Home Mortgage Disclosure (Regulation C), 43088-43149 [2017-18284]

Agencies

• BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 82, Number 176 (Wednesday, September 13, 2017)]
[Rules and Regulations]
[Pages 43088-43149]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-18284]



[[Page 43087]]

Vol. 82

Wednesday,

No. 176

September 13, 2017

Part II





Bureau of Consumer Financial Protection





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12 CFR Part 1003





Home Mortgage Disclosure (Regulation C); Rule

Federal Register / Vol. 82 , No. 176 / Wednesday, September 13, 2017 
/ Rules and Regulations

[[Page 43088]]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1003

[Docket Nos. CFPB-2017-0010; CFPB-2017-0021]
RIN 3170-AA64; 3170-AA76


Home Mortgage Disclosure (Regulation C)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Final rule.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
amending Regulation C to make technical corrections to and to clarify 
certain requirements adopted by the Bureau's Home Mortgage Disclosure 
(Regulation C) final rule (2015 HMDA Final Rule), which was published 
in the Federal Register on October 28, 2015. The Bureau is also 
amending Regulation C to increase the threshold for collecting and 
reporting data about open-end lines of credit for a period of two years 
so that financial institutions originating fewer than 500 open-end 
lines of credit in either of the preceding two years would not be 
required to begin collecting such data until January 1, 2020. The 
Bureau also is adopting a new reporting exclusion.

DATES: This rule is effective on January 1, 2018, except that the 
amendments to Sec.  1003.5 in amendatory instruction 8, the amendments 
to Sec.  1003.6 in amendatory instruction 9, and the amendments to 
supplement I to part 1003 in amendatory instruction 10 are effective on 
January 1, 2019; and the amendments to Sec.  1003.2 in amendatory 
instruction 11, the amendments to Sec.  1003.3 in amendatory 
instruction 12, the amendments to Sec.  1003.5 in amendatory 
instruction 13, the amendments to Sec.  1003.6 in amendatory 
instruction 14, and the amendments to supplement I to part 1003 in 
amendatory instruction 15 are effective on January 1, 2020. See part VI 
for more information.

FOR FURTHER INFORMATION CONTACT: Shaakira Gold-Ramirez, Paralegal 
Specialist, Joseph Devlin, Angela Fox, Kathryn Lazarev, and Alexandra 
W. Reimelt, Counsels; and Terry J. Randall, Senior Counsel, Office of 
Regulations, at 202-435-7700 or https://www.consumerfinance.gov/policy-compliance/guidance/.

SUPPLEMENTARY INFORMATION: 

I. Summary of the Final Rule

    Regulation C implements the Home Mortgage Disclosure Act (HMDA), 12 
U.S.C. 2801 through 2810. For over four decades, HMDA has provided the 
public and public officials with information about mortgage lending 
activity within communities by requiring financial institutions to 
collect, report, and disclose certain data about their mortgage 
activities. The Dodd-Frank Wall Street Reform and Consumer Protection 
Act (Dodd-Frank Act) amended HMDA, transferring rulewriting authority 
to the Bureau and expanding the scope of information that must be 
collected, reported, and disclosed under HMDA, among other changes.\1\ 
In October 2015, the Bureau issued the 2015 HMDA Final Rule 
implementing the Dodd-Frank Act amendments to HMDA.\2\ The 2015 HMDA 
Final Rule modified the types of institutions and transactions subject 
to Regulation C, the types of data that institutions are required to 
collect, and the processes for reporting and disclosing the required 
data.\3\ In addition, the 2015 HMDA Final Rule established 
transactional thresholds that determine whether financial institutions 
are required to collect data on open-end lines of credit or closed-end 
mortgage loans. The closed-end threshold was set at 25 loans in each of 
the two preceding calendar years, and the open-end threshold was set at 
100 open-end lines of credit in each of the two preceding calendar 
years. Most of the 2015 HMDA Final Rule takes effect on January 1, 
2018.
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    \1\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 1376, section 2097-101 (2010).
    \2\ Home Mortgage Disclosure (Regulation C); 80 FR 66128 (Oct. 
28, 2015) (2015 HMDA Final Rule).
    \3\ Id. at 66129.
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    The Bureau has identified a number of areas in which implementation 
of the 2015 HMDA Final Rule could be facilitated through 
clarifications, technical corrections, or minor changes. On April 25, 
2017, the Bureau published a notice of proposed rulemaking (April 2017 
HMDA Proposal) that would make certain amendments to Regulation C to 
address those areas.\4\ Since issuing the 2015 HMDA Final Rule, the 
Bureau also has heard concerns that the open-end threshold at 100 
transactions is too low. On July 20, 2017, the Bureau published a 
proposal (July 2017 HMDA Proposal) to address the threshold for 
reporting open-end lines of credit.\5\ The Bureau is publishing final 
amendments to Regulation C pursuant to the April 2017 HMDA Proposal and 
the July 2017 HMDA Proposal.
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    \4\ Technical Corrections and Clarifying Amendments to the Home 
Mortgage Disclosure (Regulation C) October 2015 Final Rule; 82 FR 
19142 (Apr. 25, 2017) (April 2017 HMDA Proposal).
    \5\ Home Mortgage Disclosure (Regulation C) Temporary Increase 
in Institutional and Transactional Coverage Thresholds for Open-End 
Lines of Credit, 82 FR 33455 (July 20, 2017) (July 2017 HMDA 
Proposal).
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    This final rule temporarily increases the open-end threshold to 500 
or more open-end lines of credit for two years (calendar years 2018 and 
2019). In addition, the final rule corrects a drafting error by 
clarifying both the open-end and closed-end thresholds so that only 
financial institutions that meet the threshold for two years in a row 
are required to collect data in the following calendar years. With 
these amendments, financial institutions that originated between 100 
and 499 open-end lines of credit in either of the two preceding 
calendar years will not be required to begin collecting data on their 
open-end lending before January 1, 2020. This temporary increase in the 
open-end threshold will provide time for the Bureau to consider whether 
to initiate another rulemaking to address the appropriate level for the 
open-end threshold for data collected beginning January 1, 2020.
    The final rule establishes transition rules for two data points, 
loan purpose and the unique identifier for the loan originator. The 
transition rules require, in the case of loan purpose, or permit, in 
the case of the unique identifier for the loan originator, financial 
institutions to report not applicable for these data points when 
reporting certain loans that they purchased and that were originated 
before certain regulatory requirements took effect. The final rule also 
makes additional amendments to clarify certain key terms, such as 
multifamily dwelling, temporary financing, and automated underwriting 
system, and to create a new reporting exception for certain 
transactions associated with New York State consolidation, extension, 
and modification agreements.
    In addition, the 2017 HMDA Final Rule facilitates reporting the 
census tract of the property securing or, in the case of an 
application, proposed to secure a covered loan that is required to be 
reported by Regulation C. The Bureau plans to make available on its Web 
site a geocoding tool that financial institutions may use to identify 
the census tract in which a property is located. The final rule 
establishes that a financial institution would not violate Regulation C 
by reporting an incorrect census tract for a particular property if the 
financial institution obtained the incorrect census tract number from 
the geocoding tool on the Bureau's Web site, provided that the 
financial institution

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entered an accurate property address into the tool and the tool 
returned a census tract for the address entered.
    Finally, the final rule also makes certain technical corrections. 
These technical corrections include, for example, a change to the 
calculation of the check digit under Sec.  1003.4(a)(1)(i) and 
replacement of the word ``income'' with the correct word ``age'' in 
comment 4(a)(10)(ii)-3.

II. Background

    HMDA requires certain banks, savings associations, credit unions, 
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). When the 
statute was originally adopted, Congress stated the purposes of HMDA 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.\6\ Congress later expanded HMDA to require, among other 
things, financial institutions to report racial characteristics, 
gender, and income information on applicants and borrowers.\7\ 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 is recited with HMDA's other 
purposes in Regulation C.\8\
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    \6\ HMDA section 302(b), 12 U.S.C. 2801(b); see also 12 CFR 
1003.1(b)(1)(i) and (ii).
    \7\ 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).
    \8\ 54 FR 51356, 51357 (Dec. 15, 1989), codified at 12 CFR 
1003.1(b)(1).
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    In 2010, Congress enacted the Dodd-Frank Act, which amended HMDA 
and also transferred HMDA rulemaking authority and other functions from 
the Board to the Bureau.\9\ Among other changes, the Dodd-Frank Act 
expands the scope of information relating to mortgage applications and 
loans that must be collected, reported, and disclosed under HMDA. New 
data points specified in the Dodd-Frank Act 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, 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 
nonamortizing payments, the origination channel, and the credit scores 
of applicants and mortgagors.\10\ 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.\11\ The Dodd-Frank Act also provides the Bureau with the 
authority to require ``such other information as the Bureau may 
require.'' \12\ In addition, the Dodd-Frank Act mandated that the 
Bureau, in consultation with other appropriate agencies, develop 
regulations after notice and comment that (1) 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; (2) 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; (3) require disclosure of the 
class of the purchaser of such loans; (4) 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 (5) 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.\13\
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    \9\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, 124 Stat. 1376, sections 1022, 1061, and 1094 
(2010). Also, in 2010, the Board conducted public hearings on 
potential revisions to Regulation C.
    \10\ Dodd-Frank Act section 1094(3)(A), amending HMDA section 
304(b), 12 U.S.C. 2803(b).
    \11\ Id.
    \12\ Id.
    \13\ Dodd-Frank Act section 1094(3)(B), amending HMDA section 
304(h), 12 U.S.C. 2803(h).
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III. Summary of Rulemaking Process

    In October 2015, the Bureau issued the 2015 HMDA Final Rule, which 
implemented the Dodd-Frank Act amendments to HMDA.\14\ The 2015 HMDA 
Final Rule modifies the types of institutions and transactions subject 
to Regulation C, the types of data that institutions are required to 
collect, and the processes for reporting and disclosing the required 
data. Most of the provisions of the 2015 HMDA Final Rule will become 
effective on January 1, 2018.
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    \14\ 2015 HMDA Final Rule, 80 FR 66128 (Oct. 28, 2015).
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    The 2015 HMDA Final Rule requires some financial institutions to 
begin collecting data on certain dwelling-secured, open-end lines of 
credit, including home-equity lines of credit. Current Regulation C 
allows, but does not require, reporting of home-equity lines of 
credit.\15\ In amending Regulation C, the Bureau explained that it 
believed collection of data on these products was important because of 
the risks posed by these products to consumers and local markets and 
the lack of visibility into these products. The Bureau noted in the 
2015 HMDA Final Rule that overleverage due to open-end mortgage lending 
and defaults on open-end lines of credit contributed to the foreclosure 
crises that many communities experienced in the late 2000s.\16\ More 
generally, as the Bureau also noted in the 2015 HMDA Final Rule, open-
end lines of credit can increase borrowers' risk of losing their homes 
to foreclosure when property values decline.\17\ The Bureau concluded 
that including data on such lines within the HMDA dataset would help 
the public and public officials understand how financial institutions 
are meeting the housing needs of communities, would inform public 
officials identify areas for targeted investment, and would assist the 
public and public officials in identifying potential fair lending 
violations.\18\ For these and other reasons articulated in the 2015 
HMDA Final Rule, the Bureau decided to improve visibility into this key 
segment of the mortgage market by requiring reporting of open-end lines 
of credit.
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    \15\ 12 CFR 1003.4(c)(3).
    \16\ 2015 HMDA Final Rule, 80 FR 66128, 66160-61 (Oct. 28, 
2015).
    \17\ Id.
    \18\ Id. at 66160.
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    As noted in the July 2017 HMDA Proposal and in the 2015 HMDA Final 
Rule, in expanding coverage to include mandatory reporting of open-end 
lines of credit, the Bureau recognized that doing so would impose one-
time and ongoing operational costs on reporting institutions; that the 
one-time costs of modifying processes and systems and training staff to 
begin open-end line of credit reporting likely would impose significant 
costs on some institutions; and that institutions' ongoing reporting 
costs would increase as a function of

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their open-end lending volume.\19\ The Bureau sought to avoid imposing 
these costs on small institutions with limited open-end lending, where 
the benefits of reporting the data do not justify the costs of 
reporting.\20\ In seeking to draw such a line, the Bureau acknowledged 
that it was handicapped by the lack of available data concerning open-
end lending.\21\ This created challenges both in estimating the 
distribution of open-end origination volume across financial 
institutions and in estimating the one-time and ongoing costs that 
would be incurred by institutions of various sizes in collecting and 
reporting data on open-end lending.
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    \19\ Id. at 66161.
    \20\ Id. at 66149.
    \21\ Id.
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    Concerning open-end origination volume, the Bureau used multiple 
data sources, including credit union Call Reports, Call Reports for 
banks and thrifts, and data from the Bureau's Consumer Credit Panel to 
develop estimates for different potential thresholds in the 2015 HMDA 
Final Rule.\22\ The Bureau assumed that all of the depository 
institutions that were exempted from HMDA reporting under Regulation C 
because of their location or asset size would continue to be 
exempt.\23\ Concerning the remaining depositories, the Bureau developed 
the following estimates: \24\
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    \22\ Id. at 66261, 66275 n.477. As the Bureau explained, credit 
union Call Reports provide the number of originations of open-end 
lines of credit secured by real estate but exclude lines of credit 
with first-lien status and may include business loans that are 
excluded from reporting under the 2015 HMDA Final Rule. Id. at 66281 
n.489.
    \23\ Id. at 66281 n.489. The Bureau limited its estimate to 
depositories because it believes that most nondepositories do not 
originate open-end lines of credit. Id. at 66281.
    \24\ The first row in the chart, labeled ``Proposed,'' assumed 
that financial institutions would be required to report on their 
open-end lines of credit regardless of the number originated so long 
as the institution originated at least 25 closed-end mortgages 
during each of the prior two calendar years. This row reflects the 
impact of the rule that the Bureau had proposed. The remaining rows 
assume that reporting of open-end lines of credit would be required 
without regard to the number of closed-end loans originated and, 
instead, only if the financial institution originated the number of 
open-end lines of credit shown in the various rows. Id. at 66281.

           Table 8--Estimates of Depository Institution Coverage by Open-End Line of Credit Thresholds
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                                                                                  Number of reporting  financial
                                   Number of    Number of  open-                  institutions  that also report
  Potential open-end-line-of-      reporting      end  lines of   Percentage  of     closed-end mortgage loans
       credit threshold            financial    credit  (rounded      market     -------------------------------
                                 institutions    to nearest  ten      covered      Not a closed-    Closed-end
                                                    thousand)                      end reporter      reporter
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Proposed......................           4,146           910,000              94               0           4,146
25............................           1,770           900,000              93             103           1,667
50............................           1,155           870,000              91              55           1,100
100...........................             749           850,000              88              24             725
500...........................             231           730,000              76               3             228
1,000.........................             123           650,000              68               0             123
5,000.........................              25           440,000              46               0              25
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The Bureau noted that expansions or contractions in the number of 
financial institutions, or changes in product offerings and demands 
during implementation could alter the estimated impacts.\25\
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    \25\ Id. at 66275 n.477.
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    To estimate the one-time and ongoing costs of collecting and 
reporting data under HMDA in the 2015 HMDA Final Rule, the Bureau 
identified seven ``dimensions'' of compliance operations and used those 
to define three broadly representative financial institutions according 
to the overall level of complexity of their compliance operations: 
``tier 1'' (high-complexity); ``tier 2'' (moderate-complexity); and 
``tier 3'' (low-complexity).\26\ In estimating costs specific to 
collecting and reporting data for open-end lines of credit, the Bureau 
assumed that tier 1 institutions each originate more than 7,000 such 
lines of credit, that tier 2 institutions each originate between 200 
and 7,000 such lines of credit, and that tier 3 institutions each 
originate fewer than 200 such lines of credit.\27\ The Bureau then 
sought to estimate one-time and ongoing costs for the average-size 
institution in each tier.\28\
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    \26\ Id. at 66261. The seven factors were: 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. Id. at 66269.
    \27\ Id. at 66285.
    \28\ For purposes of calculating aggregate costs, the Bureau 
assumed that the average tier 1 institution received 30,000 
applications for open-end lines of credit; the average tier 2 
institution received 1,000 such applications; and the average tier 3 
institution received 150 such applications. Id. at 66286.
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    Concerning one-time costs, the Bureau recognized in the 2015 HMDA 
Final Rule that the one-time cost of reporting open-end lines of credit 
could be substantial because most financial institutions do not report 
open-end lines of credit currently and thus would have to develop 
completely new systems to begin reporting these data. As a result, 
there would be one-time costs to create processes and systems for open-
end lines of credit.\29\ However, for tier 3, low-complexity 
institutions, the Bureau believed that the additional one-time costs of 
open-end reporting would be relatively low because these institutions 
are less reliant on information technology systems for HMDA reporting 
and that they may process open-end lines of credit on the same system 
and in the same business unit as closed-end mortgage loans, so that 
their one-time costs would be derived mostly from new training and 
procedures adopted for the overall changes in the final rule, not 
distinct from costs related to changes in reporting of closed-end 
mortgage loans.\30\
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    \29\ Id. at 66264; see also id. at 66284-85.
    \30\ Id. at 66265; see also id. at 66284.
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    Concerning ongoing costs, the Bureau acknowledged that costs for 
open-end reporting vary by institutions due to many factors, such as 
size, operational structure, and product complexity, and that this 
variance exists on a continuum that was impossible to capture 
fully.\31\ At the same time, the Bureau stated it believed that the 
HMDA reporting process and ongoing operational cost structure for open-
end reporting would be fundamentally similar to closed-end 
reporting.\32\ Thus, using the ongoing cost estimates developed for 
closed-end reporting, the Bureau estimated that for the average tier 1 
institutions the ongoing operational costs would be

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$273,000 per year; for the average tier 2 institution $43,400 per year; 
and for the average tier 3 institution $8,600 per year.\33\ These 
translated into average costs per HMDA record of $9, $43, and $57 
respectively.\34\ Importantly, the Bureau acknowledged that, precisely 
because no good source of publicly available data exists concerning 
open-end lines of credit, it was difficult to predict the accuracy of 
the Bureau's cost estimates but also stated its belief that they were 
reasonably reliable.\35\
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    \31\ Id. at 66285.
    \32\ Id.
    \33\ Id. at 66286.
    \34\ Id.
    \35\ Id. at 66162.
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    Drawing on all of these estimates, the Bureau decided to establish 
an open-end threshold that would require institutions that originate 
100 or more open-end lines of credit to collect and report data. The 
Bureau estimated that this threshold would avoid imposing the burden of 
establishing open-end reporting on approximately 3,000 predominantly 
smaller-sized institutions with low-volume open-end lending \36\ and 
would require reporting by only 749 financial institutions, all but 24 
of which would also report data on their closed-end mortgage 
lending.\37\ The Bureau explained that it believed this threshold 
appropriately balanced the benefits and burdens of covering 
institutions based on their open-end mortgage lending.\38\
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    \36\ Id. The estimate of the number of institutions that would 
be excluded by the transaction coverage threshold was relative to 
the number that would have been covered under the Bureau's proposal 
that led to the 2015 HMDA Final Rule. Under that proposal, a 
financial institution would have been required to report its open-
end lines of credit if it had originated at least 25 closed-end 
mortgage loans in each of the preceding two years without regard to 
how many open-end lines of credit the institution originated. See 
Home Mortgage Disclosure (Regulation C), 79 FR 51732 (Aug. 29, 
2014).
    \37\ 2015 HMDA Final Rule, 80 FR 66128, 66281 (Oct. 28, 2015).
    \38\ Id. at 66162.
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    To effectuate this decision, the 2015 HMDA Final Rule amended 
Regulation C to define two discrete thresholds that were intended to 
work in tandem. First, the rule established an institutional coverage 
threshold that limits the definition of ``financial institution'' to 
include only those institutions that either originated at least 25 
covered closed-end mortgages in each of the preceding years or that 
originated at least 100 covered open-end lines of credit in each of the 
two preceding years.\39\ Second, the rule separately established a 
transactional coverage threshold for open-end lines of credit by 
providing that an open-end line of credit is an excluded transaction if 
the financial institution originated fewer than 100 open-end lines of 
credit in each of the two preceding calendar years.\40\
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    \39\ Revised Sec.  1003.2(g)(1)(v) and (g)(2)(ii). The 2015 HMDA 
Final Rule excludes certain transactions from the definition of 
covered loans and those excluded transactions do not count towards 
the institutional transaction threshold.
    \40\ Revised Sec.  1003.3(c)(12). As discussed below, the 
exclusion as adopted in the 2015 HMDA Final Rule was intended to 
apply if the financial institution originated fewer than 100 open-
end lines of credit in either of the two preceding calendar years; 
the current text of the rule was a drafting error that the Bureau is 
correcting with this notice. The 2015 HMDA Final Rule created a 
separate transactional coverage threshold for closed-end mortgages, 
treating those as excluded transactions if an institution originated 
fewer than 25 closed-end mortgage loans in each of the two preceding 
calendar years. Id. at Sec.  1003.3(c)(11). As discussed below, the 
Bureau is adopting a proposal to change the ``each'' in this text to 
``either.''
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April 2017 HMDA Proposal

    Since issuing the 2015 HMDA Final Rule, the Bureau has conducted 
outreach with financial institutions, HMDA vendors, and other 
interested parties. As part of these efforts and through its own 
analysis of the 2015 HMDA Final Rule, the Bureau identified certain 
technical errors in the Final Rule, potential ways to ease burden of 
reporting certain data requirements, and clarification of key terms 
that will facilitate compliance with Regulation C. On April 13, 2017, 
the Bureau issued the April 2017 HMDA Proposal, which was published in 
the Federal Register on April 25, 2017,\41\ addressing these issues.
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    \41\ April 2017 HMDA Proposal, 82 FR 19142 (Apr. 25, 2017).
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    The comment period for the April 2017 HMDA Proposal closed on May 
25, 2017. The Bureau received a total of 51 comments from financial 
institutions, financial trade associations, compliance and software 
vendors, consumer advocacy groups, and individuals. The Bureau has 
considered all the comments and discusses the responsive comments below 
and now issues this final rule with certain changes and adjustments, as 
described below. As discussed in a number of instances below, the 
Bureau received comments on topics related to the 2015 HMDA Final Rule, 
but not relevant to those topics the Bureau had raised in the April and 
July 2017 HMDA Proposals. The Bureau considered all the comments but, 
as discussed further below, in many instances, found that these 
comments did not raise points relevant to the Bureau's decisions raised 
in its proposals.

