o), a reverse mortgage under Sec.  1003.2(q), or excluded from 
coverage pursuant to Sec.  1003.3(c). The Bureau solicits feedback 
regarding whether this proposed modification is appropriate. The Bureau 
also seeks additional information to ensure that this modification 
would provide useful data to the public. Specifically, the Bureau 
solicits feedback regarding whether this proposed modification would be 
as valuable to the public as the Bureau's preliminary analysis 
suggests, whether there would be unique costs or burdens associated 
with this proposed modification, and whether there are additional 
considerations that should be included in the Bureau's analysis. 
Furthermore, the Bureau is not proposing commentary to proposed Sec.  
1003.2(d) because the Bureau believes that this proposed definition is 
straightforward and clear. However, the Bureau solicits feedback 
regarding whether commentary is needed to clarify the definition or to 
facilitate compliance.
    During the Small Business Review Panel process, several small 
entity representatives expressed concerns about requiring reporting of 
dwelling-secured commercial credit.\187\ Some small entity 
representatives expressed concern about the potential compliance 
challenges associated with applying several of the HMDA requirements to 
commercial loans.\188\ The Small Business Review Panel recommended that 
the Bureau solicit public comment on whether any types of dwelling-
secured loans should be excluded from Regulation C's data collection 
and reporting requirements and, if so, which types of loans should be 
excluded.\189\ The Small Business Review Panel also encouraged the 
Bureau to consider and seek public comment on how categories of loans 
that would be affected by the proposal might be related to a financial 
institution's Community Reinvestment Act reporting obligations.\190\ 
Based on this feedback and consistent with the Small Business Review 
Panel's recommendation, the Bureau solicits feedback regarding whether 
any types of dwelling-secured loans should be excluded from the 
requirements of the regulation, which types of loans should be 
excluded, and how this proposed modification might affect a financial 
institution's Community Reinvestment Act reporting requirements. In 
addition, to address the concerns raised about commercial credit, the 
Bureau solicits feedback regarding the extent to which members of the 
public would use data related to business-purpose loans to determine 
whether financial institutions are fulfilling their obligations to 
serve community housing needs, whether dwelling-secured loans used for 
business purposes should be excluded from the scope of the regulation, 
and information related to the potential compliance costs associated 
with business-purpose loans. Finally, with respect to the concerns 
raised by small financial institutions about applying the reporting 
requirements to loans for business purposes, the Bureau solicits 
feedback regarding whether any modifications to or exclusions from the 
requirements of proposed Sec.  1003.4(a) would be appropriate if the 
Bureau decides against excluding business-purpose loans from the 
reporting requirements.
---------------------------------------------------------------------------

    \187\ See Small Business Review Panel Report at 24, 37, 59, 78, 
and 85.
    \188\ See id. at 24, 27, 30, 33, 38, 39, 40. 42, 52, 62, 75, 81, 
94, 95, 101, 126, and 129.
    \189\ See id. at 38.
    \190\ Id.
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2(e) Covered Loan
    While HMDA section 303(2) defines a ``mortgage loan'' as a loan 
which is secured by residential real property or a home improvement 
loan, Regulation C does not currently contain a defined term that 
includes all mortgage loans within the scope of the regulation. The 
Bureau has received feedback indicating that many members of industry 
find the regulation confusing and experience compliance challenges when 
determining whether and how to report the data. The Bureau believes 
that some of this confusion results from the current structure of the 
regulation, which links certain requirements to loan types, such as 
home-equity lines of credit, and other requirements to loan purposes, 
such as refinancings. Establishing clearly delineated boundaries 
between loan types and loan purposes will help clarify the regulation, 
and a new defined term that includes all types of loans subject to 
Regulation C should make subsequent references in the regulation easier 
to understand.
    Accordingly, the Bureau is proposing Sec.  1003.2(e), which defines 
a ``covered loan'' as a transaction that is, as applicable, a closed-
end mortgage loan under Sec.  1003.2(d), an open-end line of credit 
under Sec.  1003.2(o), or a reverse mortgage under Sec.  1003.2(q). The 
Bureau solicits feedback regarding whether this new proposed definition 
is appropriate. The Bureau is not proposing commentary to proposed 
Sec.  1003.2(e) because the Bureau believes that this proposed 
definition is straightforward and clear. However, the Bureau solicits 
feedback regarding whether commentary is needed to clarify this 
proposed definition or to facilitate compliance.
2(f) Dwelling
    Although HMDA does not use or define the term ``dwelling,'' the 
term has been included in some form in Regulation C since 1976 \191\ 
and is

[[Page 51749]]

important to scope, reporting, and coverage under Regulation C. 
Regulation C defines a dwelling as a residential structure (whether or 
not attached to real property) located within a U.S. State, the 
District of Columbia, or Puerto Rico. Regulation C provides that the 
definition of a dwelling includes, but is not limited to, condominium 
units, cooperative units, and mobile or manufactured homes.\192\ 
Regulation C commentary interprets the term dwelling to include 
vacation and second homes, rental properties and multifamily 
structures.\193\ Recreational vehicles such as boats or campers, and 
transitory residences such as hotels, hospitals, and dormitories are 
not included in the definition.\194\
---------------------------------------------------------------------------

    \191\ 41 FR 23932 (June 14, 1976).
    \192\ 12 CFR 1003.2 (definition of dwelling).
    \193\ 12 CFR 1003.2, comment Dwelling-1.
    \194\ 12 CFR 1003.2, comment Dwelling-2.
---------------------------------------------------------------------------

    Financial institutions have reported that they experience 
compliance burden in determining whether certain properties are 
dwellings under Regulation C, and whether the loan or application 
associated with such properties should be reported on the loan 
application register. Financial institutions report difficulty in 
determining coverage for loans secured by homes that are converted to 
commercial purposes, such as homes converted to daycare centers or 
professional offices; recreational vehicles that are used as 
residences; park model recreational vehicles; houseboats and floating 
homes; and certain mobile homes that do not meet the definition of a 
manufactured home.\195\
---------------------------------------------------------------------------

    \195\ Specifically, financial institutions report difficulty in 
determining coverage for mobile homes built prior to June 15, 1976, 
which are not covered by the HUD standards for manufactured homes.
---------------------------------------------------------------------------

    The Bureau is proposing to revise the definition of dwelling in 
Sec.  1003.2 to provide additional clarity. Specifically, the Bureau 
proposes to move the geographic location requirement currently in the 
definition of dwelling to Sec.  1003.1(c) and to add examples of 
dwellings to the commentary. The proposed examples have long been 
understood to be dwellings under Regulation C, and the revision is 
intended solely for clarity and illustration. The proposal revises 
comment Dwelling-1 to refer to investment properties rather than rental 
properties for consistency with terms used in the proposal regarding 
reporting of owner-occupancy status under Sec.  1003.4(a)(6). The 
proposal also revises comment Dwelling-1 to list condominium and 
cooperative buildings as additional examples of multifamily residential 
structures, and to provide that both multifamily complexes and 
individual buildings are covered. The Bureau solicits feedback on 
whether additional guidance is necessary to distinguish when multiple 
multifamily buildings should be considered part of the same complex and 
multifamily dwelling or when they should be considered separate 
properties and how to distinguish these scenarios.
    The proposed definition in Sec.  1003.2 would no longer refer to 
mobile homes, to reduce any confusion with the current definition of 
manufactured home. The HUD standards for manufactured homes do not 
cover mobile homes constructed before June 15, 1976, and these would 
not be covered by the proposed definitions of manufactured home or 
dwelling for purposes of Regulation C.\196\ Comment Dwelling-1 would be 
revised accordingly. The Bureau believes that reported information 
about covered loans and applications secured by pre-1976 mobile homes 
may not be useful given the limited volume of such loans and the 
difference in pricing and terms when compared to covered loans related 
to manufactured homes. Additionally, the Bureau believes that even if 
these dwellings were identified separately from manufactured homes, 
financial institutions would experience compliance burden in 
determining whether the homes are manufactured homes or pre-1976 mobile 
homes. However, the Bureau solicits feedback on whether this exclusion 
is appropriate or whether such homes should be included in the 
definition of dwelling under Regulation C and, if so, whether an 
additional enumeration should be added to the construction method 
reporting requirement under proposed Sec.  1003.4(a)(5) for such loans.
---------------------------------------------------------------------------

    \196\ 24 CFR 3282.8(a).
---------------------------------------------------------------------------

    The proposal clarifies that recreational vehicles are not 
considered dwellings under Regulation C even if they are used as 
residences. The current commentary provides that recreational vehicles 
such as campers and boats are not dwellings for purposes of Regulation 
C. However, financial institutions have reported confusion with the 
comment where the recreational vehicle is used as a residence. For 
example, in some cases borrowers use campers or boats that were not 
designed as permanent dwellings as residences. Financial institutions 
have also reported confusion about park model recreational vehicles, 
which are recreational vehicles which share some characteristics of 
manufactured homes but are excluded from the HUD standards for 
manufactured housing as recreational vehicles.\197\ Proposed comment 
2(f)-2 provides that recreational vehicles, including boats, campers, 
travel trailers, and park model recreational vehicles, are not 
considered dwellings for purposes of Sec.  1003.2(f), regardless of 
whether they are used as residences.
---------------------------------------------------------------------------

    \197\ 24 CFR 3282.8(g).
---------------------------------------------------------------------------

    Regarding houseboats and floating homes that may be used as 
residences, certain financial institutions in areas where houseboats 
and floating homes are more common report loans related to floating 
homes and houseboats on their loan application registers. These 
institutions may receive consideration under the CRA for financing 
houseboats or floating homes. The Bureau recognizes that while these 
loans may provide housing for certain communities, the Bureau believes 
that financing of such loans is different from other home loans and the 
incidence of such housing is highly localized. Unlike manufactured 
housing, discussed below, usage and financing of houseboats and 
floating homes is not as prevalent, and the small number of houseboats 
used as residences suggests that loans secured by such properties 
should not be included in HMDA data.\198\ Therefore, the Bureau 
believes that excluding houseboats and floating homes will facilitate 
compliance with HMDA. However, the Bureau solicits feedback on whether 
these exclusions are appropriate.
---------------------------------------------------------------------------

    \198\ The Bureau understands that relatively few houseboats and 
recreational vehicles are used as residential dwellings. Based on 
2008-2012 American Community Survey estimates, 108,654 of the total 
131,642,457 total housing units in the United States (0.1 percent) 
were vans, recreational vehicles, or boats.
---------------------------------------------------------------------------

    The proposal would differ from Regulation Z's definition of 
dwelling, which treats recreational vehicles used as residences as 
dwellings. 12 CFR part 1026, comment 2(a)(19)-2. When the Bureau's 2011 
Regulation C Restatement was published, industry trade associations 
asked the Bureau to align key definitions among various regulations, 
including the definition of dwelling. As discussed above, the proposal 
does not align the Regulation C definition with Regulation Z. Instead, 
it would exclude certain structures which may be covered by Regulation 
Z and provide more clarity on certain structures. The Bureau believes 
that additional guidance in this area and an exclusion for certain 
structures will reduce burden for financial institutions. However, the 
Bureau solicits feedback on whether financial institutions would prefer 
to report loans and applications for these types of structures that may 
be

[[Page 51750]]

considered dwellings under Regulation Z rather than having them 
excluded from the Regulation C reporting requirements as proposed.
    The proposal revises the sentence in the comment Dwelling-2 
regarding transitory residences to delete the reference to principal 
residences elsewhere because the explanation is inconsistent with the 
standard articulated in the commentary regarding non-principal 
residences such as second homes. The Bureau believes that this 
exclusion is better explained by the transitory nature of such 
structures. The proposal provides that structures designed for 
residential purposes but used exclusively for commercial purposes would 
not be dwellings under Regulation C and provides examples of daycare 
facilities and professional offices. The Bureau solicits feedback 
regarding whether the proposed revisions provide institutions with 
sufficient clarity to identify transactions that must be reported and 
whether any additional exclusions or examples would be appropriate.
    During the Small Business Review Panel process, one small entity 
representative requested guidance on how to account for mixed-used 
buildings.\199\ Commentary under the definitions of home improvement 
loan and home purchase loan provides guidance on whether loans secured 
by mixed-use property are reportable by allowing institutions to use 
any reasonable standard to determine the primary use of the property. 
The Bureau is proposing to add new comment 2(f)-3 regarding mixed-use 
property, which is adapted from the comments currently provided. The 
Bureau believes that the issues associated with identifying mixed-use 
property are common to all types of dwelling-secured loans and it may 
facilitate compliance to include the discussion of the issue under the 
definition of dwelling. The comment also provides that if a property 
contains five or more individual dwelling units, a financial 
institution should consider it to have a primary residential use. The 
Bureau believes that even if such properties also contain commercial 
space, five individual dwelling units is sufficient residential use to 
require coverage. This would be consistent with the proposal's new 
definition of a multifamily dwelling, discussed below in the section-
by-section analysis of proposed Sec.  1003.2(n). The Bureau solicits 
feedback on whether it would be preferable to establish a bright-line 
rule for mixed-use property. Specifically, the Bureau solicits feedback 
on whether a mixed-use property should be reported if it includes any 
individual dwelling units, or whether a clear standard can be provided 
for mixed-used property with a de minimis residential component to be 
excluded.
---------------------------------------------------------------------------

    \199\ See Small Business Review Panel Report at 80.
---------------------------------------------------------------------------

    Proposed sectionSec.  1003.2(f) is proposed to implement, in part, 
the definition of ``mortgage loan'' in HMDA section 303(2). That term 
would be implemented through other terms in Regulation C as well, 
including the proposed definitions of ``closed-end mortgage loan'' and 
``covered loan.'' In combination with other relevant provisions in 
Regulation C, the Bureau believes that the proposed definition of 
``dwelling'' is a reasonable interpretation of the definition in that 
provision. Section 1003.2(f) is also proposed pursuant to the Bureau's 
authority under section 305(a) of HMDA. Pursuant to section 305(a) of 
HMDA, the Bureau believes that this proposed definition is necessary 
and proper to effectuate the purposes of HMDA. The proposed definition 
will serve HMDA's purpose of providing information to help determine 
whether financial institutions are serving the housing needs of their 
communities by providing information about various types of housing 
that are financed by financial institutions. The definition will 
facilitate compliance with HMDA requirements by providing clarity 
regarding what transactions must be reported for purposes of Regulation 
C.
2(g) Financial Institution
    Regulation C requires institutions that meet the definition of 
financial institution to collect and report HMDA data. HMDA and 
Regulation C establish different coverage criteria for depository 
institutions (banks, savings associations, and credit unions) than for 
nondepository institutions (for profit-mortgage-lending 
institutions).\200\ Depository institutions that originate one first-
lien home purchase loan or refinancing secured by a one-to-four unit 
dwelling and that meet other criteria for ``financial institution'' 
must collect and report HMDA data, while certain nondepository 
institutions that originate many more mortgage loans annually do not 
have to collect and report HMDA data. The Bureau believes that this 
approach may exclude important data about nondepository institutions' 
practices and may inappropriately burden depository institutions that 
originate a small number of mortgage loans.
---------------------------------------------------------------------------

    \200\ See Section 1003.2 (definition of financial institution); 
HMDA sections 303(3), 309(a).
---------------------------------------------------------------------------

    The Bureau proposes to adjust Regulation C's institutional coverage 
to adopt a uniform loan volume threshold of 25 loans applicable to all 
financial institutions (25-loan volume test). Under the proposal, 
depository and nondepository institutions that meet all of the other 
criteria for a ``financial institution'' would be required to report 
HMDA data if they originated at least 25 covered loans, excluding open-
end lines of credit, in the preceding calendar year.
    The proposed loan volume test would improve the availability of 
data concerning the practices of nondepository institutions, where 
information is needed. The Bureau estimates that the proposed coverage 
criteria may increase the number of nondepository institutions covered 
by HMDA by as much as 40 percent and the number of reported 
originations and applications by nondepository institutions by as much 
as 6 percent. As discussed below, this information is important because 
Congress and other stakeholders have raised concerns about the 
practices of, and loan products offered by, nondepository institutions 
generally and their role in the broader financial crisis. With data 
from additional nondepository institutions, the public and public 
officials would be better able to evaluate whether those institutions 
are serving the housing needs of their communities and whether those 
institutions' practices pose possible fair lending risks. In addition, 
the data would allow the public and public officials to identify 
emerging products and practices in the nondepository mortgage market 
that may pose risks to consumers.
    Furthermore, the Bureau believes that the proposed 25-loan volume 
test may appropriately reduce the burdens on depository institutions 
that make very few loans while maintaining coverage of a relevant, 
diverse set of reporting institutions and reported transactions. The 
Bureau believes that eliminating reporting by lower-volume depository 
institutions may be a way to reduce burden without impacting the 
quality of HMDA data. As discussed below, the Bureau believes that the 
loss of data from depository institutions that originate fewer than 25 
loans in a calendar year would not significantly impact the utility of 
HMDA data for analyzing mortgage lending at the national, local, and 
institutional levels.
    In addition, the proposed 25-loan volume test may simplify the 
reporting regime by providing a consistent loan volume benchmark across 
all financial institutions. Institutions that originate 25 loans likely 
face similar burdens associated with HMDA reporting,

[[Page 51751]]

regardless of whether the institution is a depository or nondepository 
institution. Thus, setting a consistent loan volume threshold across 
all financial institutions may spread the burden of reporting more 
evenly among lower-volume institutions. The specific proposed changes 
to the definition of financial institution applicable to nondepository 
and depository institutions are discussed below separately.
Coverage of Nondepository Financial Institutions
    HMDA extends reporting responsibilities to certain nondepository 
institutions, defined as any person engaged for profit in the business 
of mortgage lending other than a bank, savings association, or credit 
union.\201\ HMDA section 309(a) also authorizes the Bureau to adopt an 
exemption for covered nondepository institutions that are comparable 
within their respective industries to banks, savings associations, and 
credit unions with $10 million or less in assets in the previous fiscal 
year.\202\
---------------------------------------------------------------------------

    \201\ See generally HMDA sections 303(5) (defining other lending 
institutions), 303(3)(B) (including other lending institutions in 
the definition of depository institution), and 304(a) (requiring 
depository institutions to collect, report, and disclose certain 
data if the institution has a home or branch office located in an 
MSA), 12 U.S.C. 2802(5), 2802(3), 2803(a).
    \202\ See HMDA section 309(a), 12 U.S.C. 2808(a).
---------------------------------------------------------------------------

    Under the current definition of financial institution in Sec.  
1003.2, a nondepository institution is a financial institution if it 
meets three criteria. First, the institution satisfies the following 
loan volume or amount test: In the preceding calendar year, the 
institution originated home purchase loans, including refinancings of 
home purchase loans, that equaled either at least 10 percent of its 
loan-origination volume, measured in dollars, or at least $25 
million.\203\ Second, on the preceding December 31, the institution had 
a home or branch office in an MSA.\204\ Third, the institution meets 
one of the following two criteria: (a) On the preceding December 31, 
the institution had total assets of more than $10 million, counting the 
assets of any parent corporation; or (b) in the preceding calendar 
year, the institution originated at least 100 home purchase loans, 
including refinancings of home purchase loans.\205\
---------------------------------------------------------------------------

    \203\ The Board adopted the 10 percent loan volume test in 1989 
to implement the 1989 FIRREA amendments, which extended HMDA's 
reporting requirements to institution's ``engaged for profit in the 
business of mortgage lending.'' See 54 FR 51356, 51358-59 (Dec. 15, 
1989). In 2002, the Board modified the test and added the $25 
million loan volume test to require reporting by additional 
nondepository institutions. See 67 FR 7222, 7224 (Feb. 15, 2002).
    \204\ Under Sec.  1003.2 (definition of branch office), a 
nondepository institution has a branch office in an MSA if it 
originated, received applications for, or purchased five or more 
covered loans in that MSA.
    \205\ In 1989, the $10 million asset test, derived from section 
309, applied to both depository and nondepository institutions. See 
54 FR 51356, 51359 (Dec. 15, 1989). Because the 1989 amendments 
failed to cover as many nondepository lenders as Congress had 
intended, in 1991, Congress amended the asset test in HMDA section 
309 to apply only to depository institutions, and it granted the 
Board discretion to exempt comparable nondepository institutions. 
See Public Law 102-242, section 224 (1991). Pursuant to that 
authority, the Board added the 100 loan volume test for 
nondepository institutions in 1992. See 57 FR 56963, 56964-65 (Dec. 
2, 1992).
---------------------------------------------------------------------------

    As discussed below, the Bureau proposes to modify the coverage 
criteria applicable to nondepository institutions by replacing the 
current loan volume or amount test with the same 25-loan volume test 
that the Bureau proposes for depository institutions. Under this 
approach, a nondepository institution would be required to report HMDA 
data if it had a home or branch office in an MSA on the preceding 
December 31 and it originated at least 25 covered loans, excluding 
open-end lines of credit, in the preceding calendar year. For the 
reasons discussed below, the Bureau believes that it may be appropriate 
to adopt a different formulation for determining whether a 
nondepository institution is ``engaged for profit in the business of 
mortgage lending'' than the formulation adopted by the Board and to 
eliminate the asset-size and loan volume exemption for nondepository 
institutions pursuant to its discretionary authority under HMDA section 
309(a).
    The need for greater visibility into nondepository institution 
practices. During the years leading up to the financial crisis, many 
stakeholders expressed concern over the lack of visibility into 
nondepository institution activity in the mortgage market. Concerns 
about nondepository institution involvement in the subprime market 
motivated the Board to expand nondepository institution coverage in 
2002.\206\ A 2007 report by the U.S. Government Accountability Office 
(GAO) also raised concerns that nondepository institutions, which were 
not subject to regular Federal examination at the time, ``may tend to 
originate lower-quality loans.'' \207\ GAO found that 21 of the 25 
largest originators of subprime and Alt-A loans in 2006 were 
nondepository institutions and that those 21 nondepository institutions 
had originated over 80 percent in dollar volume of the subprime and 
Alt-A loans originated in 2006.\208\
---------------------------------------------------------------------------

    \206\ See 65 FR 78656, 78657 (Dec. 15, 2000) (proposing changes 
to coverage of nondepository institutions); 67 FR 7222, 7224-25 
(Feb. 15, 2002) (finalizing changes to coverage of nondepository 
institutions).
    \207\ See U.S. Gov't Accountability Office, GAO-08-78R, Briefing 
to the Committee on Financial Services House of Representatives, 
``Home Mortgage Defaults and Foreclosures: Recent Trends and 
Associated Economic Developments 54 (2007), https://www.gao.gov/assets/100/95215.pdf.
    \208\ Id.
---------------------------------------------------------------------------

    In the aftermath of the financial crisis, Congress and other 
stakeholders expressed concerns about the lending practices of 
nondepository institutions generally and called for greater oversight 
of those institutions.\209\ In the Dodd-Frank Act, Congress granted 
Federal supervisory authority to the Bureau over certain nondepository 
institutions because it was concerned about nondepository institutions' 
practices generally and believed that the lack of Federal supervision 
of those institutions had contributed to the financial crisis.\210\ In 
addition, a 2009 GAO study found that nondepository institutions that 
reported HMDA data had a higher incidence of potential fair lending 
problems than depository institutions that reported HMDA data.\211\ GAO 
also suggested that the loan products and marketing practices of those 
nondepository institutions may have presented greater risks for 
applicants and borrowers.\212\ Moreover, community advocates and 
Federal agencies urged the Board during the Board's 2010 Hearings to 
expand HMDA's institutional coverage to include lower-volume 
nondepository institutions because they were active in the mortgage 
market and the lack of visibility into their practices created risks 
for communities.\213\ In addition,

[[Page 51752]]

officials that participated in the Financial Crisis Inquiry Commission 
hearings in 2010 noted that practices that originated in the 
nondepository mortgage sector, such as lax underwriting standards and 
loan products with potential payment shock, created competitive 
pressures on depository institutions to follow the same practices, 
which may have contributed to the broader financial crisis.\214\
---------------------------------------------------------------------------

    \209\ See, e.g., House Consideration of HR 4173, 155 Cong. 
Record H14430 (daily ed. Dec. 9, 2009) (statement of Cong. Ellison 
(MN), ``One of the most important causes of the financial crisis, as 
I mentioned, is the utter failure of consumer protection. The most 
abusive and predatory lenders were not federally regulated, were not 
regulated at all in some cases, while regulation was overly lax for 
banks and other institutions that were covered.''); U.S. Gov't 
Accountability Office, GAO-09-704, Fair Lending: Data Limitations 
and the Fragmented U.S. Financial Regulatory Structure Challenge 
Federal Oversight and Enforcement Efforts 28-29 (2009), available at 
https://www.gao.gov/new.items/d09704.pdf.
    \210\ See Dodd-Frank Act section 1024.
    \211\ See GAO-09-704, at 28-29 (``[I]ndependent lenders and 
nonbank subsidiaries of holding companies are more likely than 
depository institutions to engage in mortgage pricing 
discrimination.'').
    \212\ Id. at 29-30. See also GAO-08-78R, at 54.
    \213\ See, e.g., San Francisco Hearing, supra note 133; 
Washington Hearing, supra note 130 (remarks of Faith Schwartz, 
Senior Advisor, HOPE NOW Alliance) (urging reporting by all 
institutions that have ``any meaningful originations''); id. 
(remarks of Allison Brown, Acting Assistant Director, Division of 
Financial Practices, Federal Trade Commission) (urging expanded 
reporting by nondepository institutions ``to ensure that all 
nondepositories that made significant numbers of mortgage decisions 
report these essential data, providing the government and the public 
an accurate, timely picture of mortgage lending activity''); id. 
(remarks of Michael Bylsma, Director for Community and Consumer Law, 
Office of the Comptroller of the Currency) (urging the Board to 
``review whether its rule-making authority'' would permit it to 
expand HMDA coverage to additional institutions); Atlanta Hearing, 
supra note 131.
    \214\ See Official Transcript, First Public Hearing of the 
Financial Crisis Inquiry Commission, 97-98 (Jan. 10, 2010), (remarks 
of Sheila C. Bair, Chairman, Federal Deposit Insurance Corporation, 
and Mary L. Schapiro, Chairman, U.S. Securities and Exchange 
Commission), available at https://fcic-static.law.stanford.edu/
cdnmedia/fcic-testimony/2010-0114-Transcript.pdf.
---------------------------------------------------------------------------

    Because of this history, the Bureau believes that it may be 
appropriate to increase transparency into mortgage lending by 
nondepository institutions. Currently, there are fewer publicly 
available data about nondepository institutions than about depository 
institutions. The differing institutional coverage criteria currently 
in Regulation C result in HMDA data including more information about 
lower-volume depository institutions, which may be required to report 
even if they originated only one mortgage loan in the preceding 
calendar year, than about lower-volume nondepository institutions, 
which may not be required to report unless they originated 100 
applicable loans in the preceding calendar year and met other loan 
amount thresholds.\215\ In addition, outside of HMDA, there are less 
publicly available data about nondepository institutions than about 
depository institutions. Depository institutions, even those that do 
not report HMDA data, report detailed financial information at the bank 
level to the Federal Deposit Insurance Corporation (FDIC) or to the 
National Credit Union Association (NCUA), much of which is publicly 
available.\216\ Nondepository institutions, on the other hand, report 
some data to the Nationwide Mortgage Licensing System and Registry 
(NMLSR), but detailed financial information and data on mortgage 
applications and originations are not publicly available.\217\
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    \215\ Banks, savings associations, and credit unions are 
required to report if they originate at least one home purchase or 
refinancing of a home purchase loan secured by a first lien on a 
one-to-four family dwelling and if they meet the other criteria in 
the definition of financial institution. See Section 1003.2 
(definition of financial institution).
    \216\ Every national bank, State member bank, and insured 
nonmember bank is required by its primary Federal regulator to file 
consolidated Reports of Condition and Income, also known as Call 
Report data, for each quarter as of the close of business on the 
last day of each calendar quarter (the report date). The specific 
reporting requirements depend upon the size of the bank and whether 
it has any foreign offices. See, e.g., FDIC, Call and Thrift 
Financial Reports, https://www2.fdic.gov/
calltfrrpts/. Credit unions are also required to 
report Call Report data to NCUA. See, e.g., NCUA, 53000 Call Report 
Quarterly Data, https://www.ncua.gov/DataApps/QCallRptData/Pages/default.aspx.
    \217\ NMLSR is a national registry of nondepository 
institutions. Nondepository institutions report information about 
mortgage loan originators, mortgage loan originations, the number 
and dollar amount of loans brokered, and HOEPA originations.
---------------------------------------------------------------------------

    As a result, the public and public officials face challenges 
analyzing whether lower-volume nondepository institutions are serving 
the housing needs of their communities. The lack of data from lower-
volume nondepository institutions may also hinder the ability of the 
public and public officials to understand access to and sources of 
credit in particular communities. For example, HMDA data users cannot 
as easily identify a higher concentration of risky loan products in a 
given community. In addition, with the current HMDA data, the public 
and public officials cannot readily understand whether a lower-volume 
nondepository institution's practices pose potential fair lending 
risks. The lack of data from lower volume nondepository institutions 
may also make it more difficult for the public and public officials to 
identify trends in the nondepository mortgage market that pose 
potential risks, such as the emergence of new loan products or 
underwriting practices. Requiring additional nondepository institutions 
to report HMDA data may help resolve many of these problems and may 
provide greater visibility into the nondepository mortgage market 
sector.
    The 25-loan volume test. Due to the questions raised about 
potential risks posed to applicants and borrowers by nondepository 
institutions and the lack of other publicly available data sources 
about nondepository institutions, the Bureau believes that requiring 
additional nondepository institutions to report HMDA data may better 
effectuate HMDA's purposes. The Bureau estimates that the proposed 25-
loan volume test, in place of Regulation C's current loan volume and 
amount and asset thresholds for nondepository coverage, would increase 
the number of nondepository institutions required to report HMDA data 
by as much as 40 percent and the number of originations and 
applications reported by those institutions by as much as 6 percent. 
This additional data may provide valuable information about the 
nondepository sector of the mortgage market, such as emerging products 
or underwriting practices or a higher concentration of particularly 
risky loan products in a given community.
    In addition, the proposed change in coverage may support the 
Bureau's supervision of nondepository institutions. The Dodd-Frank Act 
granted Federal supervisory authority to the Bureau over certain 
nondepository institutions.\218\ The proposed change in coverage will 
increase the number of nondepository institutions that report HMDA data 
and may provide HMDA data for nondepository institutions that the 
Bureau now supervises. This data may assist the Bureau in identifying 
lower-volume nondepository institutions that pose possible fair lending 
risks.
---------------------------------------------------------------------------

    \218\ See Dodd-Frank Act section 1024.
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    Loan volume or amount test. The Bureau's proposal would eliminate 
the existing loan volume or amount test for nondepository institutions 
(i.e., the test that provides that, in the preceding calendar year, the 
institution must have originated home purchase loans, including 
refinancings of home purchase loans, that equaled either at least 10 
percent of its loan-origination volume, measured in dollars, or at 
least $25 million.) The Bureau believes that replacing the existing 
loan volume or amount test with the proposed 25-loan volume test may be 
appropriate. The current loan volume or amount test implements HMDA 
sections 303(3)(B) and 303(5), which require persons other than banks, 
savings associations, and credit unions that are ``engaged for profit 
in the business of mortgage lending'' to report HMDA data. When the 
Board initially implemented this provision, it explained that it 
interpreted the provision to evince the intent to exclude from coverage 
institutions that make a relatively small volume of mortgage 
loans.\219\ The Bureau agrees with the Board's interpretation but 
believes that Regulation C's current coverage test for nondepository 
institutions may inappropriately exclude nondepository institutions 
that are engaged for profit in the business of mortgage lending. The 
Bureau estimates that financial institutions that reported 25 loans in 
HMDA for the 2012 calendar year

[[Page 51753]]

originated an average of approximately $5,359,000 in covered loans. 
Given this level of mortgage activity, and consistent with the policy 
reasons discussed above, the Bureau believes that it may be appropriate 
to interpret ``engaged for profit in the business of mortgage lending'' 
to include nondepository institutions that originated 25 or more 
covered loans, excluding open-end lines of credit, in the preceding 
calendar year.
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    \219\ See 54 FR 51356, 51358-59 (Dec. 15, 1989).
---------------------------------------------------------------------------

    As discussed below under the coverage criteria for depository 
institutions, the Bureau believes that it may not be appropriate to 
require institutions that originate fewer than 25 covered loans 
annually, excluding open-end lines of credit, to report HMDA data. The 
Bureau believes that the costs to institutions that originate fewer 
than 25 covered loans may not be justified by the benefit from the data 
collected from those institutions.
    Replacing the current loan volume or amount test for nondepository 
institutions with the proposed 25-loan volume test may also simplify 
the nondepository coverage criteria. The Bureau has received feedback 
that the current loan volume or amount test, which is in part based on 
the percentage of an institution's total loan origination volume in 
dollars, is difficult both for institutions and public officials to 
calculate because many institutions do not otherwise measure or report 
their overall loan origination volume.\220\
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    \220\ See Washington Hearing, supra note 130.
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    Nondepository asset-size or loan volume exemption. As discussed 
above, Regulation C's current coverage criteria for nondepository 
institutions includes the following asset-size or loan volume 
thresholds: The institution must either have had total assets of more 
than $10 million (including assets of any parent corporation) on the 
preceding December 31, or it must have originated at least 100 home 
purchase loans, including refinancings of home purchase loans, in the 
preceding calendar year.\221\ The Board implemented this coverage 
requirement as an exercise of its discretion to exempt certain 
nondepository institutions.\222\ HMDA section 309(a) states that, after 
consultation with the HUD Secretary, the Bureau may, but is not 
required to, exempt other lending institutions that are comparable 
within their respective industries to a bank, savings association, or 
credit union that had total assets of $10,000,000 or less as of its 
last fiscal year, not adjusted for inflation. Due to changes in the 
mortgage market and for the reasons given above, the Bureau believes 
that it may be appropriate to exercise its discretion under HMDA 
section 309(a) to no longer exempt certain nondepository institutions. 
The Bureau solicits feedback on whether, and if so to what extent, an 
asset-size exemption for nondepository institutions should be retained.
---------------------------------------------------------------------------

    \221\ See Sec.  1003.2(2)(iii) (definition of financial 
institution).
    \222\ See 54 FR 51356, 51358-59 (Dec. 15, 1989); 57 FR 56963, 
56964-65 (Dec. 2, 1992).
---------------------------------------------------------------------------

    The Bureau's proposal. For the reasons discussed above, the Bureau 
proposes to modify the current definition of financial institution in 
Sec.  1003.2 as it relates to for-profit mortgage-lending institutions. 
Proposed Sec.  1003.2(g)(2) provides that the term financial 
institution includes a nondepository financial institution, which means 
a for-profit mortgage-lending institution (other than a bank, savings 
association, or credit union) that meets the following two 
requirements: First, on the preceding December 31, the institution must 
have had a home or branch office in an MSA. Second, in the preceding 
calendar year, the institution must have originated at least 25 covered 
loans, excluding open-end lines of credit. The Bureau seeks comment on 
the benefits and burdens associated with the proposed modification to 
nondepository institution coverage. The Bureau seeks comment on whether 
it has appropriately calibrated the loan volume test in terms of the 
number of loans included. There may be advantages to setting the loan 
volume test at higher or lower levels in terms of the quality and 
quantity of the data collected. In addition, the Bureau solicits 
comment on whether the loan volume test excludes important data about 
particular types of transactions, such as multifamily loans. The Bureau 
also solicits feedback on whether nondepository institutions that do 
not satisfy the proposed 25-loan volume test are comparable within 
their respective industries to depository institutions with $10 million 
or less in assets.
    By requiring data from a broader range of nondepository 
institutions, the Bureau believes that this proposed provision would 
ensure that the public and public officials are provided with 
sufficient information to enable them to determine whether financial 
institutions are fulfilling their obligations to serve the housing 
needs of communities and neighborhoods in which they are located. 
Furthermore, these data would assist public officials in their 
determination of the distribution of public sector investments in a 
manner designed to improve the private investment environment. In 
addition, because nondepository institutions pose different fair 
lending risks than depository institutions, the proposed changes would 
ensure that the public and public officials are provided with 
sufficient information to identify potential fair lending concerns.
Coverage of Depository Financial Institutions
    HMDA extends reporting responsibilities to depository institutions 
that satisfy certain location, asset-threshold, and federally related 
requirements.\223\ Regulation C implements HMDA's coverage criteria in 
the definition of financial institution in Sec.  1003.2. Under the 
definition of financial institution in Sec.  1003.2, a bank, savings 
association, or credit union meets the definition of financial 
institution if it satisfies all of the following criteria: (1) On the 
preceding December 31, it had assets of at least $43 million; \224\ (2) 
on the preceding December 31, it had a home or branch office in an MSA; 
(3) during the previous calendar year, it originated at least one home 
purchase loan or refinancing of a home purchase loan secured by a 
first-lien on a one-to-four unit dwelling; and (4) the institution is 
Federally insured or regulated, or the mortgage loan referred to in 
item (3) was insured, guaranteed, or supplemented by a Federal agency 
or intended for sale to Federal National Mortgage Association or the 
Federal Home Loan Mortgage Corporation.\225\ For the reasons discussed 
below, the Bureau proposes an additional loan-volume threshold to the 
coverage criteria for depository institutions. The new criterion would 
require reporting only by depository institutions that meet the current 
criteria in Sec.  1003.2 and that originated at least 25 covered loans, 
excluding open-end lines of credit, in the preceding calendar year.
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    \223\ See 12 U.S.C. 2802(3).
    \224\ See Comment Financial institution-2 to Sec.  1003.2.
    \225\ See Section 1003.2(financial institution)(1).
---------------------------------------------------------------------------

    As part of this rulemaking, the Bureau is seeking ways to reduce 
burden without impairing the quality of HMDA data. Participants in the 
Board's 2010 Hearings urged the Board to eliminate reporting by lower-
volume depository institutions.\226\ The Bureau believes that 
eliminating reporting by lower-volume depository institutions may be a 
way to reduce burden without impacting the ability of HMDA to achieve 
its purposes.

[[Page 51754]]

Cumulatively, the loans made by depository institutions that originated 
fewer than 25 covered loans account for a very small percentage of all 
loans reported under HMDA. For example, the loans reported by 
depository institutions that originated fewer than 25 covered loans, 
excluding open-end lines of credit, accounted for less than one percent 
of originations reported by depository institutions for the 2012 
calendar year. Depository institutions that originated fewer than 25 
covered loans, excluding open-end lines of credit, accounted for 
approximately 25 percent of depository institutions that reported HMDA 
data for the 2012 calendar year. Moreover, as discussed below in part 
VI, loans made by these depository institutions do not represent a 
significant portion of lending in most local markets. Therefore, 
eliminating reporting by these depository institutions may not affect 
HMDA's ability to provide data to analyze whether communities or 
markets could benefit from private or public sector investment. In 
addition, HMDA data collected from depository institutions with fewer 
than 25 loans may not be useful for statistically analyzing an 
individual institution's lending to identify possible discriminatory 
lending patterns and enforce antidiscrimination statutes. Finally, the 
proposed 25-loan volume test may not impact HMDA's utility as a tool to 
evaluate whether depository institutions are serving the needs of the 
communities that they serve. Therefore, the Bureau believes that adding 
a 25-loan volume test to the current coverage criteria for depository 
institutions may appropriately balance the burden of HMDA reporting 
with the benefits to the public and public officials provided by the 
reported data.
---------------------------------------------------------------------------

    \226\ See, e.g., Atlanta Hearing, supra note 131, (remarks of 
Phil Greer, Senior Vice President of Loan Administration, State 
Employees Credit Union) (noting that the burden of reporting only 
one loan would be low, but that the data reported would not provide 
``meaningful information'').
---------------------------------------------------------------------------

    Eliminating reporting by depository institutions that originate 
fewer than 25 loans annually also is consistent with the Bureau's 
proposal discussed below to require electronic reporting by all 
institutions. Currently, only institutions that report 25 or fewer 
entries annually are permitted to submit the loan application register 
in paper form.\227\ As discussed in the section-by-section analysis of 
proposed Sec.  1003.5(a), the Bureau proposes to eliminate that option.
---------------------------------------------------------------------------

    \227\ See Comment 5(a)-2.
---------------------------------------------------------------------------

    For the reasons discussed above, the Bureau proposes that Sec.  
1003.2(g)(1), the proposed definition of depository financial 
institution, include a new criterion: in the preceding calendar year, 
the institution originated at least 25 covered loans, excluding open-
end lines of credit. The Bureau is also proposing technical changes to 
paragraph one of the definition of financial institution included in 
Sec.  1003.2. The Bureau solicits comment on the proposed 25-loan 
volume test, including (1) the extent to which it may exclude valuable 
data, (2) whether it would prevent public officials and the public from 
understanding if the institutions excluded by the proposed 25-loan 
volume test are serving the needs of their communities, and (3) whether 
it would prevent public officials and the public from identifying 
geographic areas that may benefit from private and public sector 
investment. The Bureau also solicits comment on whether the proposed 
25-loan volume test may exclude data that are valuable for identifying 
possible fair lending issues.
    The Bureau also solicits comment on whether the loan-volume test 
for depository financial institutions excludes important data about 
particular types of transactions, such as multifamily loans. As 
discussed more fully below in part VI, the applications and 
originations reported in 2012 by depository institutions that 
originated 25 or fewer covered loans have different characteristics 
than overall HMDA data. For example, applications and originations 
reported by lower-volume depository institutions were more likely to 
have higher interest rates, lower loan amounts, relate to manufactured 
housing or to multifamily properties, and to be portfolio loans than 
those reported by depository institutions that originated more than 25 
covered loans. The Bureau also seeks comment on whether it has 
appropriately calibrated the proposed loan-volume test for depository 
financial institutions in terms of the number of loans included. There 
may be advantages to setting the volume test at higher or lower levels 
in terms of the quality and quantity of the data collected.
    The Bureau proposes Sec.  1003.2(g)(1), the proposed definition of 
depository financial institution, pursuant to its authority under 
section 305(a) of HMDA to provide for such adjustments and exceptions 
for any class of transactions that the Bureau judges are necessary and 
proper to effectuate the purposes of HMDA. Pursuant to section 305(a) 
of HMDA, for the reasons given above, the Bureau believes that this 
proposed exception is necessary and proper to effectuate the purposes 
of HMDA. By reducing burden on financial institutions and establishing 
a consistent loan-volume test applicable to all financial institutions, 
the Bureau believes that the proposed provision would facilitate 
compliance with HMDA's requirements.
Composition of Loan-Volume Test
    The Bureau analyzed HMDA data to determine the optimal loan volume 
threshold to propose. As discussed above, the Bureau aims to propose a 
loan volume test that would reduce burden while maintaining sufficient 
data for meaningful analysis at the institution, local, and national 
levels. The Bureau excluded open-end lines of credit from the data it 
used for this analysis because HMDA data currently does not include 
comprehensive data on open-end lines of credit. Specifically, under the 
current rule financial institutions may but are not required to report 
data on home-equity lines of credit. In addition, other open-end lines 
of credit, such as commercial lines, are not currently reported. As a 
result, the Bureau's proposed loan volume threshold also excludes open-
end lines of credit from the loans that count toward the proposed 25-
loan volume test.
    The Bureau solicits feedback on whether it should include open-end 
lines of credit in the types of loans that count toward the proposed 
loan volume threshold in light of the potential value of information 
about open-end lines of credit discussed further in the section-by-
section analysis of proposed Sec.  1003.2(o) below. The Bureau solicits 
information that would allow it to estimate the impact on HMDA data if 
open-end lines of credit were excluded from or included in the loan 
volume threshold. The Bureau is particularly interested in determining 
the types of institutions that would be covered or not covered, the 
types of mortgage businesses in which they engage, and the communities 
they serve.
    During the Small Business Review Panel process, small entity 
representatives generally supported the proposal to establish a uniform 
loan-volume threshold. The Panel recommended that the Bureau consider 
revisions to Regulation C that would simplify and clarify whether a 
financial institution is required to report HMDA data.\228\ In 
addition, the Panel recommended that the Bureau solicit feedback to 
help the Bureau establish an appropriate loan-volume threshold that 
would minimize the burden on small entities while ensuring adequate 
data collection to fulfill HMDA's objectives.\229\ The Panel also 
recommended that the Bureau solicit

[[Page 51755]]

feedback on the types of mortgage loans that should count toward the 
loan-volume test.\230\ In addition, the Panel recommended that the 
Bureau consider whether a multiyear look-back period would establish 
more predictable coverage obligations for small financial 
institutions.\231\ Consistent with the Panel's recommendation, as 
discussed above, the Bureau solicits feedback on all aspects of the 
proposed 25-loan volume test, including the number and types of loans 
that should be included. The Bureau solicits feedback on whether a 
multiyear look-back period would ease the burdens associated with 
unpredictable compliance obligations that may result from the proposed 
25-loan volume test.
---------------------------------------------------------------------------

    \228\ See, e.g., Small Business Review Panel Report at 37.
    \229\ See id.
    \230\ See id.
    \231\ See id.
---------------------------------------------------------------------------

    To clarify the definition of financial institution and facilitate 
compliance, the Bureau also proposes to modify and to renumber the 
commentary to the definition of financial institution. Proposed comment 
2(g)-1 discusses the meaning of the preceding calendar year and the 
preceding December 31 and provides an illustrative example. Proposed 
comment 2(g)-3 discusses coverage after a merger or acquisition and 
provides several illustrative examples. Proposed comment 2(g)-4 
provides cross references to commentary that are helpful in determining 
whether activities with respect to a particular loan constitute an 
origination. Proposed comments 2(g)-5 and -6 provide guidance on 
whether branches and offices of foreign banks meet the definition of 
financial institution.
2(i) Home Improvement Loan
    HMDA section 303(2) defines a ``mortgage loan'' as a loan that is 
secured by residential real property or a home improvement loan. 
However, HMDA does not expressly define ``home improvement loan.'' 
Regulation C currently defines ``home improvement loan'' to mean a loan 
secured by a lien on a dwelling that is for the purpose, in whole or in 
part, of repairing, rehabilitating, remodeling, or improving a dwelling 
or the real property on which it is located. The current definition 
also includes a non-dwelling secured loan that is for the purpose, in 
whole or in part, of repairing, rehabilitating, remodeling, or 
improving a dwelling or the real property on which it is located, and 
that is classified by the financial institution as a home improvement 
loan. For the reasons discussed below, the Bureau is proposing to 
exclude loans that are not secured by a lien on a dwelling from the 
definition of home improvement loan.
    During the 2010 Board Hearings, several participants provided 
feedback that financial institutions encounter substantial compliance 
challenges when reporting home improvement loans that are not secured 
by a dwelling.\232\ These unsecured loans are often processed, 
underwritten, and originated through different loan origination systems 
than are used for secured lending. For financial institutions that 
focus on portfolio lending, unsecured home improvement loans may be 
handled by different staff than handle secured lending, which increases 
the training cost and compliance burden. Thus, the compliance burden 
associated with unsecured home improvement lending appears to be 
significant.
---------------------------------------------------------------------------

    \232\ See Chicago Hearing, supra note 137, and Atlanta Hearing, 
supra note 131.
---------------------------------------------------------------------------

    The Bureau acknowledges that unsecured home improvement loan data 
was useful when Regulation C was originally implemented. However, it 
appears that the current value of unsecured home improvement loan data 
is limited. For example, in 2012 unsecured home improvement loans 
comprised only approximately 1.8 percent of all HMDA records.\233\ The 
Bureau is not aware of any instances where a community group relied on 
unsecured home improvement loan data to determine if a financial 
institution was serving the housing needs of a neighborhood, such as 
through discussions related to bank merger or branch expansion 
requests. In addition, few fair lending cases appear to use unsecured 
home improvement loan data, and the Bureau is not aware of any research 
studies or public or private investment programs that relied on 
unsecured home improvement loan data. Therefore, unsecured home 
improvement loan data may not provide useful information to the public.
---------------------------------------------------------------------------

    \233\ In 2012, out of 18,691,551 total HMDA records, only 
340,097 were identified as unsecured home improvement loans.
---------------------------------------------------------------------------

    Based on these considerations, the burden associated with reporting 
unsecured home improvement loan data appears to outweigh the value of 
the information, and it may be appropriate to exclude unsecured loans 
from the reporting requirements of Regulation C. Accordingly, the 
Bureau is proposing to modify Sec.  1003.2(i) to define home 
improvement loan as a covered loan that is for the purpose, in whole or 
in part, of repairing, rehabilitating, remodeling, or improving a 
dwelling or the real property on which it is located. The Bureau 
solicits feedback regarding whether this proposed exclusion is 
appropriate. In addition to general feedback, the Bureau specifically 
requests comment regarding the extent to which members of the public 
use unsecured home improvement loan data to determine whether financial 
institutions are fulfilling their obligations to serve community 
housing needs, whether financial institutions rely on unsecured home 
improvement loan data for purposes of fair lending examinations, and 
whether there are any other considerations that the Bureau should 
analyze in determining whether this proposed exception is appropriate.
    Current comment Home improvement loan-1 discusses the 
classification requirement for loans not secured by a lien on a 
dwelling. To conform to the proposed exclusion of unsecured home 
improvement loans, the Bureau is also proposing to remove this comment. 
The Bureau is proposing to replace the current comment with new comment 
2(i)-1, which clarifies that a home improvement loan is defined by 
reference to the purpose of the obligation, and also explains that an 
obligation is a home improvement loan even if only a part of the 
purpose is for repairing, rehabilitating, remodeling, or improving a 
dwelling. Proposed comment 2(i)-1 also provides several illustrative 
examples. Proposed comment 2(i)-4 is similar to current comment Home 
improvement loan-4, but with modifications to conform to the proposed 
exclusion of unsecured home improvement loans.
    Current comment Home improvement loan-5 discusses reporting 
requirements for home improvement loans. The Bureau believes that the 
most appropriate location for information related to reporting 
requirements is in the commentary to the reporting requirements under 
Sec.  1003.4. Thus, the Bureau is proposing to delete comment Home 
improvement loan-5.
    Section 1003.2(i) is proposed pursuant to the Bureau's authority 
under section 305(a) of HMDA. Pursuant to section 305(a) of HMDA, the 
Bureau believes that these proposed modifications and exceptions are 
necessary and proper to effectuate the purposes of HMDA and to 
facilitate compliance therewith. The Bureau believes that unsecured 
home improvement loan data may distort the overall quality of the HMDA 
dataset. Excluding unsecured home improvement loans from the set of 
reportable data would improve the quality of the data, which would 
provide the citizens and public officials of the United States with 
sufficient information to enable them to determine

[[Page 51756]]

whether depository institutions are filling their obligations to serve 
the housing needs of the communities and neighborhoods in which they 
are located and to assist public officials in their determination of 
the distribution of public sector investments in a manner designed to 
improve the private investment environment. The Bureau also believes 
that this proposed exception would facilitate compliance by removing a 
significant compliance burden. The Bureau also believes that it is 
reasonable to interpret HMDA section 303(2) to include only loans that 
are secured by liens on dwellings, as that interpretation aligns with 
common definitions of the term mortgage loan and such loans will 
include home improvement loans.
2(j) Home Purchase Loan
    HMDA section 303(2) defines a ``mortgage loan'' as a loan which is 
secured by residential real property or a home improvement loan. 
However, HMDA does not expressly define ``home purchase loan.'' 
Regulation C currently defines ``home purchase loan'' to mean a loan 
secured by and made for the purpose of purchasing a dwelling. As 
discussed above, the Bureau is proposing several technical 
modifications to clarify the regulation and facilitate compliance. To 
further these goals, the Bureau proposes Sec.  1003.2(j), which 
modifies the current definition of ``home purchase loan'' to replace 
``loan'' with ``covered loan,'' to make conforming edits in several of 
the comments applicable to proposed Sec.  1003.2(j), and to add 
illustrative examples to these comments. The Bureau is also proposing 
to add a new comment 2(j)-1, which discusses the definition of home 
purchase loan and provides illustrative examples.
    As part of the effort to clarify Regulation C, the Bureau is 
proposing to move, modify, or delete several existing comments. Current 
comment Home purchase loan-3 discusses loans to purchase property used 
primarily for agricultural purposes. As discussed in the section-by-
section analysis to Sec.  1003.2(b), the Bureau is proposing to move 
comment Home purchase loan-3 to the commentary under that section. 
Current comment Home purchase loan-7 discusses reporting requirements 
for home purchase loans. The Bureau believes that the most appropriate 
location for information related to reporting requirements is in the 
commentary to the reporting requirements under Sec.  1003.4. Thus, the 
Bureau is proposing to delete comment Home purchase loan-7. As 
discussed in the section-by-section analysis to Sec.  1003.4(a)(3), the 
Bureau is proposing new comments that are substantively similar to 
existing comment Home purchase loan-7, but with modifications for 
clarity and additional illustrative examples. Finally, the Bureau is 
proposing to add new comment 2(j)-7, which clarifies that, for purposes 
of Sec.  1003.2(j), an assumption is a home purchase loan when a 
financial institution enters into a written agreement accepting a new 
borrower as the obligor on an existing obligation for a covered loan. 
This proposed comment would further clarify that if an assumption does 
not involve a written agreement between a new borrower and the 
financial institution, it is not a home purchase loan for purposes of 
Sec.  1003.2(j). This proposed comment is substantively similar to 
current comment 1(c)-9, which the Bureau is proposing to delete, as 
discussed in the section-by-section analysis to Sec.  1003.1(c). The 
Bureau solicits feedback regarding these proposed relocations, 
modifications, and deletions, and solicits feedback regarding whether 
additional comments or examples would help clarify proposed Sec.  
1003.2(j) or facilitate compliance.
2(k) Loan Application Register
    Regulation C requires financial institutions to collect and record 
reportable data in the format prescribed in appendix A of the 
regulation. This format is referred to as the ``loan application 
register,'' but that name is not currently defined in the regulation. 
To improve the readability of the regulation, the Bureau is proposing 
Sec.  1003.2(k), which defines the term ``loan application register'' 
to mean a register in the format prescribed in appendix A to this part. 
The Bureau solicits feedback on this technical modification, and 
whether additional changes could be made to improve the clarity of the 
regulation.
2(l) Manufactured Home
    Regulation C requires financial institutions to report the property 
type to which a loan or application relates, including whether the 
property is a manufactured home as defined in Sec.  1003.2. The Bureau 
is proposing to make technical corrections and minor wording changes to 
the definition of manufactured home. Manufactured homes would continue 
to be defined by referring to the manufactured home construction and 
safety standards promulgated by HUD. The Bureau is proposing to require 
financial institutions to report additional information about 
manufactured home loans and applications, as discussed in the section-
by-section analysis of proposed Sec.  1003.4(a)(29) and (30).
    The proposal revises comment Manufactured home-1 for clarity and 
consistency with the HUD standards. It provides that the definition in 
Sec.  1003.2(l) refers to the Federal building code for manufactured 
housing established by HUD, and that modular or other factory-built 
homes that do not meet the HUD code standards are not manufactured 
homes for purposes of Sec.  1003.2(l). It would provide that 
recreational vehicles, which are excluded from the HUD code standards 
pursuant to 24 CFR 3282.8(g), are also excluded from the definition of 
dwelling for purposes of Sec.  1003.2(f). Proposed new comment 2(l)-2 
provides information on identifying manufactured homes with reference 
to the data plate and certification label required by HUD standards. 
The Bureau believes this comment will facilitate compliance by 
providing general guidance on distinguishing manufactured homes from 
other types of factory-built residential structures. The Bureau 
solicits feedback on whether additional guidance would provide greater 
clarity in this area.
2(n) Multifamily Dwelling
    Section 1003.4(a)(5) of Regulation C requires financial 
institutions to report the property type of the dwelling to which a 
loan or application relates. Property type includes multifamily 
dwellings pursuant to appendix A. However, the term ``multifamily 
dwelling'' is not specifically defined in Regulation C. Multifamily 
residential structures are included within the definition of dwelling 
as provided by comment 1 to the definition of dwelling. Because 
multifamily lending is different from single-family lending, appendix A 
provides that certain data points are reported as not applicable for 
loans or applications related to multifamily dwellings, including 
owner-occupancy status and the applicant or borrower's gross annual 
income. Additionally, the applicant or borrower's ethnicity, race, and 
sex are reported as not applicable for applications and loans involving 
applicants that are not natural persons, which include many applicants 
for loans related to multifamily dwellings. The Bureau is proposing to 
add a new definition of multifamily dwelling as Sec.  1003.2(n). The 
proposal would define a multifamily dwelling as a dwelling, regardless 
of construction method, that contains five or more individual dwelling 
units. The Bureau believes this definition will facilitate compliance 
by providing a clear definition for

[[Page 51757]]

multifamily dwelling for reporting and exception purposes. The Bureau 
is proposing to require additional information about multifamily 
dwellings as discussed in the section-by-section analysis of proposed 
Sec.  1003.4(a)(31) and (32). The Bureau solicits feedback on whether 
the proposed definition of a multifamily dwelling is appropriate, and 
whether any existing or proposed data points should be modified or 
eliminated for multifamily dwellings.
2(o) Open-End Line of Credit
    Currently, neither HMDA nor Regulation C provides a definition for 
the term ``open-end line of credit.'' Section 1003.4(c)(3) of 
Regulation C currently provides that a financial institution may 
report, but is not required to report, home-equity lines of credit made 
in whole or in part for the purpose of home improvement or home 
purchase. Regulation C does not currently require reporting for 
commercial lines of credit secured by a dwelling. For the reasons 
discussed below, the Bureau is proposing to require mandatory reporting 
of home-equity line of credit data, and to require reporting of 
dwelling-secured commercial line of credit data.
    The Board's original implementation of Regulation C did not address 
home-equity lines of credit because depository institutions rarely 
offered them to consumers.\234\ However, home-equity lines of credit 
gained popularity after several legislative changes in the 1980s.\235\ 
As home-equity lines of credit became increasingly common, the Board 
adopted several modifications to permit home-equity line of credit 
reporting in the late 1980s and 1990s.\236\ In response to the 
increasing importance of home-equity lines of credit, in 2000 the Board 
proposed to require mandatory reporting of all such transactions.\237\ 
However, in 2002 the Board decided to retain optional reporting.\238\ 
While mandatory reporting would have improved the usefulness of the 
data, the burden seemed to outweigh the benefit.\239\
---------------------------------------------------------------------------

    \234\ Prior to the enactment of the Depository Institutions 
Deregulation and Monetary Control Act of 1980, depository 
institutions' ability to engage in residential real estate lending 
was significantly limited. See Public Law 96-221, 94 Stat. 132 (Mar. 
31, 1980).
    \235\ The Alternative Mortgage Transaction Parity Act of 1982 
preempted State law restrictions on variable-rate mortgage loans, 
among other things, making it easier for depository institutions to 
offer HELOCs to consumers. See 12 U.S.C. 3801 et. seq. The Tax 
Reform Act of 1986 eliminated interest deductions for most types of 
credit, but not for credit secured by real estate, thereby making 
HELOCs more attractive for consumers. See Public Law 99-514, 100 
Stat. 2085 (Oct. 22, 1986).
    \236\ In 1988, the Board added an instruction permitting 
financial institutions to report HELOCs that were home improvement 
loans. 53 FR 31683, 31685 (Aug. 19, 1988). The Board subsequently 
clarified that HELOC reporting was optional. 53 FR 52657, 52660 
(Dec. 29, 1988). In 1995, the Board extended optional HELOC 
reporting to home purchase loans. 60 FR 63393, 63398 (Dec. 11, 
1995).
    \237\ 65 FR 78656, 78660 (Dec. 15, 2000).
    \238\ 67 FR 7222, 7225 (Feb. 15, 2002).
    \239\ Id.
---------------------------------------------------------------------------

    As the mortgage market continued to evolve, the need for data about 
the home-equity line of credit market increased. During the mid-2000s 
home-equity line of credit originations expanded significantly.\240\ 
Research indicates that home-equity lines of credit were often used by 
speculative real estate investors both before and after the financial 
crisis.\241\ Studies also suggest that home-equity lines of credit were 
particularly popular in areas where house prices significantly 
increased prior to the market collapse.\242\ Thus, home-equity line of 
credit data may have helped the public better understand the risks 
posed to local housing markets. Furthermore, during the housing crisis 
many public and private mortgage relief programs encountered unique 
difficulties assisting distressed consumers who had obtained 
subordinate-lien loans, including home-equity lines of credit.\243\ 
Public officials remain concerned about the potential effect of home-
equity lines of credit on the economic recovery because home-equity 
lines of credit generally permit interest-only payments for ten years 
after account opening.\244\ Thus, although permitting optional 
reporting of this data was appropriate in the past, it now may be 
appropriate to require mandatory reporting of data for home-equity 
lines of credit.
---------------------------------------------------------------------------

    \240\ In the fourth quarter of 1999, approximately $20 billion 
in HELOCs were originated. By the fourth quarter of 2005, 
approximately $125 billion in HELOCs were originated. See Donghoon 
Lee, Christopher Mayer, and Joseph Tracy, A New Look at Second 
Liens, Fed. Reserve Bank of New York Staff Report No. 569, p. 30 
(August 2012).
    \241\ ``There is evidence indicating HELOC use helped fund 
speculative purchases of nonowner-occupied investment properties 
resulting in higher first mortgage defaults and house price 
depreciation during 2006-2009.'' Michael LaCour-Little, Libo Sun, 
and Wei Yu, The Role of Home Equity Lending in the Recent Mortgage 
Crisis, Real Estate Economics, p. 182 (Aug. 2013).
    \242\ ``[B]oth HELOC lending and [closed-end second] lending 
grew faster in high house price appreciation ZIP codes, but HELOC 
lending has a much stronger association with house price 
appreciation than [closed-end second] lending.'' Michael LaCour-
Little, Libo Sun, and Wei Yu, The Role of Home Equity Lending in the 
Recent Mortgage Crisis, Real Estate Economics, p. 164 (Aug. 2013).
    \243\ See Vicki Been, Howell Jackson, and Mark Willis, Essay: 
Sticky Seconds--The Problems Second Liens Pose to the Resolution of 
Distressed Mortgages, Furman Center for Real Estate and Urban 
Policy, pp. 13-18 (Aug. 2012).
    \244\ ``Approximately 58 percent of all HELOC balances are due 
to start amortizing between 2014 and 2017.'' Office of the 
Comptroller of the Currency, Semiannual Risk Perspective, p. 20 
(Spring 2012).
---------------------------------------------------------------------------

    Similar concerns exist for dwelling-secured commercial lines of 
credit. Many people obtain lines of credit secured by their dwelling 
with the intention of using the line of credit for business 
purposes.\245\ These dwelling-secured lines of credit are especially 
important for small businesses,\246\ including small businesses started 
by immigrant entrepreneurs.\247\ However, many people who had obtained 
dwelling-secured lines of credit for business purposes faced 
foreclosure after the mortgage crisis began.\248\ In addition, as the 
mortgage crisis decreased the availability of traditional business 
credit, some small business entrepreneurs turned to dwelling-secured 
credit to maintain business operations.\249\ The foreclosures and 
delinquencies resulting from these lending practices affected many 
neighborhoods throughout the country, including many low- to moderate-
income neighborhoods.\250\ Thus,

[[Page 51758]]

dwelling-secured commercial line of credit data would have helped the 
public better understand the risks posed to local housing markets, 
thereby helping enable the public to determine whether financial 
institutions were filling their obligations to serve the housing needs 
of the communities and neighborhoods in which they are located.
---------------------------------------------------------------------------

    \245\ ``As one example, Korean Churches for Community 
Development in Los Angeles reports that 80% of the borrowers it 
counsels have HELOCs, and that many community members rely on HELOCs 
to purchase inventory and maintain cash flow.'' California 
Reinvestment Coalition et al. comment letter, Board of Governors of 
the Fed. Reserve System docket number OP-1388, p. 6, submitted Aug. 
4, 2010.
    \246\ ``Lines of credit (LOC) are the dominant credit instrument 
used by small businesses and account for more than 52% of the most 
recent loans in our data set.'' Ken S. Cavalluzzo, Linda C. 
Cavalluzzo, & John D. Wolken, Competition, Small Business Financing, 
and Discrimination: Evidence From a New Survey, 75 Journal of 
Business 641, 659 (2002).
    \247\ A 2012 study commissioned by the Small Business 
Administration found that home-secured lending was the source of 
expansion capital for 5 percent of all small businesses, but this 
lending accounted for 6 percent of expansion capital for immigrant-
owned small businesses, and 7.1 percent of expansion capital for 
small businesses owned by Asian immigrants. See Robert W. Fairlie, 
Immigrant Entrepreneurs and Small Business Owners, and Their Access 
to Financial Capital, p. 23 (May, 2012).
    \248\ See e.g. San Francisco Hearing, supra note 133.
    \249\ ``Asian Pacific Islander (API) small businesses rely 
heavily on personal real estate for their financing, and the 
significant decline in residential property values has led to a 
reduction in credit and rising delinquencies for API small business 
loans.'' Ben Bernanke (speech), ``Semiannual Monetary Policy Report 
to the Congress,'' July 21, 2010, available at https://www.federalreserve.gov/newsevents/testimony/bernanke20100721a.htm.
    \250\ ``Our paper graphically illustrates the spillover effects 
of the mortgage crisis into another vital sector--for the economy as 
a whole as well as for LMI areas in particular. Our findings suggest 
that in order to reverse the cycle of disinvestment in neighborhoods 
hit hard by foreclosures, we need to address the small business 
sector as well as housing.'' Elizabeth Laderman & Carolina Reid, The 
Community Reinvestment Act and Small Business Lending in Low- and 
Moderate-Income Neighborhoods during the Financial Crisis, Fed. 
Reserve Bank of San Francisco Working Paper 2010-05, p. 9 (Oct. 
2005).
---------------------------------------------------------------------------

    In addition to improving the usefulness of the HMDA data, the 
Bureau believes that expanding the scope of Regulation C to include all 
dwelling-secured lines of credit would be necessary to prevent evasion 
of HMDA. From the perspective of an individual applicant or borrower, a 
closed-end mortgage loan and an open-end line of credit are often 
interchangeable, as people seeking credit need to go through an 
application process of similar length and complexity. If the reporting 
requirements applied to closed-end mortgage loans, but not open-end 
lines of credit, unscrupulous financial institutions could attempt to 
evade HMDA's requirements by persuading applicants to obtain an open-
end line of credit instead of a closed-end mortgage loan.\251\ Feedback 
provided at the 2010 Board Hearings suggested that lenders currently 
sell lines of credit to applicants seeking mortgage loans, even when an 
applicant was not initially interested in obtaining an open-end line of 
credit.\252\ Given sales practices such as these and the potential 
interchangeability of these products, the Bureau believes that there is 
a serious risk that financial institutions may steer applicants seeking 
a reportable loan, such as a subordinate lien purchase-money loan or a 
home improvement loan, into an open-end line of credit to avoid the 
HMDA and Regulation C reporting requirements. This risk may be even 
greater should the Bureau determine that the proposed expansion to all 
closed-end mortgage loans, discussed in the section-by-section analysis 
to Sec.  1003.2(d) above, is appropriate. Thus, the Bureau believes 
that some financial institutions would likely attempt to evade the 
requirements of Regulation C if the reporting requirements were not 
extended to open-end lines of credit, and that this adjustment is 
necessary and proper to prevent evasion of HMDA.
---------------------------------------------------------------------------

    \251\ Concerns over potential evasion were raised during the 
2010 Board Hearings. See Washington Hearing, supra note 130.
    \252\ See Washington Hearing, supra note 130 (Remarks of Lisa 
Rice, Vice President, National Fair Housing Alliance) (``When I 
purchased my home I wasn't even thinking about getting a HELOC and 
my mortgage originator--I purchased a home with a loan from a 
depository institution, retail, and the loan officer said to me, you 
need to get a HELOC and gave me all of these reasons why. And so I 
was sold my mortgage and my HELOC at the same time by the same 
originator. Every institution doesn't do it the same way. I didn't 
ask for it. It was something that the lending institution sold to 
me, and she did a very, very good job of selling it to me.'').
---------------------------------------------------------------------------

    For these reasons, the Bureau believes that expanding the reporting 
requirements of Regulation C to all dwelling-secured, open-end lines of 
credit would provide valuable information to the public and to public 
officials. Accordingly, the Bureau is proposing Sec.  1003.2(o), which 
defines an open-end line of credit as a transaction that: Is an open-
end credit plan as defined in Sec.  1026.2(a)(20) of Regulation Z, but 
without regard to whether the credit is for personal, family, or 
household purposes, without regard to whether the person to whom credit 
is extended is a consumer, and without regard to whether the person 
extending credit is a creditor, as those terms are defined under 
Regulation Z, 12 CFR part 1026; is secured by a lien on a dwelling, as 
defined under Sec.  1003.2(f); is not a reverse mortgage under Sec.  
1003.2(q); and is not excluded from Regulation C. Proposed comment 
2(o)-1 discusses the definition of open-end line of credit and provides 
several illustrative examples. This proposed comment also clarifies 
that financial institutions may rely on Sec.  1026.2(a)(20) and the 
related commentary in determining whether a transaction is open-end 
credit under Sec.  1003.2(o)(1). This Bureau solicits feedback 
regarding whether this proposed modification is appropriate, and 
whether this proposed modification would provide useful data to the 
public and otherwise serve the purposes of HMDA. The Bureau also 
solicits feedback regarding the costs, burdens, and compliance 
challenges that would be associated with expanding the transactional 
coverage of the regulation to include home-equity lines of credit and 
dwelling-secured commercial lines of credit. Importantly, the Bureau 
requests that commenters differentiate between home-equity lines of 
credit and dwelling-secured commercial lines of credit when providing 
feedback, as precise feedback about these different products would 
assist in the Bureau's efforts to develop an effective and 
appropriately tailored final rule.
    As part of the Bureau's efforts to reduce regulatory burden by 
aligning to existing industry or regulatory standards, it may be 
appropriate to define open-end line of credit by reference to the 
existing definition of open-end credit plan under Regulation Z, with 
modifications to conform to the differences in scope between 
Regulations C and Z, because the Bureau believes that definition is 
clear and is understood by industry. However, the Bureau solicits 
feedback regarding whether this proposed definition is appropriate and 
whether there are other clarifications that would facilitate 
compliance. Finally, as discussed in the section-by-section analysis to 
proposed Sec.  1003.4(c)(3) below, the Bureau is also proposing 
modifications to Sec.  1003.4(c)(3) to conform to the proposed 
modifications in this section.
    During the Small Business Review Panel process, several small 
entity representatives expressed concerns about requiring mandatory 
reporting of home-equity lines of credit,\253\ and about requiring 
reporting of dwelling-secured commercial credit.\254\ The Small 
Business Review Panel recommended that the Bureau solicit public 
comment on whether any types of dwelling-secured loans should be 
excluded from Regulation C's data collection and reporting requirements 
and, if so, which types of loans should be excluded.\255\ Based on this 
feedback and consistent with the Small Business Review Panel's 
recommendation, the Bureau solicits feedback regarding whether any 
types of dwelling-secured loans or lines of credit should be excluded 
from the requirements of the regulation, and which types of loans or 
lines of credit should be excluded.
---------------------------------------------------------------------------

    \253\ See Small Business Review Panel Report at 24, 38, 56, 57, 
61, 91, 95, 96, 100, and 132.
    \254\ See id at 24, 37, 59, 78, and 85.
    \255\ See id. at 38.
---------------------------------------------------------------------------

    Proposed Sec.  1003.2(o) is issued pursuant to the Bureau's 
authority under section 305(a) of HMDA. For the reasons given above, 
the Bureau believes that including dwelling-secured lines of credit 
within the scope of the regulation is a reasonable interpretation of 
HMDA section 303(2), which defines ``mortgage loan'' to mean a loan 
which is secured by residential real property or a home improvement 
loan. The Bureau interprets that term to include dwelling-secured lines 
of credit, as those transactions are secured by residential real 
property, and they may be used for home improvement. As discussed 
above, information on home-equity lines of credit and dwelling-secured 
commercial lines of credit would have helped the public understand the 
risks posed to communities prior to the mortgage crisis. In addition, 
information on these

[[Page 51759]]

types of transactions would have been helpful for public officials 
developing programs intended to mitigate the effects of delinquency, 
default, and foreclosure in many areas throughout the country. Thus, 
this information will enable the people and public officials of the 
United States to determine whether depository institutions are filling 
their obligations to serve the housing needs of the communities and 
neighborhoods in which they are located and to assist public officials 
in their determination of the distribution of public sector investments 
in a manner designed to improve the private investment environment.
    In addition, pursuant to section 305(a) of HMDA, the Bureau 
believes that this proposed requirement is necessary and proper to 
effectuate the purposes of HMDA and to prevent circumvention or evasion 
thereof. For the reasons given above, by requiring all financial 
institutions to report information regarding home-equity lines of 
credit and dwelling-secured commercial lines of credit, this proposed 
modification would ensure that the citizens and public officials of the 
United States are provided with sufficient information to enable them 
to determine whether depository institutions are filling their 
obligations to serve the housing needs of the communities and 
neighborhoods in which they are located. In addition, this proposed 
modification would assist public officials in their determination of 
the distribution of public sector investments in a manner designed to 
improve the private investment environment. Furthermore, as home-equity 
lines of credit and dwelling-secured commercial lines of credit are a 
common method of obtaining credit, this proposed modification would 
assist in identifying possible discriminatory lending patterns and 
enforcing antidiscrimination statutes.
2(p) Refinancing
    HMDA does not expressly define ``refinancing.'' Regulation C 
currently defines ``refinancing'' to mean a new obligation that 
satisfies and replaces an existing obligation by the same borrower, 
subject to two qualifications. In the first qualification, for coverage 
purposes, the existing obligation is a home purchase loan (as 
determined by the lender, for example, by reference to available 
documents; or as stated by the applicant), and both the existing 
obligation and the new obligation are secured by first liens on 
dwellings. In the second qualification, for reporting purposes, both 
the existing obligation and the new obligation are secured by liens on 
dwellings. For the reasons discussed below, the Bureau is proposing 
several modifications to clarify and simplify this definition.
    The Bureau has received feedback indicating that the current 
definition of refinancing should be clarified or modified to reduce 
burden and facilitate compliance. Comments received in response to the 
2011 Regulation C Restatement argued that the definition of refinancing 
in Regulation C should be aligned with the definition in Regulation Z 
to streamline the regulatory requirements and reduce compliance burden. 
Other feedback suggests that the current two pronged definition of 
refinancing--one prong for institutional coverage and one prong for 
reporting--is also a source of confusion. While the FFIEC published 
several frequently asked questions to address some of these issues, it 
appears that some confusion remains.
    The Bureau believes that these issues would be best addressed by 
simplifying the definition and adding clarifying commentary. While 
financial institutions may often refer to the regulation to determine 
whether a reportable transaction is considered a refinancing, the 
Bureau does not believe that financial institutions often reevaluate 
institutional coverage. When an entity needs to evaluate institutional 
coverage, it currently needs to refer to the definition of refinancing 
and financial institution. The Bureau believes that moving the coverage 
prong to the definition of financial institution would simplify the 
regulation by placing the information needed to determine institutional 
coverage in one location. Thus, the Bureau is proposing Sec.  
1003.2(p), which defines a refinancing to mean a covered loan in which 
a new debt obligation satisfies and replaces an existing debt 
obligation by the same borrower, in which both the existing debt 
obligation and the new debt obligation are secured by liens on 
dwellings. The Bureau solicits feedback regarding whether these 
proposed modifications are appropriate, and whether additional 
clarification is necessary.
    Proposed comment 2(p)-1 discusses the definition in Sec.  1003.2(p) 
and provides illustrative examples of the definition. This proposed 
comment also clarifies that, if a borrower enters into a new debt 
obligation that modifies that terms of the existing debt obligation, 
but does not satisfy and replace the existing debt obligation, the new 
debt obligation is not a refinancing for purposes of Sec.  1003.2(p). 
Proposed comment 2(p)-2 explains that, for purposes of determining 
whether the transaction is a refinancing under Sec.  1003.2(p), both 
the new debt obligation and the existing debt obligation must be 
secured by liens on dwellings, and provides several illustrative 
examples. Proposed comment 2(p)-3 clarifies that the existing and new 
obligation must both be by the same borrower. This proposed comment 
provides examples of common scenarios that illustrate this proposed 
definition.
2(q) Reverse Mortgage
    Currently, neither HMDA nor Regulation C expressly addresses 
reverse mortgages. However, reverse mortgages that are home purchase 
loans, home improvement loans, or refinancings under the current 
definitions in Sec.  1003.2 are subject to the data collection and 
reporting requirements of Regulation C.
    Reverse mortgages became increasingly popular in the past decade, 
and many expect these products to become more popular in the coming 
years.\256\ While reverse mortgages may provide important benefits to 
homeowners, several concerns exist about the reverse mortgage 
market.\257\ For example, in recent years a substantial number of 
homeowners with reverse mortgages have defaulted.\258\ As discussed in 
part II.A above, many communities are struggling with the effects of 
foreclosure and default, which often contribute to a downward spiral in 
neighborhood property values.\259\ These struggles may be especially 
acute in communities with sizeable populations of homeowners eligible 
for reverse mortgage programs,\260\ and many State officials are 
focusing on harmful practices associated with reverse mortgage 
lending.\261\ Thus, information

[[Page 51760]]

on all reverse mortgages, regardless of purpose, would help communities 
understand the risks posed to local housing markets, thereby providing 
the citizens and public officials of the United States with sufficient 
information to enable them to determine whether financial institutions 
are filling their obligations to serve the housing needs of the 
communities and neighborhoods in which they are located. Furthermore, 
private institutions and nonprofit organizations, as well as local, 
State, and Federal programs, traditionally have facilitated or engaged 
in reverse mortgage lending. However, the proprietary market for 
reverse mortgages has substantially declined in recent years. Thus, 
requiring improved information regarding all reverse mortgages would 
assist public officials in their determination of the distribution of 
public sector investments in a manner designed to improve the private 
investment environment. In addition, State officials provided feedback 
during the 2010 Board Hearings that expanding the transactional 
coverage of Regulation C to include all reverse mortgages would assist 
in the identification of discriminatory and other potentially harmful 
practices.\262\ Thus, improved reverse mortgage data would assist in 
identifying possible discriminatory lending patterns and enforcing 
antidiscrimination statutes.
---------------------------------------------------------------------------

    \256\ See Lisa Prevost, Retiring on the House: Reverse Mortgages 
for Baby Boomers, N.Y. Times, Feb. 13, 2014, at RE5, available at 
https://www.nytimes.com/2014/02/16/realestate/reverse-mortgages-for-
baby-boomers.html?r=0.
    \257\ See Consumer Fin. Prot. Bureau, Report to Congress on 
Reverse Mortgages 110-145 (June 28, 2012), available at https://
files.consumerfinance.gov/a/assets/documents/
201206cfpbReverseMortgageReport.p
df.
    \258\ In July 2011, 8.1 percent of active Home Equity Conversion 
Mortgage loans were in default. By February 2012, the proportion in 
default had increased to 9.4 percent. See HUD Presentation, Nat'l 
Reverse Mortgage Lenders Ass'n Eastern Regional Meeting (Mar. 26, 
2012).
    \259\ See supra note 83.
    \260\ See Susan Taylor Martin, Complexities of Reverse Mortgages 
Snag Homeowners, Tampa Bay Times, May 30, 2014; Kevin Burbach & 
Sharon Schmickle, As State Ages, Minnesota Braces for Problems With 
Risky Reverse-Mortgages, MinnPost (April 5, 2013), https://www.minnpost.com/business/2013/04/state-ages-minnesota-braces-problems-risky-reverse-mortgages.
    \261\ See e.g., Press Release, Illinois Attorney General, 
Madigan Sues Two Reverse Mortgage Brokers For Using Deceptive 
Marketing to Target Seniors (Feb. 8, 2010), https://
www.illinoisattorneygeneral.gov/pressroom/201002/
20100208.html; Press Release, Washington State Office of the 
Attorney General, Ferguson Files Complaint Against Bellevue 
Insurance Agent and His Company for Targeting Elderly Widows (July 
29, 2013), https://www.atg.wa.gov/pressrelease.aspx?id=31312.
    \262\ ``[R]everse mortgages constitute a product geared toward a 
specific protected class, the elderly. Thus, reporting them, 
(assuming an institution chooses to report them at all), as 
refinance or HELOC loans may mask discriminatory or abusive 
practices that are occurring to harm the elderly.'' New York State 
Banking Department comment letter, Board of Governors of the Fed. 
Reserve System docket no. OP-1388, p. 5, submitted Aug. 6, 2010. See 
also San Francisco Hearing, supra note 133 (Remarks of Preston 
DuFauchard, Commissioner of the California Department of 
Corporations).
---------------------------------------------------------------------------

    Furthermore, the Bureau believes that the current applicability of 
Regulation C to reverse mortgages is a source of confusion and presents 
a compliance burden. For example, financial institutions are required 
to report information on a reverse mortgage that is a home purchase 
loan, home improvement loan, or a refinancing, but if the reverse 
mortgage is also a home-equity line of credit, the financial 
institution may report the information, but is not required to do so. 
In addition, the Bureau has received feedback that overlapping or 
inapplicable provisions in the current regulation contribute to this 
confusion. For example, a financial institution is required to report 
rate-spread information under Sec.  1003.4(a)(12)(i) for a reverse 
mortgage that is a home purchase loan or a refinancing, but is not 
required to report this information for a reverse mortgage that also 
meets the definition of home-equity line of credit under Sec.  1003.2, 
because home-equity lines of credit are exempt from the sections of 
Regulation Z related to the rate-spread calculation. Similarly, 
financial institutions are not required to report HOEPA status under 
Sec.  1003.4(a)(13) for reverse mortgages, because reverse mortgages 
are exempt from HOEPA. While the FFIEC has published FAQs to address 
much of this confusion, simplifying the applicability of Regulation C 
to reverse mortgages would further facilitate compliance.
    The Bureau believes that all of the concerns discussed above would 
be addressed by expanding the scope of reportable transactions to 
include all reverse mortgages, regardless of purpose, and by adding a 
new definition for reverse mortgages in Sec.  1003.2. As part of the 
Bureau's efforts to reduce regulatory burden by aligning to existing 
industry or regulatory standards, it may be appropriate to define 
reverse mortgages by reference to the existing Regulation Z definition 
because the Bureau believes that definition is clear and is understood 
by industry. Accordingly, the Bureau is proposing Sec.  1003.2(q), 
which would define reverse mortgage as a transaction that is a reverse 
mortgage transaction as defined in Sec.  1026.33(a) of Regulation Z and 
that is not excluded from Regulation C pursuant to Sec.  1003.3(c). The 
Bureau solicits feedback regarding whether this proposed definition is 
appropriate. Although the Bureau is not proposing commentary to this 
proposed definition, the Bureau solicits feedback regarding whether 
illustrative examples would help clarify the proposed definition or 
facilitate compliance.
    Proposed Sec.  1003.2(q) is issued pursuant to the Bureau's 
authority under section 305(a) of HMDA. For the reasons given above, 
the Bureau believes that including reverse mortgages within the scope 
of the regulation is a reasonable interpretation of HMDA section 
303(2), which defines ``mortgage loan'' to mean a loan which is secured 
by residential real property or a home improvement loan. The Bureau 
interprets that term to include reverse mortgages, as those 
transactions are secured by residential real property, and they may be 
used for home improvement. In addition, pursuant to its authority under 
section 305(a) of HMDA, the Bureau believes that this proposed 
adjustment is necessary and proper to effectuate the purposes of HMDA, 
to prevent circumvention or evasion thereof, and to facilitate 
compliance therewith. For the reasons given above, by requiring all 
financial institutions to report information regarding reverse 
mortgages, this proposed modification would ensure that the citizens 
and public officials of the United States are provided with sufficient 
information to enable them to determine whether depository institutions 
are filling their obligations to serve the housing needs of the 
communities and neighborhoods in which they are located. Furthermore, 
as reverse mortgages are a common method of obtaining credit, this 
proposed modification would assist in identifying possible 
discriminatory lending patterns and enforcing antidiscrimination 
statutes.

Section 1003.3 Exempt Institutions and Excluded Transactions

    As part of the efforts to streamline and reduce burden, the Bureau 
proposes some limited reorganization of and modifications to Regulation 
C. As discussed below, the Bureau proposes to move and consolidate all 
excluded transactions into proposed Sec.  1003.3(c). The Bureau 
proposes to modify the heading of Sec.  1003.3 to reflect the addition 
of excluded transactions listed below.
3(c) Excluded Transactions
    Regulation C currently excludes certain transactions from the 
requirements to collect and report data under HMDA. These exclusions 
are found in the regulation, appendix A, and commentary. Specifically, 
Sec.  1003.4(d) lists six types of transactions that are excluded from 
reporting requirements, including loans the financial institution 
originated or purchased when acting in a fiduciary capacity, such as a 
trustee; loans on unimproved land; temporary financing; the purchase of 
an interest in a pool of loans; the purchase solely of the right to 
service loans; and loans acquired as part of a merger or acquisition, 
or as part of the acquisition of all of the assets and liabilities of a 
branch office. In addition, section I.A.7 of appendix A instructs 
financial institutions not to report loans with a loan amount less than 
$500. Comment 1(c)-8 explains that an institution that purchases a 
partial interest in a loan does not report the transaction. Finally, 
comment Home purchase loan-3 explains that a loan to purchase property 
used primarily for

[[Page 51761]]

agricultural purposes is not considered a home purchase loan.
    The Bureau proposes to consolidate the list of the excluded 
transactions in Sec.  1003.3(c). Commentary to the existing provisions 
would also be consolidated under Sec.  1003.3(c). In addition to 
consolidating exclusions in one section, the Bureau also proposes 
additional guidance about the exclusions of loans secured by a lien on 
unimproved land and of temporary financing.
Loans Secured by a Lien on Unimproved Land
    Industry stakeholders have expressed confusion over the exclusion 
of a loan secured by a lien on unimproved land. The Bureau proposes new 
comment 3(c)(2)-1 to clarify whether a loan is secured by a lien on 
unimproved land. The proposed comment clarifies that a loan that is 
secured by vacant land under Regulation X Sec.  1024.5(b)(4) is also 
considered a loan secured by a lien on unimproved land under Regulation 
C. The proposed comment explains that a loan is not secured by a lien 
on unimproved land if the financial institution knows or reasonably 
believes that within two years after the loan closes, a dwelling will 
be constructed or placed on the land using the loan proceeds. The 
Bureau solicits feedback on whether this comment is appropriate 
generally.
Temporary Financing
    Industry stakeholders have requested additional guidance about the 
meaning of temporary financing that is excluded from HMDA data. The 
Bureau proposes new comments 3(c)(3)-1 and -2 to clarify the meaning of 
temporary financing. Proposed comment 3(c)(3)-1 provides that a loan 
that is considered temporary financing under Regulation X Sec.  
1024.5(b)(3) is also considered temporary financing under Regulation C. 
Proposed comment 3(c)(3)-1 explains that temporary financing refers to 
loans that are designed to be replaced by permanent financing at a 
later time. For example, a bridge loan or swing loan is considered 
temporary financing. A construction loan with a term of two years or 
more to construct a new dwelling, other than a loan to a bona fide 
builder (a person who regularly constructs dwellings for sale or 
lease), is not considered temporary financing.
    Questions have also been raised about permanent financing of 
construction activities. Proposed comment 3(c)(3)-2 explains that a 
loan that is designed to be converted to permanent financing by the 
same financial institution or a loan that is used to finance transfer 
of title to the first user is not temporary financing. Proposed comment 
3(c)(3)-2 clarifies that if an institution issues a commitment for 
permanent financing, with or without conditions, the loan is not 
considered temporary financing. The Bureau solicits feedback on whether 
this commentary is appropriate generally.
    As part of the reorganization discussed above, the Bureau is also 
proposing to move comment 4(d)-1 to proposed comment 3(c)(6)-1, comment 
1(c)-8 to proposed comment 3(c)(8)-1, and comment Home purchase loan-3 
to comment 3(c)(9)-1. The Bureau is also proposing nonsubstantive 
modifications to the comments. The Bureau is also proposing new comment 
3(c)(1)-1 to provide examples of what is meant by a financial 
institution acting in a fiduciary capacity and new comment 3(c)(4)-1 to 
provide examples of what is meant by the purchase of an interest in a 
pool of loans. The examples in proposed comments 3(c)(1)-1 and 3(c)(4)-
1 are currently included in Sec.  1003.4(d)(1) and (4), respectively. 
The Bureau solicits feedback on whether the proposed reorganization and 
modifications are appropriate generally.

Section 1003.4 Compilation of Reportable Data

4(a) Data Format and Itemization
    Section 1003.4(a) requires financial institutions to collect and 
record specific information about covered loans, applications for 
covered loans, and purchases of covered loans. As discussed in detail 
below, the Bureau proposes several changes to Sec.  1003.4(a) to 
implement the Dodd-Frank Act amendments to HMDA. In addition, the 
Bureau proposes modifications to Regulation C to reduce redundancy, 
provide greater clarity, and make the data more useful.
    The proposed expanded HMDA data would provide more fulsome 
information about underwriting, pricing, loan features, and the 
property securing each reported loan and application. The additional 
information would enable the public and public officials to better 
evaluate whether financial institutions are serving the housing needs 
of their communities and better identify neighborhoods that could 
benefit from public or private sector investment. More detail might 
also shed light on the demand for certain types of loans in certain 
areas, and whether that demand is being met. In addition, the expanded 
data would assist in identifying possible discriminatory lending 
patterns and facilitate fair lending analysis. It may also assist the 
public and public officials in identifying problematic trends in the 
mortgage market. The proposal also would make technical improvements 
that would facilitate reporting by better aligning the information 
collected pursuant to HMDA with financial institutions' business 
practices and with other regulatory requirements. The Bureau solicits 
feedback on whether the proposed additions to HMDA data are 
appropriate. The Bureau also seeks comment on whether including 
additional or different information in the HMDA data, such as an 
indication of whether the loan is subject to mortgage insurance, would 
better effectuate HMDA's purposes.
    As discussed in part II.B above, the Bureau is proposing alignment 
of the HMDA data requirements, to the extent practicable, with MISMO/
ULDD data standards. During the Small Business Review Panel process, 
the small entity representatives' feedback on adopting an industry data 
standard depended on whether the small entity representative sells 
loans in the secondary market, or whether their Loan Origination System 
vendor's system is aligned with industry data standards.\263\ For 
example, the small entity representatives whose financial institutions 
participate in the secondary market or have more automated processes 
generally stated that the adoption of a data standard would help keep 
costs low and allow for more efficient collection of data.\264\ On the 
other hand, other small entity representatives were not familiar with 
MISMO and expressed concern that the adoption of a new data standard 
would require additional employee training and other process 
adjustments to come into compliance, resulting in increased costs.\265\ 
A few small entity representatives indicated that they would continue 
to collect and maintain the data manually and would realize few 
benefits of the proposed data standard.\266\ In addition, some small 
entity representatives expressed concerns regarding implementation of 
the data standard.\267\ For example, a few small entity representatives 
expressed concern that there would be challenges in adapting MISMO to 
business and commercial loans, and potential penalties for errors.\268\ 
One small entity representative recommended making adoption of MISMO 
optional.\269\ The Small Business Review Panel

[[Page 51762]]

recommended that the Bureau seek comment in the proposed rule from 
small financial institutions about whether they, or their vendors, use 
MISMO-compliant data definitions and standards, and the potential 
effect on small financial institutions of alignment of the HMDA data 
requirements with MISMO data standards.\270\ Consistent with the Small 
Business Review Panel's recommendations, the Bureau solicits feedback 
on these issues.
---------------------------------------------------------------------------

    \263\ See Small Business Review Panel Report at 42.
    \264\ Id. at 33 and 42.
    \265\ Id.
    \266\ Id. at 33.
    \267\ Id.
    \268\ Id. at 33 and 42.
    \269\ Id.
    \270\ Id. at 43.
---------------------------------------------------------------------------

    As discussed above in Part II.C, in considering proposed changes to 
data required to be collected under Sec.  1003.4(a), the Bureau 
assessed the potential impacts of the proposals on the privacy 
interests of applicants and borrowers.\271\ The Bureau has considered 
applicant and borrower privacy in developing its proposals to implement 
the Dodd-Frank amendments and the additional data points and 
modifications to existing data points proposed. The Bureau's proposals 
are intended to ensure that data compiled and reported by financial 
institutions fulfill HMDA's purposes while appropriately protecting 
applicant and borrower privacy.
---------------------------------------------------------------------------

    \271\ Also see part II.C. above for a discussion of the Bureau's 
approach to protecting applicant and borrower privacy in HMDA data 
made available to the public while fulfilling the public disclosure 
purposes of the statute.
---------------------------------------------------------------------------

    The Bureau proposes modifications to Sec.  1003.4(a), comment 4(a)-
1, and new commentary to clarify the reporting requirements. In 
particular, as discussed below, the proposed modifications address a 
financial institution's responsibilities when reporting a single 
transaction involving more than one institution and reporting 
repurchased loans. In addition, the proposed modifications reflect 
substantive changes concerning reporting requests for preapproval 
discussed below in the section-by-section analysis of proposed Sec.  
1003.4(c)(2). As discussed in the section-by-section analysis to each 
proposed data point below, the Bureau is also proposing to modify and 
reorganize the current instructions in part I of appendix A to provide 
new technical instructions for each data point to facilitate 
compliance.
Reporting Transactions Involving More Than One Institution
    Currently, commentary to Sec.  1003.1(c) describes the ``broker 
rule,'' which explains a financial institution's reporting 
responsibilities when a single transaction involves more than one 
institution. Industry representatives have expressed confusion about 
this commentary and urged the Bureau to clarify the reporting 
responsibilities when more than one institution is involved in a 
transaction. To address these concerns, the Bureau proposes amendments 
to Sec.  1003.4(a) and its commentary. In particular, the proposed 
amendments clarify that only one financial institution should report 
each transaction as an origination or application. The proposed 
amendments clarify that the financial institution that makes the credit 
decision prior to closing, or prior to when the loan would have closed 
if the application does not result in an origination, reports the 
transaction as an origination or application, respectively.
    Accordingly, the Bureau proposes to modify Sec.  1003.4(a) to 
specify that a financial institution shall collect data regarding 
originations of covered loans on which it makes a credit decision. In 
addition, the Bureau proposes new comments 4(a)-4 and -5 to provide 
further clarification about the reporting responsibilities when more 
than one institution is involved in a transaction. The proposed 
amendments modify and consolidate current comments 1(c)-2 through 7, 
4(a)(1)-iii, and 4(a)(1)-iv. Proposed comment 4(a)-4 explains that each 
origination and application is only reported by one financial 
institution as an origination or application. If more than one 
institution was involved in an origination of or application for a 
covered loan, the financial institution that made the credit decision 
before the loan closed or would have closed reports the origination. In 
the case of an application for a covered loan that did not result in an 
origination, the financial institution that made the credit decision or 
that was reviewing the application when the application was withdrawn 
or closed for incompleteness reports the application. In certain 
circumstances, one financial institution would report the transaction 
as an origination and another financial institution would report the 
transaction as a purchase. Whether the loan closed or would have closed 
in the institution's name is not relevant for HMDA reporting. Proposed 
comment 4(a)-4 provides several illustrative examples. Proposed comment 
4(a)-5 discusses reporting responsibilities when a financial 
institution makes a credit decision through the actions of an agent and 
provides an illustrative example. The Bureau solicits feedback on 
whether the proposed amendments to Sec.  1003.4(a) and associated 
commentary are appropriate generally.
Repurchased Loans
    The proposal would add new comments 4(a)(8)-4 and 4(a)-6 to provide 
guidance on reporting repurchased loans. The Bureau understands that 
there has been confusion about whether the repurchase of a loan that a 
financial institution originally sold to another financial institution 
or secondary market entity, such as when the investor requires the 
financial institution to buy back the loan because it does not meet 
certain conditions, is reportable under Regulation C. An FFIEC 
publication in 2010 noted that repurchases qualify as purchases for 
Regulation C, and provided guidance on how and when to report such 
purchases.\272\ Proposed comments 4(a)(8)-4 and 4(a)-6 would provide 
that when a covered loan that a financial institution initially 
originated and sold to another financial institution or secondary 
market entity is repurchased by the originating financial institution 
within the same calendar year as it was originated, the originating 
financial institution should not report it as sold, and the purchasing 
financial institution should not report it as purchased. It would also 
provide that if the repurchase happens in a subsequent calendar year, 
the purchase and repurchase should be reported in their respective 
calendar years. It would also provide additional guidance for financial 
institutions who would be required to report on a quarterly basis under 
proposed Sec.  1003.5(a)(1)(ii). It would also provide several 
illustrative examples. The Bureau solicits feedback generally on how 
repurchases should be treated for purposes of Regulation C. 
Specifically, the Bureau solicits feedback on whether repurchases 
should be reported under Regulation C, and how they should be handled 
for financial institutions required to report on a quarterly basis.
---------------------------------------------------------------------------

    \272\ FFIEC, CRA/HMDA Reporter 5 (Dec. 2010), https://www.ffiec.gov/hmda/pdf/10news.pdf.
---------------------------------------------------------------------------

4(a)(1)(i)
    As amended by section 1094(3)(A)(iv) of the Dodd-Frank Act, HMDA 
section 304(b)(6)(G) authorizes the Bureau to require a universal loan 
identifier, as it may determine to be appropriate.\273\ Existing Sec.  
1003.4(a)(1) requires financial institutions to report an identifying 
number for each loan or loan application reported. Pursuant to existing 
comment 4(a)(1)-4, the number must be unique within the institution, 
and financial institutions are strongly encouraged not to use the 
applicant's or borrower's name or Social Security number. According to 
the instructions in appendix A, the loan identifier can be any 
alphanumeric combination of the

[[Page 51763]]

institution's choosing, up to 25 characters. The Bureau proposes to 
replace Regulation C's existing loan identifier with a new self-
assigned loan or application identifier that would be unique within the 
industry, would be used by all financial institutions that report on 
the loan or application for HMDA purposes, and could not be used to 
directly identify the applicant or borrower. Although the term 
``universal'' can be interpreted in many ways, the Bureau believes that 
this identifier would be a ``universal loan identifier'' within the 
meaning of HMDA section 304(b)(6) because it would be unique within the 
industry and would be used throughout the life of the loan.
---------------------------------------------------------------------------

    \273\ 12 U.S.C. 2803(b)(6)(G).
---------------------------------------------------------------------------

    The flexibility of Sec.  1003.4(a)(1)'s current identifier 
requirement has raised concerns. To the extent that financial 
institutions include Social Security numbers or other personal 
identifiers in their loan identifiers, they may be unnecessarily 
revealing sensitive applicant or borrower information. Although the 
commentary instructs financial institutions to select ``unique'' 
identifiers, it does not provide guidance on how this should be done. 
Some financial institutions may, for example, be recycling identifiers 
from year to year.
    Because Sec.  1003.4(a)(1) allows financial institutions that 
purchase previously reported loans to assign a new identifier to the 
loan, data users cannot link HMDA data that different financial 
institutions report for the same loan. Different identifiers may be 
assigned to the same mortgage loan by the financial institution that 
initially reports it at origination and a financial institution that 
subsequently reports it as a purchased loan. Even a single financial 
institution may assign different identifiers to the same loan for 
different purposes, such as for origination, sale of the loan, and 
reporting HMDA data. At present, there is no system or process to 
synchronize those identifiers with respect to each loan. This makes it 
difficult to track an application or loan over its life and to 
accurately identify lending patterns.
    In developing this proposal, the Bureau has consulted with a 
variety of stakeholders that have been considering these issues and the 
need for a more robust mortgage loan identifier.\274\ In September 
2012, MISMO created a Unique Loan Identification Data Working Group, 
which released a 2013 white paper that discusses possibilities for a 
unique loan identifier.\275\ The group considered a number of options, 
including using an existing loan identification number, developing a 
new identifier from loan information such as lien priority and loan 
type, and attempting to standardize the syntax and format of loan 
identifiers.\276\
---------------------------------------------------------------------------

    \274\ A paper by Linda F. Powell and John A. Bottega discussing 
the Legal Entity Identifier describes a framework for the attributes 
of a robust identifier that may also be useful in discussing loan 
identifiers; the attributes that they identified include uniqueness, 
extensibility, reliability, coverage, persistence, and neutrality. 
John A. Bottega & Linda F. Powell, Creating a Linchpin for Financial 
Data: Toward a Universal Legal Entity Identifier (2011), https://www.federalreserve.gov/pubs/feds/2011/201107/201107pap.pdf.
    \275\ MISMO, Unique Loan Identifier Development Workgroup White 
Paper (2013), https://www.mismo.org/files/BrochuresandPresentations/DWGUniqueLoanIDWhitePaper2.pdf.
    \276\ Id. at 5.
---------------------------------------------------------------------------

    In December 2013, the U.S. Department of the Treasury's Office of 
Financial Research (OFR) released a working paper discussing the need 
for a universal mortgage identifier.\277\ OFR strongly supports the 
establishment of a single, cradle[hyphen]to[hyphen]grave, universal 
mortgage identifier that cannot be linked to individuals using publicly 
available data.\278\ OFR's working paper explains that such an 
identifier would allow for better integration of the fragmented data 
produced by the U.S. mortgage finance system, resulting in significant 
benefits to regulators and researchers.\279\ OFR recognizes that there 
are significant challenges to designing a universal identifier, 
including privacy concerns and questions about the timing of 
assignment, the structure and governance of any entities issuing 
identifiers or coordinating them, what parties should have access to 
the identifier, the documents that should or could carry the 
identifier, how to ensure use of the identifier throughout the mortgage 
life cycle, how to ensure identifier integrity, and how to develop 
mechanisms to link simultaneous or sequential liens.\280\
---------------------------------------------------------------------------

    \277\ Matthew McCormick & Lynn Calahan, U.S. Dep't of Treas. 
Office of Fin. Research, Common Ground: The Need for a Universal 
Mortgage Loan Identifier (Dec. 5, 2013), https://www.treasury.gov/
initiatives/ofr/research/Documents/
OFRwp0012McCormickCalahanCommonGroundNeedforUnivers
alMortgageIdentifier.pdf.
    \278\ Id. at 14-15.
    \279\ Id. at 2-11.
    \280\ Id.
---------------------------------------------------------------------------

    The Bureau is encouraged by the progress that is being made in this 
complex area and will continue to work with industry and other agencies 
and stakeholders to assess how the HMDA loan identifier relates to 
broader mortgage identification needs. Many of the mortgage 
identification options considered by MISMO and OFR would require 
significant investment of time and money and substantial coordination 
among all relevant stakeholders to develop. Although the Bureau is not 
proposing or seeking comment on a mortgage registry or vault at this 
time, the Bureau will continue to collaborate with industry groups and 
other government offices that are considering these possibilities, 
which could potentially serve a range of purposes.
    To address the need for a unique loan identifier that can be used 
for HMDA reporting throughout the life of the loan, the Bureau proposes 
to strengthen Regulation C's self-assigned loan identifier by 
substituting proposed Sec.  1003.4(a)(1)(i) for the identification 
requirement in existing Sec.  1003.4(a)(1).\281\ Proposed Sec.  
1003.4(a)(1)(i) requires entities to provide a universal loan 
identifier (ULI) for each covered loan or application that can be used 
to retrieve the covered loan or application file. For covered loans or 
applications for which any financial institution has previously 
reported a ULI under this part, proposed Sec.  1003.4(a)(1)(i) provides 
that the ULI shall consist of the ULI that was previously reported. For 
all other covered loans and applications, proposed Sec.  
1003.4(a)(1)(i)(A) provides that the ULI shall begin with the financial 
institution's Legal Entity Identifier described in Sec.  1003.5(a)(3). 
Proposed Sec.  1003.4(a)(1)(i)(B) provides that the ULI shall follow 
that Legal Entity Identifier with up to 25 additional characters to 
identify the covered loan or application, which (1) may be letters, 
numerals, symbols, or a combination of any of these; (2) must be unique 
within the financial institution; and (3) must not include any 
information that could be used to directly identify the applicant or 
borrower.
---------------------------------------------------------------------------

    \281\ Under the Bureau's proposal, new Sec.  1003.4(a)(1)(i) 
would address the universal loan identifier, while new Sec.  
1003.4(a)(1)(ii) would address the date of application, which is 
discussed below.
---------------------------------------------------------------------------

    Two proposed comments to Sec.  1003.4(a)(1)(i) would replace 
existing comment 4(a)(1)-4. Proposed comment 4(a)(1)(i)-1 explains the 
uniqueness requirement in proposed Sec.  1003.4(a)(1)(i)(B). Only one 
ULI should be assigned to any particular application or covered loan, 
and each ULI should correspond to a single application and, if the 
application is approved and a loan is originated, the ensuing loan. A 
financial institution shall use a ULI that was reported previously to 
refer only to the same loan or application for which the ULI was used 
previously or to a loan that ensues from an application for which the 
ULI