July 2017 HMDA Proposal

    Since the Bureau issued the 2015 HMDA Final Rule, many industry 
stakeholders have expressed concerns over the levels for the 
transactional coverage thresholds. Recent credit union Call Report 
data, coupled with the evidence as to the number of institutions that 
would be covered by the open-end threshold contained in the 2015 HMDA 
Final Rule, led the Bureau to seek comment to determine whether an 
adjustment to the threshold is appropriate. On July 14, 2017, the 
Bureau issued the July 2017 HMDA Proposal, which was published in the 
Federal Register on July 20, 2017.\42\ The proposal would have 
increased temporarily the open-end threshold for both institutional and 
transactional coverage so that institutions originating fewer than 500 
open-end lines of credit in either of the two preceding calendar years 
would not have been required to commence collecting or reporting data 
on their open-end lines of credit until January 1, 2020.
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    \42\ July 2017 HMDA Proposal, 82 FR 33455 (July 20, 2017).
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    The comment period for the July 2017 HMDA Proposal closed on July 
31, 2017. The Bureau received 35 comments, which were from financial 
institutions, financial trade associations, consumer advocacy groups, 
and individuals. The Bureau has considered all comments and now 
finalizes the amendments as proposed for the reasons discussed below.
    The Bureau consulted or offered to consult with the appropriate 
Federal agencies concerning both proposals, at both the proposed and 
final rule stages of the rulemaking. The Bureau consulted or offered to 
consult with the Board, the Federal Deposit Insurance Corporation, the 
Office of the Comptroller of the Currency, the National Credit Union 
Administration, the Department of Housing and Urban Development, the 
Securities and Exchange Commission, the Department of Justice, the 
Department of Veterans Affairs, the Federal Housing Finance Agency 
(FHFA), the Department of the Treasury, the Department of Agriculture, 
the Federal Trade Commission, and the Federal Financial Institutions 
Examination Council (FFIEC).

IV. Legal Authority

    The Bureau is issuing this final rule pursuant to its authority 
under the Dodd-Frank Act and HMDA. This final rule consists of 
amendments and corrections to the 2015 HMDA Final Rule and a temporary 
change to the threshold for reporting open-end lines of credit 
established in the 2015 HMDA Final Rule. Section 1061 of the Dodd-Frank 
Act transferred to the Bureau the

[[Page 43092]]

``consumer financial protection functions'' previously vested in 
certain other Federal agencies, including the Board.\43\ 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.'' \44\ 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.'' \45\ Both HMDA and title X of the Dodd-
Frank Act are Federal consumer financial laws.\46\ Accordingly, the 
Bureau has authority to issue regulations to administer HMDA.
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    \43\ 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.
    \44\ 12 U.S.C. 5581(a)(1)(A).
    \45\ 12 U.S.C. 5512(b)(1).
    \46\ 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).
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    HMDA section 305(a) broadly authorizes the Bureau to prescribe such 
regulations as may be necessary to carry out HMDA's purposes.\47\ These 
regulations may 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.'' \48\
---------------------------------------------------------------------------

    \47\ 12 U.S.C. 2804(a).
    \48\ 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.'' \49\ 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.\50\ 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.'' \51\ HMDA section 304(j)(7) also directs the Bureau to 
make every effort in prescribing regulations under the section to 
minimize the costs incurred by a depository institution in complying 
with such regulations.\52\
---------------------------------------------------------------------------

    \49\ 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).
    \50\ 12 U.S.C. 2803(j)(1).
    \51\ 12 U.S.C. 2803(j)(2)(B).
    \52\ 12 U.S.C. 2803(j)(7).
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    HMDA section 304(e) directs the Bureau to prescribe a standard 
format for HMDA disclosures required under HMDA section 304.\53\ 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.'' \54\ HMDA section 304(h)(1) also directs the Bureau, 
in consultation with other appropriate agencies, to develop regulations 
after notice and comment that (1) 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; (2) 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; (3) require disclosure of the 
class of the purchaser of such loans; (4) 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 (5) 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.\55\ HMDA also 
authorizes the Bureau to issue regulations relating to the timing of 
HMDA disclosures.\56\
---------------------------------------------------------------------------

    \53\ 12 U.S.C. 2803(e).
    \54\ 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 HUD. 12 U.S.C. 2803(h)(2).
    \55\ 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).
    \56\ 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.'' \57\ 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.'' \58\ 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.\59\
---------------------------------------------------------------------------

    \57\ HMDA section 304(b)(5)(D), (b)(6)(J), 12 U.S.C. 
2803(b)(5)(D), (b)(6)(J).
    \58\ HMDA section 304(b)(6)(F), (G), (H), 12 U.S.C. 
2803(b)(6)(F), (G), (H).
    \59\ 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 
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.\60\ 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 million or less.\61\
---------------------------------------------------------------------------

    \60\ 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).
    \61\ HMDA section 309(a), 12 U.S.C. 2808(a).
---------------------------------------------------------------------------

    In preparing this final rule, the Bureau has considered the changes 
below in light of its legal authority under HMDA and the Dodd-Frank 
Act. The Bureau has determined that each of the changes addressed 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.

[[Page 43093]]

V. Section-by-Section Analysis

    The discussion below uses the following terminology to refer to 
provisions or proposed provisions of Regulation C, as applicable: 
``Current Sec.  1003.X'' refers to the provision currently in effect, 
which does not reflect amendments to Regulation C made by the 2015 HMDA 
Final Rule that have not yet taken effect; ``Revised Sec.  1003.X'' 
refers to the provision as revised by the 2015 HMDA Final Rule; ``Sec.  
1003.X as adopted by the 2015 HMDA Final Rule,'' refers to a provision 
newly adopted by the 2015 HMDA Final Rule; and ``Proposed Sec.  
1003.X'' refers to the proposed amendments from the April 2017 HMDA 
Proposal or the July 2017 HMDA Proposal, pursuant to which this final 
rule is adopted.

Section 1003.2 Definitions

2(d) Closed-End Mortgage Loan
    In the 2015 HMDA Final Rule, the Bureau adopted Sec.  1003.2(d) to 
provide that a closed-end mortgage loan is a dwelling-secured extension 
of credit that is not an open-end line of credit. Comment 2(d)-2, as 
adopted by the 2015 HMDA Final Rule, provides guidance on what 
constitutes an extension of credit, including an example of a 
transaction that would not be a closed-end mortgage loan because no 
credit is extended. Comment 2(d)-2 also explains that, for purposes of 
Regulation C, an extension of credit refers to the granting of credit 
pursuant to a new debt obligation. The comment provides that if a 
transaction modifies, renews, extends, or amends the terms of an 
existing debt obligation without satisfying and replacing the original 
debt obligation with a new debt obligation, the transaction generally 
is not an extension of credit under Regulation C. The Bureau proposed 
certain clarifying amendments to comment 2(d)-2.
    As adopted by the 2015 HMDA Final Rule, the example in comment 
2(d)-2 illustrating a transaction in which there is no extension of 
credit discussed installment land sales contracts and included a 
specific description of an installment land sales contract that would 
not be considered an extension of credit. The Bureau proposed to remove 
this specific description from comment 2(d)-2, while also providing 
more generally that installment land sales contracts, depending on the 
facts and circumstances, may or may not involve extensions of credit 
rendering the transactions closed-end mortgage loans.
    Three industry commenters expressed support for the proposed 
change. One stated that the new language would add clarity by 
acknowledging the complexity of the determination of whether the 
transaction involves an extension of credit. Two industry commenters 
expressed opposition to the proposal, stating that it would introduce 
additional ambiguity and reporting challenges.
    For the reasons discussed below, the Bureau is adopting the 
provision as proposed. The Bureau believes that the specific 
description of an installment land sales contract that would not be an 
extension of credit, which was included in the 2015 HMDA Final Rule, is 
not helpful for illustrating a transaction in which there is no 
extension of credit. Whether an installment land sales contract is an 
extension of credit is a fact-specific inquiry that depends on the 
particular installment contract's terms and other facts and 
circumstances. A short description without relevant details does not 
accurately illustrate the complexity of such a determination. Although 
making this determination may be challenging for some financial 
institutions, it is not feasible for the Bureau to provide specific 
examples, due to the numerous and complex forms of installment land 
sales contracts and situations in which they arise.
    Comment 2(d)-2.ii, as adopted by the 2015 HMDA Final Rule, also 
provides a narrow exception to revised Regulation C's general rule that 
an extension of credit occurs only when a new debt obligation is 
created. Under that exception, a transaction completed pursuant to a 
New York State consolidation, extension, and modification agreement and 
classified as a supplemental mortgage under New York Tax Law section 
255, such that the borrower owes reduced or no mortgage recording taxes 
(New York CEMA), is deemed an extension of credit.\62\ The Bureau 
proposed no changes to the extension of credit exception for New York 
CEMAs in comment 2(d)-2.ii but did propose to include in it a 
clarifying reference to the new Sec.  1003.3(c)(13) exclusion for 
preliminary transactions consolidated into New York CEMAs, discussed 
below. There were no comments on this clarifying reference, and the 
Bureau is adopting it as proposed with minor edits for clarity.
---------------------------------------------------------------------------

    \62\ Revised comment 2(d)-2.i provides another exception, for 
assumptions, which Regulation C historically has covered. The Bureau 
is not making any change to the assumptions exception.
---------------------------------------------------------------------------

2(f) Dwelling
    The Bureau proposed to revise comment 2(f)-2 as adopted by the 2015 
HMDA Final Rule by adding language to clarify treatment of multi-
location loans. The Bureau is revising the proposed language, and is 
incorporating that language into new comment 2(n)-3, as discussed 
below.
    In addition to the multi-location loan clarification, the Bureau 
proposed a technical correction to comment 2(f)-2. The Bureau proposed 
to change the term ``complexes'' to ``housing complexes'' for clarity, 
with no change in meaning intended. The Bureau received only one 
comment on this change, and the commenter expressed support for the 
change. The Bureau is now adopting this technical correction as 
proposed.
2(g) Financial Institution
    Section 1003.2(g) defines financial institution for purposes of 
Regulation C, and sets forth Regulation C's institutional coverage for 
depository financial institutions and nondepository financial 
institutions. The Bureau proposed amendments to Sec.  1003.2(g) and 
associated commentary to increase temporarily the level of open-end 
originations required to trigger collection and reporting 
responsibilities and to make conforming changes related to a new 
reporting exclusion for preliminary transactions providing new funds 
before consolidation as part of a New York CEMA. The Bureau is adopting 
the proposed amendments as proposed for the reasons discussed below.
Open-End Line of Credit Threshold
    Section 1003.2(g), as adopted by the 2015 HMDA Final Rule, 
conditions Regulation C's institutional coverage, in part, on the 
lender's volume of origination of open-end lines of credit or closed-
end mortgage loans by establishing loan-volume thresholds. The 
threshold for closed-end mortgage loans is at least 25 in each of the 
two preceding calendar years, and the threshold for open-end lines of 
credit is at least 100 in each of the two preceding calendar years. 
Section 1003.3(c)(11) and (12), as adopted by the 2015 HMDA Final Rule, 
includes complementary thresholds set at the same levels that determine 
whether a financial institution is required to collect and report data 
on closed-end mortgage loans or open-end lines of credit, 
respectively.\63\ In the July 2017 HMDA

[[Page 43094]]

Proposal, the Bureau proposed to amend Sec.  1003.2(g)(1)(v)(B) and 
(g)(2)(ii)(B), effective January 1, 2018, to increase the open-end 
threshold from 100 to 500 and, effective January 1, 2020, to amend 
Sec.  1003.2(g)(1)(v)(B) and (g)(2)(ii)(B) to restore the threshold to 
100. The Bureau proposed conforming amendments to comments 2(g)-3 and -
5. As discussed in the section-by-section analysis of Sec.  
1003.3(c)(12), the Bureau also proposed conforming amendments to the 
open-end threshold in Sec.  1003.3(c)(12). For the reasons discussed 
below, the Bureau is finalizing the amendments as proposed.
---------------------------------------------------------------------------

    \63\ As noted below and as explained in the April 2017 HMDA 
Proposal, under the institutional coverage threshold adopted by the 
2015 HMDA Final Rule, the definition of financial institution 
included only institutions that originate either 25 or more closed-
end mortgage loans or 100 or more open-end lines of credit in each 
of the two preceding calendar years and satisfy the other applicable 
coverage criteria. That threshold and the transactional coverage 
threshold in 12 CFR 1003.3(c)(11) and (12) were intended to be 
complementary exclusions. This final rule corrects a drafting error. 
April 2017 HMDA Proposal, 82 FR 19142, 19149 (Apr. 25, 2017).
---------------------------------------------------------------------------

    As noted in the 2015 HMDA Final Rule, the Bureau believes that 
including dwelling-secured lines of credit within the scope of 
Regulation C is a reasonable interpretation of HMDA section 303(2), 
which defines ``mortgage loan'' as a loan secured by residential real 
property or a home improvement loan. In the 2015 HMDA Final Rule, the 
Bureau interpreted ``mortgage loan'' to include dwelling-secured lines 
of credit, as they are secured by residential real property and they 
may be used for home improvement purposes.\64\ As further noted in the 
2015 HMDA Final Rule, pursuant to section 305(a) of HMDA, the Bureau 
believes that requiring reporting of dwelling-secured, consumer purpose 
open-end lines of credit is necessary and proper to effectuate the 
purposes of HMDA and prevent evasions thereof.\65\
---------------------------------------------------------------------------

    \64\ 2015 HMDA Final Rule, 80 FR 66128, 66160 (Oct. 28, 2015).
    \65\ Id. (noting ``HMDA and Regulation C are designed to provide 
citizens and public officials sufficient information about mortgage 
lending to ensure that financial institutions are serving the 
housing needs of their communities, to assist public officials in 
distributing public sector investments, and to identify possible 
discriminatory lending patterns'' and that the ``Bureau believes 
that collecting information about all dwelling-secured, consumer-
purpose open-end lines of credit serves these purposes.'').
---------------------------------------------------------------------------

    In establishing the open-end threshold at 100 in the 2015 HMDA 
Final Rule, the Bureau drew on estimates of the distribution of open-
end origination volume across financial institutions and estimates of 
the one-time and ongoing costs that would be incurred by institutions 
of various sizes in collecting and reporting data on open-end lines of 
credit. The Bureau explained that it believed this threshold 
appropriately balanced the benefits and burdens of covering 
institutions based on their open-end mortgage lending.\66\ In striking 
this balance, the Bureau estimated that, based on 2013 data, 749 
depository institutions would be required to report their open-end 
lines of credit under the 100-loan threshold. However, as discussed in 
part III above, the Bureau lacked robust data for the estimates that 
were used to establish the open-end threshold in the 2015 HMDA Final 
Rule.
---------------------------------------------------------------------------

    \66\ Id. at 66162. The Bureau also explained that it believed 
``that adopting a 100-open-end line of credit threshold will avoid 
imposing the burden of establishing open-end reporting on many small 
institutions with low open-end lending volumes.'' Id. at 66149.
---------------------------------------------------------------------------

    As explained in the July 2017 HMDA Proposal, since 2013 the number 
of dwelling-secured open-end lines of credit originated has increased 
by 36 percent and continues to grow.\67\ To the extent that 
institutions that had been originating fewer than 100 open-end lines of 
credit share in that growth, the number of institutions at the margin 
that will be required to report under the 2015 HMDA Final Rule open-end 
threshold will also increase. In the July 2017 HMDA Proposal, the 
Bureau explained that its available data concerning open-end lines of 
credit extended by banks and thrifts are not sufficiently robust to 
allow the Bureau to estimate with any precision the number of such 
institutions that have crossed over the open-end threshold adopted in 
the 2015 HMDA Final Rule. The Bureau also explained, however, that 
there are reliable data concerning credit unions that are required to 
report open-end originations in their Call Reports. The Bureau's review 
of credit union Call Report data for the July 2017 HMDA Proposal 
indicates that the number of credit unions that originated 100 or more 
open-end lines of credit in 2015 was up 31 percent over 2013,\68\ the 
most recent data cited by the Bureau for its analysis of the 2015 HMDA 
Final Rule. The Bureau explained in the July 2017 HMDA Proposal that, 
if there were a comparable increase among banks and thrifts, the total 
number of open-end reporters exceeding the transactional coverage 
threshold could be estimated at 980, as compared to the estimate of 749 
in the 2015 HMDA Final Rule, which was based on 2013 data.\69\
---------------------------------------------------------------------------

    \67\ July 2017 HMDA Proposal, 82 FR 33455, 33459 (July 20, 
2017).
    \68\ Id.
    \69\ Id.
---------------------------------------------------------------------------

    Additionally, in the July 2017 HMDA Proposal, the Bureau explained 
that information received by the Bureau since issuing the 2015 HMDA 
Final Rule has caused the Bureau to question its assumption that tier 
3, low-complexity institutions process home-equity lines of credit on 
the same data platforms as closed-end mortgages, which in turn drove 
the Bureau's assumption that the one-time costs for these institutions 
would be minimal. After issuing the 2015 HMDA Final Rule, the Bureau 
had heard anecdotal evidence suggesting that one-time costs to begin 
reporting open-end lines of credit could be as high as $100,000 for 
tier 3, low-complexity institutions. The Bureau likewise had heard 
anecdotal evidence suggesting that the ongoing costs for these 
institutions to report open-end lines of credit, which the Bureau 
estimated would be under $10,000 per year and add under $60 per line of 
credit, could be at least three times higher.
    Based on this anecdotal evidence regarding one-time and ongoing 
costs and new data indicating that more institutions would have 
reporting responsibilities under the 100-loan open-end threshold than 
estimated in the 2015 HMDA Final Rule, the Bureau believed it was 
appropriate to seek comment on whether a temporary adjustment to the 
open-end threshold was advisable to allow for additional data 
collection and assessment. The temporary increase proposed in the July 
2017 HMDA Proposal would allow the Bureau to do such an evaluation 
without requiring financial institutions originating fewer than 500 
open-end lines of credit per year to collect and report data concerning 
open-end lines of credit in the meantime.
    The Bureau sought comment on whether to increase the open-end 
threshold temporarily and, if so, whether to raise the threshold to 500 
or to a larger or smaller number. The Bureau also sought comment on 
what time period to increase the open-end threshold, should it do so.
    Comments regarding the proposed changes to the open-end threshold 
in both Sec. Sec.  1003.2(g) and 1003.3(c)(12) are discussed below. 
Industry commenters expressed support for increasing the threshold, but 
requested that the Bureau further raise the threshold to exclude more 
financial institutions from the obligation to report open-end lines of 
credit. Commenters most often requested that the Bureau raise the open-
end threshold to 1,000. Many commenters also requested that the Bureau 
make the open-end threshold increase permanent instead of temporary. 
Some commenters also urged the Bureau to reverse the 2015 HMDA Final 
Rule's decision to require some financial institutions to report data 
on open-end lines of credit and, instead, to maintain optional 
reporting. Further, many commenters requested that the Bureau also 
increase the closed-end threshold.