[[Page 51764]]

was used previously. For example, if a loan origination was previously 
reported for HMDA purposes with a ULI, a financial institution would 
report the later purchase of the loan using the same ULI. A financial 
institution may not, however, report an application for a covered loan 
in 2030 using a ULI that was reported for a covered loan that was 
originated in 2020. Similarly, refinancings or applications for 
refinancing should be assigned a different ULI than the loan that is 
being refinanced. A financial institution with multiple branches must 
ensure that its branches do not use a single ULI to refer to multiple 
covered loans or applications.
    Proposed comment 4(a)(1)(i)-2 explains that information that could 
be used to directly identify the applicant or borrower includes but is 
not limited to the applicant's or borrower's name, date of birth, 
Social Security number, official government-issued driver's license or 
identification number, alien registration number, government passport 
number, or employer or taxpayer identification number. Pursuant to 
proposed Sec.  1003.4(a)(1)(i)(B)(3), a financial institution may not 
include information of this nature in the identifier that it assigns 
for a covered loan or application.
    The Bureau believes that these changes would strengthen the 
existing identifier in three significant ways. First, by providing 
additional instructions relating to uniqueness and combining the 
financial institution's loan-specific identifier with its Legal Entity 
Identifier, the proposed rule would ensure that the resulting ULI is 
unique in the entire universe of HMDA loans and applications. Second, 
by requiring financial institutions that purchase loans to report the 
ULI that was previously reported, the proposed rule would allow the 
Bureau and other regulators to track HMDA reporting that is done over 
time by different financial institutions for a single loan, furthering 
all of HMDA's purposes. Third, to protect the privacy of borrowers and 
applicants, the proposal replaces the commentary that discourages using 
Social Security numbers and names in identifiers with regulation text 
that prohibits using information that could be used to directly 
identify the borrower or applicant. This is consistent with the 
recommendations of the Small Business Review Panel, which specifically 
urged the Bureau to consider and seek comment on prohibiting the use of 
information that could be used to directly identify an applicant or 
borrower as any component of a loan identifier.\282\ Because the 
identifier is self-assigned, the Bureau believes that the burden 
associated with these changes would be fairly minimal.
---------------------------------------------------------------------------

    \282\ See Small Business Review Panel Report at 39.
---------------------------------------------------------------------------

    The Bureau solicits feedback on whether the proposed changes to the 
loan or application identifier used for HMDA reporting purposes are 
appropriate, as well as feedback on other possible approaches to 
identifying loans and applications in HMDA reporting. This solicitation 
of feedback is consistent with the Small Business Review Panel's 
recommendation that the Bureau seek comment on each of the unique 
identifiers under consideration that were included in the Dodd-Frank 
Act.\283\ Consistent with the Small Business Review Panel's 
recommendations, the Bureau specifically solicits comments on whether 
the privacy limitations provided in Sec.  1003.4(a)(1)(i)(B) and 
explained in proposed comment 4(a)(1)(i)-2 are sufficient to protect 
applicant and borrower privacy, and whether the identifier should be 
required for all entries on the loan application register (as under 
existing Sec.  1003.4(a)(1) and as proposed here) or only for loan 
originations and purchases.\284\ The Bureau also seeks comment on 
whether 25 characters is the appropriate maximum number of characters 
for financial institutions to use in identifying the covered loan or 
application.
---------------------------------------------------------------------------

    \283\ Id.
    \284\ See id.
---------------------------------------------------------------------------

    One alternative that the Bureau is considering is requiring 
financial institutions to use a secure hash algorithm to encrypt their 
ULIs prior to submission to the Bureau or the appropriate Federal 
agency. A hash function is any algorithm that maps data of arbitrary 
length to data of a fixed length. A secure hash algorithm is designed 
to provide a measure of encryption by being non-invertible (meaning 
that the original value cannot be derived from the hash) and to resist 
``collisions'' (meaning that two different values will not hash to the 
same result). The Bureau could, for example, require use of Secure Hash 
Algorithm (SHA) 3-224 as specified by the National Institute of 
Standards and Technology (NIST) in Federal Information Processing 
Standard 202 \285\ or another hash algorithm specified by the NIST, 
such as SHA-224. Each of these algorithms is a one-way hash function 
that can process a message (in this case, the institution's Legal 
Entity Identifier merged with an identifier for the loan or 
application) to produce a representation called a message digest. 
Requiring financial institutions to report the resulting message digest 
could ensure that the identifier produced is a consistent length and 
could also mask any residual information about the loan or borrower 
that might be embedded in the underlying identifier.
---------------------------------------------------------------------------

    \285\ Announcing Draft Federal Information Processing Standard 
(FIPS) 202, SHA-3 Standard, 79 FR 30549 (May 28, 2014). Additional 
information on secure hash algorithms is available on the NIST Web 
site at https://csrc.nist.gov/groups/ST/toolkit/
securehashing.html.
---------------------------------------------------------------------------

    If the Bureau were to require hashing, it could provide tools that 
financial institutions could use to do the hashing, as well as details 
that financial institutions or their service providers could use should 
they wish to integrate the hash algorithm into their own systems. The 
Bureau invites comment on whether the Bureau should require financial 
institutions to apply a secure hash algorithm to their Legal Entity 
Identifier plus the identifier for the loan or application and then 
report the resulting message digest as the ULI, in lieu of reporting an 
unhashed ULI. If hashing is recommended, the Bureau also invites 
comment on how such hashing should be done, including whether a random 
value should be added prior to hashing through a technique called 
``salting'' to enhance the encryption.\286\
---------------------------------------------------------------------------

    \286\ See generally Meltem S[ouml]nmez Turan et al., NIST 
Special Publication 800-132: Recommendation for Password-Based Key 
Derivation, Part 1: Storage Applications (Dec. 2010), available at 
https://csrc.nist.gov/publications/nistpubs/800-132/nist-sp800-132.pdf; RSA Laboratories, PKCS #5 v.2.1: Password-Based 
Cryptography Standard (Oct. 5, 2006), ftp://ftp.rsasecurity.com/pub/
pkcs/pkcs-5v2/pkcs5v21.pdf.
---------------------------------------------------------------------------

4(a)(1)(ii)
    The Bureau is proposing technical corrections and minor wording 
changes to Sec.  1003.4(a)(1), which requires reporting of the date the 
application was received. Regulation C requires institutions to report 
the date the application was received, and comment 4(a)(1)-1 clarifies 
that institutions may report either the date of receipt or the date 
shown on the application form to provide greater flexibility for 
financial institutions but maintain reliable application date data.
    The proposal moves the requirement regarding reporting of the date 
the application was received to new Sec.  1003.4(a)(1)(ii) to provide a 
separate citation from loan identifier, which is discussed above. 
Proposed Sec.  1003.4(a)(1)(ii) provides for reporting of the date the 
application was received or the date shown on the application form, 
consistent with comment 4(a)(1)-

[[Page 51765]]

1 and instructions in appendix A. Existing comments 4(a)(1)-1, -2, -3, 
and -5 related to application date would be renumbered as comments 
4(a)(1)(ii)-1 through -4. Comment 4(a)(1)-2 related to applications 
received from brokers would be revised to use terminology consistent 
with proposed comment 4(a)-4 and the requirement to report application 
channel information under Sec.  1003.4(a)(33). Finally, the proposal 
makes technical corrections and minor wording changes to appendix A. 
Proposed instruction 4(a)(1)(ii)-1 provides for reporting the date the 
application was received or the date shown on the application form by 
year, month, and day.
    After the Bureau's 2011 Regulation C Restatement was published, the 
Bureau received a comment from a stakeholder requesting more 
flexibility in reporting the date the application was received. The 
stakeholder asserted that differences in definitions of application 
under various regulations create difficulty with determining an exact 
date for purposes of Regulation C. During the Small Business Review 
Panel process, small entity representatives expressed concern about 
reporting application date for commercial loans.\287\ The Small 
Business Review Panel recommended that the Bureau consider seeking 
public comment on providing additional guidance on how HMDA reporters 
may determine the application date.\288\ Based on this feedback and 
consistent with the recommendation of the Small Business Review Panel, 
the Bureau solicits feedback on whether additional guidance should be 
provided on how HMDA reporters may determine the application date.
---------------------------------------------------------------------------

    \287\ See Small Business Review Panel Report at 39.
    \288\ Small Business Review Panel Report at 40.
---------------------------------------------------------------------------

4(a)(2)
    HMDA section 304(b)(1) requires financial institutions to report 
``the number and dollar amount of mortgage loans which are insured 
under Title II of the National Housing Act or under Title V of the 
Housing Act of 1949 or which are guaranteed under chapter 37 of Title 
38.'' Section 1003.4(a)(2) currently implements this requirement by 
requiring financial institutions to report the type of loan or 
application. Paragraph I.A.3 in appendix A further instructs lenders to 
identify the type of loan or application as conventional, FHA-insured, 
VA-guaranteed, or FSA/RHS-guaranteed. The Bureau's proposal retains the 
current reporting requirement, but incorporates the text of the 
statutory provision, with conforming modifications, directly into 
Regulation C.
    Regulation C has always required financial institutions to report 
information regarding the type of loan or application.\289\ Section 
1003.4 itself does not, however, expressly incorporate the loan types 
provided for in the statute. The Bureau believes that reflecting the 
statutory text in Sec.  1003.4 will facilitate future modifications to 
the instructions in appendix A, which in turn will add clarity and 
reduce burden. As explained above, the Bureau is also proposing a new 
term, ``covered loan,'' that includes all types of loans subject to 
Regulation C in order to simplify the regulation and clarify its 
requirements. The proposal revises section 1003.4(a)(2) to conform to 
the use of this term. Accordingly, the Bureau's revised Sec.  
1003.4(a)(2) provides for reporting whether the covered loan or 
application is insured under title II of the National Housing Act, is 
insured under title V of the Housing Act of 1949, or is guaranteed 
under chapter 37 of title 38 of the United States Code. The Bureau 
solicits feedback regarding whether its proposed modifications are 
appropriate.
---------------------------------------------------------------------------

    \289\ See 41 FR 23931 (June 14, 1976).
---------------------------------------------------------------------------

    The Bureau is proposing to revise the technical instructions 
related to Sec.  1003.4(a)(2) in appendix A. Proposed instruction 
4(a)(2)-1 provides that a financial institution completing the loan 
application register must select from among four codes to indicate the 
type of covered loan or application, depending on whether the loan is 
conventional (Code 1), FHA (Code 2), VA (Code 3), or USDA Rural 
Development (Code 4). Proposed instruction 4(a)(2)-1.a specifies that 
Code 2 must be used if the covered loan or application is insured under 
title II of the National Housing Act. Proposed instruction 4(a)(2)-1.b 
specifies that Code 3 must be used if the covered loan or application 
is guaranteed under chapter 37 of title 38 of the United States Code. 
Proposed instruction 4(a)(2)-1.c specifies that Code 4 must be used if 
the covered loan or application is insured under title V of the Housing 
Act of 1949. Finally, proposed instruction 4(a)(2)-1.d specifies that 
Code 1 must be used if the covered loan or application is not insured 
under title II of the National Housing Act, not insured under title V 
of the Housing Act of 1949, and not guaranteed under chapter 37 of 
title 38 of the United States Code.
4(a)(3)
    HMDA section 304(b) requires the disclosure of the number and 
dollar amount of mortgage loans and home improvement loans, among other 
things. Section 1003.4(a)(3) of Regulation C requires financial 
institutions to record the purpose of the loan or application. Appendix 
A to Regulation C paragraph I.A.5 instructs financial institutions to 
identify the purpose of a loan or application as either for home 
purchase, home improvement, or refinancing. The Dodd-Frank Act did not 
amend the sections of HMDA relevant to the loan purpose reporting 
requirement. While the Bureau is only proposing technical modifications 
to Sec.  1003.4(a)(3) to conform to the addition of closed-end mortgage 
loans, the Bureau is seeking comment regarding whether the loan purpose 
reporting requirement should be modified with respect to home 
improvement loans and cash-out refinancings.
Home Improvement Loans
    The Bureau has received feedback indicating that the current 
requirement to identify whether a loan or application is for home 
improvement purposes is a substantial compliance burden. As discussed 
in part II.A above, the inability to obtain credit to repair and 
maintain homes was one of the major factors driving urban deterioration 
in the 1970s. As a result, Congress was particularly concerned about 
access to home improvement credit when HMDA was enacted.\290\ Home 
improvement loans were traditionally used for older properties, and 
community groups and public officials needed data on a neighborhood's 
ability to maintain the quality of existing housing stock.\291\ Issues 
in this subset of the market have remained over time, as some studies 
suggest that home improvement lending practices may be a concern in 
certain neighborhoods and for certain borrowers.\292\
---------------------------------------------------------------------------

    \290\ Sen. Robert Taft, Jr.'s amendment to the draft bill 
addressed the requirement to collect home improvement loan data: 
``The importance of these loans to a neighborhood's health and 
survival is obvious, particularly since many of the neighborhoods in 
question have a larger number of older homes in need to repair.'' 
121 Cong. Rec. S1281, 13192 (daily ed. July 21, 1975) (statement of 
Sen. Robert Taft, Jr.).
    \291\ See Randy E. Ryker, Louis G. Pol, & Rebecca F . Guy, 
Racial Discrimination as a Determinant of Home Improvement Loans, 21 
Urban Studies 177, 179 (May 1984).
    \292\ ``The average rejection rate for home improvement loan 
applications is much higher than that for home purchase loans--30% 
versus 15%. Also applicants for home improvement loans have lower 
incomes and live in census tracts with lower housing values than 
applicants for home purchase loans.'' Emily Y. Lin & Michelle J. 
White, Bankruptcy and the Market for Mortgage and Home Improvement 
Loans, 50 Journal Of Urban Economics 138, 153 (July 2001).
---------------------------------------------------------------------------

    Although home improvement data was a central concern when HMDA was

[[Page 51766]]

originally enacted, it may be the case that these data are no longer 
useful. While consumers routinely resorted to local banks for home 
improvement loans in the 1970s, after the widespread adoption of credit 
cards began in the 1980s consumers had alternative means of obtaining 
credit to repair or improve their homes.\293\ This trend may have 
accelerated during the 1980s and early 1990s, when home-equity lines of 
credit became an increasingly popular form of credit.\294\ In today's 
market, statistics suggest that HMDA provides the public with 
relatively little data about home improvement loans. For example, in 
2012 home improvement loans comprised only approximately 4.4 percent of 
all HMDA records.\295\ Testimony provided during the Board HMDA 
Hearings supports the argument that home improvement loan data are of 
limited value.\296\ Thus, the consumer financial market may have 
evolved to the point where relatively few consumers use secured home 
improvement loans to repair, renovate, or otherwise improve their 
homes, and the data provided through HMDA may no longer be useful. The 
Bureau is concerned about this potential reduction in usefulness, 
considering that financial institutions frequently state that home 
improvement reporting is a substantial burden.
---------------------------------------------------------------------------

    \293\ See Fed. Reserve Bulletin, Changes in Family Finances from 
1983 to 1989: Evidence from the Survey of Consumer Finances 13 (Jan. 
1992). See also David Evans & Richard Schnakebsee, Paying With 
Plastic, Massachusetts Institute of Technology Press 98-100 (1991).
    \294\ See Fed. Reverse Bulletin, Changes in Family Finances from 
1983 to 1989: Evidence from the Survey of Consumer Finances 13 (Jan. 
1992); Fed. Reserve Bulletin, Changes in Family Finances from 1989 
to 1992: Evidence from the Survey of Consumer Finances 874-875 (Oct. 
1994).
    \295\ In 2012, out of 18,691,551 total HMDA records, only 
814,857 had a home improvement purpose.
    \296\ See, e.g., Chicago Hearing, supra note 137.
---------------------------------------------------------------------------

    As discussed in the section-by-section analysis to Sec.  1003.2(i) 
above, the Bureau is proposing to exclude unsecured home improvement 
loans from the scope of Regulation C. While the Bureau believes that 
this proposed exclusion will address many of the concerns that have 
been asserted with regard to home improvement loan reporting, it may be 
the case that the public no longer finds home improvement data useful. 
For these reasons, the Bureau solicits feedback regarding whether Sec.  
1003.4(a)(3) should be modified so that financial institutions would 
not be required to identify covered loans for the purposes of home 
improvement. The Bureau requests comment regarding the current utility 
of these data, whether there are ways to lessen the costs associated 
with reporting secured home improvement loans, and whether there are 
ways to improve the usefulness of these data. Finally, the Bureau 
specifically solicits information related to financial institutions' 
current cost of reporting secured home improvement loans.
    During the Small Business Review Panel process, several small 
entity representatives expressed concern about the challenges, 
compliance costs, and examination burdens associated with reporting 
home improvement loans.\297\ The Small Business Review Panel 
recommended that the Bureau seek comment on any costs and other burdens 
associated with existing or potential HMDA requirements related to home 
improvement loans.\298\ Consistent with the Small Business Review 
Panel's recommendation, the Bureau solicits feedback regarding any 
costs and burdens associated with the current loan purpose requirements 
related to home improvement loans, as well as the costs and burdens 
generally associated with Regulation C requirements related to home 
improvement loans.
---------------------------------------------------------------------------

    \297\ See Small Business Review Panel Report at 24.
    \298\ See id. at 40.
---------------------------------------------------------------------------

Cash-Out Refinancings
    The Bureau has received feedback indicating that requiring 
financial institutions to identify whether a loan or application is for 
a cash-out refinancing would improve the usefulness of the reported 
data. Several participants during the 2010 Board Hearings argued that 
cash-out refinancings should be separately identified in the HMDA 
data.\299\ Studies suggest that cash-out refinancings were commonly 
offered in the subprime market which, as discussed in part II.A above, 
was and remains a particular area of concern for many communities.\300\ 
 Furthermore, public officials may find information on cash-out 
refinancings useful for developing programs intended to promote stable 
homeownership.\301\ Thus, requiring financial institutions to identify 
cash-out refinancings may make the HMDA data more useful.
---------------------------------------------------------------------------

    \299\ See e.g., San Francisco hearing, supra note 133; Chicago 
Hearing, supra note 137.
    \300\ See Chris Mayer & Karen Pence, Subprime Mortgages: What, 
Where, and to Whom?, Bd. of Governors of the Fed. Reserve Sys., 
Finance and Economics Discussion Series 2008-29 at 10 (2008).
    \301\ For example, a recent study suggests that Texas's strict 
restrictions on cash-out home-equity lending helped protect Texas 
homeowners from several of the harms stemming from the mortgage 
crisis. See Anil Kumar & Edward C. Skelton, Did Home Equity 
Restrictions Help Keep Texas Mortgages from Going Underwater?, Fed. 
Reserve Bank of Dallas (Third Quarter 2013).
---------------------------------------------------------------------------

    However, the Bureau is concerned about the potential burdens 
associated with requiring financial institutions to separately identify 
cash-out refinancings, and whether such burdens would outweigh the 
benefit of these additional data. First, the mortgage market does not 
currently employ a single definition of cash-out refinance. For 
example, secondary market investors often provide different definitions 
based on the terms of the transaction.\302\ Furthermore, MISMO does not 
currently provide any definition for cash-out refinancing. In addition, 
the Bureau has received feedback that financial institutions encounter 
compliance challenges when determining the purpose of the loan for the 
existing Regulation C requirements. The Bureau is concerned that adding 
another purpose-based requirement would further increase the existing 
burden associated with the reporting requirements.
---------------------------------------------------------------------------

    \302\ See Fannie Mae, Fannie Mae Single-Family Selling Guide, 
Sections B2-1.2-02 and B2-1.2-03 (June 24, 2014), https://www.fanniemae.com/content/guide/sel062414.pdf. See Freddie Mac, 
Single-Family Seller/Servicer Guide, Vol. I, Chapters 24.6 and 24.7, 
https://www.freddiemac.com/sell/guide/.
---------------------------------------------------------------------------

    For these reasons, the Bureau is considering requiring financial 
institutions to report whether a covered loan or application is for a 
cash-out refinancing, but wishes to obtain additional information to 
determine whether such a requirement is appropriate. The Bureau 
solicits feedback regarding whether Sec.  1003.4(a)(3) should be 
modified to require financial institutions to identify separately rate-
and-term refinancings from cash-out refinancings. The Bureau 
specifically solicits feedback on whether there is a clear and bright-
line definition of cash-out refinancing that would ensure the public is 
provided with useful data while minimizing the compliance burden 
associated with this potential reporting requirement. The Bureau 
specifically requests comment regarding whether this information would 
assist community groups and consumers in determining whether financial 
institutions were meeting the housing needs of communities, whether 
public officials would use this information to develop housing 
investment programs, and information regarding whether financial 
institutions are providing cash-out refinancings in a discriminatory 
manner. The Bureau also seeks feedback regarding the extent to which 
financial institutions currently differentiate between rate-and-term 
refinancings and cash-out refinancings and, for those that do not 
differentiate

[[Page 51767]]

between them, the projected cost of upgrading policies, procedures, and 
systems to make this differentiation.
The Bureau's Proposal
    In addition to the requests for feedback regarding home improvement 
loans and cash-out refinancings addressed above, the Bureau is 
proposing changes to the loan purpose reporting requirement to conform 
to the proposed extension of coverage to all dwelling-secured mortgage 
loans, as discussed above. Accordingly, the Bureau is proposing to 
modify Sec.  1003.4(a)(3) to provide that financial institutions shall 
report whether the covered loan is, or the application is for, a home 
purchase loan, a home improvement loan, a refinancing, or for a purpose 
other than home purchase, home improvement, or refinancing. The Bureau 
solicits feedback regarding whether this proposed requirement is 
appropriate, regarding the costs and benefits associated with this 
proposed requirements, and regarding whether any additional 
modifications would be appropriate.
    During the Small Business Review Panel process, some small entity 
representatives expressed concern about the applying the HMDA 
requirements to commercial loans.\303\ The Bureau is soliciting 
feedback regarding whether it would be appropriate to modify the 
proposed requirements for commercial transactions, or to exclude 
commercial transactions from HMDA, in the section-by-section analysis 
to proposed Sec.  1003.2(d) and (o) and elsewhere in this proposed 
rule. Should the Bureau determine that an exemption for commercial 
loans is not appropriate, the Bureau solicits feedback regarding 
whether it would be appropriate to add a loan purpose requirement 
applicable to commercial loans or some other method of uniquely 
identifying commercial loans in the HMDA data.
---------------------------------------------------------------------------

    \303\ See Small Business Review Panel Report at 24.
---------------------------------------------------------------------------

    The Bureau is also proposing to modify comment 4(a)(3)-2 to clarify 
that Sec.  1003.4(a)(3) requires a financial institution to report the 
purpose of a covered loan or application and also specifies the order 
of importance if a covered loan or application is for more than one 
purpose. For example, if a covered loan is a home purchase loan as well 
as a home improvement loan or a refinancing, Sec.  1003.3(a)(3) 
requires the institution to report the loan as a home purchase loan. 
This proposed comment clarifies that, if a covered loan is a home 
improvement loan as well as a refinancing, but the covered loan is not 
a home purchase loan, Sec.  1003.4(a)(3) requires the institution to 
report the covered loan as a home improvement loan; and further 
clarifies that, if a covered loan is a refinancing as well as for 
another purpose, such as for the purpose of paying educational 
expenses, but the covered loan is not a home purchase loan or a home 
improvement loan, Sec.  1003.4(a)(3) requires the institution to report 
the covered loan as a refinancing.
    Proposed comment 4(a)(3)-3 clarifies that, if a covered loan is not 
a home purchase loan, a home improvement loan, or a refinancing, Sec.  
1003.4(a)(3) requires a financial institution to report the covered 
loan as for a purpose other than home purchase, home improvement, or 
refinancing. For example, if a covered loan is for the purpose of 
paying educational expenses, the financial institution complies with 
Sec.  1003.4(a)(3) by reporting the covered loan as for a purpose other 
than home purchase, home improvement, or refinancing. Under appendix A, 
proposed instruction 4(a)(3)-1 provides technical instructions 
regarding how to enter the covered loan or application purpose on the 
loan application register.
4(a)(4)
    Current Sec.  1003.4(a)(4) requires financial institutions to 
identify whether the application is a request for a covered 
preapproval. The Bureau is proposing to revise the technical 
instructions related to paragraph 4(a)(4) in appendix A. Proposed 
instruction 4(a)(4)-1.a would provide instructions for reporting 
preapprovals requested. The proposed instruction refers to the 
definition of a preapproval program in Sec.  1003.2(b)(2) and specifies 
that the code should not be used for withdrawals or requests for 
preapprovals that are closed for incompleteness, as these preapprovals 
are not reportable under Regulation C. These instructions would also be 
specified in the instructions for reporting action taken under 
paragraph 4(a)(8) and would be added to the instructions for paragraph 
4(a)(4) merely for clarity and completeness. Current instruction 
I.A.8(a) would be renumbered and revised as instruction 4(a)(4)-1.b, 
which would incorporate a reference to the proposed definition in Sec.  
1003.2(b)(2). Current instruction I.A.8(b) would be renumbered and 
revised as instruction 4(a)(4)-1.c, which would include technical 
revisions. Current instruction I.A.8(c) would be renumbered and revised 
as instruction 4(a)(4)-1.d, which would specify that the category of 
not applicable should be reported for applications for or originations 
of home improvement loans, open-end lines of credit, home-equity lines 
of credit, reverse mortgages, and for purchased loans.
    The proposal would also delete the language in Sec.  1003.4(a)(4) 
relating to whether the request for preapproval was denied or resulted 
in an origination because it is redundant with requirements under 
Sec. Sec.  1003.4(a) and 1003.4(a)(8). The requirement to report action 
taken on preapprovals is currently contained in the reporting 
requirement for action taken under Sec.  1003.4(a)(8) and the 
associated instructions in appendix A. This would continue under the 
proposal. Proposed Sec.  1003.4(a)(4) and the associated instructions 
in appendix A would focus solely on whether the application was a 
request for a preapproval for a home purchase loan.
4(a)(5)
    Section 1003.4(a)(5) of Regulation C requires financial 
institutions to report the property type of the dwelling to which a 
loan or application relates. Appendix A instructions provide that 
property type be reported as either a one-to-four-family dwelling 
(other than manufactured housing), manufactured housing, or a 
multifamily dwelling.
    The Bureau has received feedback that the current reporting 
requirement has led to questions about how to report modular homes, 
which are factory-built but meet local building codes instead of the 
HUD standards for manufactured housing.\304\ In addition, the current 
reporting requirement for property type does not correspond to commonly 
used industry data standards and recordkeeping because it conflates two 
distinct concepts, the property's construction method and the number of 
units in the property.\305\
---------------------------------------------------------------------------

    \304\ Atlanta Hearing, supra note 131; FFIEC FAQs.
    \305\ See MISMO, Version 3.3 of the Residential Reference Model 
(Construction Method Type and Financed Unit Count); Fannie Mae, 
Fannie Mae Implementation Guide for Loan Delivery Data, Appendix A 
(Oct. 29, 2013), https://www.fanniemae.com/content/
technologyrequirements/uldd-implementation-guide-appendix-
a.pdf. Freddie Mac, Freddie Mac Implementation Guide for Loan 
Delivery Data, Appendix A (Jan. 29, 2014), https://
www.freddiemac.com/singlefamily/sell/docs/
FREIGsellingsystemappendix
adatarequirements.pdf.
---------------------------------------------------------------------------

    Proposed Sec.  1003.4(a)(5) replaces the requirement to report 
property type with the requirement to report the construction method 
for the dwelling related to the property identified in Sec.  
1003.4(a)(9). The Bureau believes this change in Regulation C's 
implementation of HMDA may more effectively carry out HMDA's purposes 
and facilitate compliance therewith, by

[[Page 51768]]

providing more detail regarding whether institutions are serving the 
housing needs of their communities and by better aligning reporting to 
industry standards. This proposal is also authorized by the Bureau's 
authority pursuant to HMDA sections 305(a) and 304(b)(6)(J). A 
financial institution would report the construction method of the 
dwelling as site-built or manufactured housing with the proposed 
instructions in appendix A. During the Small Business Review Panel 
process, one small entity representative requested definitions and 
examples of types of construction method.\306\ The proposal revises the 
instructions in appendix A and adds new instructions providing the 
technical details for reporting these data fields. The Bureau believes 
that replacing the current property type reporting requirement with 
construction method will enhance data collected under this part and 
better align it with industry practice.
---------------------------------------------------------------------------

    \306\ See Small Business Review Panel Report at 80.
---------------------------------------------------------------------------

    As discussed below, the Bureau is also proposing to require 
financial institutions to report the total number of dwelling units 
related to the property under Sec.  1003.4(a)(31). The data reported 
under proposed Sec.  1003.4(a)(31), combined with the proposed 
definition of multifamily dwelling discussed above, replace the 
enumeration for multifamily dwellings under Sec.  1003.4(a)(5). The 
Bureau believes that separating these concepts may have benefits for 
analyzing HMDA data. For example, the Bureau understands that there has 
been confusion over reporting home purchase loans that are secured by a 
manufactured home park and multiple manufactured homes on-site, because 
manufactured housing and multifamily dwelling are enumerations of the 
same data point.\307\ Under the proposal, construction method of the 
dwelling could be identified under proposed Sec.  1003.4(a)(5) and the 
number of manufactured homes could be identified under proposed Sec.  
1003.4(a)(31).
---------------------------------------------------------------------------

    \307\ FFIEC, CRA/HMDA Reporter 3 (Dec. 2010) (``It is a common 
misconception that the purchase of an entire mobile home park (e.g., 
the purchase of five or more individual mobile homes) should be 
reported as a multifamily property type. Because each mobile home 
falls within the definition of an individual unit, the property type 
should be reported as manufactured housing.''), https://www.ffiec.gov/hmda/pdf/10news.pdf.
---------------------------------------------------------------------------

    The proposed instructions in appendix A provide that modular 
housing should be reported as site built. The Bureau understands that 
appraisals do not always distinguish between a modular home and a site 
built home, and that for many purposes modular homes are treated like 
site built homes.\308\ There has been confusion as to how to report 
modular housing under current Regulation C, and the proposal is 
intended to facilitate compliance in this area. The proposed 
instructions under appendix A also provide that the use of 
prefabricated components for construction should be reported as site 
built.
---------------------------------------------------------------------------

    \308\ Atlanta Hearing, supra note 131.
---------------------------------------------------------------------------

    The Bureau is proposing to add a new comment under Sec.  
1003.4(a)(5). Proposed comment 4(a)(5)-1 would provide additional 
guidance on identifying and reporting modular homes. Modular homes are 
distinct from manufactured homes, and the Bureau believes the comment 
will facilitate compliance by describing and providing guidance on 
reporting modular homes. The comment notes that modular homes are built 
to local or other recognized building codes instead of the HUD 
manufactured home standards and that they do not bear the identifying 
markers for a manufactured home. The comment also distinguishes between 
on-frame modular homes (which are built on permanent metal chassis 
similar to manufactured homes) and off-frame modular homes (which do 
not have metal chassis). The MISMO data standard treats on-frame and 
off-frame modular home as separate construction method types.\309\ The 
Bureau understands that there are secondary market implications 
affecting the salability of loans secured by on-frame modular 
homes.\310\ The ULDD implementation of the MISMO data standard treats 
all modular homes as site built for purposes of construction method, 
consistent with the proposal.\311\
---------------------------------------------------------------------------

    \309\ See MISMO, Version 3.3 of the MISMO Residential Reference 
Model (Construction Method Type).
    \310\ See Fannie Mae, Fannie Mae Single Family Selling Guide 
Sec.  B2-3-02 (June 24, 2014) (defining any dwelling unit built on a 
permanent chassis as a manufactured home and requiring manufactured 
homes to meet HUD manufactured home construction standards), https://www.fanniemae.com/content/guide/sel062414.pdf.
    \311\ Fannie Mae, Fannie Mae Implementation Guide for Loan 
Delivery Data, Appendix A (Oct. 29, 2013), https://
www.fanniemae.com/content/technologyrequirements/uldd-
implementation-guide-appendix-a.pdf; Freddie Mac, Freddie Mac 
Implementation Guide for Loan Delivery Data, Appendix A (Jan. 29, 
2014), https://www.freddiemac.com/singlefamily/sell/docs/
FREIGsellingsystemappendix
adatarequirements.pdf.
---------------------------------------------------------------------------

    The Bureau also proposes comment 4(a)(5)-2 to clarify how to report 
construction method where a covered loan is secured by more than one 
property. As discussed in the section-by-section analysis of proposed 
Sec.  1003.4(a)(9) and in proposed comment 4(a)(9)-2, if more than one 
property is taken, or in the case of an application, proposed to be 
taken as security for a single covered loan or application, a financial 
institution may either report one of the properties in a single entry 
on its loan application register or report all of the properties using 
multiple entries on its loan application register. Regardless of 
whether the financial institution elects to report the transaction in 
one entry or more than one entry, the information required by Sec.  
1003.4(a)(5) should relate to the property identified under paragraph 
4(a)(9). The Bureau solicits feedback generally on whether the proposed 
revisions are appropriate or whether more detailed enumerations for 
construction method would be appropriate.
4(a)(6)
    HMDA section 304(b)(2) requires the disclosure of the number and 
dollar amount of mortgage loans made to mortgagors who did not, at the 
time of execution of the mortgage, intend to reside in the property 
securing the mortgage loan. Section 1003.4(a)(6) of Regulation C 
requires financial institutions to record the owner-occupancy status of 
the property to which the loan or application relates. Appendix A to 
Regulation C paragraph I.A.6 instructs financial institutions to 
identify the owner-occupancy status as either owner-occupied as a 
principal dwelling, not owner-occupied as a principal dwelling, or not 
applicable. While the Dodd-Frank Act did not amend the sections of HMDA 
relevant to the owner-occupancy status reporting requirement, section 
1094(3)(A)(iv) of the Dodd-Frank Act amended section 304(b) of HMDA to 
permit the disclosure of such other information as the Bureau may 
require. For the reasons discussed below, the Bureau is proposing to 
require financial institutions to report whether a property will be 
used as a principal residence, as a second residence, or as an 
investment property.
    As discussed in part II.A above, providing the public with data 
related to whether properties were occupied by an owner was one of 
Congress's primary goals when HMDA was originally enacted. Information 
about the number of homeowners, absentee landlords, and real estate 
speculators was viewed as necessary to help communities stabilize and 
improve their neighborhoods.\312\ To address these concerns, the Board 
interpreted HMDA section 304(b)(2) to

[[Page 51769]]

require financial institutions to differentiate between loans secured 
by a property intended to be used as a principal or non-principal 
dwelling.\313\ Although this requirement has been refined over time, 
the core requirement--whether or not the property is used as a 
principal dwelling--remains to this day.\314\
---------------------------------------------------------------------------

    \312\ See e.g., Home Mortgage Disclosure Act of 1975, S. Rep. 
94-187, p. 279 (June 6, 1975); Home Mortgage Disclosure Act of 1975, 
H. Rep. 94-561, p. 117 (Oct. 19, 1975).
    \313\ See 41 FR 23933 (June 14, 1976).
    \314\ Financial institutions were originally required to report 
occupancy data indirectly, by identifying the number of loans 
secured by owner-occupied dwellings separately from non-owner 
occupied dwellings, in a column-based format. Id. When the Board 
adopted the register reporting format, financial institutions were 
required to report occupancy status on a record-by-record basis. See 
54 FR 51356 (Dec. 15, 1989). Additional instructions and commentary 
were added over time to clarify and refine the requirement. See 
e.g., 60 FR 63393, 63399 (Dec. 11 1995) (adopting relevant 
commentary); 67 FR 7222, 7239 (Feb. 15, 2002) (adding additional 
instructions).
---------------------------------------------------------------------------

    While the current requirement historically has furthered the 
purposes of HMDA, several considerations suggest that more granular 
information related to non-principal dwellings may be necessary. First, 
over the past several years the increasing popularity of vacation and 
investment properties has affected the housing supply and economies of 
many communities. Evidence suggests that the increasing popularity of 
vacation homes has contributed to a lack of affordable housing in 
several areas.\315\ In addition to affecting housing affordability, the 
economic effect of vacation home purchases is often complex, which 
presents local governments with unique challenges.\316\ While the 
prevalence of vacation homes presents communities with several unique 
economic issues, the purchase of homes by investors (i.e., persons who 
do not occupy purchased properties, even as vacation homes) presents 
communities with an entirely different set of challenges. Recent 
studies have demonstrated that the speculative purchase of homes by 
investors contributed to the housing bubble that preceded the financial 
crisis, especially in the States that were most affected by the 
downturn.\317\ These investor purchases may be a concern for urban 
areas, many of which are experiencing a sharp increase in such 
purchases.\318\ Thus, information related to second homes and 
investment properties may help communities and local officials develop 
policies tailored to the unique characteristics associated with these 
separate segments of the mortgage market.
---------------------------------------------------------------------------

    \315\ See Deborah Halliday, You Can't Eat the View: The Loss of 
Housing Affordability in the West, The Rural Collaborative pp. 9-10 
(2003), available at https://www.theruralcollaborative.org/files/you%20can't%20eat%20the%20view.pdf.
    \316\ See Linda Venturoni, The Economic and Social Effects of 
Second Homes--Executive Summary, Northwest Colorado Council of 
Governments pp. 4-5 (June 2004) (stating that as the number of 
second homes in a community increases, the more the local economy 
will shift towards serving the needs of the second homes).
    \317\ See Andrew Haughwout, Donghoon Lee, Joseph Tracy, and 
Wilbert van der Klaauw, Real Estate Investors, the Leverage Cycle, 
and the Housing Market Crisis, Fed. Reserve Bank of New York Staff 
Report No.514 p. 21 (Sept. 2011).
    \318\ See e.g. Allan Mallach, Investors and Housing Markets in 
Las Vegas: A Case Study, Urban Institute pp. 32-34 (June 2013) 
(discussing that foreign real estate investors in Las Vegas are 
crowding out potential domestic purchasers); Robert D. Cruz and 
Ebony Johnson, Research Notes on Economic Issues: Impact of Real 
Estate Investors on Local Buyers, Miami-Dade County Regulatory and 
Economic Resources Dept. (Sept. 2013) (analyzing how domestic first-
time home purchasers are at a competitive disadvantage compared to 
foreign real estate investors); Kathleen M. Howley, Families Blocked 
by Investors from Buying U.S. Homes, Bloomberg, Oct. 24, 2013 
(discussing that the rise of all-cash purchases, among other things, 
has prevented many potential homeowners from purchasing homes).
---------------------------------------------------------------------------

    Furthermore, the mortgage market has evolved to the point where 
lending policies and procedures differentiate between principal 
dwellings, second homes, and investment properties. Financial 
institutions and investors often apply underwriting criteria tailored 
to each property type.\319\ Furthermore, large and small lenders often 
use marketing specifically targeting potential purchasers of vacation 
or investment properties, and many institutions specialize in this type 
of lending. In addition, mortgage loan pricing often varies based on 
whether the property will be used as a principal, second, or investment 
property.\320\ Thus, updating the reporting requirements related to 
second or investment properties may be necessary to ensure that the 
reported data is a useful reflection of the current mortgage market.
---------------------------------------------------------------------------

    \319\ See e.g., Fannie Mae, Fannie Mae Single-Family Selling 
Guide, Chapter B2-3 (October 22, 2013), https://www.fanniemae.com/content/guide/sel102213.pdf; Freddie Mac, Freddie Mac Single-Family 
Seller/Servicer Guide, Vol. I, Chapters 22.22 and 22.22.1, available 
at https://www.freddiemac.com/sell/guide/.
    \320\ See e.g., Fannie Mae, Fannie Mae Single-Family Selling 
Guide, Chapter B2-1.2-02 and B2-1.2-03 (October 22, 2013), available 
athttps://www.fanniemae.com/content/guide/sel102213.pdf.
---------------------------------------------------------------------------

    When these considerations are taken together, it appears that the 
concerns that motivated the original distinction between principal and 
non-principal dwellings now exist with respect to second homes and 
investment properties. For these reasons, to implement section 
304(b)(2) of HMDA and pursuant to its authority under sections 305(a) 
and 304(b)(6)(J) of HMDA, the Bureau is proposing to modify Sec.  
1003.4(a)(6) to provide that a financial institution shall report 
whether the property identified in Sec.  1003.4(a)(9) is or will be 
used by the applicant or borrower as a principal residence, as a second 
residence, or as an investment property. The Bureau solicits feedback 
regarding whether this proposed modification is appropriate. While the 
Bureau believes that financial institutions currently differentiate 
between principal, second, and investment properties for underwriting, 
pricing, and other purposes, the Bureau solicits feedback regarding 
whether, and the extent to which, financial institutions do not 
recognize this differentiation, and whether financial institutions 
would encounter unique costs or burdens associated with this proposed 
requirement.
    During the Small Business Review Panel process, some small entity 
representatives expressed concerns about differentiating between 
principal, second, and investment properties for reporting 
purposes.\321\ The Small Business Review Panel recommended that the 
Bureau solicit public comment on the challenges associated with 
requiring financial institutions to report owner-occupancy status as 
including reporting second home and investment uses, rather than just 
principal residence occupancy.\322\ Consistent with the Small Business 
Review Panel's recommendation, the Bureau requests feedback regarding 
the challenges small financial institutions currently face when 
reporting owner-occupancy status, and the additional costs and burdens 
that small financial institutions would face if the current reporting 
requirement were modified to require reporting of whether a property is 
or will be used by the applicant or borrower as a second residence or 
investment property.
---------------------------------------------------------------------------

    \321\ See Small Business Review Panel Report at 33, 42, and 100.
    \322\ See id. at 42.
---------------------------------------------------------------------------

    Proposed comment 4(a)(6)-2 clarifies that, for purposes of Sec.  
1003.4(a)(6), an applicant or borrower can have only one principal 
residence at a time. Thus, a vacation or other second home would not be 
a principal residence. However, if an applicant or borrower buys or 
builds a new dwelling that will become the applicant's or borrower's 
principal residence within a year or upon the completion of 
construction, the new dwelling is considered the principal residence 
for purposes of applying this definition to a particular transaction.
    Proposed comment 4(a)(6)-3 explains that, for purposes of Sec.  
1003.4(a)(6), a property is an applicant's or borrower's second 
residence if the property is or will be occupied by the applicant or

[[Page 51770]]

borrower for a portion of the year and is not the applicant's or 
borrower's principal residence. For example, if a person purchases a 
property, occupies the property for a portion of the year, and rents 
the property for the remainder of the year, the property is a second 
residence for purposes of Sec.  1003.4(a)(6). Similarly, if a couple 
occupies a property near their place of employment on weekdays, but the 
couple returns to their principal residence on weekends, the property 
near the couple's place of employment is a second residence for 
purposes of Sec.  1003.4(a)(6).
    Proposed comment 4(a)(6)-4 clarifies that, for purposes of Sec.  
1003.4(a)(6), a property is an investment property if the owner does 
not occupy the property. Similarly, if a person purchases a property, 
does not occupy the property, and does not generate income by renting 
the property, but intends to generate income by selling the property at 
some point in time, the property is an investment property for purposes 
of Sec.  1003.4(a)(6). Section 1003.4(a)(6) requires a financial 
institution to identify a property as an investment property if the 
owner does not occupy the property, even if the owner does not consider 
the property as owned for investment purposes. Proposed comment 
4(a)(6)-4 also provides several illustrative examples. Under appendix 
A, proposed instruction 4(a)(6)-1 provides technical instructions 
regarding how to enter the occupancy type on the loan application 
register by stating that financial institutions should enter one of 
four codes, and identifying which codes are applicable to the covered 
loan or application.
    As discussed in the section-by-section analysis to proposed Sec.  
1003.4(a)(9) and in proposed comment 4(a)(9)-2, if more than one 
property is taken, or in the case of an application, proposed to be 
taken as security for a single covered loan or application, a financial 
institution may report one of the properties in a single entry on its 
loan application register or report all of the properties using 
multiple entries on its loan application register. Regardless of 
whether the financial institution elects to report the transaction in 
one entry or more than one entry, the information required by Sec.  
1003.4(a)(6) should relate to the property identified under Sec.  
1003.4(a)(9). The Bureau is also proposing comment 4(a)(6)-5 to clarify 
how to report the information required by proposed a covered loan 
secured by, or in the case of an application, proposed to be secured 
by, more than one property. The Bureau solicits feedback generally on 
whether the proposed revisions are appropriate or whether more detailed 
enumerations for construction method would be appropriate.
    As discussed in part II.B above, one of the Bureau's objectives in 
this proposed rule is to reduce the fixed and ongoing costs associated 
with reporting HMDA data by aligning to the extent practicable to 
MISMO. MISMO version 3.3 currently defines an investment property by 
reference to whether the property will generate rental income. The 
Bureau is concerned that MISMO's definition does not encompass all 
properties that commonly would be considered investment properties. For 
example, a person that purchases a property for a family member to 
reside in, with the expectation of generating income upon the sale of 
the property in the future, may consider the property an investment 
property. Similarly, a person that purchases a property to renovate and 
sell, but does not reside in the property, may also view the property 
as an investment property. However, the properties described in these 
scenarios would not be considered investment properties under the 
definition in MISMO version 3.3. As a result, to provide clear 
reporting rules while aligning to MISMO, proposed instruction 4(a)(6)-1 
provides one instruction for reporting investment properties that 
generate income by the rental of the property, and another instruction 
for reporting investment properties that do not generate income by the 
rental of the property. The Bureau believes that this proposed 
instruction will align to MISMO while accommodating financial 
institutions that are reporting investment properties that are not 
recognized as such under MISMO, but solicits feedback on this proposed 
approach, and solicits feedback regarding whether any additional 
clarifications or changes are needed to facilitate compliance.
    Section 1003.4(a)(6) is proposed to implement section 304(b)(2) of 
HMDA, and is also proposed pursuant to the Bureau's authority under 
sections 305(a) and 304(b)(6)(J) of HMDA. The Bureau believes requiring 
this level of detail about residency status is a reasonable 
interpretation of HMDA section 304(b)(2). Furthermore, for the reasons 
given above, the Bureau believes this change is necessary and proper to 
effectuate HMDA's purpose, because this information will help determine 
whether financial institutions are serving the housing needs of their 
communities and will assist in decisions regarding the distribution of 
public sector investments. This proposal may also facilitate compliance 
with HMDA, by aligning to the extent practicable to MISMO standards, 
thereby reducing costs associated with HMDA reporting.
4(a)(7)
    Section 304(a) and (b) of HMDA requires the disclosure of the 
dollar amount of loans and applications subject to the statute.\323\ 
Section 1003.4(a)(7) of Regulation C requires financial institutions to 
report the amount of the loan or the amount applied for. Paragraph 
I.A.7 in appendix A instructs financial institutions to report loan 
amount rounded to the nearest thousand and clarifies how to determine 
and report loan amount with respect to various types of transactions. 
Comments 4(a)(7)-1 through -4 provide additional explanation concerning 
how loan amount is to be determined and reported.
---------------------------------------------------------------------------

    \323\ 12 U.S.C. 2803(a), (b).
---------------------------------------------------------------------------

    The Bureau is proposing several technical, conforming, and 
clarifying modifications to Sec.  1003.4(a)(7) and its corresponding 
instructions and comments. These proposals include moving into the text 
of Sec.  1003.4(a)(7) several requirements currently found in 
instructions and comments, and moving into the commentary several 
explanations and clarifications currently found in appendix A. The 
Bureau is also proposing to modify the amount reported for an open-end 
line of credit and clarify what amount should be reported for a reverse 
mortgage. Finally, the Bureau is proposing that loan amount be reported 
in dollars rather than rounded to the nearest thousand.
    Proposed Sec.  1003.4(a)(7) requires financial institutions to 
report the amount of the covered loan or the amount applied for, as 
applicable. Proposed Sec.  1003.4(a)(7)(i) provides that for a closed-
end mortgage loan, other than a purchased loan or an assumption, a 
financial institution shall report the amount to be repaid as disclosed 
on the legal obligation. Proposed Sec.  1003.4(a)(7)(i) further 
provides that, for a purchased closed-end mortgage loan or an 
assumption of a closed-end mortgage loan, the financial institution 
shall report the unpaid principal balance at the time of purchase or 
assumption. Proposed Sec.  1003.4(a)(7)(i) incorporates requirements 
currently set forth in paragraph I.A.7(a) and (b) of appendix A and 
comment 4(a)(7)-4.
    Proposed Sec.  1003.4(a)(7)(ii) provides that for an open-end line 
of credit, including a purchased open-end line of credit or an 
assumption of an open-end line of credit, a financial institution shall 
report the amount of credit available to the borrower under the

[[Page 51771]]

terms of the plan. The Bureau proposes to collect the full line, rather 
than only the portion intended for home purchase or improvement, as is 
currently required by paragraph I.A.7(d) of appendix A and comment 
4(a)(7)-3. The Bureau believes that this modification will produce more 
consistent and reliable data on open-end lines of credit and will 
reduce burdens on financial institutions associated with determining 
the purposes of open-end lines of credit. This proposed provision also 
clarifies how loan amount should be determined for purchases and 
assumptions of open-end lines of credit.
    Proposed Sec.  1003.4(a)(7)(iii) provides that, for a reverse 
mortgage, the amount of the covered loan is the initial principal 
limit, as determined pursuant to section 255 of the National Housing 
Act (12 U.S.C. 1715z-20) and implementing regulations and mortgagee 
letters prescribed by HUD. Regulation C is currently silent as to how 
loan amount should be determined for a reverse mortgage. The Bureau 
believes that industry is familiar with HUD's Home Equity Conversion 
Mortgage Insurance Program and its implementing regulations and 
mortgagee letters and that this modification will produce more 
consistent and reliable data on reverse mortgages. The Bureau solicits 
feedback regarding whether this proposed modification is appropriate 
and specifically solicits feedback on the determination of loan amount 
for non-federally insured reverse mortgages.
    Proposed instruction 4(a)(7)-1 provides that the amount of the 
covered loan or the amount applied for, as applicable, shall be 
reported in dollars. Currently, loan amount is reported rounded to the 
nearest thousand. The Dodd-Frank Act requirement that financial 
institutions report property value will allow the calculation of loan-
to-value ratio, an important underwriting variable, but rounded loan 
amount will render these calculations less precise, undermining their 
utility to analyses for HMDA purposes. Accordingly, the Bureau proposes 
that loan amount be reported in dollars. The Bureau solicits feedback 
on these proposals.
    The Bureau proposes to delete paragraph I.A.7(a) and (b) in 
appendix A and comment 4(a)(7)-4 because these requirements have been 
incorporated into proposed Sec.  1003.4(a)(7)(i). The Bureau proposes 
to delete the remainder of the instructions set forth in appendix A 
relating to paragraph 4(a)(7) and incorporate them into proposed new 
comments, as discussed below.
    The Bureau is proposing technical changes and minor wording changes 
to comment 4(a)(7)-1 to conform the comment to proposed changes in 
Sec.  1003.4(a)(7). Proposed comment 4(a)(7)-2 explains how loan amount 
is to be determined for an application that was denied or withdrawn and 
incorporates, with minor wording changes, paragraph I.A.7(f) of 
appendix A. Proposed comment 4(a)(7)-3 explains how loan amount is to 
be determined for a multi-purpose loan and is renumbered from current 
comment 4(a)(7)-2, modified to conform to proposed changes concerning 
reporting loan amount for home-equity lines of credit. Proposed comment 
4(a)(7)-4 is renumbered from current comment 4(a)(7)-3 and incorporates 
paragraph I.A.7(d) of appendix A, modified to conform to proposed 
changes concerning reporting loan amount for home-equity lines of 
credit. Proposed comment 4(a)(7)-5 describes how to determine loan 
amount for a refinancing and incorporates with some modifications 
paragraph I.A.7(e) of appendix A. Proposed comment 4(a)(7)-6 describes 
how to determine loan amount for a home improvement loan and 
incorporates with some modifications paragraph I.A.7(c) of appendix A.
4(a)(8)
    Regulation C Sec.  1003.4(a)(8) requires financial institutions to 
report the action taken on applications covered by HMDA and the date 
the action was taken. The proposal would revise the commentary under 
Sec.  1003.4(a)(8) with respect to rescinded loans, repurchased loans, 
conditional approvals, and applications received by third parties. The 
proposal also makes technical corrections and minor wording changes to 
the instructions in appendix A to use terminology consistent with other 
changes in the proposal.
Rescinded Loans
    Regulation Z provides for a right to rescind certain credit 
transactions in which a security interest will be retained or acquired 
in a consumer's principal dwelling. 12 CFR 1026.15(a), 1026.23(a). 
Comment 4(a)(8)-2 permits institutions to report action taken for 
rescinded transactions as either an origination or an application 
approved but not accepted. The Board adopted this comment in 1995, 
noting that it believed a strict requirement was not warranted in light 
of the small number of loans rescinded.\324\ The proposal would revise 
the comment to require institutions to report rescinded transactions as 
applications approved but not accepted if a borrower rescinds a 
transaction after closing and before a financial institution is 
required to submit its loan application register containing the 
information for the transaction under Sec.  1003.5(a). The Bureau 
believes that approved but not accepted more accurately reflects the 
outcome of a rescinded transaction, that having all such transactions 
reported with the same action taken will improve data consistency, and 
that a bright-line rule provides clear guidance to financial 
institutions. The Bureau solicits feedback on how frequently rescission 
is exercised and whether the proposed change is appropriate.
---------------------------------------------------------------------------

    \324\ 60 FR 63393, 63396 (Dec. 11, 1995).
---------------------------------------------------------------------------

Conditional Approvals
    Current comment 4(a)(8)-4 describes how institutions should report 
action taken for conditional approvals that are issued to applicants. 
The commentary generally provides that financial institutions should 
report loans approved subject to underwriting conditions which are not 
met should be reported as a denial, but it also provides that certain 
customary loan commitment or loan-closing conditions are not 
underwriting conditions. Additional guidance on this topic had been 
published in the FFIEC FAQs.\325\
---------------------------------------------------------------------------

    \325\ FFIEC FAQs.
---------------------------------------------------------------------------

    A participant at the Board's 2010 Board HMDA Hearings stated that 
existing guidance on how to report action taken for conditional 
approvals was not sufficiently clear and current business practices 
often involve issuing conditional approvals based on an automated 
underwriting system result subject to several conditions.\326\ The 
Bureau has also received feedback that financial institutions 
experience compliance burden in attempting to determine whether certain 
conditions are underwriting conditions or customary commitment or 
closing conditions, and in turn what the appropriate action taken code 
is for reporting purposes.
---------------------------------------------------------------------------

    \326\ See Washington Hearing, supra note 130.
---------------------------------------------------------------------------

    The proposal would renumber current comment 4(a)(8)-4 as 4(a)(8)-5 
and revise it to expand the examples of conditions that are considered 
customary commitment or closing conditions and those that are 
considered underwriting or creditworthiness conditions. The proposal 
also revises the comment to provide examples of scenarios when 
conditionally approved applications could be reported as withdrawn, 
closed for incompleteness, and approved but not accepted. The

[[Page 51772]]

Bureau believes that the revised comment will provide more clarity on 
reporting action taken for loans and applications that involve 
conditional approvals.
    Proposed comment 4(a)(8)-5 would add several examples of how to 
report action taken when a conditional approval is issued. If the 
approval is conditioned on satisfying underwriting or creditworthiness 
conditions and they are not met, the institution reports the action 
taken as a denial. If, however, the conditions involve submitting 
additional information about creditworthiness that the institution 
needs to make the credit decision, and the institution has sent a 
written notice of incompleteness under Regulation B and the applicant 
did not respond within the period of time specified in the notice, the 
institution reports the action taken as file closed for incompleteness. 
If the conditions are solely customary commitment or closing conditions 
and the conditions are not met, the institution would report the action 
taken as approved but not accepted. If all the conditions 
(underwriting, creditworthiness, or customary commitment or closing 
conditions) are satisfied and the institution agrees to extend credit 
but the covered loan is not originated, the institution would report 
the action taken as application approved but not accepted. If the 
applicant expressly withdraws before satisfying all underwriting or 
creditworthiness conditions and before the institution denies the 
application or closes the file for incompleteness, the institution 
reports the action taken as application withdrawn. If all underwriting 
and creditworthiness conditions have been met, and the conditions are 
solely customary commitment or closing conditions and the applicant 
expressly withdraws before the covered loan is originated, the 
institution would report the action taken as application approved but 
not accepted.
    Proposed comment 4(a)(8)-5 would provide additional examples of 
customary commitment or closing conditions. These examples include: 
acceptable title insurance binder; clear termite inspection; a 
subordination agreement from another lienholder; and where the 
applicant plans to use the proceeds from the sale of one home to 
purchase another; a settlement statement showing adequate proceeds from 
the sale. The existing examples of a clear-title requirement and 
acceptable property survey are retained.
    Proposed comment 4(a)(8)-5 would also provide examples of 
underwriting or creditworthiness conditions. These examples include: 
conditions that constitute a counter-offer; satisfactory debt-to-income 
ratio or loan-to-value ratio; determination of the need for private 
mortgage insurance; satisfactory appraisal requirement; or verification 
or confirmation that an applicant meets underwriting conditions; 
including documentation of income or assets.
    These additions in proposed comment 4(a)(8)-5 are adapted and 
developed from the FFIEC FAQs, as well as from feedback received by the 
Bureau. The Bureau believes these additions are appropriate, but 
solicits feedback on this conclusion and whether any other examples 
would be appropriate.
Applications Received by Third Parties
    The proposal adds comment 4(a)(8)-6 to provide guidance on how 
financial institutions should report applications involving more than 
one institution. The comment cross-references comment 4(a)-4 regarding 
such applications.
Other Revisions
    The proposal makes technical corrections and minor wording changes 
to several comments. Current comments 4(a)(8)-5, -6, and -7 are 
renumbered as comments 4(a)(8)-7, -8, and -9, respectively, and are 
revised to use terminology consistent with other changes in the 
proposal. Proposed comment 4(a)(8)-4 directs financial institutions to 
refer to proposed comment 4(a)-6 regarding reporting requirements when 
a covered loan is repurchased by the originating financial institution.
4(a)(9)
    As discussed in detail below, HMDA, as implemented through 
Regulation C, requires financial institutions to report certain 
information about the location of the property related to most reported 
loans and applications. Specifically, Regulation C requires financial 
institutions to report the MSA or MD, State, county, and census tract 
of the property related to most reported loans or applications.\327\
---------------------------------------------------------------------------

    \327\ See Sec.  1003.4(a)(9).
---------------------------------------------------------------------------

    Section 1094(3)(A)(iv) of the Dodd-Frank Act amended HMDA to 
authorize the Bureau, as it may determine to be appropriate, to collect 
the parcel number that corresponds to the real property pledged or 
proposed to be pledged as collateral. This parcel number would 
specifically identify the property securing or, in the case of an 
application, proposed to secure each covered loan. As amended by the 
Dodd-Frank Act, HMDA also directs the Bureau, with the assistance of 
certain other agencies and persons as the Bureau deems appropriate, to 
``develop or assist in the improvement of, methods of matching 
addresses and census tracts to facilitate compliance by depository 
institutions in as economical a manner as possible with the 
requirements of [HMDA].''\328\ The Bureau proposes to implement the 
Dodd-Frank Act authorization to collect a parcel number as discussed 
below.
---------------------------------------------------------------------------

    \328\ Dodd-Frank Act section 1094(6); 12 U.S.C. 2806(a)(1).
---------------------------------------------------------------------------

4(a)(9)(i)
    Currently, Regulation C does not require financial institutions to 
report information specifically identifying the property securing or, 
in the case of an application, proposed to secure the covered loan. 
Rather, as discussed in detail below, Regulation C requires financial 
institutions to report the MSA or MD, State, county, and census tract 
of the property related to most reported loans or applications.\329\ 
The Dodd-Frank Act amended HMDA to authorize the Bureau to collect the 
``parcel number that corresponds to the real property'' securing the 
covered loan or, in the case of an application, proposed to secure the 
covered loan.\330\ As discussed below, there is no universal parcel 
number system; therefore, the Bureau believes it is reasonable to 
interpret the Dodd-Frank Act amendment to refer to information that 
uniquely identifies a dwelling pledged or proposed to be pledged as 
collateral (parcel identifier). Proposed Sec.  1003.4(a)(9)(i) is also 
authorized pursuant to the Bureau's HMDA section 305(a) authority to 
provide for adjustments because, for the reasons given below, the 
Bureau believes the proposal is necessary and proper to effectuate 
HMDA's purposes and facilitate compliance therewith. For the reasons 
discussed below, the Bureau proposes to require financial institutions 
to report the postal address of the property securing the covered loan 
or, in the case of an application, proposed to secure the covered loan. 
The Bureau also is exploring operational improvements that it can 
achieve using the reported postal address to reduce financial 
institutions' property-location reporting burden.
---------------------------------------------------------------------------

    \329\ See Sec.  1003.4(a)(9).
    \330\ HMDA section 304(b)(6)(H) authorizes the Bureau to include 
in the HMDA data collection ``the parcel number that corresponds to 
the real property pledged or proposed to be pledged as collateral.'' 
12 U.S.C. 2803(b)(6)(H).
---------------------------------------------------------------------------

    Including a parcel identifier in the HMDA data would provide many 
benefits that would further HMDA's purposes. Researchers and community

[[Page 51773]]

advocates urged the Board to adopt a parcel identifier during the 
Board's 2010 Hearings.\331\ Collecting a parcel identifier linked to 
the property's location, like postal address, may address many of the 
challenges associated with the current property location information 
reported in HMDA. Currently, census tract is the most granular property 
location information reported in HMDA. Census tract information enables 
public officials and members of the public to identify lending trends 
in geographic areas. Census tracts, however, present challenges as a 
unit of analysis because they vary in geographic size and may change 
every ten years.\332\ In addition, analysts are not able to evaluate 
the HMDA data using geographic divisions other than those reported in 
HMDA (e.g., census tract block) and, as a result, experience difficulty 
identifying more localized lending trends.
---------------------------------------------------------------------------

    \331\ See, e.g., Washington Hearing, supra note 130 (remarks of 
Lisa Rice, Vice President, National Fair Housing Alliance).
    \332\ See, e.g., United States Census Bureau, Geographic Terms 
and Concepts-Census Tract, https://www.census.gov/geo/reference/gtc/
gtcct.html.
---------------------------------------------------------------------------

    With more specific information about the location of a property, 
the Bureau and other agencies would be able to evaluate and, for 
example, issue publicly available summary reports evaluating HMDA data 
based on different geographic divisions than census tract. These data 
and reports may facilitate a better understanding of lending trends in 
geographic divisions smaller than census tract. Geographic areas that 
would benefit from special public or private sector investment may be 
identified with greater precision. These data and reports may also 
enable more precise analysis of lending patterns to identify potential 
fair lending redlining concerns.
    Including a parcel identifier linked to the location of a property, 
like postal address, in the HMDA data may also present opportunities 
for the Bureau to reduce the burden for financial institutions 
associated with the current property location reporting. The Bureau 
understands from industry feedback that ``geocoding,'' (i.e., providing 
the census tract, MSA or MD, county and State of a property) is a 
challenging and costly aspect of HMDA reporting. Financial institutions 
report frequent examination errors relating to geocoding. The Bureau 
believes that the Dodd-Frank Act's authorization to collect a parcel 
identifier and directive to facilitate economical compliance with 
matching addresses and census tracts may provide a unique opportunity 
to improve the reporting process. The Bureau is exploring operational 
changes that it may achieve using the reported postal address that 
would reduce the burden associated with geocoding. For example, the 
Bureau may create a system where a financial institution reports only 
the postal address and the Bureau provides the financial institution 
with the census tract, county, MSA or MD, and State. The Bureau 
believes that these potential operational changes, if achieved, would 
be a significant benefit to collecting postal address. If the Bureau is 
not able to achieve these operational changes, the Bureau may not elect 
to finalize the proposal to collect postal address, but likely would 
finalize the proposal discussed below in the section-by-section 
analysis of proposed Sec.  1003.4(a)(9)(ii) to continue to collect the 
currently required property location information (State, MSA or MD, 
County, and census tract).
    In addition, a parcel identifier would allow for the identification 
of multiple loans secured by the same property, which would allow for 
better understanding of the amount of equity retained in that property 
over time. Had these data been available leading up to the financial 
crisis, public officials may have been able to see the extent to which 
borrowers used up their equity through rapid refinancings. In addition, 
they would have been able to identify which financial institutions were 
offering these refinancings, which were often unsound.
    Collecting a parcel identifier presents a number of practical 
challenges. Currently, no universal standard exists for identifying a 
property so that it can be linked to related mortgage data. There is no 
single authoritative source that delivers or maintains parcel 
numbering. Parcel data are collected and maintained by individual local 
governments with limited State or Federal involvement. Local 
jurisdictions do not use a standard way to identify properties. In 
addition, local parcel data are not easily linked to the location of 
the property, which, as discussed above, substantially amplifies the 
usefulness of a parcel identifier. Both the postal address and 
geospatial coordinates of a property are linked to the location of the 
property and uniquely identify most properties. However, there may be 
inaccuracies associated with both postal address and geospatial 
coordinates. For example, neither the postal address nor the geospatial 
coordinates may be available at the time of origination for properties 
located in new developments. In addition, both postal address and 
geospatial coordinates present standardization issues. Financial 
institutions may not collect and record postal address in the same 
format. Likewise, financial institutions may not use the same methods 
for collecting and recording geospatial coordinates. The Bureau 
understands that financial institutions currently collect postal 
address during the mortgage origination and application process if the 
postal address is available, but that not all financial institutions 
collect geospatial coordinates.
    In addition to the practical challenges discussed above, the Bureau 
recognizes that including a parcel identifier in the HMDA data raises 
privacy concerns because a parcel identifier, like a postal address, 
can easily be used to identify a borrower. The Bureau is sensitive to 
the privacy implications of including postal address in the HMDA data 
and has considered these implications carefully.\333\
---------------------------------------------------------------------------

    \333\ For discussion of the Bureau's approach to protecting 
applicant and borrower privacy in light of the goals of HMDA, see 
part II.C, above. As discussed in part II.C, the Bureau's assessment 
of the risks to privacy interests created by the disclosure of HMDA 
data and the benefits of such disclosure under its balancing test is 
ongoing. Because property address can be used to directly identify 
individual borrowers, however, the Bureau anticipates that property 
address would not be made available to the general public.
---------------------------------------------------------------------------

    The Bureau believes that it may be appropriate to collect a parcel 
identifier linked to the location of a property, given the potential 
benefits of such information to the purposes of HMDA. Collecting postal 
address may be the least burdensome way to obtain a parcel identifier 
because financial institutions generally collect postal addresses 
during the application and origination process.
    Accordingly, pursuant to its authority under HMDA sections 305(a) 
and 304(b)(6)(H), the Bureau proposes Sec.  1003.4(a)(9)(i), which 
provides that a financial institution is required to report the postal 
address of the property securing or, in the case of an application, 
proposed to the covered loan. Proposed Sec.  1003.4(a)(9)(i) applies to 
all reported covered loans and applications secured by or, in the case 
of an application, proposed to be secured by any type of manufactured 
housing. As the Bureau explains further in the section-by-section 
analysis of proposed Sec.  1003.4(a)(29), the Bureau believes that it 
is reasonable to implement HMDA through Regulation C to treat mortgage 
loans secured by all manufactured homes, regardless of the dwelling's 
legal classification under State law, consistently. The Bureau further 
believes that collecting the postal address of all covered loan secured 
by (and applications for covered loans proposed to be secured by) any

[[Page 51774]]

manufactured home is necessary and proper to effectuate HMDA's purposes 
and facilitate compliance therewith. The Bureau solicits feedback 
regarding whether to collect a parcel identifier generally and whether 
postal address is the appropriate way to collect a parcel identifier.
    During the Small Business Review Panel process, small entity 
representatives expressed concerns about the challenges of implementing 
a parcel identifier for entries that do not result in an 
origination.\334\ Consistent with that feedback, the Bureau proposes 
instructions in appendix A that allow a financial institution to omit 
certain of the required data fields if aspects of the property's postal 
address are not known. The Small Business Review Panel recommended that 
the Bureau solicit feedback on whether to require reporting of a parcel 
identifier for all entries or only for originations and purchases.\335\ 
Consistent with that recommendation, the Bureau solicits feedback on 
whether to require reporting of a parcel identifier for all entries.
---------------------------------------------------------------------------

    \334\ See, e.g., Small Business Review Panel Report at 39.
    \335\ Id.
---------------------------------------------------------------------------

4(a)(9)(ii)
    Under HMDA and Regulation C, a financial institution is required to 
report the location of the property to which the covered loan or 
application relates by MSA or MD; State; county; and census tract if 
the loan is related to a property in an MSA or MD in which the 
financial institution has a home or branch office.\336\ In addition, 
Sec.  1003.4(e) requires banks and savings associations that are 
required to report data on small business, small farm, and community 
development lending under regulations that implement the CRA to collect 
the location of property located outside MSAs and MDs in which the 
institution has a home or branch office or outside of any MSA. Section 
I.C.3 of appendix A directs financial institutions to enter ``not 
applicable'' for census tract if the property is located in a county 
with a population of 30,000 or less. The Bureau proposes to renumber 
existing Sec.  1003.4(a)(9) as Sec.  1003.4(a)(9)(ii) and to make 
certain nonsubstantive technical modifications for clarification. The 
Bureau does not propose any changes to Sec.  1003.4(e). The Bureau 
solicits feedback on whether the proposal is appropriate generally and 
on the benefits and burdens of the proposal.
---------------------------------------------------------------------------

    \336\ See Section 1003.4(a)(9); HMDA section 304(a)(2). A for-
profit mortgage-lending institution is deemed to have a branch 
office in an MSA or MD if in the preceding calendar year it received 
applications for, originated, or purchased five or more home 
purchases loans, home improvement loans, or refinancings related to 
property located in that MSA or MD, respectively. See Section 1003.2 
(definition of branch office).
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    The Bureau has received feedback from industry that reporting 
property location information is a challenging and costly aspect of 
HMDA reporting. As discussed above, the Bureau is exploring ways that 
it can reduce the burden associated with geocoding, such as operational 
changes that may enable the Bureau to perform geocoding for financial 
institutions. For example, the Bureau may create a system where a 
financial institution reports only the postal address and the Bureau 
provides the financial institution with the census tract, county, MSA 
or MD, and State. As discussed above, if the Bureau is not able to 
achieve these operational changes, the Bureau may not elect to finalize 
the proposal to collect postal address, but likely would finalize the 
proposal to continue to collect the currently required property 
location information (census tract, county, MSA or MD, and State).
    In addition, the Bureau understands that this potential operational 
change raises questions. Such questions include whether a financial 
institution would be responsible for the accuracy of the information 
provided by the Bureau and whether a financial institution would be 
responsible for geocoding an entry if the Bureau's geocoding system 
returned an error. The Bureau solicits feedback on whether such an 
operational change would alleviate burden and on whether such an 
operational change is appropriate generally.
    During the Small Business Review Panel, small entity 
representatives discussed the potential operational change related to 
geocoding.\337\ Small entity representatives generally supported the 
idea of shifting some of the burden of geocoding to the Bureau or other 
Federal agencies. Several small entity representatives stated that 
geocoding was not problematic for them. Some small entity 
representatives shared their thoughts on the type of loans or 
properties that present challenges in geocoding, including open-end 
lines of credit, new construction properties, and rural properties. One 
small entity representative stated that geocoding is the largest source 
of its reporting errors. Small entity representatives also raised 
questions about whether the financial institution or the Bureau would 
be responsible for errors if the Bureau geocoded the loans.\338\ The 
Panel supported the Bureau's suggested operational changes related to 
geocoding.\339\
---------------------------------------------------------------------------

    \337\ See Small Business Review Panel Report at 34.
    \338\ See id.
    \339\ See id.
---------------------------------------------------------------------------

Covered Loans Related to Multiple Properties
    Comments 4(a)(9)-1 and -2 clarify a financial institution's 
responsibilities when reporting a loan that relates to more than one 
property. Comment 4(a)(9)-1 discusses how to report a home improvement 
loan or a refinancing of a home improvement loan that relates to more 
than one property. Comment 4(a)(9)-2 discusses how to report a home 
purchase loan or a refinancing of a home purchase loan that relates to 
more than one property. In light of the Bureau's proposal to expand the 
types of transactions subject to Regulation C by including all mortgage 
loans secured by a dwelling (discussed above in the section-by-section 
analysis of proposed Sec.  1003.2(d) and (o)), the Bureau believes that 
it may be appropriate to revise comments 4(a)(9)-1 and -2 to provide a 
single framework clarifying how to report a covered loan related to 
multiple properties.
    Proposed comment 4(a)(9)-1 explains that if a covered loan relates 
to more than one property and only one property is taken as or, in the 
case of an application, proposed to be taken as security, a financial 
institution reports the information required by Sec.  1003.4(a)(9) for 
the property taken as or, in the case of an application, proposed to be 
taken as security. The comment also provides an illustrative example.
    Proposed comment 4(a)(9)-2 clarifies that if more than one property 
is taken or, in the case of an application, proposed to be taken as 
security for a single covered loan, a financial institution may report 
one of the properties using one entry on its loan application register 
or report all of the properties using multiple entries on its loan 
application register. Proposed comment 4(a)(9)-2 further explains that, 
if a financial institution opts to report all of the properties, the 
multiple entries should be identical with the exception of required 
information that is related to the property identified in Sec.  
1003.4(a)(9). If an institution is required to report specific 
information about the property identified in Sec.  1003.4(a)(9), the 
institution should report the information that relates to the property 
identified in Sec.  1003.4(a)(9) in that entry. The proposed comment 
provides an illustrative example.

[[Page 51775]]

    Proposed comment 4(a)(9)-3 discusses reporting multifamily 
properties with more than one postal address. The proposed comment 
explains that for the purposes of Sec.  1003.4(a)(9), a financial 
institution reports the information required by Sec.  1003.4(a)(9) for 
a multifamily dwelling with more than one postal address in the same 
manner described in proposed comment 4(a)(9)-2. The proposed comment 
also explains that regardless of whether the financial institution 
elects to report the covered loan using a single entry or multiple 
entries, the information required by Sec.  1003.4(a)(31) and (32) 
should refer to the total number of applicable units in the property or 
properties securing or, in the case of an application, proposed to 
secure the covered loan. The Bureau solicits feedback on whether the 
proposed comments are appropriate generally.
    The Bureau is also proposing to renumber current comments 4(a)(9)-3 
and -4 as proposed comments 4(a)(9)-4 and -5, respectively, and to make 
certain technical changes to align the comments with proposed Sec.  
1003.4(a)(9). In accordance with the changes discussed above, the 
Bureau proposes technical instructions in appendix A regarding how to 
enter the data on the loan application register.
4(a)(10)(i)
Ethnicity, Race, and Sex
    HMDA section 304(b)(4) requires the reporting of racial 
characteristics and gender for borrowers and applicants.\340\ Section 
1003.4(a)(10) of Regulation C requires a financial institution to 
collect the ethnicity, race, and sex of the applicant or borrower for 
applications and loan originations for each calendar year. The Bureau's 
proposal renumbers Sec.  1003.4(a)(10) and moves the requirement to 
collect the ethnicity, race, and sex of the applicant or borrower to 
Sec.  1003.4(a)(10)(i). The new numbering is intended only for ease of 
reference and is not a substantive change.
---------------------------------------------------------------------------

    \340\ 12 U.S.C. 2803(b)(4). The collection and reporting of this 
information was not a part of HMDA as originally enacted in 1975. 
See supra note 36. Originally, HMDA required lenders to collect and 
report data only on loan originations and only according to census 
tract and income. See Former 12 U.S.C. 2803(a)(1)-(a)(2) (1988). In 
order to help identify lending discrimination and enforce 
antidiscrimination laws, Congress amended HMDA to require the 
collection and reporting of the racial characteristics, gender, and 
income of loan applicants and borrowers (FIRREA). See supra note 58. 
In 2002, the Board amended Regulation C to improve the quality, 
consistency, and usefulness of the data being collected by financial 
institutions, including adding ethnicity as a new field for 
collection of information about an applicant. See supra note 75.
---------------------------------------------------------------------------

    The Bureau proposes to modify instruction I.D.1.b of appendix A, 
which requires that a financial institution use Code ``not applicable'' 
if the borrower or applicant is not a natural person, for example, a 
corporation or partnership. The Bureau provides this clarification in 
response to feedback from financial institutions expressing uncertainty 
as to whether a trust is a non-natural person. For a transaction 
involving a trust, the financial institution should report ``not 
applicable'' for the government monitoring information if the trust is 
the borrower or applicant. On the other hand, if the applicant or 
borrower is a natural person, and is the beneficiary of a trust, the 
financial institution should collect the government monitoring 
information pursuant to Sec.  1003.4(a)(10)(i).
    As part of the Bureau's efforts to streamline and clarify 
Regulation C, the Bureau is also proposing several technical 
modifications to the appendix A instructions for applicant information. 
The Bureau believes these modifications will help financial 
institutions comply with Regulation C by providing clearer instructions 
for completion of the applicant information in the loan application 
register. The Bureau is proposing to remove I.D.2 of appendix A because 
the instructions are either found elsewhere in the I.D. instructions or 
are duplicative of instructions in appendix B. For example, instruction 
I.D.2 provides that all loan applications, including applications taken 
by mail, internet, or telephone must use a collection form similar to 
that shown in appendix B regarding ethnicity, race, and sex. This 
instruction further provides that for applications taken by telephone, 
the information in the collection form must be stated orally by the 
lender, except for information that pertains uniquely to applications 
taken in writing. These instructions are also found in appendix B. The 
Bureau does not believe these instructions should appear twice and thus 
is proposing to remove the instructions from appendix A.
    In addition, the Bureau is proposing to remove the I.D.2 
instruction that provides if the applicant does not provide these data 
in an application taken by mail or telephone or on the internet, enter 
the Code for ``information not provided by applicant in mail, internet, 
or telephone application'' specified in paragraphs I.D.3., 4., and 5. 
of this appendix. As the instruction itself points out, paragraphs 
I.D.3., 4., and 5. of appendix A instruct a financial institution to 
enter the Code for ``information not provided by applicant in mail, 
internet, or telephone application'' and the Bureau does not believe 
there is a need to repeat that instruction in I.D.2. Therefore, the 
Bureau is proposing to remove this instruction from I.D.2 and is 
proposing to modify paragraph I.D.4. by adding a new subparagraph 
``b,'' redesignated as 4(a)(10)(i)-2.b, which would instruct financial 
institutions to ``Use Code 3 (for ethnicity) and Code 6 (for race) if 
the applicant or co-applicant does not provide the information in an 
application taken by mail, internet, or telephone'' and is proposing to 
modify paragraph I.D.5. by adding a new subparagraph ``a,'' 
redesignated as 4(a)(10)(i)-3.a, which would instruct financial 
institutions to use ``Use Code 3 if the applicant or co-applicant does 
not provide the information in an application taken by mail, internet, 
or telephone.''
    As part of the Bureau's efforts to streamline and clarify 
Regulation C, the Bureau is proposing to renumber current instructions 
I.D.3, I.D.4, and I.D.5. The instructions are renumbered as 
4(a)(10)(i)-1, 4(a)(10)(i)-2, and 4(a)(10)(i)-3. In line with the 
proposed renumbering to appendix A, the Bureau is proposing to renumber 
comments 4(a)(10)-1, 4(a)(10)-2, 4(a)(10)-3, 4(a)(10)-4, and 4(a)(10)-
5. The comments are renumbered as comments 4(a)(10)(i)-1, 4(a)(10)(i)-
2, 4(a)(10)(i)-3, 4(a)(10)(i)-4, and 4(a)(10)(i)-5.
    Appendix B provides instructions on the collection of the 
ethnicity, race, and sex of applicants. Appendix B instructs financial 
institutions to inform applicants that the Federal government requests 
the information in order to monitor compliance with Federal statutes 
that prohibit lenders from discriminating against applicants on these 
bases. Appendix B also provides that financial institutions must ask 
for the information but cannot require applicants to provide it. 
Questions requesting the government monitoring information can be 
listed on the loan application form or on a separate form that refers 
to the application, and appendix B provides a sample form. Financial 
institutions must offer an applicant the option of selecting one or 
more racial designations. For telephone applications, the information 
in the collection form must be stated orally by the financial 
institution. When an application is taken in person and the applicant 
does not provide the information, the financial institution is 
instructed to note this on the form, inform the applicant that it is 
required to collect the information based on visual observation and 
surname, and

[[Page 51776]]

then collect it on that basis to the extent possible. In a mail, 
telephone, or internet application, the government monitoring 
information need not be provided if the applicant declines to answer 
the questions requesting the information or fails to provide the 
information. In such a case, the financial institution should indicate 
that the application was received by mail, telephone, or internet, if 
that fact is not otherwise evident on the face of the application.
    Feedback provided during the Board's 2010 Hearings addressed the 
reluctance of applicants to provide demographic information and the 
challenges financial institutions face in collecting the 
information.\341\ The Bureau solicits feedback regarding the challenges 
faced by both applicants and financial institutions by the data 
collection instructions prescribed in appendix B and specifically 
solicits comment on ways to improve the data collection of the 
ethnicity, race, and sex of applicants and borrowers.
---------------------------------------------------------------------------

    \341\ E.g., Atlanta Hearing, supra note 131; San Francisco 
Hearing, supra note 133; Chicago Hearing, supra note 137.
---------------------------------------------------------------------------

    During the Small Business Review Panel process, one small entity 
representative urged the Bureau to eliminate the requirement to record 
government monitoring information for in-person applications when the 
customer declines to specify the information.\342\ The small entity 
representative noted that while the government monitoring information 
data are vital to HMDA's utility, recording the information on the 
basis of visual observation is highly subjective and puts financial 
institutions in the position of overriding the wishes of applicants who 
choose not to provide this information.\343\ The small entity 
representative also stated that staff at the financial institution 
spend an average of three hours following up with loan officers when 
these data are not reported in the files.\344\ While the Small Business 
Review Panel did not make a recommendation in response to these 
comments, as discussed above, the Bureau is aware that there may be 
ways to improve the collection of the government monitoring information 
and specifically solicits feedback on this issue.
---------------------------------------------------------------------------

    \342\ See Small Business Review Panel Report at 28.
    \343\ Id.
    \344\ Id.
---------------------------------------------------------------------------

Age
    Section 1094(3)(A)(i) of the Dodd-Frank Act amended HMDA section 
304(b)(4) to require financial institutions to report an applicant's or 
borrower's age.\345\ For the reasons discussed below, the Bureau is 
proposing to implement the requirement to collect and report age by 
adding this characteristic to the information listed in proposed Sec.  
1003.4(a)(10)(i).
---------------------------------------------------------------------------

    \345\ 12 U.S.C. 2803(b)(4).
---------------------------------------------------------------------------

    The MISMO/ULDD data standards for age include both the date of 
birth (YYYY-MM-DD format) and the age of the borrower in years at the 
time of application.\346\ In light of potential applicant and borrower 
privacy concerns related to reporting date of birth, the Bureau 
proposes that financial institutions enter the age of the applicant or 
borrower, as of the date of application, in number of years as derived 
from the date of birth as shown on the application form.\347\ The 
Bureau's Regulation B requires, as part of the application for credit, 
a creditor to request the age of an applicant for credit primarily for 
the purchase or refinancing of a dwelling occupied or to be occupied by 
the applicant as a principal dwelling, where the credit will be secured 
by the dwelling.\348\ The proposed requirement would align with the 
MISMO/ULDD data standard for age as well as with the definition of age 
under Regulation B. The Bureau solicits feedback regarding whether the 
collection of the age of the applicant or borrower, as of the date of 
application, in number of years as derived from the date of birth as 
shown on the application form is an appropriate manner of collecting 
such demographic information. The Bureau specifically solicits feedback 
regarding whether there is a less burdensome way for financial 
institutions to collect such information for purposes of HMDA.
---------------------------------------------------------------------------

    \346\ See Version 3.3 of the MISMO Residential Reference Model 
(Construction Method Type and Financed Unit Count), Fannie Mae, 
Fannie Mae Implementation Guide for Loan Delivery Data, Appendix A 
(Oct. 29, 2013) (https://www.fanniemae.com/content/
technologyrequirements/uldd-implementation-guide-appendix-
a.pdf), Freddie Mac, Freddie Mac Implementation Guide for Loan 
Delivery Data, Appendix A (Jan. 29, 2014) (https://
www.freddiemac.com/singlefamily/sell/docs/
FREIGsellingsystemappendix
adatarequirements.pdf.
    \347\ See part II.C above for a discussion of the Bureau's 
approach to protecting applicant and borrower privacy in light of 
the goals of HMDA.
    \348\ Regulation B Sec.  1002.13(a)(1)(iv). Age has been a 
protected category under ECOA and Regulation B since 1976, and a 
creditor may not discriminate against an applicant on the basis of 
age regarding any aspect of a credit transaction, including home 
mortgage lending. See Regulation B Sec. Sec.  1002.1(b), 
1002.4(a)(b), 15 U.S.C. 1691(a)(1). Under Regulation B, ``age'' 
refers ``only to the age of natural persons and means the number of 
fully elapsed years from the date of an applicant's birth.'' 
Regulation B Sec.  1002.2(d).
---------------------------------------------------------------------------

    During the Small Business Review Panel process, the small entity 
representatives generally expressed concern about the burden of 
reporting additional borrower data with respect to age.\349\ Some small 
entity representatives recommended that the Bureau further clarify the 
age data point.\350\ In particular, some small entity representatives 
noted that the date of birth of an applicant is already collected on 
application forms, but converting it to age would require additional 
work and increase the possibility of errors.\351\ Some small entity 
representatives suggested that the Bureau clarify at which point in the 
mortgage loan process age would be determined.\352\ One small entity 
representative suggested that the applicant's age at the time of 
application be reported.\353\ The Bureau's proposed comments and 
proposed instructions in appendix A provide clarity as to how a 
financial institution collects and reports age.
---------------------------------------------------------------------------

    \349\ See Small Business Review Panel Report at 27 and 40. The 
Dodd-Frank amendments to HMDA added new provisions directing the 
Bureau to develop regulations that ``modify or require modification 
of itemized information, for the purpose of protecting the privacy 
interests of the mortgage applicants or mortgagors, that is or will 
be available to the public,'' and identified age as a new data point 
that may raise privacy concerns. HMDA sections 304(h)(1)(E), 
(h)(3)(A)(ii). See part II.C above for a discussion of the feedback 
the Bureau received from the small entity representatives about 
privacy concerns relating to this proposed data point and the 
Bureau's approach to protecting applicant and borrower privacy in 
light of the goals of HMDA.
    \350\ See Small Business Review Panel Report at 27.
    \351\ Id.
    \352\ Id.
    \353\ Id.
---------------------------------------------------------------------------

    A requirement to collect and report the age of applicants or 
borrowers may impose some burden on financial institutions. However, 
the Bureau believes that the potential costs would be justified by the 
potential benefits to the public and public officials, and the Bureau 
believes that reporting of this information is an appropriate method of 
implementing HMDA section 304(b)(4) and carrying out HMDA's purposes. 
The Bureau believes this information will assist in identifying whether 
financial institutions are serving the housing needs of their 
communities, identifying possible discriminatory lending patterns, and 
enforcing antidiscrimination statutes.
    Proposed instruction 4(a)(10)(i)-4 in appendix A provides technical 
instructions regarding how to enter the age of the applicant or 
borrower on the loan application register. Proposed instruction 
4(a)(10)(i)-4 directs financial institutions to enter the age of the 
applicant or borrower, as of the date of

[[Page 51777]]

application, in number of years as derived from the date of birth as 
shown on the application form. The Bureau recognizes that this proposed 
instruction would require financial institutions to calculate the age 
of an applicant or borrower in number of years by referring to the date 
of birth as shown on the application form and that such calculation has 
the potential for errors. However, the Bureau believes the application 
forms used by financial institutions, such as the Uniform Residential 
Loan Application form,\354\ currently collect the date of birth of the 
applicant and any co-applicant and that requiring the calculation of 
age from this existing data source is not a significant burden. The 
Bureau believes that financial institutions will have to manage the 
risk of an error in calculating an applicant's age to ensure HMDA 
compliance.
---------------------------------------------------------------------------

    \354\ Fannie Mae Form 1003 or Freddie Mac Form 65 7/05 (rev. 6/
09).
---------------------------------------------------------------------------

    Similar to the existing technical instructions applicable to the 
ethnicity, race, and sex of an applicant or borrower, proposed 
instruction 4(a)(10)(i)-4 directs financial institutions to enter ``not 
applicable'' for age only when the applicant or co-applicant is not a 
natural person or when applicant or co-applicant information is 
unavailable because the covered loan has been purchased by the 
institution. In addition, similar to the existing instructions 
applicable to the ethnicity, race, and sex of an applicant or borrower, 
proposed instruction 4(a)(10)(i)-4 directs financial institutions to 
provide the age only for the first co-applicant listed on the 
application form when there is more than one co-applicant, and if there 
are no co-applicants or co-borrowers, to report ``no co-applicant'' in 
the co-applicant column.
    Proposed comment 4(a)(10)(i)-1 discusses the requirement that a 
financial institution report the age of the applicant or borrower, as 
of the date of application, in number of years as derived from the date 
of birth as shown on the application form and provides an illustrative 
example. Proposed comment 4(a)(10)(i)-2 clarifies that a financial 
institution reports the age of the applicant or borrower, as of the 
date of application, in number of years as derived from the date of 
birth as shown on the application form and does not report age on the 
basis of visual observation or surname as is required with respect to 
the ethnicity, race, and sex of an applicant when the applicant fails 
to provide the requested information for an application taken in 
person. The Bureau also is proposing technical modifications to 
comments 4(a)(10)(i)-3, 4(a)(10)(i)-4, and 4(a)(10)(i)-5.
4(a)(10)(ii)
    HMDA section 304(b)(4) requires the reporting of income level for 
borrowers and applicants. Section 1003.4(a)(10) of Regulation C 
implements this requirement by requiring collection and reporting of 
the gross annual income relied on in processing the application for 
applicants and borrowers. The proposal moves this requirement to Sec.  
1003.4(a)(10)(ii) and revises it to require the reporting of gross 
annual income relied on in making the credit decision requiring 
consideration of income or, if a credit decision requiring 
consideration of income was not made, the gross annual income collected 
as part of the application process. The Bureau has received feedback 
that the current income reporting requirement is confusing and unclear, 
and the new language is intended to facilitate compliance by clarifying 
and providing more specificity on when income is to be reported and 
what income should be reported.
    The proposal revises the instructions in appendix A to be 
consistent with proposed Sec.  1003.4(a)(10)(ii) and to provide 
additional guidance. Instruction 4(a)(10)(ii)-1 provides that the 
financial institution should report the gross annual income that it 
relied on in making the credit decision requiring consideration of 
income or, if the application was denied or withdrawn or the file was 
closed for incompleteness before a credit decision requiring 
consideration of income was made, the gross annual income collected as 
part of the application process. Instruction 4(a)(10)(ii)-1.a provides, 
consistent with the current instructions, that all dollar amounts 
should be rounded to the nearest thousand and shown in thousands. 
Instruction 4(a)(10)(ii)-1.b provides, consistent with the current 
instructions, that an institution would report ``NA'' for a covered 
loan or application related to a multifamily dwelling. Instruction 
4(a)(10)(ii)-1.c provides that if no income information is collected as 
part of the application process, or if the covered loan applied for 
would not or did not require consideration of income, the institution 
would report ``NA.'' Instruction 4(a)(10)(ii)-1.d provides that if the 
applicant or co-applicant is not a natural person, or if the applicant 
or co-applicant information is unavailable because the covered loan has 
been purchased by the institution, the institution would report ``NA.''
    The proposal revises and renumbers existing comments, and adds new 
comments. Specifically, the proposal renumbers current comments 
4(a)(10)-6, -7, and -8 as comments 4(a)(10)(ii)-1, -2, and -3 and 
revises them clarification and to make minor wording changes. The 
proposal adds new comment 4(a)(10)(ii)-4, which provides that amounts 
derived from asset depletion or annuitization to determine repayment 
ability are not part of gross annual income relied on for purposes of 
Sec.  1003.4(a)(10)(ii). The proposal also adds new comment 
4(a)(10)(ii)-5, which provides an example of reporting income 
information collected as part of the application process if the 
application is denied or withdrawn or the file is closed for 
incompleteness before a credit decision requiring consideration of 
income is made. The example provides that a financial institution would 
report the income collected if an applicant withdraws an application 
before a credit decision requiring consideration of income is made, or 
if an institution denied such an application or closed the file for 
incompleteness.
    The proposal renumbers existing comment 4(a)(10)-6 as new comment 
4(a)(10)(ii)-1 and revises it to make technical corrections and minor 
wording changes, and to provide an additional example of income relied 
on. The additional example provides that if an institution applied 
lender or investor guidelines to exclude commission income earned for 
less than 12 months, the institution would not include that income in 
the income reported. The Bureau understands that financial institutions 
frequently apply lender or investor guidelines when calculating income 
for purposes of making a credit decision. For example, the GSEs and the 
FHA have guidelines for determining and verifying borrower income for 
loans that financial institutions intend to sell to or insure with 
those entities.\355\ The MISMO/ULDD data standard for borrower 
qualifying income also refers to application of borrower or investor 
guidelines.\356\ The example better aligns

[[Page 51778]]

the proposed Sec.  1003.4(a)(10)(ii) reporting requirement with these 
commonly used industry data standards. The Bureau solicits feedback on 
whether financial institutions believe there are any discrepancies 
between income that would be recorded under the MISMO/ULDD data 
standard and the income reported for HMDA purposes under proposed Sec.  
1003.4(a)(10)(ii) and if additional guidance or clarification is 
needed.
---------------------------------------------------------------------------

    \355\ Fannie Mae, Fannie Mae Single Family Selling Guide Sec.  
B3-3.1, (June 24, 2014) available at https://www.fanniemae.com/content/guide/sel062414.pdf; Freddie Mac, Freddie Mac Single Family 
Selling Guide Sec.  37.13, (June 24, 2014) available at https://www.freddiemac.com/singlefamily/guide/bulletins/pdf/062414Guide.pdf; 
HUD, HUD Handbook 4155.1 Sec.  4.D.4.a, https://portal.hud.gov/
hudportal/HUD?src=/programoffices/administration/hudclips/
handbooks/hsgh/4155.1.
    \356\ See MISMO, Version 3.3 of the MISMO Residential Reference 
Model (Total Monthly Income Amount and Borrower Qualifying Income); 
Fannie Mae, Fannie Mae Implementation Guide for Loan Delivery Data, 
Appendix A (Oct. 29, 2013), https://www.fanniemae.com/content/
technologyrequirements/uldd-implementation-guide-appendix-
a.pdf; Freddie Mac, Freddie Mac Implementation Guide for Loan 
Delivery Data, Appendix A (Jan. 29, 2014), https://
www.freddiemac.com/singlefamily/sell/docs/
FREIGsellingsystemappendix
adatarequirements.pdf.
---------------------------------------------------------------------------

    The proposal adds new comment 4(a)(10)(ii)-6, which provides 
guidance on credit decisions requiring consideration of income and 
credit decisions that did not or would not have required consideration 
of income. The comment provides that an institution does not report 
income if the application did not or would not have required a credit 
decision requiring consideration of income under the policies and 
practices of the financial institution and provides an example of a 
streamlined refinance program. Small entity representatives raised 
concerns about compliance difficulties where certain programs that do 
not require analysis or verification of borrower income are 
involved.\357\ The Bureau believes this comment may address these 
concerns and facilitate compliance.
---------------------------------------------------------------------------

    \357\ See Small Business Review Panel Report at 51, 83.
---------------------------------------------------------------------------

    During the Small Business Review Panel process, small entity 
representatives noted difficulties in reporting income relied on for 
certain loans, especially commercial loans because of technical 
differences between income and cash flow.\358\ The Small Business 
Review Panel recommended that the Bureau consider clarifying 
requirements to report the income relied upon for commercial loans. 
Consistent with the recommendation of the Small Business Review Panel, 
the Bureau has considered whether additional guidance can be provided 
for reporting income relied on for commercial purpose loans. The Bureau 
notes that under the proposal, income would not be reported for loans 
or applications related to multifamily dwellings, loans or applications 
where the applicant or borrower is not a natural person (such as a 
corporation), where no income information is collected, or where a 
credit decision requiring consideration of income was not or would not 
have been required. Therefore, the Bureau believes that these reporting 
difficulties for income should be limited only to covered loans to 
natural persons for properties with less than five individual units 
where institutions ask for and rely on income for underwriting 
purposes. The Bureau believes that more specific feedback on this 
subset of covered loans and applications is necessary in order to 
consider developing appropriate guidance on this topic. Therefore, the 
Bureau solicits feedback on difficulties financial institutions 
experience in reporting income relied on for covered loans and 
applications not related to multifamily dwellings that are made to 
individual applicants or borrowers for a commercial purpose. 
Specifically, the Bureau solicits feedback on how consideration of 
income differs for such loans from consumer- or household purpose-
loans, and on how financial institutions distinguish between income and 
cash flow analysis and whether financial institutions have different 
procedures for considering them.
---------------------------------------------------------------------------

    \358\ See Small Business Review Panel Report at 28, 60.
---------------------------------------------------------------------------

4(a)(11)
    Current Sec.  1003.4(a)(11) requires financial institutions to 
report the type of entity purchasing a loan that the financial 
institution originates or purchases and then sells within the same 
calendar year, and provides that this information need not be included 
in quarterly updates.\359\ In conjunction with the Bureau's proposal to 
require quarterly data reporting by certain financial institutions as 
described further below in the section-by-section analysis of proposed 
Sec.  1003.5(a)(1)(ii), the Bureau is proposing to modify Sec.  
1003.4(a)(11) by deleting the statement that the information about the 
type of purchaser need not be included in quarterly updates.
---------------------------------------------------------------------------

    \359\ 12 U.S.C. 2803(h)(1)(C).
---------------------------------------------------------------------------

    The Bureau is proposing technical modifications to current comments 
4(a)(11)-1 and 4(a)(11)-2. The Bureau is also proposing to add six new 
comments to provide additional guidance regarding the type of purchaser 
reporting requirement. Additional guidance on this topic had been 
published in the FFIEC FAQs.\360\ The Bureau believes it is appropriate 
to place this additional guidance in the commentary to Regulation C to 
assist financial institutions with HMDA compliance. Proposed comment 
4(a)(11)-3 clarifies when a financial institution should report the 
code for ``affiliate institution'' by providing a definition of the 
term ``affiliate'' and clarifies that for purposes of proposed Sec.  
1003.4(a)(11), the term ``affiliate'' means any company that controls, 
is controlled by, or is under common control with, another company, as 
set forth in the Bank Holding Company Act of 1956 (12 U.S.C. 1841 et 
seq.). Proposed comment 4(a)(11)-4 incorporates, with modifications, an 
FFIEC FAQ that clarified when a financial institution would report the 
code for ``private securitization'' and provides an illustrative 
example. Proposed comment 4(a)(11)-5 incorporates, with modifications, 
an FFIEC FAQ that clarified the meaning of a mortgage bank for purposes 
of Sec.  1003.4(a)(11). Proposed comment 4(a)(11)-6 incorporates, with 
modifications, an FFIEC FAQ that clarified the type of purchaser to 
report when a covered loan is sold to a subsidiary of the seller 
institution. Proposed comment 4(a)(11)-7 incorporates, with 
modifications, an FFIEC FAQ that clarified the type of purchaser to 
report when the purchasing entity is a bank holding company or thrift 
holding company. Proposed comment 4(a)(11)-8 directs financial 
institutions to refer to proposed comment 4(a)-6 regarding reporting 
requirements when a covered loan is repurchased by the originating 
financial institution. The Bureau solicits feedback regarding whether 
these proposed comments are appropriate and specifically solicits 
feedback regarding whether additional clarifications would assist 
financial institutions in complying with proposed Sec.  1003.4(a)(11).
---------------------------------------------------------------------------

    \360\ See FFIEC FAQs.
---------------------------------------------------------------------------

    The Bureau is proposing to modify the instructions in appendix A to 
ensure that they align with the proposed comments as well as with the 
Bureau's proposal to require quarterly data reporting by certain 
financial institutions pursuant to Sec.  1003.5(a)(1)(ii), including 
the type of purchaser information. In addition to technical 
modifications and removing a parenthetical stating that the information 
need not be included in quarterly updates, the Bureau is proposing to 
modify instruction I.E.b in appendix A, to be renumbered as 4(a)(11)-
1.b, to provide that for purposes of recording the type of purchaser 
within 30 calendar days after the end of the calendar quarter pursuant 
to proposed Sec.  1003.4(f), a financial institution should record Code 
0 if the institution originated or purchased a covered loan and did not 
sell it during

[[Page 51779]]

the calendar quarter for which the institution is recording the data. 
If the financial institution sells the covered loan in a subsequent 
quarter of the same calendar year, the institution should record the 
appropriate code for the type of purchaser on its loan application 
register for the quarter in which the covered loan was sold.
    The Bureau is also proposing to provide clarification as to when a 
financial institution should report Code 5 for ``private 
securitization'' in proposed instruction 4(a)(11)-1.d, in order to 
align with proposed comment 4(a)(11)-4. In addition, in order to align 
with proposed comment 4(a)(11)-3, the Bureau is proposing to provide 
clarification as to when a financial institution should report Code 8 
for ``affiliate institution'' in proposed instruction 4(a)(11)-1.e by 
providing a definition of the term ``affiliate'' for purposes of Sec.  
1003.4(a)(11). The Bureau solicits feedback regarding whether the 
proposed modifications to the instructions in appendix A are 
appropriate.
4(a)(12)
    Regulation C currently requires financial institutions to report 
the difference between a loan's APR and the average prime offer rate 
(APOR) for a comparable transaction, as of the date the interest rate 
is set, if the difference equals or exceeds 1.5 percentage points for 
first-lien loans, or 3.5 percentage points for subordinate-lien loans. 
The average prime offer rate is an annual percentage rate that is 
derived from average interest rates, points, and other loan pricing 
terms offered to borrowers by a representative sample of creditors for 
mortgage loans with low risk pricing characteristics and is published 
weekly on the FFIEC Web site. Loans that require rate spread reporting 
are termed ``higher-priced mortgage loans.'' The Board added the rate 
spread requirement in 2002, and amended it in 2008, intending to 
capture price information for only the subprime market.\361\ Section 
304(b)(5)(B) of HMDA requires financial institutions to report mortgage 
loan information, grouped according to measurements of ``the difference 
between the annual percentage rate associated with the loan and a 
benchmark rate or rates for all loans.'' \362\ The Bureau proposes to 
implement this provision by requiring financial institutions to report, 
for covered loans subject to Regulation Z, 12 CFR part 1026, other than 
purchased loans and reverse mortgage transactions, the difference 
between the covered loan's annual percentage rate and the average prime 
offer rate for a comparable transaction as of the date the interest 
rate is set.
---------------------------------------------------------------------------

    \361\ See 67 FR 7222, 7229 (Feb. 15, 2002) (adopting thresholds 
of 3 percentage points for first-lien loans and 5 percentage points 
for subordinate-lien loans); 73 FR 63329, 63330, (Oct. 24, 2008) 
(revising the thresholds to 1.5 percentage points for first-lien 
loans and 3.5 percentage points for subordinate-lien loans).
    \362\ Section 1094(3)(A)(iv) of the Dodd-Frank Act amended HMDA 
by adding section 304(b)(5)(B), which expanded the rate spread 
reporting requirement beyond higher-priced mortgage loans.
---------------------------------------------------------------------------

    In amending HMDA to require financial institutions to report the 
difference between the annual percentage rate associated with the loan 
and a benchmark rate or rates for all loans, Congress found that 
improved pricing information would bring greater transparency to the 
market and facilitate the enforcement of fair lending laws.\363\ 
Feedback received during the Board's 2010 Hearings suggested that 
requiring reporting of the rate spread for all loans, instead of only 
for loans considered higher-priced mortgages, would better serve HMDA's 
purposes by providing a more complete understanding of the mortgage 
market and improving the analysis of loan prices across various 
communities and markets.\364\ For example, a 2009 GAO report found that 
the lack of pricing information limited the ability of Federal agencies 
to ``assess the potential for discrimination in the prime and 
government-guaranteed and -insured mortgage markets.'' \365\ Similarly, 
recent enforcement actions by the U.S. Department of Justice indicate 
that price discrimination can occur at levels that fall below the 
threshold for higher-priced mortgage loans.\366\ Thus, expanded pricing 
data could reveal greater detail about the extent to which prime 
lending is available and competitive in all communities.
---------------------------------------------------------------------------

    \363\ H.R. Rep. No. 111-702, at 191 (2011).
    \364\ See Atlanta Hearing, supra note 131; Chicago Hearing, 
supra note 137; see also Neil Bhutta and Glenn B. Canner, Mortgage 
Market Conditions and Borrower Outcomes: Evidence from the 2012 HMDA 
Data and Matched HMDA-Credit Record Data, 99 Fed. Reserve Bulletin 
1, at 31-32 (2013) (noting that gaps in the rate spread data limit 
its current usefulness for assessing fair lending compliance).
    \365\ GAO, Fair Lending: Data Limitations and the Fragmented 
U.S. Financial Regulatory Structure Challenge Federal Oversight and 
Enforcement Efforts, GAO-09-704, at 18 (July 2009), https://www.gao.gov/new.items/d09704.pdf.
    \366\ See Complaint, United States v. First United Security 
Bank, (S.D. Ala., Sept. 30, 2009), No. 09-0644 available at https://www.justice.gov/crt/about/hce/documents/fusbcomp.pdf; San Francisco 
Hearing, supra note 133.
---------------------------------------------------------------------------

    Proposed Sec.  1003.4(a)(12) implements HMDA section 304(b)(5)(B) 
by requiring financial institutions to report the difference between 
the covered loan's annual percentage rate and the average prime offer 
rate for a comparable transaction as of the date the interest rate is 
set. Pursuant to HMDA section 305(a), the Bureau implements section 
304(b)(5)(B) as applicable only to loans subject to the Truth in 
Lending Act (TILA), as implemented by Regulation Z. By aligning the 
scope of the rate spread provision to transactions subject to 
Regulation Z, the Bureau excepts certain types of loans for which rate 
spread data would be potentially misleading or unduly burdensome to 
report, such as business-purpose loans. The Bureau also proposes to 
exempt reporting of rate spread date for purchased loans, as appendix A 
currently does for rate-spread data on higher-priced loans, in order to 
reduce burden.
    The Bureau believes that requiring rate spread reporting only for 
loans subject to TILA, as implemented by Regulation Z, is necessary and 
proper to effectuate HMDA's purposes by improving the utility of HMDA 
data and facilitating compliance by easing reporting burdens. During 
the Small Business Review Panel process, for example, one small entity 
representative commented that requiring the rate spread for commercial 
loans would be difficult because these loans do not have an APR and 
would require an APR substitute.\367\ Furthermore, the Bureau believes 
that burden will be reduced because most financial institutions are 
already calculating the difference between APR and APOR in order to 
determine compliance with the high-cost, higher-priced, and qualified 
mortgage provisions that apply to loans that are subject to Regulation 
Z.\368\ Regulation Z Sec.  1026.32(a)(1)(i) and the associated 
commentary, for example, already provide guidance on determining the 
correct closest comparable transaction for determining whether home-
equity lines of credit are high-cost mortgages. The Bureau solicits 
feedback on the general utility of the revised rate spread data and on 
the costs associated with collecting and reporting the data. In 
particular, the Bureau solicits feedback on the scope of the rate 
spread reporting requirement, including whether the requirement should 
be expanded to cover purchased loans.
---------------------------------------------------------------------------

    \367\ See Small Business Review Panel Report at 126.
    \368\ See Regulation Z Sec. Sec.  1026.32, 1026.35, 1026.43.
---------------------------------------------------------------------------

    During the Small Business Review Panel process, the small entity 
representatives offered differing opinions on the burden of adding the 
pricing data points under consideration.