[[Page 43095]]

    Consumer advocacy groups opposed the Bureau's proposal. These 
commenters expressed concern about the gaps in the HMDA data resulting 
from the proposed increase in the threshold. They noted that these gaps 
in the HMDA data would make it harder for them and other members of the 
public to understand whether open-end credit lending is conducted in a 
responsible and non-discriminatory manner, and whether credit needs are 
being met in communities, particularly if the major lenders in their 
areas are institutions below the temporarily raised threshold. They 
stated that the benefits of reporting were clear and based on concrete 
evidence, but that the costs of reporting were not clear, arguing that 
industry cost estimates relied on by the Bureau in the proposal were 
based on anecdotal evidence. They suggested that only by allowing open-
end reporting to begin as provided in the 2015 HMDA Final Rule would 
the Bureau learn the concrete costs. Further, they expressed support 
for the Bureau's decision not to propose changes to the closed-end 
threshold.
    The Bureau is finalizing the proposed temporary increase in the 
open-end threshold to 500 loans. The Bureau is amending Sec.  
1003.2(g)(1)(v)(B) and (g)(2)(ii)(B) and comment 2(g)-3 and -5, 
effective January 1, 2018, to increase the open-end threshold from 100 
to 500 and, effective January 1, 2020, to restore the threshold to 100.
    The Bureau does not believe that increasing the threshold to 1,000 
is appropriate at this time. The Bureau believes that the temporary 
increase in the threshold will avoid imposing the costs of reporting on 
tier 3, low-complexity institutions, while the Bureau studies the 
appropriate level of the threshold in light of the market conditions 
described in the July 2017 HMDA Proposal. The Bureau estimates that, in 
2015, 289 depository institutions originated 500 or more open-end lines 
of credit as compared to an estimated 980 depository institutions that 
originated at least 100 open-end lines of credit.\70\ On average, the 
institutions that would be excluded by increasing the open-end 
threshold from 100 to 500 loans originated fewer than 250 open-end 
lines of credit per year.\71\ Under a 500-loan open-end threshold, 
approximately three quarters of the loan application volume in the 
open-end market would be reported.\72\ Increasing the open-end 
threshold to 1,000 would reduce the number of institutions reporting 
open-end lines of credit by 90 in 2016 relative to a 500-loan 
threshold.\73\ While this represents a relatively low number of 
institutions relative to the number under a 500-loan open-end 
threshold, in 2016, those institutions originated, on average, close to 
1,000 open-end lines of credit per year.\74\ The Bureau believes that 
institutions with that level of loan volume have moderately-complex 
operations able to collect and report data on their open-end lines of 
credit without major disruptions or burdens to their existing 
operations.\75\ Thus, increasing the threshold to 1,000 is not needed 
to achieve the Bureau's goal of avoiding imposing costs on, and only 
on, tier 3, low-complexity institutions while the Bureau studies the 
appropriate level of the threshold. None of the commenters advocating 
for a higher threshold took issue with the Bureau's estimate as to the 
number of institutions that would be affected by increasing the 
threshold to 1,000 open-end lines of credit nor did any of the 
commenters offer evidence inconsistent with the Bureau's estimate of 
the compliance costs for moderately complex, tier 2, institutions.
---------------------------------------------------------------------------

    \70\ Id.
    \71\ Id. In estimating costs specific to collecting and 
reporting data for open-end lines of credit in the 2015 HMDA Final 
Rule, the Bureau assumed that that tier 2 institutions originate 
between 200 and 7,000 such lines of credit and that tier 3 
institutions originate fewer than 200 such lines of credit. 2015 
HMDA Final Rule, 80 FR 66128, 66285 (Oct. 28, 2015).
    \72\ Id.
    \73\ One commenter asserted that a 1,000-loan threshold would 
have relieved significantly more institutions from reporting. 
However, in subsequent ex parte communication, the commenter 
determined that its calculations were mistaken.
    \74\ July 2017 HMDA Proposal, 82 FR 33455, 33459-60 (July 20, 
2017).
    \75\ Id. at 33460. The July 2017 HMDA Proposal explained as an 
example that it had received information from the credit league of 
one State indicating that, of the seven credit unions in that State 
that had originated more than 250 home-equity lines of credit in the 
first six months of 2016 (and thus were on track to originate 500 
for the year), six had assets over $1 billion.
---------------------------------------------------------------------------

    Additionally, the Bureau agrees generally with consumer advocacy 
groups about the importance of increasing visibility into the open-end 
line of credit market. Increasing the threshold from 100 to 500 will 
decrease visibility into the open-end line of credit market. The Bureau 
believes, however, that the limited loss of visibility occasioned by 
increasing the threshold from 100 to 500, at least for the next two 
years while the Bureau further studies the issue, is justified by the 
uncertainty surrounding the costs of reporting borne by tier 3, low-
complexity institutions and the recent trends in the market. However, 
the Bureau is not persuaded that the limited benefits of an even higher 
threshold would justify any additional loss of data.
    The Bureau is not making the threshold increase for open-end lines 
of credit permanent at this time. As discussed in the July 2017 HMDA 
Proposal, the Bureau believes it is vitally important to begin the 
collection and reporting of data on the growing market for open-end 
lines of credit and that the increase in open-end origination volume 
since 2013 further demonstrates the importance of these data. However, 
the Bureau recognizes that anecdotal evidence and recent market trends 
suggest that costs associated with the 100-loan open-end threshold may 
be significantly higher and affect more institutions than the Bureau 
estimated in the 2015 HMDA Final Rule. The two-year period will allow 
time for the Bureau to decide, through an additional rulemaking, 
whether any adjustments to the open-end threshold are needed. The 
Bureau intends to make that determination in sufficient time so that if 
institutions are covered under any permanent threshold set by the 
Bureau but not under the temporary threshold, those institutions will 
be able to resume and complete their implementation processes.\76\
---------------------------------------------------------------------------

    \76\ Id.
---------------------------------------------------------------------------

    Similarly, the Bureau declines to retain optional reporting of 
open-end lines of credit. As discussed in the 2015 HMDA Final Rule, 
improved visibility into this key segment of the mortgage market is 
critical because of the risks posed by these products to consumers and 
local markets and the lack of other publicly available data about these 
products.\77\ However, the Bureau agrees that optional reporting should 
be allowed for those financial institutions that do not meet the open-
end threshold and is providing for optional reporting, as discussed 
below in the section-by-section analysis of Sec.  1003.3(c)(12).
---------------------------------------------------------------------------

    \77\ 2015 HMDA Final Rule, 80 FR 66128, 66160-61 (Oct. 28, 
2015).
---------------------------------------------------------------------------

    The Bureau, as explained in the July 2017 HMDA Proposal, does not 
believe increasing the closed-end threshold is appropriate.\78\ Unlike 
open-end lines of credit, when adopting the 2015 HMDA Final Rule, the 
Bureau had robust data to make a determination about the number of 
transactions that would be reported and the costs, both one-time and 
ongoing, that industry would face. Additionally, unlike open-end lines 
of credit, there is no evidence of a similar change in market 
conditions post issuance of the 2015 HMDA Final Rule

[[Page 43096]]

for closed-end mortgage loans. None of the commenters advocating a 
change in the closed-end threshold took issue with the Bureau's 
estimates of costs for closed-end reporters or offered any data 
inconsistent with the Bureau's estimates.
---------------------------------------------------------------------------

    \78\ July 2017 HMDA Proposal, 82 FR 33460 (July 20, 2017).
---------------------------------------------------------------------------

    As discussed in the 2015 HMDA Final Rule, the Bureau adopted Sec.  
1003.2(g)(1) 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 in the 2015 HMDA Final Rule, the Bureau found 
that the exception in Sec.  1003.2(g)(1) 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 found that the provision will 
facilitate compliance with HMDA's requirements.\79\ Similarly, the 
Bureau believes that the temporary change in the open-end threshold in 
Sec.  1003.2(g)(1) is necessary and proper to effectuate the purposes 
of HMDA, including to facilitate compliance and reduce burden. 
Additionally, as discussed in the 2015 HMDA Final Rule, the Bureau 
adopted Sec.  1003.2(g)(2) pursuant to its interpretation of 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. The Bureau 
stated that it interprets these provisions, as the Board also did, to 
evince the intent to exclude from coverage institutions that make a 
relatively small volume of mortgage loans.\80\ Pursuant to its 
authority under section 305(a) of HMDA, and for the reasons discussed 
above, the Bureau finds that the temporary change of the open end 
threshold from 100 to 500 for two years in both Sec.  1003.2(g)(1) and 
1003.2(g)(2) is necessary and proper to facilitate compliance.
---------------------------------------------------------------------------

    \79\ 2015 HMDA Final Rule, 80 FR 66128, 66150 (Oct. 28, 2015).
    \80\ Id. at 66153.
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Conforming Amendment Related to New York CEMAs
    As discussed below, the Bureau proposed an exclusion from 
reporting, in proposed Sec.  1003.3(c)(13), for any preliminary 
transaction providing new funds before consolidation as part of a New 
York CEMA. Consistent with that proposal, the Bureau proposed a 
conforming change to Sec.  1003.2(g)(1)(v)(A) and (2)(ii)(A), as 
adopted by the 2015 HMDA Final Rule, in the definition of ``financial 
institution,'' which would add the new exclusion to a list of 
exclusions referenced in that definition regarding closed-end mortgage 
loans.
    The Bureau received no comments on this conforming change, and now 
adopts the provision as proposed.
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. 
Regulation C currently defines home improvement loan and provides 
guidance in commentary about mixed-use property, i.e., a dwelling used 
for both residential and commercial purposes. Pursuant to the Bureau's 
authority under HMDA section 305(a), the Bureau revised the current 
definition of home improvement loan in Sec.  1003.2(i), as adopted by 
the 2015 HMDA Final Rule, and revised the accompanying commentary 
regarding mixed-use property. In the April 2017 HMDA Proposal, the 
Bureau proposed to amend the commentary to Sec.  1003.2(i) to clarify 
further the reporting requirements for home improvement loans secured 
by mixed-use property. Specifically, the Bureau proposed to amend 
comment 2(i)-4 to clarify that the comment applies only to multifamily 
dwellings.\81\ For the reasons discussed below, the Bureau is adopting 
comment 2(i)-4 as proposed, with a minor amendment for further clarity.
---------------------------------------------------------------------------

    \81\ As discussed in more detail in the section-by-section 
analysis of Sec.  1003.3(c)(10), the Bureau proposed to revise the 
example in comment 3(c)(10)-3.ii to clarify that it applies to 
dwellings other than multifamily dwellings.
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    Several State trade associations and one large financial 
institution supported the proposed amendments to comment 2(i)-4. One 
commenter stated that the proposal would ease the compliance burden 
regarding mixed-use properties. Another commenter stated that it shared 
the Bureau's concern that, as adopted by the 2015 HMDA Final Rule, 
comments 2(i)-4 and 3(c)(10)-3.ii could be interpreted as providing 
inconsistent guidance. This commenter stated that it agreed that loans 
or lines of credit to improve primarily the commercial portion of a 
multifamily dwelling should not be reported because they involve 
relatively small housing components and large commercial components of 
the dwelling in comparison to loans or lines of credit to improve 
primarily the commercial portion of a non-multifamily dwelling.
    A few commenters recommended alternative reporting requirements for 
loans to improve primarily the commercial portion of a mixed-use 
dwelling. One national trade association suggested that, if a property 
is subject to HMDA reporting requirements and a loan is made for any 
improvement on that property, that loan should be considered a home 
improvement loan. It stated that this recommendation would simplify 
compliance by providing a single standard for all loans to improve 
property used for residential and commercial purposes and avoid 
financial institutions having to determine the percentage of loan 
proceeds used for a residential purpose and whether the loan is for a 
non-multifamily or multifamily dwelling. Another national trade 
association suggested that it would improve consistency to apply the 
same treatment to all loans that improve mixed-use properties. 
Alternatively, one State trade association recommended that, if any 
portion of the loan proceeds will be used to improve the commercial 
portion of a mixed-use property, the loan should not be a reportable 
home improvement loan, regardless of whether the dwelling is a 
multifamily dwelling. It suggested that, if the Bureau were to adopt 
the proposed guidance on reporting loans to improve commercial portions 
of mixed-use property, it would be helpful to clarify in comment 2(i)-4 
that a loan to improve commercial space in a dwelling other than a 
multifamily dwelling would be a reportable home improvement loan. A 
national trade association stated that all commercial-purpose loans 
should be excluded from HMDA reporting. Finally, a few commenters 
expressed concern that the proposed guidance did not address how to 
treat loans to improve commercial portions of mixed-use property where 
the property would have been considered a multifamily dwelling under 
the proposed guidance in comment 2(f)-2, which would have explained 
that a loan secured by five or more separate dwellings in more than one 
location is a loan secured by a multifamily dwelling.
    The Bureau is adopting comment 2(i)-4 as proposed, with a minor 
amendment to provide further clarity. As adopted, comment 2(i)-4 also 
includes a cross-reference to comment 3(c)(10)-3.ii for guidance on 
loans to improve primarily the commercial portion of a dwelling other 
than a multifamily dwelling. The Bureau declines to treat all loans to 
improve mixed-use property as home improvement loans as this would 
expand coverage of commercial-purpose transactions and result in the 
reporting of loans or lines of credit to improve

[[Page 43097]]

primarily the commercial portion of a multifamily dwelling. As 
discussed in the April 2017 HMDA Proposal, such loans or lines of 
credit involve relatively small housing components and large commercial 
components of the dwelling in comparison to loans or lines of credit to 
improve primarily the commercial portion of a dwelling other than a 
multifamily dwelling. Consequently, reporting such loans would provide 
limited information, at best, toward HMDA's purpose of helping 
determine whether financial institutions are serving the housing needs 
of the communities in which they are located. The Bureau also declines 
to exclude all loans or lines of credit where any portion of the loan 
proceeds will be used to improve the commercial portion of a mixed-use 
property or to exclude all commercial-purpose loans. Regulation C 
currently covers closed-end, commercial-purpose loans made to purchase, 
refinance, or improve a dwelling, including certain loans to improve 
mixed-use property, and the Bureau has not proposed or seen any new 
reason to decrease the coverage of commercial-purpose transactions from 
its current level.\82\ Finally, as discussed in more detail in the 
section-by-section analysis of Sec.  1003.2(f) above, the Bureau 
believes the revisions adopted in comment 2(f)-2 regarding the 
definition of multifamily dwellings address potential uncertainty that 
may have arisen regarding how proposed comment 2(f)-2 would have 
applied to the Bureau's guidance regarding reporting requirements for 
loans to improve various types of mixed-use property.
---------------------------------------------------------------------------

    \82\ Current comment 2 (Home Improvement Loan)-4. In the 2015 
HMDA Final Rule, the Bureau explained that ``[e]xamples of 
commercial-purpose loans that currently are reported are: (1) A loan 
to an entity to purchase or improve an apartment building (or to 
refinance a loan secured thereby); and (2) a loan to an individual 
to purchase or improve a single-family home to be used either as a 
professional office or as a rental property (or to refinance a loan 
secured thereby).'' 2015 HMDA Final Rule, 80 FR 66128, 66169 (Oct. 
28, 2015).
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2(j) Home Purchase Loan
    Current Sec.  1003.2 provides a definition of home purchase loan 
and provides guidance in commentary. The 2015 HMDA Final Rule revised 
the current definition of home purchase loan in Sec.  1003.2(j) and 
revised the current home purchase loan commentary to conform to revised 
Sec.  1003.2(j) and to provide additional clarifications. As discussed 
in more detail in the section-by-section analysis of Sec.  
1003.3(c)(3), the Bureau proposed certain amendments to the Sec.  
1003.3(c)(3) commentary regarding temporary financing. The Bureau 
proposed conforming amendments to comment 2(j)-3 to reflect the 
proposed revisions to the Sec.  1003.3(c)(3) commentary. Commenters 
supported the proposed amendments to comment 2(j)-3. The Bureau is 
adopting comment 2(j)-3 as proposed, with a minor amendment to conform 
to a clarification the Bureau is adopting in the commentary to Sec.  
1003.3(c)(3).
2(n) Multifamily Dwelling
    In revised Sec.  1003.2(f) and comment 2(f)-2, the 2015 HMDA Final 
Rule revised and clarified the definition of ``dwelling'' in Regulation 
C to provide, among other things, that multifamily residential 
structures include housing complexes and manufactured home communities 
and that such communities are dwellings. Revised Sec.  1003.2(n) 
provides that a ``multifamily dwelling'' is a dwelling that contains 
five or more individual dwelling units. To apply this definition and 
ease compliance, the Bureau proposed to add language to comment 2(f)-2 
that would have clarified that a loan secured by five or more separate 
dwellings in more than one location is a loan secured by a multifamily 
dwelling and provided an example.
    Revised Sec.  1003.4(a) excludes several data points for covered 
loans secured by or applications proposed to be secured by multifamily 
dwellings because such data may not be easily available, relevant, or 
useful for multifamily transactions. During implementation of the 2015 
HMDA Final Rule, the Bureau was asked whether loans that are secured by 
five or more separate dwellings that each contain fewer than five 
individual dwelling units in more than one location are loans secured 
by multifamily dwellings and, thus, may take advantage of the 
exclusions for covered loans secured by or applications proposed to be 
secured by multifamily dwellings in revised Sec.  1003.4(a). For 
example, a landlord might use a covered loan to improve five or more 
single-family dwellings in different locations, with those properties 
securing the loan. At the time of the April 2017 HMDA Proposal, the 
Bureau believed that such a loan should be reported as secured by a 
multifamily dwelling. The Bureau believed that as with loans that are 
secured by multifamily dwellings in one location, the information that 
would be excluded from reporting under revised Sec.  1003.4(a), such as 
the debt-to-income ratio, might also not be easily available, relevant, 
or useful for loans secured by five or more separate non-multifamily 
dwellings in more than one location. Consequently, the Bureau proposed 
to add language to comment 2(f)-2 making clear that a loan secured by 
five or more separate dwellings in more than one location is a loan 
secured by a multifamily dwelling and providing an example.
    The Bureau received 14 comments discussing the proposed change to 
comment 2(f)-2. Five commenters expressed support for the change, and 
nine expressed opposition to it. The commenters supporting the change 
stated that it would ease compliance, and one wanted clarification of 
how loans with cross-collateralization clauses, which the commenter 
stated are often used in the multi-location loans that are implicated 
in the change, should be reported.
    The commenters opposing the proposed change stated several 
different objections. Several commenters stated that the change would 
not ease compliance but, instead, would make it more confusing and 
difficult. Commenters said that the new provision conflicted with 
Regulations X, Z, and B, as well as the Call Report \83\ instructions 
that they were required to follow and the definition of multifamily 
under the Community Reinvestment Act (CRA).\84\ They stated that the 
proposed change to Regulation C's definition of multifamily would 
require double tracking of multifamily loans under HMDA and CRA. Two 
commenters pointed out that the proposed change appeared to conflict 
with the proposed clarification on home improvement loans in comment 
2(i)-4 because that provision relies on non-multifamily status to 
determine a loan's purpose, but the change to comment 2(f)-2 would make 
non-multifamily structures potentially part of multifamily dwellings, 
muddling their status. One commenter suggested that the proposed change 
could make rural lending to investors look like loans secured by 
apartment buildings. Another commenter stated that the proposed 
language would conflict with

[[Page 43098]]

the definition of multifamily in Regulation C itself.
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    \83\ Every national bank, State member bank, insured nonmember 
bank, and savings association is required by its primary Federal 
regulator to file consolidated Reports of Condition and Income, also 
known as Call Reports, for each quarter as of the close of business 
on the last day of each calendar quarter. The specific reporting 
requirements depend upon the size of the institution, the nature of 
its activities, and whether it has any foreign offices. See, e.g., 
FDIC, ``Consolidated Reports of Condition and Income,'' https://www.fdic.gov/regulations/resources/call/ (last visited 
Aug. 13, 2017). Credit unions that are not privately insured are 
also required to report Call Report data to NCUA. See, e.g., NCUA, 
``Credit Union and Corporate Call Report Data,'' https://www.ncua.gov/DataApps/QCallRptData/Pages/default.aspx (last visited 
Aug. 13, 2017).
    \84\ 12 U.S.C. 2901 et seq.
---------------------------------------------------------------------------

    After careful consideration of all the comments received, the 
Bureau now believes that it is not appropriate to add language to 
comment 2(f)-2 providing that a loan secured by five or more separate 
dwellings in more than one location is a loan secured by a multifamily 
dwelling. To ensure clarity and facilitate compliance, the Bureau is 
now changing the language proposed in the April 2017 HMDA Proposal to 
provide explicitly that such a loan is not secured by a multifamily 
dwelling. The Bureau is also altering the example provided to clarify 
that the multi-location loan described in the example should not be 
reported as secured by a multifamily dwelling. In addition, the Bureau 
has incorporated the new language into new comment 2(n)-3, because the 
comment involves the definition of multifamily dwelling in Sec.  
1003.2(n), rather than the definition of dwelling in Sec.  1003.2(f). 
The Bureau has also added to the new comment a description and example 
of a situation similar to that of multi-location loans, as discussed 
below.
    The Bureau believes that the conflicts commenters described 
regarding the CRA and Call Reports would create the compliance burdens 
described by commenters. In addition, the Bureau acknowledges that 
additional clarification would be required to reconcile the proposed 
classification of multi-site loans language with the proposed change to 
the commentary on loans for improvement of commercial space in a non-
multifamily dwellings in comment 2(i)-4. Consequently, the Bureau 
believes that the proposed language might have increased the compliance 
burden rather than decreased it as intended.
    In addition, further review of the five data points that are 
excluded \85\ for multifamily loans suggests that it will be feasible 
for reporters of the multi-location loans that were the subject of the 
proposal to provide entries for them. If the borrower of such a loan is 
not a natural person, two of the data points, income and debt-to-income 
ratio, can be excluded. If the borrower is a natural person, these two 
data points will need to be reported only if they are relied on in 
making the credit decision or in processing the application. Similarly, 
the financial institution should be able to answer whether the 
application or covered loan involved a preapproval request. The two 
other data points that are excluded from reporting for loans secured by 
multifamily dwellings involve questions about manufactured housing that 
the financial institution should be able to answer for these loans. To 
the extent the clarifications in this rule require financial 
institutions to make technical changes, those changes require only 
minor adjustments, not significant system updates. In addition, the 
Bureau has issued this final rule in August, four months before 2018, 
which the Bureau believes should afford ample time to implement any 
necessary minor system adjustments. The Bureau is releasing 
implementation aids with this final rule to facilitate implementation.
---------------------------------------------------------------------------

    \85\ Covered loans secured by a multifamily dwelling are subject 
to additional reporting requirements under revised Sec.  
1003.4(a)(32), but are not subject to reporting requirements under 
revised Sec.  1003.4(a)(4), (a)(10)(iii), (a)(23), (a)(29), or 
(a)(30). Revised comment 2(n)-2.
---------------------------------------------------------------------------

    During consideration of the public comments and consultation with 
the relevant Federal agencies, the Bureau became aware that it might 
also be useful to provide guidance on the treatment of covered loans 
that are secured by multiple dwellings within a multifamily dwelling, 
but not secured by the entire multifamily dwelling itself. The Bureau 
has been told that these loans potentially could increase similar 
issues for HMDA, CRA, and Call Report reporting requirements unless the 
Bureau clarifies that they are not secured by a multifamily dwelling. 
In addition, revised Sec.  1002.2(n)'s definition of a multifamily 
dwelling, stating that a multifamily dwelling is one that ``contains'' 
five or more individual dwelling units, is reasonably interpreted to 
mean that a loan secured by five or more separate dwellings located in 
a multifamily dwelling but not secured by the entire multifamily 
dwelling is not secured by a loan that ``contains'' five or more 
individual dwelling units, just as it is reasonably interpreted to mean 
that a loan secured by a multi-location loan is not secured by a 
dwelling that ``contains'' five or more dwelling units.
    Consequently, the Bureau is adding language to new comment 2(n)-2 
stating that a covered loan secured by five or more separate dwellings 
that are located within a multifamily dwelling, but which is not 
secured by the entire multifamily dwelling (e.g., an entire apartment 
building or housing complex), is not secured by a multifamily dwelling 
as defined by Sec.  1003.2(n), and providing an example. The Bureau is 
also adding cross references and instructions to comment 2(n)-2 to 
facilitate reporting of both the multi-location loans and the loans 
secured by multiple dwellings within a multifamily dwelling.
    Regarding reporting cross-collateralized loans, the Bureau notes 
that Sec.  1003.4(a)(31) requires reporting of 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. If the documents for a multi-location loan or a loan secured by 
multiple dwellings within a multifamily dwelling include a cross-
collateralization clause that results in the loan being secured by six 
dwelling units, the financial institution complies with Sec.  
1003.4(a)(31) by reporting ``6,'' even though the loan is not secured 
by a multifamily dwelling. Nonetheless, the HMDA data will have a clear 
indication of whether a loan is in fact wholly or partially secured by 
a multifamily dwelling in the response to Sec.  1003.4(a)(32), which 
requires reporting of income restricted dwelling units if the property 
securing or proposed to secure the loan includes a multifamily 
dwelling. Revised comment 4(a)(32)-6 makes clear that when no 
multifamily dwelling is included in the collateral, the institution 
reports that the data point is not applicable. The Filing Instructions 
Guide for HMDA Data Collected in 2018 (2018 FIG) \86\ reflects this 
rule, further providing that when a multifamily dwelling is part of the 
collateral for a loan, the institution must report a number or ``0,'' 
and reports ``NA'' for not applicable if the requirement to report 
multifamily affordable units does not apply to the covered loan or 
application. Therefore, any correctly reported loan or application with 
a value of ``NA'' in response to Sec.  1003.4(a)(32) will not be either 
wholly or partially secured or proposed to be secured by a multifamily 
dwelling.
---------------------------------------------------------------------------

    \86\ FFIEC, ``Filing Instructions Guide for HMDA Data Collected 
in 2018,'' (2018 FIG), available at https://www.consumerfinance.gov/data-research/hmda/static/for-filers/2018/2018-HMDA-FIG.pdf. The 
2018 FIG is a compendium of resources to help financial institutions 
file HMDA data collected in 2018 with the Bureau in 2019.
---------------------------------------------------------------------------

Section 1003.3 Exempt Institutions and Excluded Transactions

3(c) Excluded Transactions
3(c)(3)
    Current Regulation C provides an exclusion for temporary financing 
in Sec.  1003.4(d)(3). The 2015 HMDA Final Rule revised the exclusion 
for temporary financing in Sec.  1003.3(c)(3) and adopted comment 
3(c)(3)-1 to clarify the scope of the exclusion and to incorporate 
existing guidance included in a Federal Financial Institutions 
Examination Council (FFIEC) Frequently Asked Question (FAQ).\87\ As

[[Page 43099]]

adopted by the 2015 HMDA Final Rule, comment 3(c)(3)-1 provides that 
temporary financing is excluded from coverage and explains that a loan 
or line of credit is temporary financing if it is designed to be 
replaced by permanent financing at a later time. The comment provides 
several illustrative examples to clarify whether a loan or line of 
credit is designed to be replaced by permanent financing. The Bureau 
proposed to clarify further the meaning of comment 3(c)(3)-1 and to add 
new comment 3(c)(3)-2 to clarify that a construction-only loan or line 
of credit is considered temporary financing and excluded under Sec.  
1003.3(c)(3) if the loan or line of credit is extended to a person 
exclusively to construct a dwelling for sale. For the reasons discussed 
below, the Bureau is adopting the Sec.  1003.3(c)(3) commentary as 
proposed, with certain minor amendments for further clarity.
---------------------------------------------------------------------------

    \87\ See FFIEC, ``Home Mortgage Disclosure Act: Regulatory & 
Interpretive FAQ's, Temporary Financing,'' https://www.ffiec.gov/hmda/faqreg.htm#TemporaryFinancing (last visited Aug. 9, 2017). The 
existing FFIEC FAQ concerning temporary financing acknowledges that 
temporary financing is exempt and states that ``financing is 
temporary if it is designed to be replaced by permanent financing of 
a much longer term. A loan is not temporary financing merely because 
its term is short. For example, a lender may make a loan with a one-
year term to enable an investor to purchase a home, renovate it, and 
re-sell it before the term expires. Such a loan must be reported as 
a home purchase loan.''
---------------------------------------------------------------------------

    The majority of commenters supported the proposed changes to the 
Sec.  1003.3(c)(3) commentary. Several expressed support for the 
proposed clarifications generally, while a few State and national trade 
associations stated that the proposal would reduce burden and 
uncertainty. A few commenters indicated that construction-only loans 
are often originated through separate channels from residential loans 
and that it would be expensive to develop systems to report 
construction-only loans. A few commenters that supported the proposed 
clarifications regarding construction-only loans or lines of credit 
stated that buyers of the newly-constructed dwellings would often seek 
permanent financing that would be reportable under HMDA.
    One national trade association stated that the proposal would not 
clarify what constitutes temporary financing and that temporary 
financing may be structured in different ways, may involve a change in 
lender, or may involve only a single set of loan documents that does 
not reflect the permanent financing. This commenter suggested that the 
Bureau define temporary financing as any dwelling-secured loan to a 
borrower for any purpose where the initial advance of funds will be 
replaced by permanent financing at a later date. One State trade 
association requested further clarification on which loans would be 
excluded as temporary financing and expressed the belief that the 
proposal did not sufficiently distinguish between one-time closing home 
purchase loans and short-term construction loans with permanent 
financing to be obtained at a later date. A few commenters requested 
additional clarification on the treatment of bridge loans or 
construction loans that are paid in full with proceeds from the sale of 
the borrower's current dwelling without the borrower obtaining 
permanent financing.
    The Bureau is adopting the amendments to the Sec.  1003.3(c)(3) 
commentary substantially as proposed, with minor clarifications to 
comment 3(c)(3)-1. Final comment 3(c)(3)-1 states that Sec.  
1003.3(c)(3) provides that closed-end mortgage loans or open-end lines 
of credit obtained for temporary financing are excluded transactions. 
The comment then provides that a loan or line of credit is considered 
temporary financing and excluded under Sec.  1003.3(c)(3) if the loan 
or line of credit is designed to be replaced by separate permanent 
financing extended by any financial institution to the same borrower at 
a later time. The Bureau is also adopting revisions to the illustrative 
example in comment 3(c)(3)-1.i to provide that the borrower obtains 
permanent financing for his or her new home either from the same lender 
or from another lender.
    Final comment 3(c)(3)-1 thus clarifies further that the 
applicability of the temporary financing exclusion does not depend on 
whether the financial institution that originates the permanent 
financing is the same institution that originated the loan or line of 
credit the permanent financing is designed to replace. The Bureau notes 
that, as adopted by the 2015 HMDA Final Rule, comment 3(c)(3)-1.ii 
provides an illustrative example of a construction loan that is 
excluded because it is designed to be replaced by permanent financing 
from either the lender that originated the loan or another lender. 
Nevertheless, the Bureau believes that the additional revisions adopted 
here to comment 3(c)(3)-1 clarify further that the determination of 
whether a loan or line of credit is temporary financing does not depend 
on the identity of the financial institution that originates the 
permanent financing to replace that loan or line of credit. Final 
comment 3(c)(3)-1 also omits proposed language regarding ``except as 
provided in comment 3(c)(3)-2,'' because both comments 3(c)(3)-1 and -2 
set forth independent criteria for determining whether a loan or line 
of credit is considered temporary financing.
    Final comment 3(c)(3)-2 provides that a construction-only loan or 
line of credit is considered temporary financing and excluded under 
Sec.  1003.3(c)(3) if the loan or line of credit is extended to a 
person exclusively to construct a dwelling for sale and cross-
references comment 3(c)(3)-1.ii through .iv for examples of the 
reporting requirement for construction loans that are not extended to a 
person exclusively to construct a dwelling for sale.
    The Bureau declines to adopt further revisions to the Sec.  
1003.3(c)(3) commentary as it believes the guidance adopted in this 
final rule provides a clear standard that serves HMDA's purposes. 
Regarding the treatment of loans that close in a single transaction, 
the 2015 HMDA Final Rule explained that ``the loan is temporary 
financing if it is designed to be replaced by longer-term financing at 
a later time (e.g., financing completed through a separate closing that 
will pay off the short-term loan).'' \88\ Final comment 3(c)(3)-1 
clarifies further that, for the temporary financing exclusion to apply, 
the permanent financing must be separate from the loan or line of 
credit it is designed to replace. Regarding the treatment of loans that 
are paid in full without the borrower obtaining separate permanent 
financing, except as provided in comment 3(c)(3)-2, the applicability 
of the temporary financing exclusion depends on whether the loan or 
line of credit is designed to be replaced by separate permanent 
financing extended to the same borrower at a later time. As discussed 
in the 2015 HMDA Final Rule, the commentary to Sec.  1003.3(c)(3) will 
help to ensure reporting of short-term transactions that function as 
permanent financing while excluding those transactions that will be 
captured by the separate reporting of the longer-term financing, if it 
otherwise is covered by Regulation C.\89\
---------------------------------------------------------------------------

    \88\ 2015 HMDA Final Rule, 80 FR 66128, 66168 (Oct. 28, 2015).
    \89\ Id.
---------------------------------------------------------------------------

3(c)(10)
    Regulation C currently covers closed-end, commercial-purpose loans 
made to purchase, refinance, or improve a dwelling. The 2015 HMDA Final 
Rule adopted Sec.  1003.3(c)(10) to provide that loans and lines of 
credit made primarily for a commercial or business purpose are excluded 
transactions unless they are for the purpose of home purchase under 
Sec.  1003.2(j), home improvement under Sec.  1003.2(i), or refinancing 
under

[[Page 43100]]

Sec.  1003.2(p). The Bureau proposed to amend the example in comment 
3(c)(10)-3.ii to clarify that its guidance applies in the case of a 
dwelling other than a multifamily dwelling and to provide an additional 
illustration.\90\
---------------------------------------------------------------------------

    \90\ As discussed in more detail in the section-by-section 
analysis of Sec.  1003.2(i), the Bureau proposed to revise comment 
2(i)-4 to clarify that it applies to multifamily dwellings.
---------------------------------------------------------------------------

    Comments addressing the proposed changes to both comments 2(i)-4 
and 3(c)(10)-3.ii and comments related to the proposed clarifications 
regarding reporting requirements for loans to improve mixed-use 
property generally are discussed above in the section-by-section 
analysis of Sec.  1003.2(i). One large financial institution expressed 
the belief that the examples in proposed comment 3(c)(10)-3.ii would 
lead to uncertainty and stated that neither a doctor's office nor a 
daycare center is considered a dwelling for purposes of HMDA reporting 
because they are commercial properties without any residential 
purposes.
    The Bureau is adopting comment 3(c)(10)-3.ii as proposed. The 
Bureau notes that final comment 3(c)(10)-3.ii provides an illustrative 
example regarding a doctor's office or a daycare center located in a 
dwelling other than a multifamily dwelling. Final comment 3(c)(10)-3.ii 
does not affect the definition of dwelling in Sec.  1003.2(f) or the 
guidance in comment 2(f)-4 regarding the determination of whether a 
property used for both residential and commercial purposes is a 
dwelling for purposes of Regulation C.
3(c)(11)
    Section 1003.2(g), as adopted by the 2015 HMDA Final Rule, provides 
loan-volume thresholds for closed-end mortgage loans and open-end lines 
of credit for Regulation C's coverage of financial institutions. The 
threshold for closed-end mortgage loans is 25 loans originated in each 
of the two preceding calendar years. Section 1003.3(c)(11), as adopted 
by the 2015 HMDA Final Rule, provides a complementary exclusion for 
financial institutions with loan volumes below the threshold, providing 
that a closed-end mortgage loan is an excluded transaction if a 
financial institution originated fewer than 25 closed-end mortgage 
loans in each of the two preceding calendar years. However, the use of 
the word ``each'' in Sec.  1003.3(c)(11) was a drafting error.\91\ 
Therefore, the Bureau proposed to amend Sec.  1003.3(c)(11) and comment 
3(c)(11)-1 by replacing the word ``each'' with ``either'' to clarify 
how a financial institution applies the exclusion and to include an 
unrelated clarifying reference to purchased loans. In addition, the 
Bureau proposed to allow financial institutions voluntarily to report 
covered loans and applications excluded by Sec.  1003.3(c)(11).
---------------------------------------------------------------------------

    \91\ As noted in the April 2017 HMDA Proposal, this provision as 
adopted by the 2015 HMDA Final Rule states the test as ``fewer than 
100 open-end lines of credit in each of the two preceding calendar 
years,'' but this was a drafting error; the intent was to require 
that a financial institution exceeded the threshold in both of the 
two preceding calendar years to be subject to closed-end mortgage 
loan reporting, thus the exclusion should require that a financial 
institution originate fewer than 100 such lines of credit in either 
of the two preceding calendar years. See April 2017 HMDA Proposal, 
82 FR 19142, 19148-49 (Apr. 25, 2017).
---------------------------------------------------------------------------

Replacing ``Each'' With ``Either''
    Five financial industry and vendor commenters supported the 
proposal to replace the word ``each'' with ``either,'' stating that it 
would add clarity. One consumer advocacy group commenter opposed the 
change, stating that the word ``each'' would increase the number of 
institutions reporting, and would particularly promote accountability 
for small financial institutions. One industry commenter requested that 
the Bureau add more examples so that community banks can better 
understand application of the loan-volume test.
    The Bureau is adopting the provision as proposed. To ensure that 
the exclusion mirrors the loan-volume threshold for financial 
institutions in Sec.  1003.2(g) and excludes transactions when that 
threshold is not met, Sec.  1003.3(c)(11) must provide that a closed-
end mortgage loan is an excluded transaction if a financial institution 
originated fewer than 25 closed-end mortgage loans in ``either'' of the 
two preceding calendar years.\92\ Using the word ``each'' would 
increase the reporting requirements for smaller volume financial 
institutions, as one commenter explained, but the decision regarding 
how to apply the thresholds was carefully considered and explained when 
the Bureau adopted the 2015 HMDA Final Rule,\93\ and commenters have 
not provided a basis to restructure the two-year look-back period in a 
way that would avoid re-introducing the reporting uncertainty that the 
structure of the thresholds aims to eliminate. The April 2017 HMDA 
Proposal did not envision increasing small entity reporting 
requirements. In addition, the Bureau did not propose additional 
compliance examples, and does not believe they are needed at this time. 
With the change from ``each'' to ``either,'' the application of the 
thresholds and complementary exclusions should be much clearer than 
before.
---------------------------------------------------------------------------

    \92\ The preamble to the 2015 HMDA Final Rule reflected this 
intent: ``The institutional and transactional coverage thresholds 
are designed to operate in tandem. Under these thresholds, a 
financial institution will report closed-end mortgage loans only if 
it satisfies the closed-end mortgage threshold and will report open-
end lines of credit only if it satisfies the separate open-end 
credit threshold.'' 2015 HMDA Final Rule, 80 FR 66128, 66149 (Oct. 
28, 2015).
    \93\ Id. at 66150.
---------------------------------------------------------------------------