[[Page 51780]]

The Small Business Review Panel recommended that the Bureau seek 
comment in the proposed rule on the costs to small financial 
institutions of providing the pricing data and consider aligning the 
requirements of Regulation C to the pricing data used in other Federal 
and State mortgage disclosures.\369\ Rate spread is not included on 
Federal or State closing disclosures, but the Bureau is soliciting 
feedback on the cost to small financial institutions.
---------------------------------------------------------------------------

    \369\ See Small Business Review Panel Report at 42.
---------------------------------------------------------------------------

    The proposed rule moves parts of appendix A to supplement I, 
modifies the existing commentary, and adds several clarifying comments. 
Current comment 4(a)(12)(ii)-2 is incorporated into proposed comment 
4(a)(12)-4. Proposed comment 4(a)(12)-2, which substantially 
incorporates current comment 4(a)(12)(ii)-3, clarifies that the Bureau 
publishes on the FFIEC's Web site (https://www.ffiec.gov/hmda), in 
tables entitled ``Average Prime Offer Rates-Fixed'' and ``Average Prime 
Offer Rates-Adjustable,'' current and historic average prime offer 
rates for a wide variety of closed-end transaction types. The Bureau 
calculates an annual percentage rate, consistent with Regulation Z, for 
each transaction type for which pricing terms are available from the 
survey described in comment 4(a)(12)-1. The Bureau uses loan pricing 
terms available in the survey and other information to estimate annual 
percentage rates for other types of transactions for which direct 
survey data are not available. The Bureau publishes on the FFIEC's Web 
site the methodology it uses to arrive at these estimates. Proposed 
comment 4(a)(12)-2 explains that a financial institution may either use 
the average prime offer rates published by the Bureau or may determine 
average prime offer rates itself by employing the methodology published 
on the FFIEC Web site. A financial institution that determines average 
prime offer rates itself, however, is responsible for correctly 
determining the rates in accordance with the published methodology.
    Proposed comment 4(a)(12)-3 clarifies that the requirements of this 
part refer to the covered loan's annual percentage rate. A financial 
institution complies with Sec.  1003.4(a)(12)(i) by relying on the 
annual percentage rate for the covered loan, as calculated and 
disclosed pursuant to Regulation Z Sec.  1026.18 (closed-end credit 
transactions) or 1026.40 (open-end credit plans) as applicable.
    Proposed comment 4(a)(12)-4 discusses the fact that the rate spread 
calculation in Sec.  1003.4(a)(12)(i) is defined by reference to a 
comparable transaction, which is determined according to the covered 
loan's amortization type (i.e., fixed- or variable-rate) and loan term. 
For open-end covered loans, Sec.  1003.4(a)(12)(i) requires a financial 
institution to identify the most closely comparable closed-end 
transaction. The tables of average prime offer rates published by the 
Bureau (see comment 4(a)(12)-2) provide additional detail about how to 
identify the comparable transaction. Proposed comment 4(a)(12)-4.i 
clarifies that for fixed-rate covered loans, the term for identifying 
the comparable transaction is the transaction's maturity (i.e., the 
period until the last payment will be due under the loan contract or 
open-end credit agreement). If an open-end credit plan has a fixed rate 
but no definite plan length, a financial institution complies with 
Sec.  1003.4(a)(12)(i) by using a 30-year fixed-rate loan as the most 
closely comparable closed-end transaction. Financial institutions may 
refer to the table on the FFIEC Web site entitled ``Average Prime Offer 
Rates-Fixed'' when identifying a comparable fixed-rate transaction.
    Proposed comment 4(a)(12)-4.ii clarifies that for variable-rate 
covered loans, the term for identifying the comparable transaction is 
the initial, fixed-rate period (i.e., the period until the first 
scheduled rate adjustment). For example, five years is the relevant 
term for a variable-rate transaction with a five-year, fixed-rate 
introductory period that is amortized over thirty years. Financial 
institutions may refer to the table on the FFIEC Web site entitled 
``Average Prime Offer Rates-Variable'' when identifying a comparable 
variable-rate transaction. If an open-end credit plan has a variable 
rate and an optional, fixed-rate feature, a financial institution uses 
the rate table for variable-rate transactions.
    Proposed comment 4(a)(12)-4.iii explains that when a covered loan's 
term to maturity (or, for a variable-rate transaction, the initial 
fixed-rate period) is not in whole years, the financial institution 
uses the number of whole years closest to the actual loan term or, if 
the actual loan term is exactly halfway between two whole years, by 
using the shorter loan term. For example, for a loan term of ten years 
and three months, the relevant term is ten years; for a loan term of 
ten years and nine months, the relevant term is 11 years; for a loan 
term of ten years and six months, the relevant term is ten years. If a 
loan term includes an odd number of days, in addition to an odd number 
of months, the financial institution rounds to the nearest whole month, 
or rounds down if the number of odd days is exactly halfway between two 
months. The financial institution rounds to one year any covered loan 
with a term shorter than six months, including variable-rate covered 
loans with no initial, fixed-rate periods. For example, if an open-end 
covered loan has a rate that varies according to an index plus a 
margin, with no introductory, fixed-rate period, the transaction term 
is one year.
    Proposed comment 4(a)(12)-4.iv clarifies that if the amortization 
period of a covered loan is longer than the term of the transaction to 
maturity, Sec.  1003.4(a)(12)(i) requires a financial institution to 
use the loan term to determine the applicable average prime offer rate. 
For example, assume a financial institution originates a closed-end, 
fixed-rate loan that has a term to maturity of five years and a thirty-
year amortization period that results in a balloon payment. The 
financial institution complies with Sec.  1003.4(a)(12)(i) by using the 
five-year loan term.
    Proposed comment 4(a)(12)-5 clarifies that the relevant date to use 
to determine the average prime offer rate for a comparable transaction 
is the date on which the covered loan's interest rate was set by the 
financial institution for the final time before closing or account 
opening. This proposed comment also contains several illustrative 
examples. Proposed comment 4(a)(12)-5.i explains that if an interest 
rate is set pursuant to a ``lock-in'' agreement between the financial 
institution and the borrower, then the date on which the agreement 
fixes the interest rate is the date the rate was set. Except as 
provided in comment 4(a)(12)-4.iii, if a rate is reset after a lock-in 
agreement is executed (for example, because the borrower exercises a 
float-down option or the agreement expires), then the relevant date is 
the date the financial institution exercises discretion in setting the 
rate for the final time before closing or account opening. The same 
rule applies when a rate-lock agreement is extended and the rate is 
reset at the same rate, regardless of whether market rates have 
increased, decreased, or remained the same since the initial rate was 
set. If no lock-in agreement is executed, then the relevant date is the 
date on which the institution sets the rate for the final time before 
closing or account opening.
    Proposed comment 4(a)(12)-5.ii clarifies that if a financial 
institution issues a rate-lock commitment under one loan program, the 
borrower subsequently changes to another program that is subject to 
different

[[Page 51781]]

pricing terms, and the financial institution changes the rate promised 
to the borrower under the rate-lock commitment accordingly, the rate-
set date is the date of the program change. However, if the financial 
institution changes the promised rate to the rate that would have been 
available to the borrower under the new program on the date of the 
original rate-lock commitment, then that is the date the rate is set, 
provided the financial institution consistently follows that practice 
in all such cases or the original rate-lock agreement so provided. The 
comment contains several illustrative examples.
    Proposed comment 4(a)(12)-5.iii clarifies that when a financial 
institution has reporting responsibility for a covered loan that it 
received from a broker, as discussed in comment 4(a)-4 (e.g., because 
the financial institution makes a credit decision prior to closing or 
account opening), the rate-set date is the last date the financial 
institution set the rate with the broker, not the date the broker set 
the borrower's rate.
    Proposed comment 4(a)(12)-6 explains that a financial institution 
is required to compare the covered loan's annual percentage rate to the 
most recently available average prime offer rate that was in effect for 
the comparable transaction as of the rate-set date. Proposed comment 
4(a)(12)-6 also explains that ``most recently available'' means the 
average prime offer rate set forth in the applicable table with the 
most recent effective date as of the date the interest rate was set. 
However, Sec.  1003.4(a)(12)(i) does not permit a financial institution 
to use an average prime offer rate before its effective date.
    Proposed instruction 4(a)(12) in appendix A provides technical 
instructions regarding how to enter rate spread data on the loan 
application register. Proposed instruction 4(a)(12)-1 provides 
technical instructions for entering the rate spread. Proposed 
instruction 4(a)(12)-2 provides that a financial institution completing 
the loan application register must enter ``NA'' for a loan not subject 
to Regulation Z, 12 CFR part 1026, a reverse mortgage, a loan that the 
financial institution purchased or assumed, or an application that does 
not result in a loan origination or the opening of a line of credit, 
except for applications that have been approved but not accepted by the 
applicant.
4(a)(13)
    Regulation C currently requires financial institutions to report 
whether a loan is subject to HOEPA, as implemented by Regulation Z 
Sec.  1026.32.\370\ The Board found that information concerning the 
HOEPA status of a loan would produce more useful data about the 
mortgage market, particularly the subprime market. For the reasons 
discussed below, the Bureau proposes to require financial institutions 
to report whether the loan is a high-cost mortgage because its APR 
exceeds HOEPA's APR threshold or because its points and fees exceed the 
threshold for HOEPA coverage.
---------------------------------------------------------------------------

    \370\ Section 1003.4(a)(13).
---------------------------------------------------------------------------

    Information regarding the high-cost mortgage status of a loan has 
been essential to understanding changes in the mortgage market, 
particularly the subprime market, and to assessing fair lending 
concerns related to loan pricing. Currently, financial institutions 
must report only whether a loan is or is not a high-cost mortgage. The 
Bureau has received feedback suggesting that information regarding the 
reason for a loan's HOEPA status--whether the loan is considered a 
high-cost mortgage because of annual percentage rate, points and fees, 
or both--might improve the usefulness of the HMDA data.\371\ For 
example, a loan might be flagged as a HOEPA loan despite having a low 
APR, raising questions about the other characteristics--such as points 
and fees--of the loan. Similarly, an expanded HOEPA flag could enable 
greater insight into which specific triggers are most prevalent among 
high-cost mortgages.
---------------------------------------------------------------------------

    \371\ The 2013 HOEPA Final Rule provides for a prepayment 
penalty coverage test in addition to the APR and points-and-fees 
coverage tests. See 78 FR 6855 (Jan. 31, 2013). However, because the 
rule prohibits prepayment penalties for high-cost mortgages, the 
Bureau's proposed modifications to Sec.  1003.4(a)(13) omits 
prepayment penalty from the list of possible high-cost mortgage 
triggers provided in appendix A.
---------------------------------------------------------------------------

    The Bureau believes that the burden of the expanded HOEPA status 
reporting requirement will be lessened by the fact that financial 
institutions will likely have to determine which, if any, of the high-
cost mortgage triggers are satisfied in order to comply with Regulation 
Z Sec.  1026.32. But the Bureau also recognizes that the level of 
complexity proposed above is not currently present in either Regulation 
C or the MISMO definition of the HOEPA status indicator as used in the 
ULDD. Despite the potential increased burden described above, feedback 
received pursuant to the Bureau's outreach activities indicates that a 
HOEPA status data point that describes the HOEPA status trigger may be 
justified. Accordingly, the Bureau proposes to modify Sec.  
1003.4(a)(13) and the technical instructions to Sec.  1003.4(a)(13) 
contained in appendix A to provide that a financial institution shall 
report, for covered loans subject to the Home Ownership and Equity 
Protection Act of 1994, whether the covered loan is a high-cost 
mortgage under Regulation Z Sec.  1026.32(a), and the reason that the 
covered loan qualifies as a high-cost mortgage, if applicable. The 
Bureau seeks comment regarding the general utility of the modified data 
and on the costs associated with reporting the data.
    Proposed instruction 4(a)(13) in appendix A provides technical 
instructions regarding how to enter the high-cost mortgage data on the 
loan application register. Proposed instruction 4(a)(13)-1 provides 
that a financial institution must use one of four codes to indicate a 
loan's HOEPA status: Code 1 if the annual percentage rate exceeds the 
high-cost mortgage thresholds; Code 2 if the points and fees exceed the 
high-cost mortgage thresholds; Code 3 if both the annual percentage 
rate and the points and fees for the transaction exceed the high-cost 
mortgage thresholds; and Code 4 for all other cases, such as for 
applications that do not result in originations or loans not subject to 
the HOEPA.
    The changes to Sec.  1003.4(a)(13) are proposed pursuant to the 
Bureau's authority under sections 305(a) and 304(b)(5)(D) of HMDA. The 
Bureau believes these reporting requirements are necessary to carry out 
the purposes of HMDA. The mortgage market has changed significantly 
since HMDA was enacted and since the Board required the reporting of 
additional loan pricing data in 2002, and it continues to evolve. For 
the reasons given above, the proposal will improve the usefulness and 
continued utility of HMDA data and help the public and public officials 
assess whether financial institutions are serving the housing needs of 
their communities.
4(a)(14)
    Current Sec.  1003.4(a)(14) requires financial institutions to 
report the lien status of the loan or application (first lien, 
subordinate lien, or not secured by a lien on a dwelling). The 
technical instructions in current appendix A provide that, for loans 
that a financial institution originates and for applications that do 
not result in an origination, a financial institution shall report the 
lien status as one of the following: Secured by a first lien, secured 
by a subordinate lien, not secured by a lien, or not applicable 
(purchased loan).
    The Board first promulgated the lien status requirement in 2002 
because, among other reasons, ``[d]ata on lien

[[Page 51782]]

status may help explain some pricing disparities, because interest 
rates, and therefore APRs, vary according to lien status. Rates on 
first-lien loans are generally lower than rates on subordinate-lien or 
unsecured loans.'' \372\ The Bureau agrees with the Board's reasoning 
and believes that data on lien status furthers HMDA's purpose of 
assisting in understanding loan pricing to identify possible 
discriminatory lending patterns. Pursuant to the Bureau's authority 
under sections 305(a) and 304(b)(6)(J) of HMDA, the Bureau proposes to 
modify Sec.  1003.4(a)(14) to require reporting of the priority of the 
lien against the subject property that secures or would secure the 
loan. The proposal removes the current exclusion of reporting lien 
status on purchased loans.
---------------------------------------------------------------------------

    \372\ 67 FR 43218, 43220 (June 27, 2002).
---------------------------------------------------------------------------

    Other than amending the reporting requirement related to the lien 
status on purchased loans, the proposal is substantially similar to the 
current requirement with modifications to conform to the MISMO data 
standard. As discussed in part II.B above, the Bureau believes that 
HMDA compliance and data submission can be made easier by aligning the 
requirements of Regulation C, to the extent practicable, to existing 
industry standards for collecting and transmitting mortgage data. In 
furtherance of this proposed alignment, the Bureau determined that a 
similar definition for lien status exists in MISMO, which specifies the 
priority of the lien against the subject property and provides for the 
following enumerations: First lien, second lien, third lien, fourth 
lien, and other. The ``other'' enumeration is designed to capture the 
priority of the lien against the subject property beyond a fourth lien, 
for example, a fifth lien or sixth lien.
    Given that loan terms, including loan pricing, vary based on lien 
status, and in light of the Bureau's proposal to require reporting of 
certain pricing data for purchased loans, such as the interest rate, 
the Bureau believes that requiring financial institutions to report the 
lien status of purchased loans would further enhance the utility of 
HMDA data overall. The liquidity provided by the secondary market is a 
critical component of the modern mortgage market, and information about 
the types of loans being purchased in a particular area, and the 
pricing terms associated with those purchased loans, is needed to 
understand whether the housing needs of communities are being 
fulfilled. This information is particularly important in many 
communities where neighborhood revitalization and affordable housing 
efforts depend on the liquidity provided by purchasers of mortgage 
loans. Thus, by requiring additional information on subordinate lien 
lending, the Bureau believes that this proposal would ensure that the 
public and public officials are provided with sufficient information to 
enable them to determine whether financial institutions are fulfilling 
their obligations to serve the housing needs of the communities and 
neighborhoods in which they are located. Furthermore, local and State 
housing finance agency programs facilitate the mortgage market for low- 
to moderate-income borrowers, often by offering programs to purchase or 
insure loans originated by a private institution. Since the HMDA data 
reported by financial institutions does not include the lien status of 
purchased loans, it is difficult to determine the pricing 
characteristics of the private secondary market. Lien status 
information on purchased loans would help public entities, such as 
local and State housing finance agencies, understand how to complement 
the liquidity provided by the secondary market in certain communities, 
thereby maximizing the effectiveness of such public programs. Thus, the 
Bureau believes that requiring that such data be reported would assist 
public officials in their determination of the distribution of public 
sector investments in a manner designed to improve the private 
investment environment. Additionally, providing lien status information 
to purchasers is standard industry practice and is supported by MISMO. 
For these reasons, the Bureau believes that data on the lien status of 
purchased loans will further the purposes of HMDA.
    Modifying the current reporting requirement in Sec.  1003.4(a)(14) 
will enhance data collected under Regulation C and facilitate 
compliance by better aligning the data collected with industry 
practice. Based on these considerations, pursuant to the Bureau's 
authority under sections 305(a) and 304(b)(6)(J) of HMDA, the Bureau is 
proposing to modify Sec.  1003.4(a)(14) to provide that a financial 
institution shall report the priority of the lien against the property 
identified under Sec.  1003.4(a)(9), and is also proposing to require 
reporting of this information for purchased loans. The Bureau solicits 
feedback regarding whether this proposed modification is appropriate 
generally, and specifically solicits feedback regarding the potential 
burdens that may result from this proposal to align with the industry 
data standard. The Bureau also solicits feedback regarding whether 
alignment with the MISMO industry standard would benefit any other 
business operations of a financial institution.
    As discussed in the section-by-section analysis of Sec.  1003.4(a), 
during the Small Business Review Panel process, the small entity 
representatives' feedback on adopting an industry data standard 
depended on whether the small entity representative sells loans in the 
secondary market, or whether their Loan Origination System vendor's 
system is aligned with industry data standards.\373\ The Small Business 
Review Panel recommended that the Bureau seek comment in the proposed 
rule from small financial institutions about whether they, or their 
vendors, use MISMO-compliant data definitions and standards, and the 
potential effect on small financial institutions of alignment of the 
HMDA data requirements with MISMO data standards.\374\ Consistent with 
the Small Business Review Panel's recommendations, the Bureau solicits 
feedback on these issues.
---------------------------------------------------------------------------

    \373\ See Small Business Review Panel Report at 42.
    \374\ Id. at 43.
---------------------------------------------------------------------------

    The Bureau is proposing to modify the technical instruction in 
appendix A regarding how to enter lien status on the loan application 
register. Like the current instruction, proposed instruction 4(a)(14)-1 
directs financial institutions to enter the priority of the lien 
against the property by entering the applicable code from a list. 
Proposed instruction 4(a)(14)-1 modifies the current instruction in 
four ways. First, the Bureau proposes to remove the current instruction 
for reporting ``not applicable'' for purchased loans and proposes 
instruction 4(a)(14)-1.a, which requires that the priority of the lien 
against the property be entered not only for covered loans that a 
financial institution originates and for applications that do not 
result in an origination, but also for covered loans purchased. Second, 
in an effort to align with the industry data standard, proposed 
instruction 4(a)(14)-1 directs financial institutions to enter whether 
the priority of the lien against the property is a first lien, second 
lien, third lien, fourth lien, or other. Third, as discussed above, the 
Bureau proposes to modify Regulation C to require reporting only of 
dwelling-secured transactions and proposes to remove reporting of 
unsecured home improvement loans. As such, the current option to enter 
``not secured by a lien'' would no longer be applicable, and the Bureau 
proposes to delete it. Fourth, proposed instruction 4(a)(14)-1.b 
requires financial institutions to enter Code 5 for ``other''

[[Page 51783]]

when the priority of the lien against the property is other than one 
identified in Codes 1 through 4 (for example, secured by a fifth lien 
or sixth lien).
    The Bureau believes that its proposed modification to the current 
reporting requirement under Sec.  1003.4(a)(14) is appropriate to align 
with the industry data standard. However, the Bureau recognizes the 
potential burdens that may result from requiring financial institutions 
to report the lien status of the property as a third lien, fourth lien, 
or other lien. The Bureau solicits feedback regarding whether the 
Bureau should maintain the current reporting requirement (secured by a 
first lien or subordinate lien) modified to conform to the proposed 
removal of unsecured home improvement loans, or whether financial 
institutions prefer to report the actual priority of the lien against 
the property (secured by a first lien, second lien, third lien, fourth 
lien, or other). The Bureau also recognizes that requiring the 
reporting of lien status for purchased loans may impose some potential 
burdens on financial institutions. However, the Bureau believes that 
such information is evident on the face of the loan documents and as 
such the information may be readily available to financial 
institutions. The Bureau believes that the potential benefits to the 
public and public officials, as discussed above, justify potential 
burdens. The Bureau solicits feedback on the general utility of lien 
status data on purchased loans and on the unique costs and burdens 
associated with collecting and reporting the data that financial 
institutions may face as a result of the proposal.
    In order to conform the commentary on lien status to the proposed 
requirement to report the priority of the lien, the Bureau is proposing 
technical modifications to comment 4(a)(14)-1. In addition, comment 
4(a)(14)-1 is amended to provide guidance on reporting lien status for 
purchased loans; it explains that, for covered loans purchased by a 
financial institution, lien status is determined by reference to the 
best information readily available to the financial institution at the 
time of purchase. Comment 4(a)(14)-1 is also amended to provide 
additional guidance on reporting lien status for applications that do 
not result in originations. The amended comment explains that if an 
application does not result in an origination and the best information 
readily available to the financial institution at the time final action 
is taken indicates that there is a mortgage on the property that would 
not have been paid off as part of the transaction, but the financial 
institution is not able to determine, based on the best information 
readily available to it, the exact lien priority of the loan applied 
for, the financial institution complies with proposed Sec.  
1003.4(a)(14) by reporting that the property would have been secured by 
a second lien.
    As discussed in the section-by-section analysis of proposed Sec.  
1003.4(a)(9) and in proposed comment 4(a)(9)-2, if more than one 
property is taken, or in the case of an application, proposed to be 
taken as security for a single covered loan or application, a financial 
institution may report one of the properties in a single entry on its 
loan application register or report all of the properties using 
multiple entries on its loan application register. Regardless of 
whether a financial institution elects to report the transaction in one 
entry or more than one entry, the information required by proposed 
Sec.  1003.4(a)(14) should relate to the property identified under 
paragraph 4(a)(9). The Bureau proposes to add new comment 4(a)(14)-2 
which directs financial institutions to refer to proposed comment 
4(a)(9)-2 regarding transactions involving multiple properties and 
clarifies that a financial institution complies with Sec.  
1003.4(a)(14) by reporting lien status in a manner consistent with the 
property reported under Sec.  1003.4(a)(9).
4(a)(15)
    Although credit scores are often a critically important factor in 
underwriting and pricing loans, neither HMDA nor Regulation C 
historically has required reporting of information relating to an 
applicant's or borrower's credit score. Section 1094(3)(A)(iv) of the 
Dodd-Frank Act amended section 304(b) of HMDA to require financial 
institutions to report ``the credit score of mortgage applicants and 
mortgagors, in such form as the Bureau may prescribe.'' \375\ The 
Bureau is proposing to add new Sec.  1003.4(a)(15) to implement this 
requirement.\376\
---------------------------------------------------------------------------

    \375\ 12 U.S.C. 2803(b)(6)(I).
    \376\ The Dodd-Frank amendments to HMDA added new provisions 
directing the Bureau to develop regulations that ``modify or require 
modification of itemized information, for the purpose of protecting 
the privacy interests of the mortgage applicants or mortgagors, that 
is or will be available to the public,'' and identified credit score 
as a new data point that may raise privacy concerns. HMDA sections 
304(h)(1)(E), (h)(3)(A)(i). See part II.C above for discussion of 
the Bureau's approach to protecting applicant and borrower privacy 
in light of the goals of HMDA.
---------------------------------------------------------------------------

    Except for purchased covered loans, proposed Sec.  1003.4(a)(15)(i) 
requires financial institutions to report the credit score or scores 
relied on in making the credit decision and the name and version of the 
scoring model used to generate each credit score. The Bureau believes 
this interpretation of HMDA section 304(b)(6)(I) is reasonable because 
the name and version of the scoring model are necessary to understand 
any credit scores that would be reported, as different models are 
associated with different scoring ranges and some models may even have 
different ranges depending on the version used.\377\ This proposal is 
also authorized by HMDA sections 305(a) and 304(b)(6)(J), and is 
necessary and proper to effectuate the purposes of HMDA, because, among 
other reasons, it facilitates accurate analyses of whether financial 
institutions are serving the housing needs of their communities by 
providing adequate home financing to qualified applicants.
---------------------------------------------------------------------------

    \377\ For example, the range for VantageScore 3.0 scores is 300 
to 850, but earlier VantageScore models have a range of 501 to 990. 
See VantageScore, How the Scores Range, https://
your.vantagescore.com/interpretscores.
---------------------------------------------------------------------------

    The Bureau believes that financial institutions that rely on credit 
scores in making credit decisions will be able to easily identify the 
credit score or scores they have relied on in making the credit 
decision and the name and version of the scoring model used to generate 
each credit score. However, to facilitate compliance pursuant to HMDA 
section 305(a), the Bureau has excluded purchased covered loans from 
the requirements of proposed Sec.  1003.4(a)(15)(i) because the Bureau 
anticipates that it could be burdensome for financial institutions that 
purchase loans to identify the credit score or scores relied on in 
making the underlying credit decision and the name and version of the 
scoring model used to generate each credit score. The Bureau solicits 
feedback on whether this exception is appropriate.
    As an alternative to requiring the scoring model name and version, 
the Bureau is considering requiring financial institutions to indicate 
the range of possible scores for the scoring model used. However, the 
Bureau is concerned that the significance of a particular score may 
vary depending on the model or version used even for models and 
versions that have identical ranges. The Bureau invites comment on 
whether it is appropriate to request the name and version of the 
scoring model and whether the Bureau should require any other related 
information to assist in interpreting credit score data, such as the 
date on which the credit score was created.
    The Bureau is proposing in Sec.  1003.4(a)(15)(ii) to interpret 
``credit score'' to have the same meaning as in section 609(f)(2)(A) of 
the Fair Credit

[[Page 51784]]

Reporting Act (FCRA), 15 U.S.C. 1681g(f)(2)(A). The Dodd-Frank Act 
amendments to HMDA do not provide a definition of ``credit score.'' To 
provide clarity, proposed Sec.  1003.4(a)(15)(ii) incorporates by 
reference the definition in FCRA section 609(f)(2)(A), which is the 
only definition of ``credit score'' that appears in the FCRA or 
Regulation V. This definition applies for purposes of the credit score 
disclosure requirements in FCRA sections 609(f) and 615 and is 
incorporated by reference into the Bureau's risk-based pricing rule by 
Regulation V Sec.  1022.71(l). FCRA section 609(f)(2)(A) provides:
    The term ``credit score''--
    (i) Means a numerical value or a categorization derived from a 
statistical tool or modeling system used by a person who makes or 
arranges a loan to predict the likelihood of certain credit behaviors, 
including default (and the numerical value or the categorization 
derived from such analysis may also be referred to as a ``risk 
predictor'' or ``risk score''); and
    (ii) does not include--
    (I) Any mortgage score or rating of an automated underwriting 
system that considers one or more factors in addition to credit 
information, including the loan to value ratio, the amount of down 
payment, or the financial assets of a consumer; or
    (II) any other elements of the underwriting process or underwriting 
decision.
    The Bureau believes that FCRA section 609(f)(2)(A) provides a 
reasonable definition of ``credit score'' that is broadly familiar to 
financial institutions that are already subject to FCRA and Regulation 
V requirements. Alternatively, the Bureau could define ``credit score'' 
based on the Regulation B definitions of ``credit scoring system'' or 
``empirically derived, demonstrably and statistically sound, credit 
scoring system.'' \378\ Another alternative would be to interpret 
credit score to mean the probability of default, using a concept 
similar to the probability of default metric that the FDIC uses in 
determining assessment rates for large and highly complex insured 
depository institutions.\379\ The Bureau believes that the FCRA section 
609(f)(2)(A) definition is the most appropriate because it provides a 
general purpose definition that is familiar to industry, but the Bureau 
solicits feedback on whether Regulation C should instead use a 
different definition of ``credit score.''
---------------------------------------------------------------------------

    \378\ According to Regulation B, a credit scoring system is ``a 
system that evaluates an applicant's creditworthiness mechanically, 
based on key attributes of the applicant and aspects of the 
transaction, and that determines, alone or in conjunction with an 
evaluation of additional information about the applicant, whether an 
applicant is deemed creditworthy.'' Regulation B Sec.  1002.2(p)(1). 
The four-part definition of an ``empirically derived, demonstrably 
and statistically sound, credit scoring system'' in Regulation B 
Sec.  1002.2(p)(1) establishes the criteria that a credit system 
must meet in order to use age as a predictive factor. Regulation B 
comment 2(p)-1.
    \379\ FDIC Assessments, Large Bank Pricing, 77 FR 66000 (Oct. 
31, 2012).
---------------------------------------------------------------------------

    Proposed comment 4(a)(15)-1 explains that a financial institution 
relies on a credit score in making the credit decision if the credit 
score was a factor in the credit decision even if it was not a 
dispositive factor. For example, if a credit score is one of multiple 
factors in a financial institution's credit decision, the financial 
institution has relied on the credit score even if the financial 
institution denies the application because one or more underwriting 
requirements other than the credit score are not satisfied.
    Proposed comment 4(a)(15)-2 addresses circumstances where a 
financial institution obtains or creates multiple credit scores for a 
single applicant or borrower. It explains that, when a financial 
institution obtains or creates two or more credit scores for a single 
applicant or borrower but relies on only one score in making the credit 
decision, the financial institution complies with proposed Sec.  
1003.4(a)(15) by reporting that credit score and information about the 
scoring model used. For example, a financial institution that relies on 
the middle of the scores reported would report the middle score, and a 
financial institution that relies on the average of all of the scores 
reported would report the average score.
    Proposed comment 4(a)(15)-2 also addresses circumstances in which a 
financial institution relies on multiple scores for the applicant or 
borrower in making the credit decision. It explains that in such 
circumstances proposed Sec.  1003.4(a)(15) requires the institution to 
report one of the credit scores for the borrower or applicant that was 
relied on in making the credit decision. In choosing which credit score 
to report in this circumstance, a financial institution need not use 
the same approach for its entire HMDA submission but should be 
generally consistent. For example, a financial institution could 
routinely use one approach within a particular division of the 
institution or for a category of covered loans. The proposed comment 
also indicates that in instances such as these, the financial 
institution should report the name and version of the credit scoring 
model for the score reported.
    Proposed comment 4(a)(15)-3 addresses situations involving credit 
scores for multiple applicants or borrowers. In a transaction involving 
two or more applicants or borrowers for which the financial institution 
relies on a single credit score in making the credit decision for the 
transaction, the institution complies with proposed Sec.  1003.4(a)(15) 
by reporting that credit score. Otherwise, a financial institution 
complies with proposed Sec.  1003.4(a)(15) by reporting a credit score 
for the applicant or borrower that it relied on in making the credit 
decision, if any, and a credit score for the first co-applicant or co-
borrower that it relied on in making the credit decision, if any. To 
illustrate, assume a transaction involves one applicant and one co-
applicant and that the financial institution obtains or creates two 
credit scores for the applicant and two credit scores for the co-
applicant. Assume further that the financial institution relies on the 
lowest, highest, most recent, or average of all of the credit scores 
obtained or created to make the credit decision for the transaction. 
The financial institution would comply with proposed Sec.  
1003.4(a)(15) by reporting that credit score. Alternatively, assume a 
transaction involves one applicant and one co-applicant and that the 
financial institution obtains or creates three credit scores for the 
applicant and three credit scores for the co-applicant. Assume further 
that the financial institution relies on the middle credit score for 
the applicant and the middle credit score for the co-applicant to make 
the credit decision for the transaction. The financial institution 
would comply with proposed Sec.  1003.4(a)(15) by reporting both the 
middle score for the applicant and the middle score for the co-
applicant.
    The Bureau believes that the approach described above for 
transactions involving multiple credit scores and multiple applicants 
or borrowers would limit the number of credit scores that financial 
institutions would need to report (at most two credit scores per 
application or covered loan), while ensuring that financial 
institutions provide meaningful credit score information. The Bureau 
invites comment on whether proposed Sec.  1003.4(a)(15) and its 
associated commentary provide an appropriate approach to handling 
situations involving multiple credit scores and multiple applicants or 
borrowers.
    Proposed comment 4(a)(15)-4 clarifies that the financial 
institution complies with Sec.  1003.4(a)(15) by reporting not

[[Page 51785]]

applicable if a file was closed for incompleteness or the application 
was withdrawn before a credit decision was made. It also clarifies that 
a financial institution complies with Sec.  1003.4(a)(15) by reporting 
not applicable if it makes a credit decision without relying on a 
credit score for the applicant or borrower.
    In appendix A, proposed instruction 4(a)(15)-1 directs financial 
institutions to enter the credit scores relied on in making the credit 
decision into column ``A'' for the applicant or borrower and, where 
required by Regulation C, into column ``CA'' for the first co-applicant 
or co-borrower. Where a financial institution is required to report a 
single score for the transaction that corresponds to multiple 
applicants or borrowers, proposed instruction 4(a)(15)-1 directs the 
financial institution to use column ``A.''
    Proposed instruction 4(a)(15)-2 provides the codes that financial 
institutions would use for each credit score reported to indicate the 
name and version of the scoring model used to generate the credit score 
relied on in making the credit decision, using column ``A'' and column 
``CA'' as applicable. These include codes for the following models: 
Equifax Beacon 5.0, Experian Fair Isaac, FICO Risk Score Classic 04, 
FICO Risk Score Classic 98, VantageScore 2.0, and VantageScore 3.0. 
They also include a code to use if more than one credit scoring model 
was used in developing the credit score, as well as a code for any 
other credit scoring model that is not listed, a code for purchased 
loans, and a code for use if the financial institution did not rely on 
a credit score in making the credit decision or if a file was closed 
for incompleteness or an application was withdrawn before a credit 
decision was made. If the credit scoring model is one that is not 
listed, proposed instruction 4(a)(15)-2.b instructs the financial 
institution to provide the name and version of the scoring model used 
in a free-form text field. The Bureau invites comment on whether these 
codes and the fields described above are appropriate for reporting 
credit score data and on any alternative approaches that might be used 
for reporting this information.
4(a)(16)
    Section 1003.4(c)(1) currently permits optional reporting of the 
reasons for denial of a loan application. However, certain financial 
institutions supervised by the Office of the Comptroller of the 
Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) are 
required by those agencies to report denial reasons on their HMDA loan 
application registers.\380\ For the reasons discussed below, the Bureau 
is proposing to require all financial institutions subject to HMDA 
reporting to report the reasons for denial of a loan application.
---------------------------------------------------------------------------

    \380\ 12 CFR 27.3(a)(1)(i), 128.6, 390.147.
---------------------------------------------------------------------------

    In general, the Bureau believes that the statistical value of 
optionally reported data is lessened because of the lack of 
standardization across all HMDA reporters. In addition, the reasons an 
application is denied are critical to understanding the financial 
institution's credit decision and to screen for potential violations of 
antidiscrimination laws, such as ECOA and the Fair Housing Act.\381\ 
The Bureau has received feedback suggesting that requiring the 
collection of the reasons for denial of an application would improve 
the usefulness of HMDA data.\382\ Denial reasons are important for a 
variety of purposes including, for example, assisting examiners in 
their reviews of denial disparities and underwriting exceptions.
---------------------------------------------------------------------------

    \381\ 15 U.S.C. 1691 et seq.; 42 U.S.C. 3601 et seq. Many 
financial institutions opt not to report denial reasons under 
current Regulation C. However, ECOA and Regulation B require all 
financial institutions to provide applicants the reasons for denial, 
or a notice of their right to receive those denial reasons, and to 
maintain records of compliance. See Regulation B Sec. Sec.  1002.9 
and 1002.12, 15 U.S.C. 1691(d).
    \382\ E.g., San Francisco Hearing, supra note 133.
---------------------------------------------------------------------------

    Requiring the collection of the reasons for denial may facilitate 
more efficient, and less burdensome, fair lending examinations by the 
Bureau and other financial regulatory agencies, thereby furthering 
HMDA's purpose of assisting in identifying possible discriminatory 
lending patterns and enforcing antidiscrimination statutes. 
Furthermore, as discussed above, certain financial institutions 
supervised by the OCC and the FDIC are required by those agencies to 
report denial reasons.\383\ For these reasons, pursuant to its 
authority under HMDA sections 305(a) and 304(b)(6)(J), the Bureau 
proposes to require all financial institutions to report reasons for 
denial of an application. The Bureau believes this information is 
necessary to carry out HMDA's purposes, because it will provide more 
consistent and meaningful data, which will assist in identifying 
whether financial institutions are serving the housing needs of their 
communities, as well as assist in identifying possible discriminatory 
lending patterns and enforcing antidiscrimination statutes.
---------------------------------------------------------------------------

    \383\ See supra note 364.
---------------------------------------------------------------------------

    During the Small Business Review Panel process, a number of small 
entity representatives noted that a financial institution may have 
several reasons for denying a loan, which could complicate 
reporting.\384\ Some small entity representatives expressed concern 
about mandatory reporting of denial reasons, particularly where there 
are multiple reasons for a denial.\385\ In such instances, one small 
entity representative was concerned that the HMDA loan application 
register may not provide the full picture, while another noted that 
manual entry of the reasons would be required.\386\ Another small 
entity representative suggested an ``other'' category if financial 
institutions are required to report denial reasons.\387\ In addition, 
one small entity representative supported reporting of denial reasons, 
citing its importance for fair lending analysis.\388\ While the Small 
Business Review Panel did not make a recommendation in light of these 
comments, the Bureau solicits feedback on these issues.
---------------------------------------------------------------------------

    \384\ See Small Business Review Panel Report at 39.
    \385\ Id. at 26.
    \386\ Id.
    \387\ Id. at 26-7.
    \388\ Id. at 27.
---------------------------------------------------------------------------

    Proposed instruction 4(a)(16) in appendix A provides technical 
instructions regarding how to enter the denial reason data on the loan 
application register. Proposed instruction 4(a)(16)-1 provides that a 
financial institution must indicate the principal reason(s) for denial, 
indicating up to three reasons. The proposed instruction modifies the 
current instruction in three ways. First, the proposed instruction 
clarifies that a financial institution must list the ``principal'' 
reasons for denial. Second, the Bureau is proposing a free-form text 
field for denial reasons other than those provided in appendix A to 
account for the variety of reasons that may exist and to improve the 
utility of the ``Other'' data. The Bureau explains in proposed 
instruction 4(a)(16)-2 that, when a financial institution denies an 
application for a principal reason not included on the list of denial 
reasons in appendix A, an institution enters the corresponding code for 
``Other'' and enters the principal denial reason(s). Financial 
institutions would no longer simply enter the corresponding code for 
``Other'' on the loan application register if the reason for denial is 
not provided on the list but also would be required to enter the 
principal denial reason(s) in the free-form text field. Third, the 
proposed instruction adds a code for ``not applicable'' and explains in 
proposed instruction 4(a)(16)-3 that this code should be used by a 
financial

[[Page 51786]]

institution if the action taken on the application was not a denial 
pursuant to Sec.  1003.4(a)(8), such as if the application was 
withdrawn before a credit decision was made or the file was closed for 
incompleteness. Financial institutions would no longer leave this 
column blank on the loan application register but instead would enter 
the corresponding code for ``not applicable.''
    The Bureau solicits feedback regarding whether the current codes in 
appendix A relating to reasons for denial (debt-to-income ratio, 
employment history, credit history, collateral, insufficient cash, 
unverifiable information, credit application incomplete, mortgage 
insurance denied, and other) should be modified. For example, the 
Bureau solicits feedback as to whether there are additional reasons for 
denying an application that are commonly used by financial institutions 
but are not present in the list of denial reasons. The Bureau also 
solicits feedback on the proposed requirement that a financial 
institution enter the principal denial reason(s) in the free-form text 
field when ``Other'' is entered in the loan application register.
    The Bureau is proposing to renumber current instruction I.F.2 of 
appendix A as instruction 4(a)(16)-4. Proposed instruction 4(a)(16)-4 
explains how a financial institution that uses the model form for 
adverse action contained in appendix C to Regulation B (Form C-1, 
Sample Notice of Action Taken and Statement of Reasons) should report 
the denial reasons for purposes of HMDA. Similar to proposed 
instruction 4(a)(16)-2 discussed above, proposed instruction 4(a)(16)-4 
provides that, when a principal reason a financial institution denied 
the application is not provided on the list of denial reasons in the 
model form for adverse action contained in appendix C to Regulation B 
(Form C-1, Sample Notice of Action Taken and Statement of Reasons), 
financial institutions would no longer simply enter the corresponding 
code for ``Other'' on the loan application register but also would be 
required to enter the principal denial reason(s) in the free-form text 
field. The Bureau solicits feedback regarding whether modifications or 
clarifications would assist financial institutions in complying with 
the proposed requirement.
    Proposed comment 4(a)(16)-1 clarifies that a financial institution 
complies with Sec.  1003.4(a)(16) by reporting the principal reason(s) 
it denied the application, indicating up to three reasons. The proposed 
comment explains that the reasons reported must be specific and 
accurately describe the principal reasons the financial institution 
denied the application. The Bureau solicits feedback regarding whether 
additional clarifications would assist financial institutions in 
complying with the proposed requirement.
    In order to align with proposed instructions 4(a)(16)-2 and -4, 
proposed comment 4(a)(16)-2 clarifies that, when a principal reason a 
financial institution denied the application is not provided on the 
list of denial reasons in appendix A, a financial institution complies 
with proposed Sec.  1003.4(a)(16) by entering ``Other'' and reporting 
the principal reason(s) it denied the application. If an institution 
chooses to provide the applicant the reason(s) it denied the 
application using the model form contained in appendix C to Regulation 
B (Form C-1, Sample Notice of Action Taken and Statement of Reasons) or 
a similar form, the financial institution complies with proposed Sec.  
1003.4(a)(16) by entering the ``Other'' reason(s) that were specified 
on the form by the institution. If a financial institution chooses to 
provide the applicant a disclosure of the applicant's right to a 
statement of specific denial reasons using the model form contained in 
appendix C to Regulation B (Form C-5, Sample Disclosure of Right to 
Request Specific Reasons for Credit Denial) or a similar form, or 
chooses to provide the denial reason(s) orally under Regulation B Sec.  
1002.9(a)(2)(ii), the financial institution complies with proposed 
Sec.  1003.4(a)(16) by entering the principal reason(s) it denied the 
application. The Bureau solicits feedback regarding whether additional 
clarifications would assist financial institutions in complying with 
the proposed requirement.
4(a)(17)
    Section 304(b) of HMDA \389\ requires reporting of ``the total 
points and fees payable at origination in connection with the mortgage 
as determined by the Bureau, taking into account 15 U.S.C. 
1602(aa)(4).'' \390\ The Bureau proposes to implement this provision by 
requiring financial institutions to report the total points and fees 
associated with certain mortgage loans.
---------------------------------------------------------------------------

    \389\ Section 1094(3)(A)(iv) of the Dodd-Frank Act amended 
section 304(b) of HMDA to provide for the reporting of total points 
and fees.
    \390\ 15 U.S.C. 1602(aa)(4) is part of TILA. Prior to amendments 
made by the Dodd-Frank Act, that section generally defined ``points 
and fees'' for the purpose of determining whether a transaction was 
a high-cost mortgage. See 15 U.S.C. 1602(aa)(4) (2006). Section 
1100A of the Dodd Frank Act redesignated subsection 1602(aa)(4) as 
subsection 1602(bb)(4), where it is currently codified. In light of 
that redesignation, the Bureau interprets HMDA section 304(b) as 
directing it to take into account 15 U.S.C. 1602(bb)(4) and its 
implementing regulations, as those provisions address ``points and 
fees'' and because current subsection 1602(aa)(4) is no longer 
relevant to a determination regarding points and fees.
---------------------------------------------------------------------------

    In general, the term ``points and fees'' refers to costs associated 
with the origination of a mortgage loan. The Bureau proposes to define 
total points and fees by reference to TILA, as implemented by 
Regulation Z Sec.  1026.32(b)(1) or (2). Section 1026.32(b)(1) defines 
``points and fees'' for closed-end credit transactions. For a closed-
end credit transaction, points and fees include all items included in 
the finance charge as specified under Sec.  1026.4(a) and (b), with the 
exception of certain items specifically excluded under Sec.  
1026.32(b)(1)(i)(A) through (F). These excluded items include interest 
or time-price differential; government mortgage insurance premiums and 
funding fees; annual private mortgage insurance premiums; bona fide 
third-party charges not retained by the creditor, loan originator, or 
an affiliate; and certain bona fide discount points paid by the 
consumer. Section 1026.32(b)(1)(ii) through (vi) lists other items that 
are specifically included in points and fees, including compensation 
paid by a consumer or creditor to a loan originator; real estate-
related charges; premiums for various forms of credit insurance; the 
maximum prepayment penalty that may be charged or collected under the 
terms of the mortgage loan; and the total prepayment penalty incurred 
by the consumer in a refinance transaction. Points and fees for open-
end credit plans are defined in Sec.  1026.32(b)(2). Section 
1026.32(b)(2) generally includes all of the charges described above for 
closed-end transactions, with certain modifications and additions, such 
as the participation fees payable at or before account opening, and the 
charge, if any, to draw on the credit line.
    The Bureau's 2013 HOEPA Final Rule and 2013 ATR Final Rule both 
limit the points and fees that lenders may charge when seeking to avoid 
HOEPA coverage or making a qualified mortgage, respectively.\391\ The 
Bureau's 2013 HOEPA Final Rule provides that a transaction is a high-
cost mortgage if, among other things, the transaction's points and fees 
exceed 5 percent of the total transaction amount or, for loans below 
$20,000, the lesser of 8 percent of the total transaction amount or 
$1,000 (with the dollar figures also adjusted annually for inflation). 
High-cost

[[Page 51787]]

mortgages are subject to special disclosure requirements and 
restrictions on loan terms, and borrowers in high-cost mortgages have 
enhanced remedies for violations of the law. The Bureau's 2013 ATR 
Final Rule generally precludes a loan from being considered a qualified 
mortgage if the points and fees paid by the borrower exceed 3 percent 
of the total loan amount. Qualified mortgages are entitled to a 
presumption that the creditor making the loan has satisfied Regulation 
Z's ability-to-repay requirements.
---------------------------------------------------------------------------

    \391\ See 78 FR 6856 (Jan. 31, 2013); 78 FR 6408 (Jan. 30, 
2013).
---------------------------------------------------------------------------

    Proposed Sec.  1003.4(a)(17) requires financial institutions to 
report points-and-fees data for covered loans or applications subject 
either to HOEPA or the Bureau's 2013 ATR Final Rule. The Bureau intends 
for loans ``subject to'' HOEPA to apply to consumer loans secured by 
the borrower's principal dwelling, except for transactions specifically 
excluded under Sec.  1026.32(a)(2), such as reverse mortgages, 
construction loans, loans originated and financed by a State housing 
finance agency, and loans originated and financed through the USDA's 
direct loan program. Similarly, loans ``subject to'' the Bureau's 2013 
ATR Final Rule include all consumer loans secured by a dwelling, 
including any real property attached to a dwelling, as defined in Sec.  
1026.2(a)(19), other than transactions exempt under Sec.  1026.43(a), 
such as home-equity lines of credit, reverse mortgages, and temporary 
or bridge loans with terms of 12 months or less.\392\ Together, the 
HOEPA and qualified-mortgage prongs of the proposed points-and-fees 
provision cover open-end credit plans secured by primary residences and 
nearly all dwelling-secured, closed-end mortgage loans.
---------------------------------------------------------------------------

    \392\ In addition to the Bureau, section 1412 of the Dodd-Frank 
Act directed the following agencies to prescribe qualified mortgage 
rules with respect to loans that they insure, guarantee, or 
administer: (1) the Department of Housing and Urban Development, 
with regard to mortgages insured under the National Housing Act; (2) 
the Department of Veterans Affairs, with regard to a loan made or 
guaranteed by the Secretary of Veterans Affairs; (3) the Department 
of Agriculture, with regard to loans guaranteed by the Secretary of 
Agriculture under 42 U.S.C. 1472(h); and (4) the Rural Housing 
Service, with regard to loans insured by the Rural Housing Service. 
The qualified mortgage prong of the proposed points-and-fees 
provision would not apply to qualified mortgage rules promulgated by 
these agencies. Certain loans subject to the qualified mortgage 
rules of the other agencies would, however, be covered under the 
HOEPA prong of the points-and-fees provision.
---------------------------------------------------------------------------

    Total points and fees are an important component of loan pricing. 
Excessive points and fees have been associated with originations of 
subprime loans and loans to vulnerable borrowers. Panelists at the 
Board's 2010 Hearings stated that collecting information regarding 
points and fees would improve the usefulness of the HMDA data for 
determining whether lenders are serving the housing needs of their 
communities.\393\ As with other elements of loan pricing, greater 
information regarding points and fees will also enable deeper insight 
into the terms on which different communities are offered loans. For 
example, the Bureau has received feedback stating that borrowers in 
manufactured housing communities receive loans with higher prices than 
borrowers in other communities.
---------------------------------------------------------------------------

    \393\ See San Francisco Hearing, supra note 133.
---------------------------------------------------------------------------

    For the above reasons, to implement HMDA section 304(b)(5)(A), the 
Bureau is proposing Sec.  1003.4(a)(17), which provides that, for 
covered loans or applications subject to the Home Ownership and Equity 
Protection Act of 1994 or covered loans or applications subject to 
Regulation Z Sec.  1026.43(e)(2)(iii), other than purchased covered 
loans, financial institutions shall report the total points and fees 
payable in connection with the covered loan or application, expressed 
in dollars and calculated in accordance with Regulation Z Sec.  
1026.32(b)(1) or (2), as applicable. For the reasons given above, the 
Bureau interprets the Dodd-Frank Act's instruction to ``tak[e] into 
account'' the TILA's definition of points and fees as allowing for 
alignment between the relevant provisions of Regulation C and 
Regulation Z. Defining points and fees consistently across regulations 
will avoid confusion and reduce the burden of reporting.\394\ This 
definition is also consistent with the MISMO version 3.3 data standard 
for total points and fees.
---------------------------------------------------------------------------

    \394\ See Atlanta Hearing, supra note 131.
---------------------------------------------------------------------------

    The Bureau solicits comment on the benefits and burdens of the 
definition of points and fees proposed above, as well as on any 
specific elements of points and fees to include or exclude. Although 
the Bureau believes that most financial institutions will have to 
calculate points and fees for purposes of both the qualified mortgage 
points-and-fees cap and the high-cost mortgage coverage threshold, it 
is possible that financial institutions that are certain of a loan's 
qualified mortgage or high-cost status may not calculate the total 
points and fees. Furthermore, some financial institutions that 
calculate the total points and fees might not store the information in 
a format readily available for HMDA purposes. To facilitate compliance, 
the Bureau is proposing to exclude covered loans that have been 
purchased by a financial institution from this reporting requirement 
because it does not believe that the total points and fees would be 
evident on the face of the documentation obtained from the seller, but 
the Bureau solicits feedback on whether to apply the points-and-fees 
reporting requirement to purchased covered loans.
    During the Small Business Review Panel process, the small entity 
representatives expressed concern over the consistency and clarity of 
the points-and-fees definition.\395\ The Small Business Review Panel 
recommended that the Bureau seek comment in the proposed rule on the 
costs to small financial institutions of providing the pricing data, 
and consider aligning the requirements of Regulation C to the pricing 
data used in other Federal and State mortgage disclosures as a way to 
reduce burden.\396\ Consistent with the Small Business Review Panel's 
recommendation, the Bureau is proposing a definition of points and fees 
that aligns with the definition promulgated under the TILA. The Bureau 
also solicits feedback on the burden to small financial institutions.
---------------------------------------------------------------------------

    \395\ See Small Business Review Panel Report at 30-31, 55, 102, 
108-10, 128.
    \396\ See id. at 42.
---------------------------------------------------------------------------

    Proposed instruction 4(a)(17) in appendix A provides technical 
instructions regarding how to enter points and fees data on the loan 
application register. Proposed instruction 4(a)(17)-1 provides 
technical instructions for entering the total points and fees payable 
in connection with the covered loan or application. Proposed 
instruction 4(a)(17)-2 provides that a financial institution completing 
the loan application register must enter ``NA'' for covered loans 
subject to this reporting requirement for which the total points and 
fees were not known at or before closing, or for covered loans not 
subject to this reporting requirement, such as purchased covered loans.
4(a)(18)
    Currently, neither HMDA nor Regulation C requires financial 
institutions to report the total origination charges associated with a 
covered loan. Section 304(b) of HMDA permits the disclosure of such 
other information as the Bureau may require.\397\ For the reasons 
discussed below, the Bureau is proposing to require, for covered loans 
subject to the disclosure requirements in Regulation Z Sec.  
1026.19(f), the total of all itemized amounts that are designated 
borrower-paid at or before closing, expressed in

[[Page 51788]]

dollars, as disclosed pursuant to Sec.  1026.38(f)(1).
---------------------------------------------------------------------------

    \397\ Section 1094(3)(A)(iv) of the Dodd-Frank Act amended 
section 304(b) of HMDA.
---------------------------------------------------------------------------

    Origination charges are costs that the borrower will pay to the 
creditor and any loan originator for originating and extending the 
credit. Specifically, for covered loans subject to the disclosure 
requirements of Regulation Z Sec.  1026.19(f), origination charges are 
those costs designated ``borrower-paid'' on Line A of the Closing Cost 
Details page of the Closing Disclosure, as provided for in Regulation Z 
Sec.  1026.38(f)(1). The Bureau established this definition of 
origination charges in its 2013 TILA-RESPA Final Rule, which will 
become effective on August 1, 2015.\398\ These costs include charges 
such as application fees, origination fees, underwriting fees, 
processing fees, verification fees, and rate-lock fees, but do not 
include charges paid by the borrower for required services provided by 
persons other than the creditor or loan originator, or taxes or other 
government fees.
---------------------------------------------------------------------------

    \398\ See 78 FR 79730 (Dec. 31, 2013).
---------------------------------------------------------------------------

    The Bureau proposes to require reporting of total origination 
charges, as provided in proposed Sec.  1003.4(a)(18), because they 
provide a more complete picture of loan pricing. The price of a loan 
consists of several elements, including the loan terms, discount points 
and cash rebates, origination points or fees, and closing costs. As the 
total of all charges paid by the borrower, the proposed origination 
charges data point provides a measure of the amount of charges directly 
imposed on a borrower by a financial institution, and therefore 
discloses information about those charges over which a financial 
institution exercises the most control. According to feedback received 
by the Bureau, greater precision among the elements of loan pricing 
might provide public officials and community organizations with a 
better understanding of whether financial institutions are charging 
similar prices to similar applicants.
    Furthermore, the Bureau has received feedback suggesting that the 
reporting burden would be lessened by consistency between HMDA data 
points and items on the Closing Disclosure, and thus has proposed the 
definition of origination charges already found in Regulation Z Sec.  
1026.38(f)(1).\399\ The Small Business Review Panel recommended that 
the Bureau consider aligning the requirements of Regulation C to the 
pricing data used in other Federal and State mortgage disclosures.\400\ 
Consistent with the Small Business Review Panel's recommendation, the 
Bureau is proposing a definition of total origination charges that 
aligns with the costs designated ``borrower-paid'' on Line A of the 
closing cost details page of the Closing Disclosure.
---------------------------------------------------------------------------

    \399\ Chicago Hearing, supra note 137.
    \400\ See Small Business Review Panel Report at 42.
---------------------------------------------------------------------------

    The Bureau recognizes that the utility of data on origination fees 
may have some limits. For example, reporting only borrower-paid 
origination charges will not directly provide data about the total cost 
of credit associated with a mortgage loan, because certain charges are 
excluded. Furthermore, by limiting the scope of this provision to 
covered loans that require closing disclosures, the Bureau acknowledges 
that the data will lack the total origination charges for loans 
excluded from Regulation Z Sec.  1026.19(f), such as home-equity lines 
of credit and reverse mortgages.\401\ The Bureau is also concerned with 
the burden that may result from requiring this information. For 
example, some financial institutions that calculate origination charges 
for purposes of the Closing Disclosure might not store the information 
in a format readily available for HMDA purposes.
---------------------------------------------------------------------------

    \401\ See Regulation Z Sec.  1026.19(f)(1)(i).
---------------------------------------------------------------------------

    Despite these concerns, feedback received in the Bureau's outreach 
activities suggests that the benefits to the public and to public 
officials would justify the costs imposed on industry, and the Bureau 
believes that reporting of origination costs, pursuant to proposed 
Sec.  1003.4(a)(18), is necessary to carry out HMDA's purposes. For the 
reasons given, this information would provide a more complete and 
useful picture of loan pricing, which would assist public officials and 
members of the public in determining whether financial institutions are 
serving the housing needs of their communities and neighborhoods. As 
explained above, total origination charges would also assist in 
identifying potentially discriminatory lending patterns. Accordingly, 
pursuant to HMDA sections 305(a) and 304(b)(5)(D), the Bureau is 
proposing Sec.  1003.4(a)(18), which provides that for covered loans 
subject to the disclosure requirements in Regulation Z Sec.  
1026.19(f), a financial institution shall report the total of all 
itemized amounts that are designated borrower-paid at or before 
closing, expressed in dollars, as disclosed pursuant to Sec.  
1026.38(f)(1). The Bureau solicits feedback regarding the general 
utility of the revised data, the scope of the reporting requirement, 
and the costs associated with collecting and reporting the data. In 
particular, the Bureau solicits comment on whether a more comprehensive 
measure of the aggregate costs associated with the loan would be more 
appropriate, such as the amount listed as the ``total closing costs'' 
on Line J of the Closing Disclosure.
    Proposed instruction 4(a)(18) in appendix A provides technical 
instructions regarding how to enter the data on the loan application 
register. Proposed instruction 4(a)(18)-1 provides technical 
instructions for entering the amount of the total origination charges. 
Proposed instruction 4(a)(18)-2 provides that a financial institution 
completing the loan application register must enter ``NA'' for covered 
loans for which no amounts paid by the borrower were known at or before 
closing, or for covered loans not subject to this reporting 
requirement, such as open-end lines of credit or reverse mortgages.
4(a)(19)
    Currently, neither HMDA nor Regulation C requires financial 
institutions to report information regarding total discount points. 
Section 304(b) of HMDA permits the disclosure of such other information 
as the Bureau may require.\402\ For the reasons discussed below, the 
Bureau is proposing to require, for covered loans subject to the 
disclosure requirements in Regulation Z Sec.  1026.19(f), the points 
designated as paid to the creditor to reduce the interest rate, 
expressed in dollars, as described in Sec.  1026.37(f)(1)(i).
---------------------------------------------------------------------------

    \402\ Section 1094(3)(A)(iv) of the Dodd-Frank Act amended 
section 304(b) of HMDA.
---------------------------------------------------------------------------

    Discount points are a type of prepaid interest that borrowers can 
pay to reduce the interest rate applicable to subsequent payments. For 
covered loans subject to the disclosure requirements in Regulation Z 
Sec.  1026.19(f), the discount points that financial institutions would 
report are those listed on Line A.01 of the Closing Disclosure, as 
described in Regulation Z Sec.  1026.37(f)(1)(i). The Bureau has 
received feedback suggesting that separate disclosure of discount 
points provides information useful for identifying potentially 
discriminatory lending patterns.\403\ Specifically, information 
regarding the amount paid to reduce the interest rate, combined with 
information regarding total points and fees and total origination 
charges, enables researchers, regulators, and members of the public to 
develop a greater understanding of loan pricing. The annual percentage 
rate and interest rate cannot effectively be compared across borrowers 
without precise information on how discount points

[[Page 51789]]

have altered the rate. By examining the changes in the interest rate 
produced by the purchase of a given amount of discount points, members 
of the public and public officials can better determine the value that 
borrowers receive in exchange for discount points, and whether 
similarly situated borrowers are receiving similar value.
---------------------------------------------------------------------------

    \403\ San Francisco Hearing, supra note 133.
---------------------------------------------------------------------------

    Furthermore, the Bureau has received feedback suggesting that the 
reporting burden would be lessened by consistency between HMDA data 
points and items on the Closing Disclosure, and thus has proposed the 
definition of discount points already found in Regulation Z Sec.  
1026.37(f)(1)(i).\404\ The Small Business Review Panel recommended that 
the Bureau consider aligning the requirements of Regulation C to the 
pricing data used in other Federal and State mortgage disclosures.\405\ 
Consistent with the Small Business Review Panel's recommendation, the 
Bureau is soliciting feedback on the costs of reporting to small 
entities, and is proposing that financial institutions report the 
discount points already required to be listed on Line A.01 of the 
Closing Disclosure. This definition is also consistent with the MISMO 
version 3.3 data standard for discount points.
---------------------------------------------------------------------------

    \404\ Atlanta Hearing, supra note 131.
    \405\ See Small Business Review Panel Report at 42.
---------------------------------------------------------------------------

    As with other loan pricing data discussed above, discount point 
data do not include loan profitability, a data point that, according to 
feedback received at the Board's 2010 Hearings, might permit more 
detailed analysis of whether similarly situated borrowers are 
benefiting from similar pricing.\406\ Furthermore, by limiting the 
scope of this provision to covered loans that require closing 
disclosures, the Bureau acknowledges that the data will lack the total 
discount points for loans excluded from Regulation Z Sec.  1026.19(f), 
such as home-equity lines of credit and reverse mortgages.\407\ The 
Bureau is also concerned with the burden that may result from requiring 
financial institutions to report discount points. As with other pricing 
information, some financial institutions that calculate total discount 
points for purposes of the Closing Disclosure might not store the 
information in a format readily available for HMDA purposes.
---------------------------------------------------------------------------

    \406\ Atlanta Hearing, supra note 131.
    \407\ See Regulation Z Sec.  1026.19(f)(1)(i).
---------------------------------------------------------------------------

    Despite these concerns, feedback received in the Bureau's outreach 
activities suggests that the benefits to the public and to public 
officials may justify these costs, and the Bureau believes that 
reporting of total discount points associated with a covered loan, 
pursuant to proposed Sec.  1003.4(a)(19), is necessary to carry out 
HMDA's purposes. For the reasons given, this information would provide 
a more complete and useful picture of loan pricing, which would assist 
pubic officials and members of the public in determining whether 
financial institutions are serving the housing needs of their 
communities. Improved pricing information would also assist public 
officials and members of the public in identifying potentially 
discriminatory lending patterns. Accordingly, pursuant to HMDA sections 
305(a) and 304(b)(5)(D), the Bureau is proposing Sec.  1003.4(a)(19), 
which provides that for covered loans subject to the disclosure 
requirements in Regulation Z Sec.  1026.19(f), a financial institution 
shall report the points designated as paid to the creditor to reduce 
the interest rate, expressed in dollars, as described in Sec.  
1026.37(f)(1)(i). The Bureau solicits feedback regarding the general 
utility of the revised data, the scope of the proposed reporting 
requirement, and the costs associated with collecting and reporting the 
data. Specifically, the Bureau seeks comment on whether to include any 
lender credits, premiums, or rebates in the measure of discount points.
    Proposed instruction 4(a)(19) in appendix A provides technical 
instructions regarding how to enter the data on the loan application 
register. Proposed instruction 4(a)(19)-1 provides technical 
instructions for entering the total amount of points designated as paid 
to the creditor to reduce the interest rate. Proposed instruction 
4(a)(19)-2 provides that a financial institution completing the loan 
application register must enter ``NA'' for covered loans for which no 
points to reduce the interest rate were known at or before closing, or 
for covered loans not subject to this reporting requirement, such as 
open-end lines of credit or reverse mortgages.
4(a)(20)
    Neither HMDA nor Regulation C currently requires financial 
institutions to report the pre-discounted, risk-adjusted interest rate 
associated with a covered loan. Section 304(b) of HMDA permits the 
disclosure of such other information as the Bureau may require.\408\ 
For the reasons discussed below, the Bureau is proposing to require 
reporting of, for covered loans subject to the disclosure requirements 
in Regulation Z Sec.  1026.19(f), other than purchased covered loans, 
the interest rate that the borrower would receive if the borrower paid 
no bona fide discount points, as calculated pursuant to Regulation Z 
Sec.  1026.32.
---------------------------------------------------------------------------

    \408\ Section 1094(3)(A)(iv) of the Dodd-Frank Act amended 
section 304(b) of HMDA.
---------------------------------------------------------------------------

    The risk-adjusted, pre-discounted interest rate is the rate that 
the borrower would have received in the absence of any discount points 
or rebates. The rate the Bureau is proposing to require institutions to 
report under proposed Sec.  1003.4(a)(20) is the same base rate from 
which a financial institution would exclude ``bona fide discount 
points'' from points and fees for purposes of determining qualified 
mortgage and high-cost mortgage status under Regulation Z. Regulation Z 
Sec.  1026.32(b)(1)(i)(E) or (F) (closed-end loans), and Sec.  
1026.32(b)(2)(i)(E) or (F) (open-end credit plans), allows bona fide 
discount points to be excluded from the calculation of points and fees 
for both qualified mortgages and high-cost mortgages. Specifically, 
lenders may exclude up to two bona fide discount points from the 
points-and-fees calculation, depending on whether the ``interest rate 
without any discount'' is within one or two percentage points of the 
average prime offer rate. Under the proposal, financial institutions 
would report the risk-adjusted, pre-discounted interest rate not only 
for covered loans for which bona fide discount points have been 
excluded from total points and fees pursuant to Regulation Z Sec.  
1026.32(b), but for all covered loans subject to the disclosure 
requirements in Regulation Z Sec.  1026.19(f), other than purchased 
covered loans.
    The Bureau has received feedback suggesting that reporting the 
risk-adjusted, pre-discounted interest rate may be useful for fair 
lending purposes. The risk-adjusted, pre-discounted interest rate 
reflects loan-level price adjustments made on the basis of the 
characteristics of the borrower, collateral, and the current market 
conditions. Because these types of adjustments are typically based on 
reasonable business considerations, analyzing the changes to loan 
pricing that occur after a financial institution has determined the 
risk-adjusted, pre-discounted interest rate can provide significant 
evidence of potential impermissible discrimination. Thus, knowing the 
pre-discounted interest rate, along with the rate that the borrower 
actually received and any discount points paid, may assist in 
understanding the value that the borrower received, relative to 
otherwise similarly situated borrowers. Also, the risk-adjusted, pre-
discounted rate may be used to more efficiently focus fair

[[Page 51790]]

lending examinations, thereby reducing burden caused by false positives 
and conserving public resources.
    However, by limiting the scope of this provision to covered loans 
that require closing disclosures, the Bureau acknowledges that the data 
will lack the risk-adjusted, pre-discounted interest rate for loans 
excluded from Regulation Z Sec.  1026.19(f), such as home-equity lines 
of credit and reverse mortgages.\409\ The Bureau is also concerned with 
the burden associated with reporting the risk-adjusted, pre-discounted 
interest rate. Some financial institutions may rarely exclude bona fide 
discount points from total points and fees pursuant to Regulation Z and 
may incur additional cost in calculating the risk-adjusted, pre-
discounted interest for loans for which they would not make this 
calculation for purposes of compliance with Regulation Z. In addition, 
even financial institutions that calculate the rate for purposes of the 
qualified mortgage points-and-fees cap and the high-cost mortgage 
coverage threshold might not store the information in a format readily 
available for HMDA purposes.
---------------------------------------------------------------------------

    \409\ See Regulation Z Sec.  1026.19(f)(1)(i).
---------------------------------------------------------------------------

    Despite the potential reporting difficulties outlined above, the 
Bureau has received feedback in its outreach efforts that the benefits 
of reporting the risk-adjusted, pre-discounted interest rate may 
justify the costs, and the Bureau believes that reporting this 
information is necessary to carry out HMDA's purposes. For the reasons 
given, this information would provide a more complete and useful 
picture of loan pricing, which would be helpful in determining whether 
financial institutions are serving the housing needs of their 
communities. Improved pricing information would also significantly 
assist public officials and members of the public in identifying 
potentially discriminatory lending patterns.
    Accordingly, pursuant to HMDA sections 305(a) and 304(b)(5)(D), the 
Bureau is proposing Sec.  1003.4(a)(20), which provides that for 
covered loans subject to the disclosure requirements in Regulation Z 
Sec.  1026.19(f), other than purchased covered loans, a financial 
institution shall report the interest rate that the borrower would 
receive if the borrower paid no bona fide discount points, as 
calculated pursuant to Regulation Z Sec.  1026.32. To facilitate 
compliance, the Bureau is proposing to exclude covered loans that have 
been purchased by a financial institution from this reporting 
requirement because it does not believe that the risk-adjusted, pre-
discounted interest rate would be evident on the face of the 
documentation obtained from the seller. The Bureau solicits feedback 
regarding the general utility of the revised data and on the costs 
associated with collecting and reporting the data. In particular, the 
Bureau seeks information on any additional costs that financial 
institutions or vendors expect to encounter in calculating the risk-
adjusted, pre-discounted interest rate and in retaining these data 
specifically for HMDA reporting purposes, and any alternative means to 
calculate the base rate used in loan pricing that may be less 
burdensome for institutions to collect and report. The Bureau further 
solicits comment regarding the scope of the provision, particularly 
whether to restrict the reporting requirement to covered loans for 
which financial institutions have chosen to exclude bona fide discount 
points from total points and fees for the purposes of HOEPA coverage or 
qualified mortgage status.\410\
---------------------------------------------------------------------------

    \410\ See Regulation Z Sec.  1026.32(b)(1)(i)(E), (F); 
(b)(2)(i)(E), (F).
---------------------------------------------------------------------------

    During the Small Business Review Panel process, the small entity 
representatives were generally concerned with the definitional clarity 
of, and the potential burden associated with, reporting the risk-
adjusted, pre-discounted interest rate.\411\ The Small Business Review 
Panel recommended that the Bureau seek comment in the proposed rule on 
the costs to small financial institutions of providing the pricing 
data, and consider aligning the requirements of Regulation C to the 
pricing data used in other Federal and State mortgage disclosures.\412\ 
Consistent with the Small Business Review Panel's recommendation, the 
Bureau is soliciting feedback on the cost to small financial 
institutions.
---------------------------------------------------------------------------

    \411\ See Small Business Review Panel Report at 31-32, 74, 102, 
130.
    \412\ See id. at 42.
---------------------------------------------------------------------------

    Proposed instruction 4(a)(20) in appendix A provides technical 
instructions regarding how to enter the data on the loan application 
register. Proposed instruction 4(a)(20)-1 provides technical 
instructions for entering the risk-adjusted, pre-discounted interest 
rate. Proposed instruction 4(a)(20)-2 provides that a financial 
institution completing the loan application register must enter ``NA'' 
for covered loans not subject to this reporting requirement, such as 
purchased covered loans, open-end lines of credit, or reverse 
mortgages.
4(a)(21)
    Neither HMDA nor Regulation C currently requires financial 
institutions to report the interest rate associated with a mortgage 
loan. Section 304(b) of HMDA permits the disclosure of such other 
information as the Bureau may require.\413\ For the reasons discussed 
below, the Bureau is proposing to require reporting of the interest 
rate that is or would be applicable to the covered loan at closing or 
account opening.
---------------------------------------------------------------------------

    \413\ Section 1094(3)(A)(iv) of the Dodd-Frank Act amended 
section 304(b) of HMDA.
---------------------------------------------------------------------------

    The Bureau has received feedback that data on the interest rate 
enables more effective comparison of pricing across borrowers. The 
interest rate provides pricing information separate from the elements 
of loan pricing, such as the rate spread,\414\ and may alone enable 
preliminary comparison among borrowers or communities. Furthermore, 
when combined with the other elements of loan pricing, such as the 
total discount points paid and the risk-adjusted, pre-discounted 
interest rate, the interest rate permits greater insight into loan 
pricing. For example, comparing the interest rate to the risk-adjusted, 
pre-discounted interest rate can reveal the extent to which the rate 
has moved, and analyzing the interest rate in conjunction with the rate 
spread can permit a user of HMDA data to derive an approximation of the 
total cost associated with the loan. Therefore, reporting the interest 
rate may assist in identifying discriminatory lending patterns and in 
more precisely measuring the cost of credit available in particular 
communities.
---------------------------------------------------------------------------

    \414\ The pricing information provided by the rate spread relies 
on the annual percentage rate, which is different than the interest 
rate. The interest rate is the cost of the loan expressed as a 
percentage rate. The annual percentage rate is ``a measure of the 
cost of credit, expressed as a yearly rate, that relates the amount 
and timing of value received by the consumer to the amount and 
timing of payments made.'' Regulation Z Sec.  1026.22(a)(1); see 
also Regulation Z Sec.  1026.14 (describing the determination of APR 
for open-end credit). The cost of credit represented by the APR 
includes discount points, origination fees, other charges retained 
by the creditor, and certain third-party charges. Therefore, the 
rate spread and interest rate represent different measures of loan 
pricing.
---------------------------------------------------------------------------

    Although the proposal may entail some burden, the burden will be 
reduced by the fact that financial institutions will already know the 
interest applicable to most loans. For example, financial institutions 
would have to disclose this rate in the loan terms section of the 
Closing Disclosure, as provided for under Regulation Z Sec.  
1026.38(b). The interest rate is also currently found in part I of the 
Uniform Residential Loan Application form. Furthermore, the interest 
rate is

[[Page 51791]]

included in the MISMO version 3.3 data standard. For some financial 
institutions, however, the information might not be stored in a format 
readily available for HMDA purposes. Furthermore, the proposed interest 
rate reporting requirement would apply to all covered loans, not just 
loans subject to the disclosure requirements of Regulation Z.
    The Bureau is aware of the potential costs associated with 
requiring reporting of the interest rate. Feedback received pursuant to 
the Bureau's outreach, however, suggests that these costs may be 
justified by the benefits of this information to the public and to 
public officials, and the Bureau believes that reporting of the 
interest rate is necessary to carry out HMDA's purposes. For the 
reasons given, this information would provide a more complete and 
useful picture of loan pricing, which would be helpful in determining 
whether financial institutions are serving the housing needs of their 
communities. Furthermore, as a component of loan pricing information, 
the interest rate would assist public officials and members of the 
public in identifying potentially discriminatory lending patterns. 
Therefore, pursuant to HMDA sections 305(a) and 304(b)(6)(J), the 
Bureau is proposing Sec.  1003.4(a)(21), which provides that financial 
institutions shall report the interest rate that is or would be 
applicable to the covered loan at closing or account opening. The 
Bureau solicits feedback regarding whether this proposed requirement is 
appropriate.
    During the Small Business Review Panel process, the small entity 
representatives expressed concern over the clarity of the interest rate 
reporting requirement.\415\ The Small Business Review Panel recommended 
that the Bureau seek comment in the proposed rule on the costs to small 
financial institutions of providing the pricing data, and consider 
aligning the requirements of Regulation C to the pricing data used in 
other Federal and State mortgage disclosures.\416\ The Bureau agrees 
that the interest rate reporting requirement should be clear and 
consistent with other regulations to the extent practicable. Consistent 
with the Small Business Review Panel's recommendation, for covered 
loans subject to the disclosure requirements of Regulation Z Sec.  
1026.38, the Bureau is proposing to use the methods of identifying the 
interest rate contained in Regulation Z, as explained in the proposed 
commentary accompanying proposed Sec.  1003.4(a)(21). The Bureau is 
also soliciting feedback on the burden of reporting for small financial 
institutions.
---------------------------------------------------------------------------

    \415\ See Small Business Review Panel Report at 31, 85, 98, 102.
    \416\ See id. at 42.
---------------------------------------------------------------------------

    Proposed comment 4(a)(21)-1 clarifies that a financial institution 
must identify the interest rate that is or would be applicable to the 
covered loan at closing or account opening, as applicable. Proposed 
comment 4(a)(21)-1 illustrates that for covered loans subject to the 
disclosure requirements of Regulation Z Sec.  1026.38, a financial 
institution complies with proposed Sec.  1003.4(a)(21) by identifying 
the interest rate that is the rate disclosed pursuant to Regulation Z 
Sec.  1026.37(b)(2). For an adjustable-rate covered loan subject to the 
disclosure requirements of Regulation Z Sec.  1026.38, if the interest 
rate at closing is not known, a financial institution complies with 
proposed Sec.  1003.4(a)(21) by identifying the fully indexed rate, 
which, for purposes of Sec.  1003.4(a)(21), means the interest rate 
calculated using the index value and margin at the time of closing, 
pursuant to Regulation Z Sec.  1026.37(b)(2). Proposed instructions 
4(a)(21)-1 and -2 in appendix A provide technical instructions 
regarding how to enter the data on the loan application register.
4(a)(22)
    Regulation C does not currently require financial institutions to 
report information regarding the prepayment penalty associated with a 
mortgage loan. However, section 304(b) of HMDA \417\ requires reporting 
of the term in months of any prepayment penalty or other fee or charge 
payable upon repayment of some portion of principal or the entire 
principal in advance of scheduled payments.\418\ As discussed below, 
the Bureau is proposing to implement HMDA section 304(b)(5)(C) by 
requiring financial institutions to report the term, in months, of any 
prepayment penalty, as defined in Regulation Z Sec.  1026.32(b)(6)(i) 
or (ii), as applicable.
---------------------------------------------------------------------------

    \417\ Section 1094(3)(A)(iv) of the Dodd-Frank Act amended 
section 304(b) of HMDA.
    \418\ 12 U.S.C. 2803(b)(5)(C).
---------------------------------------------------------------------------

    Prepayment penalties are charges imposed on borrowers for paying 
all or part of the transaction's principal before the date on which the 
principal is due. The Bureau is proposing to align the definition of 
prepayment penalty for HMDA purposes with the definition found in 
Regulation Z Sec.  1026.32(b)(6), which defines prepayment penalty for 
purposes of the high-cost and qualified mortgage rules. The amount and 
term in years of any potential prepayment penalty is listed on the loan 
terms table of the Closing Disclosure.\419\
---------------------------------------------------------------------------

    \419\ See Regulation Z Sec.  1026.38 (b)(effective August 15, 
2015).
---------------------------------------------------------------------------

    In amending HMDA through section 1094 of the Dodd-Frank Act, 
Congress found that more specific loan pricing information would 
``provide more transparency on underwriting practices and patterns in 
mortgage lending and help improve the oversight and enforcement of fair 
lending laws.'' \420\ Prepayment penalties are an important component 
of loan pricing. Loans with prepayment penalties are typically more 
expensive, and the Bureau has received feedback suggesting that 
information regarding prepayment penalties would improve the usefulness 
of the HMDA data for revealing potentially discriminatory lending 
patterns and for determining whether lenders are serving their 
communities.\421\
---------------------------------------------------------------------------

    \420\ H.R. Rep. No. 111-702, at 191 (2011).
    \421\ Atlanta Hearing, supra note 131; Chicago Hearing, supra 
note 137; San Francisco Hearing, supra note 133.
---------------------------------------------------------------------------

    The Bureau has also received feedback favoring consistency between 
HMDA data points and items on the Closing Disclosure as a means of 
clarifying the regulation and reducing burden.\422\ Although the term 
of any prepayment penalty is not listed in months on the Closing 
Disclosure, it is listed in years, which enables a relatively simple 
calculation. Furthermore, the prepayment penalty data point in this 
proposal is aligned to the ``prepayment penalty expiration months 
count'' data point in version 3.3 of the MISMO data standard.
---------------------------------------------------------------------------

    \422\ Atlanta Hearings, supra note 131.
---------------------------------------------------------------------------

    To implement HMDA section 304(b)(5)(C), and pursuant to HMDA 
section 305(a), the Bureau is proposing Sec.  1003.4(a)(22), which 
provides that, except for purchased covered loans, financial 
institutions shall report the term in months of any prepayment penalty, 
as defined in Regulation Z Sec.  1026.32(b)(6)(i) or (ii), as 
applicable. To facilitate compliance, the Bureau is proposing to except 
covered loans that have been purchased by a financial institution from 
this reporting requirement because it does not believe that the term of 
the prepayment penalty would be evident on the face of the 
documentation obtained from the seller. Although the Closing Disclosure 
describes the term of any prepayment penalty that may be imposed on the 
borrower, this information is provided in years, rather than in months, 
as required by the Dodd-Frank Act and as implemented in this proposal. 
Furthermore, purchased covered loans not subject to the disclosure

[[Page 51792]]

requirements of Regulation Z would require no Closing Disclosure. The 
Bureau solicits feedback regarding the general utility and costs 
associated with collecting and reporting the data. The Bureau also 
solicits feedback on the scope of the proposed requirement, including 
whether to limit the prepayment penalty reporting requirement to loans 
subject to Regulation Z, or to apply it to purchased covered loans.
    During the Small Business Review Panel process, the small entity 
representatives did not express significant concerns regarding 
reporting of the prepayment penalty.\423\ One small entity 
representative questioned which amount would be reported in the case of 
a prepayment penalty that varied based on the borrower's actions.\424\ 
The Small Business Review Panel recommended that the Bureau seek 
comment in the proposed rule on the costs to small financial 
institutions of providing the data, as well as on the methods of 
reporting this information that would minimize burden on small 
financial institutions while still meeting the Dodd-Frank Act reporting 
requirements and purposes of HMDA.\425\ The Bureau agrees that the 
burden on small financial institutions should be minimized, but notes 
that HMDA section 304(b)(5)(C) specifically provides for reporting the 
prepayment penalty in months, rather than in amount or years, as 
provided on the Closing Disclosure. Consistent with the Small Business 
Review Panel's recommendation, the Bureau seeks feedback on the 
reporting burden for small financial institutions.
---------------------------------------------------------------------------

    \423\ See Small Business Review Panel Report at 29, 129.
    \424\ See id. at 102-03.
    \425\ See id. at 41.
---------------------------------------------------------------------------

    Proposed instruction 4(a)(22) in appendix A provides technical 
instructions regarding how to enter the data on the loan application 
register. Proposed instruction 4(a)(22)-1 provides technical 
instructions for entering the term in months of any prepayment penalty 
applicable to the covered loan or application. Proposed instruction 
4(a)(22)-2 specifies that a financial institution must enter ``NA'' for 
covered loans for which a prepayment penalty may not be imposed under 
the terms of the covered loan, for covered loans not subject to this 
reporting requirement, such as purchased covered loans, or for 
applications for which the prepayment penalty term is unknown, such as 
applications closed for incompleteness.
4(a)(23)
    Currently, neither HMDA nor Regulation C contains requirements 
regarding an applicant's or borrower's debt-to-income ratio. Section 
304(b) of HMDA permits the disclosure of such other information as the 
Bureau may require.\426\ For the reasons discussed below, the Bureau is 
proposing to require financial institutions to report information 
related to the applicant's or borrower's debt-to-income ratio.
---------------------------------------------------------------------------

    \426\ See Dodd-Frank Act section 1094(3)(A)(iv).
---------------------------------------------------------------------------

    Financial institutions often consider the ratio of an applicant's 
total monthly debt to total monthly income as part of the underwriting 
process. The Bureau has received feedback suggesting that requiring the 
collection of this debt-to-income ratio would improve the usefulness of 
the HMDA data. An applicant's debt-to-income ratio is an important 
factor in the underwriting process that often affects the pricing of 
the credit offered to an applicant. In some cases, an applicant's debt-
to-income ratio may determine whether an applicant is offered credit at 
all. Thus, this information may help the public determine whether 
financial institutions are filling their obligations to serve the 
housing needs of the communities and neighborhoods in which they are 
located. As debt-to-income ratio may be predictive of default, these 
data may help public officials identify geographic locations or 
segments of the population that would benefit from special public or 
private sector investment and lending programs.
    However, the Bureau is concerned about the reliability of these 
data. Debt-to-income ratio calculations may vary between financial 
institutions, may vary within a financial institution based on the type 
of loan, and may evolve over time. Financial institutions that intend 
to sell a mortgage loan may calculate multiple debt-to-income ratios 
during the underwriting process based on internal and investor 
requirements. The Bureau is also concerned about the potential burden 
that may result from requiring the collection of debt-to-income ratio. 
For example, the Bureau is aware that some financial institutions may 
not rely on the debt-to-income ratio for underwriting purposes.
    Collecting debt-to-income ratio information may impose a burden on 
financial institutions. However, feedback received from industry, 
consumer advocates, and other users of HMDA data suggests that the 
potential benefits to the public and to public officials may outweigh 
these potential burdens. Based on these considerations, the Bureau 
believes that it may be appropriate to require financial institutions 
to collect information regarding debt-to-income ratio. Accordingly, 
pursuant to its authority under sections 305(a) and 304(b)(6)(J) of 
HMDA, the Bureau is proposing Sec.  1003.4(a)(23), which provides that, 
for a covered loan that is not, or an application that is not for, a 
reverse mortgage, a financial institution shall report the ratio of the 
applicant's or borrower's total monthly debt to the total monthly 
income relied on in making the credit decision. The Bureau solicits 
feedback regarding whether this proposed requirement is appropriate 
generally, and specifically solicits feedback regarding whether this 
proposed requirement would be less burdensome than requiring the 
collection of other debt-to-income ratios, such as a debt-to-income 
ratio that is calculated according to investor requirements but is not 
relied on in making the credit decision, or the debt-to-income ratio 
that may be required under the ability-to-repay provisions of 
Regulation Z. Although the Bureau believes that this proposed 
requirement may be appropriate, the Bureau recognizes that financial 
institutions may not always rely on an applicant's debt-to-income ratio 
when making a credit decision, such as when underwriting a reverse 
mortgage transaction. Thus, proposed Sec.  1003.4(a)(23) does not 
require a financial institution to collect debt-to-income ratio 
information for reverse mortgages. The Bureau solicits feedback 
regarding whether this proposed exception is appropriate and regarding 
whether there are other types of transactions in which an applicant's 
debt-to-income ratio is not considered.
    During the Small Business Review Panel process, several small 
entity representatives expressed concern about a potential debt-to-
income ratio reporting requirement.\427\ The Small Business Review 
Panel recommended that the Bureau solicit comment on whether it would 
be less burdensome for small financial institutions if the Bureau 
adopted a specific method for calculating the debt-to-income ratio or 
would allow the small financial institutions flexibility in developing 
their own calculations for debt-to-income ratio.\428\ Based on this 
feedback and consistent with the Small Business Review Panel's 
recommendation, the Bureau solicits feedback regarding whether it would 
be less burdensome

[[Page 51793]]

for small financial institutions to report the debt-to-income ratio 
relied on in making the credit decision, or if it would be less 
burdensome to small financial institutions for the Bureau to adopt a 
specific debt-to-income ratio calculation.
---------------------------------------------------------------------------

    \427\ See Small Business Review Panel Report at 27-28, 40, 
81,103,129.
    \428\ See id. at 40.
---------------------------------------------------------------------------

    Proposed comment 4(a)(23)-1 discusses the requirement that the 
financial institution collect the ratio of the applicant's or 
borrower's total monthly debt to total monthly income relied on in 
making the credit decision and provides an illustrative example. 
Proposed comment 4(a)(23)-2 clarifies, if a financial institution 
relies on a set of underwriting requirements in making a credit 
decision, and the requirements include the ratio of the applicant's or 
borrower's total monthly debt to total monthly income as one of 
multiple factors, Sec.  1003.4(a)(23) requires the financial 
institution to report the DTI ratio considered as part of the set of 
underwriting requirements relied on by the financial institution. For 
example, if a financial institution relies on a set of underwriting 
requirements in making a credit decision, the requirements include the 
applicant's or borrower's DTI ratio as one of multiple factors, and the 
financial institution approves the application, the financial 
institution complies with Sec.  1003.4(a)(23) by reporting the DTI 
ratio considered as part of the set of underwriting requirements. 
Similarly, if a financial institution relies on a set of underwriting 
requirements in making a credit decision, the requirements include the 
applicant's or borrower's DTI ratio as one of multiple factors, and the 
financial institution denies the application because an underwriting 
requirement other than the DTI ratio requirement is not satisfied, the 
financial institution complies with Sec.  1003.4(a)(23) by reporting 
the DTI ratio considered as part of the set of underwriting 
requirements.
    Proposed comment 4(a)(23)-3 clarifies that, if a file was closed 
for incompleteness, or if an application was withdrawn before a credit 
decision was made, a financial institution complies with Sec.  
1003.4(a)(23) by reporting that no credit decision was made, even if 
the financial institution had calculated the ratio of the applicant's 
total monthly debt to total monthly income. For example, if a file is 
incomplete and is so reported in accordance with Sec.  1003.4(a)(8), 
the financial institution complies with Sec.  1003.4(a)(23) by 
reporting that no credit decision was made, even if the financial 
institution had calculated the applicant's DTI ratio. Similarly, if an 
application was expressly withdrawn by the applicant before a credit 
decision was made, the financial institution complies with Sec.  
1003.4(a)(23) by reporting that no credit decision was made, even if 
the financial institution had calculated the applicant's DTI ratio.
    Proposed comment 4(a)(23)-4 clarifies that Sec.  1003.4(a)(23) does 
not require a financial institution to calculate an applicant's or 
borrower's debt-to-income ratio, nor does it require a financial 
institution to rely on an applicant's or borrower's debt-to-income 
ratio in making a credit decision. This proposed comment also explains 
that if a financial institution makes a credit decision without relying 
on the applicant's or borrower's debt-to-income ratio, the financial 
institution complies with Sec.  1003.4(a)(23) by reporting that no 
debt-to-income ratio was relied on in connection with the credit 
decision. Under appendix A, proposed instruction 4(a)(23)-1 provides 
technical instructions regarding how to enter the debt-to-income ratio 
data on the loan application register. Proposed instruction 4(a)(23)-2 
provides technical instructions for covered loans in which no debt-to-
income ratio is relied on in connection with the credit decision, for 
reverse mortgages, for files closed for incompleteness, and for 
applications withdrawn before a credit decision is made.
4(a)(24)
    Currently, neither HMDA nor Regulation C contains requirements 
regarding loan-to-value ratio. Section 304(b) of HMDA permits the 
disclosure of such other information as the Bureau may require.\429\ 
For the reasons discussed below, the Bureau is proposing to require 
financial institutions to report the ratio of the total amount of debt 
secured by the property to the value of the property.
---------------------------------------------------------------------------

    \429\ See Dodd-Frank Act section 1094(3)(A)(iv).
---------------------------------------------------------------------------

    Financial institutions regularly calculate the loan-to-value (LTV) 
ratio and the combined loan-to-value (CLTV) ratio as part of the 
underwriting process. The LTV ratio generally refers to the ratio of 
the value of a secured debt to the value of the property securing the 
debt, while the CLTV ratio generally refers to the ratio of total 
amount of secured debt to the value of the property securing the debt. 
As discussed in part III.A above, during the 2010 Board Hearings the 
CLTV ratio was cited as an important factor both in the determination 
of whether to extend credit and for the pricing terms upon which credit 
would be extended. The Bureau also has received feedback that the CLTV 
ratio is a standard underwriting factor regularly calculated by 
financial institutions, both for a financial institution's own 
underwriting purposes and to satisfy investor requirements. 
Furthermore, during the mortgage market crisis State and Federal 
officials focused on CTLV ratios in crafting emergency mortgage 
programs to assist homeowners with secured debt in excess of the value 
of their homes. Thus, it appears that data related to the CLTV ratio 
would improve the usefulness of the HMDA data.
    However, a potential CLTV reporting requirement may pose some 
challenges. The Bureau is generally concerned about the potential 
burden associated with reporting calculated data fields, such as the 
CLTV ratio. Also, CLTV ratio calculations on home-equity lines of 
credit may vary between financial institutions, which may affect the 
reliability of these data. Furthermore, the Bureau understands that 
CLTV ratios may not be entirely accurate, especially when the exact 
values of multiple debts secured by the property is not known until the 
date of closing or after, which may present a challenge for reporting 
purposes.
    Notwithstanding these concerns about a CLTV reporting requirement, 
the potential benefits seem to outweigh the potential burdens. CLTV 
ratios appear to be calculated by all financial institutions, are a 
significant factor in the underwriting process, and provide valuable 
insight into both the stability of community homeownership and the 
functioning of the mortgage market. In contrast, the burdens associated 
with a CLTV reporting requirement appear to be limited to the general 
burden associated with reporting HMDA data and technical issues related 
to determining the exact ratio. Furthermore, by providing information 
regarding the combined loan-to-value ratio of transactions subject to 
Regulation C, this proposed provision would ensure that the citizens 
and public officials of the United States are provided with sufficient 
information to enable them to determine whether depository institutions 
are filling their obligations to serve the housing needs of the 
communities and neighborhoods in which they are located. Combined loan-
to-value ratio data also would assist public officials in their 
determination of the distribution of public sector investments in a 
manner designed to improve the private investment environment.
    Based on these considerations, the Bureau believes that requiring 
financial institutions to collect information regarding CLTV ratios may 
be necessary to carry out HMDA's purposes.