    The Bureau also proposed a technical clarification to the example 
in comment 3(c)(11)-1 to describe more thoroughly the reporting 
requirements for financial institutions whose origination totals for 
the prior two years are above the threshold. The clarification would 
specify that the financial institution must report purchased loans, as 
well as originated loans and applications, as required by Sec. Sec.  
1003.4(a) and 1003.5(a). One commenter stated its support for the 
change, without further discussion, and no other commenters discussed 
it. The Bureau now adopts the clarification as proposed.
Optional Reporting
    Although the 2015 HMDA Final Rule did not specifically state that 
optional reporting of the loans excluded by Sec.  1003.3(c)(11) is 
allowed, comment 3(c)(11)-1 states that a financial institution that is 
below the 25-mortgage loan threshold ``need not'' report such loans, 
suggesting that it might choose to report them. The Bureau proposed to 
clarify further that it interprets the exclusion in Sec.  
1003.3(c)(11), providing that the requirements of Regulation C do not 
apply to a closed-end mortgage loan if the financial institution 
originated fewer than 25 closed-end mortgage loans in either of the two 
preceding calendar years, to permit a financial institution to report 
closed-end mortgage loans and applications for closed-end mortgage 
loans voluntarily. The Bureau also solicited comment on whether a 
financial institution that reports such transactions voluntarily should 
be required to report all such transactions, and whether the voluntary 
reporting provision should be included in the regulation text, as well 
as the commentary.
    The Bureau received six comments discussing the voluntary reporting 
clarification. Four commenters expressed support for the provision and 
none expressed opposition. One commenter stated that voluntary 
reporting would reduce burden on smaller institutions. Another stated 
that voluntary reporting would allow financial institutions to prepare 
for implementation before they are required to report. A third 
commenter stated that a financial institution may prefer

[[Page 43101]]

voluntary reporting because it may continue to use the same compliance 
processes without incurring additional cost by switching implementation 
on and off from year to year, should its loan volumes vary above and 
below the threshold over time. However, one commenter stated that it 
did not believe that the information from voluntary reporting would be 
useful for fair lending analyses and that it would not itself choose to 
voluntarily report. Another commenter suggested that the Bureau 
explicitly state that the voluntary reporting provision includes and 
authorizes voluntary collection of demographic and other information. 
This commenter also requested that the Bureau clarify how the 
``permissible'' collection of such information referenced in Regulation 
B relates to voluntary reporting. Regulation B generally prohibits the 
collection of certain consumer information unless such collection is 
required or permitted by law. The Bureau recently issued a proposed 
rule that would amend Regulation B.\94\ Under that proposal, proposed 
Regulation B Sec.  1002.5(a)(4)(i) would permit certain voluntary 
collection of information as discussed in greater detail below.
---------------------------------------------------------------------------

    \94\ Amendments to Equal Credit Opportunity Act (Regulation B) 
Ethnicity and Race Information Collection, 82 FR 16307 (Apr. 4, 
2017).
---------------------------------------------------------------------------

    Three commenters expressed support for the inclusion of a 
requirement that voluntary reporters report all the relevant excluded 
covered loans and applications. No commenters expressed opposition to 
including this requirement. One industry commenter stated that 
requiring the reporting of all excluded covered loans and applications 
would give financial institutions a more complete understanding of the 
HMDA requirements. A consumer advocacy group commenter stated that 
selective reporting of excluded transactions could hide fair lending 
violations and compromise CRA exams.
    Two commenters expressed support for including the voluntary 
reporting provision in the regulation text rather than just the 
comment. No commenters expressed opposition. One of these commenters 
said that including the provision in the regulation text would avoid 
confusion, and the other stated that it would highlight the Bureau's 
demonstrated attempts to harmonize regulations to reduce obligations on 
smaller institutions.
    The Bureau has considered the comments and is adopting the 
provision allowing optional reporting of the loans excluded by Sec.  
1003.3(c)(11) as proposed, and is placing it in the rule text with 
additional explanation in the commentary. Final Sec.  1003.3(c)(11) 
includes new language stating that a financial institution may collect, 
record, report, and disclose information, as described in Sec. Sec.  
1003.4 and 1003.5, a closed-end mortgage loan that would otherwise be 
excluded under Sec.  1003.3(c)(11) because of the threshold as though 
it is a covered loan, provided that the financial institution complies 
with such requirements for all applications for closed-end mortgage 
loans which it receives, closed-end mortgage loans that it originates, 
and closed-end mortgage loans that it purchases during the calendar 
year during which final action is taken on the closed-end mortgage 
loan. As noted above, the Bureau recently proposed to amend Regulation 
B to add Sec.  1002.5(a)(4)(i), which would permit a creditor that is a 
financial institution under 12 CFR 1003.2(g) to collect information 
regarding the ethnicity, race, and sex of an applicant for a closed-end 
mortgage loan that is an excluded transaction under 12 CFR 
1003.3(c)(11) if it submits HMDA data concerning such closed-end 
mortgage loans and applications or if it submitted HMDA data concerning 
closed-end mortgage loans for any of the preceding five calendar years. 
The Bureau is in the process of reviewing the comments and considering 
whether to issue a final rule, which the Bureau expects would be issued 
soon after the date this rule is issued. The Bureau may offer 
additional clarification about the relationship between permissible 
collection and reporting at that time.
    The Bureau believes that the exclusion in Sec.  1003.3(c)(11) (and, 
as discussed below, in Sec.  1003.3(c)(12)), differs from the 
exclusions in Sec.  1003.3(c)(1)-(10), and the new Sec.  1003.3(c)(13), 
discussed below, because the applicability of the Sec.  1003.3(c)(11) 
exclusion is not intrinsic to the loan. Whether the loan is excluded 
can be determined only by reference to the financial institution's 
origination activity over two years. The Bureau believes that financial 
institutions that choose to report when they are not required to, 
particularly when the institution's total of closed-end mortgage loans 
may fluctuate above or below the threshold, may reduce their regulatory 
burden by doing so. In addition, the Bureau believes that requiring 
financial institutions that choose to report such excluded loans to 
report all such covered loans and applications will help ensure the 
accuracy and usefulness of the HMDA data reported and prevent selective 
reporting that could disguise fair lending violations. The Bureau 
agrees that including the optional reporting provision in the 
regulation text will avoid confusion and facilitate compliance.
    As discussed in the 2015 HMDA Final Rule, the Bureau adopted Sec.  
1003.2(g)(1) 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 in the 2015 HMDA Final Rule, the Bureau found 
that the exception in Sec.  1003.2(g)(1) exception is necessary and 
proper to effectuate the purposes of HMDA. The Bureau found that by 
reducing burden on financial institutions and establishing a consistent 
loan-volume test applicable to all financial institutions, the 
provision will facilitate compliance with HMDA's requirements.\95\ As 
discussed in the 2015 HMDA Final Rule, the Bureau adopted Sec.  
1003.2(g)(2) pursuant to its interpretation of 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. The Bureau stated 
that it interprets these provisions, as the Board also did, to evince 
the intent to exclude from coverage institutions that make a relatively 
small volume of mortgage loans.\96\ The Bureau implemented Sec.  
1003.3(c)(11) (and, for similar reasons, Sec.  1003.3(c)(12), as 
discussed further below), because the Bureau does not believe that it 
is useful to burden such institutions with reporting closed-end 
mortgage data merely because their open-end lending exceeded the 
separate, open-end loan volume threshold in Sec.  1003.2(g).\97\ As 
discussed above, the Bureau believes that permitting optional reporting 
of these excluded loans by a financial institution is consistent with 
the statute and will reduce burden on certain financial institutions.
---------------------------------------------------------------------------

    \95\ 2015 HMDA Final Rule, 80 FR 66128, 66150 (Oct. 28, 2015).
    \96\ Id. at 66153.
    \97\ Id. at 66173.
---------------------------------------------------------------------------

    In addition to the comments directly addressing the voluntary 
reporting provision, two commenters suggested that the Bureau provide a 
safe harbor in relation to voluntary reporting. One of these commenters 
stated that the Bureau should provide voluntary reporters a safe harbor 
or other relief from liability

[[Page 43102]]

under Regulation C. The other suggested that financial institutions 
should be given a safe harbor to collect demographic data if they are 
using the information for fair lending self-testing in accordance with 
Regulation B or the institution has met the reporting threshold in 
either of the previous two years.
    The Bureau did not propose a safe harbor for voluntary reporters of 
excluded transactions below the origination threshold and therefore 
does not believe that adopting one in this final rule would be 
appropriate. A safe harbor may weaken the reliability of the data 
reported, and the Bureau has not had the benefit of notice and public 
comment in considering this complex issue.
3(c)(12)
    As adopted in the 2015 HMDA Final Rule, Sec.  1003.3(c)(12) 
provides an exclusion from the requirement to report open-end lines of 
credit for institutions that did not originate at least 100 such loans 
in each of the two preceding calendar years. This threshold was 
intended to complement an open-end reporting threshold included in the 
definition of financial institution in Sec.  1003.2(g), which sets 
forth Regulation C's institutional coverage. The Bureau proposed 
amendments to Sec.  1003(c)(12) and its commentary to raise temporarily 
the open-end threshold to 500 loans and to make the same clarifying 
amendments, including optional reporting, as in Sec.  1003.3(c)(11), 
which addresses the reporting threshold for closed-end mortgage loans. 
The Bureau is finalizing the proposed amendments as discussed below.
Level of Threshold
    Section 1003.3(c)(12), as adopted by the 2015 HMDA Final Rule, 
provides that an open-end line of credit is an excluded transaction, 
and thus not subject to Regulation C, if the financial institution 
originated fewer than 100 open-end lines of credit in each of the two 
preceding calendar years. As discussed in more detail in the section-
by-section analysis of Sec.  1003.3(c)(11) and further below, the 
exclusion as adopted in the 2015 HMDA Final Rule was intended to apply 
if the financial institution originated fewer than 100 open-end lines 
of credit in either of the two preceding calendar years.\98\ As 
discussed in more detail in the section-by-section analysis of Sec.  
1003.(2)(g), in the July 2017 HMDA Proposal, the Bureau proposed to 
raise temporarily the open-end threshold to 500 loans. The Bureau 
proposed conforming amendments to Sec.  1003.3(c)(12) and comment 
3(c)(12)-1, and to proposed new comment 3(c)(12)-2, which was included 
in the April 2017 HMDA Proposal, as discussed in more detail below, to 
provide guidance regarding voluntary reporting. Under proposed Sec.  
1003.3(c)(12), for calendar years 2018 and 2019, a financial 
institution that originated between 100 and 499 open-end lines of 
credit in either of the two preceding calendar years would not be 
required to begin collecting data on such open-end lines of credit 
before 2020. Comments regarding the proposed temporary adjustment to 
the open-end threshold are discussed in the section-by-section analysis 
of Sec.  1003.2(g). For the reasons discussed in the section-by-section 
analysis of Sec.  1003.2(g), the Bureau is adopting the amendments as 
proposed, increasing the open-end line of credit threshold to 500 for 
calendar years 2018 and 2019.
---------------------------------------------------------------------------

    \98\ As noted above and as explained in the April 2017 HMDA 
Proposal, under the institutional coverage threshold adopted by the 
2015 HMDA Final Rule, the definition of financial institution 
included only institutions that originate either 25 or more closed-
end mortgage loans or 100 or more open-end lines of credit in each 
of the two preceding calendar years and satisfy the other applicable 
coverage criteria. That threshold and the transactional coverage 
threshold in 12 CFR 1003.3(c)(11) and (12) were intended to be 
complementary exclusions. April 2017 HMDA Proposal, 82 FR 19142, 
19149 (Apr. 25, 2017).
---------------------------------------------------------------------------

Optional Reporting and Other Technical and Clarifying Amendments
    Section 1003.2(g), as adopted by the 2015 HMDA Final Rule, provides 
loan-volume thresholds, for closed-end mortgage loans and open-end 
lines of credit, for Regulation C's coverage of financial institutions. 
As discussed above, the 2015 HMDA Final Rule set the threshold for 
open-end lines of credit at 100 open-end lines originated in each of 
the two preceding calendar years. Section 1003.3(c)(12), as adopted by 
the 2015 HMDA Final Rule, provides an exclusion for loans below a given 
threshold, providing that an open-end line of credit is an excluded 
transaction if a financial institution originated fewer than 100 open-
end lines of credit in each of the two preceding calendar years. The 
use of the word ``each'' in Sec.  1003.3(c)(12) is a drafting error. 
For the same reason as described above in the section-by-section 
analysis of Sec.  1003.3(c)(11), the Bureau proposed to amend Sec.  
1003.3(c)(12) and comment 3(c)(12)-1 by replacing the word ``each'' 
with ``either'' to clarify how a financial institution applies the 
exclusion. The Bureau is now adopting that correction. Comments 
generally discussing the proposed adjustment to the open-end threshold 
are discussed in the section-by-section analysis of Sec.  1003.2(g). 
None of the comments received on the proposal to replace ``each'' with 
``either'' differentiated between the Sec.  1003.3(c)(11) closed-end 
mortgage loan exclusion explained above and the Sec.  1003.3(c)(12) 
open-end line of credit exclusion, and the Bureau believes that the 
same reasoning applies to both.
    Similarly, the Bureau adopts the clarification that would specify 
that the financial institution must report purchased loans, as well as 
originated loans and applications, as required by Sec. Sec.  1003.4(a) 
and 1003.5(a), for the same reasons as described above in the section-
by-section analysis of Sec.  1003.3(c)(11).
    As with the Sec.  1003.3(c)(11) exclusion for closed-end mortgage 
loans, the Bureau proposed to clarify that it interprets the exclusion 
in Sec.  1003.3(c)(12), now providing that the requirements of 
Regulation C do not apply to an open-end line of credit if the 
financial institution originated fewer than 500 open-end lines of 
credit in either of the two preceding calendar years, to permit a 
financial institution to report such open-end lines of credit and 
applications for open-end lines of credit voluntarily.
    For the same reasons as explained above regarding the Sec.  
1003.3(c)(11) closed-end mortgage loan exclusion, the Bureau is 
adopting the provision allowing optional reporting of transactions 
excluded by Sec.  1003.3(c)(12) by including language in the regulation 
text that states that a financial institution may collect and report 
data on such loans provided that it reports all open-end lines of 
credit and applications that would otherwise be covered loans for a 
given calendar year. None of the comments received on the issue of 
optional reporting differentiated between the Sec.  1003.3(c)(11) 
closed-end mortgage loan exclusion explained above and the Sec.  
1003.3(c)(12) open-end line of credit exclusion, and the Bureau 
believes that the same reasoning applies to both.
3(c)(13)
    Comment 2(d)-2.ii, as adopted by the 2015 HMDA Final Rule, provided 
a narrow exception to Regulation C's general rule that an extension of 
credit occurs only when a new debt obligation is created.\99\ The 
exception covers

[[Page 43103]]

transactions completed pursuant to a New York State consolidation, 
extension, and modification agreement and classified as a supplemental 
mortgage under New York Tax Law section 255, such that the borrower 
owes reduced or no mortgage recording taxes (New York CEMAs). To 
facilitate the newly required reporting of New York CEMAs, the Bureau 
proposed an exclusion from reporting for preliminary transactions that 
provide new funds that are then consolidated into New York CEMAs, as 
explained below, and an associated comment. The Bureau is adopting this 
provision largely as proposed, with language added to the associated 
comment to clarify use of the exclusion.
---------------------------------------------------------------------------

    \99\ In the 2015 HMDA Final Rule, the Bureau adopted Sec.  
1003.2(d) to provide that a closed-end mortgage loan is a dwelling-
secured extension of credit that is not an open-end line of credit. 
Revised comment 2(d)-2 explains that, for purposes of Regulation C, 
an ``extension of credit'' refers to the granting of credit pursuant 
to a new debt obligation. If a transaction modifies, renews, 
extends, or amends the terms of an existing debt obligation without 
satisfying and replacing the original debt obligation with a new 
debt obligation, the transaction generally is not an extension of 
credit under revised Regulation C. In addition, revised comment 
2(d)-2.i provided another exception, for assumptions, which 
Regulation C historically has covered. The Bureau is not making any 
change to the assumptions exception.
---------------------------------------------------------------------------

    New York CEMAs are loans secured by dwellings located in New York. 
They generally are used in place of traditional refinancings, either to 
amend a transaction's interest rate or loan term, or to permit a 
borrower to take cash out. However, unlike a traditional refinancing, 
the existing debt obligation is not satisfied and replaced by a new 
obligation. Instead, the existing obligation or obligations are 
consolidated into a new loan, either by the same or a different lender, 
and either with or without new funds being added to the existing loan 
balance through a preliminary credit transaction that then becomes part 
of the consolidation. Under New York State law, if no new money is 
added by a preliminary, subsequently consolidated transaction, there is 
no ``new'' mortgage, and the borrower avoids paying the mortgage 
recording taxes that would have been imposed if a traditional 
refinancing had been used and the original obligation had been 
satisfied and replaced. If new money is added through a preliminary 
transaction that then becomes part of the consolidated loan, the 
borrower pays mortgage recording taxes only on the new money.\100\ 
While generally used in place of traditional refinancings, New York 
CEMAs also can be used for home purchases (i.e., to complete an 
assumption), where the seller and buyer agree that the buyer will 
assume the seller's outstanding principal balance, and that balance is 
consolidated with a new loan to the borrower for the remainder of the 
purchase price that the buyer is financing.
---------------------------------------------------------------------------

    \100\ See N.Y. Tax Law section 255 (McKinney. 2004).
---------------------------------------------------------------------------

    The Bureau explained in the 2015 HMDA Final Rule preamble that New 
York CEMAs are to be reported because the Bureau believed that they 
present a situation where a new debt obligation is created in 
substance, if not in form, and that the benefits of requiring such 
transactions to be reported justify the burdens.\101\ Such transactions 
are relatively common in New York, and the Bureau believed that 
reporting of New York CEMAs would provide useful information about this 
segment of the market. The provision interpreting ``extension of 
credit'' to include New York CEMAs in comment 2(d)-2.ii as adopted by 
the 2015 HMDA Final Rule was meant to clarify the reporting 
requirements regarding New York CEMAs.
---------------------------------------------------------------------------

    \101\ 2015 HMDA Final Rule, 80 FR 66128, 66143 (Oct. 28, 2015).
---------------------------------------------------------------------------

    In treating New York CEMAs as extensions of credit, the 2015 HMDA 
Final Rule departed from prior guidance from the Board that CEMAs, 
which modify and consolidate existing debt while generally extending 
the loan term, were not covered transactions because they did not meet 
the definition of a refinancing.\102\ Comment 2(d)-2.ii, as adopted by 
the 2015 HMDA Final Rule, explains that a New York CEMA should be 
considered an extension of credit for purposes of Regulation C, and a 
financial institution must report New York CEMAs if they are otherwise 
covered transactions. To facilitate the reporting of New York CEMAs, 
the Bureau's April 2017 HMDA Proposal would include an exclusion from 
reporting for preliminary transactions that provide new funds that are 
then consolidated into New York CEMAs, as explained above. The 
exception would further provide that the transaction is excluded only 
if final action on the consolidation was taken in the same calendar 
year as final action on the new funds.
---------------------------------------------------------------------------

    \102\ See id. at 66142.
---------------------------------------------------------------------------