[[Page 51794]]

Accordingly, pursuant to its authority under sections 305(a) and 
304(b)(6)(J) of HMDA, the Bureau is proposing Sec.  1003.4(a)(24), 
which provides that a financial institution shall record the ratio of 
the total amount of debt secured by the property to the value of the 
property, as determined in accordance with proposed Sec.  
1003.4(a)(24)(i) and (ii). Proposed Sec.  1003.4(a)(24)(i) provides 
that, for a covered loan that is a home-equity line of credit, the 
ratio shall be determined by dividing the sum of the unpaid principal 
balance of the first mortgage, the full amount of any home-equity line 
of credit (whether drawn or undrawn), and the balance of any other 
subordinate financing by the value of the property. Proposed Sec.  
1003.4(a)(24)(ii) provides that, for a covered loan that is not a home-
equity line of credit, the ratio shall be determined by dividing the 
combined unpaid principal balance amounts of the first and all 
subordinate mortgages, excluding undrawn home-equity lines of credit 
amounts, by the value of the property.
    The Bureau solicits feedback regarding whether this proposed 
requirement is appropriate generally. Also, as part of the Bureau's 
effort to align the Regulation C requirements to the MISMO data 
standards discussed in part II.B above, this proposed requirement is 
conceptually identical and textually similar to the definitions of the 
Combined LTV Ratio Percent data point and Home Equity Combined LTV 
Ratio Percent data point in proposed MISMO version 3.3. The Bureau 
solicits feedback regarding whether this proposed alignment is 
appropriate and whether the text of this proposed requirement should be 
clarified. Finally, although the Bureau believes that financial 
institutions calculate CTLV ratios on all transactions subject to 
Regulation C, the Bureau solicits feedback regarding whether there are 
particular transactions in which a CLTV ratio would not be calculated 
or considered during the underwriting process.
    During the Small Business Review Panel process, several small 
entity representatives stated that a combined loan-to-value ratio 
reporting requirement would pose particular burdens and challenges, 
especially with respect to ratios on home-equity lines of credit and 
commercial loans.\430\ The Small Business Review Panel recommended 
that, in addition to soliciting comment on whether to require reporting 
of the combined loan-to-value ratio, the Bureau solicit comment on 
whether a Bureau-defined calculation method would be less burdensome 
for small financial institutions than allowing the financial 
institutions to develop their own calculations for the combined loan-
to-value ratio.\431\ Consistent with the Small Business Review Panel's 
recommendation, in addition to the general solicitation of feedback 
provided above, the Bureau solicits feedback regarding whether it would 
be less burdensome for small financial institutions to report the 
combined loan-to-value relied on in making the credit decision, or if 
it would be less burdensome to small financial institutions for the 
Bureau to adopt a specific combined loan-to-value ratio calculation.
---------------------------------------------------------------------------

    \430\ See Small Business Review Panel Report at 14, 30, 57, 80, 
96, 101.
    \431\ See id. at 41.
---------------------------------------------------------------------------

    Proposed comment 4(a)(24)-1 clarifies that, if a financial 
institution makes a credit decision without calculating the combined 
loan-to-value ratio, the financial institution complies with Sec.  
1003.4(a)(24) by reporting that no combined loan-to-value ratio was 
calculated in connection with the credit decision. Proposed comment 
4(a)(24)-2 explains that, for home-equity lines of credit, Sec.  
1003.4(a)(24)(i) requires a financial institution to calculate the 
combined loan-to-value ratio by including the full amount of any home-
equity line of credit, whether drawn or undrawn, and provides 
illustrative examples. Proposed comment 4(a)(24)-3 explains that, for 
transactions that are not home-equity lines of credit, Sec.  
1003.4(a)(24)(ii) requires a financial institution to calculate the 
combined loan-to-value ratio by including the amounts outstanding under 
home-equity lines of credit secured by the property, and provides 
illustrative examples. Under appendix A, proposed instruction 4(a)(24)-
1 provides technical instructions regarding how to enter the combined 
loan-to-value ratio data on the loan application register. Proposed 
instruction 4(a)(24)-2 provides technical instructions for covered 
loans in which no combined loan-to-value ratio is calculated.
4(a)(25)
    Regulation C does not require financial institutions to report 
information regarding the loan's term. HMDA section 304(b)(6)(D) 
requires, for loans and completed applications, reporting of the actual 
or proposed term in months of the mortgage loan.\432\ The length of 
time a borrower has to repay a loan is an important loan feature for 
both borrowers and creditors. For borrowers, the loan term helps 
determine the amount of principal due with each payment, which 
significantly influences both the borrower's ability to afford the loan 
and the amount of interest the borrower will pay over the life of the 
loan. For creditors, the loan term impacts the creditor's interest rate 
risk and is thus a significant factor in the risk of extending credit 
and can affect loan pricing. For these reasons, including loan term in 
HMDA will help provide a more complete picture of the covered loans 
reported and may help to explain pricing or other differences that were 
previously indiscernible with HMDA data. The proposal to report 
information about non-amortizing features, discussed below in the 
section-by-section analysis of proposed Sec.  1003.4(a)(27) may be 
useful in discerning differences in covered loans with similar loan 
terms that may in fact be very different because of how the loans 
amortize.
---------------------------------------------------------------------------

    \432\ Dodd-Frank Act section 1094(3)(A)(iv), 12 U.S.C. 
2803(b)(6)(D).
---------------------------------------------------------------------------

    Proposed Sec.  1003.4(a)(25) implements HMDA section 304(b)(6)(D) 
by requiring financial institutions to collect and report data on the 
number of months until the legal obligation matures for a covered loan 
or application. During the Small Business Review Panel process, small 
entity representatives expressed some concerns about reporting loan 
term for certain types of loans, including home-equity lines of credit 
and loans with different amortization and maturity terms.\433\ The 
proposed instructions in appendix A for paragraph 4(a)(25) provide 
details on reporting loan term for home-equity lines of credit and 
other specific types of covered loans. Proposed instruction 4(a)(25)-
1.b provides that the loan term for an open-end line of credit with a 
definite term includes both the draw and the repayment period. The 
Bureau believes that including both the draw and repayment periods for 
home-equity lines of credit most accurately reflects the loan term. 
Proposed instruction 4(a)(25)-1.c provides that, for covered loans 
without a definite term, including some home-equity lines of credit and 
reverse mortgages, institutions should report the loan term as ``NA.'' 
The Bureau believes that this proposed instruction will facilitate 
compliance by differentiating covered loans without a definite term.
---------------------------------------------------------------------------

    \433\ See Small Business Review Panel Report at 29, 98.
---------------------------------------------------------------------------

    Proposed comment 4(a)(25)-1 clarifies that, for covered loans that 
have different maturity and amortization terms, the loan term reported 
should be

[[Page 51795]]

the maturity term. The comment provides an example of a five year 
balloon loan for illustration purposes. For covered loans with a 
balloon payment or other amortization features which would cause the 
covered loan not to be fully amortizing over its term, such features 
would be reported under the requirements of proposed Sec.  
1003.4(a)(27). Proposed comment 4(a)(25)-2 would clarify that for 
covered loans with non-monthly repayment schedules, such as a covered 
loan with a bi-weekly repayment schedule, the loan term should be 
reported in months and the term reported should not include any 
fractional months remaining. The Bureau believes this comment would 
facilitate compliance by providing guidance on how to report loan terms 
for covered loans with repayment schedules measured in time units other 
than months.
    The Small Business Review Panel recommended that the Bureau seek 
public comment on what method of reporting loan term would minimize 
burden on small financial institutions while still meeting the Dodd-
Frank Act reporting requirements and purposes of HMDA.\434\ Consistent 
with the recommendation of the Small Business Review Panel, the Bureau 
solicits feedback on what method of reporting loan term would minimize 
burden on small financial institutions while still meeting the Dodd-
Frank Act reporting requirements and purposes of HMDA.
---------------------------------------------------------------------------

    \434\ Small Business Review Panel Report at 41.
---------------------------------------------------------------------------

    Section 1003.4(a)(25) is proposed to implement HMDA section 
304(b)(6)(D). The Bureau believes the proposed reporting requirement 
will provide the public and public officials with data to help 
determine whether financial institutions are serving the housing needs 
of their communities by providing information about the types of loans 
that are being made, and assist in identifying possible discriminatory 
lending patterns and enforcing antidiscrimination statutes by allowing 
information about similar loans to be compared and analyzed 
appropriately.
4(a)(26)
    Regulation C does not require financial institutions to report 
information regarding the number of months until the first interest 
rate adjustment may occur. HMDA section 304(b)(6)(B) requires the 
reporting of the actual or proposed term in months of any introductory 
period after which the rate of interest may change.\435\ Proposed Sec.  
1003.4(a)(26) implements this requirement by requiring financial 
institutions to collect and report data on the number of months until 
the first date the interest rate may change after loan origination. 
Proposed Sec.  1003.4(a)(26) would apply regardless of how the interest 
rate adjustment is characterized by product type, such as adjustable 
rate, step rate, or another type of product with a ``teaser'' rate. 
Interest rate variability can be an important feature in long-term 
affordability for borrowers, and the Bureau believes that reporting 
this information will allow for better analysis of loans and 
applications using HMDA data.
---------------------------------------------------------------------------

    \435\ Dodd-Frank Act section 1094(3)(A)(iv), 12 U.S.C. 
2803(b)(6)(D).
---------------------------------------------------------------------------

    The proposal provides instructions for reporting the introductory 
period in appendix A. Proposed instruction 4(a)(26)-1.a provides that 
the introductory period should be reported as ``NA'' for a fixed-rate 
covered loan. Proposed instruction 4(a)(26)-1.b provides that the 
introductory period should be reported as measured from loan 
origination for purchased loans, or ``NA'' for purchased fixed rate 
loans. Proposed comment 4(a)(26)-1 illustrates the requirement to 
report the introductory interest rate period, including for a home-
equity line of credit with a teaser rate; an adjustable-rate loan with 
an introductory rate; and a step-rate loan with an introductory rate 
that then adjusts to a different, known rate. Proposed comment 
4(a)(26)-2 provides guidance on preferred rates. The comment provides 
illustrative examples of preferred rates and provides that a financial 
institution reports initial interest rate periods based on preferred 
rates only if the terms of the legal obligation provide that the 
preferred rate will expire at a defined future date.\436\
---------------------------------------------------------------------------

    \436\ The guidance provided by the commentary gives examples 
using the loan product designations from the Loan Estimate pursuant 
to the Bureau's 2013 TILA-RESPA Final Rule, and would be consistent 
with similar guidance on preferred rates in Regulation Z. See 78 FR 
79730, 79916 (Dec. 31, 2013), Regulation Z comments 17(c)(1)-11.iii 
and 40(d)(12)(viii)-1.
---------------------------------------------------------------------------

    The Small Business Review Panel recommended that the Bureau seek 
public comment on what method of reporting initial interest rate period 
would minimize burden on small financial institutions while still 
meeting the Dodd-Frank Act reporting requirements and purposes of 
HMDA.\437\ Consistent with the recommendation of the Small Business 
Review Panel, the Bureau solicits feedback on what method of reporting 
initial interest rate period would minimize burden on small financial 
institutions while still meeting the Dodd-Frank Act reporting 
requirements and purposes of HMDA.
---------------------------------------------------------------------------

    \437\ Small Business Review Panel Report at 41.
---------------------------------------------------------------------------

4(a)(27)
    Regulation C currently does not require financial institutions to 
report whether a loan allows or would have allowed the borrower to make 
payments other than fully amortizing payments. HMDA section 
304(b)(6)(C) requires reporting of the presence of contractual terms or 
proposed contractual terms that would allow the mortgagor or applicant 
to make payments other than fully amortizing payments during any 
portion of the loan term.\438\ Non-amortizing features, once a rarity, 
became more commonplace in the lead-up to the mortgage crisis. Such 
features can put borrowers at risk and even lead to foreclosure if the 
borrower is unable to pay the principal balance of the loan when it 
eventually becomes due. The Dodd-Frank Act addressed non-amortizing 
features of loans in a variety of contexts. For example, the definition 
of a qualified mortgage in TILA section 129C(b)(2)(A), as added by 
Dodd-Frank Act section 1412, generally excludes from that definition 
residential mortgage loans for which regular periodic payments may 
result in an increase of the principal balance, or that allow deferred 
repayment of principal and interest, as well as loans the terms of 
which result in certain balloon payments.
---------------------------------------------------------------------------

    \438\ Section 1094(3)(A)(iv), 12 U.S.C. 2803(b)(6)(C).
---------------------------------------------------------------------------

    The Bureau is proposing to implement HMDA section 304(b)(6)(C) by 
adding new Sec.  1003.4(a)(27) to Regulation C. During the Small 
Business Review Panel process, small entity representatives generally 
agreed that this information is currently collected and available.\439\ 
One small entity representative requested that the Bureau clearly 
define and provide specific examples of non-amortizing features.\440\ 
The Bureau believes it is reasonable to interpret HMDA section 
304(b)(6)(C) to require reporting non-amortizing features by 
identifying specific, well-defined non-amortizing loan features. 
Proposed Sec.  1003.4(a)(27) requires reporting of balloon payments, as 
defined by 12 CFR 1026.18(s)(5)(i), under Sec.  1003.4(a)(27)(i); 
interest only payments, as defined by 12 CFR 1026.18(s)(7)(iv), under 
Sec.  1003.4(a)(27)(ii); a contractual term that could cause the loan 
to be a negative amortization loan, as defined by 12 CFR 
1026.18(s)(7)(v), under

[[Page 51796]]

Sec.  1003.4(a)(27)(iii); or any other contractual term that would 
allow for payments other than fully amortizing payments, as defined by 
12 CFR 1026.43(b)(2), under Sec.  1003.4(a)(27)(iv). The Bureau 
believes that proposed Sec.  1003.4(a)(27)(iv) concerning ``other'' 
types of non-amortizing features would implement HMDA section 
304(b)(6)(C) so as to carry out HMDA's purposes, and that it may be 
helpful in identifying other such features that may be present in the 
market or that may arise at a later time.
---------------------------------------------------------------------------

    \439\ See Small Business Review Panel Report at 29-30.
    \440\ See Small Business Review Panel Report at 79.
---------------------------------------------------------------------------

    As discussed above, the Bureau is proposing to define the terms for 
reporting under Regulation C consistent with Regulation Z definitions 
to facilitate compliance. The Bureau is proposing to add comment 
4(a)(27)-1 in order to facilitate compliance and provide additional 
guidance on alignment with Regulation Z. Proposed comment 4(a)(27)-1 
would provide that an institution may rely on the definitions in 
Regulation Z for the contractual features to be reported, but clarifies 
that loans or applications should be reported without regard to whether 
the credit is for personal, family, or household purposes, without 
regard to whether the person to whom credit is extended is a consumer, 
without regard to whether the property is a dwelling, and without 
regard to whether the person extending credit is a creditor, as those 
terms are defined in Regulation Z.
    Proposed appendix A instructions 4(a)(27)(i), (ii), (iii), and (iv) 
provide that financial institutions should indicate whether a 
particular feature is present by using true or false. The Bureau 
solicits comments on whether any exclusions for this reporting 
requirement for certain types of loans are appropriate, and on whether 
any additional non-amortizing features should be specifically 
identified rather than reported under Sec.  1003.4(a)(27)(iv).
    The Small Business Review Panel recommended that the Bureau seek 
public comment on what method of reporting non-amortizing features 
would minimize burden on small financial institutions while still 
meeting the Dodd-Frank Act reporting requirements and purposes of 
HMDA.\441\ Consistent with the recommendation of the Small Business 
Review Panel, the Bureau solicits feedback on what method of reporting 
non-amortizing features would minimize burden on small financial 
institutions while still meeting the Dodd-Frank Act reporting 
requirements and purposes of HMDA.
---------------------------------------------------------------------------

    \441\ Small Business Review Panel Report at 41.
---------------------------------------------------------------------------

    Section 1003.4(a)(27) is proposed to implement HMDA section 
304(b)(6)(C). The proposed reporting requirement will provide the 
public and public officials with data to help determine whether 
financial institutions are serving the housing needs of their 
communities by providing information about the types of loans that are 
being made, and assist in identifying possible discriminatory lending 
patterns and enforcing antidiscrimination statutes by allowing 
information about similar loans to be compared and analyzed 
appropriately.
4(a)(28)
    Regulation C does not require financial institutions to report 
information regarding the value of the property that secures or will 
secure the loan. HMDA section 304(b)(6)(A) requires the reporting of 
the value of the real property pledged or proposed to be pledged as 
collateral.\442\ Proposed Sec.  1003.4(a)(28) implements this 
requirement by requiring financial institutions to report the value of 
the property securing the covered loan or, in the case of an 
application, proposed to secure the covered loan relied on in making 
the credit decision.
---------------------------------------------------------------------------

    \442\ Dodd-Frank Act section 1094(3)(A)(iv), 12 U.S.C. 
2803(b)(6)(A).
---------------------------------------------------------------------------

    Regulation C currently includes a requirement to report loan 
amount. Knowing the property value in addition to loan amount allows 
HMDA users to estimate the loan-to-value ratio (LTV). LTV measures a 
borrower's equity in the property and is a key underwriting and pricing 
criterion. A 2009 GAO report on fair lending noted that LTV would be 
valuable for screening for discriminatory practices.\443\ During the 
Board's 2010 Hearings, LTV was specifically mentioned as a topic of 
consideration.\444\ Many panelists at the hearings supported adding LTV 
to Regulation C.\445\
---------------------------------------------------------------------------

    \443\ GAO, Fair Lending: Data Limitations and the Fragmented 
U.S. Financial Regulatory Structure Challenge Federal Oversight and 
Enforcement Efforts, GAO-09-704, 21 (July 2009), https://www.gao.gov/new.items/d09704.pdf.
    \444\ 75 FR 35030, 35032 (June 21, 2010).
    \445\ Atlanta Hearing, supra note 131; San Francisco Hearing, 
supra note 133; Chicago Hearing, supra note 137; Washington Hearing, 
supra note 130.
---------------------------------------------------------------------------

    Property valuation has also long been an issue of concern for 
consumers and fair housing advocates.\446\ ECOA was amended in 1991 to 
require creditors to provide applicants with appraisal reports upon 
request for dwelling-secured loans.\447\ ECOA was amended by the Dodd-
Frank Act to mandate the provision of appraisals and other valuations 
developed in connection with applications for first lien dwelling-
secured loans, and these requirements are implemented by the Bureau's 
ECOA valuations rule.\448\ Adding property value to HMDA data will 
further HMDA's purposes by providing additional information on how 
institutions are serving the housing needs of their communities. The 
additional information about LTV may also help to explain disparities 
that otherwise might appear to be part of a potentially discriminatory 
pattern.
---------------------------------------------------------------------------

    \446\ Early fair housing litigation challenged discriminatory 
appraisal practices including, for example, a practice which 
adjusted property values downward if the ethnic composition of the 
neighborhood to which the property belonged was not homogenous. See 
United States v. Am. Inst. of Real Estate Appraisers of Nat'l Ass'n 
of Realtors, 442 F.Supp. 1072 (N.D. Ill. 1977). The 1988 amendments 
to the Fair Housing Act explicitly banned discriminatory appraisal 
practices, 42 U.S.C. 3605. The Federal Housing Enterprises Financial 
Safety and Soundness Act of 1992 provided for review of the GSEs 
with respect to potential discriminatory effects of appraisal 
guidelines, including consideration of the age of dwellings or the 
age of neighborhoods. 12 U.S.C. 4545(1), (6).
    \447\ Public Law 102-242, section 223, 105 Stat. 2236 (1991).
    \448\ 15 U.S.C. 1691(e); Regulation B Sec.  1002.14; 78 FR 7216 
(Jan. 31, 2013).
---------------------------------------------------------------------------

    During the Small Business Review Panel process, small entity 
representatives expressed some concerns regarding reporting of property 
value.\449\ Some small entity representatives noted that multiple 
valuations are sometimes developed during the application process, and 
that valuations may not be available for certain types of loans. One 
small entity representative recommended that the value reported should 
be the one relied on in the credit decision.\450\
---------------------------------------------------------------------------

    \449\ See Small Business Review Panel Report at 30, 41.
    \450\ See id.
---------------------------------------------------------------------------

    Appendix A provides technical instructions for reporting the 
property value relied on in dollars. Proposed instruction 4(a)(28)-1 
would provide that financial institutions should report the value of 
the property relied on in making the credit decision in dollars. 
Proposed instruction 4(a)(28)-2 would provide that if the value of the 
property was not relied on in making the credit decision, the value 
should be reported as ``NA.'' The Bureau is proposing to add new 
comment 4(a)(28)-1 in order to facilitate compliance. Proposed comment 
4(a)(28)-1 explains how to report the property value used by an 
institution in calculating loan-to-value ratio. The comment provides 
that if an institution relied on an appraised value for the property, 
it would report that value. However, if an institution relied

[[Page 51797]]

on the purchase price of the property, it would report that value. The 
Bureau is also proposing to add new comment 4(a)(28)-2, which provides 
guidance for reporting property value when multiple valuations are 
obtained. It provides as an example that when a financial institution 
obtains two appraisals or other valuations with different values for 
the property, it reports the value relied on in making the credit 
decision.
    The Small Business Review Panel recommended that the Bureau clarify 
in the proposed rule and seek public comment on which property 
valuations must be reported. As discussed above, the proposal provides 
guidance on which property valuation to report.\451\ Consistent with 
the recommendation of the Small Business Review Panel, the Bureau 
solicits feedback on which property valuations should be reported.
---------------------------------------------------------------------------

    \451\ Small Business Review Panel Report at 41.
---------------------------------------------------------------------------

    For the reasons given in the section-by-section analysis of 
proposed Sec.  1003.4(a)(29), the Bureau believes that implementing 
HMDA through Regulation C to treat mortgage loans secured by all 
manufactured homes consistently, regardless of legal classification 
under State law, is reasonable, and is necessary and proper to 
effectuate HMDA's purposes and facilitate compliance therewith. 
Accordingly, pursuant to its authority under HMDA sections 305(a) and 
304(b)(6)(A), the Bureau proposes Sec.  1003.4(a)(28). The Bureau 
believes that this proposed reporting requirement is necessary and 
proper to effectuate the purposes of HMDA and facilitate compliance 
therewith. The proposed reporting requirement will provide the public 
and public officials with data to help determine whether financial 
institutions are serving the housing needs of their communities by 
providing information about the values of properties that are being 
financed; it will also assist public officials in distributing public-
sector investment so as to attract private investment by providing 
information about property values; and it will assist in identifying 
possible discriminatory lending patterns and enforcing 
antidiscrimination statutes by allowing information about similar loans 
to be compared and analyzed appropriately.
4(a)(29)
    Neither HMDA nor Regulation C requires financial institutions to 
report whether loans relating to manufactured homes are or would be 
secured by real or personal property. Section 304(b) of HMDA permits 
disclosure of such other information as the Bureau may require.\452\ 
For the reasons discussed below, the Bureau believes it may be 
appropriate to require financial institutions to report whether a 
manufactured home is legally classified as real property or as personal 
property.
---------------------------------------------------------------------------

    \452\ Section 1094(3)(A)(iv) of the Dodd-Frank Act amended 
section 304(b) of HMDA.
---------------------------------------------------------------------------

    Since 1988, Regulation C has required reporting of home purchase 
and home improvement loans and refinancings related to manufactured 
homes, whether or not the homes are considered real property under 
State law.\453\ Manufactured homes serve vital housing needs in 
communities and neighborhoods throughout the United States. For 
example, manufactured housing is the largest unsubsidized source of 
affordable homeownership in the United States.\454\ Manufactured homes 
also often share certain essential financing features with non-
manufactured homes. But classifications of manufactured homes as real 
or personal property vary significantly among States and can be 
ambiguous.\455\
---------------------------------------------------------------------------

    \453\ 53 FR 31683, 31685 (Aug. 19, 1988).
    \454\ Ann M. Burkhart, Bringing Manufactured Housing into the 
Real Estate Finance System, 37 Pepperdine Law Review 427, 428 
(2010), available at https://papers.ssrn.com/sol3/
papers.cfm?abstractid=1548441.
    \455\ See James M. Milano, An Overview and Update on Legal and 
Regulatory Issues in Manufactured Housing Finance, 60 Consumer 
Financial Law Quarterly Report 379, 383 (2006); Burkhart, supra note 
438, at 430.
---------------------------------------------------------------------------

    Regulation C's consistent treatment of manufactured housing in HMDA 
data has proven important to furthering HMDA's purposes and provided 
communities and public officials with important information about 
manufactured housing lending.\456\ The Bureau believes that the unique 
nature of the manufactured home financing market warrants additional 
information reporting. Although in many respects manufactured and site 
built housing are similar, manufactured home financing reflects certain 
key differences as compared to site built home financing. State laws 
treat site built homes as real property, with financing secured by a 
mortgage or deed of trust. On the other hand State law may treat 
manufactured homes as personal property or real property depending on 
the circumstances.\457\ Manufactured home owners may own or rent the 
underlying land, which is an additional factor in manufactured home 
owners' total housing cost and can be relevant to financing.\458\
---------------------------------------------------------------------------

    \456\ Adam Rust & Peter Skillern, Community Reinvestment 
Association of North Carolina, Nine Myths of Manufactured Housing: 
What 2004 HMDA Data says about a Misunderstood Sector (2006), 
available at https://www.reinvestmentpartners.org/sites/reinvestmentpartners.org/files/Myths-and-Realities-of-Manufactured-Housing.pdf; Delaware State Housing Authority, Manufactured Housing 
in Delaware: A Summary of Information and Issues (2008), available 
at https://www.destatehousing.com/FormsAndInformation/Publications/
manuhomesinfo.pdf.
    \457\ Milano, supra note 439 at 380.
    \458\ William Apgar, et al., An Examination of Manufactured 
Housing Community- and Asset-Building Strategies 5 (2002).
---------------------------------------------------------------------------

    These features of manufactured home financing can significantly 
influence interest rates, loan pricing, appraisal and valuation 
practices, and applicable legal protections.\459\ HMDA data from 2012 
on manufactured homes highlight many of the differences between 
manufactured housing lending and lending related to site built homes. 
For example, 82 percent of conventional first-lien home purchase loans 
for manufactured homes were higher-priced, compared to 3.2 percent for 
similar loans for site built homes. The average rate spread of those 
higher-priced manufactured home loans was 6 percent, compared to 2.6 
percent for the site built home loans. The denial rate for first-lien 
conventional owner-occupied home purchase loans for manufactured 
housing was 56 percent, compared to 13.7 percent for similar loans for 
site built homes. Given these differences and the importance of 
manufactured housing to low- and moderate-income families, the Bureau 
believes that additional information collection and reporting on 
manufactured housing will further the purposes of HMDA.
---------------------------------------------------------------------------

    \459\ GAO, Federal Housing Administration: Agency Should Assess 
the Effects of Proposed Changes to the Manufactured Home Loan 
Program, GAO 07-879, available at https://www.gao.gov/new.items/d07879.pdf.
---------------------------------------------------------------------------

    Different legal regimes, tax implications, appraisal standards, and 
consumer protections can depend on whether the manufactured home is 
legally classified as personal property or as real property.\460\ 
Further, the Bureau understands that there are different underwriting 
and pricing considerations based on the distinction. Because of the 
importance of manufactured housing to the housing market, the Bureau 
believes that additional information on the legal classification of the 
manufactured home will improve the utility of HMDA data for 
manufactured housing.
---------------------------------------------------------------------------

    \460\ See generally Burkhart, supra note 438.
---------------------------------------------------------------------------

    Participants at the Board's 2010 Hearings discussed the 
distinctions between chattel and real property manufactured home loans, 
and some recommended differentiating them in HMDA.\461\ Additional 
feedback was also received as part of the Board's 2010 Hearings that 
supported differentiating

[[Page 51798]]

real and personal property manufactured home loans. The Bureau 
understands that classifying the loan as either a real property or a 
personal property loan may not provide a complete picture of 
manufactured housing finance. For example, certain State laws permit 
manufactured homes to be legally classified as real property even if 
the home is sited on leased land, such as in a manufactured home 
community, and such a manufactured home could be secured by a leasehold 
mortgage.\462\ The Bureau also understands that there could be 
reporting questions that arise from certain aspects of manufactured 
housing lending, such as lenders offering combination land/home 
financing wherein the manufactured home is secured as personal property 
but the land is secured as real property; or where the security 
interest taken in the manufactured home may change as the transaction 
progresses; or where a lender may, out of prudence, perfect its 
security interest in a manufactured home through multiple methods.\463\ 
The Bureau understands that there may be ambiguities in certain State 
laws about the legal classification of a manufactured home as personal 
property or real property, and that, as a result, it may not be clear 
whether certain financing transactions should be classified as mortgage 
transactions.\464\
---------------------------------------------------------------------------

    \461\ Washington Hearing, supra note 130.
    \462\ See, e.g., Cal. Health & Safety Code Sec.  18551(a)(1)(A); 
Colo. Rev. Stat. Sec.  38-29-202(1)(d); Conn. Gen. Stat. Sec.  21-
67a; Fla. Stat. Sec.  319.261; Idaho Code Sec.  63-304(1)(b); N.H. 
Rev. Stat. Sec.  477:44, subp. I; Or. Rev. Stat. Sec.  446.626(1); 
S.C. Code Sec.  56-19-510; Tex. Occ. Code Sec.  1201.2055.
    \463\ Manufactured Housing Institute, Quick Facts: Trends and 
Information About the Manufactured Housing Industry, 6 (2013), 
https://www.manufacturedhousing.org/lib/forcedownload.asp?filepath=www.manufacturedhousing.org/admin/template/brochures/93temp.pdf; Milano, supra note 437, at 381 n. 14.
    \464\ See generally Milano supra note 439.; See Burkhart supra 
note 438 at 443; Uniform Manufactured Housing Act Sec.  4(c) comment 
(``This provision eliminates the ambiguity that currently exists in 
some state statutes concerning the purposes for which the home is to 
be treated as real property. When a statutory provision that a 
manufactured home can be classified as real property does not 
include this type of language, courts have questioned whether the 
home is real property only for certain purposes, such as financing, 
or for all purposes.'') (2012), available at https://www.uniformlaws.org/Committee.aspx?title=Manufactured%20Housing%20Act.
---------------------------------------------------------------------------

    During the Small Business Review Panel process, the small entity 
representatives generally did not oppose collecting information on 
whether manufactured housing is legally classified as real or personal 
property. Several small entity representatives noted that State laws 
often determine under what circumstances a manufactured home is treated 
as real or personal property, and that there are pricing differences 
dependent on that classification. One small entity representative noted 
that this could be easily collected, and believed the data would be 
useful for examiners and consumer advocates and might help to clear up 
confusion as to the legal classification of the dwelling in certain 
circumstances.\465\
---------------------------------------------------------------------------

    \465\ See Small Business Review Panel Report at 32, 33, 99, and 
127.
---------------------------------------------------------------------------

    The Bureau's proposal is tied to the manufactured home's legal 
classification rather than characterizing the loan as a real property 
or personal property loan. Both GSE selling guides refer to the legal 
classification of the manufactured home for purposes of eligibility 
requirements.\466\ The Bureau believes that the manufactured housing's 
legal classification under applicable State law will facilitate 
compliance by focusing the reporting requirement on the status of the 
dwelling, rather than on the characterization of the loan or how the 
obligation is secured. As discussed below, the Bureau is also proposing 
to collect additional information regarding the applicant or borrower's 
property interest in the land on which the manufactured home is 
located, which will provide more detailed HMDA data about manufactured 
housing loans when combined with data about the legal classification of 
the home.
---------------------------------------------------------------------------

    \466\ Fannie Mae, Fannie Mae Single Family Selling Guide Sec.  
B5-2-02 (June 24, 2014), available at https://www.fanniemae.com/content/guide/sel062414.pdf; Freddie Mac, Freddie Mac Single Family 
Selling Guide Sec.  H33.2 (June 24, 2014), available at https://www.freddiemac.com/singlefamily/guide/bulletins/pdf/062414Guide.pdf.
---------------------------------------------------------------------------

    Proposed additions to appendix A provide technical instructions for 
reporting the legal classification for manufactured housing. As 
discussed in the section-by-section analysis of proposed Sec.  
1003.4(a)(9) and proposed comment 4(a)(9)-2, if more than one property 
is taken, or in the case of an application, proposed to be taken as 
security for a single covered loan or application, a financial 
institution may report one of the properties in a single entry on its 
loan application register or report all of the properties using 
multiple entries on its loan application register. Regardless of 
whether the financial institution elects to report the transaction in 
one entry or more than one entry, the information required by Sec.  
1003.4(a)(29) should relate to the property identified under paragraph 
4(a)(9). The Bureau is also proposing comment 4(a)(29)-2 to clarify how 
to report the information required by Sec.  1003.4(a)(29) for a covered 
loan secured by, or in the case of an application, proposed to be 
secured by, more than one property.
    For the reasons given, pursuant to its authority under sections 
305(a) and 304(b)(6)(J) of HMDA, the Bureau is proposing Sec.  
1003.4(a)(29), which requires financial institutions to report whether 
a dwelling is legally classified as real property or as personal 
property, if the dwelling related to the property identified in Sec.  
1003.4(a)(9) is a manufactured home. Pursuant to its authority under 
HMDA section 305(a) to provide for adjustments for any class of 
transactions, the Bureau believes that interpreting HMDA to treat 
mortgage loans secured by all manufactured homes consistently is 
necessary and proper to effectuate HMDA's purposes and facilitate 
compliance therewith. In light of changes in the mortgage market, 
certain differences between manufactured housing lending and lending 
related to site built homes, and the importance of manufactured housing 
generally, especially for low- and moderate-income families, the Bureau 
believes proposed Sec.  1003.4(a)(29) will provide necessary insight 
into this loan data and allow it to be used to help determine whether 
financial institutions are serving the housing needs of their 
communities, assist public officials in public-sector investment 
determinations, and assist in identifying possible discriminatory 
lending patterns and enforcing antidiscrimination statutes.
    The Bureau solicits feedback on these requirements in general. In 
particular, the Bureau solicits feedback on whether reporting the legal 
classification of the dwelling appropriately captures distinctions 
between personal property and real property lending, whether possible 
ambiguities in State law could make compliance with the reporting 
requirement difficult, and whether additional guidance could be 
provided on what information financial institutions could rely on to 
facilitate compliance.
4(a)(30)
    Neither HMDA nor Regulation C requires financial institutions to 
report information about what property interest applicants or borrowers 
have in the land on which their manufactured homes are located. Section 
304(b) of HMDA permits disclosure of such other information as the 
Bureau may require.\467\ For the reasons discussed below, the Bureau 
believes it may be

[[Page 51799]]

appropriate to require financial institutions to collect and report 
whether the applicant or borrower owns the land on which the 
manufactured home is or will be located through a direct or indirect 
ownership interest or leases the land through a paid or unpaid 
leasehold interest.
---------------------------------------------------------------------------

    \467\ Section 1094(3)(A)(iv) of the Dodd-Frank Act amended 
section 304(b) of HMDA.
---------------------------------------------------------------------------

    Manufactured home owners generally either own or lease the land on 
which the manufactured home is sited.\468\ Land may be owned either 
directly or indirectly through a cooperative or similar ownership 
structure. A leasehold interest could arise through a lease with 
specified terms and rental payments or through a tenancy at will 
arising from the landowner's permission. Whether a manufactured home 
owner owns or rents the underlying land can have important implications 
for the financing of the transaction and its long-term affordability 
and the appreciation of the manufactured home.\469\ Because of the 
importance of manufactured housing to the housing market, the Bureau 
believes that additional information on the applicant or borrower's 
land property interest may improve the utility of HMDA data for 
manufactured housing.
---------------------------------------------------------------------------

    \468\ Apgar, supra note 442.
    \469\ Kevin Jewell, Consumers Union, Manufactured Housing 
Appreciation: Stereotypes and Data (2003), https://consumersunion.org/pdf/mh/Appreciation.pdf.
---------------------------------------------------------------------------

    During the Small Business Review Panel process some small entity 
representatives believed that it could be burdensome to collect this 
information. One small entity representative noted that the information 
may be gathered for loan servicing, but it might not be available for 
withdrawn or denied loans.\470\ The Bureau believes that financial 
institutions may already be collecting or analyzing some information on 
land property interest for underwriting or servicing purposes. 
Cooperative fees, ground rent, and leasehold payments are included in 
the definition of mortgage-related obligations in Sec.  1026.43(b)(8) 
of Regulation Z pursuant to the Bureau's 2013 ATR Final Rule, for 
example. Creditors subject to the rule are required to consider such 
obligations in assessing an applicant's ability-to-repay and to verify 
the information using reasonably reliable third-party records pursuant 
to Sec.  1026.43(c).
---------------------------------------------------------------------------

    \470\ See Small Business Review Panel Report at 33, 127.
---------------------------------------------------------------------------

    Many manufactured homes are located on leased land. For example, in 
a manufactured home park, the home owner pays rent to the park owner 
for the right to occupy a lot in addition to making payments on the 
manufactured home loan.\471\ The park owner typically provides sewer, 
water, roads, and other services.\472\ A manufactured home owner could 
also lease land outside of a manufactured home park. Finally, 
manufactured homes are sometimes located on land for which the 
manufactured home owner does not own or have a formal lease. For 
example, a manufactured home owner may be permitted by a family member 
to locate the home on family land.\473\ This arrangement could be 
formal or informal, without a specific agreement as to term or rent. 
Even in such an informal arrangement a tenancy at will leasehold 
interest may arise.\474\
---------------------------------------------------------------------------

    \471\ Katherine MacTavish, et al., Housing Vulnerability Among 
Rural Trailer-Park Households, 13 Georgetown Journal on Poverty Law 
and Policy 97 (2006).
    \472\ GAO, Federal Housing Administration: Agency Should Assess 
the Effects of Proposed Changes to the Manufactured Home Loan 
Program, GAO 07-879, https://www.gao.gov/new.items/d07879.pdf.
    \473\ See Small Business Review Panel Report at 56.
    \474\ Restatement (Second) of Property, Landlord & Tenant Sec.  
1.6 (1977).
---------------------------------------------------------------------------

    As discussed above, if the land on which the manufactured home is 
located is owned it could be financed with the manufactured home in a 
land/home loan, or the land could be financed separately or already 
owned by the manufactured home loan borrower. An emerging scenario 
involves a manufactured home park owned as a cooperative by the 
residents, often called a resident-owned community.\475\ As compared to 
owners of manufactured homes on leased land, the residents in such 
communities have greater control over the property on which their homes 
are located due to their communal ownership interest.\476\ One study 
found that residents who own their communities benefit from lower lot 
fees, higher home sale prices, faster home sales, and access to better 
financing.\477\
---------------------------------------------------------------------------

    \475\ Katherine MacTavish, supra note 453.
    \476\ Apgar, supra note 440.
    \477\ Sally Ward, et al., Carsey Institute, Resident Ownership 
in New Hampshire's ``Mobile Home Parks:'' A Report on Economic 
Outcomes, (2010), https://www.carseyinstitute.unh.edu/publications/
WardCommunityFund.pdf.
---------------------------------------------------------------------------

    Proposed additions to appendix A provide technical instructions for 
reporting land property interest for manufactured housing covered loans 
and applications. Proposed instruction 4(a)(30)-1 instructs financial 
institutions to indicate whether the applicant or borrower's interest 
in the land on which the manufactured home related to the covered loan 
or application is or will be located is a direct ownership interest, an 
indirect ownership interest (such as a home in a resident-owned 
community), a paid leasehold interest (such as a lease for a lot in a 
manufactured home park), or an unpaid leasehold interest (such as a 
home on family-owned land). Proposed instruction 4(a)(30)-1.e provides 
for reporting ``not applicable'' if the dwelling is not a manufactured 
home or the location for the manufactured home is not determined.
    The proposal adds comment 4(a)(30)-1, which provides additional 
guidance on indirect ownership. The comment provides illustrative 
guidance on identifying resident-owned communities and examples of 
reporting land property interest depending on whether or not the 
applicant or borrower is a member of the ownership structure. Proposed 
comment 4(a)(30)-2 provides additional guidance on leasehold interests. 
The comment provides illustrative guidance on identifying paid and 
unpaid leasehold interests. As discussed in the section-by-section 
analysis of proposed Sec.  1003.4(a)(9) and proposed comment 4(a)(9)-2, 
if more than one property is taken, or in the case of an application, 
proposed to be taken as security for a single covered loan or 
application, a financial institution may report one of the properties 
in a single entry on its loan application register or report all of the 
properties using multiple entries on its loan application register. 
Regardless of whether the financial institution elects to report the 
transaction in one entry or more than one entry, the information 
required by Sec.  1003.4(a)(30) should relate to the property 
identified under paragraph 4(a)(9). The Bureau is also proposing 
comment 4(a)(30)-3 to clarify how to report the information required by 
Sec.  1003.4(a)(30) for a covered loan secured by, or in the case of an 
application, proposed to be secured by, more than one property.
    For the reasons given, pursuant to its authority under sections 
305(a) and 304(b)(6)(J) of HMDA, the Bureau is proposing Sec.  
1003.4(a)(30), which requires financial institutions to report whether 
the applicant or borrower owns the land on which the manufactured home 
is or will be located through a direct or indirect ownership interest 
or leases the land through a paid or unpaid leasehold interest, if the 
dwelling related to the property identified in Sec.  1003.4(a)(9) is a 
manufactured home. For the reasons given, the Bureau believes proposed 
Sec.  1003.4(a)(30) is necessary to carry out HMDA's purposes, because 
it will provide necessary insight into loan data and allow it to be 
used to help determine whether financial institutions are serving the 
housing needs of their communities, since this information can

[[Page 51800]]

have important implications for the financing, long-term affordability, 
and appreciation of the housing at issue.
    The Bureau solicits feedback on what information financial 
institutions collect about an applicant's or borrower's land property 
interest for manufactured home transactions, and about any potential 
difficulties associated with complying with the proposed reporting 
requirement. The Bureau solicits feedback about whether financial 
institutions consider payments that may be associated with such 
interests in underwriting, such as lease payments, ground rents, or 
cooperative fees, and about what information they typically collect 
regarding such payments. The Bureau specifically solicits feedback 
regarding reporting land property interest for land that is neither 
formally leased nor owned, such as family-owned land which the 
applicant or borrower does not have a direct ownership interest in, and 
whether the proposal appropriately addresses that scenario. The Bureau 
also specifically solicits feedback on resident-owned communities and 
whether the proposal appropriately addresses them. The Bureau solicits 
feedback on whether this proposal, combined with the proposal regarding 
manufactured home legal classification, appropriately captures and 
differentiates the lending products in manufactured home finance; on 
whether it will allow for communities to assess how financial 
institutions are meeting the needs of manufactured home owners; and on 
whether different or additional requirements, enumerations, or guidance 
is appropriate.
4(a)(31)
    Section 1003.4(a)(5) requires financial institutions to report the 
property type to which a loan or application relates. Financial 
institutions must report whether the dwelling is a one-to four-family 
dwelling (other than manufactured housing), a manufactured home, or a 
multifamily dwelling. Section 1003.4(a)(5) does not require financial 
institutions to report the number of units in properties. HMDA to 
section 304(b)(6)(J) permits disclosure of such other information as 
the Bureau may require. For the reasons discussed below, pursuant to 
HMDA sections 305(a) and 304(b)(6)(J), the Bureau is proposing to add 
Sec.  1003.4(a)(31), which requires a financial institution to report 
the number of individual dwelling units related to the property 
securing the covered loan or, in the case of an application, proposed 
to secure the covered loan. As discussed above, the Bureau is proposing 
to replace the current property type reporting requirement with 
construction method and to separate the concept of the number of units 
from that reporting requirement. Separating the property type 
requirement into two distinct reporting requirements would better align 
HMDA reporting with industry practice and will improve the quality of 
the data.
    The Bureau believes that information on the total number of units 
may improve the utility of HMDA data both for covered loans and 
applications related to one-to four-family dwellings. The information 
will allow single family homes to be differentiated from duplexes and 
similar properties. Multifamily dwellings would be reported with the 
exact number of units in the property, allowing for more robust 
analysis of multifamily dwelling finance. The Bureau understands that 
tracking total number of units is consistent with the MISMO/ULDD data 
standard.\478\ As discussed below, the Bureau is also considering a 
requirement to report the number of income-restricted units for 
multifamily dwellings with affordable housing subsidies. This 
information will be useful when combined with the total number of units 
in a multifamily dwelling to determine the percentage of subsidized 
units for mixed-income affordable housing projects. As such, the 
proposal would help serve the HMDA purposes of assisting the public and 
government officials to determine whether financial institutions are 
serving the housing needs of their communities, and it would assist 
public officials in targeting public investments.
---------------------------------------------------------------------------

    \478\ See MISMO, Version 3.3 of the MISMO Residential Reference 
Model (Financed Unit Count); Fannie Mae, Fannie Mae Implementation 
Guide for Loan Delivery Data, Appendix A (Oct. 29, 2013), https://
www.fanniemae.com/content/technologyrequirements/uldd-
implementation-guide-appendix-a.pdf; Freddie Mac, Freddie Mac 
Implementation Guide for Loan Delivery Data, Appendix A (Jan. 29, 
2014), https://www.freddiemac.com/singlefamily/sell/docs/
FREIGsellingsystemappendix
adatarequirements.pdf.
---------------------------------------------------------------------------

    Multifamily housing has always been an essential component of the 
nation's housing stock. In the wake of the housing crisis, multifamily 
housing has taken on an increasingly important role in communities, as 
families have turned to rental housing for a variety of reasons.\479\ 
Many participants at the Board's 2010 Hearings expressed a desire for 
HMDA to include more specific data about multifamily properties.\480\ 
HMDA highlights the importance of multifamily lending to the recovering 
housing finance market and to consumers. At the peak of the housing 
market in 2004, 48,437 originated multifamily loans were reported under 
HMDA. By 2010 the volume for originated multifamily loans had dropped 
to 18,974. However, in 2012 multifamily loans rose sharply to 36,761--a 
much greater rise than the originated loan volume for one- to four-
family dwellings. Greater detail about multifamily housing finance may 
provide additional information about whether financial institutions are 
serving the housing needs of their communities, and may provide 
information to assist public official in making decisions about public-
sector investments, and to help identify potential fair lending 
concerns.
---------------------------------------------------------------------------

    \479\ San Francisco Hearing, supra note 133.
    \480\ San Francisco Hearing, supra note 133.
---------------------------------------------------------------------------

    The Bureau notes that many of Regulation C's current and proposed 
reporting requirements may not be relevant for applications or loans 
related to multifamily dwellings. Financial institutions report that 
they often have different processes for commercial loans, including 
loans related to multifamily dwellings, which increases the burden of 
reporting data for such loans. The Bureau recognizes the potential 
burden associated with reporting HMDA data for applications and loans 
related to multifamily dwellings. However, the importance of 
multifamily housing to the nation's housing stock and feedback from 
public officials and consumer advocates suggests that potential 
benefits to the public and public officials may justify these potential 
burdens, and the Bureau believes that disclosure of this information, 
pursuant to proposed Sec.  1003.4(a)(31), is necessary to carry out 
HMDA's purposes.
    Proposed instructions in appendix A provide technical details for 
reporting total individual dwelling units. Proposed comment 4(a)(31)-1 
provides guidance for reporting total units for loans involving 
multiple properties and cross-references comment 4(a)(9)-2.
    The Bureau understands that tracking total number of units is 
consistent with the MISMO/ULDD data standard.\481\ However, the Bureau 
is concerned that some financial institutions may not differentiate 
total unit counts for two- to

[[Page 51801]]

four-family dwellings. During the Small Business Review Panel process, 
some small entity representatives preferred distinguishing only between 
one- to four-family dwellings and multifamily dwellings with no total 
unit count; others preferred distinguishing between single family 
dwellings, two- to four-family dwellings, and multifamily dwellings; 
and still others suggested ranges of units for multifamily 
dwellings.\482\ The Small Business Review Panel recommended that the 
Bureau seek public comment on appropriate alternatives to reporting the 
total number of dwelling units, including whether financial 
institutions should report ranges of the number of units.\483\ Based on 
this feedback and consistent with the recommendation of the Small 
Business Review Panel, the Bureau solicits feedback on appropriate 
alternatives to reporting the total number of dwelling units, including 
whether financial institutions should report ranges of the number of 
units such as one, two to four, and five or more.
---------------------------------------------------------------------------

    \481\ See MISMO, Version 3.3 of the MISMO Residential Reference 
Model (Financed Unit Count); Fannie Mae, Fannie Mae Implementation 
Guide for Loan Delivery Data, Appendix A (Oct. 29, 2013), https://
www.fanniemae.com/content/technologyrequirements/uldd-
implementation-guide-appendix-a.pdf; Freddie Mac, Freddie Mac 
Implementation Guide for Loan Delivery Data, Appendix A (Jan. 29, 
2014), https://www.freddiemac.com/singlefamily/sell/docs/
FREIGsellingsystemappendix
adatarequirements.pdf.
    \482\ See Small Business Review Panel Report at 32, 99, 127.
    \483\ See Small Business Review Panel Report at 42.
---------------------------------------------------------------------------

4(a)(32)
    Neither HMDA nor Regulation C requires financial institutions to 
report information about the number of dwelling units in multifamily 
dwellings that are income-restricted pursuant to affordable housing 
programs. Section 304(b) of HMDA permits disclosure of such other 
information as the Bureau may require.\484\ For the reasons discussed 
below, pursuant to HMDA sections 305(a) and 304(b)(6)(J), the Bureau is 
proposing Sec.  1003.4(a)(32), which requires financial institutions to 
collect and report information on the number of individual dwelling 
units in multifamily dwellings that are income-restricted pursuant to 
Federal, State, or local affordable housing programs.
---------------------------------------------------------------------------

    \484\ Section 1094(3)(A)(iv) of the Dodd-Frank Act amended 
section 304(b) of HMDA.
---------------------------------------------------------------------------

    Affordable multifamily housing is an important component of the 
housing market for low- and moderate-income consumers and an important 
investment of Federal, State, and local government resources. A 
December 2013 study by the Harvard Joint Center on Housing Studies 
noted that in 2012 approximately 21.1 million households were cost-
burdened (i.e., spending more than 30 percent of income on housing), 
and estimated that, while 19.3 million households were eligible for 
affordable housing assistance, only 4.6 million received such 
assistance.\485\ For these reasons, and as explained below, the Bureau 
believes that additional information about whether multifamily housing 
loans are related to multifamily dwellings with affordability 
restrictions would further HMDA's purposes, in part by providing more 
useful information about these vital public resources, and thereby 
assisting public officials in distributing public-sector investment so 
as to attract private investment to areas where it is needed.
---------------------------------------------------------------------------

    \485\ Harvard University Joint Center for Housing Studies, 
America's Rental Housing: Evolving Market and Needs (Dec. 9, 2013), 
https://www.jchs.harvard.edu/americas-rental-housing.
---------------------------------------------------------------------------

    The Bureau believes that data reported pursuant to this proposal 
could be combined with other existing publically available data to 
obtain additional detail on multifamily dwelling affordability. For 
example, HUD maintains publically available data on Low-Income Housing 
Tax Credit multifamily dwellings; \486\ publically available data on 
FHA-insured multifamily dwellings, which includes information on 
whether the insured dwelling loan included affordability components 
from Low-Income Housing Tax Credits or tax exempt bonds; \487\ and 
information about contracts for Section 8-assisted multifamily 
dwellings.\488\ Other organizations maintain or aggregate data on 
multifamily affordable housing which could be utilized with HMDA data 
provided by this proposal.\489\
---------------------------------------------------------------------------

    \486\ Low-Income Housing Tax Credit Database, https://lihtc.huduser.org/.
    \487\ Insured Multifamily Mortgages Database, https://
portal.hud.gov/hudportal/HUD?src=/programoffices/housing/
comp/rpts/mfh/mff47.
    \488\ Multifamily Assistance and Section 8 Contracts Database, 
https://portal.hud.gov/hudportal/HUD?src=/programoffices/
housing/mfh/exp/mfhdiscl.
    \489\ See, e.g., the National Housing Preservation Database, 
https://www.preservationdatabase.org/.
---------------------------------------------------------------------------

    The Bureau recognizes that reporting information regarding 
affordability restrictions may entail new burden for some financial 
institutions that do not ordinarily make loans to affordable housing 
properties and may be unfamiliar with these programs. Conversely, the 
Bureau understands that many financial institutions specialize in this 
kind of lending or have special programs designed for such lending and 
believes that such institutions may have this information readily 
available.
    Based on these considerations, the Bureau is proposing to require 
financial institutions to collect and report information on the number 
of individual dwellings units that are income-restricted pursuant to 
Federal, State, or local affordable housing programs.
    The proposal adds technical instructions for reporting in appendix 
A. Proposed instruction 4(a)(32)-1 provides general reporting 
information. Proposed instruction 4(a)(32)-1.a specifies to report 
``NA'' if the dwelling is not a multifamily dwelling. Proposed 
instruction 4(a)(32)-1.b specifies to report ``0'' for a multifamily 
dwelling that contains no individual dwelling units subject to 
affordable housing income restrictions.
    The Bureau is also proposing to add several comments. Proposed 
comment 4(a)(32)-1 clarifies that income-restricted affordable housing 
units are generally subject to income level restrictions defined by 
area median income and provided by HUD or another agency responsible 
for implementing the applicable affordable housing program. The comment 
provides that such restrictions are frequently part of programs that 
provide public funds, special tax treatment, or density bonuses for 
affordable housing purposes. The comment provides that rent control or 
rent stabilization and acceptance of Housing Choice Vouchers or other 
portable housing assistance are not considered to create income-
restricted affordable housing individual dwelling units for purposes of 
proposed Sec.  1003.4(a)(32).
    Proposed comment 4(a)(32)-2 provides illustrative examples of 
Federal programs and funding sources that may result in individual 
dwellings units that are reportable under Sec.  1003.4(a)(32). Proposed 
comment 4(a)(32)-3 provides illustrative examples of State and local 
programs and funding sources that may result in individual dwelling 
units that are reportable under Sec.  1003.4(a)(32). Proposed comment 
4(a)(32)-4 provides guidance for reporting income-restricted units for 
loans involving multiple properties and cross-references comment 
4(a)(9)-2.
    The Bureau considered whether to require financial institutions to 
report the specific affordable housing program related to the 
multifamily dwelling, or the area median income level at which units in 
the multifamily dwelling are considered affordable. However, the Bureau 
believes that the large variety of Federal, State, and local affordable 
housing programs would make implementing a more specific reporting 
requirement difficult and burdensome. Similarly, reporting income 
affordability level for units in the multifamily dwelling may be unduly 
burdensome. The Bureau understands that many affordable multifamily 
dwellings

[[Page 51802]]

include multiple layers of affordable housing program subsidies in 
development and long-term financing, further complicating a specific 
reporting requirement.
    During the Small Business Review Panel process, small entity 
representatives generally stated that information concerning 
multifamily affordable housing is not generally disclosed during the 
loan process and may be labor-intensive to obtain.\490\ The Small 
Business Review Panel recommended that the Bureau seek public comment 
concerning the extent to which information about multifamily affordable 
housing programs is available in loan files, how financial institutions 
currently use this information, and the costs and other burdens of 
obtaining these data.\491\ Consistent with the recommendation of the 
Small Business Review Panel, the Bureau solicits feedback on the extent 
to which information about multifamily affordable housing programs is 
available in loan files, how financial institutions currently use this 
information, and the costs and other burdens of obtaining these data.
---------------------------------------------------------------------------

    \490\ See Small Business Review Panel Report at 42.
    \491\ Id.
---------------------------------------------------------------------------

    The Bureau solicits feedback generally about this requirement. The 
Bureau also solicits feedback on whether additional information about 
the program or type of affordable housing would be valuable and serve 
HMDA's purposes, and about the burdens associated with collecting such 
information compared with the burdens of the proposal. Comment is 
solicited on the following points: whether the Bureau should require 
reporting of information concerning programs targeted at specific 
groups (such as seniors or persons with disabilities); whether income 
restrictions above a certain threshold should be excluded for reporting 
purposes (such as income restrictions above the area median income); 
whether it would be appropriate to simplify the requirement and report 
only whether a multifamily dwelling contains a number of income-
restricted units above a certain percentage threshold; whether 
financial institutions should be required to report the specific 
affordable housing program or programs; and whether financial 
institutions should be required to report the area median income level 
at which units in the multifamily dwelling are considered affordable. 
The Bureau also solicits feedback on whether the burden on financial 
institutions may be reduced by providing instructions or guidance 
specifying that institutions only to report income-restricted dwelling 
units that they considered or were aware of in originating, purchasing, 
or servicing the loan.
4(a)(33)
    Regulation C does not require financial institutions to report 
information concerning the application channel of covered loans and 
applications. HMDA section 304(b)(6)(E) requires financial institutions 
to disclose ``the channel through which application was made, including 
retail, broker, and other relevant categories,'' for each covered loan 
and application.\492\ Proposed Sec.  1003.4(a)(33) implements this 
requirement by requiring financial institutions to record certain 
information related to the application channel of each reported 
origination and application.
---------------------------------------------------------------------------

    \492\ Dodd-Frank Act, section 1094(3), 12 U.S.C. 2803(b)(6)(E).
---------------------------------------------------------------------------

    Congress added the requirement to record information about the 
application channel to the HMDA data collection because it believed 
that it would enrich HMDA data. For example, Congress expressed 
concerns that the wholesale channel may have presented greater risks to 
applicants than the retail channel during the financial crisis.\493\ 
Participants in the Board's 2010 Hearings also urged for the addition 
of information about the application channel to the HMDA data 
collection.\494\ The loan terms and rates that a financial institution 
offers an applicant may depend on how the applicant submits the 
application (i.e., whether through the retail, wholesale, or 
correspondent channel).\495\ Thus, identifying transactions by channel 
may help to interpret loan pricing and other information in the HMDA 
data.
---------------------------------------------------------------------------

    \493\ See, e.g., House Consideration of HR 4173, 155 Cong. 
Record H 14430 (daily ed. Dec. 9, 2009) (Cong. Ellison (MN)) (``And 
nearly one in four U.S. borrowers currently owes more on their 
mortgage than their home is worth. This, in large measure, happened, 
Madam Chair, because mortgage brokers, unregulated lured families 
with low teaser-rate interest rates that later skyrocketed to 
unaffordable levels, hidden fees, and charges in incomprehensible 
terms and conditions that brought on the housing crisis and 
undermined the financial system.''); Senate Consideration of S 3217, 
156 Cong. Rec. S 3323 (daily ed. May 6, 2010) (Sen. LeMieux (FL)) 
(``One is we know mortgages were given to people who should not have 
had mortgages-people who had no income and no jobs. They called them 
ninja loans-no income, no jobs. There were a lot of them in my State 
of Florida. Why were they written? Many of them were written because 
they were written by mortgage brokers and banks that did not have to 
retain any of those mortgages on their books. There were no 
underwriting standards. They could just ship them off. They had no 
skin in the game and no responsibility.'').
    \494\ See, e.g., Chicago Hearing, supra note 137 (remarks of 
Janis Bowdler, Deputy Director of the Wealth Building Project, 
National Council of La Raza); id. (remarks of Michael Collins, 
Researcher, University of Wisconsin).
    \495\ See, e.g., Keith Ernst, et al, ``Steered Wrong: Brokers, 
Borrowers, and Subprime Loans,'' Center for Responsible Lending, 
April 8, 2008, available at https://www.responsiblelending.org/mortgage-lending/research-analysis/steered-wrong-brokers-borrowers-and-subprime-loans.pdf.
---------------------------------------------------------------------------

    The mortgage industry generally operates through three primary 
application channels: retail, wholesale, and correspondent. These 
channels are often characterized by three factors: (1) which 
institution received the application directly from the applicant, (2) 
which institution made the credit decision, and (3) in which 
institution's name the loan closed (i.e., to whom the obligation 
initially was payable). The term ``retail channel'' generally refers to 
situations where the applicant submits the application directly to the 
financial institution that makes the credit decision on the application 
and to whom the obligation is initially payable.
    On the other hand, the term ``wholesale channel,'' which is also 
referred to as the ``broker channel,'' generally refers to situations 
where the applicant submits the application to a mortgage broker and 
the broker sends the application to a financial institution that makes 
the credit decision on the application and to whom the obligation is 
initially payable. The wholesale channel may also include some 
arrangements, such as table funding, in which the obligation is not 
initially payable to the financial institution that makes the credit 
decision.
    The third channel includes correspondent arrangements between two 
financial institutions. A purchasing financial institution may have 
different arrangements with correspondents and may or may not delegate 
underwriting authority to a correspondent. A correspondent with 
delegated underwriting authority processes an application much like the 
retail channel described above. The correspondent receives the 
application directly from the applicant, makes the credit decision, 
closes the loan in its name, and immediately or within a short period 
of time sells the loan to another institution. Correspondents with 
nondelegated authority operate more like a mortgage broker in the 
wholesale channel. These correspondents receive the application from 
the applicant, but prior to closing involve a third-party institution 
that makes the credit decision. The transaction generally closes in the 
name of the correspondent, which immediately or within a short period 
of time sells the loan to the third-

[[Page 51803]]

party institution that made the credit decision.\496\
---------------------------------------------------------------------------

    \496\ See generally, 78 FR 11280, 11284 (Feb. 15, 2013); CFPB 
Examination Procedure, https://files.consumerfinance.gov/f/
201401cfpbmortgage-origination-exam-
procedures.pdf.
---------------------------------------------------------------------------

    Collecting information about the application channel presents 
challenges due to the complexities of the mortgage market and HMDA's 
reporting requirements. As discussed above in the section-by-section 
analysis of proposed Sec.  1003.4(a), the financial institution that 
made the credit decision prior to closing reports the application or 
origination, regardless of whether the loan closed or would have closed 
in that institution's name. Since retail lenders, mortgage brokers, and 
correspondent lenders all may make a credit decision on an application, 
financial institutions that report HMDA data include financial 
institutions acting in all of those roles. In addition, each financial 
institution may play a different role in different transactions, e.g., 
act as a retail lender in one transaction and as a correspondent lender 
in another transaction. Furthermore, financial institutions may 
characterize the different application channels differently and may not 
routinely collect information about application channels.
    The Bureau recognizes the potential challenges and burdens with 
collecting information about application channels. However, the Bureau 
believes that the potential benefits to the public and to public 
officials may justify these potential burdens. The Bureau also believes 
that disclosure of information about application channels is an 
appropriate method of implementing HMDA section 304(b)(6)(E) in a 
manner that carries out HMDA's purposes. Based on these considerations, 
the Bureau proposes to implement the Dodd-Frank amendment by requiring 
financial institutions to collect and report information on whether the 
application was submitted directly to the financial institution 
reporting the loan or application and on whether the covered loan 
closed or, in the case of an application, would have closed in the name 
of the financial institution reporting the covered loan or application. 
The Bureau believes that this approach implements the relevant Dodd-
Frank Act amendment to HMDA in a manner that carries out HMDA's 
purposes, without imposing undue burden.
    Accordingly, pursuant to HMDA sections 304(b)(6)(E) and 305(a), the 
Bureau proposes Sec.  1003.4(a)(33), which provides that, except for 
purchased covered loans, a financial institution is required to report 
the following information about the application channel of the covered 
loan or application: Whether the applicant or borrower submitted the 
application for the covered loan directly to the financial institution; 
and whether the obligation arising from the covered loan was or, in the 
case of an application, would have been initially payable to the 
financial institution. The Bureau solicits feedback regarding whether 
this proposed requirement is appropriate generally and regarding 
alternative ways to collect application channel information.
    To facilitate compliance, the Bureau proposes to except purchased 
covered loans from this requirement. The Bureau believes that reporting 
of the information required by proposed Sec.  1003.4(a)(33) for 
purchased covered loans would not provide valuable information because 
there would likely be little variation in the information reported 
(i.e., a financial institution reporting a purchase of a covered loan 
would nearly always report that the application was not submitted 
directly to the financial institution and that the covered loan did not 
close in the name of the financial institution). Accordingly, the 
Bureau believes that it may not be appropriate to burden financial 
institutions with the requirement to report the information required by 
proposed Sec.  1003.4(a)(33) for purchased covered loans. The Bureau 
solicits feedback on whether this exception is appropriate.
    During the Small Business Review Panel process, small entity 
representatives expressed concerns about the burden associated with 
collecting application channel information given the complexities of 
their business practices.\497\ The Panel recommended that the Bureau 
seek comment on the most effective means of collecting information 
about the application channel of the reported covered loans and 
applications.\498\ Consistent with the Small Business Review Panel's 
recommendation, the Bureau seeks feedback on whether alternative ways 
of collecting application channel information would achieve the 
statutory requirement in a more efficient manner.
---------------------------------------------------------------------------

    \497\ See, e.g., Small Business Review Panel Report at 26.
    \498\ See id at 39-40.
---------------------------------------------------------------------------

    The Bureau is also proposing commentary to clarify the reporting 
requirements. Proposed comment 4(a)(33)-1 contains several examples 
that illustrate when an application is submitted directly to a 
financial institution. Proposed comment 4(a)(33)-2 clarifies that 
proposed Sec.  1003.4(a)(33) requires financial institutions to report 
whether the obligation arising from a covered loan or application was 
or would have been initially payable to the institution. Proposed 
comment 4(a)(33)-3 explains how to report the application channel 
information if the financial institution is reporting the credit 
decision made by an agent consistent with comment 4(a)-5. Proposed 
additions to appendix A provide technical instructions regarding how to 
enter the application channel data on the loan application register.
4(a)(34)
    Regulation C does not require financial institutions to report 
information regarding a loan originator identifier. HMDA section 
304(b)(6)(F) requires the reporting of, ``as the Bureau may determine 
to be appropriate, a unique identifier that identifies the loan 
originator as set forth in section 1503 of the [Secure and Fair 
Enforcement for] Mortgage Licensing Act of 2008'' (S.A.F.E. Act).\499\ 
Proposed Sec.  1003.4(a)(34) implements this requirement by requiring 
financial institutions to report, for a covered loan or application, 
the unique identifier assigned by NMLSR for the mortgage loan 
originator, as defined in Regulation G Sec.  1007.102 or Regulation H 
Sec.  1008.23, as applicable.
---------------------------------------------------------------------------

    \499\ Dodd-Frank Act section 1094(3)(A)(iv), 12 U.S.C. 
2803(b)(6)(F).
---------------------------------------------------------------------------

    The S.A.F.E. Act provides for a unique identifier under the NMLSR 
for residential mortgage loan originators.\500\ The S.A.F.E. Act 
requirements are implemented by the Bureau's Regulations G and H.\501\ 
The Bureau believes that implementing the Dodd-Frank Act requirement 
for a mortgage loan originator unique identifier will improve HMDA data 
and assist in identifying and addressing potential issues, such as 
training deficiencies with specific loan originators, as well as 
strengthen the transparency of the residential mortgage market. The 
ability to identify an individual who has primary responsibility in the 
transaction will enable new dimensions of analysis, including being 
able to link individual mortgage loan originators or groups of mortgage 
loan originators to a financial institution. The NMLSR mortgage loan 
originator unique identifier also provides a vehicle for industry to 
self-test and determine appropriate corrective measures when it 
identifies

[[Page 51804]]

individual misconduct through self-analysis of HMDA data.
---------------------------------------------------------------------------

    \500\ 12 U.S.C. 5107(c).
    \501\ 12 CFR parts 1007 (Regulation G) and 1008 (Regulation H).
---------------------------------------------------------------------------

    A requirement to collect and report a mortgage loan originator 
unique identifier may impose some burden on financial institutions. 
However, the Bureau believes that the potential benefits to the public 
and public officials justify these potential burdens, and the Bureau 
believes that disclosure of this information is an appropriate method 
of implementing HMDA section 304(b)(6)(F) and carrying out HMDA's 
purposes. This information is provided on certain loan documents 
pursuant to the loan originator compensation requirements under 
TILA.\502\ This information will also be provided on the TILA-RESPA 
integrated disclosure form starting on August 1, 2015.\503\ As a 
result, the NMLSR unique identifier for the mortgage loan originator 
will be readily available to HMDA reporters at little to no ongoing 
cost. Accordingly, the Bureau is proposing Sec.  1003.4(a)(34), which 
provides that a financial institution shall report, for a covered loan 
or application, the unique identifier assigned by the NMLSR for the 
mortgage loan originator as defined in Regulation G Sec.  1007.102 or 
Regulation H Sec.  1008.23, as applicable.
---------------------------------------------------------------------------

    \502\ Regulation Z Sec.  1026.36(g).
    \503\ Regulation Z Sec.  1026.37(k).
---------------------------------------------------------------------------

    Proposed instruction 4(a)(34)-1 in appendix A provides technical 
instructions regarding how to enter the NMLSR ID on the loan 
application register. This proposed instruction provides that a 
financial institution must enter the NMLSR mortgage loan originator 
unique identifier as set forth in the S.A.F.E. Act, as implemented by 
Regulation G (S.A.F.E. Mortgage Licensing Act--Federal Registration of 
Residential Mortgage Loan Originators), 12 CFR part 1007, and 
Regulation H (S.A.F.E. Mortgage Licensing Act--State Compliance and 
Bureau Registration System), 12 CFR part 1008. Proposed instruction 
4(a)(34)-2 in appendix A provides that, in the event that the mortgage 
loan originator is not required to obtain and has not been assigned an 
NMLSR ID, a financial institution must enter ``NA'' for not applicable.
    Proposed comment 4(a)(34)-1 discusses the requirement that a 
financial institution report the NMLSR ID for the mortgage loan 
originator and describes the NMLSR ID. Proposed comment 4(a)(34)-2 
discusses the requirement that a financial institution report ``NA'' 
for not applicable when the mortgage loan originator is not required to 
obtain and has not been assigned an NMLSR ID. Proposed comment 
4(a)(34)-2 also provides that, if a mortgage loan originator has been 
assigned an NMLSR ID, a financial institution complies with proposed 
Sec.  1003.4(a)(34) by reporting the mortgage loan originator's NMLSR 
ID regardless of whether the mortgage loan originator is required to 
obtain an NMLSR ID for the particular transaction being reported by the 
financial institution. The proposed comment provides an illustrative 
example.
    Proposed comment 4(a)(34)-3 explains that, in the event that more 
than one individual meets the definition of a mortgage loan originator, 
as defined in Regulation G Sec.  1007.102 or Regulation H Sec.  
1008.23, for a covered loan or application, a financial institution 
complies with proposed Sec.  1003.4(a)(34) by reporting the NMLSR ID of 
the individual mortgage loan originator with primary responsibility for 
the transaction.\504\ The proposed comment explains that a financial 
institution that establishes and follows a reasonable, written policy 
for determining which individual mortgage loan originator has primary 
responsibility for the reported transaction complies with proposed 
Sec.  1003.4(a)(34).
---------------------------------------------------------------------------

    \504\ The Bureau's 2013 Final Loan Originator Rule and 2013 
TILA-RESPA Final Rule also provide standards for identifying the 
appropriate loan officer or loan originator where more than one 
individual is listed in the loan documents or disclosure documents, 
as applicable. See Regulation Z Sec.  1026.36(g), comment 
36(g)(1)(ii)-1; Sec.  1026.37(k), comment 37(k)-3.
---------------------------------------------------------------------------

    During the Small Business Review Panel process, the small entity 
representatives generally supported the proposal to require the NMLSR 
identifier for the mortgage loan originator involved in the 
transaction.\505\ One small entity representative noted that the 
information is already collected on RESPA forms, but urged the Bureau 
to specify clearly when the identifier must be provided.\506\ Another 
small entity representative, however, expressed concern about the 
potential unmerited negative impact on loan originators who are 
identified with a significant number of loans that fail for reasons 
other than inadequate underwriting.\507\ With respect to each of the 
unique identifiers specified in the Dodd-Frank Act, including the 
mortgage loan originator identifier, the Small Business Review Panel 
recommended that the Bureau seek comment on each identifier under 
consideration and on whether each of the identifiers should be required 
for all entries on the loan application register, or only for loan 
originations and purchases.\508\ Consistent with the Small Business 
Review Panel's recommendations, the Bureau solicits feedback on its 
proposal requiring financial institutions to report, for a covered loan 
or application, the unique identifier assigned by the NMLSR for the 
mortgage loan originator. In addition, the Bureau specifically solicits 
comment on whether the mortgage loan originator unique identifier 
should be required for all entries on the loan application register, 
including applications that do not result in originations, or only for 
loan originations and purchases.
---------------------------------------------------------------------------

    \505\ See Small Business Review Panel Report at 26.
    \506\ Id.
    \507\ Id.
    \508\ Id. at 39.
---------------------------------------------------------------------------

4(a)(35)
    Currently, Regulation C does not require financial institutions to 
report information regarding recommendations received from automated 
underwriting systems, and HMDA does not expressly require this 
itemization. Section 304(b) of HMDA permits the disclosure of ``such 
other information as the Bureau may require.'' \509\ For the reasons 
discussed below, the Bureau believes it may be appropriate to require 
financial institutions to report information related to the automated 
underwriting system used to evaluate the application and the 
recommendation generated by that system.
---------------------------------------------------------------------------

    \509\ Dodd-Frank Act section 1094(3)(A)(iv), 12 U.S.C. 
2803(b)(6)(J).
---------------------------------------------------------------------------

    Financial institutions often use an automated underwriting system 
(AUS) to evaluate an applicant's credit risk. As part of the Board's 
2010 Hearings, feedback indicated that HMDA data would be improved if 
institutions collected and reported the automated underwriting system 
used in evaluating an application and the recommendation generated by 
that system.\510\ For example, the Federal Trade Commission stated that 
``[t]his information is often crucial to isolating and examining 
discretion in a lender's loan approval and denial decisionmaking.'' 
\511\ The Bureau believes that requiring financial institutions to 
collect and report the automated underwriting system used to evaluate 
an application, and the recommendation generated by that system, may 
further the purposes of HMDA. Information about automated underwriting 
would help the public and public officials evaluate whether financial 
institutions are serving the housing needs of their communities and 
assist in identifying possible discriminatory lending patterns by 
allowing information about similar

[[Page 51805]]

loans and applications to be compared and analyzed appropriately. The 
Bureau believes that AUS data could improve the accuracy of fair 
lending analysis used to identify potential underwriting disparities. 
By including key information considered by financial institutions in 
their underwriting decisions, financial regulators can more effectively 
monitor institutions for possible discrimination and reduce the 
likelihood of false positives that increase regulatory costs for both 
institutions and regulators.
---------------------------------------------------------------------------

    \510\ E.g., Washington Hearing, supra note 130.
    \511\ Comment Letter of Donald Clark, Secretary, Federal Trade 
Commission, December 3, 2010.
---------------------------------------------------------------------------

    However, collecting and reporting data on automated underwriting 
systems may pose some concerns. The automated underwriting systems used 
by financial institutions to evaluate applications may vary between 
institutions, as may the recommendations generated by those systems. 
Financial institutions may also have different policies and procedures 
for how they use automated underwriting systems and recommendations in 
the credit decision. In addition, automated underwriting systems may 
evolve over time. Financial institutions may also use multiple 
automated underwriting systems to evaluate an application and may 
consider multiple recommendations generated by those systems in their 
underwriting process. Requiring the collection of information about 
automated underwriting systems may impose burden on financial 
institutions.
    Notwithstanding the concerns associated with collecting and 
reporting information about automated underwriting systems, the 
potential benefits to the public and public officials may justify any 
potential burden. The Bureau believes that the collection and reporting 
of information related to automated underwriting systems, pursuant to 
proposed Sec.  1003.4(a)(35), is necessary to carry out HMDA's 
purposes. This data would assist in understanding a financial 
institution's underwriting decisionmaking and would also provide useful 
information for fair lending examinations. Based on these 
considerations and pursuant to its authority under sections 305(a) and 
304(b)(6)(J) of HMDA, the Bureau is proposing Sec.  1003.4(a)(35)(i), 
which provides that except for purchased covered loans, a financial 
institution shall report the name of the automated underwriting system 
it used to evaluate the application and the recommendation generated by 
that automated underwriting system. In addition, the Bureau is 
proposing Sec.  1003.4(a)(35)(ii), which defines an automated 
underwriting system as an electronic tool developed by a securitizer, 
Federal government insurer, or guarantor that provides a recommendation 
regarding whether the application is eligible to be purchased, insured, 
or guaranteed by that securitizer, Federal government insurer, or 
guarantor. The Bureau solicits feedback regarding whether these 
proposed requirements are appropriate and whether there are alternative 
ways to collect information about automated underwriting systems. For 
example, financial institutions could report the recommendation 
generated by the automated underwriting system used to evaluate the 
application in defined categories, such as ``recommended approval'' or 
``recommended referral for further underwriting.'' In addition, the 
Bureau specifically solicits feedback regarding whether limiting the 
definition of an automated underwriting system as proposed in Sec.  
1003.4(a)(35)(ii) to one that is developed by a securitizer, Federal 
government insurer, or guarantor is appropriate. The Bureau is not 
proposing commentary to proposed Sec.  1003.4(a)(35)(ii) because the 
Bureau believes that the proposed definition is straightforward and 
clear. However, the Bureau solicits feedback regarding whether 
commentary is needed to clarify this proposed definition or to 
facilitate compliance.
    The Bureau believes that financial institutions that use automated 
underwriting systems to evaluate applications will be able to easily 
identify the system used and the recommendation generated by that 
system for purposes of HMDA reporting. However, the Bureau has excluded 
purchased covered loans from the requirements of proposed Sec.  
1003.4(a)(35) because the Bureau anticipates that it could be 
burdensome for financial institutions that purchase covered loans to 
identify the AUS data. The Bureau solicits feedback on whether this 
exclusion is appropriate.
    During the Small Business Review Panel process, the small entity 
representatives indicated that, in general, their financial 
institutions use manual underwriting procedures, and reporting AUS 
recommendations could provide an incomplete and distorted picture of 
loan transactions, triggering unnecessary fair lending scrutiny.\512\ A 
number of small entity representatives expressed concern that, if 
financial institutions are required to report AUS results, there would 
be an increase in the ``false positive'' indicators of fair lending 
violations.\513\ Small entity representatives were particularly 
concerned about AUS results that do not align with the action taken for 
reasons unrelated to underwriting, and the potential costs and negative 
publicity that may result.\514\ A number of small entity 
representatives also questioned the value of AUS information and 
whether the HMDA purposes the information would serve could be realized 
in other ways.\515\ The Small Business Review Panel recommended that 
the Bureau solicit additional information in the proposed rule on the 
extent to which AUS-generated information is used by small financial 
institutions and how that information is used in credit decisions.\516\ 
The Small Business Review Panel also recommended that the Bureau seek 
public comment on whether any method of reporting on the use of an 
automated underwriting system that is included in the proposed rule is 
consistent with the current practices of small financial 
institutions.\517\ Consistent with the Small Business Review Panel's 
recommendations, the Bureau solicits feedback on these issues.
---------------------------------------------------------------------------

    \512\ See Small Business Review Panel Report at 39.
    \513\ Id. at 26.
    \514\ Id.
    \515\ Id.
    \516\ Id. at 39.
    \517\ Id.
---------------------------------------------------------------------------

    The Bureau is also proposing technical instructions in appendix A 
regarding how to enter the AUS data on the loan application register. 
Proposed instruction 4(a)(35)-1 provides that a financial institution 
must indicate the name of the automated underwriting system it used to 
evaluate the application by entering the applicable code from a list. 
The Bureau solicits feedback regarding whether this proposed 
instruction is appropriate generally, and specifically solicits 
feedback regarding whether the proposed instruction would be less 
burdensome if the list of systems were modified by, for example, either 
removing or adding systems.
    Proposed instruction 4(a)(35)-2 provides that a financial 
institution completing the loan application register must indicate the 
AUS recommendation generated by the automated underwriting system that 
it used to evaluate the application by entering the applicable code 
from a list. The Bureau solicits feedback regarding whether this 
proposed instruction is appropriate generally, and specifically 
solicits feedback regarding whether the proposed instruction would be 
less burdensome if the list of AUS recommendations were modified by, 
for example, either removing or adding AUS recommendations. In 
addition, the

[[Page 51806]]

Bureau is proposing to use two free-form text fields for automated 
underwriting system information (for ``Other'' automated underwriting 
systems and recommendations, respectively) to account for the variety 
of systems and recommendations that currently exist or that may exist 
in the future. The Bureau solicits feedback on the proposed requirement 
that, when a financial institution selects ``Other'' for automated 
underwriting system and recommendation, the financial institution must 
enter the name of the AUS used to evaluate the application and the 
recommendation generated by that AUS.
    Proposed comment 4(a)(35)-1 discusses the requirement that a 
financial institution report the AUS recommendation generated by the 
automated underwriting system used by the financial institution to 
evaluate the application and provides an illustrative example. A 
financial institution complies with proposed Sec.  1003.4(a)(35) by 
reporting an AUS recommendation if the recommendation was considered by 
the financial institution in its underwriting process. For example, 
when a financial institution takes into account a combination of an AUS 
recommendation and manual underwriting in making the credit decision, 
the financial institution has considered the AUS recommendation in its 
underwriting process and reports the AUS recommendation.
    Proposed comment 4(a)(35)-2.i discusses the requirement that a 
financial institution report the name of the automated underwriting 
system used by the financial institution to evaluate the application, 
explains which automated underwriting system to report if a financial 
institution uses multiple automated underwriting systems to evaluate an 
application, and provides an illustrative example. When a financial 
institution uses more than one automated underwriting system to 
evaluate an application, the financial institution complies with 
proposed Sec.  1003.4(a)(35) by reporting the name of the AUS developed 
by a securitizer, Federal government insurer, or guarantor that was 
used closest in time to the credit decision. For example, when a 
financial institution processes an application through the automated 
underwriting system of two different government-sponsored enterprises, 
such as the Federal National Mortgage Association (Fannie Mae) or the 
Federal Home Loan Mortgage Corporation (Freddie Mac), the financial 
institution complies with proposed Sec.  1003.4(a)(35) by reporting the 
name of the AUS that was used closest in time to the credit decision. 
If a financial institution processes an application through multiple 
AUSs at the same time, the financial institution complies with proposed 
Sec.  1003.4(a)(35) by reporting the name of the AUS that generated the 
recommendation that was a factor in the credit decision.
    Proposed comment 4(a)(35)-2.ii explains which AUS recommendation to 
report if a financial institution obtains multiple AUS recommendations 
and provides an illustrative example. When a financial institution 
obtains two or more AUS recommendations for an applicant or borrower 
that are generated by a single or multiple AUSs developed by a 
securitizer, Federal government insurer, or guarantor, the financial 
institution complies with proposed Sec.  1003.4(a)(35) by reporting the 
AUS recommendation generated closest in time to the credit decision. 
For example, when a financial institution receives a recommendation 
from an automated underwriting system that requires the financial 
institution to manually underwrite the loan, but in addition the 
financial institution subsequently processes the application through a 
different automated underwriting system that also generates a 
recommendation, the financial institution complies with proposed Sec.  
1003.4(a)(35) by reporting the AUS recommendation generated closest in 
time to the credit decision. If a financial institution obtains 
multiple AUS recommendations at the same time, the financial 
institution complies with proposed Sec.  1003.4(a)(35) by reporting the 
AUS recommendation that was a factor in the credit decision.
    Proposed comment 4(a)(35)-3 explains when a financial institution 
should report ``not applicable'' for AUS data and provides examples. If 
a financial institution does not use an AUS developed by a securitizer, 
Federal government insurer, or guarantor to evaluate the application, 
the financial institution complies with proposed Sec.  1003.4(a)(35) by 
reporting ``not applicable.'' For example, if a financial institution 
only manually underwrites an application and does not consider an AUS 
recommendation in its underwriting process, the financial institution 
complies with proposed Sec.  1003.4(a)(35) by reporting ``not 
applicable.'' Also, if the file was closed for incompleteness or the 
application was withdrawn before a credit decision was made, the 
financial institution complies with proposed Sec.  1003.4(a)(35) by 
reporting ``not applicable.''
4(a)(36)
    Neither HMDA nor Regulation C requires a financial institution to 
report whether a reportable transaction is a reverse mortgage. Section 
304(b) of HMDA permits the disclosure of such other information as the 
Bureau may require.\518\ For the reasons discussed below, the Bureau is 
proposing to require financial institutions to identify whether a 
reportable transaction is a reverse mortgage.
---------------------------------------------------------------------------

    \518\ See Dodd-Frank Act section 1094(3)(A)(iv).
---------------------------------------------------------------------------

    Currently, although reverse mortgages that are home purchase loans, 
home improvement loans, or refinancings are reported, financial 
institutions are not required to separately identify if a reported 
transaction is a reverse mortgage. Some of the current reporting 
requirements, and several of the proposed requirements discussed above, 
do not apply to reverse mortgages. The Bureau has received feedback 
indicating that financial institutions often spend significant amounts 
of time during the reporting process dealing with submission errors 
related to inapplicable fields. Requiring financial institutions to 
identify whether a reportable transaction is a reverse mortgage would 
allow the Bureau to develop a submission system that automatically 
removes inapplicable fields. This should facilitate compliance by 
reducing the amount of time financial institutions spend on submitting 
reverse mortgage data.
    Identifying reverse mortgages may also improve the usefulness of 
the data. Communities concerned about homeownership stability may find 
the data useful because reverse mortgages reduce a homeowner's equity 
over time. Also, as reverse mortgages are commonly obtained by persons 
approaching retirement age, communities and public officials may use 
the data to ascertain whether financial institutions are fulfilling 
their obligations to all members of their communities. Furthermore, 
improved reverse mortgage data would assist in identifying possible 
discriminatory lending patterns and enforcing antidiscrimination 
statutes.
    For the reasons discussed above, the Bureau believes that it may be 
appropriate to improve the HMDA data related to reverse mortgages. 
Pursuant to its authority under sections 305(a) and 304(b)(6)(J) of 
HMDA, the Bureau is proposing Sec.  1003.4(a)(36), which provides that 
a financial institution shall record whether the covered loan is, or 
the application is for, a reverse mortgage, and whether the reverse

[[Page 51807]]

mortgage is an open- or closed-end transaction. The Bureau solicits 
feedback regarding whether this proposed requirement is appropriate. 
While the Bureau is not proposing commentary applicable to proposed 
Sec.  1003.4(a)(36), the Bureau solicits feedback regarding whether 
commentary would help clarify or illustrate the requirements of this 
proposed reporting requirement. Proposed instruction 4(a)(36)-1 
provides technical requirements for completing the loan application 
register, stating that a financial institution should enter on the loan 
application register whether the covered loan is a reverse mortgage by 
entering one of three codes, and identifies the applicable transactions 
for each code.
    During the Small Business Review Panel process, small entity 
representatives were not generally concerned about a proposed 
requirement to identify reverse mortgages.\519\ The Small Business 
Review Panel recommended that the Bureau seek comment on any costs and 
other burdens associated with existing or potential HMDA requirements 
related to reverse mortgages.\520\ Consistent with the Small Business 
Review Panel's recommendation, the Bureau solicits feedback regarding 
any costs and burdens associated with this proposed requirement 
regarding reverse mortgages, as well as the costs and burdens generally 
associated with Regulation C requirements related to reverse mortgages.
---------------------------------------------------------------------------

    \519\ See Small Business Review Panel Report at 40, 90, 129, and 
132.
    \520\ See id. at 40.
---------------------------------------------------------------------------

4(a)(37)
    Currently, neither HMDA nor Regulation C requires a financial 
institution to identify whether a reportable transaction is a home-
equity line of credit. Section 304(b) of HMDA permits the disclosure of 
such other information as the Bureau may require.\521\ For the reasons 
discussed below, the Bureau believes that it may be appropriate to 
require financial institutions to separately identify reported 
transactions that are home-equity lines of credit.
---------------------------------------------------------------------------

    \521\ See Dodd-Frank Act section 1094(3)(A)(iv).
---------------------------------------------------------------------------

    Although home-equity lines of credit currently may be reported as 
home purchase loans or home improvement loans, users of the HMDA data 
cannot identify which of those loans are home-equity lines of credit. 
The Bureau has received feedback indicating that the HMDA data would be 
improved by requiring financial institutions to identify whether a 
reportable transaction is a home-equity line of credit. Studies suggest 
that in the years leading up to the financial crisis home-equity line 
of credit lending was correlated with real estate speculation, which 
may have increased prices in local housing markets prior to the 
collapse.\522\ Thus, clarifying the HMDA data in this manner would help 
communities and public officials better understand local lending 
practices and patterns. Furthermore, as home-equity lines of credit 
tend to be priced differently than other reportable transactions, being 
able to identify them would help clarify the data and facilitate 
effective data analysis. In addition, the Bureau believes that 
financial institutions may employ different policies, procedures, and 
systems for home-equity line of credit lending, so requiring financial 
institutions to identify these transactions would facilitate compliance 
by aligning with standard business practices. Furthermore, as the 
Bureau is also proposing to include dwelling-secured commercial lines 
of credit, the Bureau believes that differentiating between 
transactions would improve the usefulness of the data.
---------------------------------------------------------------------------

    \522\ See supra note 241, 242.
---------------------------------------------------------------------------

    For the reasons discussed above, pursuant to its authority under 
sections 305(a) and 304(b)(6)(J) of HMDA, the Bureau is proposing Sec.  
1003.4(a)(37), which provides that a financial institution shall report 
whether the covered loan is, or the application is for, an open-end 
line of credit, and also whether the open-end line of credit is a home-
equity line of credit. The Bureau solicits feedback regarding whether 
this proposed requirement is appropriate. While the Bureau is not 
proposing commentary applicable to proposed Sec.  1003.4(a)(37), the 
Bureau solicits feedback regarding whether commentary would help 
clarify or illustrate the requirements of this proposed reporting 
requirement. Proposed instruction 4(a)(37)-1 provides technical 
requirements for completing the loan application register by 
identifying the applicable transactions for one of three codes.
4(a)(38)
    Currently, neither HMDA nor Regulation C contains requirements 
related to whether a loan would be considered a qualified mortgage 
under Regulation Z. Section 304(b) of HMDA permits the disclosure of 
such other information as the Bureau may require.\523\ For the reasons 
discussed below, the Bureau believes that it may be appropriate to 
require financial institutions to report a covered loan's qualified 
mortgage status under Regulation Z.
---------------------------------------------------------------------------

    \523\ See Dodd-Frank Act section 1094(3)(A)(iv).
---------------------------------------------------------------------------

    The ability-to-repay and qualified mortgage provisions of 
Regulation Z were intended to address several of the harmful 
underwriting practices that were used in the years leading up to the 
financial crisis. For this reason, community groups and public 
officials may find useful information related to loans that are exempt 
from the ability-to-repay requirements, subject to the requirements, or 
are considered qualified mortgages under the requirements. Furthermore, 
this information may be particularly useful for public officials at the 
U.S. Department of Housing and Urban Development, the U.S. Department 
of Veterans Affairs, and the U.S. Department of Agriculture, as these 
agencies administer programs and promulgate regulations related to the 
ability-to-repay standards of Regulation Z. In addition, the Bureau has 
received feedback that information related to qualified mortgage status 
is becoming a part of the mortgage industry data standards. Thus, this 
information is consistent with the regular business practices of 
financial institutions and should not be particularly burdensome.
    For these reasons, the Bureau believes that it may be appropriate 
to require financial institutions to report data regarding whether a 
covered loan is a qualified mortgage under Regulation Z. Accordingly, 
pursuant to its authority under sections 305(a) and 304(b)(5)(D) of 
HMDA, the Bureau is proposing Sec.  1003.4(a)(38), which provides that 
a financial institution shall report whether the covered loan is 
subject to the ability-to-repay provisions of Regulation Z, 12 CFR 
1026.43, and whether the covered loan is a qualified mortgage, as 
described under 12 CFR 1026.43(e) or (f). The Bureau solicits feedback 
regarding whether this proposed requirement is appropriate, whether 
this proposed requirement would result in more useful data, and whether 
this proposed requirement would impose additional burdens or result in 
additional challenges that the Bureau has not considered.
    During the Small Business Review Panel process, several small 
entity representatives expressed concerns about a potential requirement 
to report a covered loan's qualified mortgage status.\524\ The Small 
Business Review

[[Page 51808]]

Panel recommended that the Bureau solicit comment on how the burden of 
collecting the qualified mortgage information could be minimized.\525\ 
Based on this feedback and consistent with the Small Business Review 
Panel's recommendation, the Bureau requests feedback regarding whether 
modifications to the proposed requirement would minimize the burden of 
collecting information related to a covered loan's qualified mortgage 
status.
---------------------------------------------------------------------------

    \524\ See Small Business Review Panel Report at 40, 57, 80, 85, 
103-104, and 129.
    \525\ See id. at 40.
---------------------------------------------------------------------------

    Proposed comment 4(a)(38)-1 clarifies that financial institutions 
may rely on Regulation Z Sec.  1026.43, the related commentary, and 
appendix Q to part 1026 in determining whether a covered loan is a 
qualified mortgage. This proposed comment further clarifies that, if a 
covered loan is subject to Regulation Z Sec.  1026.43, but is not a 
qualified mortgage pursuant to Sec.  1026.43(e) or (f), Sec.  
1003.4(a)(38) requires a financial institution to identify the covered 
loan as a loan that is not a qualified mortgage. Proposed comment 
4(a)(38)-1 also explains that, if a covered loan is not subject to 
paragraphs (c) through (f) of Regulation Z Sec.  1026.43, Sec.  
1003.4(a)(38) requires the financial institution to identify the 
covered loan as a loan that is not subject to the reporting 
requirements of Sec.  1026.43. Finally, this proposed comment provides 
several illustrative examples of the requirements of Sec.  
1003.4(a)(38).
    The Bureau is also proposing technical requirements related to the 
completion of the loan application register in appendix A. Proposed 
instruction 4(a)(38)-1 states that financial institutions should enter 
on the loan application register whether the covered loan is a 
qualified mortgage under Regulation Z by entering one of six codes. 
Proposed instruction 4(a)(38)-2 identifies the applicable codes for a 
covered loan that is a standard qualified mortgage, a temporary 
qualified mortgage, a small creditor qualified mortgage, a balloon-
payment qualified mortgage, or not a qualified mortgage. Proposed 
instruction 4(a)(38)-3 identifies the applicable code for an 
application for a covered loan, and for a covered loan that is not 
subject to the ability-to-repay requirements of Regulation Z.
    Section 1003.4(a)(38) is proposed pursuant to the Bureau's 
authority under sections 305(a) and 304(b)(5)(D) of HMDA. Pursuant to 
section 305(a) of HMDA, the Bureau believes that this proposed 
requirement is necessary to carry out the purposes of HMDA. By 
providing information regarding whether a covered loan is a qualified 
mortgage under Regulation Z, this proposed provision would ensure that 
the citizens and public officials of the United States are provided 
with sufficient information to enable them to determine whether 
depository institutions are filling their obligations to serve the 
housing needs of the communities and neighborhoods in which they are 
located. Furthermore, qualified mortgage data also would assist public 
officials, particularly HUD's Federal Housing Administration, in their 
determination of the distribution of public sector investments in a 
manner designed to improve the private investment environment.
4(a)(39)
    Currently, neither HMDA nor Regulation C requires a financial 
institution to report the amount of first draw on a home-equity line of 
credit or an open-end reverse mortgage.\526\ Section 304(b) of HMDA 
permits the disclosure of such other information as the Bureau may 
require.\527\ For the reasons discussed below, the Bureau is proposing 
to require financial institutions to report, for a home-equity line of 
credit and an open-end reverse mortgage, the amount of the draw on the 
covered loan, if any, made at account opening.
---------------------------------------------------------------------------

    \526\ Section 1003.4(c)(3) of Regulation C currently provides 
that a financial institution may report, but is not required to 
report, home-equity lines of credit made in whole or in part for the 
purpose of home improvement or home purchase. If a financial 
institution elects to report a home-equity line of credit, it 
reports only the amount of the line intended for home improvement or 
home purchase purposes at the time of the application. As a result, 
in certain cases, current HMDA data contains information regarding 
the initial draw on a home-equity line of credit.
    \527\ Section 1094(3)(A)(iv) of the Dodd-Frank Act amended 
section 304(b) of HMDA.
---------------------------------------------------------------------------

    Both home-equity lines of credit and reverse mortgages represent 
important segments of the mortgage market that have been associated 
with problematic practices. Home-equity lines of credit were often used 
by speculative real estate investors both before and after the 
financial crisis, and were popular in areas where housing prices 
increased significantly prior to the collapse of the real estate 
market.\528\ Likewise, reverse mortgages have long presented the 
potential for abuse of vulnerable seniors.\529\ As a result, 
participants in the Board's 2010 Hearings called for more data 
regarding home-equity lines of credit and reverse mortgages, including 
the initial amount drawn.\530\ Although originations of home-equity 
lines of credit have declined from their pre-market crash levels, they 
are expected to be become increasingly popular as homeowners regain 
equity.\531\ Similarly, as the population of elderly individuals 
increases, reverse mortgages may become available to a larger segment 
of the population. The Bureau believes that requiring financial 
institutions to report the amount of the initial draw would permit 
greater insight into the operation of the markets for these important 
products. Such information would also help to ensure that public 
officials and public interest organizations can monitor risks to their 
communities and neighborhoods.
---------------------------------------------------------------------------

    \528\ See Michael LaCour-Little, Wei Yu, and Libo Sun, The Role 
of Home Equity Lending in the Recent Mortgage Crisis, 42 Real Estate 
Economics 153 (2014).
    \529\ Jessica Silver-Greenberg, A Risky Lifeline for the Elderly 
Is Costing Some Their Homes, N.Y. Times, Oct. 14, 2012, at A1 
(``Reverse mortgages, which allow homeowners 62 and older to borrow 
money against the value of their homes and not pay it back until 
they move out or die, have long been fraught with problems.''); see 
also U.S. Consumer Fin. Prot. Bureau, Report to Congress on Reverse 
Mortgages (2012).
    \530\ See Atlanta Hearing, supra note 131; Chicago Hearing, 
supra note 137.
    \531\ See Bd. Of Governors of the Fed. Reserve Sys., Fed. 
Reserve Statistical Release, Z.1 Financial Accounts of the United 
States: Flow of Funds, Balance Sheets, and Integrated Macroeconomic 
Accounts, at 113, Table B.100 (2014), available at https://www.federalreserve.gov/releases/z1/Current/z1.pdf .; see also Ken 
Harney, Homeowners' Equity Jumps 20 Percent After a Years-Long 
Slump, Wash. Post, Jan. 4, 2013.
---------------------------------------------------------------------------

    The Bureau believes that the burden of reporting the amount of the 
initial draw will be lessened by the fact that financial institutions 
will already need to record this amount in order to properly service 
the loan. However, the Bureau recognizes that financial institutions 
might not store the information in a format readily available for HMDA 
purposes. Home-equity lines of credit, for example, tend to run on a 
different platform than traditional, closed-end mortgage loans. Despite 
the potential increased burden described above, feedback received 
pursuant to the Bureau's outreach activities indicates that reporting 
of the initial draw may be justified. Accordingly, pursuant to its 
authority under sections 305(a) and 304(b)(5)(D) of HMDA, the Bureau is 
proposing Sec.  1003.4(a)(39), which provides that a financial 
institution shall report, for a home-equity line of credit and an open-
end reverse mortgage, the amount of the draw on the covered loan, if 
any, made at account opening. The Bureau believes that this proposed 
requirement is necessary to carry out HMDA's purposes. This proposed 
revision would provide a more complete picture of the home mortgage 
market and help the public and public officials compare the

[[Page 51809]]

use of these products across different communities and groups of 
borrowers, thereby assisting in determining whether financial 
institutions are serving the housing needs of their communities. The 
Bureau seeks comment regarding the general utility of the data and on 
the costs associated with collecting and reporting the data. Although 
the Bureau believes that information about the initial draw is most 
useful for home-equity lines of credit, the Bureau solicits feedback 
regarding whether this data would be useful for all open-end lines of 
credit, including dwelling-secured commercial lines of credit. 
Furthermore, the Bureau understands that financial institutions have 
been developing new products, including multiple-draw closed-end 
reverse mortgages, and accordingly seeks feedback on whether to require 
reporting of the initial draw for all reverse mortgages, whether closed 
or open-end.
    Proposed instruction 4(a)(39) in appendix A provides technical 
instructions regarding how to enter the data on the loan application 
register. Proposed instruction 4(a)(39)-1 provides that a financial 
institution must enter in dollars the amount of any draw on a home-
equity line of credit or an open-end reverse mortgage made at the time 
of account opening.
4(b) Collection of Data on Ethnicity, Race, Sex, Age, and Income
    Section 1003.4(b)(1) of current Regulation C requires that a 
financial institution collect data about the ethnicity, race, and sex 
of the applicant or borrower as prescribed in appendix B. Section 
1003.4(b)(2) provides that the ethnicity, race, sex, and income of an 
applicant or borrower may but need not be collected for loans purchased 
by the financial institution. The Bureau proposes to add age to Sec.  
1003.4(b)(1) and (b)(2), and proposes to amend Sec.  1003.4(b)(1) by 
requiring a financial institution to collect data about the ethnicity, 
race, sex, and age of the applicant or borrower as prescribed in both 
appendices A and B. The Bureau also is proposing minor wording changes 
to Sec.  1003.4(b)(1) and (b)(2).
    As discussed in the section-by-section analysis of Sec.  
1003.4(a)(10), the Dodd-Frank Act amended HMDA section 304(b)(4) to 
require financial institutions to report an applicant's or borrower's 
age.\532\ As discussed above, the Bureau is proposing to implement the 
requirement to collect and report age by adding this characteristic to 
the information listed in Sec.  1003.4(a)(10)(i). To conform to that 
proposed requirement, the Bureau is proposing to add age to Sec.  
1003.4(b)(1) and (b)(2). In addition, as part of the Bureau's efforts 
to streamline and clarify Regulation C, the Bureau is proposing to 
amend Sec.  1003.4(b)(1) by requiring a financial institution to 
collect data about the ethnicity, race, sex, and age of the applicant 
or borrower as prescribed in appendices A and B since both appendices 
contain instructions for the collection of an applicant's or borrower's 
demographic information.
---------------------------------------------------------------------------

    \532\ Dodd-Frank Act section 1094(3)(A)(i), 12 U.S.C. 
2803(b)(4).
---------------------------------------------------------------------------

    As discussed above, Sec.  1003.4(b)(2) provides that ethnicity, 
race, sex, and income data may but need not be collected for loans 
purchased by a financial institution. Instruction I.D.1.a of appendix A 
provides that a financial institution need not collect or report this 
applicant and borrower information for loans purchased and if an 
institution chooses not to report this information, it should use the 
Codes for ``not applicable.'' While the proposed reporting requirements 
do not require reporting of ethnicity, race, sex, age, and income for 
loans purchased by a financial institution, the Bureau solicits 
feedback on whether this exclusion is appropriate. In particular, the 
Bureau specifically solicits feedback on the general utility of 
ethnicity, race, sex, age, and income data on purchased loans and on 
the unique costs and burdens associated with collecting and reporting 
the data that financial institutions may face if the reporting 
requirement were modified to no longer permit optional reporting but 
instead require reporting of this applicant and borrower information 
for purchased loans.
4(c) Optional Data
4(c)(1)
    Current Sec.  1003.4(c)(1) provides that a financial institution 
may report the reasons it denied a loan application but is not required 
to do so. As discussed in the section-by-section analysis of Sec.  
1003.4(a)(16), the Bureau is proposing to make reporting of denial 
reasons mandatory instead of optional. To conform to that proposed 
requirement, the Bureau is proposing to delete Sec.  1003.4(c)(1).
4(c)(2)
    Section 1003.4(c)(2) provides that institutions may report requests 
for preapprovals that are approved by the institution but not accepted 
by the applicant, but they are not required to do so. The Bureau is 
proposing to make reporting of requests for preapprovals approved by 
the financial institution but not accepted by the applicant mandatory 
instead of optional.
    The Board published an advanced notice of proposed rulemaking in 
1998 which solicited feedback about reporting of preapprovals.\533\ The 
Board noted that originations resulting from preapprovals were already 
being reported without any kind of preapproval identifier, and noted 
that Regulation B required sending adverse action notices when 
preapproval requests were denied.\534\ Some commenters noted that 
aligning with Regulation B's adverse action requirement could distort 
the data by capturing denials but not requests that were approved but 
did not lead to an origination.\535\ Following the advance notice, the 
Board proposed an approach that would align with Regulation B's 
discussion of preapprovals and prequalifications.\536\ In response to 
additional comments received on that proposal the Board adopted the 
current preapproval requirement in 2002, with specific action taken 
codes and a flag for preapproval requests.\537\ The Board also provided 
for optional reporting of preapproval requests that are approved but 
not accepted by the applicant, because it believed that lenders might 
want ``to put into context the preapproval requests that are denied.'' 
\538\ The Board did not provide for reporting preapproval requests that 
were closed for incompleteness or withdrawn because it believed that 
the number of such requests would be small and the benefit of such data 
would not warrant the burden of reporting it.\539\ The Board noted 
that, based on 2000 HMDA data, 2 percent of other mortgage applications 
were closed for incompleteness and 7 percent were withdrawn.
---------------------------------------------------------------------------

    \533\ 63 FR 12329 (Mar. 12, 1998).
    \534\ 63 FR 12329, 12330.
    \535\ 65 FR 78656, 78658 (Dec. 15, 2000).
    \536\ 65 FR 78659.
    \537\ 67 FR 7222 (Feb. 15, 2002).
    \538\ 67 FR 7224.
    \539\ Id..
---------------------------------------------------------------------------

    The Bureau believes that reporting of preapprovals approved by the 
financial institution but not accepted by the applicant provides 
context for denials of preapproval requests, and improves fair lending 
analysis because it allows denials to be compared to a more complete 
set of approved preapproval requests. Combining originated loans and 
loans approved but not accepted for purposes of comparison with denied 
applications is common in fair lending analysis for other home purchase 
applications. However, such analysis is

[[Page 51810]]

not possible for preapprovals if an institution does not report 
preapprovals approved but not accepted.
    Analysis of the currently reported preapproval requests that are 
approved but not accepted highlights the importance of these data. Over 
half of all reported home purchase applications in the 2012 HMDA data 
(excluding loans purchased by a financial institution) were received by 
financial institutions that offer preapproval programs. Approximately 
14 percent of reported preapproval requests were approved but not 
accepted. For all home purchase applications (excluding loans purchased 
by a financial institution), approximately 5 percent were approved but 
not accepted. Because the 14 percent represents only institutions that 
chose to report preapproval requests approved but not accepted, the 
percentage if the proposal were adopted would likely be higher. For 
certain institutions with large preapproval programs, the percentage of 
preapproval requests that are approved but not accepted is much higher, 
including above 50 percent for some institutions. For all home purchase 
applications (excluding loans purchased by a financial institution and 
not including preapproval requests), approximately 2 percent were 
closed for incompleteness and 9 percent were withdrawn, similar to the 
percentages from the 2000 HMDA data. Preapproval requests that are 
approved but not accepted thus occur more frequently than other 
applications for home purchases that are approved but not accepted and 
represent an important element of HMDA data.
    Therefore, the Bureau is proposing to make reporting of requests 
for preapprovals approved by the financial institution but not accepted 
by the applicant mandatory instead of optional. Consequently, the 
Bureau is proposing to delete current Sec.  1003.4(c)(2) and, as noted 
above, to revise Sec.  1003.4(a) accordingly. The Bureau believes that 
this change will not represent any additional burden for institutions 
that currently choose to report such preapprovals, and that the burden 
may not be great for institutions that currently do not choose to 
report such preapprovals because of information that such institutions 
currently collect about all of their preapproval requests before the 
outcome of the request is known. However, the Bureau solicits feedback 
about whether financial institutions expect significant burden 
associated with the proposed change.
4(c)(3)
    Section 1003.4(c)(3) of Regulation C currently provides that a 
financial institution may report, but is not required to report, home-
equity lines of credit made in whole or in part for the purpose of home 
improvement or home purchase. As discussed in the section-by-section 
analysis to Sec.  1003.2(o), the Bureau is proposing to require 
reporting of open-end lines of credit, which include home-equity lines 
of credit. To conform to that proposed modification, the Bureau 
proposes to delete Sec.  1003.4(c)(3). The Bureau also proposes to 
delete comment 4(c)(3)-1, which currently provides that an institution 
that opts to report home-equity lines reports the disposition of all 
applications, not just originations. The Bureau solicits feedback 
regarding whether this proposed modification is appropriate.
4(d)
    For the reasons discussed above in the section-by-section analysis 
of proposed Sec.  1003.3(c), the Bureau proposes to move the discussion 
of excluded data to proposed Sec.  1003.3(c). Accordingly, the Bureau 
proposes to reserve Sec.  1003.4(d).
4(f) Quarterly Recording of Data
    As part of the effort to streamline Regulation C, the Bureau 
proposes to move the data recording requirement in Sec.  1003.4(a) to 
proposed Sec.  1003.4(f) and to make technical modifications to the 
requirement. Proposed Sec.  1003.4(f) provides that a financial 
institution shall record \540\ the data collected pursuant to Sec.  
1003.4 on a loan application register within 30 calendar days after the 
end of the calendar quarter in which final action is taken (such as 
origination or purchase of a covered loan, or denial or withdrawal of 
an application).
---------------------------------------------------------------------------

    \540\ A financial institution's obligation to report data to the 
Bureau or the appropriate agency for the institution is addressed 
below in the section-by-section analysis of proposed Sec.  
1003.5(a).
---------------------------------------------------------------------------

Section 1003.5 Disclosure and Reporting

5(a) Reporting to Agency
5(a)(1)
    HMDA section 304(h)(1) provides that a financial institution shall 
submit its HMDA data to the Bureau or to the appropriate agency for the 
institution in accordance with rules prescribed by the Bureau.\541\ 
HMDA section 304(h)(1) also directs the Bureau to develop regulations, 
in consultation with other appropriate agencies, that prescribe the 
format for disclosures required under HMDA section 304(b), the method 
for submission of the data to the appropriate agency, and the 
procedures for disclosing the information to the public. HMDA section 
304(n) also requires that the data required to be disclosed under HMDA 
section 304(b) shall be submitted to the Bureau or to the appropriate 
agency for any institution reporting under HMDA, in accordance with 
regulations prescribed by the Bureau. HMDA section 304(c) requires that 
information required to be compiled and made available under HMDA 
section 304, other than loan application register information under 
section 304(j), must be maintained and made available for a period of 
five years.\542\
---------------------------------------------------------------------------

    \541\ Dodd-Frank Act section 1094(3)(B), 12 U.S.C. 2803(h)(1).
    \542\ HMDA section 304(j)(6) requires that loan application 
register information described in HMDA section 304(j)(1) for any 
year shall be maintained and made available, upon request, for three 
years.
---------------------------------------------------------------------------

    Section 1003.5(a)(1) of Regulation C requires that, by March 1 
following the calendar year for which data are compiled, a financial 
institution must submit its complete loan application register to the 
agency specified in appendix A. Section 1003.5(a)(1) also provides that 
a financial institution shall retain a copy of its complete loan 
application register for its records for at least three years. Section 
II of appendix A to Regulation C provides information concerning where 
financial institutions should submit their complete loan application 
registers. Additional information concerning submission of the loan 
application register is found in comments 4(a)-1.vi and -1.vii, 5(a)-1 
and -2, and 5(a)-5 through -8. Comment 5(a)-2 provides that a financial 
institution that reports 25 or fewer entries on its loan application 
register may submit the register in paper form. For the reasons 
described below, the Bureau is proposing several changes to Sec.  
1003.5(a)(1).
Quarterly Reporting
    The Bureau is proposing that a financial institution with a high 
transaction volume report its HMDA data to the Bureau or appropriate 
agency on a quarterly, rather than an annual, basis. This proposal is 
based on considerations relating to the timeliness of HMDA data 
submitted, the quality of the data submitted, and the Bureau's desire 
to make annual HMDA data available to the public earlier than they are 
currently made available.
    Under the current regime, HMDA data may be reported as many as 14 
months after final action is taken on an

[[Page 51811]]

application or loan.\543\ The Bureau is concerned that this delay 
impairs the ability of the Bureau and the appropriate agencies to use 
HMDA data to effectuate the purposes of the statute in a timely manner. 
The Bureau believes that timelier data would allow it and the 
appropriate agencies to determine, in much closer to ``real time,'' 
whether financial institutions are fulfilling their obligations to 
serve the housing needs of communities in which they are located. The 
Bureau also believes that timelier identification of risks to local 
housing markets and troublesome trends by the Bureau and the 
appropriate agencies would allow for more effective interventions or 
other actions by the agencies and other public officials. The Bureau's 
proposal reduces the maximum time lag between final action on a loan or 
application and reporting from 14 months to approximately five months 
for a significant percentage of reported transactions.
---------------------------------------------------------------------------

    \543\ For example, a loan originated on January 1 in calendar 
year one is not reported to the Bureau or other appropriate agency 
until March 1 of calendar year two.
---------------------------------------------------------------------------

    Further, as quarterly reporting requires financial institutions 
with larger transaction volumes to review and edit smaller batches of 
reportable data several times throughout the year, the Bureau believes 
that quarterly reporting would facilitate and enhance compliance with 
HMDA, reduce reporting errors, and improve the quality of HMDA data. 
Finally, because quarterly reporting would permit the Bureau to process 
HMDA data throughout the year, the Bureau believes the proposal may 
allow for the earlier annual release to the public of HMDA data. The 
HMDA data are currently made public by the FFIEC in September of each 
year, up to 20 months after final action is taken on applications and 
loans reflected in the data. HMDA data users have complained to the 
Bureau, and to the Board before it, that this delay reduces the 
usefulness of the data to the public. Although the Bureau currently 
does not anticipate that HMDA data would be released to the public more 
frequently than annually,\544\ it believes that quarterly reporting may 
allow the Bureau and the FFIEC to expedite disclosures of annual HMDA 
data to the public and better serve the public disclosure goals of the 
statute.
---------------------------------------------------------------------------

    \544\ Based on its analysis to date, the Bureau believes that 
releasing HMDA data to the public on a quarterly basis, even in 
aggregate form, may create risks to applicant and borrower privacy 
that are not justified by the benefits of such release. However, the 
Bureau, in consultation with the other appropriate agencies, intends 
to evaluate options for the agencies' release of data or analysis 
more frequently than annually at a later date.
---------------------------------------------------------------------------

    Based on these considerations, the Bureau believes that it may be 
appropriate to require certain financial institutions to report their 
HMDA data on a quarterly basis. Accordingly, proposed Sec.  
1003.5(a)(1)(ii) requires that, within 60 calendar days after the end 
of each calendar quarter, a financial institution that reported at 
least 75,000 covered loans, applications, and purchased covered loans, 
combined, for the preceding calendar year (the 75,000 transaction 
threshold) shall submit its loan application register containing all 
data required to be recorded pursuant to Sec.  1003.4(f).\545\ The 
Bureau believes that this proposed requirement is necessary and proper 
to effectuate the purposes of HMDA. The Bureau solicits comment on 
whether this proposal is appropriate, including any increase in costs 
resulting from the requirement that financial institutions submit 
accurate HMDA data on a quarterly basis as opposed to once each year.
---------------------------------------------------------------------------

    \545\ Currently, Sec.  1003.4(a) requires that ``all reportable 
transactions shall be recorded, within thirty calendar days after 
the end of the calendar quarter in which final action is taken (such 
as origination or purchase of a loan, or denial or withdrawal of an 
application), on a register in the format prescribed in Appendix A 
of this part.'' The Bureau's proposal moves this requirement, with 
some revisions, to proposed Sec.  1003.4(f).
---------------------------------------------------------------------------