    Four commenters discussed the proposed exclusion. Three expressed 
support for the exclusion, and the fourth only objected to the proposed 
timing requirement, as discussed below. A consumer advocacy group 
commenter stated that the proposal would eliminate double counting and 
lead to a more accurate picture of how successful financial 
institutions are at meeting credit needs. Although they expressed 
support for the proposal, two industry commenters objected to the 2015 
HMDA Final Rule's treatment of New York CEMAs as extensions of credit, 
and another requested that the proposed exclusion for preliminary 
transactions be expanded to include non-New York consolidations.
    The Bureau has considered the comments and is adopting the proposed 
exclusion as proposed, with the clarifications discussed below. The 
Bureau is adopting the exclusion to simplify and clarify reporting 
requirements regarding transactions associated with New York CEMAs. As 
explained above, a borrower may enter into a CEMA that consolidates 
both the prior debt and new funds. The new funds are added through a 
preliminary credit transaction in which the borrower obtains an 
extension of credit providing only the new funds. Then, the CEMA 
consolidates the new-funds transaction with the original mortgage loan 
into a single loan. Because the initial transaction is an extension of 
credit, it would be reportable under revised Regulation C if it were 
otherwise a covered loan. Regarding New York CEMAs, this would lead to 
double reporting of the new funds, once through reporting of the 
preliminary transaction, and again through reporting of the full New 
York CEMA, which includes the new funds. The Bureau believes that such 
an outcome would elevate the form of the transaction over the substance 
of the resulting consumer indebtedness and could present challenges in 
interpreting the reported data. Therefore, the Bureau believes it is 
appropriate to require that only the New York CEMA, i.e., the single, 
consolidated loan that results after both sequential transactions are 
completed, be reported. Insofar as a New York CEMA is the functional 
equivalent of a refinancing achieved by other means purely for tax 
reasons, a New York CEMA that consolidates a preliminary extension of 
new funds is generally the functional equivalent of a refinancing with 
new funds extended, i.e., a ``cash-out'' refinancing, which is clearly 
a single transaction and thus is reported as such.
    To achieve this outcome, the Bureau is adopting Sec.  
1003.3(c)(13), which provides that any transaction providing or, in the 
case of an application, proposing to provide new funds in advance of a 
consolidation as part of a New York CEMA is an excluded transaction. 
The Bureau also adopts proposed comment 3(c)(13)-1 explaining the 
application of the new Sec.  1003.3(c)(13) exclusion. The Bureau 
believes that this exclusion will clarify and simplify reporting of New 
York CEMAs, eliminating double reporting

[[Page 43104]]

and facilitating compliance for financial institutions that provide New 
York CEMAs. The exclusion does not change the exception in comment 
2(d)-2.ii that requires New York CEMAs to be reported as extensions of 
credit, which the Bureau continues to believe is appropriate and 
necessary for the reasons stated above and in the 2015 HMDA Final 
Rule.\103\ In addition, the Bureau chose not to change the treatment of 
preliminary, new money transactions regarding CEMAs made pursuant to 
the law of States other than New York because the problem of double 
counting does not exist when the CEMA is not itself being reported, as 
is the case outside New York.
---------------------------------------------------------------------------

    \103\ Id. at 66143.
---------------------------------------------------------------------------

    One industry commenter expressed support for the timing requirement 
of the Sec.  1003.3(c)(13) exclusion, which requires that the 
preliminary transaction and the consolidation occur within the same 
calendar year, stating that it would provide a clear timeline for 
reporting. Two other industry commenters objected to the timing 
requirement, stating that it was unnecessary because the preliminary 
transaction and consolidation usually happens at about the same time. 
One of these commenters said that the timing provision was potentially 
confusing and problematic, and could create difficulties for year-end 
transactions. That commenter suggested that the Bureau should instead 
limit the exclusion to cases where the borrower applies for the new 
money and the consolidation at the same time. That commenter also 
requested that, if the timing provision is not changed, the Bureau 
clarify that an earlier, unrelated loan that occurs in the same year 
and is later consolidated in a New York CEMA is not required to be 
excluded, which would otherwise create tracking and compliance 
challenges. In addition, the industry commenter that expressed support 
for the timing provision requested that the Bureau clarify that a 
consolidation will be considered as having been concluded in a calendar 
year even if the right of rescission extends into January of the next 
year.
    The Bureau has considered the comments on the timing provision and 
is adopting the provision as proposed, clarifying that the exclusion 
applies only to a transaction that is consolidated in a New York CEMA 
if the final action on the consolidation has been taken before the end 
of the calendar year in which final action on the preliminary 
transaction occurred. The Bureau is also adding new language to comment 
3(c)(13)-1 to address how the exclusion relates to earlier, unrelated 
transactions that are consolidated into New York CEMAs in the same 
calendar year and how to report New York CEMAs that involve 
assumptions.
    The Bureau believes that consolidation of a prior transaction into 
the New York CEMA qualifies it as an excluded transaction, thus final 
action on the consolidation must occur within the relevant final 
reporting period in order for the HMDA data to be accurate and 
reporting requirements to be clear. As two of the commenters pointed 
out, the preliminary new funds transaction and the consolidation will 
generally occur at about the same time, and therefore in the vast 
majority of these situations the timing requirement will not even be 
potentially implicated. In addition, the three-day right of rescission 
has no bearing on the date of the action taken on the originated 
preliminary transaction or the New York CEMA, which would occur at 
closing. As long as the consolidation occurs on or before December 31 
of the year final action was taken on the preliminary transaction, it 
would be excluded. For those very few situations in which the two 
transactions might straddle the year's end, the financial institution 
can avoid this problem through a scheduling change, or can report the 
two transactions separately.
    The Bureau chooses not to adopt the suggestion that the proposed 
timing requirement be replaced with a requirement that the applications 
for the preliminary transaction and the consolidation into the New York 
CEMA occur at the same time. Such a provision would lack the clarity 
regarding reporting requirements that a definite year-end cutoff 
provides.
    To clarify the exclusion's timing requirement, the Bureau is adding 
language to comment 3(c)(13)-1 to clarify that a transaction that 
occurs earlier in the same year and is later consolidated in a New York 
CEMA is not excluded if the financial institution did not, when 
originated, intend to later consolidate it into a New York CEMA. The 
comment now states that the exclusion applies only if, at the time of 
the transaction that provided or proposed to provide new funds, the 
financial institution intended to consolidate the loan into a New York 
CEMA. The Bureau believes that this language will clarify and simplify 
reporting requirements in this situation because the financial 
institution will not need to track earlier, unrelated loans and can 
apply the exclusion based on its own knowledge of the transaction.
    The commenters who discussed New York CEMAs also asked for certain 
clarifications of how the proposed exclusion and the 2015 HMDA Final 
Rule provision will work. One commenter requested clarification of how 
to report a new money transaction preliminary to a consolidation 
outside of New York. Another commenter asked the Bureau to clarify 
whether preliminary, new money transactions that are consolidated into 
New York CEMAs involving assumptions will be covered by the new 
exclusion. In addition, one commenter asked for clarification that the 
Bureau's interpretation of New York CEMAs as extensions of credit is 
not meant to preempt State law interpretations of New York Tax Law 
section 255.
    Consolidation transactions similar to New York CEMAs occur in 
States other than New York, although the Bureau believes they are far 
less common.\104\ Non-New York CEMAs may be called CEMAs or MECAs 
(modification, extension and consolidation agreements). In the 2015 
HMDA Final Rule, the Bureau limited the reporting requirement in 
comment 2(d)-2.ii to New York CEMAs. As with New York CEMAs, similar 
transactions in other States may involve preliminary transactions the 
proceeds of which become part of the consolidation. In addition to the 
interpretation discussed above, comment 3(c)(13)-1 explains that the 
exclusion for preliminary transactions consolidated into New York CEMAs 
does not apply to similar preliminary transactions that are 
consolidated pursuant to the law of States other than New York, 
providing an example. The comment also explains that, if such a 
preliminary transaction providing or proposing to provide new funds is 
a covered loan or application, it must be reported. In addition, the 
comment also states that if the associated consolidation and 
modification agreement is carried out pursuant to the law of a State 
other than New York and is not an extension of credit under Regulation 
C, it may not be reported.
---------------------------------------------------------------------------

    \104\ Id. at 66143 n.113.
---------------------------------------------------------------------------

    Regarding the method for reporting these preliminary transactions 
for CEMAs or MECAs outside New York, if the eventual consolidation is 
not an extension of credit, as described by comments 2(d)-2 as adopted 
by the 2015 HMDA Final Rule, the financial institution should report 
data related only to the terms of the preliminary, new funds 
transaction and treat the CEMA or MECA that follows as if it were an 
unrelated transaction. As noted in the 2015 HMDA Final Rule, the Bureau 
believes that limiting the scope

[[Page 43105]]

of reportable MECAs/CEMAs to those covered by New York Tax Law section 
255 will permit New York CEMAs to be reported while avoiding the 
confusion that, as the Board worried, could result from departing from 
a bright-line ``satisfies and replaces'' rule for the definition of 
refinancings generally.
    New York CEMAs are sometimes carried out in a transaction involving 
an assumption. The Bureau notes that the 2015 HMDA Final Rule, the 
April 2017 HMDA Proposal, and this final rule all include references to 
home purchase by assumption using a New York CEMA.\105\ As long as the 
CEMA fits the description of a New York CEMA in comment 2(d)-2.ii, and 
the preliminary new money transaction meets the requirements of Sec.  
1003.3(c)(13), the financial institution should report the New York 
CEMA, pursuant to comment 2(d)-2.ii, and should not report the 
preliminary transaction, pursuant to Sec.  1003.3(c)(13). In this way, 
the assumption is reported under Regulation C. The Bureau is adding 
language to comment 3(c)(13)-1 to make this clear.
---------------------------------------------------------------------------

    \105\ 2015 HMDA Final Rule, 80 FR 66128, 66142 (Oct. 28, 2015); 
April 2017 HMDA Proposal, 82 FR 19142, 19150 (Apr. 25, 2017).
---------------------------------------------------------------------------

    Regarding the comment requesting clarification of the relation of 
Regulation C's requirement to report New York CEMAs to New York State's 
interpretation of New York Tax Law section 255, the Bureau points out 
that Regulation C and HMDA set out requirements for collecting, 
recording, and reporting information. The requirement to report New 
York CEMAs as extensions of credit for HMDA purposes is not intended to 
preempt or otherwise affect the proper interpretation of New York Tax 
Law section 255.
    HMDA section 305(a) authorizes the Bureau to prescribe such 
regulations as may be necessary to carry out HMDA's purposes.\106\ 
These regulations may 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.'' \107\ As explained above, the new exception would 
effectuate the purposes of HMDA and facilitate compliance by 
eliminating double reporting of preliminary transactions that are 
subsequently consolidated in New York CEMA transactions.
---------------------------------------------------------------------------

    \106\ 12 U.S.C. 2804(a).
    \107\ Id.
---------------------------------------------------------------------------

Section 1003.4 Compilation of Reportable Data

4(a) Data Format and Itemization
4(a)(1)
4(a)(1)(i)
    HMDA section 304(b)(6)(G), as amended by Dodd-Frank Act section 
1094(3)(A)(iv), authorizes the Bureau to require a universal loan 
identifier (ULI), as it may determine to be appropriate.\108\ Current 
Sec.  1003.4(a)(1) requires financial institutions to report an 
identifying number for each covered loan or application reported. As 
adopted by the 2015 HMDA Final Rule, Sec.  1003.4(a)(1)(i) requires 
financial institutions to provide a universal loan identifier (ULI) for 
each covered loan or application reported. Section 1003.4(a)(1)(i) and 
its associated commentary also address ULI requirements for purchased 
covered loans and applications that are reconsidered or reinstated 
during the same calendar year. In addition, Sec.  1003.4(a)(1)(i)(C), 
as adopted by the 2015 HMDA Final Rule, requires a check digit as part 
of the ULI. The check digit is meant to enable financial institutions 
to identify and correct errors in the ULI, which would ensure a valid 
ULI, and therefore enhance data quality. As part of the 2015 HMDA Final 
Rule, the Bureau published new appendix C that includes the methodology 
for generating a check digit and instructions on how to validate a ULI 
using the check digit. In the April 2017 HMDA Proposal, the Bureau 
proposed certain amendments to appendix C and to the commentary to 
Sec.  1003.4(a)(1)(i).
---------------------------------------------------------------------------

    \108\ 12 U.S.C. 2803(b)(6)(G).
---------------------------------------------------------------------------

    Previous to the April 2017 HMDA Proposal, the Bureau had become 
aware of a typographical error that occurs twice in appendix C and 
makes one method of computing the check digit inaccurate. The Bureau 
proposed to revise appendix C by substituting 97 for .97 in two places 
in the relevant instructions in appendix C.
    All the commenters that discussed the proposed technical correction 
to appendix C expressed support for the change. One industry commenter 
stated that it had noticed the error and had begun implementation 
assuming that it was wrong.
    The Bureau is adopting the technical correction as proposed. Step 3 
of the method for computing the check digit has two alternatives. 
Appendix C mistakenly provided that the second of the alternatives 
requires multiplication by .97 when the needed operation requires 
multiplication by 97 for the result to be accurate. The same 
typographical error occurred in Step 3 of the example based on this 
alternative method. The computation result presented in the example, 
59.946, can be reached only by multiplying by 97, not .97. To ensure 
correct computation of the check digit, the Bureau now substitutes 97 
for .97 in the two places where the error occurred.
    For those financial institutions that do not wish to calculate the 
check digit themselves, the Bureau also notes that it will provide a 
check digit tool on its Web site before the effective date of the 2015 
HMDA Final Rule.
    In addition to the check digit technical correction, the Bureau 
proposed to amend comments 4(a)(1)(i)-3 and -4 to reflect the different 
effective dates for data reporting requirements adopted by the 2015 
HMDA Final Rule. Specifically, the Bureau proposed to amend comments 
4(a)(1)(i)-3 and -4, effective January 1, 2018, to remove the 
references to quarterly reporting, and to amend comments 4(a)(1)(i)-3 
and -4, effective January 1, 2020, to reincorporate the references to 
quarterly reporting. The Bureau also proposed certain non-substantive 
clarifications to comments 4(a)(1)(i)-3 and -4. For the reasons 
discussed below, the Bureau is adopting comments 4(a)(1)(i)-3 and -4, 
effective January 1, 2018, and as amended again effective January 1, 
2020, as proposed, with minor technical revisions.
    Several commenters expressed support for the proposed 
clarifications to comments 4(a)(1)(i)-3 and -4 regarding purchased 
loans and reconsidered or reinstated applications. One national trade 
association stated that the guidance regarding reinstated or 
reconsidered applications generally reflects the operations of most 
lenders. A few vendor commenters expressed concern with the term 
``assigned'' as used in proposed comment 4(a)(1)(i)-3 and requested 
that it be removed or that a definition of the term be provided. These 
commenters also stated that, because the loan identification number is 
often part of the ULI, not being able to use the same ULI for a 
reconsidered or reinstated application more than once would result in 
lenders needing to restart the application process to obtain a unique 
ULI. A few commenters expressed concern that multiple entities involved 
in a transaction could assign a ULI and requested additional guidance 
on which ULI to report in such instances. One commenter requested 
additional guidance on whether a new

[[Page 43106]]

ULI should be generated and reported in the case of assumptions while 
another commenter stated that uncertainty remained over how the ULI 
will be transferred between lenders, investors, and servicers.
    The Bureau is adopting comments 4(a)(1)(i)-3 and -4 effective 
January 1, 2018, and again as amended effective January 1, 2020, as 
proposed, with minor technical revisions. Final comment 4(a)(1)(i)-3 
does not change any substantive reporting requirements regarding 
purchased covered loans with previously assigned ULIs. Rather, it 
clarifies further the requirement in Sec.  1003.4(a)(1)(i)(D) that, for 
a purchased covered loan that any financial institution has previously 
assigned or reported with a ULI under Regulation C, the financial 
institution that purchases the covered loan must use the ULI that was 
assigned or previously reported for the covered loan. Regarding 
commenters' concerns about reinstated or reconsidered applications, 
final comment 4(a)(1)(i)-4 does not change the substantive requirements 
regarding when a financial institution may or may not use a previously 
reported ULI. Final comment 4(a)(1)(i)-4, effective January 1, 2020, 
clarifies that a financial institution may not use a ULI previously 
reported if it reinstates or reconsiders an application that was 
reported in a prior calendar year, but that a financial institution 
does have the option to report a ULI previously reported if an 
application is reconsidered or reinstated during the same calendar 
year. As explained in the 2015 HMDA Final Rule, ``the Bureau believes 
that providing this option for financial institutions will reduce 
burden associated with assigning a new ULI for a later transaction that 
a financial institution considers as a continuation of an earlier 
transaction.'' \109\
---------------------------------------------------------------------------

    \109\ 2015 HMDA Final Rule, 80 FR 66128, 66178 (Oct. 28, 2015).
---------------------------------------------------------------------------

    As to questions regarding the assignment of a ULI in situations 
where more than one entity is involved in a transaction, Sec.  
1003.4(a)(1) requires that, if a financial institution is required to 
report an application or origination under Regulation C, then, except 
as set forth in Sec.  1003.4(a)(1)(i)(D) and (E), that financial 
institution is responsible for assigning and reporting a unique ULI for 
that application or origination. Comment 4(a)(1)(i)-1 clarifies that a 
financial institution should assign only one ULI to any particular 
covered loan or application, and each ULI should correspond to a single 
application and ensuing loan if the application is approved and a loan 
is originated. Comment 4(a)(1)(i)-1 clarifies further that a financial 
institution may 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. Under comment 4(a)-2.i, if more than one financial 
institution is involved in the origination of a covered loan, then the 
institution that makes the credit decision approving the application 
before loan closing or account opening reports the origination and 
pursuant to Sec.  1003.4(a)(1) must assign a unique ULI to the covered 
loan. Pursuant to comment 4(a)-2.ii, in the case of an application for 
a covered loan that did not result in an origination, a financial 
institution reports the action it took on that application, and 
pursuant to Sec.  1003.4(a)(1) assigns a unique ULI to that 
application, if the financial institution made a credit decision on the 
application or was reviewing the application when the application was 
withdrawn or closed for incompleteness. Comment 4(a)-2.ii further 
provides that it is not relevant whether the financial institution 
received the application from the applicant or from another 
institution, such as a broker, or whether another financial institution 
also reviewed, reported an action taken, and assigned a ULI to the same 
application.
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.'' Current Sec.  1003.4(a)(2) implements HMDA section 304(b)(1) by 
requiring financial institutions to report the type of loan or 
application. In the 2015 HMDA Final Rule, the Bureau revised Sec.  
1003.4(a)(2) to require financial institutions to report whether the 
covered loan is, or in the case of an application would have been, 
insured by the Federal Housing Administration, guaranteed by the 
Veterans Administration, or guaranteed by the Rural Housing Service or 
the Farm Service Agency. The Bureau adopted new comment 4(a)(2)-1 to 
provide further guidance. The Bureau proposed to substitute 
``Department of Veterans Affairs'' for ``Veterans Administration'' in 
Sec.  1003.4(a)(2) and comment 4(a)(2)-1. The Bureau received one 
comment in support of these proposed changes, and is adopting Sec.  
1003.4(a)(2) and comment 4(a)(2)-1 as proposed.
4(a)(3)
    Current Sec.  1003.4(a)(3) requires financial institutions to 
report the purpose of a covered loan or application using the 
categories home purchase, home improvement, or refinancing. The Bureau 
revised Sec.  1003.4(a)(3) in the 2015 HMDA Final Rule to add an 
``other'' category, a cash-out refinancing category, and to make 
changes to the commentary to implement these additional categories and 
provide instructions for reporting covered loans with multiple 
purposes. In the April 2017 HMDA Proposal the Bureau proposed to add 
new comment 4(a)(3)-6 to provide that, for purchased covered loans 
where the origination took place before January 1, 2018, a financial 
institution complies with Sec.  1003.4(a)(3) by reporting that the 
requirement is not applicable.
    The Bureau received many comments supporting the proposed 
clarification, and several commenters stated that it would alleviate 
burden for purchasers of loans originated before January 1, 2018. One 
vendor stated that many smaller financial institutions may be able to 
determine loan purpose because they review purchased loan files and 
recommended that financial institutions have the option to comply with 
Sec.  1003.4(a)(3) by reporting the loan purpose or not applicable. A 
few commenters requested that the definitions of the loan purpose 
categories be changed to align with those set forth in Regulation Z 
Sec.  1026.37(a)(9).
    The Bureau is adopting comment 4(a)(3)-6 as proposed. The Bureau 
believes that final comment 4(a)(3)-6 provides a consistent standard 
that will facilitate compliance for financial institutions that 
purchase covered loans originated before January 1, 2018. The Bureau 
declines to revise Sec.  1003.4(a)(3) to align with Regulation Z Sec.  
1026.37(a)(9). As explained in the 2015 HMDA Final Rule, the Bureau 
does not believe that aligning Sec.  1003.4(a)(3) with Regulation Z 
Sec.  1026.37(a)(9) would be appropriate because Regulation Z Sec.  
1026.37(a)(9) does not include a loan purpose for home improvement 
loans and does not include a separate cash-out refinancing 
purpose.\110\
---------------------------------------------------------------------------

    \110\ Id. at 66180.
---------------------------------------------------------------------------