    To the extent there are cost increases, the Bureau seeks to balance 
those costs with the benefits of quarterly reporting described above. 
The Bureau's proposal limits the imposition of any increased costs to 
those institutions with the largest transaction volumes, thus 
minimizing the number of financial institutions subject to the proposed 
requirement while maximizing the volume of data reported on a quarterly 
basis. The Bureau believes that realizing the benefits of more timely 
data submission requires that the agencies receive sufficient data to 
perform meaningful analyses. Further, the Bureau believes that, the 
larger the volume of data submitted and processed during the course of 
the calendar year, the more likely HMDA data could be released to the 
public earlier the following year than is currently the case. Based on 
2012 HMDA data, the 75,000 transaction threshold proposed would have 
required 28 financial institutions to report on a quarterly basis in 
2013. In 2012, these 28 institutions reported approximately 50 percent 
of all transactions reported under HMDA. The Bureau solicits feedback 
on whether the proposed 75,000 transaction threshold is justified by 
the benefits of quarterly reporting.
    The Bureau's proposal requires that HMDA data submitted on a 
quarterly basis be submitted within 60 days after the end of the 
calendar quarter in which final action is taken (such as origination or 
purchase of a covered loan, or denial or withdrawal of an application). 
Financial institutions currently record all reportable transactions on 
the loan application register within 30 days after the end of the 
calendar quarter.\546\ The Bureau's proposal retains this requirement 
for all financial institutions.\547\ Under the proposal, financial 
institutions that must report on a quarterly basis have an additional 
30 days beyond the date by which they must record their HMDA data to 
submit their quarterly loan application registers. The Bureau solicits 
feedback on whether this proposal provides financial institutions 
required to report on a quarterly basis sufficient time to prepare 
their quarterly data for submission.
---------------------------------------------------------------------------

    \546\ Section 1003.4(a).
    \547\ See proposed Sec.  1003.4(f).
---------------------------------------------------------------------------

    As proposed, Sec.  1003.5(a)(1) allows for a delay in the effective 
date of the proposed quarterly reporting provision. The Bureau has left 
the effective date blank in proposed Sec.  1003.5(a)(1)(ii), but is 
considering a delay of at least one year from the effective date of the 
other amendments to Regulation C proposed herein. The Bureau solicits 
feedback on the length of time beyond the effective date of the other 
proposed amendments to Regulation C, if any, that financial 
institutions would require to develop and implement the systems, 
policies, and procedures required to report HMDA data on a quarterly 
basis.
    The Bureau is proposing new comment 5(a)-1 to illustrate coverage 
under proposed Sec.  1003.5(a)(1)(ii). The Bureau is proposing 
conforming modifications to comment 5(a)-2 to clarify when, if the 
appropriate Federal agency for a financial institution reporting on a 
quarterly basis changes, the financial institution would report to the 
new agency. The Bureau is proposing new comment 5(a)-5 to clarify that, 
for purposes of the proposed Sec.  1003.5(a)(1)(ii) requirement that a 
financial institution that reports on a quarterly basis must retain a 
copy of its complete loan application register for its records for at 
least three years, the complete loan application register is the loan 
application register reflecting all data reported for the preceding 
calendar year. The comment explains that a financial institution that 
reports data on a quarterly basis may satisfy the retention requirement 
in Sec.  1003.5(a)(1)(ii) by retaining the data

[[Page 51812]]

for the calendar year combined on one loan application register or on 
four quarterly loan application registers. The Bureau solicits feedback 
on whether these proposals are appropriate.
Elimination of Paper Reporting
    Comment 5(a)-2 provides that a financial institution that reports 
25 or fewer entries on its loan application register may submit the 
register in paper, rather than electronic, format. The Bureau 
understands that, in recent years, very few financial institutions have 
submitted their loan application registers in paper format. The FFIEC 
provides the HMDA Data Entry Software (DES) at no cost to institutions, 
and the Bureau understands that the vast majority of financial 
institutions with small transaction volumes take advantage of this free 
tool to compile and securely submit their HMDA data to the appropriate 
agencies. Loan application registers that are submitted on paper must 
be manually input by the processor into its system, requiring the 
processor to duplicate the work of the financial institution, in order 
for the data to be used by the agencies and included in the HMDA data 
products later prepared.
    The Bureau notes that, if its proposal to exclude from the 
definition of financial institution any institution that originated 
less than 25 covered loans, excluding open-end lines of credit, is 
adopted,\548\ the number of financial institutions that would be 
eligible to submit their loan application register in paper format 
would be significantly reduced.\549\ Further, as part of its efforts to 
improve and modernize HMDA operations, the Bureau is considering 
various improvements to the HMDA data submission process that should 
reduce even further the need for institutions to compile and submit 
their HMDA data in paper format. The improvements under consideration 
include upgrades to the HMDA DES, such as moving DES to the web, which 
would allow financial institutions to use the software from multiple 
terminals in different branches and would eliminate the need to 
download and install updated software each year.
---------------------------------------------------------------------------

    \548\ See proposed Sec.  1003.2(g).
    \549\ If proposed Sec.  1003.2(g) is adopted and the Bureau 
continues to allow a financial institution that reports 25 or fewer 
entries on its loan application register to submit its register in 
paper format, only a financial institution that originated exactly 
25 covered loans would be eligible to submit its register in paper 
format.
---------------------------------------------------------------------------

    Based on these considerations, the Bureau believes that preserving 
an option to permit the submission of loan application registers in 
paper format is no longer necessary. Accordingly, the Bureau is 
proposing to delete comment 5(a)-2, which allows a financial 
institution that reports 25 or fewer entries on its loan application 
register to submit the register in paper form, and to clarify in Sec.  
1003.5(a)(1) that the register must be submitted in electronic format. 
The Bureau solicits comment on this proposal, including concerning any 
additional costs it imposes upon small-volume financial institutions.
Retention of Complete Loan Application Register in Electronic Format
    Section 1003.5(a)(1) requires that a financial institution shall 
retain a copy of its complete loan application register for three 
years, but Regulation C is silent concerning the formats in which the 
complete loan application register may be retained. During the Small 
Business Review Panel process, the Bureau learned that some financial 
institutions have interpreted Sec.  1003.5(a)(1) to require that 
complete loan application registers must be retained in paper format, 
and that this can be burdensome depending on the size of the complete 
loan application register. Proposed comment 5(a)-4 clarifies that 
retention of the loan application register in electronic format is 
sufficient to satisfy the requirements of Sec.  1003.5(a)(1). The 
Bureau seeks comment on whether this proposal is appropriate.
Submission Procedures and Related Technical Requirements
    As part of its efforts to improve and modernize HMDA operations, 
the Bureau is considering various improvements to the HMDA data 
submission process. The Bureau is proposing to reorganize sections I 
and II of appendix A and portions of the commentary so that 
instructions relating to data submission are found in one place in the 
regulation. The Bureau expects to publish procedural and technical 
requirements and specifications relating to data submission separately 
from this proposal.\550\
---------------------------------------------------------------------------

    \550\ The Board has published technical specification for HMDA 
reporting annually since 1998. See Bd. of Governors of the Fed. 
Reserve Sys., 2014 HMDA File Specifications 2-3 (Sept. 13, 2013), 
https://www.ffiec.gov/hmda/pdf/spec2014.pdf.
---------------------------------------------------------------------------

    The content of section II of appendix A and comment 5(a)-1 are 
inconsistent with the Bureau's plan for data submission and the Bureau 
therefore proposes to delete these provisions. The Bureau proposes to 
move the portion of comment 4(a)-1.vi concerning officer certification 
to Sec.  1003.5(a)(1)(iii). The Bureau proposes to incorporate the 
pertinent remaining portion of comment 4(a)-1.vi and comments 4(a)-
1.vii and 5(a)-7 and -8 into proposed instructions 5(a)-2 and -3 in 
appendix A. The Bureau proposes to delete the remaining portions of 
these comments. Proposed instruction 5(a)-1 in appendix A provides 
procedural and technical information concerning submission 
requirements. When the Bureau finalizes this proposed rule, it will 
make conforming technical changes to the transmittal sheet and loan 
application register form in appendix A. The Bureau solicits feedback 
on whether these proposals are appropriate.
5(a)(3) Entity Identifier
    Currently the transmittal sheet and loan application register in 
appendix A to Regulation C require entry of the Reporter's 
Identification Number (HMDA RID). The HMDA RID consists of an entity 
identifier specified by the financial institution's appropriate agency 
combined with a code that designates the agency. For the reasons 
discussed below, pursuant to HMDA section 305(a), the Bureau is 
proposing to require financial institutions to provide a globally-
accepted Legal Entity Identifier (LEI) to replace the HMDA RID in HMDA 
submissions.
    Under the current system, each Federal agency chooses the entity 
identifier that its financial institutions use in reporting their HMDA 
data. The following entity identifiers are currently used in generating 
the HMDA RID:
     The Research Statistics Supervision and Discount (RSSD) 
number for institutions supervised by the Board and for depository 
institutions supervised by the Bureau;
     the Federal Tax Identification number for nondepository 
institutions supervised by agencies other than the Board;
     the charter number for depository institutions supervised 
by the NCUA and the OCC; and
     the certificate number for depository institutions 
supervised by the FDIC.\551\
---------------------------------------------------------------------------

    \551\ Id. at 2.
---------------------------------------------------------------------------

    Leading zeroes are added to the extent necessary to make this 
entity identifier ten digits for purposes of the transmittal sheet and 
loan application register, and the identifier is then amalgamated with 
a one-digit code at the end that identifies the agency.\552\
---------------------------------------------------------------------------

    \552\ Id. at 2, 8.
---------------------------------------------------------------------------

    There is no mechanism to link nondepository institutions identified 
by a Federal Tax Identification number to related companies. The lack 
of a sufficiently comprehensive

[[Page 51813]]

identification system for financial institutions that are parties to 
mortgage transactions can result in the same financial institution 
being identified by different names or codes across and within 
datasets. As a result, financial institutions, regulators, and data 
users can find data aggregation, validation, and analysis difficult.
    Requiring financial institutions to provide an LEI when they report 
their HMDA data could help to address these concerns. The LEI is a 
unique, 20-digit alphanumeric identifier associated with a single legal 
entity and is intended to serve as a uniform international standard for 
identifying participants in financial transactions. The LEI's 
alphanumeric identifier does not itself contain any embedded 
information about the entity but is linked to reference data about the 
entity. Once the LEI is fully implemented, this information is 
projected to include data on ownership and corporate hierarchies.\553\
---------------------------------------------------------------------------

    \553\ See generally Fin. Stability Bd., A Global Legal Entity 
Identifier for Financial Markets 38-39 (June 8, 2012), https://
www.financialstabilityboard.org/publications/r120608.pdf 
(including a recommendation on LEI reference data relating to 
ownership); Fin. Stability Bd., LEI Implementation Group, Fourth 
Progress Note on the Global LEI Initiative 4 (Dec. 11, 2012), http:/
/www.financialstabilityboard.org/publications/r121211.pdf 
(noting that the LEI Implementation Group is developing proposals 
for additional reference data on the direct and ultimate parent(s) 
of legal entities and on relationship data more generally).
---------------------------------------------------------------------------

    A global LEI standard is currently in the implementation stage, 
with strong support from the Financial Stability Board,\554\ the Group 
of 20 Finance Ministers and Central Bank Governors, and others.\555\ 
The LEI's Regulatory Oversight Committee (ROC)--the top tier in the LEI 
governance structure--held its inaugural meeting in early 2013.\556\
---------------------------------------------------------------------------

    \554\ The Financial Stability Board is an international 
coordinating body established to promote global financial stability 
and regulatory coordination. It is a successor to the Financial 
Stability Forum, which was founded in 1999 by the Group of 7 Finance 
Ministers and Central Bank Governors.
    \555\ See, e.g., Matthew Reed, Legal Entity Identifier System 
Gains Global Momentum, Treasury Notes Blog (Jan. 14, 2014), https://www.treasury.gov/connect/blog/Pages/Legal-Entity-IdentifierSystem-Gains-Global-Momentum.aspx; Fin. Stability Bd., A Global Legal 
Entity Identifier for Financial Markets (June 8, 2012), https://
www.financialstabilityboard.org/publications/r120608.pdf. A 
number of trade associations, including the Americans Bankers 
Association, expressed support for creation of the LEI in an April 
12, 2011 letter to all G-20 finance ministers, which is available at 
https://www.gfma.org/correspondence/item.aspx?id=159.
    \556\ See ROC, Inaugural Meeting of the Global Legal Entity 
Identifier (LEI) Regulatory Oversight Committee (ROC) (Jan. 28, 
2013), https://www.leiroc.org/publications/gls/
roc20130128.pdf.
---------------------------------------------------------------------------

    The second tier in LEI governance--the Global LEI Foundation 
(GLEIF)--was recently established as a not-for-profit foundation in 
Switzerland.\557\ The GLEIF will build the LEI system's technology 
infrastructure and have responsibility for operational and quality 
controls, assuring adherence to standards for reliability, quality, and 
uniqueness.\558\ The third tier of the LEI system is the network of 
local operating units (LOUs) that assign LEIs, validate and maintain 
the associated reference data, and make these data continuously 
available to the public and regulators.\559\
---------------------------------------------------------------------------

    \557\ Press Release, GLEIF, Inaugural Meeting of the Global 
Legal Entity Identifier Foundation (GLEIF) (Jun. 30, 2014), https://
www.leiroc.org/publications/gls/
gleif201406292.pdf; ROC, Regulatory Oversight 
Committee Welcomes First Meeting of Global LEI Foundation (June 30, 
2014), https://www.leiroc.org/publications/gls/
gleif201406291.pdf.
    \558\ See, e.g., Matthew Reed, Legal Entity Identifier System 
Gains Global Momentum, Treasury Notes Blog (Jan. 14, 2014), https://www.treasury.gov/connect/blog/Pages/Legal-Entity-IdentifierSystem-Gains-Global-Momentum.aspx.
    \559\ Id.
---------------------------------------------------------------------------

    The ROC has already endorsed more than a dozen pre-LOUs around the 
world, and the LEI identifiers issued by these pre-LOUs have been 
accepted for regulatory purposes in various jurisdictions represented 
in the ROC.\560\ Approximately 300,000 entities have been issued LEI 
identifiers to date.\561\
---------------------------------------------------------------------------

    \560\ See Global Fin. Markets Ass'n, Progress and Developments 
in Establishing the Global LEI System 5-6 (Mar. 2014), https://
www.gfma.org/uploadedFiles/Initiatives/
LegalEntityIdentifier(LEI)/
GFMAwebinarLEISlideDeck10Mar2014%20%5bCompatibility%20Mode%5d.pdf 
(listing examples of regulatory acceptance); ROC, Endorsed Pre-LOUs 
of the Interim Global Legal Entity Identifier System (GLEIS) (May 
2014), https://www.leiroc.org/publications/gls/
lou201310032.pdf.
    \561\ ROC, Regulatory Oversight Committee Welcomes First Meeting 
of Global LEI Foundation (June 30, 2014), https://www.leiroc.org/
publications/gls/gleif201406291.pdf.
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    In light of the potential benefits that a robust and uniform entity 
identifier could provide, the Bureau is proposing to add new Sec.  
1003.5(a)(3) to require financial institutions to provide an LEI when 
reporting HMDA data. Proposed Sec.  1003.5(a)(3) specifies that the LEI 
must be issued by: (i) A utility endorsed by the ROC or (ii) a utility 
endorsed or otherwise governed by the GLEIF (or any successor of the 
GLEIF) after the GLEIF assumes operational governance of the global LEI 
system.
    The Bureau believes that requiring use of the LEI could improve the 
ability to identify the legal entity that is reporting data and to link 
it to its corporate family. For these reasons, pursuant to HMDA section 
305(a), the Bureau believes that proposed Sec.  1003.5(a)(3) is 
necessary and proper to effectuate HMDA's purposes and facilitate 
compliance therewith. By facilitating identification, the Bureau's 
proposal would help data users in achieving HMDA's objectives of 
identifying whether financial institutions are serving the housing 
needs of their communities, as well as identifying possible 
discriminatory lending patterns. This new requirement could also assist 
in identifying market activity and risks by related companies.
    The Bureau recognizes that requiring financial institutions to 
obtain LEIs would impose some costs on the financial institutions. The 
LEI system is based on a cost-recovery model.\562\ One LOU endorsed by 
the ROC currently charges registrants approximately $200 for initial 
registration plus $100 per year for maintenance.\563\ These costs could 
decrease as the LEI identifier is used more widely.
---------------------------------------------------------------------------

    \562\ Charter of the ROC For the Global LEI System 2, 18 (Nov. 
5, 2012), available at https://www.financialstabilityboard.org/
publications/r121105c.pdf.
    \563\ See GMEI Utility, Frequently Asked Questions, https://www.gmeiutility.org/frequentlyAskedQuestions.jsp (accessed July 17, 
2014).
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    In light of all these considerations, the Bureau believes that the 
benefits of having all HMDA reporters obtain and report an LEI may 
justify the associated costs. The Bureau solicits feedback on whether 
the LEI would be a more appropriate entity identifier than the HMDA 
RID. The Bureau is also seeking feedback regarding whether other 
identifiers, such as the RSSD number \564\ or the NMLSR 
Identifier,\565\ would be an appropriate alternative to the LEI.
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    \564\ RSSD numbers are assigned and managed by the Board's 
National Information Center. As noted above, they are currently used 
by some financial institutions as their HMDA RID.
    \565\ NMLSR assigns a unique identifier to each entity, branch, 
and individual loan originator that has a record within its system. 
The NMLSR Identifier is required on certain loan documents pursuant 
to the Bureau's 2013 Loan Originator Rule. Regulation Z Sec.  
1026.36(g). The Bureau's 2013 TILA-RESPA Final Rule will also 
require use of the NMLSR Identifier when the rule becomes effective 
in August 2015. Regulation Z Sec.  1026.37(k).
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5(a)(4) Parent Company
    The transmittal sheet in appendix A to Regulation C currently 
requires financial institutions to provide the name of their parent 
company, if any. Because information about parent companies is not yet 
available through the LEI, the Bureau believes it is necessary to 
maintain this requirement to ensure that financial institutions' 
submissions can be linked with those of their corporate parents. The 
Bureau is therefore proposing new Sec.  1003.5(a)(4), which provides 
that when reporting its

[[Page 51814]]

data, a financial institution shall identify its parent company, if 
any. Proposed comment 5(a)-3 explains that for purposes of Sec.  
1003.5(a)(4), an entity that holds or controls an ownership interest in 
the financial institution that is greater than 50 percent should be 
listed as a parent company. This is the same test that is used to 
determine if a financial institution is a subsidiary of a bank or 
savings association for purposes of reporting HMDA data to the same 
agency as the parent.
5(b) Public Disclosure of Statement
    Under Regulation C as originally promulgated, the disclosure 
statement was the means by which financial institutions made available 
to the public the aggregate data required to be disclosed under HMDA 
section 304.\566\ At present, the FFIEC prepares an individual 
disclosure statement for each financial institution using the HMDA data 
submitted by the institution for the previous calendar year. A 
disclosure statement is a series of tables made available to the public 
by a financial institution and on the FFIEC Web site. Unlike the 
modified loan application register that a financial institution must 
make available to the public under HMDA section 304(j) and Sec.  
1003.5(c) of Regulation C, a financial institution's disclosure 
statement presents the institution's HMDA data in aggregate forms, 
rather than on the loan level.
---------------------------------------------------------------------------

    \566\ 41 FR 23931, 23937-38 (June 14, 1976).
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5(b)(1)
    HMDA section 304(k) requires the FFIEC to make available a 
disclosure statement for each financial institution required to make 
disclosures under HMDA section 304.\567\ Section 1003.5(b)(1) of 
Regulation C requires that the FFIEC prepare a disclosure statement for 
each financial institution based on the data each financial institution 
submits on its loan application register.
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    \567\ HMDA section 304(k)(1)(A) provides that a financial 
institution ``shall make a disclosure statement available, upon 
request, to the public no later than 3 business days after the 
institution receives the statement from the Federal Financial 
Institutions Examination Council.''
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    The Bureau proposes to modify Sec.  1003.5(b)(1) to clarify that, 
although some financial institutions will report quarterly under 
proposed Sec.  1003.5(a)(1)(ii), disclosure statements for these 
financial institutions will be based on all data submitted by each 
institution for the preceding calendar year. The Bureau also proposes 
to replace the word ``prepare'' with ``make available'' in Sec.  
1003.5(b)(1). The Bureau believes that advances in technology may 
permit, for example, the FFIEC to produce an online tool that would 
allow users of the tool to generate disclosure statements. It is the 
Bureau's interpretation that the FFIEC's obligation under HMDA section 
304(k) would be satisfied if the FFIEC produced such a tool, which in 
turn would produce disclosure statements upon request. The Bureau 
proposes to modify the language in Sec.  1003.5(b)(1) to clarify that 
such developments are accommodated by this section. Further, pursuant 
to its authority under HMDA section 305(a), the Bureau believes that 
permitting the FFIEC to produce a tool that allows members of the 
public to generate disclosure statements is necessary and proper to 
effectuate the purposes of HMDA and to facilitate compliance therewith. 
The Bureau solicits feedback on whether these proposals are 
appropriate.
5(b)(2)
    HMDA section 304(k)(1) requires that, in accordance with procedures 
established by the Bureau, a financial institution shall make its 
disclosure statement available to the public upon request no later than 
three business days after it receives the statement from the FFIEC. 
HMDA section 304(m), titled ``Opportunity to reduce compliance 
burden,'' provides that a financial institution shall be deemed to have 
satisfied the public availability requirements of section 304(a) if it 
compiles the information required at the home office of the institution 
and provides notice at the branch locations specified in HMDA section 
304(a) that such information is available from the home office upon 
written request. The Bureau is given broad discretion as to the media 
and format in which disclosure statements are made available and the 
procedures for disclosing them.\568\
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    \568\ See HMDA sections 304(h)(1)(A), 304(k)(1), 304(m)(2).
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    Section 1003.5(b)(2) of Regulation C requires that each financial 
institution make its disclosure statement available to the public in 
its home office within three business days of receiving it. In 
addition, Sec.  1003.5(b)(3) requires that a financial institution must 
either (1) make the statement available to the public in at least one 
branch office in each other MSA and each other MD where the institution 
has offices or (2) post the address for sending written requests for 
the disclosure statement in the lobby of each branch office in each 
other MSA and each other MD and provide a copy of the disclosure 
statement within 15 calendar days of receiving a written request. 
Comment 5(b)-2 provides that an institution may make the disclosure 
statement available in paper form or, if the person requesting the data 
agrees, in electronic form. For the reasons described below, the Bureau 
is proposing to allow a financial institution to make its disclosure 
statement available to the public by making available a notice that 
clearly conveys that the disclosure statement may be obtained on the 
FFIEC Web site and that includes the FFIEC's Web site address.
    The current disclosure statement for each reporting financial 
institution is comprised of a series of numerous tables that are 
prepared using the HMDA data submitted by the financial institution for 
the previous calendar year. The Bureau has received feedback from 
financial institutions that the largest disclosure statements can 
exceed 4,000 pages. The FFIEC posts the disclosure statements to the 
FFIEC Web site in September each year and, after receiving notice that 
the statements are available on the FFIEC Web site, financial 
institutions download or print the statements from the Web site so as 
to have them available for members of the public. The Bureau has 
received feedback from financial institutions that having to print and 
download the disclosure statements so as to make them available is 
burdensome and often wasteful, as disclosure statements are 
infrequently requested. Financial institutions have argued that, 
because the source of the disclosure statements--the FFIEC Web site--is 
readily available and easily accessible to the public at no cost, 
institutions should be permitted to direct members of the public who 
request disclosure statements to the FFIEC Web site. During the Small 
Business Review Panel process, the Bureau heard from small entity 
representatives that they rarely if ever receive requests for their 
disclosure statements and that making them available as currently 
required can be burdensome. The Small Business Review Panel recommended 
that the Bureau consider whether there may be alternative means of 
providing disclosure statements to the public.\569\
---------------------------------------------------------------------------

    \569\ See Small Business Review Panel Report at 43.
---------------------------------------------------------------------------

    The Bureau believes that costs to financial institutions would be 
reduced by allowing institutions to refer members of the public who 
request disclosure statements to the FFIEC Web site. The Bureau has 
considered whether the provision to the public of disclosure statements 
in paper or electronic form by the financial institution itself confers 
any unique

[[Page 51815]]

benefit to the disclosure goals of the statute, but does not believe it 
does. The FFIEC Web site provides one, easily accessible location where 
members of the public can access all HMDA disclosure statements for all 
financial institutions required to report under the statute, which the 
Bureau believes furthers the goals of the statute.\570\ The Bureau has 
also considered whether requiring that a member of the public seeking a 
disclosure statement obtain it online would be unduly burdensome. Given 
the prevalence of internet access today, the Bureau believes that 
members of the public should be able to readily access HMDA disclosure 
statements online with minimum inconvenience, if any. The Bureau 
believes that any such inconvenience is not greater than, and is likely 
less than, the potential inconvenience of receiving a disclosure 
statement on a floppy disc or other electronic data storage medium 
which may be used with a personal computer, as is contemplated by HMDA 
section 304(k)(1)(b).
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    \570\ Under current Sec.  1003.5(b)(3), for example, a member of 
the public that requests a disclosure statement at a branch office 
must only be provided with a disclosure statement containing data 
relating to the MSA or MD where the branch is located. Referral to 
the FFIEC Web site would allow that member of the public to easily 
view the financial institution's disclosure statements for all MSAs 
and MDs. Also, to the extent a member of the public wanted to 
compare the lending activities of financial institutions in a 
particular MSA or MD, the FFIEC Web site allows her to do so all in 
one place, rather than requiring her to obtain disclosure statements 
from multiple institutions.
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    The Bureau believes that the burden to financial institutions 
associated with the provision of disclosure statements to members of 
the public upon request is likely not justified by any benefit to 
maintaining the current disclosure statement dissemination scheme. For 
these reasons, the Bureau believes it is reasonable to deem that 
financial institutions make disclosure statements available, pursuant 
to HMDA sections 304(k)(1) and 304(m), by referring members of the 
public seeking disclosure statements to the FFIEC Web site, as provided 
under proposed Sec.  1003.5(b)(2). This proposal is also proposed 
pursuant to the Bureau's authority under HMDA 305(a). For the reasons 
given, this proposal is necessary and proper to effectuate the purposes 
of HMDA and facilitate compliance therewith.
    Accordingly, the Bureau is proposing that, no later than three 
business days after receiving notice that its disclosure statement is 
available, a financial institution shall make available to the public 
at its home office and each branch office located in each MSA and each 
MD a notice that clearly conveys that the institution's disclosure 
statement may be obtained on the FFIEC Web site and that includes the 
FFIEC's Web site address.\571\ Because this proposal requires only that 
a financial institution make available a notice, rather than its 
disclosure statement, the Bureau believes it appropriate to require 
that a financial institution make available the notice in every branch 
office located in an MSA or MD. The Bureau is proposing a new comment 
5(b)-3 to provide an example of notice content that would satisfy the 
requirements of proposed Sec.  1003.5(b)(2). Because the Bureau intends 
to make disclosure statements also available on its Web site, the 
example in proposed comment 5(b)-3 includes the Bureau's Web site 
address. The Bureau seeks feedback on whether these proposals are 
appropriate.
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    \571\ The Bureau notes that, as reflected in proposed comment 
5(b)-3, its proposal does not require financial institutions to 
update each year the notice required under proposed Sec.  
1003.5(b)(2). Accordingly, the requirement that a financial 
institution make the notice available ``within three business days'' 
after receiving notice that its disclosure statement is available 
will be meaningful for a financial institution only in the year that 
it first reports HMDA data under revised Regulation C.
---------------------------------------------------------------------------

    The Bureau also proposes to modify comment 5(b)-2 to conform to 
proposed Sec.  1003.5(b)(2) and to allow a financial institution to 
provide the proposed notice in paper or electronic form. Comment 5(b)-2 
requires that an institution may make its disclosure statement 
available in electronic form to a person requesting it only if the 
person agrees. This comment implements a requirement previously found 
in HMDA section 304(m)(2), which provided that, in complying with its 
obligation to make its HMDA data available to the public as required by 
section 304(m)(1), an institution could provide the information in 
electronic form only ``if acceptable to the person'' requesting the 
information. The Dodd-Frank Act amended HMDA section 304(m)(2) to 
substitute this language with new language providing that, in complying 
with section 304(m)(1), a financial institution ``shall provide the 
person requesting the information with a copy of the information 
requested in such formats as the Bureau may require.'' \572\ The Bureau 
believes it is appropriate to align the formats in which a financial 
institution may make its disclosure statement available to the public 
with the formats in which it may make its modified loan application 
register available to the public.\573\ Accordingly, the Bureau is 
proposing to modify comment 5(b)-2 to provide that an institution may 
make the notice required under proposed Sec.  1003.5(b)(2) available in 
paper or electronic form. The Bureau seeks feedback on this proposal.
---------------------------------------------------------------------------

    \572\ Dodd-Frank Act section 1094(3)(E), 12 U.S.C. 2803(m)(1).
    \573\ Comment 5(c)-1 allows a financial institution to make its 
modified loan application register available in either paper or 
electronic form.
---------------------------------------------------------------------------

5(c) Public Disclosure of Modified Loan Application Register
    HMDA section 304(j)(1) requires that financial institutions make 
available to the public, upon request, ``loan application register 
information'' as defined by the Bureau and in the form required under 
regulations prescribed by the Bureau. HMDA section 304(j)(2) provides 
that the Bureau shall require such deletions from the loan application 
register information made available to the public as the Bureau may 
determine to be appropriate to protect any privacy interest of any 
applicant and to protect financial institutions from liability under 
any Federal or State privacy law, and identifies three fields in 
particular as appropriate for deletion.\574\ HMDA section 304(j)(5) 
requires that the loan application register information described in 
section 304(j)(1) must be made available as early as March 31 following 
the calendar year for which the information was compiled. HMDA section 
304(j)(7) provides that the Bureau shall make every effort to minimize 
costs incurred by financial institutions in complying with section 
304(j).
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    \574\ The fields identified in the statute as appropriate for 
deletion are ``the applicant's name and identification number, the 
date of the application, and the date of any determination by the 
institution with respect to such application.'' HMDA section 
304(j)(2)(B).
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    Section 1003.5(c) of Regulation C requires a financial institution 
to make its loan application register available to the public after 
removing three fields to protect applicant and borrower privacy: The 
application or loan number, the date that the application was received, 
and the date action was taken. An institution must make this 
``modified'' loan application register publicly available following the 
calendar year for which the data are compiled by, March 31 for a 
request received on or before March 1, and within 30 calendar days for 
a request received after March 1. The modified loan application 
register need only contain data relating to the MSA or MD for which the 
request is made. Comment 5(c)-1 explains that a financial institution 
may make the modified loan application register

[[Page 51816]]

available in paper or electronic form and that, although institutions 
are not required to make the modified loan application register 
available in census tract order, they are strongly encouraged to do so 
in order to enhance its utility to users.
    For the reasons discussed below, the Bureau is proposing to modify 
Sec.  1003.5(c) to require that a financial institution make available 
to the public a modified loan application register showing only the 
data fields that currently are released on the modified loan 
application register. The Bureau is proposing new comment 5(c)-3 to 
clarify that a modified loan application register made available to the 
public by a financial institution that reports its HMDA data on a 
quarterly basis under proposed Sec.  1003.5(a)(1)(ii) must show data 
for the entire calendar year. The Bureau seeks comment on whether it 
should except smaller financial institutions from the obligation to 
release a modified loan application register.
    As discussed above in part II.C, the Bureau's assessment under its 
balancing test of the risks to privacy interests created by the 
disclosure of HMDA data and the benefits of such disclosure is ongoing. 
Based on its analysis thus far, however, the Bureau believes that some 
of the new data points required or permitted by the Dodd-Frank Act and 
proposed by the Bureau may raise privacy concerns sufficient to warrant 
some degree of modification, including redaction, before they are 
disclosed to the public. This has two implications for the future 
release of loan-level HMDA data.\575\ First, wherever the Bureau 
considers modifying HMDA data before it is made available to the 
public, it will consider strategies to preserve the utility of the data 
subject to modification. These strategies may include, but may not be 
limited to, various disclosure limitation techniques, such as 
techniques aimed at masking the precise value of certain data 
points.\576\ While such techniques can address privacy and data utility 
concerns, the Bureau is mindful that requiring financial institutions 
to apply them in order to prepare the modified loan application 
register may impose undue burden on financial institutions and may 
increase the risk of errors that could result in the unintended 
disclosure of data or other error.
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    \575\ As discussed above in part II.C, the FFIEC releases 
annually, on behalf of the Bureau and other agencies, a public loan-
level dataset containing reported HMDA data for the preceding 
calendar year (the agencies' data release). Deleted from this 
release are the same three fields that are deleted from the modified 
loan application register that financial institutions make 
available.
    \576\ See supra note 122 for examples of these techniques.
---------------------------------------------------------------------------

    Second, the Bureau believes that any privacy risks created by the 
disclosure of loan-level HMDA data may evolve over time. For example, 
technological developments in areas such as data aggregation and mining 
and the availability of new public sources of data may increase, 
decrease, or otherwise alter the likelihood and nature of potential 
privacy harms that could result from the public disclosure of loan-
level HMDA data. Evolving privacy risks may warrant changes to the 
privacy protections applied to HMDA data disclosed to the public. 
Changing the modifications a financial institution must make to the 
modified loan application register in order to protect applicant and 
borrower privacy interests would require amendments to Regulation C 
that may impose undue costs on financial institutions and delay the 
implementation of the changes.
    Based on these considerations,\577\ the Bureau believes it may be 
appropriate to require that financial institutions include on their 
modified loan application registers only the data fields that currently 
are released on the modified loan application register.\578\ The Bureau 
believes this approach would avoid creating new privacy risks or 
liabilities for financial institutions in connection with the release 
of loan-level data via the modified loan application register. It would 
also minimize the burden to institutions associated with preparing 
their modified loan application registers to implement amendments to 
Regulation C. The proposed approach would allow the Bureau and the 
other agencies flexibility in disclosing new data points in the 
agencies' data release, including flexibility to adjust any privacy 
protections as risks evolve, without unduly burdening financial 
institutions or creating opportunities for the modified loan 
application register and the agencies' data release to interact in ways 
that might increase privacy risk.\579\
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    \577\ The Bureau notes that, as part of its efforts to improve 
and modernize HMDA operations, it is exploring technological 
solutions that may allow the Bureau to apply appropriate privacy 
protections to the modified loan application register. These 
solutions, if realized, and would reduce burdens on financial 
institutions related to preparing the modified loan application 
register and otherwise impact the considerations described herein.
    \578\ Because the Bureau proposes to modify some of the existing 
HMDA data points, the data disclosed on the modified loan 
application register under this proposal will not be exactly the 
same as under current Regulation C in some respects. See proposed 
Sec.  1003.4(a)(5) (replacing property type with construction 
method), 1003.4(a)(6) (providing more detail on owner-occupancy 
status), 1003.4(a)(10) (modifying and clarifying income reporting 
for various reporting scenarios), 1003.4(a)(13) (requiring 
additional information on HOEPA status), 1003.4(a)(14) (requiring 
additional information about lien priority).
    \579\ For example, if the modified loan application register 
were to disclose more data fields, or more granular data, than was 
disclosed in the agencies' data release, the modified loan 
application register could be used to reverse engineer the agencies' 
data release and undermine privacy protections applied to that 
release. Accordingly, limiting the data disclosed on the modified 
loan application register would allow the agencies flexibility in 
their data release, including to adjust privacy protections as risks 
evolve.
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    The Bureau has concerns about the impact such a proposal may have 
on members of the public that regularly use modified loan application 
registers. Although the Bureau has received feedback that requests for 
modified loan applications registers are infrequently received at many 
institutions, the Bureau believes that a small number of HMDA data 
users routinely request modified loan application registers from large 
financial institutions. The Bureau understands that this practice is 
driven primarily by the timing of the agencies' data release: Whereas a 
financial institution must make available its modified loan application 
register as early as March 31, the agencies' loan-level HMDA data 
currently are not released until almost six months later, in September. 
The Bureau notes that it intends to coordinate with the other agencies 
to explore processing improvements that may allow the agencies' data 
release to be made available to the public, in the future, closer to 
March 31 than is the current practice.
    For the reasons described above, the Bureau is proposing to modify 
Sec.  1003.5(c) to provide that a financial institution shall make its 
loan application register available to the public after, for each 
entry: Removing the information required to be reported under Sec.  
1003.4(a)(1), the date required to be reported under Sec.  
1003.4(a)(8), the postal address required to be reported under proposed 
Sec.  1003.4(a)(9), the age of the applicant or borrower required to be 
reported under proposed Sec.  1003.4(a)(10), and the information 
required to be reported under proposed Sec.  1003.4(a)(15) and (a)(17) 
through (39); and rounding the information required to be reported 
under proposed Sec.  1003.4(a)(7) to the nearest thousand.\580\ 
Proposed comment 5(c)-2

[[Page 51817]]

explains how a financial institution should round the loan amount on 
their modified loan application register and provides an illustrative 
example. The Bureau solicits comment concerning whether this proposal 
is appropriate.
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    \580\ Currently under Regulation C, financial institutions 
report loan amount rounded to the nearest thousand. See paragraph 
I.A.7 of appendix A. Proposed instruction 4(a)(7)-1 modifies this 
requirement to provide that loan amount is reported in dollars. The 
Bureau proposes that financial institutions round loan amount to the 
nearest thousand before making available to the public their 
modified loan application registers so that loan amount is shown on 
the modified loan application register as it is under current 
Regulation C.
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    The Bureau is aware that concerns have been raised that data 
currently disclosed on the modified loan application register may 
create risks to borrower and applicant privacy.\581\ As discussed 
above, the Bureau is considering all data reported under HMDA in its 
privacy assessment, including data currently disclosed. However, the 
Bureau is unaware of any misuse of the currently-disclosed loan-level 
HMDA data, which has been made available to the public annually since 
1991. The Bureau is also aware that some of these data are publicly 
available, such as in county land transfer records. The Bureau solicits 
comment concerning any risks to applicant or borrower privacy interests 
posed by the continued release of currently-released data fields on the 
modified loan application register. The Bureau also solicits comment 
concerning the benefits of disclosure of the currently-released fields 
for HMDA purposes.
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    \581\ The Bureau and the Board before it have received feedback 
that certain data fields disclosed in the HMDA loan-level data 
releases, including financial institution name, loan amount, and 
census tract, might be used in some circumstances to identify 
individual applicants or borrowers. See, e.g., Small Business Review 
Panel Report at 35 (reflecting concern expressed by small entity 
representative that, ``especially in less populated areas, the 
modified loan application register could be compared to public 
records to identify borrowers''). In other contexts, it has been 
suggested that loan-level disclosure of borrower income, which is 
currently disclosed on the modified loan application register, may 
raise privacy concerns. See, e.g., Div. of Corp. Fin., U.S. Sec. and 
Exch. Comm'n, Disclosure of Asset-Level Data 14 (Feb. 25, 2014), 
available at https://www.sec.gov/comments/s7-08-10/s70810-258.pdf 
(suggesting that borrower income raises privacy concerns; this 
memorandum relates to the SEC's decision to re-open the comment 
period for two proposed rules concerning the offering, disclosure, 
and reporting requirements for asset-backed securities, see 79 FR 
11361, 11362 n.5 (Feb. 28, 2014)).
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    Proposed comment 5(c)-3 clarifies that the modified loan 
application register is the loan application register reflecting all 
data reported for a calendar year, modified as described in Sec.  
1003.5(c)(1), whether the data were submitted on a quarterly or annual 
basis. Financial institutions that report on a quarterly basis under 
proposed Sec.  1003.5(a)(1)(ii) must show on their modified loan 
application register data reported for the calendar year, not just data 
reported for a particular quarter.
    The Bureau seeks comment on whether it should except, pursuant to 
its authority under HMDA section 305(a), smaller financial institutions 
from the requirement under Sec.  1003.5(c) that a financial institution 
make available to the public its modified loan application register. 
During the Small Business Review Panel process, the Bureau heard from 
small entity representatives that they rarely if ever receive requests 
for their modified loan application registers. The Small Business 
Review Panel recommended that the Bureau consider whether there is a 
continued need for small financial institutions to make their modified 
loan application registers available to the public.\582\ The Bureau 
solicits comment on whether such an exception from the obligation to 
make a modified loan application register available to the public is 
desirable and, if so, which financial institutions should qualify for 
the exception, including whether such exception should align with the 
quarterly reporting threshold proposed in Sec.  1003.5(a)(1)(ii).\583\
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    \582\ See Small Business Review Panel Report at 43.
    \583\ Proposed Sec.  1003.5(a)(1)(ii) requires a financial 
institution that reported at least 75,000 covered loans, 
applications, and purchased covered loans, combined, for the 
preceding calendar year to submit its loan application register to 
the agencies on a quarterly, rather than annual, basis. If the 
threshold to exclude a financial institution from the obligation to 
make available to the public a modified loan application register 
were aligned with the threshold proposed in Sec.  1003.5(a)(1)(ii), 
only financial institutions required to report on a quarterly basis 
would be required to make a modified loan application register 
available to the public under Sec.  1003.5(c).
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5(d) Availability of Data
    HMDA sections 304(c) and 304(j)(6) set forth the time periods for 
which financial institutions must maintain and make available 
information required to be disclosed under the statute. HMDA sections 
304(j)(4) and 304(k)(3) permit a financial institution that provides 
its loan application register information or its disclosure statement 
to a member of the public to impose a reasonable fee for any cost 
incurred in reproducing the information or statement. Section 1003.5(d) 
of Regulation C requires that a financial institution must make its 
modified loan application register available to the public for a period 
of three years and its disclosure statement available to the public for 
a period of five years. This section also provides that an institution 
must make these disclosures available to the public for inspection and 
copying during the hours the office is normally open to the public for 
business and may impose a reasonable fee for any cost incurred in 
providing or reproducing the data. The Bureau is proposing to delete 
the requirement that a financial institution make its HMDA data 
available for inspection and copying and to make additional technical 
modifications to Sec.  1003.5(d).
    Section 1003.5(d) requires that an institution shall make its data 
available for inspection and copying during the hours the office is 
normally open to the public. This language suggests that a member of 
the public seeking a financial institution's disclosure statement or 
modified loan application register could require the financial 
institution to permit him to reproduce these documents himself at the 
financial institution's office. The Bureau believes that preserving 
this option is unnecessary and may be burdensome to financial 
institutions. The Bureau proposes to modify Sec.  1003.5(d) to delete 
reference to inspection and copying and seeks comment on whether this 
proposed modification is appropriate.
5(e) Notice of Availability
    HMDA section 304(m) provides that a financial institution shall be 
deemed to have satisfied the public availability requirements of HMDA 
section 304(a) if it compiles its HMDA data at its home office and 
provides notice at certain branch locations that its information is 
available upon written request. Section 1003.5(e) of Regulation C 
requires that a financial institution post a notice concerning the 
availability of its HMDA data in the lobby of its home office and of 
each branch office located in an MSA and MD. Section 1003.5(e) also 
requires that a financial institution must provide, or the posted 
notice must include, the location of the institution's office where its 
disclosure statement is available for inspection and copying. Comment 
5(e)-1 suggests text for the posted notice required under Sec.  
1003.5(e). Comment 5(e)-2 suggests text concerning disclosure 
statements that may be included in the posted notice to satisfy Sec.  
1003.5(b)(3)(ii). The Bureau is proposing conforming, clarifying, and 
technical modifications to Sec.  1003.5(e).
    Under proposed Sec.  1003.5(b)(2), a financial institution shall 
make its disclosure statement available to the public by making 
available at its home office and at each branch office located in each 
MSA and each MD a notice that clearly conveys that the institution's 
disclosure statement may be obtained on the FFIEC Web site and that 
includes the FFIEC's Web site address. If this proposal is adopted, a 
financial institution's disclosure statement would be available online 
and the notice advising of this fact would be available in every branch 
office located in an

[[Page 51818]]

MSA or MD, rendering unnecessary the current Sec.  1003.5(e) 
requirement that an institution provide the location of the office 
where the disclosure statement is available for inspection and copying 
or include the location in the posted notice. Accordingly, the Bureau 
is proposing to remove from Sec.  1003.5(e) the requirement that an 
institution provide, or its posted notice include, the location of the 
institution's office where its disclosure statement is available for 
inspection and copying. The Bureau solicits comment on whether this 
proposal is appropriate. The Bureau is proposing to delete comment 
5(e)-2 to conform to the deletion of proposed Sec.  1003.5(b)(3).
    The Bureau is also proposing to clarify that the notice required 
under Sec.  1003.5(e) must be posted in a financial institution's home 
office and in each branch office located in an MSA or MD. Finally, the 
Bureau is proposing to make minor technical modifications to comment 
5(e)-1. These include adding language to the suggested content for the 
notice required under Sec.  1003.5(e) to highlight that HMDA data 
include the age of applicants and borrowers and to provide additional 
information about the online availability of HMDA data. The Bureau 
solicits feedback on whether these changes are appropriate.
5(f) Aggregation
    HMDA section 310 requires the FFIEC to compile aggregate data by 
census tract for all financial institutions reporting under HMDA and to 
produce tables indicating aggregate lending patterns for various 
categories of census tracts grouped according to location, age of 
housing stock, income level, and racial characteristics. HMDA section 
304(f) requires the FFIEC to implement a system to facilitate access to 
data required to be disclosed under HMDA section 304, including 
arrangements for central depositories where such data are made 
available for inspection and copying. Section 1003.5(f) of Regulation C 
provides that the FFIEC will produce reports for individual 
institutions and reports of aggregate data for each MSA and MD, showing 
lending patterns by property location, age of housing stock, and income 
level, sex, ethnicity, and race, and will make these reports available 
at central depositories. Section 1003.5(f) also contains information 
concerning how to obtain a list of central depositories from the FFIEC. 
For the reasons discussed below, the Bureau is proposing two 
modifications to Sec.  1003.5(f).
    The Bureau understands that the FFIEC has not made HMDA data 
available at brick-and-mortar central depositories since approximately 
the mid-2000s. Instead, since at least the early 2000s, the FFIEC has 
made data required to be disclosed under HMDA, including the data 
required under HMDA section 310, readily available at no cost to the 
public on its Web site. The Bureau concludes that sole reliance on the 
FFIEC Web site to publish HMDA data satisfies HMDA section 304(f). The 
Web site provides a single, convenient place for public officials and 
members of the public to inspect and copy all public HMDA data, and 
thus qualifies as a central depository: Access is available through any 
computer with internet connectivity, and the Web site constitutes an 
effective system for facilitating access to HMDA data. The Bureau also 
concludes, pursuant to HMDA section 305(a), that this means of 
providing access to HMDA data is necessary and proper to effectuate 
HMDA's purposes and facilitate compliance therewith. Accordingly, the 
Bureau is proposing to delete reference to central depositories in 
Sec.  1003.5(f) and to instead explicitly reference the data's 
availability on the FFIEC Web site, to conform to current practices.
    The Bureau also proposes to replace the word ``produce'' with 
``make available'' in Sec.  1003.5(f) for clarity. The Bureau believes 
that advances in technology may permit, for example, the FFIEC to 
produce an online tool, such as a tabular engine, that would allow 
public officials and members of the public to generate the tables 
described in HMDA section 310. It is the Bureau's interpretation that 
the obligation to ``produce tables'' set forth in HMDA section 310 
would be satisfied if the FFIEC produced such a tool, which in turn 
would produce the tables described in HMDA section 310 on request. The 
Bureau proposes to modify the language in Sec.  1003.5(f) to clarify 
that such developments are accommodated by this section. Further, 
pursuant to HMDA section 305(a), the Bureau believes that permitting 
the FFIEC to produce a tool that allows members of the public to 
generate tables described in HMDA section 310 is necessary and proper 
to effectuate the purposes of HMDA and facilitate compliance therewith.
    The Bureau solicits feedback on whether these proposed 
modifications to Sec.  1003.5(f) are appropriate.

Section 1003.6 Enforcement

6(b) Bona Fide Errors
    During the Small Business Review Panel process, some small entity 
representatives raised concerns regarding reporting errors. Small 
entity representatives expressed concern that adoption of any new data 
points would make financial institutions more vulnerable to being cited 
in examinations for reporting errors that they consider minor, but in 
total exceed their supervisory agencies' tolerances for reporting 
accurate HMDA information.\584\ Some small entity representatives 
suggested that tolerances for errors be increased if additional data 
points were added to Regulation C.\585\ One small entity representative 
recommended that error rates be judged by the total number of data 
points contained in the loan application register entries sampled 
rather than by the number of entries sampled.\586\ Another small entity 
representative noted that strict tolerances for errors increased HMDA 
compliance costs because they required substantial review of loan 
application registers for precision.\587\
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    \584\ See Small Business Review Panel Report at 21.
    \585\ See Small Business Review Panel Report at 21.
    \586\ See Small Business Review Panel Report at 97.
    \587\ See Small Business Review Panel Report at 55.
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    Section 1003.6(b) of Regulation C provides that an error in 
compiling and recording loan data is not a violation of HMDA or 
Regulation C if the error was unintentional and occurred despite the 
maintenance of procedures reasonably adapted to avoid such errors; that 
census tract reporting errors are not violations if an institution 
maintains procedures reasonably adapted to avoid such errors; and that, 
if an institution makes a good faith effort to record all data 
concerning covered transactions fully and accurately within thirty 
calendar days after the end of each calendar quarter, and some data are 
nevertheless inaccurate or incomplete, the error or omission is not a 
violation of HMDA or Regulation C provided that the institution 
corrects or completes the information prior to submitting the loan 
application register to its regulatory agency. The Bureau is not 
proposing specific changes to Sec.  1003.6(b). However, the Bureau is 
concerned about the issues related to errors raised by the small entity 
representatives. The Bureau is seeking feedback generally regarding 
whether, in light of the new proposed reporting requirements, it would 
be appropriate to add new provisions to Sec.  1003.6 to clarify 
compliance expectations and address compliance burdens or operational 
challenges. The Bureau is seeking feedback on whether a more precise 
definition of what constitutes an error would be helpful, whether there 
are ways to improve the current methods of calculating error rates, and 
whether tolerance levels for error rates would be appropriate.

[[Page 51819]]

VI. Section 1022(b)(2) of the Dodd-Frank Act

    The Bureau is considering the potential benefits, costs, and 
impacts of the proposed rule.\588\ The Bureau requests comment on the 
preliminary discussion presented below, as well as submissions of 
additional data that could inform the Bureau's consideration of the 
benefits, costs, and impacts of the proposed rule. In developing the 
proposed rule, the Bureau has consulted with or offered to consult with 
the prudential regulators (the Board of Governors of the Federal 
Reserve System, the Federal Deposit Insurance Corporation, the National 
Credit Union Administration, and the Office of the Comptroller of the 
Currency), the Department of Justice, the Department of Housing and 
Urban Development, the Federal Housing Finance Agency, the Securities 
and Exchange Commission, and the Federal Trade Commission regarding, 
among other things, consistency with any prudential, market, or 
systemic objectives administered by such agencies.
---------------------------------------------------------------------------

    \588\ Specifically, section 1022(b)(2)(A) of the Dodd-Frank Act 
calls for the Bureau to consider the potential benefits and costs of 
a regulation to consumers and covered persons, including the 
potential reduction of access by consumers to consumer financial 
products or services; the impact on depository institutions and 
credit unions with $10 billion or less in total assets as described 
in section 1026 of the Dodd-Frank Act; and the impact on consumers 
in rural areas.
---------------------------------------------------------------------------

    As discussed in greater detail elsewhere throughout this 
supplementary information, in this rulemaking, the Bureau is proposing 
to amend Regulation C, which implements HMDA, and the official 
commentary to the regulation, as part of the Bureau's implementation of 
the Dodd-Frank Act amendments to HMDA regarding the reporting and 
disclosure of mortgage loan information. The proposed amendments to 
Regulation C implement section 1094 of the Dodd-Frank Act, which made 
certain amendments to HMDA.\589\
---------------------------------------------------------------------------

    \589\ These amendments, among other things, require financial 
institutions to itemize their HMDA data by: The age of mortgagors 
and mortgage applicants; points and fees payable at origination in 
connection with a mortgage; the difference between the annual 
percentage rate associated with a loan and a benchmark rate or rates 
for all loans; the term in months of any prepayment penalty or other 
fee or charge payable on repayment of some portion of principal or 
the entire principal in advance of scheduled payments; the value of 
the real property pledged or proposed to be pledged as collateral; 
the actual or proposed term in months of any introductory period 
after which the rates of interest may change; the presence of 
contractual terms or proposed contractual terms that would allow the 
mortgagor or applicant to make payments other than fully amortizing 
payments during any portion of the loan term; the actual or proposed 
term in months of the mortgage; the channel through which the 
mortgage application was made, including retail, broker, and other 
relevant categories; and the credit score of mortgage applicants and 
mortgagors.
---------------------------------------------------------------------------

    In addition, the proposal includes additional amendments to 
Regulation C to implement the Dodd-Frank Act's provisions permitting 
reporting of, as the Bureau may determine to be appropriate, a unique 
identifier that identifies the loan originator, a universal loan 
identifier, and the parcel number that corresponds to the real property 
pledged or proposed to be pledged as collateral. The proposed rule 
would also require financial institutions to report additional 
information pursuant to authority under sections 304(b)(5)(D) and 
304(b)(6)(J) of HMDA, which permit the disclosure of such other 
information as the Bureau may require, and section 305(a) of HMDA, 
which, among other things, broadly authorizes the Bureau to prescribe 
such regulations as may be necessary to carry out HMDA's purposes. 
Certain additional data points included in the proposed rule are not 
specifically identified by the Dodd-Frank Act amendments to HMDA.\590\
---------------------------------------------------------------------------

    \590\ These additional data include: The construction method for 
the dwelling related to the subject property; mandatory reporting of 
the reasons for denial of a loan application; the total origination 
charges associated with the loan; the total points paid to the 
lender to reduce the interest rate of the loan; the interest rate 
the borrower would have received if the borrower had not paid any 
bona fide discount points; the interest rate applicable to the 
covered loan at closing or account open; the applicant's or 
borrower's debt-to-income ratio; the ratio of the total amount of 
debt secured by the property to the value of the property; whether a 
manufactured home is legally classified as real property or as 
personal property; the land property interest for loans or 
applications related to manufactured housing; the total number of 
individual dwelling units contained in the dwelling related to the 
loan; the number of individual dwellings units that are income-
restricted pursuant to Federal, State, or local affordable housing 
programs; information related to the automated underwriting system 
used in evaluating an application; whether the loan is a reverse 
mortgage, and whether the reverse mortgage is an open- or closed-end 
transaction; whether the loan is a home-equity line of credit; 
whether the loan is a qualified mortgage; and the amount of the draw 
on a home-equity line of credit and on an open-end reverse mortgage.
---------------------------------------------------------------------------

    The proposed rule would also modify the regulation's institutional 
and transactional coverage by, among other things, requiring financial 
institutions to report activity only for dwelling-secured loans, 
regardless of whether the loans are for home purchase, home 
improvement, or refinancing; adjusting the institutional coverage to 
adopt a uniform loan-volume threshold of 25 loans applicable to all 
financial institutions; and requiring financial institutions to report 
data on applications and accounts opened for home-equity lines of 
credit.
    Furthermore, the Bureau is proposing to modify the frequency of 
reporting for certain financial institutions with large numbers of 
transactions, modify the requirements regarding the disclosure 
statement, and specify the form required for the loan application 
register information that HMDA reporters must make available to the 
public. Financial institutions that reported at least 75,000 covered 
loans, applications, and purchased covered loans, combined, for the 
preceding calendar year, would be required to report data quarterly to 
the Bureau or to the appropriate Federal agency. Financial institutions 
would be permitted to make their disclosure statements available to the 
public by providing, upon request, a notice that clearly conveys that 
the disclosure statement may be obtained on the FFIEC Web site and that 
includes the Web site address. Under the proposed regulation, financial 
institutions would make available to the public a modified loan 
application register showing only the data fields that are currently 
released on the modified loan application register.
    The Bureau is also separately considering several operational 
improvements designed to reduce the burden associated with reporting 
HMDA data. The Bureau is considering restructuring the geocoding 
process, creating an improved web-based HMDA Data Entry Software (DES), 
and otherwise streamlining the submission and editing process to make 
it more efficient. The Bureau is also proposing to align the HMDA data 
requirements with the widely-used MISMO data standards for residential 
mortgages to the extent practicable.
    As discussed in greater detail elsewhere in this supplementary 
information, HMDA requires lenders located in metropolitan areas to 
report data about their housing-related lending activity. In 2010, 
Congress responded to the mortgage crisis with the Dodd-Frank Act, 
which enacted changes to HMDA and directed reforms to the mortgage 
market and the broader financial system. In addition to transferring 
rulemaking authority for HMDA from the Board to the Bureau, the Dodd-
Frank Act directed the Bureau to implement changes requiring the 
collection and reporting of several new data points and such other 
information as the Bureau may require. In doing so, Congress sought to 
ensure that HMDA data continue to be useful for determining whether 
institutions are serving the housing needs of their communities, for 
identifying potentially discriminatory lending patterns, and for 
helping public officials target public investment to

[[Page 51820]]

attract private investment where it is needed.

A. Provisions To Be Analyzed

    The proposal contains both specific proposed provisions with 
regulatory or commentary language (proposed provisions) as well as 
requests for comment on modifications where regulatory or commentary 
language was not specifically included (additional proposed 
modifications). The discussion below considers the benefits, costs, and 
impacts of the following major proposed provisions and the additional 
proposed modifications:
    1. The scope of the institutional coverage of the proposed rule.
    2. The scope of the transactional coverage of the proposed rule.
    3. The data that financial institutions are required to report 
about each loan or application.
    4. The proposed modifications to disclosure and reporting 
requirements.
    With respect to each major proposed provision, the discussion 
considers the benefits, costs, and impacts to consumers and covered 
persons. The discussion also addresses certain alternative provisions 
that were considered by the Bureau in the development of the proposed 
rule. The Bureau requests comment on the consideration of the potential 
benefits, costs, and impacts of the proposed rule.

B. Statement of Need

1. HMDA's Purposes and the Current Deficiencies in Regulation C
    Congress intended HMDA to provide the public and public officials 
with information to help determine whether financial institutions are 
serving the housing needs of their communities, to target public 
investment to attract private investment in communities, and to 
identify possible discriminatory lending patterns and enforce 
antidiscrimination statutes. Today, HMDA data are the preeminent data 
source for regulators, researchers, economists, industry, and advocates 
analyzing the mortgage market both for the three stated purposes of 
HMDA and for general market monitoring. For example, HMDA data are used 
by bank supervisors to evaluate depository institutions for purposes of 
the CRA; by local groups as the basis for discussions with lenders 
about local community needs; and by regulators, community groups, and 
researchers to identify disparities in mortgage lending that may 
provide evidence of prohibited discrimination. In addition, HMDA data 
provide a broadly representative, national picture of home lending that 
is unavailable from any other data source. This information permits 
users to monitor market conditions and trends, such as the supply and 
demand of applications and originations. For example, industry uses 
HMDA data to identify and meet the needs of underserved markets through 
potentially profitable lending and investment opportunities.
    HMDA data include records regarding applications by mortgage 
borrowers and records regarding the flow of funding from lenders to 
borrowers. Together, these records form a near-census of the home 
mortgage market for covered loans and applications, with rich 
geographical detail (down to census tract level) and identification of 
the specific financial institution for each transaction. Therefore, 
HMDA allows users to draw a detailed picture of the supply and demand 
of mortgage credit at various levels of geography and lender 
aggregation.
    Despite past improvements, however, serious inadequacies exist in 
the information currently collected under Regulation C. HMDA data can 
generally be used to calculate underwriting and pricing disparities 
across various protected classes in mortgage lending, at the national, 
market, and individual-lender levels. Nevertheless, the data lack key 
fields that explain legitimate underwriting and pricing decisions for 
mortgage loans. Therefore, in most cases, HMDA data alone cannot 
demonstrate whether borrowers and applicants have received 
nondiscriminatory treatment by financial institutions. Additional 
proposed data points, such as credit score, AUS recommendations, CLTV, 
and DTI, would help users understand the reasons for approvals and 
denials of applications and for pricing decisions regarding 
originations. Similarly, current HMDA data provide certain information 
about borrowers (race, ethnicity, sex, income, and location) and loans 
(loan amount, purpose, loan type, occupancy, lien status, and property 
type). However, the current data points do not fully characterize the 
types of loans for which consumers are applying and do not explain why 
some applications are denied. The additional proposed data points, such 
as non-amortizing features, prepayment penalties, and loan terms, would 
help fill these important information gaps.
    Additionally, analysis of the cost of credit to mortgage borrowers 
is incomplete without the inclusion of key pricing information. The 
current rate spread reporting requirement requires financial 
institutions to report rate spread only for higher-priced mortgage 
loans. Currently, such loans comprise less than 5 percent of total 
originations. These limited data restrict analysis of the cost of 
credit to a small segment of total mortgage originations and create 
severe selection bias as changes in the market lead to shifts in the 
average spreads between APR values and APOR. Adding the proposed 
pricing data fields, such as discount points, risk-adjusted, pre-
discounted interest rate, origination charges, interest rate, and total 
points and fees, will allow users to better understand the price that 
consumers pay for mortgages and more effectively analyze the tradeoffs 
between rates, points, and fees.
    HMDA also currently provides limited information about the property 
that secures or will secure the loan. Despite being one of the most 
important characteristics for underwriting and pricing decisions, the 
value of the property securing the loan has not been collected under 
the current HMDA reporting requirements. The proposed rule would 
address this deficiency by providing for reporting of the value of the 
property securing the covered loan or application. Current HMDA data 
also lack information about the manufactured housing segment of the 
mortgage market. Manufactured housing is an important source of housing 
for many borrowers, such as low-income and elderly borrowers, that are 
often financially fragile and possibly more vulnerable to unfair and 
predatory practices.\591\ Multifamily financing for both institutional 
and individual borrowers serves the housing needs of multifamily unit 
dwellers who are mostly renters and many of whom face challenges 
related to housing affordability. The Bureau's proposal would provide 
for reporting of the construction method, number of multifamily 
affordable units, manufactured housing security type, and property 
interest. The improved data would help community groups, government 
agencies, researchers, members of the public, and industry to better 
understand the properties for

[[Page 51821]]

which borrowers are receiving or being denied credit.
---------------------------------------------------------------------------

    \591\ Eric S. Belsky & Mark Duda, ``Anatomy of the Low-Income 
Homeownership Boom in the 1990s,'' in Low Income Homeownership: 
Examining the Unexamined Goal 15-63, Joint Center for Housing 
Studies of Harvard University Low-Income Homeownership Working Paper 
Series 01-1 (2001) (providing evidence that manufactured housing was 
an important driver of the homeownership boom for the low-income 
population in the 1990s). Manufactured housing is also an important 
source of housing for the elderly. See Robert W. Wilden, Comm'n on 
Affordable Housing and Health Facility Needs for Seniors in the 21st 
Century, Manufactured Housing and Its Impact on Seniors (2002).
---------------------------------------------------------------------------

    Finally, the transactional coverage criteria omit a large 
proportion of dwelling-secured loan products, such as home-equity lines 
of credit. In the lead-up to the financial crisis between 2000 and 
2008, the total balance of closed- and open-end home-equity loans 
increased by approximately 16.8 percent annually, growing from a total 
of $275.5 billion to $953.5 billion. Recent research has shown that 
this growth in home-equity lending was correlated with subsequent home 
price depreciation, as well as high default and foreclosure rates among 
first mortgages.\592\ These correlations were driven in part by 
consumers using home-equity lines of credit to fund investment 
properties, which impacted default rates when housing prices began to 
fall. By identifying home-equity lines of credit and loan purposes, 
industry, members of the public, and public officials will be better 
able to identify and respond to similar patterns in the future.
---------------------------------------------------------------------------

    \592\ Michael LaCour-Little, Wei Yu, and Libo Sun, The Role of 
Home Equity Lending in the Recent Mortgage Crisis, 42 Real Estate 
Economics 153 (2014).
---------------------------------------------------------------------------

    Congress recognized the current deficiencies in HMDA, and responded 
with the Dodd-Frank Act, which amended HMDA and provided broader 
reforms to the financial system. The Dodd-Frank Act's amendments to 
HMDA require the collection and reporting of several new data points, 
including information about borrowers (age and credit score), 
information about loan features and pricing, and, as the Bureau may 
determine to be appropriate, unique identifiers for loans, properties, 
and loan originators. It also authorizes the Bureau to require 
financial institutions to collect and report ``such other information 
as the Bureau may require.''
2. Improving HMDA Data To Address Market Failures
    HMDA does not regulate the interactions between lenders and 
borrowers. Instead, HMDA requires financial institutions to report 
detailed information to their Federal supervisory agencies and to the 
public about mortgage applications and originations at the transaction 
level. Such information provides an important public good that 
illuminates the lending activities of financial institutions and the 
mortgage market in general. This increased transparency allows members 
of the public, community groups, and public officials to better assess 
compliance with various Federal laws and regulations. In doing so, HMDA 
data help correct the potential market failures that those laws and 
regulations were designed to address.
    From the perspective of economics, the proposed improvements to 
HMDA would address two market failures: (1) The under-production of 
public mortgage data by the private sector, and (2) the information 
asymmetries present in credit markets.
    First, HMDA data is a public good in that it is both non-rival, 
meaning that it may be used without reducing the amount available for 
others, and non-excludable, meaning that it cannot be withheld from 
consumers who do not pay for it. As with other public goods, standard 
microeconomic principles dictate that public mortgage data would be 
under-produced by the private sector, creating an outcome that is not 
socially optimal. Not surprisingly, no privately produced loan-level 
mortgage databases with comprehensive national coverage exist that are 
easily accessible by the public. Private data vendors offer a few large 
databases for sale that typically contain data collected from either 
the largest servicers or securitizers. However, none of these databases 
match the near-universal coverage of the HMDA data.\593\ Furthermore, 
commercial datasets come at high cost to subscribers, creating a 
substantial hurdle for community groups, government agencies, and 
researchers that wish to obtain access. Importantly, these commercially 
available datasets typically do not identify individual lenders and 
therefore cannot be used to study whether specific lenders are meeting 
community needs or making nondiscriminatory credit decisions. In 
addition, all privately produced, commercially available mortgage 
databases cover only originated loans and exclude applications that do 
not result in originations. A crucial feature of the HMDA data is that 
they include information about applications in addition to 
originations. In other words, in economic terms, private mortgage 
databases only provide information about the market outcome resulting 
from the intersection of supply and demand, while HMDA data provide 
information about both the market outcome and the demand for credit. 
Thus, users can examine both supply and demand regarding mortgage 
credit and understand the reasons for discrepancies between supply and 
demand at various levels of analysis, including by lender, geographic 
region, type of product or feature, credit risk, income, and race or 
ethnicity.
---------------------------------------------------------------------------

    \593\ Although limited transactions and institutions are 
excluded from HMDA, these are also typically excluded from 
commercial datasets.
---------------------------------------------------------------------------

    Second, it is well-accepted that credit markets are characterized 
by information asymmetries. Mortgage products and transactions are 
highly complex, and lenders have a significant information advantage. 
Such information asymmetry affects price and quantity allocations and 
can contribute to types of lender behavior, such as discrimination or 
predatory lending, that conflict with the best interests of consumers. 
In addition to disadvantaging individual consumers, information failure 
may also lead to herding behavior by both lenders and consumers, 
creating substantial systemic risk to the mortgage market and the 
nation's overall financial system. The recent mortgage crisis provides 
a vivid demonstration of such a threat to the overall safety and 
stability of the housing market.
    These market failures are intertwined. Following the financial 
crisis, the Bureau and other government regulators have attempted to 
directly address misallocation, enhance consumer protection, and stem 
systemic risk in the mortgage market through rules that regulate the 
business practices of financial institutions. In contrast, the proposed 
rule provides another approach to solving failures in the mortgage 
market: Correcting the informational market failure. Increased mortgage 
data would provide greater transparency about the mortgage market, 
weakening the information advantage that lenders possess relative to 
borrowers, community groups, and public officials. Greater information 
enables these groups to advocate that financial institutions adopt 
fairer practices and increases the prospect that self-correction by 
financial institutions would be rewarded. Additional information would 
also help reduce the herding behavior of both lenders and borrowers, 
reducing the systemic risk that has been so detrimental to the nation. 
Mandatory sharing of information may lead to more efficient outcomes. 
Thus, as a public good that reduces information asymmetry in the 
mortgage market, HMDA data are irreplaceable.
    Finally, the proposed rule would meet the compelling public need 
for improved efficiency in government operations. The new data would 
allow the government to more effectively assess compliance by financial 
institutions with the Equal Credit Opportunity Act and the Fair Housing 
Act. The new data will also help regulatory agencies assess the 
performance of certain financial

[[Page 51822]]

institutions under the Community Reinvestment Act. Improved HMDA data 
would also provide valuable information that supports future market 
analyses and optimal policy-making.

C. Baseline for Consideration of Costs and Benefits

    The Bureau has discretion in any rulemaking to choose an 
appropriate scope of consideration with respect to potential benefits 
and costs and an appropriate baseline. The Bureau does not believe the 
amendments to HMDA in section 1094 of the Dodd-Frank Act would take 
effect automatically without implementing rules. Financial institutions 
are not required to report additional data required by section 
304(b)(5) and (6) of HMDA, as amended, ``before the first January 1 
that occurs after the end of the 9-month period beginning on the date 
on which regulations are issued by the Bureau in final form with 
respect to such disclosures.'' \594\ Furthermore, financial 
institutions are unable to comply with the obligation to report data 
regarding the age of mortgagors and mortgage applicants, which is 
required pursuant to section 304(b)(4) of HMDA, until the Bureau 
provides the necessary guidance on the manner of such reporting, 
including modification of the loan application register to accommodate 
the reporting of age data. Therefore, the Bureau believes that the 
requirements to report all of the new data elements under HMDA section 
304(b)(4)-(6) cannot be effective until the Bureau completes a 
rulemaking with respect to the reporting of such data. Accordingly, 
this analysis considers the benefits, costs, and impacts of the major 
provisions of the proposed rule against a pre-Dodd-Frank Act baseline, 
i.e., the current state of the world before the provisions of the Dodd-
Frank Act that amended HMDA are implemented by an amended Regulation C. 
The Bureau believes that such a baseline will also provide the public 
with better information about the benefits and costs of the statutory 
amendments to HMDA.
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    \594\ Public Law 111-203, section 1094(3)(F).
---------------------------------------------------------------------------

D. Coverage of the Proposed Rule

    Each proposed provision applies to certain financial institutions, 
and requires these financial institutions to report and disclose data 
regarding covered loans secured by a dwelling that they originate or 
purchase, or for which they receive applications, as described further 
in each section below.

E. Basic Approach of the Bureau's Consideration of Benefits and Costs 
and Data Limitations

    This discussion relies on data that the Bureau has obtained from 
industry, other regulatory agencies, and publicly available sources. 
However, as discussed further below, the data limit the Bureau's 
ability to quantify the potential costs, benefits, and impacts of the 
proposed rule.
1. Costs to Covered Persons
    Regarding the costs to covered persons, the proposed rule generally 
establishes which financial institutions, transactions, and data points 
are covered under HMDA's reporting requirements. In order to precisely 
quantify the costs to covered persons, the Bureau would need, for both 
current and potential HMDA reporters, representative data on the 
operational costs that financial institutions incur to gather and 
report HMDA data, one-time costs for financial institutions to update 
reporting infrastructure in response to the proposed rule, and 
information on the level of complexity of financial institutions' 
business models and compliance systems. Currently, the Bureau does not 
believe that data on HMDA reporting costs with this level of 
granularity is systematically available from any source. The Bureau has 
made reasonable efforts to gather data on HMDA reporting costs. Through 
outreach efforts with industry, community groups, and other regulatory 
agencies, the Bureau has obtained some information about ongoing 
operational and one-time compliance costs, and the discussion below 
uses this information to quantify certain costs of the proposed rule. 
The Bureau believes that the discussion constitutes the most 
comprehensive assessment to date of the costs of HMDA reporting by 
financial institutions. However, the Bureau recognizes that these 
calculations may not fully quantify the costs to covered persons, 
especially given the wide variation of HMDA reporting costs among 
financial institutions. The Bureau continues to seek data from 
available sources in order to better quantify the costs to covered 
persons.
    More specifically, in considering the benefits, costs, and impacts 
of the proposed rule, the Bureau has engaged in a series of efforts to 
estimate the cost of compliance by covered entities. First, the Bureau 
attempted to understand and estimate the current cost of reporting for 
financial institutions, i.e. the baseline cost at the institution 
level. Second, the Bureau evaluated the change in financial 
institutions' operational and one-time costs in response to the 
proposed changes. Part VI.F, below, provides details on the Bureau's 
approach in performing these institution-level analyses. The Bureau 
realizes that costs vary by institution due to many factors, such as 
size, operational structure, and product complexity, and that this 
variance exists on a continuum that is impossible to fully represent. 
In order to conduct a cost consideration that is both practical and 
meaningful, the Bureau has chosen an approach that focuses on three 
representative tiers of financial institutions. For each tier, the 
Bureau has produced a reasonable estimate of the cost of compliance 
given the limitations of the available data. Part VI.F.2, below, 
provides additional details on this approach. More elaboration is 
available in the Small Business Review Panel Outline of Proposals and 
the Small Business Review Panel Report.\595\
---------------------------------------------------------------------------

    \595\ See U.S. Consumer Fin. Prot. Bureau, Small Business Review 
Panel for Home Mortgage Disclosure Act Rulemaking: Outline of 
Proposals Under Consideration and Alternative Considered (Feb. 7, 
2014) (Outline of Proposals), available at https://
files.consumerfinance.gov/f/
201402cfpbhmdaoutline-of-proposals.pdf.
---------------------------------------------------------------------------

    The third stage of the Bureau's consideration of costs involved 
projecting and mapping the total number of potentially impacted 
financial institutions to the three tiers described above. The Bureau 
used a wide range of data in conducting this task, including current 
HMDA data, call reports, and NMLSR data.\596\ The Bureau faced 
substantial challenges in completing this task, because no single data 
source provided complete coverage of all the financial institutions 
that could be impacted, and the data quality of some sources was less 
than perfect. For example, estimating the number of HMDA reporters that 
would be eliminated under the proposed rule was relatively easier than 
estimating the number of HMDA reporters that would be added. Similarly, 
the Bureau faced certain challenges in mapping the financial 
institutions to the three representative tiers. Where the Bureau is 
uncertain about the aggregate impacts, it has provided certain range 
estimates.
---------------------------------------------------------------------------

    \596\ NMLSR is a national registry of non-depository financial 
institutions, including mortgage loan originators.
---------------------------------------------------------------------------

2. Costs to Consumers
    Having generated estimates of the cost impact on covered financial 
institutions, the Bureau attempted to estimate the costs to consumers. 
According to economic theory, in a perfectly competitive market where 
financial institutions are profit maximizers, the

[[Page 51823]]

affected financial institutions would pass on to consumers the 
marginal, i.e. variable, cost per application or origination, and 
absorb the one-time and increased fixed costs of complying with the 
rule. The Bureau received feedback through the Small Business Review 
Panel process that, if the market permitted, some small entities would 
attempt to pass on to consumers the entire amount of the increased cost 
of compliance and not just the increase in variable costs. Because the 
competiveness, supply-demand conditions, and impact of market failures 
may vary across different markets, the Bureau seeks additional comment 
on the costs to consumers.
3. Benefits to Consumers and Covered Persons
    Quantifying benefits to consumers also presented substantial 
challenges. As discussed above, Congress intended for HMDA, including 
the Dodd-Frank Act amendments to the Act and the Bureau's rules 
implementing HMDA, to achieve compelling social benefits. The Bureau is 
unable to readily quantify some of these benefits with precision, both 
because the Bureau does not have the data to quantify all benefits and 
because the Bureau is not able to assess completely how effective the 
Dodd-Frank amendments to HMDA will be in achieving those benefits. As 
explained elsewhere in this supplementary information, the Bureau 
believes that its proposals appropriately implement the statutory 
amendments and are necessary and proper to effectuate HMDA's purposes. 
As discussed further below, as a data reporting rule, most provisions 
of the proposal would benefit consumers in indirect ways. Nevertheless, 
the Bureau believes that the impact of enhanced transparency would 
substantially benefit consumers. For example, the proposed rule would 
facilitate the detection and remediation of discrimination; promote 
public and private investment in certain under-served markets, 
potentially increasing access to mortgage credit; and promote more 
stable and competitive markets. Quantifying and monetizing these 
benefits would require identifying all possible uses of HMDA data, 
establishing causal links to the resulting public benefits, and then 
quantifying the magnitude of these benefits. The Bureau continues to 
seek data from available sources regarding the benefits to consumers of 
the proposed rule. The Bureau is particularly interested in the 
quantifiable impact of increased transparency on financial institution 
behavior, the need for public and private investment, the housing needs 
of communities, the number of lenders potentially engaging in 
discriminatory or predatory behavior, and the number of consumers 
currently being unfairly disadvantaged and the level of quantifiable 
damage from such disadvantage. The Bureau is unaware of data that would 
enable reliable quantitative estimates of all of these effects.
    Similar issues arise in attempting to quantify the benefits to 
covered persons. Certain benefits to covered persons are difficult to 
quantify. For example, the Bureau believes that the enhanced HMDA data 
will facilitate improved monitoring of the mortgage market in order to 
prevent major disruptions to the financial system, which in turn would 
benefit financial institutions over the long run. But such effects are 
hard to quantify because they are largely related to future events that 
the proposed changes themselves are designed to prevent from happening. 
Similarly, the Bureau believes that the enhanced HMDA data will provide 
a better analytical basis for financial regulators and community groups 
to screen and monitor lenders for possible discrimination. Because of 
limitations in the current HMDA data fields, high false positive rates 
have been widely cited by financial institutions in various HMDA-
related fair lending exams, complaints, and lawsuits. The proposed 
changes would greatly reduce the rate of false positives and therefore 
reduce the associated compliance burden on financial institutions. The 
Bureau believes that such benefits to financial institutions could be 
substantial. Nevertheless, quantifying them would require data that are 
currently unavailable.
    In light of these data limitations, the discussion below generally 
provides a qualitative consideration of the benefits, costs, and 
impacts of the proposed rule. General economic principles, together 
with the limited data available, provide insight into these benefits, 
costs, and impacts. Where possible, the Bureau has made quantitative 
estimates based on these principles and the data that are available. 
The Bureau seeks comment on the appropriateness of the approach 
described above, including additional data relevant to the benefits and 
costs to consumers and covered persons.

F. Potential Benefits and Costs to Consumers and Covered Persons

1. Overall Summary
    In this section, the Bureau presents a concise, high-level overview 
of the benefits and costs considered in the remainder of the 
discussion. This overview is not intended to capture all details and 
nuances that are provided both in the rest of the analysis and in the 
section-by-section discussion above, but rather to provide an overview 
of the major benefits and costs of the proposed rule.
    Major benefits of the rule. The proposed rule has a number of major 
benefits. First, the proposed changes will improve the usefulness of 
HMDA data in identifying possible discriminatory lending patterns and 
enforcing antidiscrimination statutes. By covering additional 
transactions, including mandatory reporting of open-end lines of 
credit, home-equity loans, reverse mortgages, and preapproval requests 
that were approved, but not accepted, and by requiring reporting by 
additional nondepository institutions, the proposal expands the scope 
of the market that community groups and government agencies can include 
in fair lending analyses. The addition of pricing data fields such as 
interest rate, discount points, and origination charges improves 
understanding of disparities in pricing outcomes beyond that permitted 
by the current rate spread data field. The addition of data fields such 
as CLTV, credit score, DTI, and AUS recommendations allow for a more 
refined analysis and understanding of disparities in both underwriting 
and pricing outcomes. Overall, the proposed changes make fair lending 
analyses more comprehensive and accurate. This is especially important 
for the prioritization and peer analysis or redlining reviews that 
regulatory agencies conduct for fair lending supervision and 
enforcement purposes because a consistent and clean dataset will be 
available for all financial institutions.
    Second, the proposal will help determine whether financial 
institutions are serving the housing needs of their communities and 
help public officials target public investment to better attract 
private investment, two of HMDA's stated purposes. The proposed 
expansions of institutional and transactional coverage would provide 
additional data helpful to both industry and government in identifying 
profitable lending and investment opportunities in underserved 
communities. Similarly, the proposed data points related to multifamily 
dwellings and manufactured housing would reveal more information about 
these segments of the market. Borrowers who seek financing for 
manufactured housing are typically more financially vulnerable than 
borrowers financing site-built homes, and may deserve closer attention 
from government agencies and

[[Page 51824]]

community groups. Although financing involving multifamily dwellings 
reported under HMDA is typically offered to institutional borrowers, 
the ultimate constituents these loans serve are mostly low- to mid-
income renters who live in these financed units. Advocacy groups and 
government agencies have raised concerns over affordability issues 
faced by individuals living in multifamily dwellings, who also tend to 
be more financially vulnerable than individuals living in single-family 
dwellings. Overall, by permitting a better and more comprehensive 
understanding of these markets, the proposal will improve the 
usefulness of HMDA data for assessing the supply and demand of credit, 
and financial institutions' treatment of applicants and borrowers, in 
these communities.
    Third, the proposed changes would assist in earlier identification 
of trends in the mortgage market including the cyclical loosening and 
tightening of credit. Mandatory reporting of additional transactions, 
such as open-end lines of credit, home-equity loans, and reverse 
mortgages, as well as additional data fields, such as amortization 
type, prepayment penalty, and occupancy type, would improve 
understanding of the types of products and product characteristics 
received by consumers. Recent research has indicated that certain 
product types and characteristics may have increased the likelihood of 
default and exacerbated declines in housing prices during the recent 
financial crisis. In addition to being able to better identify some of 
the risk factors that played a role in the recent financial crisis, the 
additional transactions and data points would improve current research 
efforts to understand mortgage markets. This research may identify new 
risk factors that might increase systemic risk to the overall economy. 
Better understanding of these risk factors could provide early warning 
signals to the government of worrisome market trends.
    Fourth, the proposed changes will improve the effectiveness of 
policy-making efforts. In response to the recent financial crisis, the 
government has generated a number of rules and implemented a wide array 
of public policy measures to address market failures and protect 
consumers. The additional data being proposed, as well as the proposed 
coverage and transaction changes, will allow for more informed 
decisions by policy makers and improve the consideration of benefits, 
costs, and impacts for future policy efforts, resulting in more 
effective policy.
    Quantifying these benefits is difficult because the size of each 
particular effect cannot be known in advance. Given the number of 
mortgage transactions and the size of the mortgage market, however, 
small changes in behavior can have substantial aggregate effects. The 
Bureau seeks comments and suggestions on whether such effects can be 
reliably estimated and possible ways of doing so.
    Major costs of the rule. The proposed rule will increase ongoing 
operational costs and impose one-time costs on financial institutions. 
Financial institutions conduct a variety of operational tasks to 
collect the necessary data points, prepare the data for submission, 
conduct compliance and audit checks, and prepare for HMDA-related 
exams. These operational costs are driven primarily by the time spent 
on each task and the wage of the relevant employee. The Bureau 
estimates that current annual operational costs of reporting under HMDA 
are approximately $2,200 for a representative low-complexity financial 
institution with a loan application register size of 50 records; 
$32,000 for a representative moderate-complexity financial institution 
with a loan application register size of 1,000 records; and $267,000 
for a representative high-complexity financial institution with loan 
application register size of 50,000 records. This translates into an 
estimated per-application cost of approximately $45, $30, and $5 for 
representative low-, moderate- and high-complexity financial 
institutions, respectively. These operational cost estimates were 
shared with small entity representatives during the Small Business 
Review Panel meeting and their general accuracy was confirmed by most 
of the small entity representatives.\597\ Using recent survey estimates 
of net income from the Mortgage Bankers Association \598\ as a frame of 
reference for these ongoing, operational costs, the average net income 
per origination is approximately $2,900 for small/mid-size banks, 
$3,900 for medium banks, and $2,100 for large banks; and approximately 
$2,300 for small/mid-size independent mortgage companies, $3,000 for 
medium independent mortgage companies, and $1,900 for large independent 
mortgage companies.\599\
---------------------------------------------------------------------------

    \597\ During the Small Business Review Panel Meetings, most 
small entity representatives self-identified as tier 3 and tier 2 
institutions. There were a few non-depository institutions with 
large mortgage loan volume that self-identify as tier 1 
institutions.
    \598\ These estimates come from an annual survey conducted by 
the Mortgage Bankers Association and the STRATMORE group as part of 
the Peer Group Program and are available at https://www.mba.org/ResearchandForecasts/ProductsandSurveys/MBASTRATMORPeerGroupSurveyandRoundtables.htm.
    \599\ The Bureau notes that these net income estimates were 
reported by the Mortgage Bankers Association and the STRATMORE group 
on per-origination basis. The Bureau estimates the HMDA operational 
cost per application, not per origination.
---------------------------------------------------------------------------

    The proposed rule will affect the operational tasks associated with 
collecting and reporting HMDA data. More time will be required for 
tasks such as transcribing and checking data, and more resources will 
need to be devoted to tasks such as internal and external audits. The 
Bureau estimates that, absent the mitigation efforts discussed below, 
the addition to ongoing, operational costs borne by covered persons 
would be approximately $1,600 for a representative low-complexity 
financial institution; $10,300 for a representative moderate-complexity 
financial institution; and $27,000 for a representative high-complexity 
financial institution, per year. For the estimated 28 financial 
institutions that reported at least 75,000 transactions in the 
preceding year and would be required to report HMDA data quarterly, the 
addition to ongoing, operational costs would be approximately $54,000 
per year. This would translate into a market-level impact of 
approximately $18,400,000 to $59,000,000 per year. Using a 7 percent 
discount rate, the net present value of this impact over five years 
across the entire market would be an increase in costs of $75,600,000 
to $242,000,000.\600\
---------------------------------------------------------------------------

    \600\ The market-level estimates provide lower and upper bounds 
of the impact of the proposed rule on the market as a whole. To 
convey differences in impacts across the three representative tiers, 
we present institution-level estimates for each tier and do not 
aggregate up to market-level estimates for each tier. The 
institution-level estimates for each tier provide more useful and 
accurate estimates of differences in impacts across the three 
representative financial institutions, because they do not require 
the additional assumptions used to map HMDA reporters into tiers.
---------------------------------------------------------------------------

    With operational improvements the Bureau is considering, the net 
cost increase from the proposal would be smaller than the above 
estimates. The Bureau's initial outreach efforts, as well as 
information gathered during the Small Business Review Panel process, 
indicated that reportability questions, regulatory clarity, geocoding, 
and submission processes and edits were significant concerns to 
financial institutions. Along with modifying the reporting 
requirements, the Bureau is separately considering operational 
enhancements and modifications to address these concerns. For example,

[[Page 51825]]

the Bureau is considering working to consolidate the outlets for 
assistance, providing guidance support similar to the guidance provided 
for Title XIV rules; improving points of contact processes for help 
inquiries; modifying the types of edits and when edits are approved; 
exploring opportunities to improve the current DES; and considering 
approaches to reduce geocoding burdens. All of these enhancements would 
improve the submission and processing of data, increase clarity, and 
reduce reporting burden. With the inclusion of these operational 
improvements, the net impact of the proposed rule on ongoing 
operational costs would be approximately $1,000, $2,100, and $12,600 
per year, for representative low-, moderate-, and high-complexity 
financial institutions, respectively. For the estimated 28 financial 
institutions that reported at least 75,000 transactions in the 
preceding calendar year would be required to report HMDA data 
quarterly, the addition to ongoing operational costs would be 
approximately $31,300 per year. This would translate into a market-
level net cost increase of $10,200,000 to $14,900,000 per year. Using a 
7 percent discount rate, the net present value of this impact over five 
years would be a cost of $41,900,000 to $61,200,000.
    In addition to impacting ongoing, operational costs, the proposed 
rule would impose one-time costs necessary to modify processes in 
response to the proposal. These one-time costs are driven primarily by 
updating software systems, training staff, updating compliance 
procedures and manuals, and overall planning and preparation time. The 
Bureau estimates that these one-time costs would be approximately 
$3,000 for low-complexity financial institutions, $250,000 for 
moderate-complexity financial institutions, and $800,000 for high-
complexity financial institutions.
    These estimates exclude the impact of expanding transactional 
coverage to include open-end lines of credit, home-equity loans, and 
reverse mortgages.\601\ As discussed in more detail below, outreach 
efforts indicated that many financial institutions, especially larger 
and more complex institutions, process home-equity products in the 
consumer business line using separate procedures, policies, and data 
systems. As a result, there would be one-time costs to modify processes 
and systems for home-equity products and one-time costs to modify 
processes and systems for other mortgage products. The Bureau 
recognizes that the one-time cost from reporting dwelling-secured home-
equity products could be substantial for many financial institutions 
but so far lacks the data necessary to accurately quantify it. For this 
discussion, the Bureau assumes that the one-time cost of integrating 
home-equity products into HMDA reporting processes would be roughly 
equal to 50 percent of the one-time costs absent mandatory reporting of 
such products. This estimate accounts for the fact that compliance with 
the reporting requirements for these lines of business would require 
some new systems, extra start-up training, and new compliance 
procedures and manuals, but that some fixed, one-time costs could be 
shared with lines of business currently subject to Regulation C because 
both have to undergo systemic changes. For high- and moderate-
complexity financial institutions, the Bureau therefore estimates one-
time costs to adapt to mandatory reporting of open-end lines of credit, 
home-equity loans, and reverse mortgages to be $400,000 and $125,000, 
respectively. For low-complexity financial institutions, the one-time 
cost associated with mandatory reporting of dwelling-secured home-
equity products is relatively low because these institutions are less 
reliant on information technology systems for HMDA reporting, and home-
equity products are often processed on the same system and in the same 
business unit as mortgage products. Therefore, for tier 3 financial 
institutions, the Bureau estimates that the additional one-time cost 
created by the proposed changes to transactional coverage is minimal 
and is derived mostly from new training and procedures adopted for the 
proposed changes.
---------------------------------------------------------------------------

    \601\ The Bureau realizes that the impact to one-time costs 
varies by institution due to many factors, such as size, operational 
structure, and product complexity, and that this variance exists on 
a continuum that is impossible to fully capture. As a result, the 
one-time cost estimates will be high for some financial 
institutions, and low for others.
---------------------------------------------------------------------------

    The specific estimates of one-time costs are based on the Bureau's 
outreach efforts. Specifically, for low-complexity financial 
institutions, these outreach efforts indicated that the cost to update 
information technology systems would be minimal, because the processes 
involved in reporting are highly manual. The estimate of one-time 
training cost is based on estimated ongoing training costs of $300 per 
year for staff directly responsible for data reporting. In response to 
the proposed rule, additional staff will require one-time training, but 
the intensity of this training will be lower than ongoing training. To 
capture this additional, less-intensive training, the Bureau used five 
times the annual training cost as the estimated one-time training cost 
($1,500). Training costs provide the best-available proxy for the one-
time cost to update compliance procedures and manuals, so the Bureau 
used $1,500 as an estimate of these costs as well. Therefore, the total 
one-time cost estimate for lower-complexity financial institutions is 
approximately $3,000 (=0+1,500+1,500). This estimate varies little with 
or without the inclusion of mandatory reporting of dwelling-secured 
home-equity products.
    For moderate-complexity financial institutions, outreach efforts 
indicated that representative costs to update information technology 
would be approximately $225,000. This estimate excludes the impact of 
expanding transactional coverage to include dwelling-secured home-
equity products. The estimate of one-time training cost is based on the 
estimate of ongoing training costs of $2,500 per year. Again, the 
Bureau used five times the annual training cost as the estimated one-
time training cost ($12,500). Training costs provide the best-available 
proxy for the one-time cost to update compliance procedures and 
manuals, so the Bureau used $12,500 as an estimate of these costs as 
well. The one-time cost estimate for a representative moderate-
complexity financial institution is therefore approximately $250,000 
(=225,000+12,500+12,500), excluding the costs of mandatory reporting of 
dwelling-secured home-equity products. By including the 50 percent 
multiplier discussed above, the Bureau assumes that the one-time cost 
of mandatory reporting of dwelling-secured home-equity products is 
$125,000. Therefore, for a representative moderate-complexity financial 
institution, the one-time cost estimate including mandatory reporting 
of dwelling-secured home-equity products is $375,000.
    For high-complexity financial institutions, outreach efforts 
indicated that representative costs to update information technology 
would be approximately $500,000. This estimate excludes the impact of 
expanding transactional coverage to include dwelling-secured home-
equity products. The estimate of one-time training costs is based on 
the estimate of ongoing training costs of $30,000 per year. Again, the 
Bureau used five times the annual training cost as the estimated one-
time training cost ($150,000). Training costs provide the best 
available proxy for the one-time cost to update compliance procedures 
and manuals, so the Bureau used $150,000 as an estimate

[[Page 51826]]

of these costs as well. The one-time cost estimate for a representative 
high-complexity financial institution is therefore approximately 
$800,000 (=500,000+150,000+150,000). By including the 50 percent 
multiplier discussed above, the Bureau assumes that the one-time cost 
of mandatory reporting of dwelling-secured home-equity products is 
$400,000. Therefore, for a representative high-complexity financial 
institution, the one-time cost estimate including mandatory reporting 
of dwelling-secured home-equity products is $1,200,000.
    The Bureau estimates an overall market impact on one-time costs of 
between $383,000,000 and $2,100,000,000. As a frame of reference for 
all of these market-level, one-time cost estimates, the total non-
interest expenses for current HMDA reporters were approximately $420 
billion in 2012. The upper-bound estimate of $2.1 billion is 
approximately 0.5 percent of the total annual non-interest 
expenses.\602\ Because these costs are one-time investments, financial 
institutions are expected to amortize these costs over a period of 
years. In this analysis the Bureau amortizes all costs over five years, 
using a simple straight-line amortization. Using a 7 percent discount 
rate and a five-year window, the annualized additional one-time cost is 
$93,400,000 to $514,900,000.
---------------------------------------------------------------------------

    \602\ The Bureau estimated the total non-interest expense for 
banks, thrifts and credit unions that reported under HMDA based on 
Call Report and NCUA Call Report data for depository institutions 
and credit unions, and NMLS data for non-depository insitutions, all 
matched with 2012 HMDA reporters.
---------------------------------------------------------------------------

    The Bureau has taken a conservative approach to estimating the one-
time costs because of the uncertainty regarding how many financial 
institutions belong to each of the three representative tiers. Thus the 
Bureau has mapped out all possible distributions to arrive at the lower 
bound and higher bound cost estimates, as explained in part VI.F.2, 
below. The Bureau hopes to obtain more information on the distribution 
of financial institutions across the three tiers and to refine its 
estimate of these one-time costs through feedback received during the 
rulemaking process. In particular, the Bureau seeks additional 
information on the number of HMDA reporters that are moderate 
complexity, tier 2 institutions.
2. Methodology for Generating Cost Estimates
    In connection with the development of the proposed rule, the Bureau 
reviewed the current HMDA compliance systems and activities of 
financial institutions. The review used a cost-accounting, case-study 
methodology consisting, in part, of interviews with 20 financial 
institutions of various sizes, nine vendors, and 15 governmental agency 
representatives.\603\ These interviews provided the Bureau with 
detailed information about current HMDA compliance processes and 
costs.\604\ This information showed how financial institutions gather 
and report HMDA data and provided the foundation for the approach the 
Bureau took to consider the benefits, costs and impacts of the proposed 
rule. The Bureau augmented this information through the Small Business 
Review Panel process, and through relevant academic literature, 
publicly available information and data sources available through the 
Internet,\605\ historical HMDA data, Call Report Data, NMLSR Data, and 
the Bureau's expertise.
---------------------------------------------------------------------------

    \603\ For a discussion of this methodology in the analysis of 
the costs of regulatory compliance, see Gregory Elliehausen, The 
Cost of Bank Regulation: A Review of the Evidence, Bd. of Governors 
of the Fed. Reserve Sys. Working Paper Series 171 (1998). In 
addition, the Bureau recently conducted a Compliance Cost Study as 
an independent analysis of the costs of regulatory compliance. See 
U.S. Consumer Fin. Prot. Bureau, Understanding the Effects of 
Certain Deposit Regulations on Financial Institution's Operations: 
Findings on Relative Costs for Systems, Personnel, and Processes at 
Seven Institutions, (2013), available at https://
files.consumerfinance.gov/f/
201311cfpbreportfindings-relative-
costs.pdf.
    \604\ The financial institutions interviewed were selected to 
provide variation in key characteristics like institution type 
(bank, credit union, independent mortgage bank), regulator, record 
count, submission mechanism, number of resubmissions, and other 
designations like multifamily lender or rural. However the Bureau 
recognizes that this does not constitute a random survey of 
financial intuitions and the sample size might not be large enough 
to capture all variations among financial institutions. Therefore 
the Bureau interprets the findings cautiously.
    \605\ Internet resources included, among others, sites such as 
Jstor.org, which provides information on published research 
articles; FFIEC.gov, which provides information about HMDA, CRA, and 
the financial industry in general; university Web sites, which 
provide information on current research related to mortgages, HMDA 
and the financial industry; community group Web sites, which provide 
the perspective of community groups; and trade group Web sites which 
provide the perspective of industry.
---------------------------------------------------------------------------

    Based on the outreach described above, the Bureau classified the 
operational activities that financial institutions currently use for 
HMDA data collection and reporting into discrete compliance ``tasks.'' 
This classification consists of 18 ``component tasks,'' which can be 
grouped into four ``primary tasks.'' The level of detail of the 
classification is intended to facilitate estimation of baseline costs 
and to enable rigorous analysis of the impact of the proposals across a 
wide range of financial institutions. The four primary tasks are 
described briefly below.
    1. Data collection: Transcribing data, resolving reportability 
questions, and transferring data to HMDA Management System (HMS).
    2. Reporting and resubmission: Geocoding, standard annual edit and 
internal checks, researching questions, resolving question responses, 
checking post-submission edits, filing post-submission documents, 
creating public loan application register, distributing public loan 
application register, distributing disclosure report, and using vendor 
HMS software.
    3. Compliance and internal audits: Training, internal audits, and 
external audits.
    4. HMDA-related exams: Exam preparation and exam assistance.
    In addition to collecting information about operational activities 
and costs, the Bureau also used outreach efforts and the Small Business 
Review Panel process to better understand the potential one-time costs 
that HMDA reporters will incur in response to the proposed rule. 
Management, legal, and compliance personnel will likely require time to 
learn new reporting requirements and assess legal and compliance risks. 
Financial institutions that use vendors for HMDA compliance will incur 
one-time costs associated with software installation, troubleshooting, 
and testing. The Bureau is aware that these activities will take time 
and that the costs may vary depending on the time available. Financial 
institutions that maintain their own reporting systems will incur one-
time costs to develop, prepare, and implement necessary modifications 
to those systems. In all cases, financial institutions will need to 
update training materials to reflect new requirements and activities 
and may have certain one-time costs for providing initial training to 
current employees.
    The Bureau recognizes that the cost per loan of complying with the 
current requirements of HMDA, as well as the operational and one-time 
impact of the proposed rule will differ by financial institution. 
During the Bureau's outreach with financial institutions, the Bureau 
identified seven key dimensions of compliance operations that were 
significant drivers of compliance costs. These seven dimensions are: 
The reporting system used; the degree of system integration; the degree 
of system automation; the compliance program; and the tools for 
geocoding, performing completeness checks, and editing. The Bureau 
found that financial institutions tended to have similar levels of 
complexity in compliance operations

[[Page 51827]]

across all seven dimensions. For example, if a given financial 
institution had less system integration, then it would also tend to use 
less automation and less-complex tools for geocoding. It was generally 
not the case that a financial institution would use less complex 
approaches on one dimension and more complex approaches on another. The 
small entity representatives validated this perspective during the 
Small Business Review Panel meeting.
    To capture the relationships between operational complexity and 
compliance cost, the Bureau used these seven dimensions to define three 
broadly representative lenders according to the overall level of 
complexity of their compliance operations. Tier 1 denotes a 
representative financial institution with the highest level of 
complexity, tier 2 denotes a representative financial institution with 
a moderate level of complexity, and tier 3 denotes a representative 
financial institution with the lowest level of complexity. For each 
tier, the Bureau developed a separate set of assumptions and cost 
estimates. All of these assumptions and cost estimates apply at the 
institutional level.\606\ In the Outline of Proposals prepared for the 
Small Business Review Panel, the Bureau provided a detailed exposition 
of the analytical approach used for the three tiers.\607\
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    \606\ The Bureau assumes that the tier 1 representative 
financial institution has 50,000 records, the tier 2 representative 
has 1,000 records, and the tier 3 representative financial 
institution has 50 records on the HMDA loan application register. 
All cost estimates reflect the assumptions defining the three 
representative financial institutions, and reflect general 
characteristics and patterns, including man-hours spent on each of 
the 18 component tasks and salaries of the personnel involved. To 
the extent that an individual financial institution specializes in a 
given product, or reports different numbers of records on its loan 
application register, these representative estimates will differ 
from the actual cost of that particular financial institution.
    \607\ See U.S. Consumer Fin. Prot. Bureau, Small Business Review 
Panel for Home Mortgage Disclosure Act Rulemaking: Outline of 
Proposals Under Consideration and Alternative Considered (Feb. 7, 
2014) (Outline of Proposals), available at https://
files.consumerfinance.gov/f/
201402cfpbhmdaoutline-of-proposals.pdf.
---------------------------------------------------------------------------

    Table 1 below provides an overview of all three representative 
tiers across the seven dimensions of compliance operations:
[GRAPHIC] [TIFF OMITTED] TP29AU14.000

    Tables 2-4 convey the baseline estimates of annual ongoing 
operational costs as well as the underlying formulas used to calculate 
these estimates for the 18 operational tasks for the three 
representative financial institutions. The wage rate is $28 per hour, 
which is the national average wage for compliance officers based on 
most recent National Compensation Survey from the Bureau of Labor 
Statistics. The number of applications for tier 3, tier 2, and tier 1 
financial institutions is 50, 1,000, and 50,000, respectively. The 
Bureau used similar breakdowns of the 18 operational tasks for each 
representative financial institution to estimate the impact of the 
proposal on ongoing operational costs. The Bureau notes that with the 
assumed wage rate, number of applications, and other key

[[Page 51828]]

assumptions provided in the notes following each table, it is possible 
for readers of this discussion to back out all elements in the formulas 
provided below using the baseline estimates for each task in each tier.
[GRAPHIC] [TIFF OMITTED] TP29AU14.001


[[Page 51829]]


[GRAPHIC] [TIFF OMITTED] TP29AU14.002


[[Page 51830]]


[GRAPHIC] [TIFF OMITTED] TP29AU14.003

    To generate cost estimates at the market level, the Bureau 
developed an approach to map all HMDA reporters to one of three tiers. 
Because financial institutions are arrayed along a continuum of 
compliance cost that cannot be precisely mapped to three representative 
tiers, the Bureau has adopted a conservative strategy in providing a 
possible range of the number of financial institutions in each tier. To 
identify these distributions, the

[[Page 51831]]

Bureau used the total number of reporters (7,421) and the total number 
of loan application register records (18,723,000) in the 2012 HMDA 
data.
    As a first step, the Bureau identified all possible tier 
distributions that were consistent with these two reporter and record 
counts, using the same loan application register sizes adopted in the 
institutional-level analysis (50,000 for tier 1 institutions; 1,000 for 
tier 2 institutions; and 50 for tier 3 institutions). Specifically the 
Bureau set the following two constraints: (1) The total number of HMDA 
reporters in all three tiers must sum to 7,421; and (2) using the 
assumed loan application register size in each tier, the total number 
of loan application register records by all reporters in all three 
tiers must sum to 18,723,000. For this step, the Bureau imposed an 
additional constraint by classifying all 217 HMDA reporters with over 
10,000 records as tier 1, because the Bureau's investigation led it to 
believe that these large financial institutions all possess a high 
level of complexity in HMDA reporting. This assumption helped to narrow 
the range of possible combinations. The Bureau also substituted the 
actual loan application register size of these 217 largest HMDA 
reporters into this constraint for the loan application register size 
of a tier 1 financial institution, further narrowing the range of 
possible combinations. The Bureau notes that all distributions 
identified are mathematically possible based on the Bureau's 
assumptions.
    Second, for the subset of tier distributions satisfying these 
reporter and count constraints, the Bureau then estimated market-level 
costs based on the tier-specific assumptions and cost estimates. That 
is, for a given distribution derived in the first step, the Bureau 
multiplied the institutional-level cost estimate for each tier by the 
number of institutions in that tier, and then summed across all three 
tiers. The distributions with the lowest- and highest-estimated market-
level costs provided the lower and upper bounds for the market-level 
estimates throughout the consideration of the benefits and costs. 
Specifically, the Bureau arrived at two distributions for all HMDA 
reporters: (1) The first distribution has 4 percent of financial 
institutions in tier 1, 0 percent of financial institutions in tier 2, 
and 96 percent of financial institutions in tier 3; and (2) the second 
distribution has 3 percent of financial institutions in tier 1, 66 
percent of financial institutions in tier 2, and 31 percent of 
financial institutions in tier 3. The Bureau notes that these two 
distributions likely do not match the state of the world exactly. 
Nevertheless, for the set of assumptions described above, these 
distributions provide upper and lower bounds for the market-level 
estimates. The Bureau recognizes that this range estimate does not 
permit perfect precision in estimating the impact of the proposed rule 
and will refine the range estimate for the final rule to the extent 
that public comments supplement the Bureau's knowledge. The Bureau 
solicits comments and data that might assist in producing more precise 
estimates.
    Initial outreach efforts, as well as information gathered during 
the Small Business Review Panel process, indicated that compliance 
costs for financial institutions were impacted by the complexity of the 
data field specifications and the process of submitting and editing 
HMDA data. As part of the proposed rule, the Bureau is considering 
enhancements to the sources of help and the processing procedures. For 
example, the Bureau is considering working to consolidate the outlets 
for assistance, providing guidance support similar to the guidance 
provided for title XIV rules; and improving points of contact processes 
for help inquiries. In addition, the Bureau is separately considering 
possible modifications to data submission tools to include loan-type 
specific edits and pre-approved edits. All of these enhancements would 
clarify the data field specifications and reduce burden. The 
consideration of benefits and costs discusses how these enhancements 
might affect the impact of the proposed rule.
3. The Scope of the Institutional Coverage of the Proposed Rule
    The proposed rule would revise the threshold that determines which 
financial institutions are required to report data under HMDA. 
Specifically, depository and nondepository institutions that meet all 
the other criteria for a ``financial institution'' in proposed Sec.  
1003.2(g) would only be required to report HMDA data if they originated 
at least 25 covered loans, excluding open-end lines of credit, in the 
previous calendar year. The Bureau is proposing to no longer exempt 
nondepository institutions pursuant to its discretionary authority 
under HMDA section 309(a).
    Based on data for 2012 from Call Reports, HMDA, and the NMLSR, the 
Bureau estimates that these proposed changes would reduce the number of 
reporting depository institutions by approximately 1,600 and increase 
the number of reporting nondepository institutions by approximately 
450.\608\ The exclusion of depository institutions would reduce loan 
application register records by approximately 70,000 and the inclusion 
of additional nondepository institutions would add approximately 30,000 
records. Expansions or contractions of the number of financial 
institutions, or changes in product offerings between now and 
implementation of the proposed rule may alter these estimated impacts.
---------------------------------------------------------------------------

    \608\ Estimates of the number of depository institutions that 
would no longer be required to report under HMDA, as well as the 
reduction in loan application register volume can be obtained 
directly from current HMDA data, and are therefore relatively 
reliable. The number of nondepository institutions that would be 
required to start reporting based on the proposed rule is more 
difficult to estimate, because it requires data and information from 
an alternative source as these nondepository institutions are not 
currently HMDA reporters. There are various data quality issues 
related to the alternative data sources on nondepository 
institutions. As such, the estimates for non-depository institutions 
are less reliable, and should be viewed as the best effort estimates 
given the data limitations.
---------------------------------------------------------------------------

    Benefits to consumers. The proposed institutional coverage 
threshold would have several benefits to consumers. Traditionally, 
nondepository institutions have been subject to less scrutiny by 
regulators than depository institutions and little is known about the 
mortgage lending behavior of nondepository institutions that fall below 
the current reporting thresholds. By illuminating this part of the 
mortgage market, the proposed rule would provide regulators, public 
officials, and members of the public with important information. For 
example, it is possible that small nondepository institutions are 
serving particular market segments or populations that would benefit 
from more oversight by public officials and community groups. This 
oversight can be enhanced only if more information is revealed about 
the segments, and the proposed change in institutional coverage is 
designed to fill this vacuum. To the extent that such increased 
monitoring and transparency enhances social welfare, consumers served 
by these nondepository institutions would benefit.
    Similarly, expanding coverage among nondepository institutions 
could improve the processes used to identify possible discriminatory 
lending patterns and enforce antidiscrimination statutes. Financial 
regulators and enforcement agencies use HMDA data in their initial 
prioritization and screening processes to select institutions for 
examination. HMDA data also provide information that is used in fair 
lending reviews of mortgage lenders for potential violations

[[Page 51832]]

of ECOA and the Fair Housing Act. This is especially true for redlining 
analyses, which compare lending patterns across lenders within given 
markets. Current deficiencies in HMDA's institutional coverage leave 
gaps in the data used by regulators for conducting fair lending 
prioritization and redlining analyses to compare lenders or markets. 
Because many depository and nondepository institutions with similar 
loan volumes are similar in other respects, excluding some 
nondepository institutions with fewer than 100 loans may weaken the 
understanding of markets needed for prioritization and redlining 
analyses. Consequently, increased reporting among nondepository 
institutions may increase the ability to identify fair lending risk.
    Finally, the proposed rule will also improve the ability to 
determine whether financial institutions are serving the housing needs 
of their communities. Information from data sources such as the United 
States Census, Call Reports, and the NMLSR can be used to characterize 
the housing needs of the communities each lender serves. HMDA data 
provide a supply-side picture of how well each lender is meeting these 
housing needs. Indeed, HMDA data may be analogized to a census of 
mortgage demand and supply for covered financial institutions. However, 
such data currently paints only a partial picture of the market served 
by financial institutions with 25 to 99 loans. The addition of 
nondepository institutions with between 25 and 99 originations will 
provide an improved understanding of the mortgage markets where these 
financial institutions operate, thereby enhancing efforts to assess 
whether these institutions, and financial institutions overall, are 
serving the housing needs of their communities.
    Costs to consumers. The revised threshold will not impose any 
direct costs on consumers. Consumers may bear some indirect costs if 
nondepository institutions that would be required to report under the 
proposed rule pass on some or all of their costs to consumers. 
Following microeconomic principles, the Bureau believes that these 
nondepository institutions will pass on increased variable costs to 
future mortgage applicants, but absorb start-up costs, one-time costs, 
and increased fixed costs if financial institutions are profit 
maximizers and the market is perfectly competitive.\609\
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    \609\ If markets are not perfectly competitive or financial 
institutions are not profit maximizers then what financial 
institutions pass on may differ. For example, they may attempt to 
pass on one-time costs and increases in fixed costs, or they may not 
be able to pass on variable costs.
---------------------------------------------------------------------------

    The Bureau defines variable costs as costs that depend on the 
number of applications received. Based on initial outreach efforts, the 
following five operational steps affect variable costs: Transcribing 
data, resolving reportability questions, transferring data to an HMS, 
geocoding, and researching questions. The primary impact of the 
proposed rule on these operational steps is an increase in time spent 
per task. Overall, the Bureau estimates that the impact of the proposed 
rule on variable costs per application is approximately $13 for a 
representative tier 3 financial institution, $0.20 for a representative 
tier 2 financial institution, and $0.11 for a representative tier 1 
financial institution.\610\ The 450 nondepository institutions that 
would now be required to report have small origination volumes, so the 
Bureau expects most of them to be tier 3 financial institutions. Hence, 
based on microeconomics principles, the Bureau expects the costs that a 
representative financial institution affected by this proposal would 
pass on to mortgage applicants would be $13 per application. This 
expense will be amortized over the life of the loan and represents a 
negligible increase in the cost of a mortgage loan. Therefore, the 
Bureau does not anticipate any material adverse effect on credit access 
in the long or short term even if the additional reporting 
nondepository institutions pass on these costs to consumers.
---------------------------------------------------------------------------

    \610\ These cost estimates do not incorporate the impact of 
adding operational changes affecting geocoding, DES processing, and 
help sources. Incorporating these additional operational changes 
would reduce the estimated impact on variable costs. Therefore, the 
estimates we provided are upper bound estimates of the increase in 
variable costs that financial institutions would pass on to 
consumers. These estimates of the impact of the proposed rule on 
variable cost per application show the impact of all components of 
the proposed rule, and therefore differ from estimates of the impact 
on variable cost presented below, which show the impact of specific 
components of the proposed rule. In addition, these estimates focus 
only on the variable cost tasks, while other estimates incorporate 
both variable and fixed cost tasks.
---------------------------------------------------------------------------

    During the Small Business Review Panel process, some small entity 
representatives noted that they would attempt to pass on all increased 
compliance costs associated with the proposed rule, but that whether 
these costs were passed on would depend on the competiveness of the 
market in which they operate, especially for smaller financial 
institutions. In addition, some small entity representatives noted that 
they would attempt to pass on costs through higher fees on other 
products, would leave geographic or product markets, or would spend 
less time on customer service. To the extent that the market is less 
than perfectly competitive and financial institutions are able to pass 
on a greater amount of these compliance costs, the cost to consumers 
would be slightly larger than the estimates described above. Even so 
the Bureau believes that the potential costs that would be passed on to 
consumers are small.
    The proposed rule may impose additional costs on consumers. 
Reducing the number of depository institutions required to report will 
reduce HMDA's overall coverage of the mortgage market. This reduction 
would reduce the usefulness of HMDA data for assessing whether lenders 
are meeting the housing needs of their communities and highlighting 
opportunities for public and private investment. This reduction may 
also affect the usefulness of HMDA for identifying possible 
discriminatory lending patterns--especially for redlining analyses, 
which focus on market-level data and data on competitors. To better 
understand these potential costs, the Bureau analyzed the 
characteristics of the depository institutions that would be excluded 
by the 25-loan threshold, and compared these characteristics to 
depository institutions that currently report and would not be 
excluded. This type of analysis is possible because the proposed rule 
reduces both the number of depository institutions and the transactions 
they report, and the total universe reported under the current 
regulation is known. For this exercise, the Bureau also excluded 
purchased loans from its comparisons.
    The Bureau analyzed the distribution of various HMDA data fields 
for depository institutions that would be newly excluded and included 
under the proposal. Overall, the Bureau found that, relative to 
depository institutions that would continue to report under the 
proposal, applications for covered loans at excluded depository 
institutions were more likely to be (1) made to the depository 
institutions supervised by the FDIC or NCUA; (2) unsecured or second-
lien; (3) home improvement; (4) non-owner-occupied; (5) manufactured 
housing or multi-family; (6) portfolio loans; (7) higher-priced; and 
(8) lower-loan amount. Specifically, over 36 percent and 44 percent of 
applications that would be excluded were submitted to depository 
institutions regulated by the FDIC and NCUA, respectively. In contrast, 
for applications at depository institutions that would continue to 
report under the proposal, 13.74 percent

[[Page 51833]]

and 10.15 percent were submitted to depository institutions supervised 
by the FDIC and NCUA, respectively. Over 16 percent and 12 percent of 
applications at depository institutions that would be excluded were 
second-lien or unsecured, respectively, compared to 2.92 percent and 
2.75 percent of applications at depository institutions not excluded. 
Over 31 percent of applications at depository institutions that would 
be excluded were for home improvement products, compared to 6.78 
percent of applications at depository institutions not excluded. Over 
19 percent of applications at depository institutions that would be 
excluded were non-owner-occupied, compared to 11.86 percent of 
applications at depository institutions not excluded. Slightly fewer 
than 4 percent of applications at depository institutions that would be 
excluded were manufactured housing and just under 4 percent were multi-
family, compared to 1.83 percent and 0.42 percent of applications at 
depository institutions not excluded, respectively. Slightly fewer than 
13 percent of originations at depository institutions that would be 
excluded were sold in the secondary market, compared to 67.26 percent 
of originations at depository institutions not excluded. Nearly 9 
percent of originations at depository institutions that would be 
excluded exceeded HMDA's current rate spread threshold, compared to 
1.88 percent of originations at depository institutions not excluded. 
Finally, the average loan amount for applications at depository 
institutions that would be excluded was $184,000, compared to $205,333 
for applications at depository institutions not excluded.
    Excluding small-volume depository institutions currently reporting 
under HMDA also impacts the volume of records available for analysis at 
the market level. The geographic data fields currently in the HMDA data 
provide four possible market levels: State, MSA, county, and census 
tract. Overall, analysis \611\ of these markets shows that for most 
markets, a small percentage of loan application register records would 
be lost by excluding small-volume depository institutions. For all but 
five states, less than 1 percent of loan application register records 
reported under 2012 HMDA would be excluded. The percentage excluded is 
greater than 1 percent for Colorado, Texas, Nevada, Alaska and Puerto 
Rico. Alaska and Puerto Rico had the highest percentage of excluded 
records at 3.31 percent and 9.27 percent, respectively. Ranked by the 
percentage of loan application register records that would be excluded 
for each MSA, the 75th percentile was 0.72 percent, suggesting that for 
75 percent of MSAs, excluding small depository institutions would 
exclude less than 0.72 percent of total loan application register 
records. The 95th percentile was 1.99 percent, suggesting that for 5 
percent of MSAs, excluding small depository institutions would exclude 
more than 1.99 percent of total loan application register records. The 
top five MSAs were all in Puerto Rico. Counties and census tracts have 
smaller volumes, so the variation in percentages is naturally expected 
to be higher. Ranked by the percentage of loan application register 
records that would be excluded, the 75th and 95th percentiles for 
counties were 0.61 percent and 4.55 percent, respectively. The 75th and 
95th percentiles for census tracts were 0.66 percent and 3.23 percent, 
respectively
---------------------------------------------------------------------------

    \611\ This analysis includes purchased loans.
---------------------------------------------------------------------------

    Benefits to covered persons. The proposal would provide some cost 
savings to depository institutions that would be excluded under the 25-
loan threshold. The estimated 1,600 depository institutions that would 
be excluded under the proposed threshold would no longer incur current 
operational costs associated with gathering and reporting data. The 
Bureau expects most of these depository institutions to be tier 3 
financial institutions, given the small volume of home purchase, 
refinance and reverse mortgage originations for them. The Bureau 
estimates that the current annual, operational costs of reporting under 
HMDA are approximately $2,200 for representative tier 3 financial 
institutions with a loan application register sizes of 50 records. This 
translates into a market-level benefit of approximately $3,500,000 
(=2,200*1,600) per year. Using a 7 percent discount rate, the net 
present value of this impact savings over five years is 
$14,400,000.\612\
---------------------------------------------------------------------------

    \612\ Note that the figures above refer to cost savings by the 
newly-excluded small depository institutions, assuming costs based 
on the current Regulation C reporting system. With the proposed 
changes, along with the operational improvements that the Bureau is 
separately considering, the impact of the proposed rule on 
operational costs would be approximately $1,000 per year for a 
representative tier 3 financial institution. This translates into a 
market-level savings of approximately $1,600,000 (=1,000*1,600) per 
year. Using a 7 percent discount rate, the net present value of this 
savings over five years is $6,600,000.
---------------------------------------------------------------------------

    In addition to avoiding ongoing costs, the 1,600 excluded 
depository institutions would not incur the one-time costs necessary to 
modify processes in response to the proposed rule. The Bureau estimates 
these one-time costs to be, on average, $3,000 for tier 3 financial 
institutions. Assuming that all 1,600 depository institutions are tier 
3 institutions, this yields an overall market savings of $4,800,000. 
Using a 7 percent discount rate and a five-year amortization window, 
the annualized one-time savings is $1,200,000.
    One-time costs to covered persons. The estimated additional 450 
nondepository institutions that would have to report under the proposal 
would incur start-up costs to develop policies and procedures, 
infrastructure, and training. Given the small origination volume by 
these nondepository institutions, the Bureau expects most of them to be 
tier 3 financial institutions. Based on outreach discussions with 
financial institutions, the Bureau believes that these start-up costs 
would be approximately $25,000 for tier 3 financial institutions. This 
yields an overall market cost of $11,300,000. Using a 7 percent 
discount rate and a five-year amortization window, the annualized one-
time cost is $2,700,000. The Bureau hopes to learn more about the costs 
of initiating HMDA reporting through comment letters.
    Ongoing costs to covered persons. The estimated 450 nondepository 
institutions that would have to report under the proposal would incur 
the operational costs of gathering and reporting data. Including both 
current operational costs and the impact of the proposed rule, the 
Bureau estimates that these operational costs will total approximately 
$3,200 for a representative tier 3 financial institution per year. This 
yields an overall market impact of $1,400,000. Using a 7 percent 
discount rate, the net present value of this cost over five years is 
$5,900,000. These estimates incorporate all of the operational 
improvements that the Bureau is considering.
4. The Scope of the Transactional Coverage of the Proposed Rule
    The proposed rule requires financial institutions to report 
activity only for dwelling-secured loans, regardless of whether the 
loans are for home purchase, home improvement, or refinancing. As a 
result, home improvement loans not secured by a dwelling would be 
removed from the reporting requirements, while home-equity loans and 
reverse mortgages would be included regardless of purpose. Importantly, 
institutions would be required to report data on all open-end line of 
credit. In addition, for preapproval requests that are approved, but 
not accepted, reporting would change from optional to mandatory.

[[Page 51834]]

    Benefits to consumers. The proposed revisions to Regulation C's 
transactional coverage would have several benefits to consumers. The 
Bureau believes that data on open-end lines of credit, home-equity 
loans, reverse mortgages, and preapproval requests that were approved, 
but not accepted will provide a much more complete picture of the 
dwelling-secured lending market.
    Using home-equity lines of credit and home-equity loans as an 
example, in the lead up to the financial crisis between 2000 and 2008, 
the balance of home-equity lending increased by approximately 16.8 
percent annually, moving from $275.5 billion to $953.5 billion in 
total.\613\ Various researchers have pointed out that rapidly expanding 
lending activities in home-equity lines of credit and home-equity loans 
contributed to the housing bubble as borrowers and lenders both 
vigorously took on high leverage. Additional research has shown that 
the growth in home-equity lending was correlated with subsequent home 
price depreciation, as well as high default and foreclosure rates among 
first mortgages.\614\ Researchers have argued that these correlations 
were driven in part by consumers using home-equity lines of credit to 
fund investment properties, which impacted default rates when housing 
prices began to fall. Researchers have also shown evidence that 
distressed homeowners with closed-end subordinate-lien mortgage loans 
encountered several challenges when seeking assistance from public and 
private mortgage relief programs.\615\ Data on these loans might have 
helped public officials improve the effectiveness of these relief 
programs. However, because HMDA does not currently cover all home-
equity loans, and most financial institutions choose not to report 
home-equity lines of credit, this substantial market is almost 
completely missing from the HMDA data. Based on information from HUD 
and Moody's Analytics (May 2013), HMDA data currently include 
approximately 1 percent of all home-equity lines of credit and 35 
percent of home-equity loan originations. Data identifying the presence 
and purpose of home-equity lending will enable government, industry, 
and the public to potentially avert similar scenarios in the future. 
Secondly, housing equity has long been the most important form of 
household savings and consumers often resort to tapping their home 
equity for various purposes. Providing a full picture of home-equity 
secured consumer lending would be especially important for determining 
whether financial institutions are serving the housing needs of their 
communities. Again, the optional reporting of these transactions under 
the current Regulation C leaves this picture incomplete. Finally, 
mandatory reporting of home-equity secured lending would guard against 
regulatory gaming by financial institutions. To the extent that home-
equity lines of credit and home-equity loans are largely 
interchangeable for customers applying for credit for a given purpose, 
lenders could intentionally recommend open-end home-equity lines of 
credit as substitutes for closed-end home-equity loans in order to 
avoid mandatory reporting of the home-equity loans. Therefore, 
mandatory reporting of both home-equity loans and home-equity lines of 
credit would mitigate such misaligned incentives and ultimately benefit 
consumers by closing the data reporting gap.
---------------------------------------------------------------------------

    \613\ Michael LaCour-Little, Wei Yu, and Libo Sun, The Role of 
Home Equity Lending in the Recent Mortgage Crisis, 42 Real Estate 
Economics 153 (2014).
    \614\ See Atif Mian and Amir Sufi, House Prices, Home Equity-
Based Borrowing, and the U.S. Household Leverage Crisis, 101 
American Economic Review 2132, 2154 (2011); Donghoon Lee, 
Christopher Mayer, and Joseph Tracy, A New Look at Second Liens, 
Fed. Reserve Bank of New York Staff Report No. 569, at 11 (2012); 
Michael LaCour-Little, Wei Yu, and Libo Sun, The Role of Home Equity 
Lending in the Recent Mortgage Crisis, 42 Real Estate Economics 153 
(2014).
    \615\ See Vicki Been, Howell Jackson, and Mark Willis, Furman 
Ctr. for Real Estate and Urban Policy, Essay: Sticky Seconds--The 
Problems Second Liens Pose to the Resolution of Distressed Mortgages 
13-18 (2012).
---------------------------------------------------------------------------

    Including mandatory reporting of reverse mortgages also provides 
benefit to consumers. Reverse mortgages are a special mortgage product 
designed to satisfy the later-life consumption needs of seniors by 
leveraging their home equity while permitting them to maintain 
homeownership. In its Fiscal Year 2013, HUD endorsed in total 60,091 
home-equity conversion mortgages (HECM), which counted for almost all 
of the reverse mortgage market. Various stakeholders and advocates have 
called for closer monitoring of the reverse mortgage market based on 
concerns of potential abuse to vulnerable seniors. Mandatory reporting 
of all reverse mortgages will provide public officials, community 
organizations, and members of the public with more information to 
assist consumers age 62 or older. This change is consistent with 
Congress's decision to include age in the Dodd-Frank Act, signaling its 
intention to strengthen protections for seniors.
    Additionally, the proposed changes to transactional coverage would 
benefit consumers by improving fair lending analyses. Regulators, 
community groups, and researchers use HMDA data to identify disparities 
in mortgage lending based on race, ethnicity, and sex. These analyses 
are used for prioritization and scoping purposes to select the 
institutions and parts of institutions to review. Based on information 
from HUD and Moody's Analytics (May 2013), HMDA data currently include 
approximately 1 percent of home-equity lines of credit and 35 percent 
of home-equity loans. The extent of reverse mortgage reporting under 
HMDA is unknown because the existing data provide no way to distinguish 
reverse mortgages from other loans, but the Bureau believes that a 
substantial number of reverse mortgages are not reported under HMDA. 
Because a substantial amount of these transactions are not reported, it 
is not possible during prioritization analyses to develop a clear 
assessment of the fair lending risk to consumers of these specific 
products. In addition, all of these products may have unique 
underwriting and pricing guidelines that would merit separate analyses. 
It is not currently possible to identify these products in HMDA, 
however, so most fair lending analyses that use HMDA data combine these 
products and other products with potentially different underwriting and 
pricing standards. This shortcoming reduces the reliability of risk 
assessment analyses, limiting the ability to identify consumers that 
might have been impacted by potential discrimination.
    Mandatory reporting of preapproval requests that are approved but 
not accepted will also benefit consumers through improved fair lending 
analyses. Data about preapproval requests that are approved but not 
accepted are optionally reported. Thus these data are largely absent 
from the HMDA data that regulators and community groups analyze. 
Including these preapproval requests would improve fair lending 
analysis by providing a more accurate comparison between those 
applications that satisfy a financial institution's underwriting 
criteria and those that did not.
    The proposed rule also improves the ability of public officials to 
distribute public-sector investment so as to attract private investment 
to areas where it is needed. HMDA data provide a broadly-representative 
picture of home lending in the nation unavailable from any other data 
source. Home-equity lines of credit and home-equity loans are important 
forms of lending that are considered in evaluations under the CRA. 
Mandatory reporting of all open-end lines of credit, home-equity loans, 
and reverse

[[Page 51835]]

mortgages will improve HMDA's coverage of mortgage markets, which in 
turn will enhance its usefulness for identifying areas in need of 
public and private investment and thereby benefit consumers.
    Similarly, the proposed rule also improves the ability to determine 
whether financial institutions are serving the housing needs of their 
communities. Mandatory reporting of all open-end lines of credit, home-
equity loans, and reverse mortgages will improve HMDA's coverage of the 
market for these specific products. This will enhance the usefulness of 
the data for assessing whether financial institutions are serving their 
communities.
    Costs to consumers. The proposals related to transactional coverage 
would eliminate reporting of unsecured home-improvement loans. The 
Bureau estimates that financial institutions reported approximately 
340,000 unsecured home improvement loans under HMDA during 2012. This 
comprised 1.8 percent of the total record volume. With this proposed 
revision, regulators, community groups, and researchers will no longer 
be able to use HMDA data to assess fair lending risks for this product, 
which would reduce the likelihood of identifying consumers who are 
potentially disadvantaged when taking out unsecured home-improvement 
loans. In addition, it is also possible that the general loss of data 
may negatively affect research in other unexpected ways and thus 
negatively impact consumers. However, despite these risks, the Bureau 
is not aware of any instances where HMDA data on unsecured home 
improvement loans were used to determine if a financial institution was 
serving the housing needs of a community or to identify opportunities 
for public or private investment.
    The proposed transactional coverage will not impose any direct 
costs on consumers. Consumers may bear some indirect costs of the 
proposed changes if financial institutions that would be required to 
report home-equity lines of credit, home-equity loans, reverse 
mortgages, and preapproval requests that are approved, but not accepted 
passed on some or all of the costs imposed on them by the proposed 
rule. Following microeconomic principles, the Bureau believes that 
these financial institutions will pass on increased variable costs to 
future mortgage applicants, but absorb one-time costs and increased 
fixed costs. The Bureau estimates that the overall impact of the 
proposed rule on variable costs per application is approximately $2 for 
a representative tier 3 financial institution, $0.11 for a 
representative tier 2 financial institution, and $0.07 for a 
representative tier 1 financial institution.\616\ Thus, the Bureau 
expects that a representative tier 3 financial institution affected by 
this proposed change would pass on to mortgage applicants $2 per 
application; a representative tier 2 financial institution affected by 
this proposed change would pass on to mortgage applicants $0.11 per 
application; and a representative tier 1 financial institution affected 
by this proposed change would pass on to mortgage applicants $0.07 per 
application. This expense will be amortized over the life of the loan 
and represents a negligible increase in the cost of a mortgage loan. 
Therefore, the Bureau does not anticipate any material adverse effect 
on credit access in the long or short term if financial institutions 
pass on the costs of reporting under the proposed transaction coverage 
to consumers.
---------------------------------------------------------------------------

    \616\ These cost estimates do not incorporate the impact of 
adding operational changes affecting geocoding, DES processing, and 
help sources. These estimated changes to variable costs are due 
solely to the proposed change to transaction coverage requiring 
reporting of all open-end lines of credit, home-equity loans, and 
reverse mortgages, as well as preapproval requests that are 
approved, but not accepted. As such, they differ from estimated 
changes to variable costs presented earlier, which reflected the 
impact of all proposed changes including additional data points, 
alignment with industry data standard and changes in transaction 
coverage.
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    During the Small Business Review Panel process, some small entity 
representatives noted that they would attempt to pass on all increased 
compliance costs associated with the proposed rule, but that this would 
be difficult in the current market where profit margins for mortgages 
are tight, especially for smaller financial institutions. In addition, 
some small entity representatives noted that they would attempt to pass 
on costs through higher fees on other products offered, leave 
geographic or product markets, or spend less time on customer service. 
If lenders attempt and are able to pass on more than increases in 
variable costs to consumers, these estimates of the cost to consumers 
may be conservative. Nevertheless, the Bureau believes any such 
additional costs would be small relative to general cost of credit of 
mortgage loans amortized over the life of the loans.
    Benefits to covered persons. The proposals related to transactional 
coverage would eliminate reporting of unsecured home improvement loans. 
Using 2012 HMDA data, as well as information from interviews of 
financial institutions, the Bureau estimates that, on average, tier 3, 
tier 2, and tier 1 financial institutions receive approximately 1, 20, 
and 900 applications for unsecured home improvement products, 
respectively. Excluding those average numbers of unsecured home 
improvement loans from reporting would reduce operational costs by 
approximately $70 for a representative tier 3 financial institution, 
$750 for a representative tier 2 financial institution, and $5,200 for 
a representative tier 1 financial institution per year.\617\ This 
translates into a market-level savings of $2,000,000 to $5,000,000 per 
year. Using a 7 percent discount rate, the net present value of this 
impact over five years would be a reduction in cost of $8,300,000 to 
$20,500,000.
---------------------------------------------------------------------------

    \617\ These estimates do not include potential cost savings from 
proposed changes in operations including geocoding, DES process and 
help sources.
---------------------------------------------------------------------------

    Requiring reporting of all open-end lines of credit, home-equity 
loans, reverse mortgages, and preapprovals that are approved, but not 
accepted will improve the prioritization process regulators and 
government enforcement agencies use to identify institutions at higher 
risk of fair lending violations. This improvement will reduce the false 
positives that occur when inadequate information causes lenders with 
low fair lending risk to be initially misidentified as high risk. 
Additional information on these products will explain some of these 
false positives, so that examination resources are used more 
efficiently and that lenders with low fair lending risk receive a 
reduced level of regulatory scrutiny.
    One-time costs to covered persons. Based on outreach efforts, the 
Bureau believes that many financial institutions process applications 
for home-equity products, including reverse mortgages, on separate data 
platforms and data systems in different business units than purchase 
and refinance mortgages. Financial institutions not currently reporting 
home-equity products under HMDA will incur one-time costs to develop 
reporting capabilities for these business lines. Financial 
institutions, whether they use vendors for HMDA compliance or develop 
software internally, will incur one-time costs associated with 
preparation, development, implementation, integration, troubleshooting, 
and testing of new systems for these business units. Management, 
operation, legal, and compliance personnel in these business lines will 
likely require time to learn the new reporting requirements and assess 
legal and compliance risks. In all cases, financial institutions will 
need to

[[Page 51836]]

update training materials to reflect new requirements and may incur 
certain one-time costs for providing initial training to current 
employees. The Bureau is aware that these activities will take time and 
that the costs may be sensitive to the time available for them.
    The Bureau expects these one-time costs to be smaller for financial 
institutions that are less complex and less likely to have separate 
business lines with separate data platforms and data systems for home-
equity products. These entities use less complex reporting processes, 
so tasks are more manual than automated, and new requirements may 
involve greater use of established processes. As a result, compliance 
would likely require straightforward changes in systems and workplace 
practices and therefore impose relatively low one-time costs. The 
Bureau believes that for these less-complex financial institutions, the 
one-time costs associated with the proposed change in transactional 
coverage would be captured by the overall estimate of the one-time 
costs the institutions would incur in response to the entire proposed 
rule. Thus, the Bureau estimates that the proposed rule will impose 
average one-time costs of $3,000 for tier 3 financial institutions.
    For more complex financial institutions, the Bureau expects the 
one-time costs imposed by the proposed change in transactional coverage 
to be relatively large. To estimate these one-time costs, the Bureau 
views the business line responsible for home-equity products as a 
second business line that has to modify its reporting infrastructure in 
response to the proposed rule. Industry repeated this view of 
additional costs during the Bureau's outreach prior to this proposal. 
However, no financial institutions or trade associations have provided 
the Bureau with specific estimates of the one-time cost associated with 
this change. Some industry participants generally stated that the one-
time cost of mandatory reporting of all home-equity lines of credit, 
home-equity loans, and reverse mortgages could be twice as much as the 
one-time cost of adapting to other parts of the proposed rule, but did 
not provide any further detail. The Bureau estimates that the overall 
proposed rule will impose average one-time costs of $250,000 for tier 2 
financial institutions and $800,000 for tier 1 financial institutions, 
excluding reporting of home-equity lines of credit, home-equity loans, 
and reverse mortgages. The Bureau assumes that the one-time cost of 
integrating home-equity products into the HMDA reporting processes 
would be roughly equal to 50 percent of the one-time costs absent 
mandatory reporting of such products. This estimate accounts for the 
fact that some new systems may have to be built to facilitate reporting 
for these lines of business but that some fixed, one-time costs could 
be shared with lines of business currently subject to Regulation C 
because both have to undergo systemic changes. Using this general 
estimate (i.e. one-and-one-half times as much) for all tier 1 and tier 
2 institutions, therefore, the Bureau estimates one-time costs of 
$250,000 and $800,000 for business lines responsible for purchase and 
refinance products and an additional $125,000 and $400,000 for business 
lines responsible for home-equity products.
    In total, this yields an overall market impact between $383,000,000 
and $2,100,000,000. Using a 7 percent discount rate and a five-year 
amortization window, the annualized one-time cost is $93,400,000 to 
$514,900,000. As a frame of reference for these market-level, one-time 
cost estimates, the total non-interest expenses of current HMDA 
reporters were approximately $420 billion in 2012. The upper bound 
estimate of $2.1 billion is approximately 0.5 percent of the total 
annual non-interest expenses.\618\ Because these costs are one-time 
investments, financial institutions are expected to amortize these 
costs over a period of years.
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    \618\ The Bureau estimated the total non-interest expense for 
banks, thrifts and credit unions that reported to HMDA based on Call 
Report and NCUA Call Report data for depository institutions and 
credit unions, and NMLS data for non-depository insitutions, all 
matched with 2012 HMDA reporters.
---------------------------------------------------------------------------

    The Bureau has taken a conservative approach to estimating the one-
time costs because of the uncertainty regarding how many financial 
institutions belong to each of the three representative tiers. Thus, 
the Bureau has mapped out all possible distributions to arrive at the 
lower bound and higher bound cost estimates, as explained in part 
VI.F.2, above. The Bureau hopes to obtain more information on the 
distribution of financial institutions across the three tiers and to 
refine its estimate of these one-time costs through feedback received 
during the rulemaking process. In particular, the Bureau seeks 
additional information on the number of HMDA reporters that are 
moderate complexity, tier 2 institutions.
    For proposed mandatory reporting of preapproval requests that are 
approved, but not accepted, the Bureau believes that the primary impact 
will be on ongoing operational costs rather than on one-time costs. 
Financial institutions are currently required to report whether a 
preapproval was requested for home purchase loans, and whether the 
preapproval was approved (if accepted) or denied, so the infrastructure 
to report preapproval information is already in place. Expanding 
mandatory reporting to all outcomes of the preapproval process 
therefore primarily impacts the ongoing, operational tasks required to 
gather information and data on additional reportable transactions.
    Ongoing costs to covered persons. The proposal would mandate 
reporting of all open-end lines of credit, home-equity loans, and 
reverse mortgages, as well as preapproval requests that were approved, 
but not accepted. This change would potentially increase the number of 
applications and loans that financial institutions must report, thereby 
increasing the cost of HMDA reporting. Using HMDA data, along with 
information from HUD, Moody's Analytics (May 2013), and industry 
interviews, the Bureau estimated the total number of open-end lines of 
credit, home-equity loans, and reverse mortgages, as well as 
preapproval requests that were approved, but not accepted in the market 
and the portion currently in HMDA. Based on these estimates, these 
transactions were then allocated among lenders proportionately to the 
lender's loan application register size. The Bureau estimated that, on 
average, tier 3 financial institutions receive approximately two 
applications for open-end lines of credit, one application for home-
equity loans, no applications for reverse mortgages, and no preapproval 
requests that were approved, but not accepted. On average, tier 2 
financial institutions receive an estimated 45 applications for open-
end lines of credit, 15 applications for home-equity loans, no 
applications for reverse mortgages, and five preapproval requests that 
were approved, but not accepted. On average, tier 1 financial 
institutions receive an estimated 2,200 applications for open-end lines 
of credit, 700 applications for home-equity loans, five applications 
for reverse mortgages, and 245 preapproval requests that were approved, 
but not accepted.
    Reporting data for these additional loans would increase 
operational costs by approximately $265, $2,400 and $16,500 per year 
for representative tier 3, tier 2 and tier 1 financial institutions, 
respectively.\619\ This translates into a market-level cost of 
$6,800,000 to

[[Page 51837]]

$16,000,000 per year. Using a 7 percent discount rate, the net present 
value of this cost over five years is $27,800,000 to $65,100,000.
---------------------------------------------------------------------------

    \619\ These estimates do not include potential cost savings from 
proposed changes in operations including geocoding, DES process, and 
help sources.
---------------------------------------------------------------------------

    Initial outreach efforts, as well as information gathered during 
the Small Business Review Panel process, indicated that uncertainty 
regarding reportability generated significant costs for financial 
institutions. In addition to the proposed rule, the Bureau is 
separately considering operational enhancements and modifications. For 
example, the Bureau is considering working to consolidate the outlets 
for assistance, providing guidance support similar to the guidance 
provided for title XIV rules; improving point of contact processes for 
help inquiries; modifying the types of edits and when edits are 
approved; exploring opportunities to improve current DES; and 
considering approaches to reduce geocoding burdens. All of these 
enhancements will clarify reportability issues, improve processing, and 
reduce burden. With the inclusion of these operational improvements, 
operational costs would increase by approximately $180, $1,900, and 
$15,700 per year, for the representative entities in tier 3, tier 2 and 
tier 1, respectively. This translates into a market-level cost of 
$5,900,000 to $13,300,000 per year. Using a 7 percent discount rate, 
the net present value of this cost over five years is $24,300,000 to 
$54,400,000.
    Alternatives considered. Because industry participants raised 
questions regarding the quality of preapproval data, the Bureau also 
considered excluding preapprovals from reporting requirements. Based on 
a review of 2012 HMDA data, the Bureau estimates that on average tier 3 
financial institutions receive 1 request for a preapproval a year, tier 
2 financial institutions receive 15 requests a year, and tier 1 
financial institutions receive 700 requests a year. The estimated 
reduction in the operational cost of reporting data for these 
preapprovals is approximately $50, $565 and $3,900 per year, for 
representative tier 3, tier 2, and tier 1 financial institutions, 
respectively.\620\ This translates into a market-level impact of 
$1,500,000 to $3,700,000 per year. Using a 7 percent discount rate, the 
net present value of this savings over five years is $6,200,000 to 
$15,400,000.
---------------------------------------------------------------------------

    \620\ These estimates do not include potential cost savings from 
proposed changes in operations including geocoding, DES process and 
help sources.
---------------------------------------------------------------------------

    Including the proposed operational improvements reduces the 
estimated operational costs of reporting data for preapprovals by 
approximately $45, $460 and $3,700 per year for representative tier 3, 
tier 2 and tier 1 financial institutions, respectively. This translates 
into a market-level savings of $1,400,000 to $3,200,000 per year. Using 
a 7 percent discount rate, the net present value of this savings over 
five years is $5,800,000 to $12,900,000.
5. The Data That Financial Institutions Are Required To Report About 
Each Loan or Application
    For each application, originated loan, or purchased loan submitted 
as part of a financial institution's loan application register, 
Regulation C currently requires reporting of 35 separate pieces of 
information, and allows for optional reporting of three denial 
reasons.\621\ Throughout this section, the Bureau uses the term ``data 
point'' to convey general data information and ``data field'' to convey 
the specific information financial institutions must report. For 
example, race is one data point with ten data fields (five for primary 
applicant race and five for co-applicant race). The Dodd-Frank Act 
amended HMDA by enhancing two existing data points (rate spread and 
application ID) and identifying 11 new data points.\622\ As part of 
this rulemaking, the Bureau is comprehensively reviewing all current 
data points in Regulation C, carefully examining each data point 
specifically mentioned in the Dodd-Frank Act, and considering proposals 
to collect other appropriate data points to fill gaps where additional 
information could be useful to better understand the HMDA data.
---------------------------------------------------------------------------

    \621\ The 35 pieces of information are respondent ID, agency 
code, application number, application date, loan type, property 
type, purpose, occupancy, loan amount, preapprovals, action, action 
date, MSA, State, county, census tract, applicant ethnicity, 
applicant sex, five applicant race data fields, co-applicant 
ethnicity, co-applicant sex, five co-applicant race data fields, 
income, purchaser, rate spread, HOEPA status, and lien status.
    \622\ These 11 data points consist of total points and fees, 
prepayment penalty term, introductory interest rate term, non-
amortizing features, loan term, application channel, universal loan 
ID, loan originator number, property value, parcel number, age and 
credit score.
---------------------------------------------------------------------------

    The proposed revisions include improvements and technical revisions 
to current Regulation C data requirements; the implementation as 
required or appropriate of the categories of information specifically 
identified in the Dodd-Frank Act; and the addition of other data points 
that fill existing informational gaps and would further the purposes of 
HMDA. To the extent practicable, all of these proposed changes align 
new data fields and definitions with industry data standards. In order 
to develop this proposed alignment, the Bureau analyzed each data point 
currently included in Regulation C, each new data point identified in 
the Dodd-Frank Act, and each additional data point under consideration 
by the Bureau to determine whether analogous data exist in the ULDD 
data set (first preference) or the larger MISMO data dictionary (second 
preference). In each instance, the MISMO/ULDD definitions would need to 
be adequate to meet the objectives of HMDA and Regulation C. For data 
points that cannot be aligned with MISMO/ULDD, the Bureau is 
considering aligning data points with definitions provided by other 
regulations, or using a completely new definition.
    Current HMDA data points. Currently, financial institutions are 
required to collect and report information for 35 data fields, and have 
the option of reporting three additional fields conveying denial 
reasons. For these 35 mandatory fields, the proposed rule will increase 
the number of required fields by four. Three of these additional data 
fields convey denial reasons, for which reporting will change from 
optional to mandatory. The fourth additional data field is for property 
type. To align this data point with industry data standards, the 
current property type field will be replaced by two fields (number of 
units and construction method), both of which are in MISMO and ULDD. 
This change yields a net increase of one data field for property type.
    In addition to adding four data fields, the proposed rule will also 
change the information reported for eight current HMDA data fields. 
These revisions address changes required by the Dodd-Frank Act, align 
current HMDA fields with industry data standards, and close information 
gaps. Specifically, to address changes required by the Dodd-Frank Act, 
the financial institution's identifier will be replaced by a Legal 
Entity Identifier, application ID will be replaced by a unique, robust 
ID number, and rate spread will be required for all originations 
covered by Regulation Z. As part of the effort to align current data 
fields with MISMO/ULDD, occupancy will be revised to convey primary 
home, second home or investment property, and lien status will be 
expanded to allow for third, fourth, and fifth liens. Finally, to close 
information gaps, loan amount will be reported in dollars instead of 
thousands of dollars; an additional ``other'' category will be added to 
loan purpose; the HOEPA flag will be revised to convey whether HOEPA 
was triggered by rate, points and fees, or both; and lien status will 
be required for purchased loans.

[[Page 51838]]

    Current HMDA data points--benefits to consumers. The Bureau 
believes that the proposed revisions to the current HMDA data fields, 
which increase the amount of information included in HMDA, will improve 
current processes used to identify possible discriminatory lending 
patterns and enforcing antidiscrimination statutes. The following 
discussion provides several examples of how the revised existing 
variables would ultimately benefit consumers by facilitating enhanced 
fair lending analyses. The supplementary information contained in part 
V, above, provides more detailed exposition on each of the enhanced 
data points.
    For example, the reason for denial is a key data point used to 
understand underwriting decisions and focus fair lending reviews. 
Currently, Sec.  1003.4(c)(1) permits optional reporting of the reasons 
for denial of a loan application. Mandatory reporting of this 
information, pursuant to proposed Sec.  1003.4(c)(16), combined with 
enhanced or additional data points commonly used in underwriting 
decisions, will provide more consistent and meaningful data, thereby 
improving the ability to identify both discriminatory lending patterns 
in underwriting decisions and consumers who have been disadvantaged so 
that appropriate restitution can be provided. In addition, denial 
reasons combined with careful analysis of key underwriting variables 
could help reduce the false positive rate of fair lending 
prioritization analyses, leading to better targeting of fair lending 
reviews and thereby reducing compliance costs to some covered persons 
subject to fair lending exams.
    Additionally, rate spread is currently the only quantitative 
pricing measure in HMDA, and it is only available for originated loans 
meeting or exceeding the higher-priced mortgage loan thresholds for 
first- and second-lien loans. Expanding reporting of rate spread to all 
originations covered by Regulation Z, except purchased loans and 
reverse mortgage transactions, greatly enhances HMDA's usefulness for 
analyzing fair lending risk in pricing decisions. This proposed change 
will also reduce the false positive rate observed during fair lending 
prioritization analyses so that the resources of regulators and 
financial institutions are used more efficiently. This information will 
also improve the limited picture of the cost of credit provided by 
current HMDA data.
    The proposed rule would revise data regarding occupancy status by 
requiring separate itemization of second residences and investment 
properties, and data regarding property type by adding the total number 
of units and number of units that are income-restricted pursuant to 
affordable housing programs. These revisions would allow more accurate 
accounting of the differences in underwriting and pricing policies and 
outcomes and hence would reduce false positive rates in current fair 
lending prioritization processes used by regulatory agencies.
    The Bureau also believes that the proposed revisions to the current 
HMDA data fields, which increase the amount of information included in 
the HMDA dataset, will improve the ability to assess whether financial 
institutions are meeting the housing needs of their communities and 
assist public officials in making decisions about public-sector 
investments. The denial reason data fields will provide greater 
understanding of why credit is denied or offered to specific 
communities, and the rate spread data point will provide additional 
information about the affordability of the credit offered.
    Additionally, the proposed revisions to the occupancy status data 
field would provide finer gradients by separately identifying second 
homes and investment properties, which would help identify trends 
involving potentially speculative purchases of housing units similar to 
those that contributed to the recent financial crisis. Recent research 
suggests that speculative purchases by investors were one potential 
driver of the recent housing bubble and subsequent financial 
crisis.\623\ These impacts may be especially relevant for areas that 
are experiencing sharp increases in investor purchases. Thus, 
information related to second homes and investment properties may help 
communities and local officials develop policies tailored to the unique 
characteristics associated with these separate segments of the mortgage 
market.
---------------------------------------------------------------------------

    \623\ See Andrew Haughwout, Donghoon Lee, Joseph Tracy, and 
Wilbert van der Klaauw, Real Estate Investors, the Leverage Cycle, 
and the Housing Market Crisis, Fed. Reserve Bank of N.Y. York Staff 
Report No. 514 (2011).
---------------------------------------------------------------------------

    Finally, proposed revisions to the property type data field would 
be of particular interest in the wake of the housing crisis as families 
have increasingly turned to rental housing. Greater detail about 
multifamily housing finance may provide additional information about 
whether financial institutions are serving the housing needs of their 
communities
    Current HMDA data points--costs to consumers. The proposed 
revisions to the current HMDA data fields will not impose any direct 
costs on consumers. Consumers may bear some indirect costs if financial 
institutions pass on some or all of the costs imposed on them by the 
proposed rule. Following microeconomic principles, the Bureau believes 
that financial institutions will pass on increased variable costs to 
future mortgage applicants, but absorb one-time costs and increased 
fixed costs if markets are perfectly competitive and financial 
institutions are profit maximizers. The impact of the proposed changes 
to the eight current HMDA data fields will affect only one-time costs, 
as financial institutions modify their infrastructure to incorporate 
the proposed data point specifications. The only proposed revision to 
current HMDA data fields that impacts variable costs is the addition of 
four data fields. To construct cost impact estimates, the Bureau 
treated the three denial reason variables as new variables and the 
additional property type field as a new variable that aligns with 
MISMO/ULDD. The Bureau estimates that the impact of this component of 
the proposed rule on variable costs per application is approximately $2 
for a representative tier 3 financial institution, $0.06 for a 
representative tier 2 financial institution, and $0.01 for a 
representative tier 1 financial institution. This expense will be 
amortized over the life of the loan and represents a negligible 
increase in the cost of a mortgage loan. Therefore, the Bureau does not 
anticipate any material adverse effect on credit access in the long or 
short term if financial institutions pass on these costs to consumers.
    During the Small Business Review Panel process, some small entity 
representatives noted that they would attempt to pass on all increased 
compliance costs associated with the proposed rule, but that this would 
be difficult in the current market where profit margins for mortgages 
are tight. In addition, some small entity representatives noted that 
they would attempt to pass on costs through higher fees on other 
products offered, leave geographic or product markets, or spend less 
time on customer service.
    Current HMDA data points--benefits to covered persons. Aligning 
current HMDA data fields with industry data standards would benefit 
financial institutions. Currently, HMDA data are submitted in the loan 
application register format, except for financial institutions that 
report 25 or fewer entries, which may submit their loan application 
register entries in paper format.\624\ The current loan application

[[Page 51839]]

register format may not be directly compatible with the records of 
mortgage loan applications in loan origination systems and may have 
created extra burden on financial institutions that had to use 
additional software and modify data in existing systems in order to 
submit HMDA data in the proper format.
---------------------------------------------------------------------------

    \624\ See comment 5(a)-2.
---------------------------------------------------------------------------

    The Bureau believes that the burden associated with Regulation C 
compliance and data submission can be reduced by aligning the 
requirements of Regulation C to existing industry standards for 
collecting and transmitting data on mortgage loans and applications. 
Promoting consistent data standards for both industry and regulatory 
use has benefits for market efficiency, market understanding, and 
market oversight. The efficiencies achieved by such alignment should 
grow over time, as the industry moves toward common data standards 
platforms. In light of these considerations, the Bureau is proposing to 
align the HMDA data requirements, to the extent practicable, with the 
widely-used MISMO standards for residential mortgages, including the 
ULDD that is used in the delivery of loans to the government-sponsored 
entities.
    For example, many lenders already separately identify second 
residence and investment properties in their underwriting process and 
LOS. Separate enumeration of these properties is present in MISMO/ULDD. 
Therefore, aligning to industry standards would reduce burden for 
financial institutions by maintaining the same definition for HMDA 
reporting that they use in the ordinary course of business. Smaller, 
less-complex financial institutions will experience fewer potential 
benefits because these institutions rely on more manual reporting 
processes and are more likely to originate portfolio loans where MISMO/
ULDD may have not been adopted.
    Among current HMDA data fields, property type, occupancy, and lien 
status will be modified to align with MISMO/ULDD. This alignment will 
reduce costs for training and researching questions. The Bureau 
estimates that this alignment will reduce operational costs by 
approximately $100, $900, and $8,600 per year for representative tier 
3, 2, and 1 financial institutions, respectively.\625\ This translates 
into a market-level impact of $3,300,000 to $6,500,000 per year. Using 
a 7 percent discount rate, the net present value of this savings over 
five years is $13,500,000 to $26,800,000. With the inclusion of 
proposed operational improvements, the estimated reduction in 
operational costs is approximately $100, $850, and $8,400 per year for 
representative tier 3, tier 2, and tier 1 financial institutions, 
respectively. This translates into a market-level savings of $3,200,000 
to $6,200,000 per year. The net present value of this savings over five 
years is $13,000,000 to $25,500,000. The Bureau seeks comment about the 
potential impact on financial institutions of aligning the HMDA data 
requirements with MISMO/ULDD data standards.
---------------------------------------------------------------------------

    \625\ These estimates do not include potential cost savings from 
proposed changes in operations including geocoding, DES process and 
help sources.
---------------------------------------------------------------------------

    Current HMDA data points--ongoing costs to covered persons. 
Specific to the current set of HMDA data points, the proposed rule 
increases the number of data fields by four and alters the information 
provided for eight other fields. The cost impact of these changes on 
covered persons will vary by data field. For example, some data fields 
may depend on multiple sub-components or information from multiple 
platforms. To capture these potential differences, the Bureau estimated 
different costs depending on whether a proposed data field is aligned 
with ULDD, MISMO, or another regulation, or is a completely new 
variable.
    Adding three new variables (denial reasons) and one variable 
aligned with ULDD (occupancy status) increases costs because financial 
institutions now have to report four additional fields. Adding these 
additional data fields increases the costs of transcribing data, 
transferring data to HMS, conducting annual edits/checks, and 
conducting external audits. The Bureau estimates that this component of 
the proposed rule would increase operational costs by approximately 
$135, $860, and $2,200 per year for representative tier 3, tier 2, and 
tier 1 financial institutions, respectively.\626\ Property type would 
be a new data field for all reporters, while denial reason would only 
be a new data field for reporters currently choosing not to report it. 
In the 2012 HMDA data, approximately 30 percent of HMDA reporters did 
not provide denial reasons, and approximately 20 percent of all denials 
did not have data regarding the reason for denial. Further analysis 
reveals that, compared to other HMDA reporters, HMDA reporters 
currently providing data regarding denial reasons had larger loan 
application registers and reported almost twice as many denials. 
Therefore, requiring mandatory reporting of denial reasons will only 
impact about 30 percent of reporters, and these reporters will likely 
be smaller institutions. With all reporters having to start reporting 
the additional property type data field and 30 percent of reporters 
having to start reporting the denial reasons, the Bureau estimates the 
market-level cost of this proposed change to be between $770,000 and 
$2,400,000. Using a 7 percent discount rate, the net present value of 
the cost increase over five years is $3,100,000 to $9,800,000.
---------------------------------------------------------------------------

    \626\ These estimates do not include potential cost savings from 
proposed changes in operations including geocoding, DES process and 
help sources.
---------------------------------------------------------------------------

    With the inclusion of the operational improvements the Bureau is 
considering, the proposed rule will increase operational costs by 
approximately $105, $550, and $1,680 per year for representative tier 
3, tier 2, and tier 1 financial institutions, respectively. This 
translates into a market-level cost of between $570,000 and $1,500,000. 
Using a 7 percent discount rate, the net present value over five years 
would be a cost increase of $2,300,000 to $6,000,000.
    The primary cost impact of modifying eight existing data fields, 
three of which would align with ULDD, will be increases in one-time 
costs to modify current reporting policies and procedures, update 
software systems, and conduct training and planning. These cost impacts 
will generally be addressed in the discussion of one-time costs below, 
except for the proposed requirement that financial institutions obtain 
and report an LEI instead of the current reporter's ID. The Bureau 
estimates that the one-time cost of acquiring an LEI is approximately 
$200 with an ongoing cost of approximately $100 per year. This 
translates into an estimated market-level impact of $1,480,000 in one-
time costs and an increase of $740,000 in ongoing costs per year. For 
one-time costs, using a 7 percent discount rate and five-year window, 
the annualized cost is $361,000. For ongoing costs, using a 7 percent 
discount rate, the net present value over five years is an increase in 
costs of approximately $3,000,000.
    Current HMDA data points--alternatives considered. The Bureau did 
not consider any other alternative proposals that would have impacted 
the current HMDA data points.
    New HMDA data points. The proposed rule requires financial 
institutions to report 37 additional data fields under HMDA. This 
number does not include unique loan ID, rate spread for all 
originations, or total units, each of which replaces a data field 
currently reported under HMDA. The Dodd-Frank Act identified 13 
additional data points. Excluding unique loan ID and rate

[[Page 51840]]

spread, which replace data fields currently reported under HMDA, the 
remaining 11 Dodd-Frank Act-identified data points translate into 17 
data fields financial institutions would have to report on their loan 
application registers. To fill information and data gaps, the Bureau is 
proposing to add 13 additional data points, which translates into 20 
data fields financial institutions would have to report on their loan 
application register. For these 37 additional data fields, 19 are 
aligned with ULDD, two are aligned with MISMO, one is aligned with 
another regulation. The remaining 15 data fields are not in MISMO or 
ULDD, or aligned with another regulation.\627\
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    \627\ Some data fields were aligned with multiple sources. For 
example, total points and fees is aligned with ULDD and Regulation 
Z. For the consideration of costs and benefits, the Bureau assigned 
each data field to one source. The following hierarchy was used for 
data fields aligned to multiple sources: (1) ULDD, (2) MISMO, (3) 
another regulation, and (4) not aligned to another source.
---------------------------------------------------------------------------

    New HMDA data points--benefits to consumers. The proposed 
additional data points would have several benefits to consumers. First, 
the proposed additional fields will improve the usefulness of HMDA data 
for analyzing mortgage markets by regulators and the public. For 
example, data points such as non-amortizing features, introductory 
interest rate, prepayment penalty, and home-equity line of credit 
indicator are related to certain high-risk lending concerns, and 
reporting this information will enable a better understanding of the 
types of products and features consumers are receiving. Recent research 
has indicated that each of these products and product characteristics 
have increased likelihoods of default and foreclosure and may have 
exacerbated the recent housing crisis. In addition to being better able 
to identify some of the risk factors that played a role in the recent 
financial crisis, adding additional data points on pricing and 
underwriting will improve current research efforts to understand 
mortgage markets. All of these enhancements will allow for improved 
monitoring of trends in mortgage markets and help identify and prevent 
problems that could potentially harm consumers and society overall.
    Second, the additional data points will improve current policy 
efforts designed to address various market failures. As discussed 
previously, the mortgage market is characterized by information 
asymmetry and this inherent deficiency was made apparent during the 
financial crisis. In response to the recent financial crisis, the 
government has pursued a number of policies aimed at regulating the 
market and protecting consumers. The additional data points being 
proposed will help inform future policy-making efforts by improving 
consideration of the benefits and costs associated with various 
choices, resulting in more effective policy. As an example, many recent 
regulations have limited the types of risky mortgage products that 
lenders can make to borrowers without fully considering borrowers' 
ability to repay. New data fields on non-amortizing features, 
introductory interest rate, prepayment penalty, debit-to-income ratio, 
and the qualified mortgage indicator can assist future assessment of 
the effectiveness of such regulations and facilitate adjustments when 
needed.
    Third, the additional data points will help determine whether 
financial institutions are serving the housing needs of their 
communities and help public officials target public investment to 
better attract private investment. For example, the proposed data 
points related to manufactured housing would reveal more information 
about this segment of the market. Borrowers in manufactured housing are 
typically more financially vulnerable than borrowers in site-built 
housing and may deserve closer attention from government agencies and 
community groups. Similarly, the proposed data points related to 
multifamily dwellings would reveal more information about this segment 
of the market, which mostly serves low- to mid-income renters who live 
in these financed units. Advocacy groups and government agencies have 
raised concerns over affordability issues faced by individuals living 
in multifamily dwellings, who also tend to be more financially 
vulnerable. Overall, by permitting a better and more comprehensive 
understanding of these markets, the proposal will improve the 
usefulness of HMDA data for assessing the supply and demand of credit, 
and financial institutions' treatment of applicants and borrowers in 
these communities.
    Fourth, the Bureau believes that the additional data points will 
improve current processes used to identify possible discriminatory 
lending patterns and enforce antidiscrimination statutes. Financial 
regulators and enforcement agencies use HMDA data in their initial 
prioritization and screening processes to select institutions for 
examination and as the base dataset during fair lending reviews. The 
additional data will allow for improved segmentation during these 
analyses, so that applications are compared to other applications for 
similar products. For example, underwriting and pricing policies often 
differ for open-end lines of credit, home-equity loans, reverse 
mortgages, and products with different amortization types. Currently, 
these products are all combined during prioritization and screening 
analyses. With additional data fields identifying these products, 
separate analyses can be conducted for each product, which will more 
accurately reflect outcomes for consumers. As a second example, pricing 
often differs across delivery channels, because pricing policies and 
processing differ, and because intermediaries, such as brokers, add an 
additional layer requiring compensation. The addition of the 
origination channel data point will permit the separation of 
originations for pricing analyses, allowing for a better understanding 
of the drivers of pricing outcomes. Improved segmentation improves the 
accuracy of fair lending analyses, which improves the usefulness of 
HMDA to identify potentially disadvantaged consumers.
    The additional data points on pricing will greatly improve the 
usefulness of HMDA data for assessing pricing outcomes. Currently, the 
rate spread data field is the only quantitative pricing measure 
included in the current HMDA data . This data field includes rate 
spread data only for higher-priced mortgage loans, which currently 
comprise less than 5 percent of originated loans in the HMDA data. 
Thus, in today's environment, and for the foreseeable future, the 
usefulness of this data field is highly limited. In addition, mortgage 
products and pricing structure are inherently complex. APR alone, 
though useful and recognizable to borrowers, fails to capture the true 
cost of a mortgage loan. Adding discount points, interest rate, and 
risk-adjusted, pre-discounted interest rate will provide a much clearer 
understanding of the trade-offs between rates and points that are the 
foundation of mortgage pricing. The total points and fees and 
origination-charge data fields will provide a deeper understanding of 
the third component of mortgage pricing: Fees.
    Many of the additional data points capture legitimate factors 
financial institutions use in underwriting and pricing that are 
currently lacking in the HMDA data, helping regulators and government 
enforcement agencies to better understand disparities in outcomes. 
Many, if not all, lenders consider data points such as credit score, 
CLTV, DTI, and AUS results when either underwriting or pricing mortgage 
applications. The addition of

[[Page 51841]]

these types of data points will help users understand patterns in 
underwriting and pricing outcomes and thus better assess the fair 
lending risk presented by those outcomes.
    Finally, the addition of the age data field will allow users to 
analyze outcomes for different age groups. Although consumers are 
protected against discrimination on the basis of age by ECOA and 
Regulation B, HMDA data lack a direct means of measuring the age of 
applicants, which limits the ability of government agencies and 
community groups to monitor and enforce the ECOA and Regulation B 
against age discrimination in mortgage markets. The addition of the age 
data field would provide a clearer understanding of different age 
groups. In particular, older individuals are one demographic group that 
is potentially at a higher risk of discrimination, as well as unfair, 
deceptive, or abusive acts or practices. This data is especially 
important as baby boomers enter retirement. The addition of the age 
data field would allow regulatory agencies and community groups to 
identify potential differential treatment of older Americans for 
various mortgage products. For example, reverse mortgages are designed 
to serve senior consumers and are priced based on age factors, 
providing an illustration of the importance of adding this data field 
to the HMDA data. The age data field will allow users of HMDA data to 
better understand reverse mortgages, increasing HMDA's usefulness for 
assessing whether financial institutions are meeting the credit needs 
of older populations in their communities when offering these products. 
Age data might also help inform housing policies designed to assist 
seniors in maintaining or obtaining home ownership, and building or 
utilizing home equity for improved social welfare.
    All of these improvements would reduce the false positive rates 
that occur when inadequate information causes regulators and 
enforcement agencies to initially misidentify financial institutions 
with low fair lending risk as having high risk of fair lending 
violations. Better alignment between the degrees of regulatory scrutiny 
and fair lending risk would increase the likelihood of identifying any 
instances where consumers are being illegally disadvantaged, thereby 
ultimately benefitting consumers.
    New HMDA data points--costs to consumers. The proposed addition of 
37 data fields will not impose any direct costs on consumers. Consumers 
may bear some indirect costs if financial institutions pass on some or 
all of the costs imposed on them by the proposed rule. Following 
microeconomic principles, the Bureau believes that financial 
institutions will pass on increased variable costs to future mortgage 
applicants, but absorb one-time costs and increased fixed costs if 
markets are perfectly competitive and financial institutions are profit 
maximizers. The Bureau estimates that the impact of the additional 37 
data fields on variable costs per application is approximately $12 for 
a representative tier 3 financial institution, $0.30 for a 
representative tier 2 financial institution, and $0.03 for a 
representative tier 1 financial institution. This expense will be 
amortized over the life of the loan and represents a negligible 
increase in the cost of a mortgage loan. Therefore, the Bureau does not 
anticipate any material adverse effect on credit access in the long or 
short term if financial institutions pass on these costs to consumers.
    During the Small Business Review Panel process, some small entity 
representatives noted that they would attempt to pass on all increased 
compliance costs associated with the proposed rule, but that this would 
be difficult in the current market where profit margins for mortgages 
are tight. In addition, some small entity representatives noted that 
they would attempt to pass on costs through higher fees on other 
products offered, leave geographic or product markets, or spend less 
time on customer service.
    New HMDA data points--benefits to covered persons. The Bureau 
believes that the additional data points will improve current processes 
used to identify possible discriminatory lending patterns, which could 
greatly reduce the burden of financial institutions subject to fair 
lending examinations or investigations. Financial regulators and 
enforcement agencies use HMDA data in their initial prioritization and 
screening processes to select institutions for examination or 
investigation, and as the base dataset during fair lending reviews. 
During prioritization analyses, the additional data points will provide 
information about the legitimate factors used in underwriting and 
pricing that are currently lacking in the HMDA data, helping government 
agencies better understand disparities in outcomes. They will also 
allow for improved segmentation, so that applications are compared to 
other applications for similar products. The additional data points on 
pricing will greatly enhance screening analyses of pricing decisions. 
All of these improvements will reduce false positives resulting from 
inadequate information. Examination resources will be used more 
efficiently, so that lenders at low risk of fair lending violations 
receive a reduced level of regulatory scrutiny.
    New HMDA data points--one-time costs to covered persons. The 
proposed rule will impose one-time costs on HMDA reporters. Management, 
operation, legal, and compliance personnel will likely require time to 
learn the new reporting requirements and assess legal and compliance 
risks. Financial institutions that use vendors for HMDA compliance will 
incur one-time costs associated with software installation, 
troubleshooting, and testing. The Bureau is aware that these activities 
will take time and that the costs may be sensitive to the time 
available for them. Financial institutions that maintain their own 
reporting systems will incur one-time costs to develop, prepare, and 
implement the necessary modifications to those systems. In all cases, 
financial institutions will need to update training materials to 
reflect new requirements and may have certain one-time costs for 
providing initial training to current employees. The Bureau expects 
these one-time costs to be relatively small for less complex financial 
institutions. These entities use less complex reporting processes, so 
the tasks involved are more manual than automated and new requirements 
may involve greater use of established processes. As a result, 
compliance would likely require straightforward changes in systems and 
workplace practices and therefore impose relatively low one-time costs.
    The Bureau estimates the additional reporting requirements would 
impose on average estimated one-time costs of $3,000 for tier 3 
financial institutions, $250,000 for tier 2 financial institutions, and 
$800,000 for tier 1 financial institutions and without considering the 
expansion of transactional coverage to include mandatory reporting of 
all open-end lines of credit, home-equity loans, and reverse 
mortgages.\628\ Including the estimated one-time costs to modify 
processes and systems for home-equity products, the Bureau estimates 
that the total one-time costs would be $3,000 for tier 3 institutions, 
$375,000 for tier 2 institutions, and $1,200,000 for tier 1 
institutions. In total, this yields an overall market

[[Page 51842]]

impact between $383,000,000 and $2,100,000,000. Using a 7 percent 
discount rate and a five-year amortization window, the annualized one-
time cost is $93,400,000 to $514,900,000. As a frame of reference for 
these market-level, one-time cost estimates, the total non-interest 
expenses of current HMDA reporters were approximately $420 billion in 
2012. The upper bound estimate of $2.1 billion is approximately 0.5 
percent of the total annual non-interest expenses.\629\ Because these 
costs are one-time investments, financial institutions are expected to 
amortize these costs over a period of years.
---------------------------------------------------------------------------

    \628\ The Bureau realizes that the impact to one-time costs 
varies by institution due to many factors, such as size, operational 
structure, and product complexity, and that this variance exists on 
a continuum that is impossible to fully capture. As a result, the 
one-time cost estimates will be high for some financial 
institutions, and low for others.
    \629\ The Bureau estimated the total non-interest expense for 
banks, thrifts and credit unions that reported to HMDA based on Call 
Report and NCUA Call Report data for depository institutions and 
credit unions, and NMLS data for non-depository insitutions, all 
matched with 2012 HMDA reporters.
---------------------------------------------------------------------------

    The Bureau has taken a conservative approach to estimating the one-
time costs because of the uncertainty regarding how many financial 
institutions belong to each of the three representative tiers. Thus, 
the Bureau has mapped out all possible distributions to arrive at the 
lower bound and higher bound cost estimates, as explained in part 
VI.F.2, above. The Bureau hopes to obtain more information on the 
distribution of financial institutions across the three tiers and to 
refine its estimate of these one-time costs through feedback received 
during the rulemaking process. In particular, the Bureau seeks 
additional information on the number of HMDA reporters that are 
moderate complexity, tier 2 institutions.
    The Bureau has taken a conservative approach to estimating the one-
time costs because of the uncertainty regarding how many financial 
institutions belong to each of the three representative tiers. Thus, 
the Bureau has mapped out all possible distributions to arrive at the 
lower bound and higher bound cost estimates, as explained in part 
VI.F.2, above. The Bureau hopes to obtain more information on the 
distribution of financial institutions across the three tiers and to 
refine its estimate of these one-time costs through feedback received 
during the rulemaking process. In particular, the Bureau seeks 
additional information on the number of HMDA reporters that are 
moderate complexity, tier 2 institutions.
    New HMDA data points--ongoing costs to covered persons. The 
proposed rule requires financial institutions to report 37 additional 
data fields under HMDA. Adding these additional data fields increases 
the cost of many operational steps required to report data, including 
transcribing data, transferring data to HMS, conducting annual edits/
checks, and conducting external audits. The Bureau estimates that the 
impact of the additional 37 data fields on annual operational costs is 
approximately $13,200 for a representative tier 3 financial 
institution, $8,400 for a representative tier 2 financial institution, 
and $20,800 for a representative tier 1 financial institution. This 
translates into a market-level cost of $15,500,000 to $48,400,000 per 
year. Using a 7 percent discount rate, the net present value of this 
cost over five years is $63,500,000 to $198,500,000. With the inclusion 
of the operational improvements, the estimated increase in the 
operational cost of reporting these 37 additional data fields is 
approximately $1,100, $5,300 and $15,700 per year for representative 
tier 3, tier 2, and tier 1 financial institutions, respectively. This 
translates into a market-level cost of $12,600,000 to $32,100,000 per 
year. The net present value of this impact over five years would be a 
cost increase of $51,800,000 to $131,800,000.
    New HMDA data points--alternatives considered. During the 
rulemaking process, the Bureau considered a wide range of data fields 
identified during internal discussions, as well as through outreach 
efforts to other regulatory agencies, community groups, and industry. 
These alternative data fields included such items as identification of 
whether an applicant or borrower is self-employed, a military member, 
or a first-time homeowner; loan performance indicators; Principal, 
Interest, Taxes, and Insurance payment (PITI); and initial pricing 
offer. Although the cost of reporting varies by data field, the general 
estimated impact of an additional data field on operational costs per 
year is approximately $35 for a representative tier 3 financial 
institution, $230 for a representative tier 2 financial institution, 
and $560 for a representative tier 1 financial institution. The 
benefits are more difficult to measure, so it was not possible to 
identify which data fields to include by directly comparing costs and 
benefits. The Bureau believes that the proposed data points advance 
HMDA's statutory purposes while reducing unnecessary burden on 
financial institutions. However, the Bureau seeks additional comment 
and data to better understand the costs and benefits of data points. 
Specifically, the Bureau seeks additional comment and data on the one-
time and ongoing costs of implementing each proposed new data point, 
which data points are more costly to gather and report and estimates of 
the amount of this additional cost, and supporting explanations. The 
Bureau is also seeking information on what data points are applicable 
to specific products, or whether there are any alternatives to or 
adjustments in each data point that would reduce burden on small while 
still meeting the purposes of HMDA.
6. The Proposed Modifications to Disclosure and Reporting Requirements
    The proposed rule would make several changes to the disclosure and 
reporting requirements under Regulation C. Regulation C currently 
requires that a financial institution must make its ``modified'' loan 
application register available to the public after removing three 
fields to protect applicant and borrower privacy: The application or 
loan number, the date that the application was received, and the date 
action was taken. The Bureau's proposal would require that financial 
institutions make available to the public a modified loan application 
register showing only the data fields that are currently released on 
the modified loan application register. The proposal would also permit 
a financial institution to make its disclosure statement available to 
the public by making available a notice that clearly conveys that the 
disclosure statement may be obtained on the FFIEC Web site and that 
includes the FFIEC's Web site address. The Bureau is also proposing to 
require that a financial institution that reported at least 75,000 
covered loans, applications, and purchased covered loans, combined, for 
the preceding calendar year submit its loan application registers to 
the Bureau or appropriate agency on a quarterly, rather than annual, 
basis. Finally, the proposal would eliminate the option for financial 
institutions with 25 or fewer reported transactions to submit the loan 
application register in paper format.
    Benefits to consumers. The proposals to require that financial 
institutions make available to the public a modified loan application 
register showing only the data fields that are currently released on 
the modified loan application register, to eliminate the option of 
paper reporting for financial institutions reporting 25 or fewer 
records, and to permit financial institutions to make their disclosure 
statements available to the public through a notice that clearly 
conveys that the disclosure statement may be obtained on the FFIEC Web 
site would have little direct benefit to consumers. These proposals do 
not change in any

[[Page 51843]]

significant way either the substance of the information required to be 
reported or the manner in which this information is collected or 
released to the public.
    However, quarterly reporting by financial institutions that 
reported at least 75,000 transactions in the preceding calendar year 
may have a number of benefits to consumers. Currently, there is 
significant delay between the time that final action is taken on an 
application and the time this information about the application or loan 
is reported to the Bureau and the appropriate agencies under HMDA. This 
time delay ranges from 2 months if the date of final action occurs 
during December to 14 months if the date of final action occurs during 
January. The Bureau believes that timelier data would improve the 
ability of the Bureau and the appropriate agencies to identify current 
trends in mortgage markets, detect early warning signs of future 
housing finance crises, and determine, in much closer to ``real time,'' 
whether financial institutions are fulfilling their obligations to 
serve the housing needs of communities in which they are located. 
Timelier identification of risks to mortgage markets and troublesome 
trends by the Bureau and the appropriate agencies would allow for more 
effective interventions by public officials. Finally, although the 
Bureau currently does not plan for the FFIEC to release HMDA data to 
the public more frequently than annually, it believes that quarterly 
reporting may allow the Bureau and FFIEC to expedite the disclosure of 
annual HMDA data to the public because it would permit the processing 
of a significant volume of HMDA data throughout the year. Because, 
based on 2012 data, financial institutions that would be subject to 
quarterly reporting likely would report approximately 50 percent of all 
reported transactions, the benefits described above would relate to a 
substantial segment of the mortgage market.
    Benefits to covered persons. The Bureau believes that the proposals 
to require that financial institutions make available to the public a 
modified loan application register showing only the data fields that 
are currently released on the modified loan application register, to 
eliminate the option of paper reporting for financial institutions 
reporting 25 or fewer records, and to require quarterly reporting for 
financial institutions that reported at least 75,000 transactions in 
the preceding calendar year would provide little benefit to covered 
persons. However, the proposal to permit a financial institution to 
make its disclosure statements available to the public through a notice 
that clearly conveys that the disclosure statement may be obtained on 
the FFIEC Web site would free financial institutions from having to 
print and download their disclosure statements in order to provide them 
to requesters. Initial outreach efforts indicated that tier 3 financial 
institutions rarely receive requests for disclosure statements. 
However, some tier 3 financial institutions indicated that they 
nevertheless download and print a disclosure statement in preparation 
for requests. The Bureau has represented this cost as equivalent to 
receiving 1 request for a disclosure statement each year. The Bureau 
estimates that tier 2 and tier 1 financial institutions receive 3 and 
15 requests for disclosure statements each year, respectively. Based on 
these estimated volumes, the Bureau estimates that this proposed change 
would reduce ongoing operational costs by approximately $15 per year 
for a representative tier 3 financial institution, approximately $40 
per year for a representative tier 2 financial institution, and 
approximately $210 per year for a representative tier 1 financial 
institution. This translates into a market-level reduction in cost of 
approximately $161,000 to $278,000 per year. Using a 7 percent discount 
rate, the net present value of this savings over five years is $659,000 
to $1,140,000.
    Costs to consumers. The proposals to require that financial 
institutions make available to the public a modified loan application 
register showing only the data fields that are currently released on 
the modified loan application register, to eliminate the option of 
paper reporting for financial institutions reporting 25 or fewer 
records, and to require quarterly reporting by financial institutions 
that reported at least 75,000 transactions in the preceding year would 
not impose any direct costs on consumers. Permitting financial 
institutions to make their disclosure statements available to the 
public through notices that clearly convey that the disclosure 
statements may be obtained on the FFIEC Web site would require 
consumers to obtain these disclosure statements online. Given the 
prevalence of internet access and the ease of using the FFIEC Web site, 
the Bureau also believes this proposal will impose minimal direct costs 
on consumers. Any potential costs to consumers of obtaining disclosure 
statements online are likely no greater than the costs of obtaining 
disclosure statements from the physical offices of financial 
institutions, or from a floppy disk or other electronic data storage 
medium that may be used with a personal computer, as contemplated in 
HMDA section 304(k)(1)(b).
    However, consumers may bear some indirect costs of the proposed 
changes if financial institutions pass on some or all of their 
increased costs to consumers. Following microeconomic principles, the 
Bureau believes that financial institutions will pass on increased 
variable costs to future loan applicants, but absorb one-time costs and 
increased fixed costs if financial institutions are profit maximizers 
and the market is perfectly competitive. The Bureau defines variable 
costs as costs that depend on the number of applications received. 
Based on initial outreach efforts, five of the 18 operational tasks are 
variable cost tasks: Transcribing data, resolving reportability 
questions, transferring data to an HMS, geocoding, and researching 
questions. The Bureau believes that the four proposed changes discussed 
in this section would have either no, or only a minimal, effect on 
these variable cost tasks. The proposal to require that financial 
institutions make available to the public a modified loan application 
register showing only the data fields that are currently released on 
the modified loan application register will not impact any operational 
step. Eliminating the option of paper reporting for financial 
institutions reporting 25 or fewer records may increase transcribing 
costs for financial institutions that qualify for this option and 
currently report HMDA data in paper form. However, the Bureau believes 
that the number of financial institutions that report in paper format 
is very low. Also, if the proposal to exclude from the definition of 
financial institution any institution that originated less than 25 
covered loans, excluding open-end lines of credit, is adopted,\630\ the 
number of financial institutions that would be eligible to submit their 
loan application register in paper format would be significantly 
reduced.\631\ Finally, as part of its efforts to improve and modernize 
HMDA operations, the Bureau is considering various improvements to the 
HMDA data submission process that should reduce even further the need 
for institutions to compile and submit their HMDA data in paper format. 
Given these factors and the small loan application register size at 
issue (25 or

[[Page 51844]]

fewer records), the Bureau estimates that the impact of this cost is 
negligible. Permitting financial institutions to make their disclosure 
statements available to the public through a notice that clearly 
conveys that the disclosure statement may be obtained on the FFIEC Web 
site would impact the ``distributing disclosure report'' task, but none 
of the variable cost tasks. Finally, requiring quarterly reporting by 
financial institutions that reported at least 75,000 transactions in 
the preceding calendar year would affect annual edits and internal 
checks, checking post-submission edits, filing post-submission edits, 
internal audits, and external audits. None of these tasks are variable 
cost tasks and hence would not lead financial institutions to pass 
through some of the incremental costs to consumers in a perfectly 
competitive market with profit-maximizing financial institutions.
---------------------------------------------------------------------------

    \630\ See proposed Sec.  1003.2(g).
    \631\ If proposed Sec.  1003.2(g) is adopted and the Bureau 
continues to allow a financial institution that reports 25 or fewer 
entries on its loan application register to submit its register in 
paper format, only a financial institution that originated exactly 
25 covered loans would be eligible to submit its register in paper 
format.
---------------------------------------------------------------------------

    During the Small Business Review Panel process, some small entity 
representatives noted that they would attempt to pass on all increased 
compliance costs associated with the proposed rule, but that whether 
costs were passed on would depend upon the competiveness of the market 
in which they operate, especially for smaller financial institutions. 
In addition, some small entity representatives noted that they would 
attempt to pass on costs through higher fees on other products, would 
leave geographic or product markets, or would spend less time on 
customer service. To the extent that lenders are able to pass on a 
greater amount of these compliance costs, the costs to consumers would 
be slightly larger than the estimates described above. Nevertheless, 
the Bureau still believes that the potential costs that would be passed 
on to consumers are small.
    Ongoing costs to covered persons. The Bureau believes that the 
proposals to require that financial institutions make available to the 
public a modified loan application register showing only the data 
fields that are currently released on the modified loan application 
register and to permit financial institutions to make their disclosure 
statements available through a notice that clearly conveys that the 
disclosure statement may be obtained on the FFIEC Web site would not 
impact ongoing costs to covered persons. Leaving the modified loan 
application register in its current state would require financial 
institutions to redact additional proposed data fields, but the ongoing 
costs of doing so are negligible. Eliminating the option of paper 
reporting for financial institutions reporting 25 or fewer records may 
increase transcribing costs for financial institutions that currently 
maintain all HMDA data in paper form. However, as discussed above, the 
Bureau believes that the number of financial institutions that do this 
is very low, and given proposed changes to the institutional coverage 
criteria, potential improvements to the data submission process under 
consideration, and the small size of the loan application register at 
issue (25 or fewer records), the Bureau estimates that the impact of 
this cost is negligible.
    Requiring quarterly reporting by financial institutions that 
reported at least 75,000 transactions in the preceding calendar year 
would increase ongoing costs to covered persons, as costs would 
increase for annual edits and internal checks, checking post-submission 
edits, filing post-submission edits, internal audits, and external 
audits. The Bureau estimates that this proposed change would increase 
ongoing operational costs by approximately $19,000 per year for a 
representative tier 3 financial institutions.\632\
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    \632\ The Bureau also estimates that this proposed change would 
increase ongoing operational costs by approximately $800 and $5000 
per year for representative tier 3 and 2 institutions, respectively, 
were these institutions required to report quarterly. However, since 
the Bureau believes that all the financial institutions subject to 
quarterly reporting under the proposal would be tier 1 institutions, 
the estimates for tier 3 and tier 2 institutions have been excluded.
---------------------------------------------------------------------------

    Based on 2012 HMDA data, 28 financial institutions reported at 
least 75,000 transactions in the preceding calendar year, which is 
substantially larger than the average loan application register sizes 
of the representative tier 3 (50 records), tier 2 institutions (1,000 
records), and tier 1 institutions (50,000) assumed by the Bureau. 
Therefore, the Bureau believes that it is reasonable to regard all of 
these institutions as tier 1 HMDA reporters. This yields an estimated 
market cost of $532,000 (=28*19000). Using a 7 percent discount rate, 
the net present value of this impact over five years would be 
approximately an increase in costs of $2,200,000.
    One-time costs to covered persons. The Bureau believes that the 
proposals to require that financial institutions make available to the 
public a modified loan application register showing only the data 
fields that are currently released on the modified loan application 
register, to permit financial institutions to make their disclosure 
statements available through a notice that clearly conveys that the 
disclosure statement may be obtained on the FFIEC Web site, and to 
require quarterly reporting by financial institutions that reported at 
least 75,000 transactions in the preceding calendar year would not 
impose any significant one-time costs on covered persons. Although 
leaving the modified loan application register in its current state 
would require financial institutions to develop the capability to 
redact additional data fields from the loan application register, the 
Bureau views the cost of doing so as insubstantial because financial 
institutions already possess the infrastructure necessary to redact 
information prior to publicly disclosing the modified loan application 
register. Reporting HMDA data on a quarterly basis would require 
repetition of processes currently in place, and eliminating the option 
of paper reporting would only impact ongoing transcription costs.
    The proposal to permit financial institutions to make their 
disclosure statements available to the public through a notice that 
clearly conveys that the disclosure statement may be obtained on the 
FFIEC Web site would require a one-time cost to create the notice. 
However the Bureau believes that the one-time cost to create this 
notice would be negligible.

G. Potential Specific Impacts of the Proposed Rule

1. Depository Institutions and Credit Unions With $10 Billion or Less 
in Total Assets, as Described in Sec.  1026
    As discussed above, the proposed rule would exclude financial 
institutions with fewer than 25 originated covered loans, excluding 
open-end lines of credit; require reporting of home-equity lines of 
credit, home-equity loans, and reverse mortgages; exclude reporting of 
unsecured home improvement loans; modify current HMDA data points to 
address the Dodd-Frank Act amendments to HMDA and align the data points 
with industry data standards to the extent practicable; and add 
additional data points to implement the requirements of the Dodd-Frank 
Act and to fulfill the purposes of HMDA.
    The Bureau believes that the benefits of these proposed rules to 
depository institutions and credit unions with $10 billion or less in 
total assets will be similar to the benefit to creditors as a whole, as 
discussed above. Regarding costs, other than as noted here, the Bureau 
also believes that the impact of the proposed rule on the depository 
institutions and credit unions with $10 billion or less in total assets 
will be similar to the impact for creditors as a whole. The primary 
difference in the impact on these institutions is likely to

[[Page 51845]]

come from differences in the level of complexity of operations, 
compliance systems and software of these institutions.
    Based on Call Report data for December 2012, 13,998 of 14,110 
depository institutions and credit unions had $10 billion or less in 
total assets. The 112 depository institutions and credit unions with 
over $10 billion in assets are most likely tier 1 institutions based on 
the Bureau's definition. The 28 institutions that reported at least 
75,000 transactions in the preceding calendar year and would be 
required to report quarterly with the proposals and are assumed to be 
tier 1 institutions. Under these assumptions, the Bureau estimates that 
the market-level impact of the proposed rule on operational costs for 
depository institutions and credit unions with $10 billion or less in 
total assets would be a cost of between $6,400,000 and $10,500,000. 
Using a discount rate of 7 percent, the net present value of this cost 
over five years is between $26,200,000 and $42,800,000. Regarding one-
time costs, the Bureau estimates that the market-level impact of the 
proposed rule for depository institutions and credit unions with $10 
billion or less in total assets is between $186,400,000 and 
$1,700,000,000. Using a 7 percent discount rate and a five-year 
amortization window, the annualized one-time cost is $45,500,000 and 
$410,000,000.
2. Impact of the Proposed Provisions on Consumers in Rural Areas
    The proposed provisions will not directly impact consumers in rural 
areas. However, as with all consumers, consumers in rural areas may 
bear some indirect costs of the proposal. This would occur if financial 
institutions serving rural areas are HMDA reporters and if these 
institutions pass on some or all of the cost increase to consumers.
    Recent research suggests that financial institutions that primarily 
serve rural areas are generally not HMDA reporters.\633\ The Housing 
Assistance Council (HAC) suggests that the asset and geographic 
coverage criteria disproportionately exempt small lenders operating in 
rural communities. For example, HAC uses 2009 Call Report data to show 
that approximately 700 FDIC-insured lending institutions had assets 
totaling less than the HMDA institutional coverage threshold and were 
headquartered in rural communities. These institutions, which would not 
be HMDA reporters, may represent one of the few sources of credit for 
many rural areas. Research by economists at the Federal Reserve Board 
also suggests that HMDA's coverage of rural areas is limited, 
especially areas further from MSAs.\634\ If a large portion of the 
rural housing market is serviced by financial institutions that are not 
HMDA reporters, any indirect impact of the proposed changes on 
consumers in rural areas would be limited, as the proposed changes 
directly involve none of those financial institutions.
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    \633\ Keith Wiley, Housing Assistance Council, What Are We 
Missing? HMDA Asset-Excluded Filers, (2011); Lance George and Keith 
Wiley, Housing Assistance Council, Improving HMDA: A Need to Better 
Understand Rural Mortgage Markets, (2010).
    \634\ Robert B. Avery, Kenneth P. Brevoort, and Glenn B. Canner, 
Opportunities and Issues in Using HMDA Data, 29 J. of Real Estate 
Research 352 (2007).
---------------------------------------------------------------------------

    However, although some research suggests that HMDA currently does 
not cover a significant number of financial institutions serving the 
rural housing market, HMDA data do contain information for some covered 
loans involving properties in rural areas. These data can be used to 
estimate the number of HMDA reporters servicing rural areas, and the 
number of consumers in rural areas that might potentially be affected 
by the proposed changes to Regulation C. For this analysis, the Bureau 
uses non-MSA areas as a proxy for rural areas, with the understanding 
that portions of MSAs and non-MSAs may contain urban and rural 
territory and populations. In 2012, 5,525 HMDA reporters reported 
applications or purchased loans for property located in geographic 
areas outside of an MSA.\635\ This count provides an upper bound of the 
estimate of the number of financial institutions that would be impacted 
by the proposed changes and that also might attempt to pass on these 
cost increases to consumers in rural areas. In total, these 5,525 
financial institutions reported 1,925,937 applications or purchased 
loans for properties in non-MSA areas. This number provides an upper 
bound estimate of the number of consumers in rural areas that could be 
impacted indirectly by the proposed changes. In general, individual 
financial institutions report small numbers of covered loans from non-
MSAs, as approximately 70 percent reported fewer than 100 covered loans 
from non-MSAs.
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    \635\ These counts exclude preapproval requests that were denied 
or approved but not accepted, because geographic information is 
typically not available for these transactions.
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    Following microeconomic principles, the Bureau believes that 
financial institutions will pass on increased variable costs to future 
mortgage applicants, but absorb one-time costs and increased fixed 
costs if financial institutions are profit maximizers and the market is 
perfectly competitive.\636\ The Bureau defines variable costs as costs 
that depend on the number of applications received. Based on initial 
outreach efforts, the following five operational steps affect variable 
costs: Transcribing data, resolving reportability questions, 
transferring data to an HMS, geocoding, and researching questions. The 
primary impact of the proposed rule on these operational steps is an 
increase in time spent per task. Overall, the Bureau estimates that the 
impact of the proposed rule on variable costs per application is $13 
for a representative tier 3 financial institution, $0.20 for a 
representative tier 2 financial institution, and $0.11 for a 
representative tier 1 financial institution.\637\ The 5,525 financial 
institutions that serviced rural areas would attempt to pass these 
variable costs on to all future mortgage customers, including the 
estimated 2 million consumers from rural areas. Amortized over the life 
of the loan, this expense would represent a negligible increase in the 
cost of a mortgage loan. Therefore, the Bureau does not anticipate any 
material adverse effect on credit access in the long or short term even 
if these financial institutions pass on these costs to consumers.
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    \636\ If markets are not perfectly competitive or financial 
institutions are not profit maximizers then what financial 
institutions pass on may differ. For example, they may attempt to 
pass on one-time costs and increases in fixed costs, or they may not 
be able to pass on variable costs.
    \637\ These cost estimates do not incorporate the impact of 
adding operational changes affecting geocoding, DES processing, and 
help sources.
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    During the Small Business Review Panel process, some small entity 
representatives noted that they would attempt to pass on all increased 
compliance costs associated with the proposed rule, but that this would 
depend upon the competiveness of the market in which they operate, 
especially for smaller financial institutions. In addition, some small 
entity representatives noted that they would attempt to pass on costs 
through higher fees on other products, exit geographic or product 
markets, or spend less time on customer service. To the extent that the 
market is less than perfectly competitive and the lenders are able to 
pass on a greater amount of these compliance costs, the costs to 
consumers would be slightly larger than the estimates described above. 
Nevertheless, the Bureau believes that the potential costs that would 
be passed on to consumers are small.

[[Page 51846]]

    Given the differences between rural and non-rural markets in 
structure, demand, supply, and competition level, consumers in rural 
areas may experience benefits and costs from the proposed rule that are 
different than those experienced by consumers in general. To the extent 
that the impacts of the proposal on creditors differ by type of 
creditor, this may affect the costs and benefits of the proposal on 
consumers in rural areas. The Bureau will further consider the impact 
of the proposed rule on consumers in rural areas. The Bureau therefore 
asks interested parties to provide data, research results, and other 
factual information on the impact of the proposed rule on consumers in 
rural areas. For example, this would include any evidence and 
supporting information indicating that access to credit would fall or 
the cost of credit would increase.

H. Additional Analysis Being Considered and Request for Information

    The Bureau will further consider the benefits, costs and impacts of 
the proposed provisions and additional alternatives before finalizing 
the proposed rule. As noted above, there are a number of areas where 
additional information would allow the Bureau to better estimate the 
benefits, costs, and impacts of this proposed rule and more fully 
inform the rulemaking. The Bureau asks interested parties to provide 
comment or data on various aspects of the proposed rule, as detailed in 
the section-by-section analysis.

VII. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act (RFA) generally requires an agency 
to conduct an initial regulatory flexibility analysis (IRFA) and a 
final regulatory flexibility analysis (FRFA) of any rule subject to 
notice-and-comment rulemaking requirements.\638\ These analyses must 
``describe the impact of the proposed rule on small entities.'' \639\ 
An IRFA or FRFA is not required if the agency certifies that the rule 
will not have a significant economic impact on a substantial number of 
small entities.\640\ The Bureau also is subject to certain additional 
procedures under the RFA involving the convening of a panel to consult 
with small business representatives prior to proposing a rule for which 
an IRFA is required.\641\
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    \638\ 5 U.S.C. 601 et. seq.
    \639\ 5 U.S.C. 603(a). For purposes of assessing the impacts of 
the proposed rule on small entities, ``small entities'' is defined 
in the RFA to include small businesses, small not-for-profit 
organizations, and small government jurisdictions. 5 U.S.C. 601(6). 
A ``small business'' is determined by application of Small Business 
Administration regulations and reference to the North American 
Industry Classification System (NAICS) classifications and size 
standards. 5 U.S.C. 601(3). A ``small organization'' is any ``not-
for-profit enterprise which is independently owned and operated and 
is not dominant in its field.'' 5 U.S.C. 601(4). A ``small 
governmental jurisdiction'' is the government of a city, county, 
town, township, village, school district, or special district with a 
population of less than 50,000. 5 U.S.C. 601(5).
    \640\ 5 U.S.C. 605(b).
    \641\ 5 U.S.C. 609.
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    The Bureau has not certified that the proposed rule would not have 
a significant economic impact on a substantial number of small entities 
within the meaning of the RFA. Accordingly, the Bureau convened and 
chaired a Small Business Review Panel under the Small Business 
Regulatory Enforcement Fairness Act (SBREFA) to consider the impact of 
the proposed rule on small entities that would be subject to that rule 
and to obtain feedback from representatives of such small entities. The 
Small Business Review Panel for this rulemaking is discussed below in 
part VII.A.
    The Bureau is publishing an IRFA. Among other things, the IRFA 
estimates the number of small entities that will be subject to the 
proposed rule and describes the impact of that rule on those entities. 
The IRFA for this rulemaking is set forth below in part VII.B.

A. Small Business Review Panel

    Under section 609(b) of the RFA, as amended by SBREFA and the Dodd-
Frank Act, the Bureau seeks, prior to conducting the IRFA, information 
from representatives of small entities that may potentially be affected 
by its proposed rules to assess the potential impacts of that rule on 
such small entities.\642\ Section 609(b) sets forth a series of 
procedural steps with regard to obtaining this information. The Bureau 
first notifies the Chief Counsel for Advocacy (Chief Counsel) of the 
SBA and provides the Chief Counsel with information on the potential 
impacts of the proposed rule on small entities and the types of small 
entities that might be affected.\643\ Not later than 15 days after 
receipt of the formal notification and other information described in 
section 609(b)(1) of the RFA, the Chief Counsel then identifies the 
small entity representatives, the individuals representative of 
affected small entities for the purpose of obtaining advice and 
recommendations from those individuals about the potential impacts of 
the proposed rule.\644\ The Bureau convenes a Small Business Review 
Panel for such rule consisting wholly of full-time Federal employees of 
the office within the Bureau responsible for carrying out the proposed 
rule, the Office of Information and Regulatory Affairs (OIRA) within 
the OMB, and the Chief Counsel.\645\ The Small Business Review Panel 
reviews any material the Bureau has prepared in connection with the 
SBREFA process and collects the advice and recommendations of each 
individual small entity representative identified by the Bureau after 
consultation with the Chief Counsel on issues related to sections 
603(b)(3) through (b)(5) and 603(c) of the RFA.\646\ Not later than 60 
days after the date the Bureau convenes the Small Business Review 
Panel, the panel reports on the comments of the small entity 
representatives and its findings as to the issues on which the Small 
Business Review Panel consulted with the small entity representatives, 
and the report is made public as part of the rulemaking record.\647\ 
Where appropriate, the Bureau modifies the proposed rule or the IRFA in 
light of the foregoing process.\648\
---------------------------------------------------------------------------

    \642\ 5 U.S.C. 609(b).
    \643\ 5 U.S.C. 609(b)(1).
    \644\ 5 U.S.C. 609(b)(2).
    \645\ 5 U.S.C. 609(b)(3).
    \646\ 5 U.S.C. 609(b)(4). As described in the IRFA in part 
VII.B, below, sections 603(b)(3) through (b)(5) and 603(c) of the 
RFA, respectively, require a description of and, where feasible, 
provision of an estimate of the number of small entities to which 
the proposed rule will apply; a description of the projected 
reporting, record keeping, and other compliance requirements of the 
proposed rule, including an estimate of the classes of small 
entities which will be subject to the requirement and the type of 
professional skills necessary for preparation of the report or 
record; an identification, to the extent practicable, of all 
relevant Federal rules which may duplicate, overlap, or conflict 
with the proposed rule; and a description of any significant 
alternatives to the proposed rule which accomplish the stated 
objectives of applicable statutes and which minimize any significant 
economic impact of the proposed rule on small entities. 5 U.S.C. 
603(b)(3)-(5), 603(c).
    \647\ 5 U.S.C. 609(b)(5).
    \648\ 5 U.S.C. 609(b)(6).
---------------------------------------------------------------------------

    In December 2013, the Bureau provided the Chief Counsel with the 
formal notification and other information required under section 
609(b)(1) of the RFA. To obtain feedback from small entity 
representatives to inform the Small Business Review Panel pursuant to 
sections 609(b)(2) and 609(b)(4) of the RFA, the Bureau, in 
consultation with the Chief Counsel, identified three categories of 
small entities that may be subject to the proposed rule for purposes of 
the IRFA: Commercial banks and savings institutions, credit unions, and 
mortgage companies (i.e., nondepository mortgage lenders). Section 3 of 
the IRFA, in part VII.B.3, below, describes in greater detail the 
Bureau's analysis of the

[[Page 51847]]

number and types of entities that may be affected by the proposed rule. 
Having identified the categories of small entities that may be subject 
to the proposed rule for purposes of an IRFA, the Bureau then, in 
consultation with the Chief Counsel, selected 20 small entity 
representatives to participate in the SBREFA process. As discussed in 
chapter 7 of the SBREFA Final Report, described below, the small entity 
representatives selected by the Bureau in consultation with the Chief 
Counsel included representatives from each of the categories identified 
by the Bureau and comprised a diverse group of individuals with regard 
to geography and type of locality (i.e., rural, urban, suburban, or 
metropolitan areas).
    On February 27, 2014, the Bureau formally convened the Small 
Business Review Panel pursuant to section 609(b)(3) of the RFA. 
Afterwards, to collect the advice and recommendations of the small 
entity representatives under section 609(b)(4) of the RFA, the Small 
Business Review Panel held an outreach meeting/teleconference with the 
small entity representatives on March 6, 2014 (Panel Outreach Meeting). 
To help the small entity representatives prepare for the Panel Outreach 
Meeting beforehand, the Small Business Review Panel circulated briefing 
materials prepared in connection with section 609(b)(4) of the RFA that 
summarized the proposals under consideration at that time, posed 
discussion issues, and provided information about the SBREFA process 
generally.\649\ All 20 small entity representatives participated in the 
outreach meeting either in person or by telephone. The Small Business 
Review Panel also provided the small entity representatives with an 
opportunity to submit written feedback until March 20, 2014. In 
response, the Small Business Review Panel received written feedback 
from 15 of the representatives.\650\
---------------------------------------------------------------------------

    \649\ The Bureau posted these materials on its Web site and 
invited the public to email remarks on the materials. See U.S. 
Consumer Fin. Prot. Bureau, Small Business Review Panel for Home 
Mortgage Disclosure Act Rulemaking: Outline of Proposals Under 
Consideration and Alternative Considered (Feb. 7, 2014) (Outline of 
Proposals), available at https://files.consumerfinance.gov/f/
201402cfpbhmdaoutline-of-proposals.pdf.
    \650\ This written feedback is attached as appendix A to the 
Small Business Review Panel Final Report discussed below.
---------------------------------------------------------------------------

    On April 24, 2014, the Director of the Bureau, Richard Cordray, 
signed the written SBREFA Final Report \651\ submitted by the Small 
Business Review panel that includes the following: Background 
information on the proposals under consideration at the time; 
information on the types of small entities that would be subject to 
those proposals and on the small entity representatives who were 
selected to advise the Small Business Review Panel; a summary of the 
Small Business Review Panel's outreach to obtain the advice and 
recommendations of those small entity representatives; a discussion of 
the comments and recommendations of the small entity representatives; 
and a discussion of the Small Business Review Panel findings, focusing 
on the statutory elements required under section 603 of the RFA.\652\
---------------------------------------------------------------------------

    \651\ Final Report of the Small Business Review Panel on the 
CFPB's Proposals Under Consideration for Home Mortgage Disclosure 
Act Rulemaking, dated April 28, 2014. As discussed above, this 
report is available on the Bureau's Web site.
    \652\ 5 U.S.C. 609(b)(5).
---------------------------------------------------------------------------

    In preparing this proposed rule and the IRFA, the Bureau has 
carefully considered the feedback from the small entity representatives 
participating in the SBREFA process and the findings and 
recommendations in the SBREFA Final Report. The section-by-section 
analysis of the proposed rule in part V, above, and the IRFA discuss 
this feedback and the specific findings and recommendations of the 
Small Business Review Panel, as applicable. The SBREFA process provided 
the Small Business Review Panel and the Bureau with an opportunity to 
identify and explore opportunities to minimize the burden of the rule 
on small entities while achieving the rule's purposes. It is important 
to note, however, that the Small Business Review Panel prepared the 
SBREFA Final Report at a preliminary stage of the proposal's 
development and that the SBREFA Final Report--in particular, the Small 
Business Review Panel's findings and recommendations--should be 
considered in that light. Also, any options identified in the SBREFA 
Final Report for reducing the proposed rule's regulatory impact on 
small entities were expressly subject to further consideration, 
analysis, and data collection by the Bureau to ensure that the options 
identified were practicable, enforceable, and consistent with HMDA, the 
Dodd-Frank Act, and their statutory purposes. The proposed rule and the 
IRFA reflect further consideration, analysis, and data collection by 
the Bureau.