4(a)(8)
4(a)(8)(i)
    Section 1003.4(a)(8)(i), as adopted by the 2015 HMDA Final Rule, 
requires financial institutions to report the action taken on covered 
loans and

[[Page 43107]]

applications, and comment 4(a)(8)(i)-9 explains how to report the 
action taken when a financial institution makes a counteroffer to lend 
on terms different from the applicant's initial request and the 
applicant does not accept the counteroffer or fails to respond. Comment 
4(a)(8)(i)-13, as adopted by the 2015 HMDA Final Rule, provides 
guidance on how to report the action taken for different scenarios in 
which a conditional approval occurs. The Bureau proposed to clarify the 
guidance on reporting action taken for counteroffers, including its 
relation to the guidance on reporting action taken on conditional 
approvals.
    The Bureau recognized that revised comments 4(a)(8)(i)-9 and 
4(a)(8)(i)-13 may be read as in tension regarding how to report the 
action taken on an application for which a counteroffer is made, the 
applicant expresses interest in the new terms, and the financial 
institution provides a conditional approval to which the applicant does 
not respond or which otherwise does not result in an originated loan. 
Comment 4(a)(8)(i)-9 could be read to require the financial institution 
to report the action taken as a denial on the original loan terms 
applied for, while comment 4(a)(8)(i)-13 could be read to require the 
action taken to be reported as a denial, file closed for 
incompleteness, approved but not accepted, or application withdrawn, 
depending on the circumstances. In addition, the Bureau believed that 
limiting the reportable actions taken for counteroffers to only covered 
loan originated or application denied might lead to less complete and 
accurate reporting.
    In addressing inquiries raising this concern, the Bureau had 
provided informal guidance that a financial institution should follow 
comment 4(a)(8)(i)-13 when an application for which a counteroffer is 
made is followed by a conditional approval that does not result in an 
originated loan. In accordance with this informal guidance, and to 
address the need to provide a full range of options in reporting the 
action taken on an application when there is a counteroffer, the Bureau 
proposed to amend the language of comment 4(a)(8)(i)-9 to broaden the 
possible actions taken that could be reported. The Bureau proposed to 
clarify that, if the applicant agrees to proceed with consideration of 
the financial institution's counteroffer, the counteroffer takes the 
place of the prior application, and the financial institution reports 
the action taken on the application under the terms of the 
counteroffer. In addition, the Bureau proposed to illustrate this 
interpretation by providing an example in comment 4(a)(8)(i)-9. The 
example would clarify that, if a financial institution makes a 
counteroffer, the applicant agrees to proceed with consideration of the 
counteroffer, and the financial institution sends a conditional 
approval letter stating the terms of the counteroffer, the financial 
institution reports the action taken on the application in accordance 
with comment 4(a)(8)(i)-13 regarding conditional approvals.
    Five industry commenters expressed support for the changes to 
comment 4(a)(8)(i)-9, and three industry commenters expressed 
opposition. One commenter who expressed support for the changes stated 
that the guidance would ease the difficulties of reporting by allowing 
financial institutions' systems to reflect more accurately the 
specifics of the loan file at the time of final action without 
requiring additional fields.
    One commenter who expressed opposition to the changes preferred 
that comment 4(a)(8)(i)-9 be read to require that the action taken be 
reported as loan denied whenever a counteroffer is made and the loan is 
not ultimately originated. This commenter also stated that the new 
language was a major change and that financial institutions would have 
problems implementing it before the effective date. Two commenters 
expressed concern that it might be difficult for financial institutions 
to determine and track whether an applicant agrees to proceed with a 
counteroffer. Two commenters stated that this difficulty would be 
greater in the case of commercial and multifamily transactions because 
the negotiations are often fluid and several counteroffers may go back 
and forth. One commenter suggested that a financial institution should 
only have to report something more than loan denied if the loan 
origination system has been updated with the applicant's agreement to 
proceed. Another commenter suggested specific guidance for reporting 
action taken for different scenarios after a counteroffer.
    Two commenters suggested that the language added to comment 
4(a)(8)(i)-9 conflicts with the treatment of counteroffers in 
Regulation B, which one suggested does not treat a counteroffer as a 
new application when an applicant agrees to proceed. Two commenters 
objected to the idea of a counteroffer being treated as a new 
application, with one asking how the original application should then 
be reported. One commenter who expressed support for the changes stated 
that many financial institutions do not use conditional approval 
letters, and requested that the example in comment 4(a)(8)(i)-9 be 
changed to allow other indications of a conditional approval. Finally, 
one commenter requested that a deleted sentence stating that a 
financial institution should report the action taken as loan originated 
when a loan is originated after a counteroffer should be put back into 
the comment.
    The Bureau now adopts the amendment to comment 4(a)(8)(i)-9 largely 
as proposed, with some modifications to address commenters' concerns. 
First, the example in comment 4(a)(8)(i)-9 no longer includes a 
reference to a conditional approval letter, which the Bureau did not 
intend to suggest was required for a conditional approval to exist. The 
Bureau believes that removing the reference to a conditional approval 
letter will broaden the applicability of the example and facilitate 
compliance. Second, the comment is revised to clarify that a financial 
institution reports the action taken based on the final disposition of 
the application in response to the terms of the counteroffer. 
Information such as the application date and ULI will not change as a 
result of the existence of a counteroffer with which the applicant is 
proceeding. An additional example is also added to the commentary.
    The Bureau continues to believe that it is necessary to provide a 
full range of options in reporting the action taken on an application 
when there is a counteroffer. The Bureau agrees with the industry 
commenter who stated that the guidance would ease the difficulties of 
reporting by allowing financial institutions' systems to reflect more 
accurately the specifics of the loan file at the time of final action. 
In addition, the Bureau believes that those institutions and vendors 
that were reading comments 4(a)(8)(i)-9 and -13 differently from this 
clarification will have adequate time to change their systems. To the 
extent the clarifications in this rule require financial institutions 
to make technical changes, those changes require only minor 
adjustments, not significant system updates. In addition, the Bureau 
has issued this final rule in August, four months before 2018, which 
the Bureau believes should afford ample time to implement any necessary 
minor system adjustments. The Bureau is releasing implementation aids 
with this final rule to facilitate implementation.
    Although some financial institutions may find added difficulty in 
determining and tracking the action taken for counteroffers if they 
were previously interpreting the comments

[[Page 43108]]

differently, the majority of industry commenters support the 
clarification and do not appear to believe that undue burden will 
result. In addition, the Bureau believes that accurate reporting of the 
action taken in this situation will enhance the accuracy and usefulness 
of HMDA data. The Bureau does not believe that allowing compliance and 
accuracy to depend entirely on whether a financial institution has 
updated its loan origination system would provide the necessary 
accuracy or uniformity. Regarding commercial and multifamily 
transactions, the Bureau notes that a financial institution may report 
the action taken on an application that does not result in an 
originated loan by reference to the final counteroffer made and is not 
required to consider any previous negotiations. Although the Bureau 
appreciates the suggestion of new options for reporting action taken 
that were provided by one of the commenters, the Bureau believes that 
the combination of options provided by comments 4(a)(8)(i)-9 and -13 
are sufficient, and the Bureau has not had the benefit of notice and 
public comment on this newly suggested guidance.
    In addition, the Bureau does not believe that the new language in 
comment 4(a)(8)(i)-9 conflicts with the requirements of Regulation 
B.\111\ Regulation B and Regulation C address different requirements: 
The revisions to comment 4(a)(8)(i)-9 clarify reporting of the action 
taken field while Regulation B, 12 CFR 1002.9(a), sets forth when an 
adverse action notice is required. Thus, comment 4(a)(8)(i)-9 does not 
affect a financial institution's obligation to comply with Regulation 
B.
---------------------------------------------------------------------------

    \111\ The new language in comment 4(a)(8)(i)-9 does not affect a 
financial institution's obligation to comply with Regulation B Sec.  
1002.9. See comment 4(a)(8)(i)-6 for a discussion of the relation 
between Regulation B and Regulation C compliance regarding reporting 
the action taken when the file is closed for incompleteness.
---------------------------------------------------------------------------

    Furthermore, the Bureau has replaced the language in the proposed 
comment stating that the counteroffer takes the place of the prior 
application. This change is meant to make clear that the revisions to 
comment 4(a)(8)(i)-9 do not treat a counteroffer as a new covered loan 
that must be reported as a separate entry in the loan/application 
register, but rather provide that for purposes of reporting action 
taken, where the applicant agrees to proceed with consideration of the 
financial institution's counteroffer, the financial institution reports 
the action taken field as the disposition of the application based on 
the terms of counteroffer.
    In addition to the change to comment 4(a)(8)(i)-9, the Bureau 
proposed a technical correction to comment 4(a)(8)(i)-6, as adopted by 
the 21015 HMDA Final Rule, correcting a citation that was intended to 
reference Regulation B, 12 CFR 1002.9(c)(1)(i). The citation read, ``12 
CFR 1002.9(c)(i).'' The proposal would correct the typographical error 
by inserting the ``(1)'' paragraph designation missing from the 
citation. The Bureau received no comments on this technical correction 
and now adopts it as proposed. The Bureau is also adding language to 
clarify a different, correct citation in the comment.
4(a)(9)
4(a)(9)(i)
    Section 1003.4(a)(9)(i) as adopted by the 2015 HMDA Final Rule 
requires financial institutions to report the property address of the 
property securing the covered loan or, in the case of an application, 
proposed to secure the covered loan.\112\ Comment 4(a)(9)(i)-3 as 
adopted by the 2015 HMDA Final Rule explains that this requirement is 
not applicable if the address of the property securing the covered loan 
is not known and provides an example. The Bureau proposed certain non-
substantive amendments to comment 4(a)(9)(i)-3 to replace 
``indicating'' with ``reporting'' for consistency with other comments 
providing similar guidance.
---------------------------------------------------------------------------

    \112\ See HMDA section 304(b)(6)(H), 12 U.S.C. 2803(b)(6)(H).
---------------------------------------------------------------------------

    The Bureau did not receive any comments discussing the replacement 
of ``indicating'' with ``reporting'' in comment 4(a)(9)(i)-3. The 
Bureau is adopting the amendments to comment 4(a)(9)(i)-3 as proposed, 
replacing ``indicating'' with ``reporting'' for consistency with other 
comments providing similar guidance.
4(a)(9)(ii)
    Current Sec.  1003.4(a)(9) introductory text and (a)(9)(ii), as 
adopted by the 2015 HMDA Final Rule, both require financial 
institutions to report certain information for certain transactions 
about the location of the property related to the covered loan or 
application, including the State, county, and census tract.\113\ The 
Bureau proposed amendments to the commentary to Sec.  
1003.4(a)(9)(ii)(A) through (C) to provide guidance on what a financial 
institution should report if it has incomplete information about the 
location of the property when reporting an application.
---------------------------------------------------------------------------

    \113\ Section 1003.4(a)(9) requires reporting of property 
location information if the property securing the covered loan or in 
the case of an application proposed to secure the covered loan is 
located in a MSA or Metropolitan Division (MD) in which the 
financial institution has a home or branch office. 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 Community 
Reinvestment Act 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.
---------------------------------------------------------------------------

    A financial institution may have incomplete information about the 
location of a property when it takes final action on an application in 
certain situations. For example, an applicant may not identify a 
specific property or census tract, but may provide the financial 
institution with only the State and county where the applicant intends 
to purchase a home before the financial institution denies the 
application.
    The Bureau proposed new comments 4(a)(9)(ii)(A)-1, 4(a)(9)(ii)(B)-
2, and 4(a)(9)(ii)(C)-2 to clarify that, when reporting an application, 
the financial institution reports that the property location 
requirement is not applicable if the State, county, or census tract, 
respectively, was not known before the application was denied, 
withdrawn, or closed for incompleteness.
    The Bureau received two comments on the proposed comments, and both 
expressed support for the change. One commenter stated that the new 
comments would be extremely helpful. The Bureau also received one 
comment urging the Bureau to clarify whether reporting State, county, 
or census tract is permissible when a property is not located in a 
Metropolitan Statistical Area (MSA) or Metropolitan Division (MD) in 
which a financial institution has a home or branch office. Instruction 
I.C.5 in current appendix A to Regulation C addresses the situations 
when a financial institution may report not applicable. It states that 
for loans on property located outside the MSAs and MDs in which an 
institution has a home or branch office, or for property located 
outside of any MSA or MD and for which the institution is not required 
to report such information by Sec.  1003.4(e), the institution may 
choose one of the following two options: First, a financial institution 
may enter the property location information, and the information 
reported must accurately identify the property location. Second, a 
financial institution may indicate that the requirement to report the 
property location is not applicable. The Bureau agrees that it is 
appropriate to clarify that a financial institution may report not 
applicable in these circumstances and is finalizing new comment 
4(a)(9)(ii)-1 to clarify that in

[[Page 43109]]

circumstances where State, county, or census tract reporting is not 
required, financial institutions may report that the requirement is not 
applicable, or may voluntarily report the State, county, or census 
tract information.
    In addition, the Bureau is adopting new comments 4(a)(9)(ii)(A)-1, 
4(a)(9)(ii)(B)-2, and 4(a)(9)(ii)(C)-2 as proposed.
4(a)(10)
4(a)(10)(ii)
    Section 1003.4(a)(10)(ii) as adopted by the 2015 HMDA Final Rule 
requires that a financial institution report the age of the applicant 
or borrower. Comment 4(a)(10)(ii)-3, as adopted by the 2015 HMDA Final 
Rule, contains a drafting error in providing guidance on treatment of 
purchased loans that refers to reporting income rather than age. The 
Bureau proposed to correct the drafting error in comment 4(a)(10)(ii)-3 
by replacing the term ``income'' with ``age'' to clarify that a 
financial institution complies with Sec.  1003.4(a)(10)(ii) by 
reporting that the requirement is not applicable when reporting a 
purchased loan for which the institution chooses not to report the age 
of the applicant or borrower.
    The Bureau received one comment discussing this correction. The 
commenter expressed support for the change and asked for further 
guidance on reporting an applicant's age for a purchased loan when a 
financial institution chooses to report age.
    The Bureau adopts the technical correction as proposed. Regarding 
optional reporting of a borrower's age for purchased loans, as 
explained in comment 4(a)(10)(ii)-1, a financial institution complies 
with Sec.  1003.4(a)(10)(ii) by reporting the applicant's age, as of 
the application date under Sec.  1003.4(a)(1)(ii), as the number of 
whole years derived from the date of birth as shown on the application 
form.
4(a)(10)(iii)
    HMDA section 304(b)(4) requires the reporting of income level for 
borrowers and applicants. The 2015 HMDA Final Rule requires in Sec.  
1003.4(a)(10)(iii) that a financial institution report the gross annual 
income relied on in making the credit decision or processing the 
application if a credit decision was not made.\114\ Comment 
4(a)(10)(iii)-4 adopted by the 2015 HMDA Final Rule explains that a 
financial 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. The Bureau proposed to 
clarify the intended meaning of this comment by amending the comment 
language to specify that a financial 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 underwriting calculations of the potential annuitization 
or depletion of an applicant's remaining assets. The new comment 
language would also state that actual distributions from retirement 
accounts or other assets that are relied on by the financial 
institution as income should be reported as income, and that comment 
4(a)(10)(iii)-4's interpretation of income does not apply to Sec.  
1003.4(a)(23), which requires reporting of the debt-to-income ratio.
---------------------------------------------------------------------------

    \114\ Revised Sec.  1003.4(a)(10)(iii) also excluded from the 
reporting of this data point covered loans and applications for 
which the credit decision did not consider or would not have 
considered income. See the commentary to Sec.  1003.4(a)(10)(iii) 
for more information and descriptions of different situations in 
which the income reporting requirement is not applicable.
---------------------------------------------------------------------------

    The Bureau proposed this clarification because it had become aware 
of uncertainty among financial institutions regarding how to determine 
which amounts are derived from annuitization or depletion of an 
applicant's remaining assets. The Bureau explained in the proposal that 
the use of the modifier ``remaining'' regarding the assets referred to 
was meant to specify assets that are not in actual distribution, but 
are remaining. In addition, the word ``derived'' was meant to refer to 
the underwriting method by which hypothetical (not actual) 
distributions are calculated from the amounts of the remaining assets.
    Four industry commenters discussed the proposed clarification, and 
all four expressed opposition to it. Commenters stated that the 
provision would require separate tracking of income and hypothetical 
income formulated from assets for HMDA compliance. One commenter stated 
that this would make compliance and programming difficult, and another 
suggested that filers should be able to report either the income and 
formulated asset depletion together as income or else that the income 
data point is not applicable when a financial institution relies on 
formulated asset depletion. Otherwise, one commenter suggested, the 
institution will be reporting partial information that could 
incorrectly raise fair lending red flags. Another commenter stated that 
failure to include the asset depletion information may result in false 
positives during an underwriting matched pair analysis. One commenter 
stated that applicants that have reportable income may use assets to 
qualify for the loan, such as when an applicant will be returning to 
work from an extended leave or is planning to retire shortly after 
receiving the loan.
    One commenter asked that the Bureau create a special rule for 
reverse mortgages or else exclude them from the income reporting 
requirement. Another asked for guidance in reporting income as ``0,'' 
such as when an applicant becomes unemployed after applying for the 
loan.
    The Bureau is adopting the clarifying language in comment 
4(a)(10)(iii)-4 as proposed, providing that a financial institution 
does not include as income amounts considered in making a credit 
decision based on factors in addition to income, such as amounts 
derived from underwriting calculations of the potential annuitization 
or depletion of an applicant's remaining assets. The comment further 
provides that actual distributions from retirement accounts or other 
assets that are relied on by the financial institution as income should 
be reported as income. Because the determination of what to exclude 
depends on the underwriting method the financial institution applies in 
making the credit decision, the proposed clarification should 
facilitate implementation of the 2015 HMDA Final Rule.\115\ In 
addition, to avoid confusion and facilitate compliance, the Bureau also 
adopts the proposed language clarifying that the comment's 
interpretation of income does not apply to Sec.  1003.4(a)(23) as 
adopted in the 2015 HMDA Final Rule, which requires, except for 
purchased covered loans, the collection of the ratio of the applicant's 
or borrower's total monthly debt to the total monthly income relied on 
in making the credit decision.
---------------------------------------------------------------------------

    \115\ Intermittent actual withdrawals from the remaining assets 
should not be reported if the financial institution does not 
consider them as income in its underwriting.
---------------------------------------------------------------------------

    The commenters' objections to separate tracking of income and asset 
depletion were not relevant in assessing the proposed clarification. 
The 2015 HMDA Final Rule income reporting provision already required a 
separate determination when remaining assets were used, and the April 
2017 HMDA Proposal would limit the number of times that separate 
tracking would be required. Similarly, although the Bureau believes 
that careful analysis will avoid fair lending misinterpretations, the

[[Page 43110]]

potential for such problems should actually be mitigated by the new 
language. The comments about the use of assets when income is available 
also appear more relevant to the provision adopted by the 2015 HMDA 
Final Rule, as opposed to the proposed clarification in the April 2017 
HMDA Proposal. The Bureau did not propose revisions to the 2015 HMDA 
Final Rule's treatment of the reliance on assets when income is not 
available and therefore the need for such revisions has not benefited 
from appropriate notice and comment regarding any such amendment. The 
comment does not provide a basis to change the approach proposed by the 
Bureau in the April 2017 HMDA Proposal. Accordingly, the Bureau 
declines to adopt such amendments in this final rule.
    Similarly, the Bureau did not propose any change to the treatment 
of income reporting for reverse mortgages and so has not benefited from 
notice and comment on this complex issue. In addition, the 2015 HMDA 
Final Rule preamble noted that the reverse mortgage flag required by 
Sec.  1003.4(a)(36) will ensure that data reported for reverse 
mortgages will not be commingled unknowingly with data reported for 
other covered loans.\116\
---------------------------------------------------------------------------

    \116\ 2015 HMDA Final Rule, 80 FR 66128, 66166 (Oct. 28, 2015).
---------------------------------------------------------------------------

    Finally, the Bureau notes that the 2015 HMDA Final Rule and the 
2018 FIG do not include any language that would bar a financial 
institution from reporting an applicant's gross annual income as ``0'' 
or even a negative number when that is the accurate figure that it 
relied on.\117\
---------------------------------------------------------------------------