B. Initial Regulatory Flexibility Analysis

    Under RFA section 603(a), an IRFA ``shall describe the impact of 
the proposed rule on small entities.'' \653\ Section 603(b) of the RFA 
sets forth the required elements of the IRFA. Section 603(b)(1) 
requires the IRFA to contain a description of the reasons why action by 
the agency is being considered.\654\ Section 603(b)(2) requires a 
succinct statement of the objectives of, and the legal basis for, the 
proposed rule.\655\ The IRFA further must contain a description of and, 
where feasible, an estimate of the number of small entities to which 
the proposed rule will apply.\656\ Section 603(b)(4) requires a 
description of the projected reporting, recordkeeping, and other 
compliance requirements of the proposed rule, including an estimate of 
the classes of small entities that will be subject to the requirement 
and the types of professional skills necessary for the preparation of 
the report or record.\657\ In addition, the Bureau must identify, to 
the extent practicable, all relevant Federal rules which may duplicate, 
overlap, or conflict with the proposed rule.\658\ Furthermore, the 
Bureau must describe any significant alternatives to the proposed rule 
which accomplish the stated objectives of applicable statutes and which 
minimize any significant economic impact of the proposed rule on small 
entities.\659\ Finally, as amended by the Dodd-Frank Act, RFA section 
603(d) requires that the IRFA include a description of any projected 
increase in the cost of credit for small entities, a description of any 
significant alternatives to the proposed rule which accomplish the 
stated objectives of applicable statutes and which minimize any 
increase in the cost of credit for small entities (if such an increase 
in the cost of credit is projected), and a description of the advice 
and recommendations of representatives of small entities relating to 
the cost of credit issues.\660\
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    \653\ 5 U.S.C. 603(a).
    \654\ 5 U.S.C. 603(b)(1).
    \655\ 5 U.S.C. 603(b)(2).
    \656\ 5 U.S.C. 603(b)(3).
    \657\ 5 U.S.C. 603(b)(4).
    \658\ 5 U.S.C. 603(b)(5).
    \659\ 5 U.S.C. 603(b)(6).
    \660\ 5 U.S.C. 603(d)(1); Public Law 111-203, section 
1100G(d)(1).
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1. Description of the Reasons Why Agency Action Is Being Considered
    As discussed in the background, part II above, for more than 30 
years HMDA has required financial institutions to collect, report to 
regulators, and disclose to the public data about applications and 
originations of home mortgage loans. HMDA was intended to provide the 
public with information that can be used to help determine whether 
financial institutions are serving the housing needs of their 
communities, to assist public officials in distributing public-sector 
investment so as to attract private investment, and to assist in 
identifying possible discriminatory

[[Page 51848]]

lending patterns and enforcing antidiscrimination statutes. HMDA data 
represent the primary data source for regulators, industry, advocates, 
researchers, and economists studying and analyzing trends in the 
mortgage market for a variety of purposes, including general market and 
economic monitoring, as well as assessing housing needs, public 
investment, and possible discrimination. Historically, HMDA has been 
implemented by the Board through Regulation C, 12 CFR part 203. In 
2011, the Bureau established a new Regulation C, 12 CFR part 1003, 
substantially duplicating the Board's Regulation C, making only non-
substantive, technical, formatting, and stylistic changes. Congress has 
periodically modified the law, and the Board routinely updated 
Regulation C, in order to ensure that the data continued to fulfill 
HMDA's purposes.
    Users of HMDA data, however, have consistently advocated for 
expansion of HMDA data to keep pace with the mortgage market's 
evolution, particularly during the market's rapid growth into 
nontraditional lending products and its subsequent collapse in 2008. In 
2010, Congress responded to the mortgage crisis in the Dodd-Frank Act 
by enacting changes to HMDA as well as directing reforms to the 
mortgage market and the broader financial system. In addition to 
transferring rulemaking authority for HMDA from the Board to the 
Bureau, section 1094 of the Dodd-Frank Act, among other things, 
directed the Bureau to implement changes requiring the collection and 
reporting of several new data points, and authorized the Bureau to 
require financial institutions to collect and report such other 
information as the Bureau may require.
    The proposed rule, therefore, both follows on the prior efforts of 
the Board to address shortcomings in HMDA's reporting requirements, and 
effectuates Congress's specific mandate to the Bureau to implement 
changes regarding the collection and reporting of HMDA data. For a 
further description of the reasons why agency action is being 
considered, see the background discussion for the proposed rule in part 
II, above.
2. Succinct Statement of the Objectives of, and Legal Basis for, the 
Proposed Rule
    This rulemaking has multiple objectives. First, the proposed rule 
is designed to improve the usefulness of HMDA data for determining 
whether institutions are serving the housing needs of their 
communities, identifying potentially discriminatory lending patterns 
and enforcing antidiscrimination laws, and helping public officials 
target public investment so as to attract private investment to areas 
where it is needed. To achieve these objectives, the proposed rule 
requires financial institutions to report additional information 
regarding originations and applications of mortgage loans, and makes 
several modifications to the institutional and transactional coverage 
of Regulation C. To improve the quality and timeliness of HMDA data, 
the Bureau is also proposing to require financial institutions with 
large numbers of reported transactions to submit their HMDA data on a 
quarterly, rather than an annual, basis.
    The Bureau also intends for the proposal to reduce unnecessary 
burden on financial institutions. To this end, the Bureau is proposing 
to adjust Regulation C's institutional coverage test to simplify the 
institutional coverage requirements by adopting, for all financial 
institutions, a uniform loan-volume threshold of 25 loans. The proposed 
rule would also increase the clarity of the regulation by, among other 
things, modifying the definitions of certain ambiguous terms, adopting 
certain new definitions, and consolidating the list of exempt 
institutions and excluded transactions in the same section. Under the 
proposed regulation, financial institutions would make available to the 
public a modified loan application register showing only the data 
fields that are currently released on the modified loan application 
register, and financial institutions would be permitted to direct 
members of the public to a publicly available Web site to obtain their 
disclosure statements. Finally, the proposed rule would modernize and 
streamline the manner in which financial institutions collect and 
report HMDA data. Among other things, the Bureau is proposing to align 
the data requirements with the widely-used MISMO data standards to the 
extent practicable, and is separately considering various improvements 
to the HMDA data submission process, such as moving the HMDA data entry 
software to the Web and restructuring the geocoding process.
    As described above, the Dodd-Frank Act transferred to the Bureau 
the ``consumer financial protection functions'' previously vested in 
certain other Federal agencies, and authorized the Bureau to prescribe 
rules necessary or appropriate to administer and carry out the purposes 
and objectives of the Federal consumer financial laws, and to prevent 
evasions thereof, including HMDA. As amended by the Dodd-Frank Act, 
HMDA section 305(a) broadly authorizes the Bureau to prescribe such 
regulations as may be necessary to carry out HMDA's purposes. These 
regulations can include ``classifications, differentiations, or other 
provisions, and may provide for such adjustments and exceptions for any 
class of transactions, as in the judgment of the Bureau are necessary 
and proper to effectuate the purposes of [HMDA], and prevent 
circumvention or evasion thereof, or to facilitate compliance 
therewith.'' HMDA section 304 requires itemization of specified 
categories of information, including information about borrowers and 
loan features and pricing, as well as ``such other information as the 
Bureau may require.'' Finally, HMDA also grants the Bureau authority 
over the formats required for compilation and public disclosure of HMDA 
data, the format required for disclosure to the Bureau or other Federal 
agencies, and the improvement of methods of matching addresses and 
census tracts to facilitate HMDA compliance. The legal basis for the 
proposed rule is discussed in detail in the legal authority analysis in 
part IV and in the section-by-section analysis in part V, above.
3. Description and, Where Feasible, Provision of an Estimate of the 
Number of Small Entities to Which the Proposed Rule Will Apply
    The following table provides the Bureau's estimate of the number 
and types of entities that may be affected by the proposals under 
consideration:

[[Page 51849]]

[GRAPHIC] [TIFF OMITTED] TP29AU14.004

4. Projected Reporting, Recordkeeping, and Other Compliance 
Requirements of the Proposed Rule, Including an Estimate of the Classes 
of Small Entities Which Will Be Subject to the Requirement and the Type 
of Professional Skills Necessary for the Preparation of the Report
    Reporting Requirements. HMDA requires financial institutions to 
report certain information related to covered loans. Financial 
institutions are required to report HMDA data to the Bureau or to the 
appropriate Federal agency.\661\ All reportable transactions must be 
recorded within 30 calendar days \662\ after the end of the calendar 
quarter in which final action is taken on a loan application register, 
and a modified version of the loan application register must be 
disclosed to the public upon request.\663\ Under the proposed 
regulation, financial institutions would make available to the public a 
modified loan application register showing only the data fields that 
are currently released on the modified loan application register. 
Additionally, financial institutions that reported at least 75,000 
covered loans, applications, and purchased covered loans, combined, in 
the preceding calendar year will be required to report HMDA data 
quarterly to the Bureau or to the appropriate Federal agency. Financial 
institutions must also make their disclosure statements, which are 
prepared by the FFIEC from data submitted by the institutions, 
available to the public upon request.\664\
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    \661\ 12 U.S.C. 2803(h)(1).
    \662\ 12 CFR 1003.4(a).
    \663\ 12 U.S.C. 2803(j).
    \664\ 12 U.S.C. 2803(k); 12 CFR 1003.5(b).
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    The proposed rule would modify current reporting requirements and 
impose new reporting requirements by requiring financial institutions 
to report additional information required by the Dodd-Frank Act, as 
well as certain information determined by the Bureau to be necessary 
and proper to effectuate HMDA's purposes. The proposed rule also 
modifies the scope of the institutional and transactional coverage 
thresholds. The Bureau is also proposing to allow a financial 
institution to make its disclosure statement available to the public by 
making available at its home office and each branch office located in 
an MSA and MD a notice that clearly conveys that the institution's 
disclosure statement may be obtained on the FFIEC Web site and that 
includes the Web site address. The section-by-section analysis of the 
proposed rule in part V, above, discusses the additional required data

[[Page 51850]]

points and the scope of the proposed rule in greater detail. More 
information is also available in section 3 of the SBREFA Final 
Report.\665\
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    \665\ Final Report of the Small Business Review Panel on the 
CFPB's Proposals Under Consideration for Home Mortgage Disclosure 
Act Rulemaking, dated April 28, 2014. As discussed above, this 
report is available on the Bureau's Web site.
---------------------------------------------------------------------------

    Recordkeeping Requirements. HMDA currently requires financial 
institutions to compile and maintain information related to certain 
transactions involving covered loans. HMDA section 304(c) requires that 
information required to be compiled and made available under HMDA 
section 304, other than loan application register information required 
under section 304(j), must be maintained and made available for a 
period of five years. HMDA section 304(j)(6) requires that loan 
application register information for any year shall be maintained and 
made available, upon request, for three years. Regulation C requires 
that all reportable transactions be recorded within thirty calendar 
days after the end of the calendar quarter in which final action is 
taken on a loan application register.\666\ Regulation C further 
specifies that a financial institution shall retain a copy of its loan 
application register for its records for at least three years.\667\ The 
proposed rule would not modify the recordkeeping period for covered 
financial institutions. The proposed rule would, however, potentially 
require additional recordkeeping in that it would require financial 
institutions to maintain additional information as a result of the 
expanded reporting requirements described above. Furthermore, the 
proposal would allow financial institutions to provide disclosure 
statements by directing members of the public to the FFIEC Web site 
rather than requiring the institutions to download or print the 
statements from the Web site so as to have them available for members 
of the public that make a request.
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    \666\ 12 CFR 1003.4(a).
    \667\ 12 CFR 1003.5(a).
---------------------------------------------------------------------------

    Benefits to small entities. HMDA is a data reporting statute, so 
all provisions of the proposed rule affect reporting requirements. 
Overall, the proposed rule has several potential benefits for small 
entities. First, the proposed revision to the institutional coverage 
criteria, which imposes a loan volume threshold of 25 loans, excluding 
open-end lines of credit, applicable to all financial institutions, 
would benefit depository institutions that are not significantly 
involved in originating dwelling-secured loans. The Bureau expects that 
most of these depository institutions are small entities. These 
depository institutions would no longer have to report under HMDA and 
would no longer have to incur current operational costs, or the 
increase in operational cost and the one-time costs, created by the 
proposed rule.
    Second, the proposed revisions to the transactional coverage 
criteria would eliminate reporting of unsecured home improvement loans. 
The Bureau believes most small entities will be comparable to the 
representative tier 3 institution based on the Bureau's assumptions 
discussed extensively in part VI.E of this supplementary information, 
and that the volume of applications for unsecured home improvement 
loans for these financial institutions is small. Therefore, the benefit 
from this change will be small for most small entities. However, some 
small entities may receive larger volumes of applications for unsecured 
home improvement products, and the benefit will be larger for these 
financial institutions.
    Third, the proposed revisions requiring mandatory reporting of all 
home-equity lines of credit, home-equity loans, reverse mortgages, and 
preapproval requests that have been approved but not accepted, combined 
with the additional data points being proposed, will improve the 
prioritization process that regulators and enforcement agencies use to 
identify institutions with higher fair lending risk. During 
prioritization analyses, the additional transactions and data points 
will allow for improved segmentation, so that applications are compared 
to other applications for similar products. In addition, the data 
points will add to the legitimate factors used in underwriting and 
pricing that are currently lacking in the HMDA data, helping regulators 
and government enforcement agencies better understand disparities in 
outcomes. These improvements will reduce false positives that occur 
when inadequate information causes lenders with low fair lending risk 
to be initially misidentified as having high-risk. The additional 
information on these products and data points will explain some of 
these false positives, so that examination resources can be used more 
efficiently and lenders with low fair lending risk receive a reduced 
level of regulatory scrutiny. For small entities currently receiving 
regulatory oversight, this could greatly reduce the burden from fair 
lending examinations and enforcement actions.
    Fourth, incorporating into the proposed rule alignment of current 
HMDA data fields with industry data standards provides a benefit to 
small entities. The Bureau believes that the burden associated with 
Regulation C compliance and data submission can be reduced by aligning 
to the extent practicable the requirements of Regulation C to existing 
industry standards for collecting and transmitting data on mortgage 
loans and applications. The Bureau believes that promoting consistent 
data standards for both industry and regulatory use has benefits for 
market efficiency, market understanding, and market oversight. The 
efficiencies achieved by aligning HMDA data with widely used industry 
data standards should grow over time. Specific to small entities, 
outreach efforts have determined that aligning HMDA with industry data 
standards will reduce costs for training and researching questions.
    Finally, the proposed additional fields will improve the usefulness 
of HMDA data for analyzing mortgage markets by the regulators and the 
public. For instance, data points such as non-amortizing features, 
introductory interest rate, and prepayment penalty that are commonly 
related to higher risk lending will provide a better understanding of 
the types of products and features consumers are receiving. This will 
allow for improved monitoring of trends in mortgage markets and help 
identify problems that could potentially harm consumers and society 
overall. Lowering the likelihood of future financial crises benefits 
all financial institutions, including small entities.
    Costs to small entities. The proposed revision to the coverage 
criteria raises the reporting threshold for depository institutions 
from 1 to 25 originations and lowers the reporting thresholds for 
nondepository institutions from 100 to 25 originations. The Bureau 
expects most of the affected nondepository institutions to be small 
entities. The additional nondepository institutions that would now be 
required to report under HMDA would incur one-time start-up costs to 
develop the necessary reporting infrastructure, as well as the ongoing 
operational costs to report.
    The proposed revisions to transaction coverage would make reporting 
of open-end lines of credit mandatory, rather than optional; require 
reporting of all home-equity loans, not just those to be used for home 
purchase, refinancing, or home improvement; and require reporting of 
all reverse mortgages. These additional reporting requirements would 
increase operational costs for small entities as costs increase to 
transcribe data, resolve reportability questions, transfer data to HMS, 
and research questions.

[[Page 51851]]

    The proposed rule adds additional data points identified by the 
Dodd-Frank Act and that the Bureau believes are necessary to close 
information gaps. As part of this proposal, the Bureau is aligning all 
current and proposed data points to industry data standards to the 
extent practicable. The additional data points will increase ongoing 
operational costs, and impose one-time costs as small entities modify 
reporting infrastructure to incorporate additional fields. The 
transition to industry data standards would offset this cost slightly 
through reduced costs of researching questions and training.
    Estimate of the classes of small entities that will be subject to 
the requirement and the type of professional skills necessary for the 
preparation of the report or record.
    The following table conveys the classes of small entities affected:
    [GRAPHIC] [TIFF OMITTED] TP29AU14.005
    
    Type of professional skills required. Section 603(b)(4) of the RFA 
also requires an estimate of the type of professional skills necessary 
for the preparation of the reports or records. The recordkeeping and 
compliance requirements of the proposed rule that would affect small 
entities are summarized above.
    Based on outreach with financial institutions, vendors, and 
governmental agency representatives, the Bureau classified the 
operational activities that financial institutions currently use for 
HMDA data collection and reporting into 18 operational ``tasks'' which 
can be further grouped into four ``primary tasks.'' These are:
    1. Data collection: Transcribing data, resolving reportability 
questions, and transferring data to an HMS.
    2. Reporting and resubmission: Geocoding, standard annual edit and 
internal checks, researching questions, resolving question responses, 
checking post-submission edits, filing post-submission documents, 
creating public loan application register, distributing public loan 
application register, distributing disclosure report, and using vendor 
HMS software.
    3. Compliance and internal audits: Training, internal audits, and 
external audits.
    4. HMDA-related exams: Exam preparation and exam assistance.
    All these tasks are related to the preparation of reports or 
records and most of them are performed by compliance personnel in the 
compliance department of financial institutions. For some financial

[[Page 51852]]

institutions, however, the data intake and transcribing stage could 
involve loan officers or processors whose primary function is to 
evaluate or process loan applications. For example, the loan officers 
would take in government monitoring information from the applicants and 
input that information into the reporting system. However, the Bureau 
believes that such roles generally do not require any additional 
professional skills related to recordkeeping or other compliance 
requirements of this proposed rule that are not otherwise required 
during the ordinary course of business for small entities.
    The type of professional skills required for compliance varies 
depending on the particular task involved. For example, data 
transcribing requires data entry skills. Transferring data to an HMS 
and using vendor HMS software requires knowledge of computer systems 
and the ability to use them. Researching and resolving reportability 
questions requires a more complex understanding of the regulatory 
requirements and the details of the relevant line of business. 
Geocoding requires skills in using the geocoding software, web systems, 
or, in cases where geocoding is difficult, knowledge of the local area 
in which the property is located. Standard annual editing, internal 
checks, and post-submission editing require knowledge of the relevant 
data systems, data formats, and HMDA regulatory requirements in 
addition to skills in quality control and assurance. Filing post-
submission documents, creating public loan application registers, and 
distributing public loan application registers and disclosure reports 
requires skills in information creation, dissemination, and 
communication. Training, internal audits, and external audits requires 
communications skills, educational skills, and regulatory knowledge. 
HMDA-related exam preparation and exam assistance involve knowledge of 
regulatory requirements, the relevant line of business, and the 
relevant data systems.
    The Standard Occupational Classification (SOC) code has compliance 
officers listed under code 13-1041. The Bureau believes that most of 
the skills required for preparation of the reports or records related 
to this proposal are the skills required for job functions performed in 
this occupation. However, the Bureau recognizes that under this general 
occupational code there is a high level of heterogeneity in the type of 
skills required as well as the corresponding labor costs incurred by 
the financial institutions performing these functions.
    During the SBREFA process, some small entity representatives noted 
that due to the small size of their institutions, they do not have 
separate compliance departments exclusively dedicated to HMDA 
compliance. Their HMDA compliance personnel are often engaged in other 
corporate compliance functions. To the extent that the compliance 
personnel of a small entity are divided between HMDA compliance and 
other functions, the skills required for those personnel may differ 
from the skills required for fully-dedicated HMDA compliance personnel. 
For instance, some small entity representatives noted that high-level 
corporate officers such as CEOs and senior vice presidents could be 
directly involved in some HMDA tasks. The Bureau seeks comment 
regarding the skills required for the preparation of the reports or 
records related to this proposed rule.
    Due to the proposed changes, the Bureau acknowledges the 
possibility that certain aspects of the proposed rule may require some 
small entities to hire additional compliance staff. The Bureau has no 
evidence that such additional staff will possess a qualitatively 
different set of professional skills than small entity staff employed 
currently for HMDA purposes. It is possible, however, that compliance 
with the proposed rule may emphasize certain skills. For example, 
additional data points may increase demand for skills involved in 
researching questions, standard annual editing, and post-submission 
editing. On the other hand, the Bureau is separately considering 
operational enhancements and modifications to alleviate some of the 
compliance burden. For example, the Bureau is considering working to 
consolidate the outlets for assistance, providing guidance support 
similar to the guidance provided for Title XIV rules; improving points 
of contact processes for help inquiries; modifying the types of edits 
and when edits are approved; exploring opportunities to improve the 
current DES; and considering approaches to reduce geocoding burdens. 
Such enhancements may also change the relative composition of HMDA 
compliance personnel and the skills involved in recording and reporting 
data. Nevertheless, the Bureau believes that compliance would still 
involve the general set of skills identified above.
    The recordkeeping and reporting requirements associated with this 
proposal would also involve skills for information technology system 
development, integration, and maintenance. Financial institutions often 
use the HMS for HMDA purpose. HMS could be developed by the institution 
internally or purchased from a third-party vendor. Under the proposed 
rule, the Bureau anticipates that most of these systems would need 
substantial upgrades to comply with the proposed requirements. It is 
possible that other systems used by financial institutions, such as 
loan origination systems, might also need upgrades to be compatible 
with the upgraded HMS. The professional skills required for this one-
time upgrade would be related to software development, testing, system 
engineering, information technology project management, budgeting and 
operation.
    Based on feedback from the small entity representatives, many small 
business HMDA reporters rely on FFIEC DES tools and do not use a 
dedicated HMS. The Bureau is separately considering upgrades to the 
HMDA DES, such as moving DES to the web, which would allow financial 
institutions to use the software from multiple terminals in different 
branches and might reduce the required information technology 
implementation cost for small financial institutions that choose to 
employ this new web-based DES.
5. Identification, to the Extent Practicable, of All Relevant Federal 
Rules Which May Duplicate, Overlap, or Conflict With the Proposed Rule
    The proposed rule contains requirements related to the disclosure 
of mortgage loan information by certain financial institutions. The 
Bureau has identified certain other Federal rules that relate in some 
fashion to these areas and has considered the extent to which they may 
duplicate, overlap, or conflict with this proposal.\668\ Each of these 
is discussed below.
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    \668\ Rules are duplicative or overlapping if they are based on 
the same or similar reasons for the regulation, the same or similar 
regulatory goals, and if they regulate the same classes of industry. 
Rules are conflicting when they impose two conflicting regulatory 
requirements on the same classes of industry.
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    The Community Reinvestment Act (CRA), implemented by Office of 
Comptroller of the Currency, Board, and Federal Deposit Insurance 
Corporation regulations requires some financial institutions to 
collect, maintain, and report certain data about small business, farm, 
and consumer lending to ensure they are serving their communities. HMDA 
data are frequently used in CRA exams as part of evaluating home 
mortgage lending under the CRA

[[Page 51853]]

lending test, and many CRA definitions and concepts are aligned with 
HMDA. The Bureau intends to work with CRA regulatory agencies to ensure 
that HMDA and the CRA do not conflict and that HMDA data can continue 
to be used as part of the CRA compliance process.
    The Equal Credit Opportunity Act (ECOA), implemented by the 
Bureau's Regulation B (12 CFR part 1002), among other things, prohibits 
creditors from discriminating in credit transactions and requires 
creditors to notify applicants of reasons for denial and provide copies 
of appraisals for certain home-secured loans. Regulation B requires 
creditors to collect race, ethnicity, sex, marital status, and age of 
applicants for some home purchase loans and refinancings and to 
maintain that information for 25 months for purposes of monitoring 
compliance with antidiscrimination laws. One of HMDA's purposes is to 
provide data that can be used to assist in enforcing antidiscrimination 
statutes, which include ECOA.
    The Truth in Lending Act (TILA) and Real Estate Settlement 
Procedures Act (RESPA), implemented by the Bureau's Regulation Z (12 
CFR part 1026) and Regulation X (12 CFR part 1024), provide protections 
to consumers who apply for and receive mortgage loans. These 
protections include disclosures and restrictions on certain types of 
transactions. The Bureau recently issued a final rule on integrated 
mortgage disclosures under the Real Estate Settlement Procedures Act 
(Regulation X) and the Truth in Lending Act (Regulation Z). The Bureau 
has considered the definitions, requirements, and purposes of TILA and 
RESPA as it developed its proposals under Regulation C.
    Proposed Regulation AB II (17 CFR part 229, subpart 229.1100) from 
the Securities and Exchange Commission (SEC) would require private 
issuers of asset-backed securities, including mortgage-backed 
securities, to disclose certain asset-level information.
    The Fair Housing Home Loan Data System (12 CFR part 27), 
promulgated by the OCC, provides for a data collection system for 
monitoring national bank compliance with the Fair Housing Act and ECOA. 
Under the regulations governing the Fair Housing Loan Data System, 
financial institutions generally maintain these data in a format 
similar to that currently prescribed under Regulation C, except that 
financial institutions are required to report the reasons for denial on 
the loan application register.\669\ Under section 1003.4(a)(16) of the 
proposed rule, financial institutions would report the reasons for 
denial of a loan application.
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    \669\ See 12 CFR 128.6 (requiring certain financial institutions 
to report denial reasons to OCC for nondiscriminatory lending 
purposes. Certain financial institutions supervised by the FDIC are 
also required to report denial reasons under 12 CFR 390.147.
---------------------------------------------------------------------------

    The Bureau requests comment to identify any additional such Federal 
rules that impose duplicative, overlapping, or conflicting requirements 
on servicers and potential changes to the proposed rules in light of 
duplicative, overlapping, or conflicting requirements.
6. Description of Any Significant Alternatives to the Proposed Rule 
Which Accomplish the Stated Objectives of Applicable Statutes and 
Minimize Any Significant Economic Impact of the Proposed Rule on Small 
Entities
    The small entity representatives generally were receptive to the 
Bureau's proposals to modernize and streamline the HMDA data collection 
and reporting processes, but expressed some concerns about the 
proposals under consideration to add new data points to the HMDA 
reporting requirements. Where the small entity representatives 
expressed concern about the costs of complying with a proposed 
provision, the Bureau considered alternatives that might impose lower 
costs on small entities. One component of this consideration was to 
ensure that any alternative would accomplish the stated objectives of 
HMDA.
    Institutional coverage threshold. As described above, Regulation 
C's institutional coverage is determined by complicated tests based on 
assets, loan volume, geographic location, and whether the financial 
institution makes loans that are federally related. The institutional 
coverage tests differ depending on whether the financial institution is 
a depository institution or nondepository institution. The proposed 
regulation would adopt a uniform 25-loan volume threshold for both 
depository and nondepository institutions.
    The uniform standard promotes simplicity and clarity, an objective 
of the proposal, and was generally favored by the small entity 
representatives. Many small entity representatives suggested a higher 
coverage threshold, with recommendations ranging from 100 to 500 loans. 
The Bureau understands that some burden reduction may result from a 
threshold higher than 25 loans. However, the Bureau was concerned that 
a higher threshold would result in the elimination of data that are 
important in fulfilling the purposes of HMDA. Therefore, the Bureau is 
proposing a threshold of 25 loans.
    Disclosure and reporting requirements. As described above, 
Regulation C currently requires that a financial institution must make 
its loan application register available to the public after removing 
three fields to protect applicant and borrower privacy: The application 
or loan number, the date that the application was received, and the 
date action was taken. An institution must make this ``modified loan 
application register'' available following the calendar year for which 
the data are compiled, by March 31 for a request received on or before 
March 1, and within 30 calendar days for a request received after March 
1.
    The Bureau is seeking comment on whether it should eliminate the 
requirement that the modified loan application register be made 
available to the public by smaller institutions. During the Small 
Business Review Panel process, the Bureau heard from small entity 
representatives that they rarely, if ever, receive requests for their 
modified loan application registers. The Small Business Review Panel 
recommended that the Bureau consider whether there is a continued need 
for small institutions to make their modified loan application 
registers available. Accordingly, the Bureau is soliciting comment on 
whether institutions should be excluded from the obligation to make 
their modified loan application registers available to the public, and, 
if so, which institutions should be excluded.
7. Discussion of Impact on Cost of Credit for Small Entities
    Section 603(d) of the RFA requires the Bureau to consult with small 
entities regarding the potential impact of the proposed rule on the 
cost of credit for small entities and related matters.\670\ To satisfy 
these statutory requirements, the Bureau provided notification to the 
Chief Counsel for Advocacy of the SBA in December 2013 that the Bureau 
would collect the advice and recommendations of the same small entity 
representatives identified in consultation with the Chief Counsel for 
Advocacy of the SBA through the Small Business Review Panel outreach 
concerning any projected impact of the proposed rule on the cost of 
credit for small entities as well as any significant alternatives to 
the proposed rule which

[[Page 51854]]

accomplish the stated objectives of applicable statutes and which 
minimize any increase in the cost of credit for small entities.\671\ 
The Bureau sought to collect the advice and recommendations of the 
small entity representatives during the Panel Outreach Meeting 
regarding these issues because, as small financial service providers, 
the small entity representatives could provide valuable input on any 
such impact related to the proposed rule.\672\
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    \670\ 5 U.S.C. 603(d).
    \671\ See 5 U.S.C. 603(d)(2). The Bureau provided this 
notification as part of the notification and other information 
provided to the Chief Counsel for Advocacy of the SBA with respect 
to the Small Business Review Panel outreach pursuant to RFA section 
609(b)(1).
    \672\ See 5 U.S.C. 603(d)(2)(B).
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    Following microeconomic principles, the Bureau believes that 
financial institutions will pass on increased variable costs to future 
mortgage applicants, but absorb one-time costs and increased fixed 
costs if financial institutions are profit maximizers and the market is 
perfectly competitive. Overall, the Bureau estimates that the impact of 
the proposed rule on variable costs per application is approximately 
$13 for a representative tier 3 financial institution, $0.20 for a 
representative tier 2 financial institution, and $0.11 for a 
representative tier 1 financial institution.
    At the time the Bureau circulated the Small Business Review Panel 
outreach materials to the small entity representatives in advance of 
the Panel Outreach Meeting, it believed that the proposals under 
consideration would result in a minimal increase in the cost of 
business credit for small entities. Although the proposals would apply 
primarily to mortgage loans obtained by consumers for personal, family, 
or household purposes, the proposals under consideration would also 
cover certain dwelling-secured loans used for business purposes.
    At the Small Business Review Panel Outreach Meeting, the Bureau 
asked the small entity representatives a series of questions regarding 
the cost of business credit.\673\ These questions were focused on 
determining which proposals, if any, might impact the cost of credit 
for small entities, and whether feasible alternatives existed that 
would minimize the impact on small entities while accomplishing the 
statutory objectives addressed by the proposed rule. Specifically, the 
Bureau asked the small entity representatives whether they extended 
consumer mortgage loans used secondarily to finance small businesses. 
For nondepository institutions, the Bureau asked whether they had taken 
out a consumer mortgage loan that was also used secondarily to finance 
a small business.
---------------------------------------------------------------------------

    \673\ See Small Business Review Panel Report at 35.
---------------------------------------------------------------------------

    The small entity representatives had few comments on the impact on 
the cost of business credit. Not all of the small entity 
representatives made loans to small businesses. One credit union small 
entity representatives, however, noted that many of its home-equity 
loans are used by individuals to fund a business. Two bank small entity 
representatives stated that a high percentage of their loans are small 
business or commercial loans where homes are typically used as 
additional collateral. These two small entity representatives explained 
that, because competition for loans currently is strong, they have to 
absorb extra costs. One of these small entity representatives also 
stated that so far it has improved efficiency to cut costs and has not 
imposed a regulatory compliance fee or marketed its data, as have other 
financial institutions, to offset compliance costs. A few small entity 
representatives noted that they would likely have to pass additional 
costs on to business customers. A third bank small entity 
representative stated that it charges a loan documentation fee to its 
commercial clients, but because borrowers are fee-sensitive, the 
financial institution could lose business with additional fees. When 
asked, the small entity representatives did not identify significant 
alternatives to any of the proposals under consideration that might 
minimize the impact on the cost of credit for small entities while 
accomplishing the statutory objectives addressed by the proposals under 
consideration.
    Based on the feedback obtained from small entity representatives at 
the Panel Outreach Meeting, the Bureau currently anticipates that the 
proposed rule will result in a minimal increase in the cost of credit 
for small business entities. To further evaluate this question, the 
Bureau solicits comment on whether the proposed rule will have any 
impact on the cost of credit for small entities.

VIII. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA),\674\ Federal 
agencies are generally required to seek approval from the Office of 
Management and Budget (OMB) for information collection requirements 
prior to implementation. Further, the Bureau may not conduct or sponsor 
a collection of information unless OMB approves the collection under 
the PRA and displays a currently valid OMB control number. 
Notwithstanding any other provision of law, no person is required to 
comply with, or is subject to penalty for failure to comply with, a 
collection of information if the collection instrument does not display 
a currently valid OMB control number. The information collection 
requirements contained in Regulation C are currently approved by OMB 
under OMB control number 3170-0008.
---------------------------------------------------------------------------

    \674\ 44 U.S.C. 3501 et seq.
---------------------------------------------------------------------------

    As part of its continuing effort to reduce paperwork and respondent 
burden, the Bureau conducts a preclearance consultation program to 
provide the general public and Federal agencies with an opportunity to 
comment on the revised information collection requirements in 
accordance with the PRA.\675\ This helps ensure that the public 
understands the Bureau's requirements or instructions, that respondents 
can provide the requested data in the desired format, that reporting 
burden (time and financial resources) is minimized, that collection 
instruments are clearly understood, and that the Bureau can properly 
assess the impact of collection requirements on respondents.
---------------------------------------------------------------------------

    \675\ 44 U.S.C. 3506(c)(2)(A).
---------------------------------------------------------------------------

    As described below, the proposal would amend the information 
collection requirements contained in Regulation C \676\ and currently 
approved under OMB control number 3170-0008. The revised information 
collection requirements are contained in sections 1003.4 and 1003.5 of 
the prosed rule. The Bureau's information collection requirements 
contained in this proposal, and identified as such, will be submitted 
to OMB for review under section 3507(d) of the PRA on or before 
publication of this proposal in the Federal Register.
---------------------------------------------------------------------------

    \676\ 12 CFR 1003.
---------------------------------------------------------------------------

    The title of this information collection is Home Mortgage 
Disclosure (Regulation C). The frequency of response is annually, 
quarterly, and on-occasion. The Bureau's regulation would require 
covered financial institutions that meet certain thresholds to maintain 
data about originations and purchases of mortgage loans, as well as 
mortgage loan applications that do not result in originations, to 
update the information quarterly, and to report the information 
annually or quarterly. Financial institutions must also make certain 
information available to the public upon request.
    The information collection requirements in this proposed rule would 
be mandatory.\677\ Certain of data fields are redacted before they are 
made

[[Page 51855]]

available to the public, as required by the statute and regulation. The 
non-redacted data are made publicly available and are not considered 
confidential. The rest of the data, including information that might 
identify an individual borrower or applicant, such as loan number, date 
the application was received, and the date the application was taken, 
is considered confidential under the Bureau's confidentiality 
regulations, 12 CFR part 1070 et seq., and the Freedom of Information 
Act.\678\ The likely respondents will be financial institutions--
specifically banks, savings associations, or credit unions (depository 
institutions), and for-profit mortgage-lending institutions 
(nondepository institutions)--that meet the tests for coverage under 
Regulation C. These respondents would be required under the proposal to 
maintain, disclose to the public, and report to Federal agencies, 
information regarding covered loans and applications for covered loans.
---------------------------------------------------------------------------

    \677\ See 12 U.S.C. 2801 et seq.
    \678\ 5 U.S.C. 552(b)(6).
---------------------------------------------------------------------------

    For the purposes of this PRA analysis, the Bureau estimates that, 
under the proposal, approximately 1,600 depository institutions that 
currently report HMDA data would no longer be required to report, and 
that approximately 450 more nondepository institutions would now be 
required to report. In 2012, approximately 7,400 financial institutions 
reported data under HMDA. The proposed coverage changes would reduce 
the number of reporters by an estimated 1,150 reporters for an 
estimated total of approximately 6,250. Under the proposal, the Bureau 
generally would account for the paperwork burden for all respondents 
under Regulation C. Using the Bureau's burden estimation methodology, 
which projects the estimated burden on several types of representative 
respondents to the entire market, the Bureau believes the total 
estimated industry burden for the approximately 6,250 respondents \679\ 
subject to the proposed rule would be approximately 4,700,000 hours per 
year.\680\ The Bureau expects that the amount of time required to 
implement each of the proposed changes for a given institution may vary 
based on the size, complexity, and practices of the respondent.
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    \679\ The count of 6,250 is constructed as the number of HMDA 
reporters in 2012 (7,400) less the estimated 1,600 depository 
institutions that would no longer have to report under the proposed 
coverage rules plus the additional 450 estimated non-depository 
institutions that would have to begin reporting under the proposed 
coverage rules.
    \680\ The Bureau estimates that, for all HMDA reporters, the 
burden hours will be approximately 3,356,000 to 5,953,000 hours per 
year. 4,700,000 is approximately the mid-point of this estimated 
range.
---------------------------------------------------------------------------

    197 financial institutions reported HMDA data to the Bureau in 
2012. Currently, only depository institutions with over $10 billion in 
assets and their affiliates report their HMDA data to the Bureau. Given 
their large asset size, it is reasonable to believe that Bureau 
reporters are most likely aligned with the representative tier 1 
institution.\681\ Therefore, to calculate burden hours, the Bureau 
assumes all 197 financial institutions that reported HMDA data to the 
Bureau are tier 1 institutions. The Bureau estimates that the current 
time burden for the Bureau reporters is approximately 1,787,000 hours 
per year. 18 of these 197 institutions reported over 75,000 HMDA loan 
application register records, and would therefore be required to report 
data quarterly. Including the modifications to the information 
collection requirements contained in the proposed rule, and the 
operations modernization measures, the Bureau estimates that the time 
burden for annual and quarterly Bureau reporters would be 1,694,000 and 
183,000 hours per year, respectively, for a total estimated burden 
hours of 1,877,000 per year. This represents an increase of 
approximately 90,000 burden hours.
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    \681\ The Bureau's estimation methodology is fully described in 
section VI, above.
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A. Information Collection Requirements \682\
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    \682\ A detailed analysis of the burdens and costs described in 
this section can be found in the Paperwork Reduction Act Supporting 
Statement that corresponds with this proposal. The Supporting 
Statement is available at www.reginfo.gov.
---------------------------------------------------------------------------

    The Bureau believes the following aspects of the proposed rule 
would be information collection requirements under the PRA: (1) The 
requirement that financial institutions maintain loan application 
register information for three years, disclosure statements for five 
years, and update information regarding reportable transactions 
quarterly; (2) the requirement that financial institutions report HMDA 
data annually--or, in the case of financial institutions with at least 
75,000 loan application register entries for the preceding calendar 
year, quarterly--to the Bureau or to the appropriate Federal agency; 
and (3) the requirement that financial institutions provide modified 
loan application registers to the public upon request, and provide 
notices that clearly convey that disclosure statements may be obtained 
on the FFIEC Web site.
1. Recordkeeping Requirements
    Financial institutions are required to maintain loan application 
register information for three years and disclosure statements for five 
years. The proposed rule would not modify the recordkeeping period for 
covered financial institutions, or increase the documentation or non-
data-specific information that financial institutions would have to 
maintain. The proposed rule would increase the number of data fields, 
and possibly the number of records, that financial institutions are 
required to gather and report. The Bureau estimates that the current 
time burden of reporting for the Bureau reporters is approximately 
810,000 hours per year. The Bureau estimates that, with the proposed 
changes and the operations modernization, the time burden for annual 
and quarterly Bureau reporters would be approximately 766,000 and 
77,000 hours per year, respectively, for a total estimate of 
approximately 843,000 burden hours per year. This represents an 
increase of approximately 33,000 burden hours.
2. Reporting Requirements
    HMDA is a data reporting statute, so most provisions of the 
proposed rule affect reporting requirements, as described above. 
Specifically, financial institutions are required to report HMDA data 
to the Bureau or to the appropriate Federal agency.\683\ All reportable 
transactions must be recorded within 30 calendar days \684\ after the 
end of the calendar quarter in which final action is taken on a loan 
application register, and a modified version of the loan application 
register must be disclosed to the public upon request.\685\ Under the 
proposed regulation, financial institutions would make available to the 
public a modified loan application register showing only the data 
fields that are currently released on the modified loan application 
register. Additionally, financial institutions that reported at least 
75,000 covered loans, applications, and purchased covered loans, 
combined, in the preceding calendar year will be required to report 
HMDA data quarterly to the Bureau or the appropriate Federal agency.
---------------------------------------------------------------------------

    \683\ 12 U.S.C. 2803(h)(1).
    \684\ 12 CFR 1003.4(a).
    \685\ 12 U.S.C. 2803(j).
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    The Bureau estimates that the current time burden of reporting for 
the Bureau reporters is approximately 971,000 hours per year. The 
Bureau estimates that, with the proposed changes and the operations 
modernization, the time burden for annual and quarterly Bureau

[[Page 51856]]

reporters would be approximately 921,000 and 105,000 hours per year, 
respectively, for a total estimate of approximately 1,026,000 burden 
hours per year. This represents an increase of approximately 55,000 
burden hours.
3. Disclosure Requirements
    The proposed rule would modify Regulation C's requirements for 
financial institutions to disclose information to third parties. 
Covered financial institutions would continue to make their modified 
loan application registers available to the public upon request, but, 
as described above, the modified loan application register would be 
limited to the data that are currently released under Regulation C. 
Additionally, the proposed rule would allow financial institutions to 
provide their disclosure statements to the public by making available a 
notice that clearly conveys that the disclosure statement may be 
obtained on the FFIEC Web site and that includes the FFIEC's Web site 
address.
    The Bureau estimates that the current time burden of disclosure for 
the Bureau reporters is approximately 6,000 hours per year. The Bureau 
estimates that, with the proposed changes and the operations 
modernization, the time burden for annual and quarterly Bureau 
reporters would be approximately 7,000 and 1,000 hours per year, 
respectively, for a total estimate of approximately 8,000 burden hours 
per year. This represents an increase of approximately 2,000 burden 
hours.
4. One-Time Costs Associated With the Proposed Information Collections
    Financial institutions' management, legal, and compliance personnel 
will likely take time to learn new reporting requirements and assess 
legal and compliance risks. Financial institutions that use vendors for 
HMDA compliance will incur one-time costs associated with software 
installation, troubleshooting, and testing. The Bureau is aware that 
these activities will require time and that the costs may be sensitive 
to the time available for them. Financial institutions that maintain 
their own reporting systems will incur one-time costs to develop, 
prepare, and implement necessary modifications to those systems. In all 
cases, financial institutions will need to update training materials to 
reflect new requirements and activities and may have certain one-time 
costs for providing initial training to current employees.
    For current HMDA reporters, the Bureau estimates that the proposed 
rule will impose on average one-time costs of $3,000 for tier 3 
financial institutions, $250,000 for tier 2 financial institutions and 
$800,000 for tier 1 financial institutions without considering the 
expansion of transactional coverage to include open-end lines of credit 
and reverse mortgages.\686\ Including the estimated one-time costs to 
modify processes and systems for home-equity products, the Bureau 
estimates that the total one-time costs would be $3,000 for tier 3 
institutions, $375,000 for tier 2 institutions, and $1,200,000 for tier 
1 institutions. This yields an overall estimated market impact of 
between $383,000,000 and $2,100,000,000. Using a 7 percent discount 
rate and a five-year window, the annualized one-time, additional cost 
is $93,400,000 to $514,900,000. The Bureau expects to obtain more 
information about these one-time costs through this NPRM process and 
other outreach efforts.
---------------------------------------------------------------------------

    \686\ The Bureau realizes that the impact to one-time costs 
varies by institution due to many factors, such as size, operational 
structure, and product complexity, and that this variance exists on 
a continuum that is impossible to fully capture. As a result, the 
one-time cost estimates will be high for some financial 
institutions, and low for others.
---------------------------------------------------------------------------

    The proposed revisions to the institutional coverage criteria will 
require an estimated 450 nondepository institutions that are currently 
not reporting under HMDA to begin reporting. These nondepository 
institutions will incur start-up costs to develop policies and 
procedures, infrastructure, and training. Based on outreach discussions 
with financial institutions, the Bureau believes that these start-up 
costs will be similar to the one-time costs current reporters will 
incur in response to the proposed rule, which average $3,000 for tier 3 
financial institutions, $375,000 for tier 2 financial institutions, and 
$1,200,000 for tier 1 financial institutions. Although origination 
volumes for these 450 nondepository institutions are slightly higher, 
the Bureau still expects most of these nondepository institutions to be 
tier 3 financial institutions. Under this assumption, the estimated 
overall market cost would be $1,350,000.

B. Summary of Burden Hours

    The tables below summarize the estimated annual burdens under 
Regulation C associated with the information collections described 
above for Bureau reporters and all HMDA reporters, respectively. The 
tables combine all three aspects of information collection: Reporting, 
recordkeeping, and disclosure requirements. The Paperwork Reduction Act 
Supporting Statement that corresponds with this proposal provides more 
information as to how these estimates were derived and further detail 
regarding the burden hours associated with each information collection. 
The first table presents burden hour estimates for financial 
institutions that report HMDA data to the Bureau, and the second table 
provides information for all HMDA reporters.

[[Page 51857]]

[GRAPHIC] [TIFF OMITTED] TP29AU14.006

[GRAPHIC] [TIFF OMITTED] TP29AU14.007

C. Comments

    Comments are specifically requested concerning: (i) Whether the 
proposed collections of information are necessary for the proper 
performance of the functions of the Bureau, including whether the 
information will have practical utility; (ii) the accuracy of the 
estimated burden associated with the proposed collections of 
information; (iii) how to enhance the quality, utility, and clarity of 
the information to be collected; and (iv) how to minimize the burden of 
complying with the proposed collections of information, including the 
application of automated collection techniques or other forms of 
information technology. Comments regarding the burden estimate, or any 
other aspect of these collections of information, including suggestions 
for reducing the burden, should be sent to: The Office of Management 
and Budget (OMB), Attention: Desk Officer for the Consumer Financial 
Protection Bureau, Office of Information and Regulatory Affairs, 
Washington, DC, 20503, or by the Internet to submissions@omb.eop.gov. 
If you wish to share your comments with the Bureau, please send a copy 
of these comments to the docket for this proposed rule at 
www.regulations.gov. The ICR submitted to OMB requesting approval under 
the PRA for the information collection requirements contained herein is 
available both at www.regulations.gov as well as OMB's public-facing 
docket at www.reginfo.gov.

List of Subjects in 12 CFR Part 1003

    Banks, Banking, Credit unions, Mortgages, National banks, Savings 
associations, Reporting and recordkeeping requirements.

Authority and Issuance

    For the reasons set forth above, the Bureau of Consumer Financial 
Protection proposes to amend Regulation C, 12 CFR part 1003, as set 
forth below:

[[Page 51858]]

PART 1003--HOME MORTGAGE DISCLOSURE (REGULATION C)

0
1. The authority citation for part 1003 continues to read as follows:


    Authority: 12 U.S.C. 2803, 2804, 2805, 5512, 5581.

0
2. Section 1003.1 is amended by revising paragraph (c) to read as 
follows:


Sec.  1003.1  Authority, purpose, and scope.

* * * * *
    (c) Scope. This part applies to financial institutions as defined 
in Sec.  1003.2(g). The regulation requires a financial institution to 
report data to the Bureau or to the appropriate Federal agency for the 
financial institution about covered loans secured by a dwelling located 
in a State of the United States of America, the District of Columbia, 
or the Commonwealth of Puerto Rico that it originates or purchases, or 
for which it receives applications; and to disclose certain data to the 
public.
0
3. Section 1003.2 is amended by adding paragraph numbers to the 
existing definitions, by adding paragraphs (d), (e), (k), (n), (o), and 
(q), and by revising newly designated paragraphs (b), (c), (f), (g), 
(h), (i), (l), and (p) to read as follows:


Sec.  1003.2  Definitions.

* * * * *
    (b) Application. (1) In general. Application means an oral or 
written request for a covered loan that is made in accordance with 
procedures used by a financial institution for the type of credit 
requested.
    (2) Preapproval programs. A request for preapproval for a home 
purchase loan is an application under this section if the request is 
reviewed under a program in which the financial institution, after a 
comprehensive analysis of the creditworthiness of the applicant, issues 
a written commitment to the applicant valid for a designated period of 
time to extend a home purchase loan up to a specified amount. The 
written commitment may not be subject to conditions other than:
    (i) Conditions that require the identification of a suitable 
property;
    (ii) Conditions that require that no material change has occurred 
in the applicant's financial condition or creditworthiness prior to 
closing; and
    (iii) Limited conditions that are not related to the financial 
condition or creditworthiness of the applicant that the financial 
institution ordinarily attaches to a traditional home mortgage 
application.
    (c) Branch office means:
    (1) Any office of a depository financial institution, as defined in 
paragraph (g)(1) of this section, that is considered a branch by the 
Federal or State supervisory agency applicable to that financial 
institution, excluding automated teller machines and other free-
standing electronic terminals; and
    (2) Any office of a nondepository financial institution, as defined 
in paragraph (g)(2) of this section, that takes applications from the 
public for covered loans. A nondepository financial institution is also 
deemed to have a branch office in an MSA or in an MD, if, in the 
preceding calendar year, it received applications for, originated, or 
purchased five or more covered loans related to property located in 
that MSA or MD, respectively.
    (d) Closed-end mortgage loan means a debt obligation secured by a 
lien on a dwelling that is not an open-end line of credit under 
paragraph (o) of this section, a reverse mortgage under paragraph (q) 
of this section, or excluded from this part pursuant to Sec.  
1003.3(c).
    (e) Covered loan means a transaction that is, as applicable, a 
closed-end mortgage loan under paragraph (d) of this section, an open-
end line of credit under paragraph (o) of this section, or a reverse 
mortgage under paragraph (q) of this section.
    (f) Dwelling means a residential structure, whether or not attached 
to real property. The term includes but is not limited to a detached 
home, an individual condominium or cooperative unit, a manufactured or 
other factory-built home, or a multifamily residential structure.
    (g) Financial institution means a depository financial institution 
or a nondepository financial institution, where:
    (1) Depository financial institution means a bank, savings 
association, or credit union that:
    (i) On the preceding December 31 had assets in excess of the asset 
threshold established and published annually by the Bureau for coverage 
by the Act, based on the year-to-year change in the average of the 
Consumer Price Index for Urban Wage Earners and Clerical Workers, not 
seasonally adjusted, for each twelve month period ending in November, 
with rounding to the nearest million;
    (ii) On the preceding December 31, had a home or branch office in 
an MSA;
    (iii) In the preceding calendar year, originated at least one home 
purchase loan or refinancing of a home purchase loan, secured by a 
first lien on a one-to four-unit dwelling;
    (iv) Meets one or more of the following three criteria:
    (A) The institution is Federally insured or regulated;
    (B) The loan referred to in paragraph (g)(1)(iii) of this section 
was insured, guaranteed, or supplemented by a Federal agency; or
    (C) The loan referred to in paragraph (g)(1)(iii) of this section 
was intended by the institution for sale to the Federal National 
Mortgage Association or the Federal Home Loan Mortgage Corporation; and
    (v) In the preceding calendar year, originated at least 25 covered 
loans, excluding open-end lines of credit; and
    (2) Nondepository financial institution means a for-profit 
mortgage-lending institution (other than a bank, savings association, 
or credit union) that:
    (i) On the preceding December 31, had a home or branch office in an 
MSA; and
    (ii) In the preceding calendar year, originated at least 25 covered 
loans, excluding open-end lines of credit.
* * * * *
    (i) Home improvement loan means a covered loan that is for the 
purpose, in whole or in part, of repairing, rehabilitating, remodeling, 
or improving a dwelling or the real property on which it is located.
    (j) Home purchase loan means a covered loan that is for the purpose 
of purchasing a dwelling.
    (k) Loan application register means a register in the format 
prescribed in appendix A to this part.
    (l) Manufactured home means any residential structure as defined 
under regulations of the U.S. Department of Housing and Urban 
Development establishing manufactured home construction and safety 
standards (24 CFR 3280.2).
* * * * *
    (n) Multifamily dwelling means a dwelling, regardless of 
construction method, that contains five or more individual dwelling 
units.
    (o) Open-end line of credit means a transaction that:
    (1) Is an open-end credit plan as defined in Sec.  1026.2(a)(20) of 
Regulation Z, but without regard to whether the credit is for personal, 
family, or household purposes, without regard to whether the person to 
whom credit is extended is a consumer, and without regard to whether 
the person extending credit is a creditor, as those terms are defined 
under Regulation Z, 12 CFR part 1026;
    (2) Is secured by a lien on a dwelling, as defined under paragraph 
(f) of this section;

[[Page 51859]]

    (3) Is not a reverse mortgage under paragraph (q) of this section; 
and
    (4) Is not excluded from this part pursuant to Sec.  1003.3(c).
    (p) Refinancing means a covered loan in which a new debt obligation 
satisfies and replaces an existing debt obligation by the same 
borrower, in which both the existing debt obligation and the new debt 
obligation are secured by liens on dwellings.
    (q) Reverse mortgage means a transaction that:
    (1) Is a reverse mortgage transaction as defined in Regulation Z, 
12 CFR 1026.33(a); and
    (2) Is not excluded from this part pursuant to Sec.  1003.3(c).
0
4. Section 1003.3 is amended by revising the section heading and adding 
paragraph (c) to read as follows:


Sec.  1003.3  Exempt institutions and excluded transactions.

* * * * *
    (c) Excluded transactions. The requirements of this part do not 
apply to:
    (1) A loan originated or purchased by the financial institution 
acting in a fiduciary capacity;
    (2) A loan secured by a lien on unimproved land;
    (3) Temporary financing;
    (4) The purchase of an interest in a pool of loans;
    (5) The purchase solely of the right to service loans;
    (6) The purchase of loans as part of a merger or acquisition, or as 
part of the acquisition of all of the assets and liabilities of a 
branch office as defined in Sec.  1003.2(c);
    (7) A loan or application for which the total dollar amount is less 
than $500;
    (8) The purchase of a partial interest in a covered loan; or
    (9) A loan used primarily for agricultural purposes.
0
5. Section 1003.4 is amended by:
0
a. Revising the section heading;
0
b. Revising paragraphs (a) introductory text, (a)(1) through (7), 
(a)(9) through (11), (a)(12)(i), and (a)(13) and (14);
0
c. Adding paragraphs (a)(15) through (39) and (b);
0
d. Revising paragraph (b);
0
e. Removing and reserving paragraphs (c)(1) through (3) and (d); and
0
f. Adding paragraph (f).
    The revisions and addtions read as follows:


Sec.  1003.4  Compilation of reportable data.

    (a) Data format and itemization. A financial institution shall 
collect data regarding applications for covered loans which it 
receives, originations of covered loans on which it makes a credit 
decision, and covered loans it purchases for each calendar year. A 
financial institution shall collect data regarding requests under a 
preapproval program, as defined in Sec.  1003.2(b)(2), only if the 
preapproval request is denied, is approved by the financial institution 
but not accepted by the applicant, or results in the origination of a 
home purchase loan. The data collected shall include the following 
items:
    (1)(i) A universal loan identifier (ULI) for the covered loan or 
application that can be used to retrieve the covered loan or 
application file. For covered loans or applications for which any 
financial institution has previously reported a ULI under this part, 
the ULI shall consist of the ULI that was previously reported for the 
covered loan or application under this part. For all other covered 
loans and applications, the ULI shall:
    (A) Begin with the financial institution's Legal Entity Identifier 
described in Sec.  1003.5(a)(3); and
    (B) Follow the Legal Entity Identifier described in Sec.  
1003.5(a)(3) with up to 25 additional characters to identify the 
covered loan or application, which:
    (1) May be letters, numerals, symbols, or a combination of any of 
these;
    (2) Must be unique within the financial institution; and
    (3) Must not include any information that could be used to directly 
identify the applicant or borrower.
    (ii) Except for purchased covered loans, the date the application 
was received or the date shown on the application form.
    (2) Whether the covered loan or application is insured under title 
II of the National Housing Act, is insured under title V of the Housing 
Act of 1949, or is guaranteed under chapter 37 of title 38 of the 
United States Code.
    (3) Whether the covered loan is, or the application is for, a home 
purchase loan, a home improvement loan, a refinancing, or for a purpose 
other than home purchase, home improvement, or refinancing.
    (4) Whether the application is a request for preapproval for a home 
purchase loan.
    (5) Whether the construction method for the dwelling related to the 
property identified in paragraph (a)(9) of this section is site built 
or a manufactured home.
    (6) Whether the property identified in paragraph (a)(9) of this 
section is or will be used by the applicant or borrower as a principal 
residence, as a second residence, or as an investment property.
    (7) The amount of the covered loan or the amount applied for, as 
applicable.
    (i) For a closed-end mortgage loan, other than a purchased loan or 
an assumption, the amount of the covered loan is the amount to be 
repaid as disclosed on the legal obligation. For a purchased closed-end 
mortgage loan or an assumption of a closed-end mortgage loan, the 
amount of the covered loan is the unpaid principal balance on the 
covered loan or assumption at the time of purchase or assumption.
    (ii) For an open-end line of credit, including a purchased open-end 
line of credit or an assumption of an open-end line of credit, the 
amount of the covered loan is the amount of credit available to the 
borrower under the terms of the plan.
    (iii) For a reverse mortgage, the amount of the covered loan is the 
initial principal limit, as determined pursuant to section 255 of the 
National Housing Act (12 U.S.C. 1715z-20) and implementing regulations 
and mortgagee letters prescribed by the U.S. Department of Housing and 
Urban Development.
* * * * *
    (9) The following information about the location of the property 
securing the covered loan or, in the case of an application, proposed 
to secure the covered loan:
    (i) The postal address; and
    (ii) If the property is located in an MSA or MD in which the 
financial institution has a home or branch office, the location of the 
property by:
    (A) State;
    (B) County;
    (C) MSA or MD; and
    (D) Census tract if the property is located in a county with a 
population of more than 30,000 according to the most recent decennial 
census conducted by the U.S. Census Bureau.
    (10) The following information about the applicant or borrower:
    (i) Ethnicity, race, sex, and age; and
    (ii) Gross annual income relied on in making the credit decision 
requiring consideration of income or, if a credit decision requiring 
consideration of income was not made, the gross annual income collected 
as part of the application process.
    (11) The type of entity purchasing a covered loan that the 
financial institution originates or purchases and then sells within the 
same calendar year.
    (12)(i) For covered loans subject to Regulation Z, 12 CFR part 
1026, other than purchased covered loans and reverse mortgages, the 
difference between the covered loan's annual

[[Page 51860]]

percentage rate and the average prime offer rate for a comparable 
transaction as of the date the interest rate is set.
* * * * *
    (13) For covered loans subject to the Home Ownership and Equity 
Protection Act of 1994, as implemented in Regulation Z, 12 CFR 1026.32, 
whether the covered loan is a high-cost mortgage under Regulation Z, 12 
CFR 1026.32(a), and the reason that the covered loan is a high-cost 
mortgage, if applicable.
    (14) The priority of the lien against the property identified under 
paragraph (a)(9) of this section.
    (15)(i) Except for purchased covered loans, the credit score or 
scores relied on in making the credit decision and the name and version 
of the scoring model used to generate each credit score.
    (ii) ``Credit score'' has the meaning set forth in 15 U.S.C. 
1681g(f)(2)(A).
    (16) The reason(s) the financial institution denied the 
application.
    (17) For covered loans or applications subject to the Home 
Ownership and Equity Protection Act of 1994, as implemented in 
Regulation Z, 12 CFR 1026.32, or covered loans or applications subject 
to Regulation Z, 12 CFR 1026.43(e)(2)(iii), other than purchased 
covered loans, the total points and fees payable in connection with the 
covered loan or application, expressed in dollars and calculated in 
accordance with Regulation Z, 12 CFR 1026.32(b)(1) or (2), as 
applicable.
    (18) For covered loans subject to the disclosure requirements in 
Regulation Z, 12 CFR 1026.19(f), the total of all itemized amounts that 
are designated borrower-paid at or before closing, expressed in 
dollars, as disclosed pursuant to Regulation Z, 12 CFR 1026.38(f)(1).
    (19) For covered loans subject to the disclosure requirements in 
Regulation Z, 12 CFR 1026.19(f), the points designated as paid to the 
creditor to reduce the interest rate, expressed in dollars, as 
described in Regulation Z, 12 CFR 1026.37(f)(1)(i).
    (20) For covered loans subject to the disclosure requirements in 
Regulation Z, 12 CFR 1026.19(f), other than purchased covered loans, 
the interest rate that the borrower would receive if the borrower paid 
no bona fide discount points, as calculated pursuant to Regulation Z, 
12 CFR 1026.32.
    (21) The interest rate that is or would be applicable to the 
covered loan at closing or account opening.
    (22) Except for purchased covered loans, the term in months of any 
prepayment penalty, as defined in Regulation Z, 12 CFR 1026.32(b)(6)(i) 
or (ii), as applicable.
    (23) For a covered loan that is not, or an application that is not 
for, a reverse mortgage, the ratio of the applicant's or borrower's 
total monthly debt to the total monthly income relied on in making the 
credit decision.
    (24) The ratio of the total amount of debt secured by the property 
to the value of the property, determined as follows:
    (i) For a covered loan that is a home-equity line of credit, by 
dividing the sum of the unpaid principal balance of the first mortgage, 
the full amount of any home-equity line of credit (whether drawn or 
undrawn), and the balance of any other subordinate financing by the 
property value identified in paragraph (a)(28) of this section;
    (ii) For a covered loan that is not a home-equity line of credit, 
by dividing the combined unpaid principal balance amounts of the first 
and all subordinate mortgages, excluding undrawn home-equity lines of 
credit amounts, by the property value identified in paragraph (a)(28) 
of this section.
    (25) The scheduled number of months after which the legal 
obligation will mature or would have matured.
    (26) The number of months until the first date the interest rate 
may change after loan origination.
    (27) Whether the contractual terms include or would have included 
any of the following:
    (i) A balloon payment as defined in Regulation Z, 12 CFR 
1026.18(s)(5)(i);
    (ii) Interest-only payments as defined in Regulation Z, 12 CFR 
1026.18(s)(7)(iv);
    (iii) A contractual term that would cause the covered loan to be a 
negative amortization loan as defined in Regulation Z, 12 CFR 
1026.18(s)(7)(v); or
    (iv) Any other contractual term that would allow for payments other 
than fully amortizing payments, as defined in Regulation Z, 12 CFR 
1026.43(b)(2), during the loan term, other than the terms described in 
paragraphs (a)(27)(i), (ii), and (iii) of this section.
    (28) The value of the property securing the covered loan or, in the 
case of an application, proposed to secure the covered loan relied on 
in making the credit decision.
    (29) If the dwelling related to the property identified in 
paragraph (a)(9) of this section is a manufactured home, whether it is 
legally classified as real property or as personal property.
    (30) If the dwelling related to the property identified in 
paragraph (a)(9) of this section is a manufactured home, whether the 
applicant or borrower owns the land on which it is or will be located 
through a direct or indirect ownership interest or leases the land 
through a paid or unpaid leasehold.
    (31) The number of individual dwelling units related to the 
property securing the covered loan or, in the case of an application, 
proposed to secure the covered loan.
    (32) If the property securing the covered loan or, in the case of 
an application, proposed to secure the covered loan includes a 
multifamily dwelling, the number of individual dwelling units related 
to the property that are income-restricted pursuant to Federal, State, 
or local affordable housing programs.
    (33) Except for purchased covered loans, the following information 
about the application channel of the covered loan or application:
    (i) Whether the applicant or borrower submitted the application for 
the covered loan directly to the financial institution; and
    (ii) Whether the obligation arising from the covered loan was, or 
in the case of an application, would have been initially payable to the 
financial institution.
    (34) For a covered loan or application, the unique identifier 
assigned by the Nationwide Mortgage Licensing System and Registry 
(NMLSR ID) for the mortgage loan originator, as defined in Regulation 
G, 12 CFR 1007.102, or Regulation H, 12 CFR 1008.23, as applicable.
    (35)(i) Except for purchased covered loans, the name of the 
automated underwriting system used by the financial institution to 
evaluate the application and the recommendation generated by that 
automated underwriting system.
    (ii) For purposes of this section, an automated underwriting system 
means an electronic tool developed by a securitizer, Federal government 
insurer, or guarantor that provides a recommendation regarding whether 
the application is eligible to be purchased, insured, or guaranteed by 
that securitizer, Federal government insurer, or guarantor.
    (36) Whether the covered loan is, or the application is for, a 
reverse mortgage, as defined in Sec.  1003.2(q), and whether the 
reverse mortgage is an open- or closed-end transaction.
    (37) Whether the covered loan is, or the application is for, an 
open-end line of credit, as defined in Sec.  1003.2(o), and whether the 
covered loan is, or the application is for, a home-equity line of 
credit, as defined in Sec.  1003.2(h).
    (38) Whether the covered loan is subject to the ability-to-repay 
provisions of Regulation Z, 12 CFR 1026.43, and whether the covered 
loan is a qualified

[[Page 51861]]

mortgage, as described under Regulation Z, 12 CFR 1026.43(e) or (f).
    (39) For a home-equity line of credit and an open-end reverse 
mortgage, the amount of the draw on the covered loan, if any, made at 
account opening.
    (b) Collection of data on ethnicity, race, sex, age, and income. 
(1) A financial institution shall collect data about the ethnicity, 
race, sex, and age of the applicant or borrower as prescribed in 
appendices A and B to this part.
    (2) Ethnicity, race, sex, age, and income data may but need not be 
collected for covered loans purchased by the financial institution.
* * * * *
    (f) Quarterly recording of data. A financial institution shall 
record the data collected pursuant to this section on a loan 
application register within 30 calendar days after the end of the 
calendar quarter in which final action is taken (such as origination or 
purchase of a covered loan, or denial or withdrawal of an application).
0
6. Section 1003.5 is amended by revising paragraph (a)(1), adding 
paragraphs (a)(3) and (4), and revising paragraphs (b) through (f) to 
read as follows:


Sec.  1003.5  Disclosure and reporting.

    (a) Reporting to agency. (1)(i) Except as described in paragraph 
(a)(1)(ii) of this section, by March 1 following the calendar year for 
which data are compiled and recorded as required by Sec.  1003.4, a 
financial institution shall submit its complete loan application 
register in electronic format to the Bureau or to the appropriate 
Federal agency for the financial institution in accordance with the 
instructions in appendix A to this part. The financial institution 
shall retain a copy of its complete loan application register for its 
records for at least three years.
    (ii) Effective [x], within 60 calendar days after the end of each 
calendar quarter, a financial institution that reported at least 75,000 
covered loans, applications, and purchased covered loans, combined, for 
the preceding calendar year shall submit its loan application register 
containing all data required to be recorded for that quarter pursuant 
to Sec.  1003.4(f). The financial institution shall submit its 
quarterly loan application register in electronic format to the Bureau 
or to the appropriate Federal agency for the financial institution in 
accordance with the instructions in appendix A to this part. The 
financial institution shall retain a copy of its complete loan 
application register for its records for at least three years.
    (iii) An officer of the financial institution shall certify to the 
accuracy of data submitted.
* * * * *
    (3) When reporting its data, a financial institution shall provide 
a Legal Entity Identifier (LEI) for the financial institution issued 
by:
    (i) A utility endorsed by the LEI Regulatory Oversight Committee; 
or
    (ii) A utility endorsed or otherwise governed by the Global LEI 
Foundation (GLEIF) (or any successor of the GLEIF) after the GLEIF 
assumes operational governance of the global LEI system.
    (4) When reporting its data, a financial institution shall identify 
its parent company, if any.
    (b) Disclosure statement. (1) The Federal Financial Institutions 
Examination Council (FFIEC) will make available a disclosure statement 
based on the data each financial institution submits for the preceding 
calendar year.
    (2) No later than three business days after receiving notice that 
its disclosure statement is available, a financial institution shall 
make its disclosure statement available to the public by making 
available at its home office and each branch office located in each MSA 
and each MD a notice that clearly conveys that the institution's 
disclosure statement may be obtained on the FFIEC Web site and that 
includes the FFIEC's Web site address.
    (c) Public disclosure of modified loan application register. (1) A 
financial institution shall make its loan application register 
available to the public after, for each entry:
    (i) Removing the information required to be reported under Sec.  
1003.4(a)(1), the date required to be reported under Sec.  
1003.4(a)(8), the postal address required to be reported under Sec.  
1003.4(a)(9), the age of the applicant or borrower required to be 
reported under Sec.  1003.4(a)(10), and the information required to be 
reported under Sec.  1003.4(a)(15) and (a)(17) through (39); and
    (ii) Rounding the information required to be reported under Sec.  
1003.4(a)(7) to the nearest thousand.
    (2) A financial institution shall make available its loan 
application register, modified as required by paragraph (c)(1) of this 
section, following the calendar year for which the data are compiled, 
as follows:
    (i) By March 31 for a request received on or before March 1; and
    (ii) Within 30 calendar days for a request received after March 1.
    (3) The modified loan application register made available pursuant 
to this paragraph (c) need contain data relating to only the MSA or MD 
for which the request is made.
    (d) Availability of data. (1) A financial institution shall make 
its modified loan application register available to the public for a 
period of three years and its disclosure statement available to the 
public for a period of five years. An institution shall make its data 
available during the hours the office is normally open to the public 
for business.
    (2) A financial institution may impose a reasonable fee for any 
cost incurred in providing or reproducing its data.
    (e) Notice of availability of data. A financial institution shall 
post a general notice about the availability of its HMDA data in the 
lobby of its home office and of each branch office located in each MSA 
and each MD.
    (f) Aggregated data. Using the data submitted by financial 
institutions, the FFIEC will make available reports for individual 
institutions and reports of aggregate data for each MSA and MD, showing 
lending patterns by property location, age of housing stock, and income 
level, sex, ethnicity, and race. These reports will be made available 
to the public online at the FFIEC's Web site (www.ffiec.gov/hmda).
0
7. Appendix A to Part 1003 is revised to read as follows:

Appendix A to Part 1003--Form and Instructions for Completion of HMDA 
Loan Application Register

Paperwork Reduction Act Notice

    This report is required by law (12 U.S.C. 2801-2810 and 12 CFR 
1003). An agency may not conduct or sponsor, and an organization is 
not required to respond to, a collection of information unless it 
displays a valid Office of Management and Budget (OMB) Control 
Number. See 12 CFR 1003.1(a) for the valid OMB Control Numbers 
applicable to this information collection. Send comments regarding 
this burden estimate or any other aspect of this collection of 
information, including suggestions for reducing the burden, to the 
respective agencies and to OMB, Office of Information and Regulatory 
Affairs, Paperwork Reduction Project, Washington, DC 20503. Be sure 
to reference the applicable agency and the OMB Control Number, as 
found in 12 CFR 1003.1(a), when submitting comments to OMB.

I. Instructions for Completion of Loan Application Register

    1. Instructions and designations. This part to this appendix 
contains instructions for the completion of the loan application 
register. Each instruction in this appendix is identified by a 
number and the regulatory section and paragraph which provides the 
reporting requirement. The instructions are designated according to 
the particular regulatory provision addressed. For example, the 
first instruction in this appendix for reporting the action taken 
under

[[Page 51862]]

Sec.  1003.4(a)(8) may be cited as instruction 4(a)(8)-1. This 
paragraph may be cited as instruction I-1.

Paragraph 4(a)(1)(i)--ULI

    1. Enter the ULI assigned to the covered loan or application.

Paragraph 4(a)(1)(ii)--Date Application Received

    1. Enter the date the application was received or the date shown 
on the application form by year, month, and day, using numerals in 
the form YYYYMMDD. Enter ``NA'' for covered loans purchased by your 
institution.

Paragraph 4(a)(2)--Loan or Application Type

    1. Indicate the type of covered loan or application by entering 
the applicable Code from the following:

Code 1--Conventional
Code 2--FHA
Code 3--VA
Code 4--USDA Rural Development

    a. Use Code 2 if the covered loan or application is insured 
under title II of the National Housing Act.
    b. Use Code 3 if the covered loan or application is guaranteed 
under chapter 37 of title 38 of the United States Code.
    c. Use Code 4 if the covered loan or application is insured 
under title V of the Housing Act of 1949.
    d. Use Code 1 if the covered loan or application is not insured 
under title II of the National Housing Act, not insured under title 
V of the Housing Act of 1949, and not guaranteed under chapter 37 of 
title 38 of the United States Code.

Paragraph 4(a)(3)--Purpose of Loan or Application

    1. Indicate the purpose of the loan or application by entering 
the applicable Code from the following:

Code 1--Home purchase
Code 2--Home improvement
Code 3--Refinancing
Code 4--Other

    a. For refinancings, enter Code 4 if, under the terms of the 
agreement, you were unconditionally obligated to refinance the 
obligation, or you were obligated to refinance the obligation 
subject to conditions within the borrower's control.

Paragraph 4(a)(4)--Preapproval

    1. Indicate whether the application or covered loan involved a 
request for preapproval for a home purchase loan by entering the 
applicable Code from the following:

Code 1--Preapproval requested
Code 2--Preapproval not requested
Code 3--Not applicable

    a. Enter Code 1 if your institution has a preapproval program as 
defined in Sec.  1003.2(b)(2) and the applicant requests a 
preapproval for a home purchase loan. Do not use Code 1 if a request 
for preapproval is withdrawn or for requests for preapproval that 
are closed for incompleteness; such preapproval requests are not 
reported under HMDA as implemented by Regulation C.
    b. Enter Code 2 if your institution has a preapproval program as 
defined in Sec.  1003.2(b)(2) but the applicant does not request a 
preapproval.
    c. Enter Code 3 if your institution does not have a preapproval 
program as defined in Sec.  1003.2(b)(2).
    d. Enter Code 3 for applications for or originations of home 
improvement loans, refinancings, open-end lines of credit, home-
equity lines of credit, reverse mortgages, and for purchased loans.

Paragraph 4(a)(5)--Construction Method

    1. Indicate the construction method for the dwelling related to 
the covered loan or application by entering the applicable Code from 
the following:

Code 1--Site Built
Code 2--Manufactured Home
Code 3--Other

    a. Enter Code 1 if most of the dwelling's elements were created 
at the dwelling's permanent site (including the use of prefabricated 
components), or if the dwelling is a modular or other factory-built 
home (including a modular home with a permanent metal chassis) that 
does not meet the definition of a manufactured home under Sec.  
1003.2(l).
    b. Enter Code 2 if the dwelling meets the definition of a 
manufactured home under Sec.  1003.2(l).
    c. Enter Code 3 for a dwelling that is not site built or a 
manufactured home under Sec.  1003.2(l).

Paragraph 4(a)(6)--Occupancy Type

    1. Indicate the occupancy status of the property to which the 
covered loan or application relates by entering the applicable Code 
from the following:

Code 1--Principal residence
Code 2--Second residence
Code 3--Investment property with rental income
Code 4--Investment property without rental income

    a. For purchased loans, use Code 1 unless the application or 
documents for the covered loan indicate that the property will not 
be occupied as a principal residence.
    b. Use Code 2 for second homes or vacation homes.
    c. Use Code 3 for investment properties that are owned for the 
purpose of generating income by renting the property.
    d. Use Code 4 for investment properties that are not owned for 
the purpose of generating income by renting the property.

Paragraph 4(a)(7)--Loan Amount

    1. Enter the amount of the covered loan or the amount applied 
for, as applicable, in dollars.

Paragraph 4(a)(8)--Action Taken

    1. Type of Action. Indicate the type of action taken on the 
application or covered loan by using one of the following Codes.

Code 1--Loan originated
Code 2--Application approved but not accepted
Code 3--Application denied
Code 4--Application withdrawn
Code 5--File closed for incompleteness
Code 6--Loan purchased by your institution
Code 7--Preapproval request denied
Code 8--Preapproval request approved but not accepted
    a. Use Code 1 for a covered loan that is originated, including 
one resulting from a request for preapproval.
    b. For a counteroffer (your offer to the applicant to make the 
covered loan on different terms or in a different amount from the 
terms or amount applied for), use Code 1 if the applicant accepts. 
Use Code 3 if the applicant turns down the counteroffer or does not 
respond.
    c. Use Code 2 when the application is approved but the applicant 
(or the party that initially received the application) fails to 
respond to your notification of approval or your commitment letter 
within the specific time. Do not use this Code for a preapproval 
request.
    d. Use Code 4 only when the application is expressly withdrawn 
by the applicant before satisfying all underwriting or 
creditworthiness conditions and before the institution denies the 
application or closes the file for incompleteness. Do not use Code 4 
if a request for preapproval is withdrawn; preapproval requests that 
are withdrawn are not reported under HMDA.
    e. Use Code 5 if you sent a written notice of incompleteness 
under Sec.  1002.9(c)(2) of Regulation B (Equal Credit Opportunity 
Act) and the applicant did not respond to your request for 
additional information within the period of time specified in your 
notice. Do not use this Code for requests for preapproval that are 
incomplete; these preapproval requests are not reported under HMDA.
    2. Date of Action. Enter the date of action taken by year, 
month, and day, using numerals in the form YYYYMMDD.
    a. For covered loans originated, enter the settlement or closing 
date.
    b. For covered loans purchased, enter the date of purchase by 
your institution.
    c. For applications and preapprovals denied, applications and 
preapprovals approved but not accepted by the applicant, and files 
closed for incompleteness, enter the date that the action was taken 
by your institution or the date the notice was sent to the 
applicant.
    d. For applications withdrawn, enter the date you received the 
applicant's express withdrawal, whether received in writing or 
orally, or enter the date shown on the notification from the 
applicant, in the case of a written withdrawal.
    e. For preapprovals that lead to a loan origination, enter the 
date of the origination.

Paragraph 4(a)(9)--Postal Address and Location of Subject Property

    1. Property Location Information. Enter the following 
information about the location of the property securing the covered 
loan or, in the case of an application, proposed to secure the 
covered loan:
    a. Street Address. Enter the street address of the property.
    i. For originations and purchases, the address must correspond 
to the property identified on the legal obligation related to the 
covered loan. For applications that did not result in an 
origination, the address must

[[Page 51863]]

correspond to the property identified by the applicant.
    ii. Include, as applicable, the address number, the street name, 
the street direction, address unit designators, and the address unit 
value, using U.S. Postal Service official abbreviations. For 
example, 100 N Main St Apt 1.
    iii. Do not enter a post office box.
    iv. Enter ``NA'' only if the street address is not known. For 
example, if the property does not have a postal address at closing 
or if the applicant did not provide the postal address of the 
property to the financial institution before the application was 
denied, withdrawn, or closed for incompleteness.
    b. City Name. Enter the name of the city.
    i. Enter ``NA'' only if the city location is not known. For 
example, if the property does not have a postal address at closing 
or if the applicant did not provide the postal address of the 
property to the financial institution before the application was 
denied, withdrawn, or closed for incompleteness.
    c. State Code. Enter the two letter State code for the 
applicable State, using the U.S. Postal Service official State 
abbreviations.
    d. Zip Code. Enter the zip code. The zip code may be five or 
nine digits. Do not enter dashes.
    i. Enter ``NA'' only if the zip code is not known. For example, 
if the property does not have a postal address at closing or if the 
applicant did not provide the postal address of the property to the 
financial institution before the application was denied, withdrawn, 
or closed for incompleteness.
    e. Metropolitan Statistical Area (MSA) or Metropolitan Division 
(MD). Enter the five-digit MSA or MD number if the MSA is divided 
into MDs. MSA and MD boundaries and five-digit codes are defined by 
the U.S. Office of Management and Budget. Use the boundaries and 
codes that were in effect on January 1 of the calendar year for 
which you are reporting.
    i. Enter ``NA'' if the property is not located in an MSA or an 
MD.
    f. County. Enter the Federal Information Processing Standards 
(FIPS) three-digit numerical code for the county. These codes are 
available from the appropriate Federal agency to which you report 
data.
    g. Census Tract. Enter the census tract number. Census tract 
numbers are defined by the U.S. Census Bureau. Use the boundaries 
and codes that were in effect on January 1 of the calendar year for 
which you are reporting.
    i. You may enter ``NA'' if the property is located in a county 
with a population of 30,000 or less according to the most recent 
decennial census conducted by the U.S. Census Bureau.
    2. Certain Location Information not Required. If your 
institution is not required to report data for CRA purposes under 
Sec.  1003.4(e), you may elect to enter ``NA'' for County, MSA, and 
census tract for entries related to properties that are not located 
in the MSAs or MDs in which you have a home or branch office.

Paragraph 4(a)(10)--Applicant or Borrower Information

    1. Appendix B to this part contains instructions for the 
collection of data on ethnicity, race, and sex, and also contains a 
sample form for data collection.
    2. Applicability. Report this information for covered loans that 
you originate as well as for applications that do not result in an 
origination.
    a. You need not collect or report this information for covered 
loans purchased. If you choose not to report this information for 
covered loans that you purchase, use the Codes for ``not 
applicable.''
    b. If the borrower or applicant is not a natural person (a 
corporation, partnership, or trust, for example), use the Codes for 
``not applicable.''

Paragraph 4(a)(10)(i)--Ethnicity, Race, Sex, and Age

    1. Ethnicity of Borrower or Applicant. Use the following Codes 
to indicate the ethnicity of the applicant or borrower under column 
``A'' and of any co-applicant or co-borrower under column ``CA.''

Code 1--Hispanic or Latino
Code 2--Not Hispanic or Latino
Code 3--Information not provided by applicant in mail, internet, or 
telephone application
Code 4--Not applicable
Code 5--No co-applicant

    2. Race of Borrower or Applicant. Use the following Codes to 
indicate the race of the applicant or borrower under column ``A'' 
and of any co-applicant or co-borrower under column ``CA.''
Code 1--American Indian or Alaska Native
Code 2--Asian
Code 3--Black or African American
Code 4--Native Hawaiian or Other Pacific Islander
Code 5--White
Code 6--Information not provided by applicant in mail, internet, or 
telephone application
Code 7--Not applicable
Code 8--No co-applicant

    a. If an applicant selects more than one racial designation, 
enter all Codes corresponding to the applicant's selections.
    b. Use Code 3 (for ethnicity) and Code 6 (for race) if the 
applicant or co-applicant does not provide the information in an 
application taken by mail, internet, or telephone.
    c. Use Code 4 (for ethnicity) and Code 7 (for race) for ``not 
applicable'' only when the applicant or co-applicant is not a 
natural person or when applicant or co-applicant information is 
unavailable because the covered loan has been purchased by your 
institution.
    d. If there is more than one co-applicant, provide the required 
information only for the first co-applicant listed on the 
application form. If there are no co-applicants or co-borrowers, use 
Code 5 (for ethnicity) and Code 8 (for race) for ``no co-applicant'' 
in the co-applicant column.
    3. Sex of Borrower or Applicant. Use the following Codes to 
indicate the sex of the applicant or borrower under column ``A'' and 
of any co-applicant or co-borrower under column ``CA.''

Code 1--Male
Code 2--Female
Code 3--Information not provided by applicant in mail, internet, or 
telephone application
Code 4--Not applicable
Code 5--No co-applicant

    a. Use Code 3 if the applicant or co-applicant does not provide 
the information in an application taken by mail, internet, or 
telephone.
    b. Use Code 4 for ``not applicable'' only when the applicant or 
co-applicant is not a natural person or when applicant or co-
applicant information is unavailable because the covered loan has 
been purchased by your institution.
    c. If there is more than one co-applicant, provide the required 
information only for the first co-applicant listed on the 
application form. If there are no co-applicants or co-borrowers, use 
Code 5 for ``no co-applicant'' in the co-applicant column.
    4. Age of Borrower or Applicant. Enter the age of the applicant 
or borrower, as of the date of application, derived from the date of 
birth as shown on the application form, in number of years under 
column ``A'' and of any co-applicant or co-borrower under column 
``CA.'' Or, use the following Codes as applicable.

Code 1--Not applicable
Code 2--No co-applicant

    a. Use Code 1 for ``not applicable'' only when the applicant or 
co-applicant is not a natural person or when applicant or co-
applicant information is unavailable because the covered loan has 
been purchased by your institution.
    b. If there is more than one co-applicant, provide the required 
information only for the first co-applicant listed on the 
application form. If there are no co-applicants or co-borrowers, use 
Code 2 for ``no co-applicant'' in the co-applicant column.

Paragraph 4(a)(10)(ii)--Income

    1. Income. Enter the gross annual income that your institution 
relied on in making the credit decision requiring consideration of 
income or, if the application was denied or withdrawn or the file 
was closed for incompleteness before a credit decision requiring 
consideration of income was made, the gross annual income collected 
as part of the application process.
    a. Round all dollar amounts to the nearest thousand (round $500 
up to the next $1,000), and show in thousands. For example, report 
$35,500 as 36.
    b. For a covered loan or application related to a multifamily 
dwelling, enter ``NA.''
    c. If no income information is collected as part of the 
application process or the covered loan applied for would not or did 
not require consideration of income, enter ``NA.''
    d. If the applicant or co-applicant is not a natural person or 
the applicant or co-applicant information is unavailable because the 
covered loan has been purchased by your institution, enter ``NA.''

Paragraph 4(a)(11)--Type of Purchaser

    1. Enter the applicable Code to indicate whether a covered loan 
that your institution originated or purchased was then sold to a 
secondary market entity within the same calendar year:


[[Page 51864]]


Code 0--Covered loan was not originated or was originated or 
purchased but was not sold to a secondary market entity in calendar 
year covered by register.
Code 1--Fannie Mae
Code 2--Ginnie Mae
Code 3--Freddie Mac
Code 4--Farmer Mac
Code 5--Private securitization
Code 6--Commercial bank, savings bank, or savings association
Code 7--Life insurance company, credit union, mortgage bank, or 
finance company
Code 8--Affiliate institution
Code 9--Other type of purchaser

    a. Use Code 0 for applications that were denied, withdrawn, or 
approved but not accepted by the applicant; and for files closed for 
incompleteness.
    b. Use Code 0 if you originated or purchased a covered loan and 
did not sell it during that same calendar year. For purposes of 
recording the type of purchaser within 30 calendar days after the 
end of the calendar quarter pursuant to Sec.  1003.4(f), use Code 0 
if you originated or purchased a covered loan and did not sell it 
during the calendar quarter for which you are recording the data. If 
you sell the covered loan in a subsequent quarter of the same 
calendar year, use the appropriate code for the type of purchaser on 
your loan application register for the quarter in which the covered 
loan was sold. If you sell the covered loan in a succeeding year, 
you need not report the sale.
    c. Use Code 2 if you conditionally assign a covered loan to 
Ginnie Mae in connection with a mortgage-backed security 
transaction.
    d. Use Code 5 for private securitizations by purchasers other 
than by one of the government-sponsored enterprises identified in 
Codes 1 through 4. If you know or reasonably believe that the 
covered loan you are selling will be securitized by the institution 
purchasing the covered loan, then use Code 5 regardless of the type 
or affiliation of the purchasing institution.
    e. Use Code 8 for covered loans sold to an institution 
affiliated with you, such as your subsidiary or a subsidiary of your 
parent corporation. For purposes of Sec.  1003.4(a)(11), the term 
``affiliate'' means any company that controls, is controlled by, or 
is under common control with, another company, as set forth in the 
Bank Holding Company Act of 1956 (12 U.S.C. 1841 et seq.).

Paragraph 4(a)(12)--Rate Spread

    1. Enter the rate spread to three decimal places and use a 
leading zero, or two leading zeroes, if the rate is less than 1 
percent. If the APR exceeds the APOR, enter a positive value. For 
example, enter 03.295. If the APOR exceeds the APR, enter a negative 
value. For example, enter -03.295. If the difference between the 
annual percentage rate and the average prime offer rate is a figure 
with more than three decimal places, round the figure to three 
decimal places.
    2. Enter ``NA'' in the case of a covered loan not subject to 
Regulation Z, 12 CFR part 1026, a reverse mortgage, a loan that you 
purchased or assumed, or an application that does not result in a 
loan origination or the opening of a line of credit, except for 
applications that have been approved but not accepted by the 
applicant.

Paragraph 4(a)(13)--HOEPA Status

    1. For a covered loan that you originated or purchased that is a 
high-cost mortgage under the Home Ownership and Equity Protection 
Act of 1994 (HOEPA), as implemented in Regulation Z Sec.  1026.32, 
use the following Codes as applicable:

Code 1--HOEPA loan because of APR
Code 2--HOEPA loan because of points and fees
Code 3--HOEPA loan because of both APR and points and fees
Code 4--Other

    a. Enter Code 1 if the annual percentage rate for the 
transaction exceeds the high-cost mortgage thresholds.
    b. Enter Code 2 if the points and fees for the transaction 
exceed the high-cost mortgage thresholds.
    c. Enter Code 3 if both the annual percentage rate and the 
points and fees for the transaction exceed the high-cost mortgage 
thresholds.
    d. Enter Code 4 in all other cases. For example, enter Code 4 
for a covered loan that you originated or purchased that is not a 
high-cost mortgage for any reason, including because the transaction 
is not subject to coverage under HOEPA (e.g., reverse mortgage 
transactions). Also enter Code 4 in the case of an application that 
does not result in a loan origination.

Paragraph 4(a)(14)--Lien Status

    1. Enter the applicable Code for covered loans that you 
originate or purchase and for applications that do not result in an 
origination.

Code 1--Secured by a first lien
Code 2--Secured by a second lien
Code 3--Secured by a third lien
Code 4--Secured by a fourth lien
Code 5--Other

    a. Use Codes 1 through 5 for covered loans that you originate or 
purchase, as well as for applications that do not result in an 
origination (applications that are approved but not accepted, 
denied, withdrawn, or closed for incompleteness).
    b. Use Code 5 when the priority of the lien against the property 
is other than one identified in Codes 1 through 4 (for example, 
secured by a fifth lien or sixth lien).

Paragraph 4(a)(15)--Credit Score

    1. Score. Enter the credit score(s) relied on in making the 
credit decision, using column ``A'' for the applicant or borrower 
and, where required by Regulation C, column ``CA'' for the first co-
applicant or co-borrower. Where Regulation C requires you to report 
a single score for the transaction that corresponds to multiple 
applicants or borrowers, use column ``A.''
    2. Name and Version of Model. For each credit score reported, 
use the following Codes to indicate the name and version of the 
model used to generate the credit score relied on in making the 
credit decision, using column ``A'' and column ``CA'' as applicable.

Code 1--Equifax Beacon 5.0
Code 2--Experian Fair Isaac
Code 3--FICO Risk Score Classic 04
Code 4--FICO Risk Score Classic 98
Code 5--VantageScore 2.0
Code 6--VantageScore 3.0
Code 7--More than one credit scoring model
Code 8--Other credit scoring model
Code 9--Not applicable
Code 10--Purchased loan

    a. Use Code 7 if more than one credit scoring model was used in 
developing the credit score.
    b. Use Code 8 for any credit scoring model that is not listed 
above, and provide the name and version of the scoring model used.
    c. Use Code 9 if the file was closed for incompleteness or the 
application was withdrawn before a credit decision was made or if 
you did not rely on a credit score in making the credit decision.
    d. Use Code 10 if the loan is a purchased loan.

Paragraph 4(a)(16)--Reason(s) for Denial

    1. Use the following Codes to indicate the principal reason(s) 
for denial, indicating up to three reasons.

Code 1--Debt-to-income ratio
Code 2--Employment history
Code 3--Credit history
Code 4--Collateral
Code 5--Insufficient cash (downpayment, closing costs)
Code 6--Unverifiable information
Code 7--Credit application incomplete
Code 8--Mortgage insurance denied
Code 9--Other
Code 10--Not applicable

    2. Use Code 9 for ``other'' when a principal reason your 
institution denied the application is not listed in Codes 1 through 
8. For a transaction in which your institution enters Code 9, enter 
the principal reason(s) the application was denied.
    3. Use Code 10 for ``not applicable'' if the action taken on the 
application, pursuant to Sec.  1003.4(a)(8), is not a denial. For 
example, use Code 10 if the application was withdrawn before a 
credit decision was made or the file was closed for incompleteness.
    4. If your institution uses the model form for adverse action 
contained in appendix C to Regulation B (Form C-1, Sample Notice of 
Action Taken and Statement of Reasons), use the foregoing Codes as 
follows:
    a. Code 1 for: Income insufficient for amount of credit 
requested, and Excessive obligations in relation to income.
    b. Code 2 for: Temporary or irregular employment, and Length of 
employment.
    c. Code 3 for: Insufficient number of credit references 
provided; Unacceptable type of credit references provided; No credit 
file; Limited credit experience; Poor credit performance with us; 
Delinquent past or present credit obligations with others; Number of 
recent inquiries on credit bureau report; Garnishment, attachment, 
foreclosure, repossession, collection action, or judgment; and 
Bankruptcy.
    d. Code 4 for: Value or type of collateral not sufficient.
    e. Code 6 for: Unable to verify credit references; Unable to 
verify employment; Unable to verify income; and Unable to verify 
residence.
    f. Code 7 for: Credit application incomplete.
    g. Code 9 for: Length of residence; Temporary residence; and 
Other reasons

[[Page 51865]]

specified on the adverse action notice. For a transaction in which 
your institution enters Code 9 for Other reasons, enter the 
principal reason(s) the application was denied.

Paragraph 4(a)(17)--Total Points and Fees

    1. Enter in dollars the amount of the total points and fees 
payable in connection with the covered loan or application, rounded 
to the nearest whole dollar. For example, enter 5472.
    2. Enter ``NA'' for covered loans or applications subject to 
this reporting requirement for which the total points and fees were 
not known at or before closing in connection with the covered loan, 
or for covered loans not subject to this reporting requirement, such 
as purchased covered loans.

Paragraph 4(a)(18)--Total Origination Charges

    1. Enter in dollars the total of all itemized amounts that are 
designated borrower-paid at or before closing, rounded to the 
nearest whole dollar. For example, enter 1078.
    2. Enter ``NA'' for covered loans subject to this reporting 
requirement for which no amounts paid by the borrower were known at 
or before closing in connection with the covered loan, or for 
covered loans not subject to this reporting requirement, such as 
open-end lines of credit or reverse mortgages.

Paragraph 4(a)(19)--Total Discount Points

    1. Enter in dollars the total amount of the points designated as 
paid to the creditor to reduce the interest rate, rounded to the 
nearest whole dollar. For example, enter 405.
    2. Enter ``NA'' for covered loans subject to this reporting 
requirement for which no points to reduce the interest rate were 
known at or before closing in connection with the covered loan, or 
for covered loans not subject to this reporting requirement, such as 
open-end lines of credit or reverse mortgages.

Paragraph 4(a)(20)--Risk-Adjusted, Pre-Discounted Interest Rate

    1. Enter the interest rate to three decimal places and use a 
leading zero if the interest rate is under 10 percent. For example, 
enter 04.125. If the interest rate applicable to the covered loan or 
application is a figure with more than three decimal places, round 
the figure to three decimal places.
    2. Enter ``NA'' for covered loans not subject to this reporting 
requirement, such as purchased covered loans, open-end lines of 
credit, or reverse mortgages.

Paragraph 4(a)(21)--Interest Rate

    1. Enter the interest rate that will be applicable, or in the 
case of an application, that would be applicable, to the covered 
loan at closing or account opening to three decimal places and use a 
leading zero if the interest rate is under 10 percent. For example, 
enter 04.125. If the interest rate applicable to the covered loan is 
a figure with more than three decimal places, round the figure to 
three decimal places.
    2. Enter ``NA'' for covered loans for which no interest rate is 
applicable, or for applications for which the interest rate is 
unknown, such as applications closed for incompleteness.

Paragraph 4(a)(22)--Prepayment Penalty Term

    1. Enter the term in months of any prepayment penalty applicable 
to the covered loan or application. For example, if a prepayment 
penalty may be imposed within the first 24 months after closing, 
enter 24.
    2. Enter ``NA'' for covered loans for which a prepayment penalty 
may not be imposed under the terms of the covered loan, for covered 
loans not subject to this reporting requirement, such as purchased 
covered loans, or for applications for which the prepayment penalty 
term is unknown, such as applications closed for incompleteness.

Paragraph 4(a)(23)--DTI Ratio

    1. Enter the applicant's or borrower's debt-to-income ratio to 
two decimal places. For example, enter 25.25. If the applicant's or 
borrower's debt-to-income ratio is a figure with more than two 
decimal places, round up to the next hundredth. For example, for a 
debt-to-income ratio of 25.251, enter 25.26.
    2. If no debt-to-income ratio was relied on in making the credit 
decision, if a file was closed for incompleteness, or if an 
application was withdrawn before a credit decision was made, enter 
``NA.'' Also enter ``NA'' for reverse mortgages.

Paragraph 4(a)(24)--CLTV Ratio

    1. Enter the combined loan-to-value ratio applicable to the 
property to two decimal places. For example, enter 82.95. If the 
combined loan-to-value ratio is a figure with more than two decimal 
places, truncate the digits beyond two decimal places.
    2. If no combined loan-to-value ratio was calculated in 
connection with the covered loan or application, enter ``NA.''

Paragraph 4(a)(25)--Loan Term

    1. Loan Term. Enter the scheduled number of months after which 
the legal obligation will mature or would have matured.
    a. For a covered loan that you purchased, enter the number of 
months after which the legal obligation matures as measured from the 
covered loan's origination.
    b. For an open-end line of credit with a definite term, enter 
the number of months from origination until the account termination 
date, including both the draw and repayment period.
    c. For a covered loan or application without a definite term, 
such as some home-equity lines of credit or reverse mortgages, enter 
``NA.''

Paragraph 4(a)(26)--Introductory Rate Period

    1. Enter the number of months from loan origination until the 
first date the interest rate may change.
    a. For a fixed rate covered loan or an application for a fixed 
rate covered loan, enter ``NA.''
    b. For a covered loan you purchased, enter the number of months 
until the first date the interest rate may change as measured from 
loan origination, or enter ``NA'' for a purchased fixed rate covered 
loan.

Paragraph 4(a)(27)(i)--Balloon Payment

    1. Indicate if the covered loan or application requires a 
payment that is more than two times a regular periodic payment.
Code 1--True
Code 2--False

Paragraph 4(a)(27)(ii)--Interest-Only Payments

    1. Indicate if the covered loan or application would permit one 
or more periodic payments to be applied solely to accrued interest 
and not to principal.

Code 1--True
Code 2--False

Paragraph 4(a)(27)(iii)--Negative Amortization

    1. Indicate if the covered loan or application would permit a 
minimum periodic payment that covers only a portion of the accrued 
interest, resulting in an increase in the principal balance under 
the terms of the legal obligation.

Code 1--True
Code 2--False

Paragraph 4(a)(27)(iv)--Other Non-amortizing Features

    1. Indicate if the covered loan or application includes 
contractual terms other than contractual terms described in 
Sec. Sec.  1003.4(a)(27)(i), (ii), and (iii) that would allow for 
payments other than fully amortizing payments during the loan term.

Code 1--True
Code 2--False

Paragraph 4(a)(28)--Property Value

    1. Enter the value of the property securing the covered loan or, 
in the case of an application, proposed to secure the covered loan 
relied on in making the credit decision in dollars.
    a. If the value of the property was not relied on in making the 
credit decision, enter ``NA.''

Paragraph 4(a)(29)--Manufactured Home Legal Classification

    1. Indicate whether the manufactured home related to the covered 
loan or application is legally classified as real property or as 
personal property using the following codes:

Code 1--Real Property
Code 2--Personal Property
Code 3--Not Applicable

    a. Use Code 1 if the manufactured home is legally classified as 
real property under applicable State law.
    b. Use Code 2 if the manufactured home is legally classified as 
personal property under applicable State law.
    c. Use Code 3 if the covered loan or application does not relate 
to a manufactured home.

Paragraph 4(a)(30)--Manufactured Home Land Property Interest

    1. Indicate whether the applicant or borrower owns the land on 
which a manufactured home is or will be located through a direct or 
indirect ownership interest or leases the land through a paid or

[[Page 51866]]

unpaid leasehold according to the following codes:

Code 1--Direct Ownership
Code 2--Indirect Ownership
Code 3--Paid Leasehold
Code 4--Unpaid Leasehold
Code 5--Not Applicable

    a. Use Code 1 for a covered loan or application for which the 
applicant or borrower has a direct ownership interest in the land on 
which the dwelling is or is to be located, such as fee simple 
ownership.
    b. Use Code 2 for a covered loan or application for which the 
applicant or borrower holds or will hold an indirect ownership 
interest in the land on which the dwelling is or is to be located, 
such as through a resident-owned community structured as a housing 
cooperative that owns the underlying land.
    c. Use Code 3 for a covered loan or application for which the 
applicant or borrower leases the land on which the dwelling is or is 
to be located and pays or will make payments pursuant to the lease, 
such as a lease for a lot in a manufactured home park.
    d. Use Code 4 for a covered loan or application for which the 
applicant or borrower is or will be a tenant on the land on which 
the dwelling is or is to be located and does not or will not make 
payments pursuant to the tenancy, such as tenancy on land owned by a 
family member who has given permission for the location of the 
manufactured home.
    e. Use Code 5 if the covered loan or application does not relate 
to a manufactured home or if a location for a manufactured home 
related to a covered loan or application is not determined.

Paragraph 4(a)(31)--Total Units

    1. Enter the number of individual dwelling units related to the 
property securing the covered loan or, in the case of an 
application, proposed to secure the covered loan.

Paragraph 4(a)(32)--Multifamily Affordable Units

    1. Enter the number of individual dwelling units related to the 
property securing the covered loan or, in the case of an 
application, proposed to secure the covered loan that are income-
restricted pursuant to Federal, State, or local affordable housing 
programs.
    a. For a covered loan or application not related to a 
multifamily dwelling, enter ``NA.''
    b. For a covered loan or application related to a multifamily 
dwelling that does not contain any such income-restricted individual 
dwelling units, enter ``0.''

Paragraph 4(a)(33)--Application Channel

    1. Direct Application. Indicate whether the applicant or 
borrower submitted the application directly to your institution.

Code 1--True
Code 2--False
Code 3--Not applicable

    a. Use Code 1 if the applicant or borrower submitted the 
application directly to your institution.
    b. Use Code 2 if the applicant or borrower did not submit the 
application directly to your institution.
    c. Use Code 3 only if the loan is a purchased loan.
    2. Initially Payable. Indicate whether the covered loan was or, 
in the case of an application, would have been initially payable to 
your institution.

Code 1--True
Code 2--False
Code 3--Not applicable

    a. Use Code 1 if the covered loan was or, in the case of an 
application, would have been initially payable to your institution.
    b. Use Code 2 if the covered loan was not or, in the case of an 
application, would not have been initially payable to your 
institution.
    c. Use Code 3 only if the loan is a purchased loan.

Paragraph 4(a)(34)--Mortgage Loan Originator Identifier

    1. NMLSR ID: Enter the Nationwide Mortgage Licensing System and 
Registry mortgage loan originator unique identifier (NMLSR ID) as 
set forth in the Secure and Fair Enforcement for Mortgage Licensing 
Act of 2008, title V of the Housing and Economic Recovery Act of 
2008 (S.A.F.E. Act), 12 U.S.C. 5101 et seq., as implemented by 
Regulation G (S.A.F.E. Mortgage Licensing Act--Federal Registration 
of Residential Mortgage Loan Originators), 12 CFR part 1007, and 
Regulation H (S.A.F.E. Mortgage Licensing Act--State Compliance and 
Bureau Registration System), 12 CFR part 1008.
    2. No NMLSR ID: If the mortgage loan originator is not required 
to obtain and has not been assigned an NMLSR ID, enter ``NA'' for 
not applicable.

Paragraph 4(a)(35)--Automated Underwriting System (AUS) and 
Recommendation

    1. Automated Underwriting System: Indicate the name of the 
automated underwriting system (AUS) used by your institution to 
evaluate the application by entering the applicable Code from the 
following:

Code 1--Desktop Underwriter
Code 2--Loan Prospector
Code 3--Technology Open to Approved Lenders (TOTAL) Scorecard
Code 4--Guaranteed Underwriting System (GUS)
Code 5--Other
Code 6--Not applicable
Code 7--Purchased loan

    a. Use Code 1 for the AUS developed by the Federal National 
Mortgage Association (Fannie Mae) or any successor.
    b. Use Code 2 for the AUS developed by the Federal Home Loan 
Mortgage Corporation (Freddie Mac) or any successor.
    c. Use Code 3 for the AUS developed by the U.S. Department of 
Housing and Urban Development for Federal Housing Administration 
(FHA) loans.
    d. Use Code 4 for the AUS developed by the U.S. Department of 
Agriculture for Single Family Housing Guaranteed Loan Program loans.
    e. Use Code 5 for an AUS developed by a securitzer, Federal 
government insurer, or guarantor not listed in Codes 1 through 4. 
For a transaction in which your institution enters Code 5, enter the 
name of the AUS used to evaluate the application.
    f. Use Code 6 for ``not applicable'' if your institution did not 
use an AUS developed by a securitzer, Federal government insurer, or 
guarantor to evaluate the application.
    g. Use Code 7 if the loan is a purchased loan.
    2. Automated Underwriting System Recommendation: Indicate the 
recommendation generated by the automated underwriting system (AUS) 
used by your institution to evaluate the application by entering the 
applicable Code from the following:

Code 1--Approve/Eligible
Code 2--Approve/Ineligible
Code 3--Refer with Caution
Code 4--Out of Scope
Code 5--Error
Code 6--Accept
Code 7--Caution
Code 8--Refer
Code 9--Other
Code 10--Not applicable
Code 11--Purchased loan

    a. Use Code 1, 2, 3, 4, or 5 for the AUS recommendation returned 
by the Federal National Mortgage Association (Fannie Mae) or any 
successor.
    b. Use Code 6 or 7 for the AUS recommendation returned by the 
Federal Home Loan Mortgage Corporation (Freddie Mac) or any 
successor.
    c. Use Code 6 or 8 for the AUS recommendation returned by FHA 
TOTAL Scorecard.
    d. Use Code 3, 6, or 8 for the AUS recommendation returned by 
GUS.
    e. Use Code 9 for any AUS recommendation not listed in Codes 1 
through 8. For a transaction in which your institution enters Code 
9, enter the recommendation generated by the AUS developed by a 
securitzer, Federal government insurer, or guarantor that was used 
to evaluate the application.
    f. Use Code 10 for ``not applicable'' if your institution did 
not consider a recommendation generated by an AUS developed by a 
securitzer, Federal government insurer, or guarantor in its 
underwriting process. For example, use Code 10 if your institution 
only manually underwrote the application. Also, use Code 10 if the 
file was closed for incompleteness or the application was withdrawn 
before a credit decision was made.
    g. Use Code 11 if the loan is a purchased loan.

Paragraph 4(a)(36)--Reverse Mortgage Flag

    1. Indicate whether the covered loan is, or the application is 
for, a reverse mortgage and, for transactions that are reverse 
mortgages, whether or not it is an open- or closed-end transaction 
by entering the applicable Code from the following:

Code 1--Closed-end reverse mortgage
Code 2--Open-end reverse mortgage
Code 3--Not applicable


[[Page 51867]]


    a. If the transaction is a closed-end reverse mortgage 
transaction, enter Code 1.
    b. If the transaction is an open-end reverse mortgage 
transaction, enter Code 2.
    c. If the transaction is not a reverse mortgage transaction, 
enter Code 3.

Paragraph 4(a)(37)--HELOC Flag.

    1. Indicate whether the covered loan is, or the application is 
for, an open-end line of credit, and whether the covered loan is, or 
the application is for, a home-equity line of credit, by entering 
the applicable Code from the following:

Code 1--Home-equity line of credit
Code 2--Open-end line of credit that is not a home-equity line of 
credit
Code 3--Not applicable

    a. If the transaction is a home-equity line of credit, enter 
Code 1.
    b. If the transaction an open-end line of credit, but is not a 
home-equity line of credit, enter Code 2.
    c. If the transaction is not an open-end line of credit, enter 
Code 3. Also enter Code 3 for an open-end reverse mortgage 
transaction.

Paragraph 4(a)(38)--Qualified Mortgage Identifier

    1. Indicate whether the covered loan is a qualified mortgage, as 
described under Regulation Z, by entering the applicable Code from 
the following:

Code 1--Standard qualified mortgage
Code 2--Temporary qualified mortgage
Code 3--Small creditor qualified mortgage
Code 4--Balloon-payment qualified mortgage
Code 5--Not a qualified mortgage
Code 6--Not applicable

    2. For covered loans subject to the ability-to-repay provisions 
of Regulation Z:
    a. If the covered loan is a standard qualified mortgage pursuant 
to Regulation Z Sec.  1026.43(e)(2), enter Code 1.
    b. If the covered loan is a temporary qualified mortgage 
pursuant to Regulation Z Sec.  1026.43(e)(4), enter Code 2.
    c. If the covered loan is a small creditor qualified mortgage 
pursuant to Regulation Z Sec.  1026.43(e)(5), enter Code 3.
    d. If the covered loan is a balloon-payment qualified mortgage 
pursuant to Regulation Z Sec.  1026.43(f), enter Code 4.
    e. If the covered loan is not a qualified mortgage pursuant to 
Regulation Z Sec.  1026.43(e) or (f), enter Code 5.
    3. For applications for covered loans and for covered loans not 
subject to the ability-to-repay provisions of Regulation Z, enter 
``not applicable.''

Paragraph 4(a)(39)--HELOC and Open-End Reverse Mortgage First Draw

    1. Enter in dollars the amount of any draw on a home-equity line 
of credit or on an open-end reverse mortgage made at the time of 
account opening.

II. Instructions for Reporting to the Bureau or Appropriate Federal 
Agencies

Paragraph 5(a)--Reporting

    1. Financial institutions are required to submit all required 
data to the Bureau or appropriate Federal agency via the Bureau's 
Web site or via secure electronic submission as specified by the 
Bureau or appropriate Federal agency in prescribed procedures and 
technical specifications.
    2. With its submission, each financial institution is required:
    a. To provide the name, telephone number, facsimile number, and 
email address of a person who may contacted with questions about the 
institution's submission;
    b. To identify its appropriate Federal agency; and
    c. To identify the total entries contained in the submission.
    3. Data required to be submitted that are not recorded on the 
loan application register shall be submitted with the loan 
application register on the transmittal sheet or in such other 
format specified by the Bureau or appropriate Federal agency.

[Revised forms to publish in final rule]


0
8. In Supplement I to Part 1003:
0
a. The heading Section 1003.1--Authority, Purpose, and Scope, the 
subheading 1(c) Scope under that heading, and paragraphs 1, 2, 3, 4, 5, 
6, 7, 8, and 9 under that subheading are removed.
0
b. Under Section 1003.2--Definitions:
0
i. The subheading Application and paragraphs 1, 2, and 3 under that 
subheading are revised.
0
ii. The subheading Branch office is revised and paragraphs 2 and 3 
under that subheading are revised.
0
iii. The subheading Dwelling is revised, paragraphs 1 and 2 under that 
subheading are revised, and paragraph 3 under that subheading is added.
0
iv. The subheading Financial institution is revised and paragraphs 1, 
3, 4, 5, and 6 under that subheading are revised.
0
v. The subheading Home improvement loan is revised, paragraphs 1 and 4 
under that subheading are revised, and paragraph 5 under that 
subheading is removed and reserved.
0
vi. The subheading Home purchase loan and paragraphs 1, 2, 3, and 7 
under that subheading are revised.
0
vii. The subheading Manufactured home is revised, paragraph 1 under 
that subheading is revised, and new paragraph 2 under that subheading 
is added.
0
viii. The subheading 2(o) Open-end line of credit and paragraph 1 under 
that subheading are added.
0
ix. The subheading 2(p) Refinancing and paragraphs 1, 2, and 3 under 
that subheading are added.
0
c. The subheading Section 1003.3--Exempt institutions and excluded 
transactions is added. Under that subheading:
0
i. The subheading 3(c) Excluded transactions is added.
0
ii. The subheading Paragraph 3(c)(1) and paragraph 1 under that 
subheading are added.
0
iii. The subheading Paragraph 3(c)(2) and paragraph 1 under that 
subheading are added.
0
iv. The subheading Paragraph 3(c)(3) and paragraphs 1 and 2 under that 
subheading are added.
0
v. New subheading Paragraph 3(c)(4) and paragraph 1 under that 
subheading are added.
0
vi. New subheading Paragraph 3(c)(6) and paragraph 1 under that 
subheading are added.
0
vii. New subheading Paragraph 3(c)(8) and paragraph 1 under that 
subheading are added.
0
viii. New subheading Paragraph 3(c)(9) and paragraph 1 under that 
subheading are added.
0
d. The heading Section 1003.4--Compilation of Reportable Data is 
revised, and under that heading:
0
i. Under the subheading 4(a) Data format and itemization, paragraph 1 
is revised and paragraphs 4, 5, and 6 are added.
0
ii. The subheading Paragraph 4(a)(1) and paragraphs 1, 2, 3, 4, and 5 
under that subheading are removed.
0
iii. The subheading Paragraph 4(a)(1)(i) and paragraphs 1 and 2 under 
that subheading are added.
0
iv. The subheading Paragraph 4(a)(1)(ii) and paragraphs 1, 2, 3, and 4 
under that subheading are added.
0
v. Under subheading Paragraph 4(a)(3), paragraph 2 is revised and 
paragraph 3 is added.
0
vi. The subheading Paragraph 4(a)(5) and paragraphs 1 and 2 under that 
subheading are added.
0
vii. Under subheading Paragraph 4(a)(6), paragraphs 2, 3, and 4 are 
added.
0
viii. Under the subheading Paragraph 4(a)(7), paragraphs 1, 2, 3, and 4 
are revised and paragraphs 5 and 6 are added.
0
ix. Under subheading Paragraph 4(a)(8), paragraphs 1, 2, 3, 4, 5, 6 and 
7 are revised and paragraphs 8 and 9 are added.
0
x. Under the subheading Paragraph 4(a)(9), paragraphs 1, 2, 3, and 4 
are revised and paragraph 5 is added.
0
xi. The subheading Paragraph 4(a)(10) and paragraphs 1, 2, 3, 4, 5, 6, 
7, and 8 under that subheading are removed.
0
xii. The subheading Paragraph 4(a)(10)(i) and paragraphs 1, 2, 3, 4, 
and 5 under that subheading are added.
0
xiii. The subheading Paragraph 4(a)(10)(ii) and paragraphs 1, 2, 3, 4, 
5, and 6 under that subheading are added.
0
xiv. Under the subheading Paragraph 4(a)(11), paragraphs 1 and 2 are 
revised and paragraphs 3, 4, 5, 6, 7, and 8 are added.
0
xv. The subheading Paragraph 4(a)(12)(ii) is revised, paragraphs 2 and

[[Page 51868]]

3 under that subheading are revised, and paragraphs 4, 5, and 6 are 
added.
0
xvi. Under the subheading Paragraph 4(a)(14), paragraph 1 is revised 
and paragraph 2 is added.
0
xvii. The subheading Paragraph 4(a)(15) and paragraphs 1, 2, 3, and 4 
under that subheading are added.
0
xviii. The subheading Paragraph 4(a)(16) and paragraphs 1 and 2 under 
that subheading are added.
0
xix. The subheading Paragraph 4(a)(21) and paragraph 1 under that 
subheading are added.
0
xx. The subheading Paragraph 4(a)(23) and paragraphs 1, 2, 3, and 4 
under that subheading are added.
0
xxi. The subheading Paragraph 4(a)(24) and paragraphs 1, 2, and 3 under 
that subheading are added.
0
xxii. The subheading Paragraph 4(a)(25) and paragraphs 1 and 2 under 
that subheading are added.
0
xxiii. The subheading Paragraph 4(a)(26) and paragraphs 1 and 2 under 
that subheading are added.
0
xxiv. The subheading Paragraph 4(a)(27) and paragraph 1 under that 
subheading is added.
0
xxv. The subheading Paragraph 4(a)(28) and paragraphs 1 and 2 under 
that subheading are added.
0
xxvi. The subheading Paragraph 4(a)(29) and paragraph 1 under that 
subheading is added.
0
xxvii. The subheading Paragraph 4(a)(30) and paragraphs 1, 2, and 3 
under that subheading are added.
0
xxviii. The subheading Paragraph 4(a)(31) and paragraph 1 under that 
subheading are added.
0
xxix. The subheading Paragraph 4(a)(32) and paragraphs 1, 2, 3, and 4 
under that subheading are added.
0
xxx. New subheading Paragraph 4(a)(33) is added, and paragraphs 1, 2, 
and 3 under that subheading are added.
0
xxxi. The subheading Paragraph 4(a)(34) and paragraphs 1, 2, and 3 
under that subheading are added.
0
xxxii. The subheading Paragraph 4(a)(35) and paragraphs 1, 2, and 3 
under that subheading are added.
0
xxxiii. The subheading Paragraph 4(a)(38) and paragraph 1 under that 
subheading are added.
0
xxxiv. Under subheading Paragraph 4(c)(3), paragraph 1 is removed and 
reserved.
0
xxxv. The subheading 4(d) Excluded data is removed and paragraph 1 
under that subheading is removed.
0
E. Under Section 1003.5--Disclosure and Reporting:
0
i. Under subheading 5(a) Reporting to Agency, paragraphs 1, 2, 3, 4, 
and 5 are revised, and paragraphs 6, 7, and 8 are removed.
0
ii. The subheading 5(b) Public disclosure of statement is revised, 
paragraph 2 under that subheading is revised, and paragraph 3 under 
that subheading is added.
0
iii. The subheading 5(c) Public Disclosure of modified loan/application 
register is revised and paragraphs 2 and 3 under that subheading are 
added.
0
iv. Under subheading 5(e) Notice of availability, paragraph 1 is 
revised and paragraph 2 is removed.
    The revisions and additions read as follows:

Supplement I to Part 1003--Staff Commentary

* * * * *

Section 1003.2--Definitions

    2(b) Application.
    1. Consistency with Regulation B. Bureau interpretations that 
appear in the official staff commentary to Regulation B (Equal 
Credit Opportunity Act, 12 CFR part 1002, Supplement I) are 
generally applicable to the definition of application under 
Regulation C. However, under Regulation C the definition of an 
application does not include prequalification requests.
    2. Prequalification. A prequalification request is a request by 
a prospective loan applicant (other than a request for preapproval) 
for a preliminary determination on whether the prospective loan 
applicant would likely qualify for credit under an institution's 
standards, or for a determination on the amount of credit for which 
the prospective applicant would likely qualify. Some institutions 
evaluate prequalification requests through a procedure that is 
separate from the institution's normal loan application process; 
others use the same process. In either case, Regulation C does not 
require an institution to report prequalification requests on the 
loan application register, even though these requests may constitute 
applications under Regulation B for purposes of adverse action 
notices.
    3. Requests for preapproval. To be a preapproval program as 
defined in Sec.  1003.2(b)(2), the written commitment issued under 
the program must result from a comprehensive review of the 
creditworthiness of the applicant, including such verification of 
income, resources, and other matters as is typically done by the 
institution as part of its normal credit evaluation program. In 
addition to conditions involving the identification of a suitable 
property and verification that no material change has occurred in 
the applicant's financial condition or creditworthiness, the written 
commitment may be subject only to other conditions (unrelated to the 
financial condition or creditworthiness of the applicant) that the 
lender ordinarily attaches to a traditional home mortgage 
application approval. These conditions are limited to conditions 
such as requiring an acceptable title insurance binder or a 
certificate indicating clear termite inspection, and, in the case 
where the applicant plans to use the proceeds from the sale of the 
applicant's present home to purchase a new home, a settlement 
statement showing adequate proceeds from the sale of the present 
home. Regardless of its name, a program that satisfies the 
definition of a preapproval program in Sec.  1003.2(b)(2) is a 
preapproval program for purposes of Regulation C. Conversely, a 
program that a financial institution describes as a ``preapproval 
program'' that does not satisfy the requirements of Sec.  
1003.2(b)(2) is not a preapproval program for purposes of Regulation 
C. If a financial institution does not regularly use the procedures 
specified in Sec.  1003.2(b)(2), but instead considers requests for 
preapprovals on an ad hoc basis, the financial institution need not 
treat ad hoc requests as part of a preapproval program for purposes 
of Regulation C. A financial institution should, however, be 
generally consistent in following uniform procedures for considering 
such ad hoc requests.
    2(c) Branch office.
* * * * *
    2. Depository financial institution. A branch office of a 
depository financial institution does not include a loan-production 
office if the loan production office is not considered a branch by 
the Federal or State supervisory authority applicable to that 
institution. A branch office also does not include the office of an 
affiliate or of a third party, such as a third-party broker.
    3. Nondepository financial institution. A branch office of a 
nondepository financial institution does not include the office of 
an affiliate or of a third party, such as a third party broker.
    2(f) Dwelling.
    1. General. The definition of a dwelling is not limited to the 
principal or other residence of the applicant or borrower, and thus 
includes vacation or second homes and investment properties. A 
dwelling also includes a multifamily residential structure such as 
an apartment, condominium, or cooperative building or complex.
    2. Exclusions. Recreational vehicles, including boats, campers, 
travel trailers, and park model recreational vehicles, are not 
considered dwellings for purposes of Sec.  1003.2(f), regardless of 
whether they are used as residences. Houseboats, floating homes, and 
mobile homes constructed before June 15, 1976, are also excluded, 
regardless of whether they are used as residences. Also excluded are 
transitory residences such as hotels, hospitals, and college 
dormitories, and structures originally designed as dwellings but 
used exclusively for commercial purposes such as homes converted to 
daycare facilities or professional offices.
    3. Mixed-use properties. A property used for both residential 
and commercial purposes, such as a building containing apartment 
units and retail space, is a dwelling if the property's primary use 
is residential. An institution may use any reasonable standard to 
determine the primary use of the property, such as by square footage 
or by the income generated. An institution may select the standard 
to apply on a case-by-case basis. However, an institution shall 
consider a property that includes five or more individual dwelling 
units to have a primary residential use.

[[Page 51869]]

    2(g) Financial institution.
    1. Preceding calendar year and preceding December 31. The 
definition of financial institution refers both to the preceding 
calendar year and the preceding December 31. These terms refer to 
the calendar year and the December 31 preceding the current calendar 
year. For example, in year two, year one is the preceding calendar 
year and December 31 of year one is the preceding December 31. 
Accordingly, in year two, Financial Institution A satisfies the 
asset threshold described in Sec.  1003.2(g)(1)(i) if its assets 
exceeded the threshold specified in comment 2(g)-2 on December 31 of 
year one. Likewise, in year two, Financial Institution A does not 
meet the loan volume test described in Sec.  1003.2(g)(1)(v) if it 
originated fewer than 25 covered loans during year one.
* * * * *
    3. Coverage after a merger or acquisition. Several scenarios of 
data-collection responsibilities for the calendar year of a merger 
or acquisition are described below. For the purposes of these 
illustrations, a ``covered institution'' means a financial 
institution, as defined in Sec.  1003.2(g), that is not exempt from 
reporting under Sec.  1003.3(a), and ``an institution that is not 
covered'' means an institution that is not a financial institution, 
as defined in Sec.  1003.2(g) or that is exempt from reporting under 
Sec.  1003.3(a). Under all the scenarios, if the merger or 
acquisition results in a covered institution, that institution must 
begin data collection on January 1 of the calendar year following 
the merger.
    i. Two institutions that are not covered merge. The merged 
entity meets all of the requirements necessary to be a covered 
institution. No data collection is required for the calendar year of 
the merger (even though the merger creates an institution that meets 
all of the requirements necessary to be a covered institution). When 
a branch office of an institution that is not covered is acquired by 
another institution that is not covered, and the acquisition results 
in a covered institution, no data collection is required for the 
calendar year of the acquisition.
    ii. A covered institution and an institution that is not covered 
merge. The covered institution is the surviving institution, or a 
new covered institution is formed. For the calendar year of the 
merger, data collection is required for the covered institution's 
covered loans and applications and is optional for covered loans and 
applications handled in offices of the institution that was 
previously not covered. When a covered institution acquires a branch 
office of an institution that is not covered, data collection is 
optional for covered loans and applications handled by the acquired 
branch office for the calendar year of the acquisition.
    iii. A covered institution and an institution that is not 
covered merge. The institution that is not covered is the surviving 
institution, or a new institution that is not covered is formed. For 
the calendar year of the merger, data collection is required for 
covered loans and applications of the covered institution that take 
place prior to the merger. Data collection by the previously covered 
institution is optional for that calendar year for transactions 
taking place after the merger date. When an institution remains not 
covered after acquiring a branch office of a covered institution, 
data collection is required for transactions of the covered branch 
office that take place prior to the acquisition. Data collection by 
the previously covered branch office is optional for transactions 
taking place after the acquisition.
    iv. Two covered institutions merge. Data collection is required 
for the entire year. The surviving or new institution files either a 
consolidated submission or separate submissions for that calendar 
year. When a covered institution acquires a branch office of a 
covered institution, data collection is required for the entire 
year. Data for the acquired branch office may be submitted by either 
institution.
    4. Originations. Whether an institution meets the definition of 
a financial institution depends in part on whether an institution 
has originated a certain number and type of covered loans. To 
determine whether activities with respect to a particular covered 
loan constitute an origination, institutions should consult comments 
4(a)-4 and 4(a)-5.
    5. Branches of foreign banks--treated as banks. A Federal branch 
or a State-licensed or insured branch of a foreign bank that meets 
the definition of a ``bank'' under section 3(a)(1) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(a)) is a bank for the purposes 
of Sec.  1003.2(g).
    6. Branches and offices of foreign banks and other entities--
treated as nondepository financial institutions. A Federal agency, 
State-licensed agency, State-licensed uninsured branch of a foreign 
bank, commercial lending company owned or controlled by a foreign 
bank, or entity operating under section 25 or 25A of the Federal 
Reserve Act, 12 U.S.C. 601 and 611 (Edge Act and agreement 
corporations) may not meet the definition of ``bank'' under the 
Federal Deposit Insurance Act and may thereby fail to satisfy the 
definition of a depository financial institution under Sec.  
1003.2(g)(1). An entity is nonetheless a financial institution if it 
meets the definition of nondepository financial institution under 
Sec.  1003.2(g)(2).
    2(i) Home improvement loan.
    1. General. Section 1003.2(i) defines a home improvement loan by 
reference to the purpose of the obligation. For example, a closed-
end mortgage loan obtained for the purpose of repairing a dwelling 
by replacing a roof is a home improvement loan for purposes of Sec.  
1003.2(i). An obligation is a home improvement loan even if only a 
part of the purpose is for repairing, rehabilitating, remodeling, or 
improving a dwelling. For example, a home-equity line of credit 
obtained in part for the purpose of remodeling a kitchen and in part 
for purposes other than repairing, rehabilitating, remodeling, or 
improving a dwelling is a home improvement loan for purposes of 
Sec.  1003.2(i).
* * * * *
    4. Mixed-use property. A covered loan to improve property used 
for residential and commercial purposes (for example, a building 
containing apartment units and retail space) is a home improvement 
loan if the loan proceeds are used primarily to improve the 
residential portion of the property. If the loan proceeds are used 
to improve the entire property (for example, to replace the heating 
system), the covered loan is a home improvement loan if the property 
itself is primarily residential. A financial institution may use any 
reasonable standard to determine the primary use of the property, 
such as by square footage or by the income generated. A financial 
institution may select the standard to apply on a case-by-case 
basis.
* * * * *
    2(j) Home purchase loan.
    1. General. Section 1003.2(j) defines a home purchase loan as a 
covered loan that is for the purpose of purchasing a dwelling. For 
example, if a person obtains a closed-end mortgage loan for the 
purpose of purchasing a dwelling, the closed-end mortgage loan is a 
home purchase loan for purposes of Sec.  1003.2(j). However, if a 
person purchases a dwelling by entering into an installment contract 
that is not secured by a lien on a dwelling, that contract is not a 
home purchase loan for purposes of Sec.  1003.2(j).
    2. Multiple properties. A home purchase loan includes a covered 
loan secured by one dwelling and used to purchase another dwelling. 
For example, if a person obtains a reverse mortgage secured by one 
dwelling for the purpose of purchasing another dwelling, the reverse 
mortgage is a home purchase loan for purposes of Sec.  1003.2(j).
    3. Mixed-use property. A covered loan to purchase property used 
primarily for residential purposes (for example, an apartment 
building containing a convenience store) is a home purchase loan. A 
financial institution may use any reasonable standard to determine 
the primary use of the property, such as by square footage or by the 
income generated. A financial institution may select the standard to 
apply on a case-by-case basis.
* * * * *
    7. Assumptions. For purposes of Sec.  1003.2(j), an assumption 
is a home purchase loan when a financial institution enters into a 
written agreement accepting a new borrower as the obligor on an 
existing obligation for a covered loan. If an assumption does not 
involve a written agreement between a new borrower and the financial 
institution, it is not a home purchase loan for purposes of Sec.  
1003.2(j).
    2(l) Manufactured home.
    1. Definition of a manufactured home. The definition in Sec.  
1003.2(l) refers to the Federal building code for manufactured 
housing established by the U.S. Department of Housing and Urban 
Development (HUD) (24 CFR 3280.2). Modular or other factory-built 
homes that do not meet the HUD code standards are not manufactured 
homes for purposes of Sec.  1003.2(l). Recreational vehicles are 
excluded from the HUD code standards pursuant to 24 CFR 3282.8(g) 
and are also excluded from the definition of dwelling for purposes 
of Sec.  1003.2(f). See comment 2(f)-2.
    2. Identification. A manufactured home will generally bear a 
data plate affixed in a permanent manner near the main electrical 
panel or other readily accessible and visible location noting its 
compliance with the Federal Manufactured Home Construction and 
Safety Standards in force at the time of

[[Page 51870]]

manufacture and providing other information about its manufacture 
pursuant to 24 CFR 3280.5. A manufactured home will generally also 
bear a HUD Certification Label pursuant to 24 CFR 3280.11.
* * * * *
    2(o) Open-end line of credit.
    1. General. Section 1003.2(o) defines an open-end line of credit 
for purposes of Regulation C. Among other things, Sec.  1003.2(o) 
defines an open-end line of credit by reference to Regulation Z, 12 
CFR 1026.2(a)(20), but without regard to whether the credit is for 
personal, family, or household purposes, without regard to whether 
the person to whom credit is extended is a consumer, and without 
regard to whether the person extending credit is a creditor, as 
those terms are defined under Regulation Z. For example, assume a 
business-purpose transaction that is exempt from Regulation Z 
pursuant to Sec.  1026.3(a)(1), but that otherwise would be 
considered open-end credit under Sec.  1026.2(a)(20). In this 
example, the business-purpose transaction is an open-end line of 
credit, provided the other requirements of Sec.  1003.2(o) are met. 
Similarly, assume a transaction in which the person extending open-
end credit is a financial institution under Sec.  1003.2(g), but is 
not a creditor under Sec.  1026.2(a)(17). In this example, the 
transaction is an open-end line of credit, assuming the other 
requirements of Sec.  1003.2(o) are met. Aside from these 
distinctions, financial institutions may rely on Sec.  1026.2(a)(20) 
and the related commentary in determining whether a transaction is 
open-end credit under Sec.  1003.2(o)(1).
    2(p) Refinancing.
    1. General. Section 1003.2(p) defines a refinancing as a covered 
loan in which a new debt obligation satisfies and replaces an 
existing debt obligation by the same borrower, in which both the 
existing debt obligation and the new debt obligation are secured by 
liens on dwellings. For example, if a borrower obtains a new closed-
end mortgage loan that satisfies and replaces one or more existing 
closed-end mortgage loans, the new closed-end mortgage loan is a 
refinancing for purposes of Sec.  1003.2(p). Similarly, if a 
borrower obtains a home-equity line of credit that satisfies and 
replaces an existing closed-end mortgage loan, the new home-equity 
line of credit is a refinancing for purposes of Sec.  1003.2(p). 
However, if a borrower enters into a new debt obligation that 
modifies that terms of the existing debt obligation, but does not 
satisfy and replace the existing debt obligation, the new debt 
obligation is not a refinancing for purposes of Sec.  1003.2(p). See 
also Sec.  1003.2(g) and the related commentary regarding the 
refinancings that are considered for purposes of determining whether 
a person is a financial institution.
    2. Debt obligation. For purposes of determining whether the 
transaction is a refinancing under Sec.  1003.2(p), both the 
existing debt obligation and the new debt obligation must be secured 
by liens on dwellings. For example, assume that a borrower has an 
existing $30,000 covered loan secured by a dwelling. If the borrower 
obtains a new $50,000 covered loan secured by a dwelling that 
satisfies and replaces the existing $30,000 covered loan, the new 
$50,000 covered loan is a refinancing for purposes of Sec.  
1003.2(p). However, if the borrower obtains a new $50,000 loan 
secured by a guarantee that satisfies and replaces the existing 
$30,000 loan, the new $50,000 loan is not a refinancing for purposes 
of Sec.  1003.2(p).
    3. Same borrower. Section 1003.2(p) provides that the existing 
and new obligation must both be by the same borrower. For purposes 
of Sec.  1003.2(p), only one borrower must be the same on both the 
existing and new obligation. For example, if two borrowers are 
obligated on an existing obligation, and only one of those two 
borrowers are obligated on a new obligation that satisfies and 
replaces the existing obligation, the new obligation is a 
refinancing for purposes of Sec.  1003.2(p), assuming the other 
requirements of that section are met. However, assume a scenario 
where two spouses are divorcing. If only one spouse is obligated on 
an existing obligation, and the other spouse is obligated on a new 
obligation that satisfies and replaces the existing obligation, the 
new obligation is not a refinancing for purposes of Sec.  1003.2(p).

Section 1003.3--Exempt Institutions and Excluded Transactions

    3(c) Excluded transactions.
    Paragraph 3(c)(1).
    1. Financial institution acting in a fiduciary capacity. A 
financial institution is acting in a fiduciary capacity if, for 
example, the financial institution is acting as a trustee.
    Paragraph 3(c)(2).
    1. Loan secured by a lien on unimproved land. Section 
1003.3(c)(2) provides that a loan secured by a lien on unimproved 
land is an excluded transaction. A loan that is secured by vacant 
land under Regulation X, 12 CFR 1024.5(b)(4), is a loan secured by a 
lien on unimproved land. However, a loan does not qualify for this 
exclusion if the financial institution knows or reasonably believes 
that within two years after the loan closes, a dwelling will be 
constructed or placed on the land using the loan proceeds.
    Paragraph 3(c)(3).
    1. Temporary financing--general. Temporary financing refers to 
loans that are designed to be replaced by permanent financing at a 
later time. For example, a bridge loan or swing loan is considered 
temporary financing, as is a loan that meets the definition of 
temporary financing in Regulation X, 12 CFR 1024.5(b)(3). A 
construction loan with a term of two years or more to construct a 
new dwelling, other than a loan to a bona fide builder (a person who 
regularly constructs dwellings for sale or lease), is not considered 
temporary financing.
    2. Temporary financing--loans that convert to permanent 
financing. A loan that is designed to be converted to permanent 
financing by the same financial institution is not temporary 
financing. For example, a loan made to finance construction of a 
dwelling is not considered temporary financing if the loan is 
designed to be converted to permanent financing by the same 
institution or if the loan is used to finance transfer of title to 
the first user. Likewise, if an institution issues a commitment for 
permanent financing, with or without conditions, the loan is not 
considered temporary financing.
    Paragraph 3(c)(4).
    1. Purchase of an interest in a pool of loans. The purchase of 
an interest in a pool of loans includes, for example, mortgage-
participation certificates, mortgage-backed securities, or real 
estate mortgage investment conduits.
    Paragraph 3(c)(6).
    1. Mergers, purchases in bulk, and branch office acquisitions. 
If a financial institution acquires covered loans in bulk from 
another institution (for example, from the receiver for a failed 
institution), but no merger or acquisition of an institution, or 
acquisition of a branch office, is involved, the acquiring financial 
institution reports the covered loans as purchased loans.
    Paragraph 3(c)(8).
    1. Partial interest. If a financial institution acquires only a 
partial interest in a covered loan, the institution does not report 
the transaction even if the institution participated in the 
underwriting and origination of the loan. If a financial institution 
acquires a 100 percent interest in a covered loan, the transaction 
is not excluded under Sec.  1003.3(c)(8).
    Paragraph 3(c)(9).
    1. Farm loan. A financial institution does not report a loan to 
purchase property used primarily for agricultural purposes, even if 
the property includes a dwelling. A financial institution may use 
any reasonable standard to determine the primary use of the 
property, such as by reference to the exemption from Regulation X, 
12 CFR 1024.5(b)(1), for a loan on property of 25 acres or more. An 
institution may select the standard to apply on a case-by-case 
basis.

Section 1003.4--Compilation of Reportable Data

4(a) Data Format and Itemization

    1. General. Section 1003.4(a) describes a financial 
institution's obligation to collect data on applications which it 
received, covered loans on which it made a credit decision, and on 
covered loans that it purchased during the calendar year described 
in the loan application register.
    i. A financial institution reports these data even if the 
covered loans were subsequently sold by the institution.
    ii. A financial institution reports data for applications that 
did not result in an origination but on which action was taken--for 
example, an application that the institution denied, that it 
approved but was not accepted, that it closed for incompleteness, or 
that the applicant withdrew during the calendar year covered by the 
register. A financial institution is required to report data 
regarding requests under a preapproval program (as defined in Sec.  
1003.2(b)(2)) only if the preapproval request is denied, results in 
the origination of a home purchase loan, or was approved but not 
accepted.
    iii. A financial institution reports the data for an application 
on the loan application register for the calendar year during which 
the application was acted upon even if the

[[Page 51871]]

institution received the application in a previous calendar year.
    iv. A financial institution may report data on a single loan 
application register, separate loan application registers at 
different branches, or on separate loan application registers for 
different loan types (such as for home purchase or home improvement 
loans, or for loans on multifamily dwellings).
* * * * *
    4. Originations and applications involving more than one 
institution. Each origination and application is only reported by 
one financial institution as an origination or application, although 
a second institution may report the loan as a purchase depending on 
the circumstances. If more than one institution was involved in an 
origination of a covered loan, the financial institution that made 
the credit decision before the loan closed reports the origination 
or application. In the case of an application for a covered loan 
that did not result in an origination, the financial institution 
that made the credit decision or that was reviewing the application 
when the application was withdrawn or closed for incompleteness 
reports the application. It is not relevant whether the loan closed 
or, in the case of an application, would have closed in the 
institution's name. The following scenarios illustrate which 
institution reports a particular origination or application. Comment 
4(a)-5 discusses how to report actions taken by agents.
    i. Financial Institution A received an application for a covered 
loan from an applicant and forwarded that application to Financial 
Institution B. Financial Institution B reviewed the application and 
approved the loan prior to closing. The loan closed in Financial 
Institution A's name. Financial Institution B purchased the loan 
from Financial Institution A after closing. Financial Institution B 
was not acting as Financial Institution A's agent. Since Financial 
Institution B made the credit decision prior to closing, Financial 
Institution B reports the transaction as an origination, not as a 
purchase. Financial Institution A does not report the transaction.
    ii. Financial Institution A received an application for a 
covered loan from an applicant and forwarded that application to 
Financial Institution B. Financial Institution B reviewed the 
application before the loan would have closed, but the application 
did not result in an origination because, for example, the 
application was denied or the application was withdrawn by the 
applicant. Financial Institution B was not acting as Financial 
Institution A's agent. If the loan had been originated, the loan 
would have closed in Financial Institution A's name and Financial 
Institution B would have purchased the loan after closing. Since 
Financial Institution B made the credit decision before the loan 
would have closed or, in the case of a withdrawal, was in the 
process of reviewing the application to make a credit decision when 
the application was withdrawn, Financial Institution B reports the 
application. Financial Institution A does not report the 
application.
    iii. Financial Institution B purchased a covered loan from 
Financial Institution A. Financial Institution B did not review the 
application before closing. Financial Institution A approved the 
application before closing. Financial Institution A was not acting 
as Financial Institution B's agent. Since Financial Institution A 
made the credit decision before closing, Financial Institution A 
reports the loan as an origination. Financial Institution B reports 
the loan as a purchase.
    iv. Financial Institution A received an application directly 
from an applicant. If approved, the loan would have closed in 
Financial Institution B's name. Financial Institution A denied the 
application without sending it to Financial Institution B for 
approval. Financial Institution A was not acting as Financial 
Institution B's agent. Since Financial Institution A made the credit 
decision before the loan would have closed, Financial Institution A 
reports the application. Financial Institution B does not report the 
application.
    v. Financial Institution A reviewed and made a credit decision 
on an application using Financial Institution B's underwriting 
criteria. Financial Institution B did not review the application. 
Financial Institution A was not acting as Financial Institution B's 
agent. Financial Institution A reports the application or 
origination. Financial Institution B does not report the 
transaction.
    vi. Financial Institution A reviewed and made a credit decision 
on an application based on the criteria of a third-party insurer or 
guarantor (including a government or private insurer or guarantor). 
Financial Institution A reports the application or origination.
    5. Agents. If a financial institution made a credit decision on 
a covered loan or application through the actions of an agent, the 
institution reports the application or origination. State law 
determines whether one party is the agent of another. For example, 
acting as Financial Institution A's agent, Financial Institution B 
approved an application prior to closing and a covered loan was 
originated. Financial Institution A reports the loan as an 
origination.
    6. Repurchased loans. When a covered loan that a financial 
institution initially originated and sold to a secondary market 
entity is repurchased by the originating financial institution 
within the same calendar year as it was originated, the originating 
financial institution should report it as not sold under Sec.  
1003.4(a)(11), and the purchasing entity, if a financial 
institution, should not report it as purchased. However, if the 
repurchase happens in a subsequent calendar year, the purchase and 
repurchase, reported as a purchase, should be reported in their 
respective calendar years. If a financial institution is required to 
report on a quarterly basis under Sec.  1003.5(a)(1)(ii) and it 
originates and repurchases a covered loan in different quarters of 
the same calendar year, in its submission for the quarter during 
which it repurchased the covered loan it should update its previous 
submission to remove the reported sale of the covered loan to the 
financial institution from which it repurchased the covered loan. If 
a financial institution is required to report on a quarterly basis 
under Sec.  1003.5(a)(1)(ii) and it purchases a covered loan from 
the originating institution and sells the covered loan back to the 
originating financial institution in different quarters of the same 
calendar year, in its submission for the quarter during which it 
sold the covered loan back to the originating financial institution 
it should update its previous submission to delete the reported 
purchase. The following scenarios illustrate if and when a purchase 
or repurchase is reported:
    i. Financial Institution A originates covered loan 001 in year 
one and sells it to Financial Institution B in year one. Later in 
year one, Financial Institution B requires Financial Institution A 
to repurchase covered loan 001. Financial Institution A reports the 
origination of covered loan 001 in year one and does not report the 
sale of covered loan 001 or the repurchase of covered loan 001. 
Financial Institution B does not report the purchase of covered loan 
001 in year one.
    ii. Financial Institution A originates covered loan 001 in year 
1 and sells it to Financial Institution B in year one. In year two, 
Financial Institution B requires Financial Institution A to 
repurchase covered loan 001. Financial Institution A reports the 
origination and sale of covered loan 001 in year one and the 
repurchase, reported as a purchase, of covered loan 001 in year two. 
Financial Institution B reports the purchase of covered loan 001 in 
year one.
    iii. Financial Institution A originates covered loan 001 in year 
one and sells it to Financial Institution B in year two. In year 
two, Financial Institution B requires Financial Institution A to 
repurchase covered loan 001. Financial Institution A reports the 
origination of covered loan 001 in year one and the repurchase, 
reported as a purchase, of covered loan 001 in year two but does not 
report the sale of covered loan 001 in year two. Financial 
Institution B reports the purchase and the sale of covered loan 001 
in year two.
    Paragraph 4(a)(1)(i).
    1. ULI--uniqueness. Section 1003.4(a)(1)(i)(B)(2) requires a 
financial institution that assigns a ULI to ensure that the 
character sequence it assigns is unique within the institution. Only 
one ULI should be assigned to any particular application or covered 
loan, and each ULI should correspond to a single application and 
ensuing loan in the case that the application is approved and a loan 
is originated. A financial institution shall use a ULI that was 
reported previously to refer only to the same loan or application 
for which the ULI was used previously or a loan that ensues from an 
application for which the ULI was used previously. For example, if a 
loan origination was previously reported under this part with a ULI, 
a financial institution would report the later purchase of the loan 
using the same ULI. A financial institution may not, however, report 
an application for a covered loan in 2030 using a ULI that was 
reported for a covered loan that was originated in 2020. Similarly, 
refinancings or applications for refinancing should be assigned a 
different ULI than the loan that is being refinanced. A financial 
institution with multiple branches must ensure that its branches do 
not use a single ULI to refer to multiple covered loans or 
applications.

[[Page 51872]]

    2. ULI--privacy. Section 1003.4(a)(1)(i)(B)(3) prohibits a 
financial institution from including information that could be used 
to directly identify the applicant or borrower in the identifier 
that it assigns for the application or covered loan of the applicant 
or borrower. Information that could be used to directly identify the 
applicant or borrower includes but is not limited to the applicant's 
or borrower's name, date of birth, Social Security number, official 
government-issued driver's license or identification number, alien 
registration number, government passport number, or employer or 
taxpayer identification number.
    Paragraph 4(a)(1)(ii).
    1. Application date--consistency. Section 1003.4(a)(1)(ii) 
requires that in reporting the date of application, a financial 
institution report the date it received the application or the date 
shown on the application form. Although a financial institution need 
not choose the same approach for its entire HMDA submission, it 
should be generally consistent (such as by routinely using one 
approach within a particular division of the institution or for a 
category of loans).
    2. Application date--indirect application. For an application 
that was not submitted directly to the financial institution, the 
institution may report the date the application was received by the 
party who initially received the application, the date the 
application was received by the institution, or the date shown on 
the application. Although an institution need not choose the same 
approach for its entire HMDA submission, it should be generally 
consistent (such as by routinely using one approach within a 
particular division of the institution or for a category of loans).
    3. Application date--reinstated application. If, within the same 
calendar year, an applicant asks a financial institution to 
reinstate a counteroffer that the applicant previously did not 
accept (or asks the institution to reconsider an application that 
was denied, withdrawn, or closed for incompleteness), the 
institution may treat that request as the continuation of the 
earlier transaction or as a new transaction. If the institution 
treats the request for reinstatement or reconsideration as a new 
transaction, it reports the date of the request as the application 
date.
    4. Application--year action taken. A financial institution must 
report an application as occurring in the calendar year in which the 
institution takes final action on the application.
    Paragraph 4(a)(3).
* * * * *
    2. Purpose--multiple-purpose loan. Section 1003.4(a)(3) requires 
a financial institution to report the purpose of a covered loan or 
application and also specifies the order of importance if a covered 
loan or application is for more than one purpose. If a covered loan 
is a home purchase loan as well as a home improvement loan or a 
refinancing, Sec.  1003.4(a)(3) requires the institution to report 
the loan as a home purchase loan. If a covered loan is a home 
improvement loan as well as a refinancing, but the covered loan is 
not a home purchase loan, Sec.  1003.4(a)(3) requires the 
institution to report the covered loan as a home improvement loan. 
If a covered loan is a refinancing as well as for another purpose, 
such as for the purpose of paying educational expenses, but the 
covered loan is not a home purchase loan or a home improvement loan, 
Sec.  1003.4(a)(3) requires the institution to report the covered 
loan as a refinancing.
    3. Purpose--other. If a covered loan is not, or an application 
is not for, a home purchase loan, a home improvement loan, or a 
refinancing, Sec.  1003.4(a)(3) requires a financial institution to 
report the covered loan or application as for a purpose other than 
home purchase, home improvement, or refinancing. For example, if a 
covered loan is for the purpose of paying educational expenses, the 
financial institution complies with Sec.  1003.4(a)(3) by reporting 
the covered loan as for a purpose other than home purchase, home 
improvement, or refinancing.
    Paragraph 4(a)(5).
    1. Modular homes. Covered loans or applications related to 
modular homes should be reported with a construction method of site 
built, regardless of whether they are on-frame or off-frame modular 
homes. Modular homes comply with local or other recognized buildings 
codes rather than standards established by the National Manufactured 
Housing Construction and Safety Standards Act, 42 U.S.C. 5401 et 
seq. Modular homes are not required to have HUD Certification Labels 
under 24 CFR 3280.11 or data plates under 24 CFR 3280.5. Modular 
homes may have a certification from a State licensing agency that 
documents compliance with State or other applicable building codes. 
On-frame modular homes are constructed on permanent metal chassis 
similar to those used in manufactured homes. The chassis are not 
removed on site and are secured to the foundation. Off-frame modular 
homes typically have floor construction similar to the construction 
of other site built homes, and the construction typically includes 
wooden floor joists and does not include permanent metal chassis.
    2. Multiple properties. See comment 4(a)(9)-2 regarding 
transactions involving multiple properties with more than one 
property taken as security.
    Paragraph 4(a)(6).
* * * * *
    2. Principal residence. Section 1003.4(a)(6) requires a 
financial institution to identify whether the property to which the 
covered loan or application relates is or will be used as a 
residence that the applicant or borrower physically occupies and 
uses, or will occupy and use, as his or her principal residence. For 
purposes of Sec.  1003.4(a)(6) an applicant or borrower can have 
only one principal residence at a time. Thus, a vacation or other 
second home would not be a principal residence. However, if an 
applicant or borrower buys or builds a new dwelling that will become 
the applicant's or borrower's principal residence within a year or 
upon the completion of construction, the new dwelling is considered 
the principal residence for purposes of applying this definition to 
a particular transaction.
    3. Second residences. Section 1003.4(a)(6) requires a financial 
institution to identify whether the property to which the loan or 
application relates is or will be used as a second residence. For 
purposes of Sec.  1003.4(a)(6), a property is an applicant's or 
borrower's second residence if the property is or will be occupied 
by the applicant or borrower for a portion of the year and is not 
the applicant's or borrower's principal residence. For example, if a 
person purchases a property, occupies the property for a portion of 
the year, and rents the property for the remainder of the year, the 
property is a second residence for purposes of Sec.  1003.4(a)(6). 
Similarly, if a couple occupies a property near their place of 
employment on weekdays, but the couple returns to their principal 
residence on weekends, the property near the couple's place of 
employment is a second residence for purposes of Sec.  1003.4(a)(6).
    4. Investment properties. Section 1003.4(a)(6) requires a 
financial institution to identify whether the property to which the 
covered loan or application relates is or will be used as an 
investment property. For purposes of Sec.  1003.4(a)(6), a property 
is an investment property if the owner does not occupy the property. 
For example, if a person purchases a property, does not occupy the 
property, and generates income by renting the property, the property 
is an investment property for purposes of Sec.  1003.4(a)(6). 
Similarly, if a person purchases a property, does not occupy the 
property, and does not generate income by renting the property, but 
intends to generate income by selling the property at some point in 
time, the property is an investment property for purposes of Sec.  
1003.4(a)(6). Section 1003.4(a)(6) requires a financial institution 
to identify a property as an investment property if the owner does 
not occupy the property, even if the owner does not consider the 
property as owned for investment purposes. For example, if a 
corporation purchases a property that is a dwelling under Sec.  
1003.2(f), that it does not occupy, and that is for the use of its 
employees, the property is an investment property for purposes of 
Sec.  1003.4(a)(6), even if the corporation considers the property 
as owned for business purposes rather than investment purposes, does 
not generate income by renting the property, and does not intend to 
generate income by selling the property at some point in time.
    5. Multiple properties. See comment 4(a)(9)-2 regarding 
transactions involving multiple properties with more than one 
property taken as security.
    Paragraph 4(a)(7).
    1. Covered loan amount--counteroffer. If an applicant accepts a 
counteroffer for an amount different from the amount for which the 
applicant applied, the financial institution reports the covered 
loan amount granted. If an applicant does not accept a counteroffer 
or fails to respond, the institution reports the amount initially 
requested.
    2. Covered loan amount--application denied or withdrawn. For an 
application that was denied or withdrawn, a financial institution 
reports the amount for which the applicant applied.
    3. Covered loan amount--multiple-purpose loan. A financial 
institution reports the entire amount of the covered loan, even if 
only a

[[Page 51873]]

part of the proceeds is intended for home purchase or home 
improvement.
    4. Covered loan amount--open-end line of credit. A financial 
institution reports the entire amount of credit available to the 
borrower under the terms of the plan.
    5. Covered loan amount--refinancing. For a refinancing, a 
financial institution reports the amount of credit extended under 
the terms of the new legal obligation.
    6. Covered loan amount--home improvement loan. A financial 
institution reports the entire amount of a home improvement loan, 
even if only a part of the proceeds is intended for home 
improvement.
    Paragraph 4(a)(8).
    1. Action taken--counteroffers. If a financial institution makes 
a counteroffer to lend on terms different from the applicant's 
initial request (for example, for a shorter loan maturity or in a 
different amount) and the applicant does not accept the counteroffer 
or fails to respond, the institution reports the action taken as a 
denial on the original terms requested by the applicant.
    2. Action taken--rescinded transactions. If a borrower rescinds 
a transaction after closing and before a financial institution is 
required to submit its loan application register containing the 
information for the transaction under Sec.  1003.5(a), the 
institution reports the transaction as an application that was 
approved but not accepted.
    3. Action taken--purchased loans. An institution reports the 
covered loans that it purchased during the calendar year, and does 
not report the covered loans that it declined to purchase, unless, 
as discussed in comment 4(a)-4.i, the institution reviewed the 
application prior to closing and reports it as an origination.
    4. Action taken--repurchased covered loans. See comment 4(a)-6 
regarding reporting requirements when a covered loan is repurchased 
by the originating financial institution.
    5. Action taken--conditional approvals. If an institution issues 
an approval other than a commitment pursuant to a preapproval 
program as defined under Sec.  1003.2(b)(2), and that approval is 
subject to the applicant meeting certain conditions, the institution 
reports the action taken as provided below dependent on whether the 
conditions are solely customary commitment or closing conditions or 
if the conditions include any underwriting or creditworthiness 
conditions.
    i. Action taken examples. If the approval is conditioned on 
satisfying underwriting or creditworthiness conditions and they are 
not met, the institution reports the action taken as a denial. If, 
however, the conditions involve submitting additional information 
about creditworthiness that the institution needs to make the credit 
decision, and the institution has sent a written notice of 
incompleteness under Regulation B, 12 CFR 1002.9(c)(2) and the 
applicant did not respond within the period of time specified in the 
notice, the institution reports the action taken as file closed for 
incompleteness. If the conditions are solely customary commitment or 
closing conditions and the conditions are not met, the institution 
reports the action taken as approved but not accepted. If all the 
conditions (underwriting, creditworthiness, or customary commitment 
or closing conditions) are satisfied and the institution agrees to 
extend credit but the covered loan is not originated, the 
institution reports the action taken as application approved but not 
accepted. If the applicant expressly withdraws before satisfying all 
underwriting or creditworthiness conditions and before the 
institution denies the application or closes the file for 
incompleteness, the institution reports the action taken as 
application withdrawn. If all underwriting and creditworthiness 
conditions have been met, and the conditions are solely customary 
commitment or closing conditions and the applicant expressly 
withdraws before the covered loan is originated, the institution 
reports the action taken as application approved but not accepted.
    ii. Customary commitment or closing conditions. Customary 
commitment or closing conditions include, for example: A clear-title 
requirement, an acceptable property survey, acceptable title 
insurance binder, clear termite inspection, a subordination 
agreement from another lienholder, and, where the applicant plans to 
use the proceeds from the sale of one home to purchase another, a 
settlement statement showing adequate proceeds from the sale.
    iii. Underwriting or creditworthiness conditions. Underwriting 
or creditworthiness conditions include, for example: Conditions that 
constitute a counter-offer, such as a demand for a higher down-
payment; satisfactory debt-to-income or loan-to-value ratios, 
determination of need for private mortgage insurance, or a 
satisfactory appraisal requirement; or verification or confirmation, 
in whatever form the institution requires, that the applicant meets 
underwriting conditions concerning applicant creditworthiness, 
including documentation or verification of income or assets.
    6. Action taken--transactions involving more than one 
institution. A financial institution reports the action taken on a 
covered loan or application involving more than one institution in 
accordance with the instructions in comment 4(a)-4.
    7. Action taken date--approved but not accepted. For a covered 
loan approved by an institution but not accepted by the applicant, 
the institution reports any reasonable date, such as the approval 
date, the deadline for accepting the offer, or the date the file was 
closed. Although an institution need not choose the same approach 
for its entire HMDA submission, it should be generally consistent 
(such as by routinely using one approach within a particular 
division of the institution or for a category of covered loans).
    8. Action taken date--originations. For covered loan 
originations, an institution generally reports the settlement or 
closing date. For covered loan originations that an institution 
acquires from a party that initially received the application, the 
institution reports either the settlement or closing date, or the 
date the institution acquired the covered loan from the party that 
initially received the application. If the disbursement of funds 
takes place on a date later than the settlement or closing date, the 
institution may use the date of disbursement. For a construction/
permanent covered loan, the institution reports either the 
settlement or closing date, or the date the covered loan converts to 
the permanent financing. Although an institution need not choose the 
same approach for its entire HMDA submission, it should be generally 
consistent (such as by routinely using one approach within a 
particular division of the institution or for a category of covered 
loans). Notwithstanding this flexibility regarding the use of the 
closing date in connection with reporting the date action was taken, 
the institution must report the origination as occurring in the year 
in which the origination goes to closing.
    9. Action taken--pending applications. An institution does not 
report any covered loan application still pending at the end of the 
calendar year; it reports that application on its loan application 
register for the year in which final action is taken.
    Paragraph 4(a)(9).
    1. Multiple properties with one property taken as security. If a 
covered loan is related to more than one property, but only one 
property is taken as or, in the case of an application, proposed to 
be taken as security, a financial institution reports the 
information required by Sec.  1003.4(a)(9) for the property taken as 
or, in the case of an application, proposed to be taken as security. 
A financial institution does not report the information required by 
Sec.  1003.4(a)(9) for the property or properties related to the 
loan that are not taken as, or in the case of an application, 
proposed to be taken as security. For example, if a covered loan is 
secured by property A, and the proceeds are used to purchase or 
rehabilitate property B, the institution reports the information 
required by Sec.  1003.4(a)(9) for property A and does not report 
the information required by Sec.  1003.4(a)(9) for property B.
    2. Multiple properties with more than one property taken as 
security. If more than one property is taken or, in the case of an 
application, proposed to be taken as security for a single covered 
loan, a financial institution may report one of the properties in a 
single entry on its loan application register or report all of the 
properties using multiple entries on its loan application register. 
If a financial institution opts to report all of the properties, the 
multiple entries should be identical except for the required 
information that relates to the property identified in Sec.  
1003.4(a)(9). If an institution is required to report specific 
information about the property identified in Sec.  1003.4(a)(9), the 
institution should report the information that relates to the 
property identified in Sec.  1003.4(a)(9) in that entry. For 
example, Financial Institution A originated a covered loan that is 
secured by both property A and property B. Financial Institution A 
may report the loan as one entry on its loan application register, 
reporting the information required by Sec.  1003.4(a)(9) for either 
property A or property B. Financial Institution A may also report 
the loan as two entries on its loan application register. If 
Financial Institution A elects to report the loan as two entries, in 
the first entry, Financial Institution A reports the

[[Page 51874]]

information required by Sec.  1003.4(a)(9) for property A and the 
information required by Sec.  1003.4(a)(5), (6), (14), (29), and 
(30) related to property A. In the second entry, Financial 
Institution A reports the information required by Sec.  1003.4(a)(9) 
for property B and the information required by Sec.  1003.4(a)(5), 
(6), (14), (29), and (30) related to property B. For aspects of the 
entries that are not specific to the property identified in Sec.  
1003.4(a)(9) (i.e., Sec.  1003.4(a)(1) through (4), (7), (8), (10) 
through (13), (15) through (28), (31) through (39)), Financial 
Institution A reports the same information in both entries.
    3. Multifamily dwellings. A single multifamily dwelling may have 
more than one postal address. For example, three apartment 
buildings, each with a different street address, comprise a single 
multifamily dwelling that secures a covered loan. For the purposes 
of Sec.  1003.4(a)(9), a financial institution reports the 
information required by Sec.  1003.4(a)(9) in the same manner 
described in comment 4(a)(9)-2. As discussed below in comments 
4(a)(31)-1 and 4(a)(32)-4, regardless of whether the financial 
institution elects to report the covered loan using one or more than 
one entry, the information required by Sec.  1003.4(a)(31) and (32) 
should refer to the total number of applicable units in the property 
or properties securing or, in the case of an application, proposed 
to secure the covered loan.
    4. Loans purchased from another institution. The requirement to 
report the property location information required by Sec.  
1003.4(a)(9) applies not only to applications and originations but 
also to covered loans purchased from another institution.
    5. Manufactured home. If the site of a manufactured home has not 
been identified, a financial institution reports the transaction on 
its loan application register using ``not applicable'' in each of 
the fields required by Sec.  1003.4(a)(9).
    Paragraph 4(a)(10)(i).
    1. Applicant data--completion by applicant. A financial 
institution reports the government monitoring information as 
provided by the applicant. For example, if an applicant checks the 
``Asian'' box the institution reports using the ``Asian'' Code. With 
respect to age, Sec.  1003.4(a)(10)(i) requires that a financial 
institution report the age of the applicant or borrower, as of the 
application date under Sec.  1003.4(a)(1)(ii), in number of years as 
derived from the date of birth as shown on the application form. For 
example, if an applicant indicates a date of birth of 01/15/1970 on 
the application form that the financial institution receives on 01/
15/2014, the institution reports 44 as the age of the applicant.
    2. Applicant data--completion by financial institution. If an 
applicant fails to provide the requested information for an 
application taken in person, the financial institution reports the 
data on the basis of visual observation or surname, other than the 
age of the applicant which the financial institution reports in 
number of years as derived from the date of birth as shown on the 
application form and the application date under Sec.  
1003.4(a)(1)(ii).
    3. Applicant data--application completed in person. When an 
applicant meets in person with a financial institution to complete 
an application that was begun by mail, internet, or telephone, the 
financial institution must request the government monitoring 
information. If the meeting occurs after the application process is 
complete, for example, at closing or account opening, the financial 
institution is not required to obtain government monitoring 
information.
    4. Applicant data--joint applicant. A joint applicant may 
provide the government monitoring information on behalf of an absent 
joint applicant. If the information is not provided, the financial 
institution reports using the Code for ``information not provided by 
applicant in mail, internet, or telephone application.''
    5. Applicant data--video and other electronic-application 
processes. A financial institution that accepts applications through 
electronic media with a video component treats the applications as 
taken in person and collects the information about the ethnicity, 
race, and sex of applicants. A financial institution that accepts 
applications through electronic media without a video component (for 
example, the internet or facsimile) treats the applications as 
accepted by mail.
    Paragraph 4(a)(10)(ii).
    1. Income data--income relied on. When an institution evaluates 
income as part of a credit decision, it reports the gross annual 
income relied on in making the credit decision. For example, if an 
institution relies on an applicant's salary to compute a debt-to-
income ratio but also relies on the applicant's annual bonus to 
evaluate creditworthiness, the institution reports the salary and 
the bonus to the extent relied upon. However, if an institution 
relies on an applicant's income, but does not rely on certain income 
from an applicant in its determination, it does not report that 
portion of income not relied on. For example, the income relied on 
would not include commission income if the institution, pursuant to 
lender and investor guidelines, does not rely on an applicant's 
commission income because it has been earned for less than 12 
months. Similarly, if an institution relies on the income of a 
cosigner to evaluate creditworthiness, the institution includes this 
income to the extent relied upon. But an institution does not 
include the income of a guarantor who is only secondarily liable.
    2. Income data--co-applicant. If two persons jointly apply for a 
covered loan and both list income on the application, but the 
institution relies only on the income of one applicant in computing 
ratios and in evaluating creditworthiness, the institution reports 
only the income relied on.
    3. Income data--loan to employee. An institution may report 
``NA'' in the income field for covered loans to or applications from 
its employees to protect their privacy, even though the institution 
relied on their income in making its credit decisions.
    4. Income data--assets. An institution does not include as 
income amounts considered in making a credit decision based on 
factors that an institution relies on in addition to income, such as 
amounts derived from annuitization or depletion of an applicant's 
remaining assets.
    5. Income data--collected income. An institution reports income 
information collected as part of the application process if the 
application is denied or withdrawn or the file is closed for 
incompleteness before a credit decision requiring consideration of 
income is made. For example, if an institution receives an 
application that includes an applicant's self-reported income, but 
the application is withdrawn before a credit decision requiring 
consideration of income is made, the institution reports the income 
provided on the application.
    6. Income data--credit decision not requiring consideration of 
income. An institution does not report income if the application did 
not or would not have required a credit decision requiring 
consideration of income under the policies and practices of the 
financial institution. For example, if the institution does not 
consider income for a streamlined refinance program but obtained 
income information submitted by the borrower, the institution 
reports neither gross annual income relied on nor gross annual 
income collected.
    Paragraph 4(a)(11).
    1. Type of purchaser--loan-participation interests sold to more 
than one entity. A financial institution that originates a covered 
loan, and then sells it to more than one entity, reports the ``type 
of purchaser'' based on the entity purchasing the greatest interest, 
if any. For purposes of Sec.  1003.4(a)(11), if a financial 
institution sells a covered loan but retains a majority interest in 
that loan, it does not report the sale.
    2. Type of purchaser--swapped covered loans. Covered loans 
``swapped'' for mortgage-backed securities are to be treated as 
sales; the purchaser is the type of entity receiving the covered 
loans that are swapped.
    3. Type of purchaser--affiliate institution. For purposes of 
Sec.  1003.4(a)(11), the term ``affiliate'' means any company that 
controls, is controlled by, or is under common control with, another 
company, as set forth in the Bank Holding Company Act of 1956 (12 
U.S.C. 1841 et seq.).
    4. Type of purchaser--private securitizations. A financial 
institution that knows or reasonably believes that the covered loan 
it is selling will be securitized by the institution purchasing the 
covered loan, other than by one of the government-sponsored 
enterprises, reports the purchasing entity type as a private 
securitization regardless of the type or affiliation of the 
purchasing entity. Knowledge or reasonable belief could, for 
example, be based on the purchase agreement or other related 
documents, the financial institution's previous transactions with 
the purchaser, or the purchaser's role as a securitizer (such as an 
investment bank). If a financial institution selling a covered loan 
does not know or reasonably believe that the purchaser will 
securitize the loan, and the seller knows that the purchaser 
frequently holds or disposes of loans by means other than 
securitization, then the financial institution should report the 
covered loan as purchased by, as appropriate, a commercial bank, 
savings bank, savings association, life insurance company, credit 
union, mortgage bank, finance company, affiliate institution, or 
other type of purchaser.
    5. Type of purchaser--mortgage bank. For purposes of Sec.  
1003.4(a)(11), a mortgage bank,

[[Page 51875]]

often referred to as a mortgage company, means an institution that 
purchases covered loans and typically originates such loans. A 
mortgage bank might be an affiliate or a subsidiary of a bank 
holding company or thrift holding company, or it might be an 
independent mortgage company. In either case, a financial 
institution reports the purchasing entity type as a mortgage bank, 
unless the mortgage bank is an affiliate of the seller institution, 
in which case the seller institution should report the loan as 
purchased by an affiliate institution.
    6. Purchases by subsidiaries. A financial institution that sells 
a covered loan to its subsidiary that is a commercial bank, savings 
bank, or savings association, should report the covered loan as 
purchased by a commercial bank, savings bank, or savings 
association. A financial institution that sells a covered loan to 
its subsidiary that is a life insurance company, credit union, 
mortgage bank, or finance company, should report the covered loan as 
purchased by a life insurance company, credit union, mortgage bank, 
or finance company. If the subsidiary that purchases the covered 
loan is not a commercial bank, savings bank, savings association, 
life insurance company, credit union, mortgage bank, or finance 
company, the seller institution should report the loan as purchased 
by other type of purchaser. The financial institution should report 
the covered loan as purchased by an affiliate institution when the 
subsidiary is an affiliate of the seller institution.
    7. Type of purchaser--bank holding company or thrift holding 
company. When a financial institution sells a covered loan to a bank 
holding company or thrift holding company (rather than to one of its 
subsidiaries), it should report the loan as purchased by other type 
of purchaser, unless the bank holding company or thrift holding 
company is an affiliate of the seller institution, in which case the 
seller institution should report the loan as purchased by an 
affiliate institution.
    8. Repurchased covered loans. See comment 4(a)-6 regarding 
reporting requirements when a covered loan is repurchased by the 
originating financial institution.
    Paragraph 4(a)(12).
* * * * *
    2. Bureau tables. The Bureau publishes on the FFIEC's Web site 
(https://www.ffiec.gov/hmda), in tables entitled ``Average Prime 
Offer Rates-Fixed'' and ``Average Prime Offer Rates-Adjustable,'' 
current and historic average prime offer rates for a wide variety of 
closed-end transaction types. The Bureau calculates an annual 
percentage rate, consistent with Regulation Z (see 12 CFR 1026.22 
and part 1026, appendix J), for each transaction type for which 
pricing terms are available from the survey described in comment 
4(a)(12)-1. The Bureau uses loan pricing terms available in the 
survey and other information to estimate annual percentage rates for 
other types of transactions for which direct survey data are not 
available. The Bureau publishes on the FFIEC's Web site the 
methodology it uses to arrive at these estimates. A financial 
institution may either use the average prime offer rates published 
by the Bureau or may determine average prime offer rates itself by 
employing the methodology published on the FFIEC Web site. A 
financial institution that determines average prime offer rates 
itself, however, is responsible for correctly determining the rates 
in accordance with the published methodology.
    3. Rate spread calculation--annual percentage rate. The 
requirements of Sec.  1003.4(a)(12)(i) refer to the covered loan's 
annual percentage rate. A financial institution complies with Sec.  
1003.4(a)(12)(i) by relying on the annual percentage rate for the 
covered loan, as calculated and disclosed pursuant to Regulation Z, 
12 CFR 1026.18 (closed-end credit transactions) or 1026.40 (open-end 
credit plans), as applicable.
    4. Rate spread calculation--comparable transaction. The rate 
spread calculation in Sec.  1003.4(a)(12)(i) is defined by reference 
to a comparable transaction, which is determined according to the 
covered loan's amortization type (i.e., fixed- or variable-rate) and 
loan term. For open-end covered loans, Sec.  1003.4(a)(12)(i) 
requires a financial institution to identify the most closely 
comparable closed-end transaction. The tables of average prime offer 
rates published by the Bureau (see comment 4(a)(12)-2) provide 
additional detail about how to identify the comparable transaction.
    i. Fixed-rate transactions. For fixed-rate covered loans, the 
term for identifying the comparable transaction is the transaction's 
maturity (i.e., the period until the last payment will be due under 
the loan contract or open-end credit agreement). If an open-end 
credit plan has a fixed rate but no definite plan length, a 
financial institution complies with Sec.  1003.4(a)(12)(i) by using 
a 30-year fixed-rate loan as the most closely comparable closed-end 
transaction. Financial institutions may refer to the table on the 
FFIEC Web site entitled ``Average Prime Offer Rates-Fixed'' when 
identifying a comparable fixed-rate transaction.
    ii. Variable-rate transactions. For variable-rate covered loans, 
the term for identifying the comparable transaction is the initial, 
fixed-rate period (i.e., the period until the first scheduled rate 
adjustment). For example, five years is the relevant term for a 
variable-rate transaction with a five-year, fixed-rate introductory 
period that is amortized over thirty years. Financial institutions 
may refer to the table on the FFIEC Web site entitled ``Average 
Prime Offer Rates-Variable'' when identifying a comparable variable-
rate transaction. If an open-end credit plan has a variable rate and 
an optional, fixed-rate feature, a financial institution uses the 
rate table for variable-rate transactions.
    iii. Term not in whole years. When a covered loan's term to 
maturity (or, for a variable-rate transaction, the initial fixed-
rate period) is not in whole years, the financial institution uses 
the number of whole years closest to the actual loan term or, if the 
actual loan term is exactly halfway between two whole years, by 
using the shorter loan term. For example, for a loan term of ten 
years and three months, the relevant term is ten years; for a loan 
term of ten years and nine months, the relevant term is 11 years; 
for a loan term of ten years and six months, the relevant term is 
ten years. If a loan term includes an odd number of days, in 
addition to an odd number of months, the financial institution 
rounds to the nearest whole month, or rounds down if the number of 
odd days is exactly halfway between two months. The financial 
institution rounds to one year any covered loan with a term shorter 
than six months, including variable-rate covered loans with no 
initial, fixed-rate periods. For example, if an open-end covered 
loan has a rate that varies according to an index plus a margin, 
with no introductory, fixed-rate period, the transaction term is one 
year.
    iv. Amortization period longer than loan term. If the 
amortization period of a covered loan is longer than the term of the 
transaction to maturity, Sec.  1003.4(a)(12)(i) requires a financial 
institution to use the loan term to determine the applicable average 
prime offer rate. For example, assume a financial institution 
originates a closed-end, fixed-rate loan that has a term to maturity 
of five years and a thirty-year amortization period that results in 
a balloon payment. The financial institution complies with Sec.  
1003.4(a)(12)(i) by using the five-year loan term.
    5. Rate-set date. The relevant date to use to determine the 
average prime offer rate for a comparable transaction is the date on 
which the covered loan's interest rate was set by the financial 
institution for the final time before closing or account opening.
    i. Rate-lock agreement. If an interest rate is set pursuant to a 
``lock-in'' agreement between the financial institution and the 
borrower, then the date on which the agreement fixes the interest 
rate is the date the rate was set. Except as provided in comment 
4(a)(12)-5.ii, if a rate is reset after a lock-in agreement is 
executed (for example, because the borrower exercises a float-down 
option or the agreement expires), then the relevant date is the date 
the financial institution exercises discretion in setting the rate 
for the final time before closing or account opening. The same rule 
applies when a rate-lock agreement is extended and the rate is reset 
at the same rate, regardless of whether market rates have increased, 
decreased, or remained the same since the initial rate was set. If 
no lock-in agreement is executed, then the relevant date is the date 
on which the institution sets the rate for the final time before 
closing or account opening.
    ii. Change in loan program. If a financial institution issues a 
rate-lock commitment under one loan program, the borrower 
subsequently changes to another program that is subject to different 
pricing terms, and the financial institution changes the rate 
promised to the borrower under the rate-lock commitment accordingly, 
the rate-set date is the date of the program change. However, if the 
financial institution changes the promised rate to the rate that 
would have been available to the borrower under the new program on 
the date of the original rate-lock commitment, then that is the date 
the rate is set, provided the financial institution consistently 
follows that practice in all such cases or the original rate-lock 
agreement so provided. For example, assume that a borrower locks a 
rate of 2.5 percent on June 1 for a 30-year, variable-rate loan with 
a 5-

[[Page 51876]]

year, fixed-rate introductory period. On June 15, the borrower 
decides to switch to a 30-year, fixed-rate loan, and the rate 
available to the borrower for that product on June 15 is 4.0 
percent. On June 1, the 30-year, fixed-rate loan would have been 
available to the borrower at a rate of 3.5 percent. If the financial 
institution offers the borrower the 3.5 percent rate (i.e., the rate 
that would have been available to the borrower for the fixed-rate 
product on June 1, the date of the original rate-lock) because the 
original agreement so provided or because the financial institution 
consistently follows that practice for borrowers who change loan 
programs, then the financial institution should use June 1 as the 
rate-set date. In all other cases, the financial institution should 
use June 15 as the rate-set date.
    iii. Brokered loans. When a financial institution has reporting 
responsibility for a covered loan that it received from a broker, as 
discussed in comment 4(a)-4 (e.g., because the financial institution 
makes a credit decision prior to closing or account opening), the 
rate-set date is the last date the financial institution set the 
rate with the broker, not the date the broker set the borrower's 
rate.
    6. Compare the annual percentage rate to the average prime offer 
rate. Section 1003.4(a)(12)(i) requires a financial institution to 
compare the covered loan's annual percentage rate to the most 
recently available average prime offer rate that was in effect for 
the comparable transaction as of the rate-set date. For purposes of 
Sec.  1003.4(a)(12)(i), the most recently available rate means the 
average prime offer rate set forth in the applicable table with the 
most recent effective date as of the date the interest rate was set. 
However, Sec.  1003.4(a)(12)(i) does not permit a financial 
institution to use an average prime offer rate before its effective 
date.
    Paragraph 4(a)(14).
    1. Determining lien status for applications and covered loans 
originated and purchased. i. Financial institutions are required to 
report lien status for covered loans they originate and purchase and 
applications that do not result in originations. For covered loans 
purchased by a financial institution, lien status is determined by 
reference to the best information readily available to the financial 
institution at the time of purchase. For covered loans that a 
financial institution originates and applications that do not result 
in originations, lien status is determined by reference to the best 
information readily available to the financial institution at the 
time final action is taken and to the financial institution's own 
procedures. Thus, financial institutions may rely on the title 
search they routinely perform as part of their underwriting 
procedures--for example, for home purchase loans. Regulation C does 
not require financial institutions to perform title searches solely 
to comply with HMDA reporting requirements. Financial institutions 
may rely on other information that is readily available to them at 
the time final action is taken and that they reasonably believe is 
accurate, such as the applicant's statement on the application or 
the applicant's credit report. If an application does not result in 
an origination and the best information readily available to the 
financial institution at the time final action is taken indicates 
that there is a mortgage on the property that would not have been 
paid off as part of the transaction, but the financial institution 
is not able to determine, based on the best information readily 
available to it, the exact lien priority of the loan applied for, 
the financial institution complies with Sec.  1003.4(a)(14) by 
reporting that the property would have been secured by a second 
lien.
    ii. Financial institutions may also consider their established 
procedures when determining lien status for applications that do not 
result in originations. For example, an applicant applies to a 
financial institution to refinance a $100,000 first mortgage; the 
applicant also has a home-equity line of credit for $20,000. If the 
financial institution's practice in such a case is to ensure that it 
will have first-lien position--through a subordination agreement 
with the holder of the mortgage on the home-equity line of credit--
then the financial institution should report the application as an 
application for a first-lien covered loan.
    2. Multiple properties. See comment 4(a)(9)-2 regarding 
transactions involving multiple properties with more than one 
property taken as security.
    Paragraph 4(a)(15).
    1. Credit score--relied on. Except for purchased covered loans, 
Sec.  1003.4(a)(15) requires a financial institution to report the 
credit score or scores relied on in making the credit decision and 
information about the scoring model used to generate each score. A 
financial institution relies on a credit score in making the credit 
decision if the credit score was a factor in the credit decision 
even if it was not a dispositive factor. For example, if a credit 
score is one of multiple factors in a financial institution's credit 
decision, the financial institution has relied on the credit score 
even if the financial institution denies the application because one 
or more underwriting requirements other than the credit score are 
not satisfied.
    2. Credit score--multiple credit scores. When a financial 
institution obtains or creates two or more credit scores for a 
single applicant or borrower but relies on only one score in making 
the credit decision (for example, by relying on the lowest, highest, 
most recent, or average of all of the scores), the financial 
institution complies with Sec.  1003.4(a)(15) by reporting that 
credit score and information about the scoring model used. When a 
financial institution obtains or creates two or more credit scores 
for an applicant or borrower and relies on multiple scores for the 
applicant or borrower in making the credit decision (for example, by 
relying on a scoring grid that considers each of the scores obtained 
or created for the applicant or borrower without combining the 
scores into a composite score), Sec.  1003.4(a)(15) requires the 
financial institution to report one of the credit scores for the 
borrower or applicant that was relied on in making the credit 
decision. In choosing which credit score to report in this 
circumstance, a financial institution need not use the same approach 
for its entire HMDA submission, but it should be generally 
consistent (such as by routinely using one approach within a 
particular division of the institution or for a category of covered 
loans). In instances such as these, the financial institution should 
report the name and version of the credit scoring model for the 
score reported.
    3. Credit score--multiple applicants or borrowers. In a 
transaction involving two or more applicants or borrowers for which 
the financial institution relies on a single credit score in making 
the credit decision for the transaction, the institution complies 
with Sec.  1003.4(a)(15) by reporting that credit score. Otherwise, 
a financial institution complies with Sec.  1003.4(a)(15) by 
reporting a credit score for the applicant or borrower that it 
relied on in making the credit decision, if any, and a credit score 
for the first co-applicant or co-borrower that it relied on in 
making the credit decision, if any. To illustrate, assume a 
transaction involves one applicant and one co-applicant and that the 
financial institution obtains or creates two credit scores for the 
applicant and two credit scores for the co-applicant. Assume further 
that the financial institution relies on the lowest, highest, most 
recent, or average of all of the credit scores obtained or created 
to make the credit decision for the transaction. The financial 
institution complies with Sec.  1003.4(a)(15) by reporting that 
credit score and information about the scoring model used. 
Alternatively, assume a transaction involves one applicant and one 
co-applicant and that the financial institution obtains or creates 
three credit scores for the applicant and three credit scores for 
the co-applicant. Assume further that the financial institution 
relies on the middle credit score for the applicant and the middle 
credit score for the co-applicant to make the credit decision for 
the transaction. The financial institution complies with Sec.  
1003.4(a)(15) by reporting both the middle score for the applicant 
and the middle score for the co-applicant.
    4. No credit decision or credit decision made without reliance 
on a credit score. If a file was closed for incompleteness or the 
application was withdrawn before a credit decision was made, the 
financial institution complies with Sec.  1003.4(a)(15) by reporting 
not applicable. If a financial institution makes a credit decision 
without relying on a credit score for the applicant or borrower, the 
financial institution complies with Sec.  1003.4(a)(15) by reporting 
not applicable.
    Paragraph 4(a)(16).
    1. Reason(s) for denial--general. A financial institution 
complies with Sec.  1003.4(a)(16) by reporting the principal 
reason(s) it denied the application, indicating up to three reasons. 
The reasons reported must be specific and accurately describe the 
principal reasons the financial institution denied the application.
    2. Reason(s) for denial--other reason(s). When a principal 
reason a financial institution denied the application is not 
provided on the list of denial reasons in appendix A, a financial 
institution complies with Sec.  1003.4(a)(16) by entering ``Other'' 
and reporting the principal reason(s) it denied the application. If 
a financial institution chooses to provide the applicant the 
reason(s) it denied the application using the model form contained 
in appendix C to Regulation B (Form C-1, Sample Notice of Action 
Taken

[[Page 51877]]

and Statement of Reasons) or a similar form, the financial 
institution complies with Sec.  1003.4(a)(16) by entering the 
``Other'' reason(s) that were specified on the form by the financial 
institution. If a financial institution chooses to provide a 
disclosure of the applicant's right to a statement of specific 
reasons using the model form contained in appendix C to Regulation B 
(Form C-5, Sample Disclosure of Right to Request Specific Reasons 
for Credit Denial) or a similar form, or chooses to provide the 
denial reason(s) orally under Regulation B, 12 CFR 1002.9(a)(2)(ii), 
the financial institution complies with Sec.  1003.4(a)(16) by 
entering the principal reason(s) it denied the application.
    Paragraph 4(a)(21).
    1. General. Section 1003.4(a)(21) requires a financial 
institution to identify the interest rate applicable to the covered 
loan at closing or account opening, as applicable. For covered loans 
subject to the disclosure requirements of Regulation Z, 12 CFR 
1026.38, a financial institution complies with Sec.  1003.4(a)(21) 
by identifying the interest rate as the rate disclosed pursuant to 
Regulation Z, 12 CFR 1026.37(b)(2). For an adjustable-rate covered 
loan subject to the disclosure requirements of Regulation Z, 12 CFR 
1026.38, if the interest rate at closing is not known, a financial 
institution complies with Sec.  1003.4(a)(21) by identifying the 
fully-indexed rate, which, for purposes of Sec.  1003.4(a)(21), 
means the interest rate calculated using the index value and margin 
at the time of closing, pursuant to Regulation Z, 12 CFR 
1026.37(b)(2).
    Paragraph 4(a)(23).
    1. General. For covered loans that are not reverse mortgages, 
Sec.  1003.4(a)(23) requires a financial institution to report the 
ratio of the applicant's or borrower's total monthly debt to total 
monthly income (DTI ratio) relied on in making the credit decision. 
For example, if a financial institution calculated the applicant's 
or borrower's DTI ratio twice--once according to the financial 
institution's own requirements and once according to the 
requirements of a secondary market investor--and the financial 
institution relied on the DTI ratio calculated according to the 
secondary market investor's requirements in making the credit 
decision, Sec.  1003.4(a)(23) requires the financial institution to 
report the debt-to-income ratio calculated according to the 
requirements of the secondary market investor.
    2. Transactions for which a debt-to-income ratio is one of 
multiple factors. If a financial institution relies on a set of 
underwriting requirements in making a credit decision, and the 
requirements include the ratio of the applicant's or borrower's 
total monthly debt to total monthly income (DTI ratio) as one of 
multiple factors, Sec.  1003.4(a)(23) requires the financial 
institution to report the DTI ratio considered as part of the set of 
underwriting requirements relied on by the financial institution. 
For example, if a financial institution relies on a set of 
underwriting requirements in making a credit decision, the 
requirements include the applicant's or borrower's DTI ratio as one 
of multiple factors, and the financial institution approves the 
application, the financial institution complies with Sec.  
1003.4(a)(23) by reporting the DTI ratio considered as part of the 
set of underwriting requirements. Similarly, if a financial 
institution relies on a set of underwriting requirements in making a 
credit decision, the requirements include the applicant's or 
borrower's DTI ratio as one of multiple factors, and the financial 
institution denies the application because an underwriting 
requirement other than the DTI ratio requirement is not satisfied, 
the financial institution complies with Sec.  1003.4(a)(23) by 
reporting the DTI ratio considered as part of the set of 
underwriting requirements.
    3. Transactions for which no credit decision was made. If a file 
was closed for incompleteness, or if an application was withdrawn 
before a credit decision was made, a financial institution complies 
with Sec.  1003.4(a)(23) by reporting that no credit decision was 
made, even if the financial institution had calculated the ratio of 
the applicant's total monthly debt to total monthly income (DTI 
ratio). For example, if a file is incomplete and is so reported in 
accordance with Sec.  1003.4(a)(8), the financial institution 
complies with Sec.  1003.4(a)(23) by reporting that no credit 
decision was made, even if the financial institution had calculated 
the applicant's DTI ratio. Similarly, if an application was 
withdrawn by the applicant before a credit decision was made, the 
financial institution complies with Sec.  1003.4(a)(23) by reporting 
that no credit decision was made, even if the financial institution 
had calculated the applicant's DTI ratio.
    4. Transactions for which no debt-to-income ratio is relied on. 
Section 1003.4(a)(23) does not require a financial institution to 
calculate the ratio of an applicant's or borrower's total monthly 
debt to total monthly income (DTI ratio), nor does it require a 
financial institution to rely on an applicant's or borrower's DTI 
ratio in making a credit decision. If a financial institution makes 
a credit decision without relying on the applicant's or borrower's 
DTI ratio, the financial institution complies with Sec.  
1003.4(a)(23) by reporting that no DTI ratio was relied on in 
connection with the credit decision.
    Paragraph 4(a)(24).
    1. General. Section 1003.4(a)(24) requires a financial 
institution to report the ratio of the total amount of debt secured 
by the property to the property value identified under Sec.  
1003.4(a)(28). If a financial institution makes a credit decision 
without calculating the ratio of the total amount of debt secured by 
the property to the value of the property, the financial institution 
complies with Sec.  1003.4(a)(24) by reporting that this ratio was 
not calculated in connection with the credit decision.
    2. Calculation for transactions that are home-equity lines of 
credit. For home-equity lines of credit, as defined under Sec.  
1003.2(h), Sec.  1003.4(a)(24)(i) requires a financial institution 
to calculate the ratio of the total amount of debt secured by the 
property to the value of the property by including the full amount 
of any home-equity line of credit, whether drawn or undrawn. For 
example, assume that an applicant applies for a home-equity line of 
credit to be secured by a subordinate lien on the property, where 
the initial draw amount will be $10,000 and the full amount of 
credit available under the line of credit will be $20,000. Assume 
further that a home-equity line of credit with an amount outstanding 
of $23,000, and in which the full amount of credit available under 
the line of credit is $25,000, is secured by a first lien on the 
property; that a loan with a $10,000 unpaid principal balance that 
is not a home-equity line of credit is secured by a subordinate-lien 
on the property; and that no other debts are secured by the 
property. The financial institution complies with Sec.  
1003.4(a)(24)(i) by dividing $55,000, representing the $45,000 
amount of credit that will be available to the applicant under the 
home-equity lines of credit plus the $10,000 unpaid principal 
balance of the subordinate-lien loan, by the value of the property 
identified under Sec.  1003.4(a)(28).
    3. Calculation for transactions that are not home-equity lines 
of credit. For transactions that are not home-equity lines of 
credit, as defined under Sec.  1003.2(h), Sec.  1003.4(a)(24)(ii) 
requires a financial institution to calculate the ratio of the total 
amount of debt secured by the property to the value of the property 
by including the amounts outstanding under home-equity lines of 
credit secured by the property. For example, assume that an 
applicant applies for a $10,000 loan that is not a home-equity line 
of credit to be secured by a subordinate lien on the property. 
Assume further that a home-equity line of credit with an amount 
outstanding of $10,000, and in which the full amount of credit 
available under the line of credit is $20,000, is secured by a 
subordinate lien on the property; that a home-equity line of credit 
with an amount outstanding of $23,000, and in which the full amount 
of credit available under the line of credit is $25,000, is secured 
by a first lien on the property; and that no other debts are secured 
by the property. The financial institution complies with Sec.  
1003.4(a)(24)(ii) by dividing $43,000, representing the $33,000 
amount of credit outstanding under the home-equity lines of credit 
plus the $10,000 subordinate-lien loan for which the applicant is 
applying, by the value of the property identified under Sec.  
1003.4(a)(28).
    Paragraph 4(a)(25).
    1. Amortization and maturity. For a fully amortizing covered 
loan, the number of months after which the legal obligation matures 
is the number of months in the amortization schedule, ending with 
the final payment. Some covered loans do not fully amortize during 
the maturity term, such as covered loans with a balloon payment; 
such loans should still be reported using the maturity term rather 
than the amortization term, even in the case of covered loans that 
mature before fully amortizing but have reset options. For example, 
a 30-year fully amortizing covered loan would be reported with a 
term of ``360,'' while a five year balloon covered loan would be 
reported with a loan term of ``60.''
    2. Non-monthly repayment periods. If a covered loan or 
application includes a schedule with repayment periods measured in a 
unit of time other than months, the financial institution should 
report the

[[Page 51878]]

covered loan or application term using an equivalent number of whole 
months without regard for any remainder.
    Paragraph 4(a)(26).
    1. Types of introductory rates. Section 1003.4(a)(26) requires a 
financial institution to report the number of months from loan 
origination until the first date the interest rate may change. For 
example, assume a home-equity line of credit contains an 
introductory or ``teaser'' interest rate for two months after the 
date of account opening, after which the interest rate may adjust. 
In this example, the financial institution complies with Sec.  
1003.4(a)(26) by reporting the number of months as ``2.'' Section 
1003.4(a)(26) requires a financial institution to report the number 
of months based on when the first interest rate adjustment may 
occur, even if an interest rate adjustment is not required to occur, 
or if the rates that will apply or the periods for which they will 
apply, are not known at loan origination. For example, if a closed-
end mortgage loan with a 30-year term is an adjustable rate product 
with an introductory interest rate for the first 60 months, after 
which the interest rate is permitted to vary, but not required to 
vary, according to the terms of an index rate, the financial 
institution complies with Sec.  1003.4(a)(26) by reporting the 
number of months as ``60.'' Similarly, if a closed-end mortgage loan 
with a 30-year term is a step rate product with an introductory 
interest rate for the first 24 months, after which the interest rate 
will increase to a different known interest rate for the next 36 
months, the financial institution complies with Sec.  1003.4(a)(26) 
by reporting the number of months as ``24.''
    2. Preferred rates. Section 1003.4(a)(26) does not requiring 
reporting of introductory interest rate periods based on preferred 
rates unless the terms of the legal obligation provide that the 
preferred rate will expire at a defined future date. Preferred rates 
include terms of the legal obligation which provide that the initial 
underlying rate is fixed but will increase upon the occurrence of 
some future event, such as an employee leaving the employ of the 
financial institution, the borrower closing an existing deposit 
account with the financial institution, or the borrower revoking an 
election to make automated payments.
    Paragraph 4(a)(27).
    1. General. Section 1003.4(a)(27) requires reporting of 
contractual features that would allow payments other than fully 
amortizing payments. Section 1003.4(a)(27) defines the contractual 
features by reference to Regulation Z, 12 CFR part 1026, but without 
regard to whether the covered loan is credit for personal, family, 
or household purposes, without regard to whether the person to whom 
credit is extended is a consumer, without regard to whether the 
property is a dwelling, and without regard to whether the person 
extending credit is a creditor, as those terms are used in 
Regulation Z. For example, assume that a financial institution 
originates a business-purpose transaction pursuant to Regulation Z, 
12 CFR 1026.3(a)(1), to finance a multifamily dwelling that is not a 
dwelling under Regulation Z, 12 CFR 1026.2(a)(19), but that 
qualifies as a covered loan pursuant to Sec.  1003.2(e). The 
transaction is secured by a lien on a dwelling pursuant to Sec.  
1003.2(f) and has a balloon payment as defined by Regulation Z, 12 
CFR 1026.18(s)(5)(i), such as a home purchase loan for a multifamily 
dwelling that has a balloon payment at the end of the loan term. In 
this example, the financial institution should report the business-
purpose transaction as having a balloon payment under Sec.  
1003.4(a)(27)(i), assuming the other requirements of this part are 
met. Aside from these distinctions, financial institutions may rely 
on the definitions and related commentary provided in the 
appropriate sections of Regulation Z referenced in Sec.  
1003.4(a)(27) of this part and in determining whether the 
contractual feature should be reported.
    Paragraph 4(a)(28).
    1. Property value relied on. A financial institution reports the 
property value relied on in making the credit decision. For example, 
if the institution relies on an appraisal or other valuation for the 
property in calculating the loan-to-value ratio, it reports that 
value; if the institution relies on the purchase price of the 
property in calculating the loan-to-value ratio, it reports that 
value.
    2. Multiple property values. When a financial institution 
obtains two or more valuations of the property securing or proposed 
to secure the covered loan, the financial institution complies with 
Sec.  1003.4(a)(28) by reporting the value relied on in making the 
credit decision. For example, when a financial institution obtains 
two appraisals or other valuations with different values for the 
property, it reports the value relied on in making the credit 
decision.
    Paragraph 4(a)(29).
    1. Multiple properties. See comment 4(a)(9)-2 regarding 
transactions involving multiple properties with more than one 
property taken as security.
    Paragraph 4(a)(30).
    1. Indirect land ownership. Indirect land ownership can occur 
when the applicant is or will be a member of a resident-owned 
community structured as a housing cooperative in which the occupants 
own an entity that holds the underlying land of the manufactured 
home community. In such communities, the applicant may still pay 
rent for the lot on which his or her manufactured home is or will be 
located and have a lease, but the property interest type for such an 
arrangement should be reported as indirect ownership if the 
applicant is or will be a member of the cooperative that owns the 
underlying land of the manufactured home. If an applicant resides or 
will reside in such a community but is not a member, the property 
interest type should be reported as a paid leasehold.
    2. Leasehold interest. A leasehold interest could be formalized 
in a lease with a defined term and specified rent payments, or could 
arise as a tenancy at will through permission of a land owner 
without any written, formal arrangement. For example, assume a 
borrower will locate the manufactured home in a manufactured home 
park, has a written lease for a lot in that park, and the lease 
specifies rent payments. In this example, a financial institution 
complies with Sec.  1003.4(a)(30) by reporting a paid leasehold. 
However, if instead the borrower will locate the manufactured home 
on land owned by a family member without a written lease and with no 
agreement as to rent payments, a financial institution complies with 
Sec.  1003.4(a)(30) by reporting an unpaid leasehold.
    3. Multiple properties. See comment 4(a)(9)-2 regarding 
transactions involving multiple properties with more than one 
property taken as security.
    Paragraph 4(a)(31).
    1. Multiple properties and multifamily dwelling. Comments 
4(a)(9)-2 and -3 explain that a financial institution may elect to 
report a single covered loan or application in a single or multiple 
entries if the covered loan or application is secured by or, in the 
case of an application, proposed to be secured by multiple 
properties or a multifamily dwelling with more than one postal 
address. Regardless of whether the institution reports the loan in a 
single or multiple entries, an institution reports the information 
required by Sec.  1003.4(a)(31) for all of the property or 
properties securing or, in the case of an application, proposed to 
secure the covered loan. See comments 2(f)-1 and 4(a)(9)-2. For 
example, assume a financial institution originated a covered loan 
secured by a multifamily dwelling, comprised of two 10-unit 
apartment buildings, each with a different postal address. If the 
financial institution elects to report the loan in two entries, 
reporting the information required for Sec.  1003.4(a)(9) for each 
of the two apartment buildings, the financial institution reports, 
as required by Sec.  1003.4(a)(31), 20 individual dwelling units in 
each of the two entries. The financial institution also reports, as 
required by Sec.  1003.4(a)(31), 20 individual dwelling units, if 
the financial institution elects to report the loan in a single 
entry by reporting the information required for Sec.  1003.4(a)(9) 
for only one of the two buildings.
    Paragraph 4(a)(32).
    1. Affordable housing income restrictions. For purposes of Sec.  
1003.4(a)(32), affordable housing income-restricted units are 
individual dwelling units that have restrictions based on the income 
level of occupants. Such income levels are frequently expressed as a 
percentage of area median income by household size as established by 
the U.S. Department of Housing and Urban Development or another 
agency responsible for implementing the applicable affordable 
housing program. Such restrictions are frequently part of compliance 
with programs that provide public funds, special tax treatment, or 
density bonuses to encourage development or preservation of 
affordable housing. Rent control or rent stabilization laws, and the 
acceptance by the owner or manager of a multifamily dwelling of 
Housing Choice Vouchers (24 CFR part 982) or other similar forms of 
portable housing assistance that are tied to an occupant and not an 
individual dwelling unit are not affordable housing income-
restricted dwelling units for purposes of Sec.  1003.4(a)(32).
    2. Federal affordable housing sources. Examples of Federal 
programs and funding

[[Page 51879]]

sources that may result in individual dwelling units that are 
reportable under Sec.  1003.4(a)(32) include, but are not limited 
to:
    i. Affordable housing programs pursuant to Section 8 of the 
United States Housing Act of 1937 (42 U.S.C. 1437f);
    ii. Public housing (42 U.S.C. 1437a(b)(6));
    iii. The HOME Investment Partnerships program (24 CFR part 92);
    iv. The Community Development Block Grant program (24 CFR part 
570);
    v. Multifamily tax subsidy project funding through tax-exempt 
bonds or tax credits (26 U.S.C. 42; 26 U.S.C. 142(d));
    vi. Project-based vouchers (24 CFR part 983);
    vii. Federal Home Loan Bank affordable housing program funding 
(12 CFR part 1291); and
    viii. Rural Housing Service multifamily housing loans and grants 
(7 CFR part 3560).
    3. State and local government affordable housing sources. 
Examples of State and local sources that may result in individual 
dwelling units that are reportable under Sec.  1003.4(a)(32) 
include, but are not limited to: State or local administration of 
Federal funds or programs; State or local funding programs for 
affordable housing or rental assistance, including programs operated 
by independent public authorities; inclusionary zoning laws; and tax 
abatement or tax increment financing contingent on affordable 
housing requirements.
    4. Multiple properties and multifamily dwelling. Comments 
4(a)(9)-2 and -3 explain that a financial institution may elect to 
report a single covered loan or application in a single or multiple 
entries if the covered loan or application is secured by or, in the 
case of an application, proposed to be secured by multiple 
properties or a multifamily dwelling with more than one postal 
address. Regardless of whether the institution reports the loan in a 
single or multiple entries, an institution reports the information 
required by Sec.  1003.4(a)(32) for all of the property or 
properties securing or, in the case of an application, proposed to 
secure the covered loan. See comments 2(f)-1 and 4(a)(9)-2. For 
example, a financial institution originated a covered loan secured 
by a multifamily dwelling, comprised of two 50-unit apartment 
buildings that each contain 10 income-restricted individual dwelling 
units, each with a different postal address. If the financial 
institution elects to report the loan in two entries, reporting the 
information required for Sec.  1003.4(a)(9) for each of the two 
apartment buildings, the financial institution reports, as required 
by Sec.  1003.4(a)(32), 20 income-restricted individual dwelling 
units in each of the two entries. The financial institution also 
reports, as required by Sec.  1003.4(a)(32), 20 income-restricted 
individual dwelling units, if the financial institution elects to 
report the loan in a single entry by reporting the information 
required for Sec.  1003.4(a)(9) for only one of the two buildings.
    Paragraph 4(a)(33).
    1. Direct submission. An application is submitted directly to 
the financial institution if the institution receives the 
application directly from the applicant or borrower. For example, if 
an applicant submits an application through the financial 
institution's Web site, the application is submitted directly to the 
institution. An application is not submitted directly to an 
institution if the institution does not receive the application 
directly from the applicant or borrower. For example, if an 
applicant completes an application over the telephone with a broker 
or correspondent and the broker or correspondent forwards the 
application to the institution for approval, the institution does 
not receive the application directly from the applicant or borrower. 
For example, assume that an applicant submits an application for a 
covered loan to a correspondent lender that approves the 
application, originates the covered loan in its name, and sells the 
covered loan to another financial institution. The correspondent 
reports the covered loan as an origination and indicates that it 
received the application directly from the applicant. The purchasing 
financial institution reports the loan as a purchase, and uses the 
code for ``not applicable'' for the information required by Sec.  
1003.4(a)(33).
    2. Initially payable. Section 1003.4(a)(33) requires financial 
institutions to report whether the obligation arising from a covered 
loan was or, in the case of an application, would have been 
initially payable to the institution. An obligation is initially 
payable to the institution if, for example, the loan closed in the 
institution's name or if the institution meets the definition of 
creditor in Regulation Z, 12 CFR 1026.2(a)(17), with respect to the 
transaction at issue. Conversely, if, for example, a covered loan 
closed in the name of another financial institution, such as a 
correspondent lender, the covered loan was not initially payable to 
the institution.
    3. Agents. If a financial institution is reporting the credit 
decision made by its third party agent consistent with comment 4(a)-
5, the agent is not considered the financial institution for the 
purposes of Sec.  1003.4(a)(33). For example, assume that an 
applicant submitted an application to Financial Institution A, and 
Financial Institution A made the credit decision acting as Financial 
Institution B's agent under State law. A covered loan was originated 
and closed in Financial Institution A's name. Financial Institution 
B purchased the loan. Financial Institution B reports the 
origination and not the purchase, and indicates that the application 
was not submitted directly to the financial institution and that the 
transaction was not initially payable to the financial institution.
    Paragraph 4(a)(34).
    1. NMLSR ID. Section 1003.4(a)(34) requires a financial 
institution to report the Nationwide Mortgage Licensing System and 
Registry unique identifier (NMLSR ID) for the mortgage loan 
originator, as defined in Regulation G, 12 CFR 1007.102, or 
Regulation H, 12 CFR 1008.23, as applicable. The NMLSR ID is a 
unique number or other identifier generally assigned to individuals 
registered or licensed through NMLSR to provide loan originating 
services. For more information, see the Secure and Fair Enforcement 
for Mortgage Licensing Act of 2008, title V of the Housing and 
Economic Recovery Act of 2008 (S.A.F.E. Act), 12 U.S.C. 5101 et 
seq., and its implementing regulations (12 CFR part 1007 and 12 CFR 
part 1008).
    2. Mortgage loan originator without NMLSR ID. An NMLSR ID for 
the mortgage loan originator is not required by Sec.  1003.4(a)(34) 
to be reported by a financial institution if the mortgage loan 
originator is not required to obtain and has not been assigned an 
NMLSR ID. For example, certain individual mortgage loan originators 
may not be required to obtain an NMLSR ID for the particular 
transaction being reported by the financial institution, such as a 
commercial loan. However, some mortgage loan originators may have 
obtained an NMLSR ID even if they are not required to obtain one for 
that particular transaction. If a mortgage loan originator has been 
assigned an NMLSR ID, a financial institution complies with Sec.  
1003.4(a)(34) by reporting the mortgage loan originator's NMLSR ID 
regardless of whether the mortgage loan originator is required to 
obtain an NMLSR ID for the particular transaction being reported by 
the financial institution. In the event that the mortgage loan 
originator is not required to obtain and has not been assigned an 
NMLSR ID, a financial institution complies with Sec.  1003.4(a)(34) 
by reporting ``NA'' for not applicable.
    3. Multiple mortgage loan originators. If more than one 
individual meets the definition of a mortgage loan originator, as 
defined in Regulation G, 12 CFR 1007.102, or Regulation H, 12 CFR 
1008.23, for a covered loan or application, a financial institution 
complies with Sec.  1003.4(a)(34) by reporting the NMLSR ID of the 
individual mortgage loan originator with primary responsibility for 
the transaction. A financial institution that establishes and 
follows a reasonable, written policy for determining which 
individual mortgage loan originator has primary responsibility for 
the reported transaction complies with Sec.  1003.4(a)(34).
    Paragraph 4(a)(35).
    1. AUS recommendation--considered in underwriting. Except for 
purchased covered loans, Sec.  1003.4(a)(35) requires a financial 
institution to report the recommendation generated by the automated 
underwriting system (AUS) used to evaluate the application. A 
financial institution complies with Sec.  1003.4(a)(35) by reporting 
an AUS recommendation if the recommendation was considered by the 
financial institution in its underwriting process. For example, when 
a financial institution takes into account a combination of an AUS 
recommendation and manual underwriting in making the credit 
decision, the financial institution has considered the AUS 
recommendation in its underwriting process and reports the AUS 
recommendation.
    2. Reporting AUS data. i. Multiple systems. When a financial 
institution uses more than one AUS to evaluate an application, the 
financial institution complies with Sec.  1003.4(a)(35) by reporting 
the name of the AUS developed by a securitizer, Federal government 
insurer, or guarantor that the financial institution used closest in 
time to the credit decision. For example, when a

[[Page 51880]]

financial institution processes an application through the AUS of 
two different government-sponsored enterprises, such as the Federal 
National Mortgage Association (Fannie Mae) or the Federal Home Loan 
Mortgage Corporation (Freddie Mac), the financial institution 
complies with Sec.  1003.4(a)(35) by reporting the name of the AUS 
that was used closest in time to the credit decision. If a financial 
institution processes an application through multiple AUSs at the 
same time, the financial institution complies with Sec.  
1003.4(a)(35) by reporting the name of the AUS that generated the 
recommendation that was a factor in the credit decision.
    ii. Multiple recommendations. When a financial institution 
obtains two or more recommendations for an applicant or borrower 
that are generated by a single or multiple AUSs developed by a 
securitizer, Federal government insurer, or guarantor, the financial 
institution complies with Sec.  1003.4(a)(35) by reporting the AUS 
recommendation generated closest in time to the credit decision. For 
example, when a financial institution receives a recommendation from 
an AUS that requires the financial institution to manually 
underwrite the loan, but in addition the financial institution 
subsequently processes the application through a different AUS that 
also generates a recommendation, the financial institution complies 
with Sec.  1003.4(a)(35) by reporting the AUS recommendation 
generated closest in time to the credit decision. If a financial 
institution obtains multiple AUS recommendations at the same time, 
the financial institution complies with Sec.  1003.4(a)(35) by 
reporting the AUS recommendation that was a factor in the credit 
decision.
    3. No credit decision or AUS not considered in underwriting. If 
a financial institution does not use an AUS developed by a 
securitizer, Federal government insurer, or guarantor to evaluate 
the application, the financial institution complies with Sec.  
1003.4(a)(35) by reporting ``not applicable.'' For example, if a 
financial institution only manually underwrites an application and 
does not consider an AUS recommendation in its underwriting process, 
the financial institution complies with Sec.  1003.4(a)(35) by 
reporting ``not applicable.'' Also, if the file was closed for 
incompleteness or the application was withdrawn before a credit 
decision was made, the financial institution complies with Sec.  
1003.4(a)(35) by reporting ``not applicable.''
    Paragraph 4(a)(38).
    1. General. Section 1003.4(a)(38) requires a financial 
institution to identify whether the covered loan is subject to the 
ability-to-repay provisions of Regulation Z, 12 CFR 1026.43, and 
whether the covered loan is a qualified mortgage, as described under 
Regulation Z, 12 CFR 1026.43(e) or (f). Financial institutions may 
rely on 12 CFR 1026.43, the related commentary in supplement I to 
part 1026, and appendix Q to part 1026 in determining whether a 
covered loan is a qualified mortgage. If a covered loan, as defined 
in Sec.  1003.2(e), is subject to 12 CFR 1026.43, but is not a 
qualified mortgage pursuant to 12 CFR 1026.43(e) or (f), Sec.  
1003.4(a)(38) requires a financial institution to identify the 
covered loan as a loan that is not a qualified mortgage. For 
example, if a covered loan, as defined in Sec.  1003.2(e), is 
subject to the requirements of 12 CFR 1026.43, but does not meet the 
criteria for the definition of qualified mortgage under Regulation Z 
12 CFR 1026.43(e)(2), (e)(4), (e)(5), or (f), the financial 
institution complies with Sec.  1003.4(a)(38) by identifying the 
covered loan as a loan that is not a qualified mortgage. If a 
covered loan, as defined in Sec.  1003.2(e), is not subject to 
paragraphs (c) through (f) of 12 CFR 1026.43, Sec.  1003.4(a)(38) 
requires the financial institution to identify the covered loan as a 
loan that is not subject to the reporting requirements of 12 CFR 
1026.43. For example, if a covered loan, such as a reverse mortgage, 
is not subject to paragraphs (c) through (f) of 12 CFR 1026.43, the 
financial institution complies with Sec.  1003.4(a)(38) by 
identifying the loan as not subject to the ability-to-repay 
provisions.
* * * * *

Section 1003.5--Disclosure and Reporting

    5(a) Reporting to agency.
    1. Quarterly reporting--coverage. Section 1003.5(a)(1)(ii) 
requires that a financial institution that reported at least 75,000 
covered loans, applications, and purchased covered loans, combined, 
for the preceding calendar year must submit on a quarterly basis the 
HMDA data required to be recorded on a loan application register 
pursuant to Sec.  1004.4(f). For example, if for calendar year one 
Financial Institution A reports 75,001 purchased covered loans, it 
must submit its data on a quarterly basis in calendar year two. 
Similarly, if for calendar year one Financial Institution A reports 
25,001 covered loans and 50,000 purchased covered loans, it must 
submit its data on a quarterly basis in calendar year two. If for 
calendar year two Financial Institution A reports a total of fewer 
than 75,000 covered loans, applications, and purchased covered 
loans, combined, it will return to submitting its data on a calendar 
year basis for calendar year three.
    2. Change in appropriate Federal agency. If the appropriate 
Federal agency for a financial institution changes (as a consequence 
of a merger or a change in the institution's charter, for example), 
the institution must submit its data to the Bureau or the new 
appropriate Federal agency beginning in the calendar year following 
the change or, for institutions reporting on a quarterly basis, in 
the quarter following the change.
    3. Subsidiaries. A financial institution is a subsidiary of a 
bank or savings association (for purposes of reporting HMDA data to 
the same agency as the parent) if the bank or savings association 
holds or controls an ownership interest in the institution that is 
greater than 50 percent. For purposes of Sec.  1003.5(a)(4), an 
entity that holds or controls an ownership interest in the financial 
institution that is greater than 50 percent should be listed as a 
parent company.
    4. Retention. A financial institution shall retain a copy of its 
complete loan application register for its records in either 
electronic or paper form.
    5. Quarterly reporting--retention. Section 1003.5(a)(1)(ii) 
requires that a financial institution that reports on a quarterly 
basis shall retain a copy of its complete loan application register 
for its records for at least three years. A complete loan 
application register reflects all data reported for a calendar year. 
A financial institution that reports data on a quarterly basis 
satisfies the retention requirement in Sec.  1003.5(a)(1)(ii) by 
retaining the data for the calendar year combined on one loan 
application register or on four quarterly loan application 
registers.
    5(b) Disclosure statement.
* * * * *
    2. Format of notice. An institution may make the notice required 
under Sec.  1003.5(b)(2) available in paper or electronic form.
    3. Notice--suggested text. A financial institution may use any 
text that meets the requirements of Sec.  1003.5(b)(2). The 
following language is suggested but is not required:

Home Mortgage Disclosure Act Notice

    The HMDA data about our residential mortgage lending are 
available online for review. The data show geographic distribution 
of loans and applications; ethnicity, race, sex, age, and income of 
applicants and borrowers; and information about loan approvals and 
denials. This data is available online at the Web sites of the 
Federal Financial Institutions Examination Council (www.ffiec.gov/hmda) and the Consumer Financial Protection Bureau 
(www.consumerfinance.gov).
    5(c) Public disclosure of modified loan application register.
* * * * *
    2. Loan amount. Before it makes available to the public its 
modified loan application register, a financial institution must 
round the loan amount for each covered loan, application, and 
purchased covered loan to the nearest thousand (round $500 up to the 
next $1,000). For example, a loan for $167,300 should be shown as 
167,000 and one for $15,500 shown as 16,000.
    3. Modified loan application register data. The modified loan 
application register is the loan application register reflecting all 
data reported for a calendar year, modified as described in Sec.  
1003.5(c)(1), whether the data were submitted on a quarterly or 
annual basis. A financial institution that submits its HMDA data on 
a quarterly basis must show on the modified loan application 
register all data reported for the calendar year, not just data 
reported for a particular quarter.
    5(e) Notice of availability.
    1. Posted notice--suggested text. A financial institution may 
use any text that meets the requirements of Sec.  1003.5(e). The 
Bureau or an appropriate Federal agency may provide HMDA posters 
that an institution can use to inform the public of the availability 
of its HMDA data, or an institution may create its own notice. The 
following language is suggested but is not required:

Home Mortgage Disclosure Act Notice

    The HMDA data about our residential mortgage lending are 
available for review. The data show geographic distribution of loans 
and applications; ethnicity, race, sex,

[[Page 51881]]

age, and income of applicants and borrowers; and information about 
loan approvals and denials. Inquire at this office about how to 
obtain our HMDA data. HMDA data for this and many other financial 
institutions are also available online. For more information, visit 
the Web site of the Federal Financial Institutions Examination 
Council (www.ffiec.gov/hmda) or the Consumer Financial Protection 
Bureau (www.consumerfinance.gov).

    Dated: July 23, 2014.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.

[FR Doc. 2014-18353 Filed 8-25-14; 11:15 am]
BILLING CODE 4810-AM-P