    \117\ See revised comment 4(a)(10)(iii)-1.
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4(a)(12)
    HMDA section 304(b)(5)(B) 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.'' \118\ Current Sec.  
1003.4(a)(12)(i) requires financial institutions to report, for 
originated loans subject to Regulation Z, 12 CFR part 1026 that are 
considered higher priced, the difference between a loan's annual 
percentage rate (APR) and the average prime offer rate (APOR) for a 
comparable transaction, as of the date the interest rate is set. 
Current Sec.  1003.4(a)(12)(ii) explains the definition of APOR, that 
the Bureau publishes APORs for a broad range of types of transactions 
in tables updated at least weekly, and the methodology the Bureau uses 
to derive these rates. As revised by the 2015 HMDA Final Rule, Sec.  
1003.4(a)(12)(i) requires financial institutions to report, for covered 
loans subject to Regulation Z, 12 CFR part 1026, other than 
assumptions, purchased covered loans, and reverse mortgages, the 
difference between the covered loan's APR and APOR for a comparable 
transaction as of the date the interest rate is set. The Bureau 
proposed certain amendments to Sec.  1003.4(a)(12)(ii) and to the Sec.  
1003.4(a)(12) commentary adopted by the 2015 HMDA Final Rule and 
proposed new comment 4(a)(12)-9 to address reporting requirements when 
a financial institution provides corrected disclosures. For the reasons 
discussed below, the Bureau is revising Sec.  1003.4(a)(12)(i) to 
clarify its scope and is adopting Sec.  1003.4(a)(12)(ii) and the 
associated commentary substantially as proposed, with certain 
additional amendments for clarity.
---------------------------------------------------------------------------

    \118\ 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.
---------------------------------------------------------------------------

Scope
    The Bureau is adopting an amendment to Sec.  1003.4(a)(12)(i) to 
clarify that the reporting requirement applies to covered loans and 
applications that are approved but not accepted. Although the Bureau 
did not propose to revise Sec.  1003.4(a)(12)(i), it believes this 
amendment will address potential uncertainty regarding the scope of 
Sec.  1003.4(a)(12). As discussed above, the 2015 HMDA Final Rule 
revised Sec.  1003.4(a)(12)(i) to require that financial institutions 
report, for covered loans subject to Regulation Z, other than 
assumptions, purchased covered loans, and reverse mortgages, the 
difference between the covered loan's APR and the APOR for a comparable 
transaction as of the date the interest rate is set. However, as 
adopted in the 2015 HMDA Final Rule, comments 4(a)(12)-7 and -8 clarify 
the Bureau's intent that Sec.  1003.4(a)(12) also apply to applications 
and preapproval requests approved but not accepted. Several other data 
points revised or adopted by the 2015 HMDA Final Rule, such as loan 
purpose, interest rate, and prepayment penalty, specify that reporting 
is required for covered loans or applications.\119\ The Bureau believes 
it would improve clarity and consistency between Sec.  1003.4(a)(12)(i) 
and its associated commentary to provide expressly in regulation text 
that the rate spread reporting requirement applies to covered loans and 
applications that are approved but not accepted. Thus, final Sec.  
1003.4(a)(12)(i) provides that, for covered loans and applications that 
are approved but not accepted subject to Regulation Z, other than 
assumptions, purchased covered loans, and reverse mortgages, the 
financial institution must report the difference between the covered 
loan's APR and the APOR for a comparable transaction as of the date the 
interest rate is set.
---------------------------------------------------------------------------

    \119\ For example, revised Sec.  1003.4(a)(3) requires a 
financial institution to report whether the covered loan is, or the 
application is for, a home purchase loan, a home improvement loan, a 
refinancing, a cash-out refinancing, or for a purpose other than 
home purchase, home improvement, refinancing, or cash-out 
refinancing. Revised Sec.  1003.4(a)(21) requires a financial 
institution to report the interest rate applicable to the approved 
application or to the covered loan at closing or account opening. 
Revised Sec.  1003.4(a)(22) requires a financial institution to 
report, for covered loans or applications subject to Regulation Z, 
12 CFR part 1026, other than reverse mortgages or purchased covered 
loans, the term in months of any prepayment penalty, as defined in 
Regulation Z Sec.  1026.32(b)(6)(i) or (ii), as applicable.
---------------------------------------------------------------------------

Average Prime Offer Rate (APOR)
    The Bureau calculates APORs on a weekly basis according to a 
methodology statement that is available to the public and then posts 
the APORs on the FFIEC Web site. In light of recent variability in the 
sources of survey data used to calculate APORs and the Bureau's 
resulting revisions to the methodology statement,\120\ the Bureau 
proposed certain amendments to Sec.  1003.4(a)(12)(ii). The Bureau 
proposed to amend revised comment 4(a)(12)-1 to conform to the proposed 
amendments to Sec.  1003.4(a)(12)(ii). The Bureau proposed to amend 
comment 4(a)(12)-2 to explain that the Bureau publishes tables of 
current and historic APORs by transaction type and its methodology 
statement on its Web site (https://www.consumerfinance.gov), in addition 
to the FFIEC Web site, and to make certain other minor clarifications. 
The Bureau received no specific comments on the proposed changes to 
Sec.  1003.4(a)(12)(ii) and comments 4(a)(12)-1 and -2 and, 
accordingly, is adopting those provisions as proposed, with a minor 
technical revision to comment 4(a)(12)-2.
---------------------------------------------------------------------------

    \120\ Notice of Availability of Revised Methodology for 
Determining Average Prime Offer Rates, 81 FR 64142 (Sept. 19, 2016). 
The source of survey data used by the Bureau to calculate APORs is 
currently available on the FFIEC Web site. FFIEC, ``Mortgage Rate 
Survey Data Used To Calculate Rate Spreads for Loans Reportable 
Under HMDA,'' https://www.ffiec.gov/ratespread/mortgagerates.htm 
(last visited Aug. 8, 2017).
---------------------------------------------------------------------------

Open-End Lines of Credit
    The 2015 HMDA Final Rule revised comment 4(a)(12)-3 to clarify that 
the requirements of Sec.  1003.4(a)(12)(i) refer to the covered loan's 
APR. Revised

[[Page 43111]]

comment 4(a)(12)-3 explains further that a financial institution 
complies with Sec.  1003.4(a)(12)(i) by relying on the APR for the 
covered loan, as calculated and disclosed pursuant to Regulation Z 
Sec.  1026.18 or Sec.  1026.38 (for closed-end mortgage loans) or Sec.  
1026.40 (for open-end lines of credit), as applicable. The Bureau 
proposed to amend revised comment 4(a)(12)-3 to remove the reference to 
Regulation Z Sec.  1026.40, which sets forth requirements regarding the 
disclosures provided at the time an application is provided to the 
consumer, and to replace it with a reference to Regulation Z Sec.  
1026.6, which sets forth the disclosure requirements for open-end lines 
of credit at account opening. For the reasons discussed below, the 
Bureau is adopting comment 4(a)(12)-3 substantially as proposed, with 
additional clarifications regarding open-end lines of credit and a 
cross-reference to comment 4(a)(12)-8.
    A few commenters expressed support for the proposed clarification. 
One national trade association stated that information on rate spread 
would be more useful if calculated based on the account-specific APR 
disclosed on the account opening disclosures rather than on the non-
specific APR disclosed at the time of application. Another national 
trade association suggested that a simple approach would be to require 
reporting based on the APR at the time of closing or account opening, 
and that in situations where the loan does not close, the lender rely 
on the last APR disclosed to the borrower. One commenter that supported 
the proposed clarification stated that account opening disclosures may 
disclose more than one APR and recommended that the final rule clarify 
which APR to use in that circumstance. The commenter also sought 
clarification on whether rate spreads for open-end lines of credit 
under Regulation C should be calculated in the same manner as set forth 
in Regulation Z Sec.  1026.32(a).
    Final comment 4(a)(12)-3 explains that the requirements of Sec.  
1003.4(a)(12)(i) refer to the covered loan's APR. It provides further 
that, for closed-end mortgage loans, a financial institution complies 
with Sec.  1003.4(a)(12)(i) by relying on the APR for the covered loan, 
as calculated and disclosed pursuant to Regulation Z Sec.  1026.18 or 
Sec.  1026.38. Final comment 4(a)(12)-3 provides still further that, 
for open-end lines of credit, a financial institution complies with 
Sec.  1003.4(a)(12)(i) by relying on the APR for the covered loan, as 
calculated and disclosed pursuant to Regulation Z Sec.  1026.6. The 
comment clarifies that, if multiple APRs are calculated and disclosed 
pursuant to Regulation Z Sec.  1026.6, a financial institution relies 
on the APR in effect at the time of account opening. It provides that, 
if an open-end line of credit has a variable-rate feature and a fixed-
rate and -term payment option during the draw period, a financial 
institution relies on the APR in effect at the time of account opening 
under the variable-rate feature, which would be a discounted initial 
rate if one is offered under the variable-rate feature. Finally, the 
comment includes a cross-reference to comment 4(a)(12)-8 for guidance 
regarding the APR a financial institution relies on in the case of an 
application or preapproval request that was approved but not accepted.
    As to the request for clarification regarding Regulation Z Sec.  
1026.32(a) and the calculation of rate spreads for open-end lines of 
credit, the Bureau believes that existing provisions already address 
this question. Regulation Z Sec.  1026.14(b) sets forth the method of 
calculating APR for purposes of the disclosures required under 
Regulation Z Sec.  1026.6, and Regulation C Sec.  1003.4(a)(12) and its 
associated commentary set forth the method of calculating rate spread 
for purposes of Regulation C.
Rate-Set Date
    The 2015 HMDA Final Rule adopted new comment 4(a)(12)-5 to clarify 
that the relevant date to use to determine the APOR 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. Comment 4(a)(12)-5 includes several illustrative 
examples. To reflect the renumbering of proposed comment 4(a)-4 to 
comment 4(a)-2 in the 2015 HMDA Final Rule, the Bureau proposed to 
amend comment 4(a)(12)-5.iii to replace the reference to comment 4(a)-4 
with a reference to comment 4(a)-2. Comment 4(a)-2 provides guidance on 
a financial institution's reporting responsibilities when a single 
transaction involves more than one institution. The Bureau did not 
receive specific comment on the proposed amendment to comment 4(a)(12)-
5.iii. One commenter stated that it agreed that the rate-set date 
should be the date when the lender last set the rate for the 
transaction. One commenter expressed concern that a financial 
institution would need to update its loan/application register when a 
rate-lock agreement is extended, and another commenter stated that, 
where a rate-lock agreement is extended, using the date the interest 
rate was originally locked to determine the APOR would provide more 
relevant pricing information. One commenter requested further 
clarification on how a financial institution may exercise discretion in 
setting the rate before closing.
    The Bureau is adopting comment 4(a)(12)-5 as proposed, with minor 
amendments for further clarity. Final comment 4(a)(12)-5 explains that 
the relevant date to use to determine the APOR for a comparable 
transaction is the date on which the interest rate was set by the 
financial institution for the final time before final action is taken 
(i.e., the application was approved but not accepted or the covered 
loan was originated). Final comment 4(a)(12)-5.i also refers to the 
final time before final action is taken, rather than the final time 
before closing or account opening. Because Sec.  1003.4(a)(12) also 
applies to applications that are approved but not accepted, the Bureau 
believes it is more appropriate to refer to final action rather than to 
closing or account opening. The Bureau has not seen any new reason to 
amend further the guidance adopted in the 2015 HMDA Final Rule 
regarding the determination of the rate-set date, and it does not 
believe that complying with Sec.  1003.4(a)(12)(i) when a rate-lock 
agreement is extended will be unduly burdensome. The Bureau does not 
believe that it is appropriate to prescribe in Regulation C how a 
financial institution may exercise discretion in setting the rate.
Application or Preapproval Request Approved But Not Accepted
    As adopted by the 2015 HMDA Final Rule, comment 4(a)(12)-8 explains 
that, in the case of an application or preapproval request that was 
approved but not accepted, Sec.  1003.4(a)(12) requires the financial 
institution to report the applicable rate spread. As discussed above, 
final comment 4(a)(12)-3 provides that, for closed-end mortgage loans, 
a financial institution complies with Sec.  1003.4(a)(12)(i) by relying 
on the APR for the covered loan as calculated and disclosed pursuant to 
Regulation Z Sec.  1026.18 or Sec.  1026.38 and that, for open-end 
lines of credit, a financial institution complies with Sec.  
1003.4(a)(12)(i) by relying on the APR as calculated and disclosed 
pursuant to Regulation Z Sec.  1026.6. The Bureau proposed to amend 
comment 4(a)(12)-8 to clarify reporting requirements where an 
application or preapproval request is approved but not accepted and 
only the early disclosures required under Regulation Z Sec.  1026.18 or 
Sec.  1026.37 (for closed-end mortgage loans) or Sec.  1026.40 (for 
open-end lines of credit) are provided. The Bureau is adopting comment 
4(a)(12)-8 substantially as proposed, with a clarification to address

[[Page 43112]]

situations where no Regulation Z disclosures are required for a 
transaction.
    A few national trade associations and one large financial 
institution expressed support for the proposed clarifications to 
comment 4(a)(12)-8. Several commenters stated, however, that an 
application or a preapproval request for purposes of Regulation C may 
not meet the definition of application under Regulation Z, and thus 
would not trigger the early disclosure requirements under Regulation Z. 
One national trade association requested further guidance because, in 
such instances where no Regulation Z disclosures are required, the 
proposed guidance regarding relying on the APR disclosed pursuant to 
the early Regulation Z disclosures would not suffice. One large 
financial institution expressed concern that the proposal would require 
a financial institution to provide the early Regulation Z disclosures 
in situations where such disclosures would not otherwise be required 
under Regulation Z, merely to permit compliance with Regulation C. This 
commenter, along with a national trade association and another large 
financial institution, requested that applications or preapproval 
requests that do not trigger the Regulation Z disclosure requirements 
be excluded from the reporting requirements in Sec.  1003.4(a)(12).
    One national trade association stated that rate spreads should not 
be required for open-end lines of credit where the account is not 
opened because the APR disclosed at the time of application is generic 
and would not provide useful data. Another national trade association 
stated that rate spreads would only be valuable for covered loans and 
recommended that this data point not apply to applications that do not 
result in a covered loan.
    The Bureau is adopting comment 4(a)(12)-8 as proposed, with certain 
minor amendments for clarity and to address an issue discussed by 
several commenters. Final comment 4(a)(12)-8 provides that, in the case 
of an application or preapproval request that was approved but not 
accepted, Sec.  1003.4(a)(12) requires a financial institution to 
report the applicable rate spread. The comment provides further that, 
in such cases, the financial institution would provide early 
disclosures under Regulation Z Sec.  1026.18 or Sec.  1026.37 (for 
closed-end mortgage loans) or Sec.  1026.40 (for open-end lines of 
credit), but might never provide any subsequent disclosures. Final 
comment 4(a)(12)-8 provides still further that, in such cases where no 
subsequent disclosures are provided, a financial institution complies 
with Sec.  1003.4(a)(12)(i) by relying on the APR for the application 
or preapproval request, as calculated and disclosed pursuant to 
Regulation Z Sec.  1026.18 or Sec.  1026.37 (for closed-end mortgage 
loans) or Sec.  1026.40 (for open-end lines of credit), as applicable. 
Final comment 4(a)(12)-8 includes an additional clarification that, for 
transactions subject to Regulation C for which no disclosures under 
Regulation Z are required, a financial institution complies with Sec.  
1003.4(a)(12)(i) by reporting that the requirement is not applicable.
    The Bureau recognizes that an application or a preapproval request 
as defined under Regulation C may not meet the definition of 
application under Regulation Z and, in such instances, would not 
trigger the early Regulation Z disclosures.\121\ Where an application 
or a preapproval request under Regulation C is not an application under 
Regulation Z, then that application or preapproval request is not 
subject to Regulation Z and thus is not covered by the reporting 
requirements in Sec.  1003.4(a)(12). Final Sec.  1003.4(a)(12)(i) 
applies to covered loans and applications that are approved but not 
accepted subject to Regulation Z, other than assumptions, purchased 
covered loans, and reverse mortgages. The Bureau does not intend that a 
financial institution provide the early Regulation Z disclosures or 
calculate an APR for a transaction solely for purposes of complying 
with Regulation C where it is not otherwise required to do so under 
Regulation Z. Accordingly, this final rule clarifies further that the 
requirement to report under Sec.  1003.4(a)(12) is not applicable if no 
Regulation Z disclosures are required for the transaction. The Bureau 
declines to specify further instances in which Sec.  1003.4(a)(12) is 
not applicable for applications and preapproval requests that are 
approved but not accepted, as it continues to believe such data will 
further HMDA's purposes and that reporting rate spreads for 
transactions for which Regulation Z disclosures are required will not 
be unduly burdensome.
---------------------------------------------------------------------------

    \121\ 12 CFR 1003.2(b), 1026.2(a)(3).
---------------------------------------------------------------------------

Corrected Disclosures
    The 2015 HMDA Final Rule does not explain how a financial 
institution complies with Sec.  1003.4(a)(12)(i) where a financial 
institution provides a corrected disclosure under Regulation Z that 
reflects a corrected APR. Specifically, the 2015 HMDA Final Rule does 
not clarify whether a financial institution relies on the APR for the 
covered loan or application approved but not accepted as initially 
calculated and disclosed or as calculated and disclosed pursuant to the 
corrected disclosure. The Bureau proposed to add new comment 4(a)(12)-9 
to provide that, if a financial institution provides a corrected 
disclosure under Regulation Z that reflects a corrected APR, the 
financial institution complies with Sec.  1003.4(a)(12)(i) by comparing 
the corrected and disclosed APR to the most recently available APOR 
that was in effect for a comparable transaction as of the rate-set 
date, so long as the corrected disclosure was provided to the borrower 
before the end of the reporting period in which final action is taken. 
The Bureau also proposed to amend new comment 4(a)(12)-9, effective 
January 1, 2020, to include additional guidance pertaining to quarterly 
reporting. For the reasons discussed below, the Bureau is adopting new 
comment 4(a)(12)-9 effective January 1, 2018, and as amended effective 
January 1, 2020, substantially as proposed, with certain amendments for 
clarity.
    A few commenters expressed support for the proposal to clarify 
reporting requirements under Sec.  1003.4(a)(12) when a corrected 
disclosure is provided pursuant to Regulation Z. One national trade 
association noted that the proposed comment would apply to applications 
and preapproval requests that are approved but not accepted and stated 
that, because only the early Regulation Z disclosures could be provided 
in such instances, the proposed comment should apply to originated 
loans. This commenter also stated that the proposed guidance regarding 
the date on which the corrected disclosure was provided to the borrower 
would be helpful for transactions subject to Regulation Z Sec.  
1026.19(f) and requested additional guidance regarding the date on 
which the corrected disclosure was provided to the borrower for 
transactions subject to the disclosure requirements in Regulation Z 
Sec.  1026.6(a) or Sec.  1026.19(a). One national trade association 
that supported the proposal stated that the same guidance regarding the 
use of a corrected APR would also apply when a lender provides a 
corrected disclosure reflecting a corrected amount of total points and 
fees, total loan costs, borrower-paid origination charges, discount 
points, lender credits, or interest rate. This commenter stated that it 
would be simpler and more accurate if a financial institution were 
permitted to use the corrected information disclosed on the corrected 
disclosure so

[[Page 43113]]

long as the corrected disclosure was provided to the borrower before 
the institution's submission of its loan/application register. One 
small financial institution that supported the proposed guidance 
regarding corrected disclosures nonetheless stated that many financial 
institutions begin gathering information to complete the loan/
application register well before the end of a reporting period such 
that the proposal could increase significantly the number of 
adjustments made to the data when a corrected disclosure is provided 
before the end of the reporting period in which final action is taken.
    The Bureau is adopting new comment 4(a)(12)-9 substantially as 
proposed, with certain clarifications to address issues discussed by 
commenters. To correct an oversight in the April 2017 HMDA Proposal, 
the Bureau is adopting the first sentence of comment 4(a)(12)-9 with 
revisions to clarify that the guidance in comment 4(a)(12)-9 applies to 
covered loans and applications that are approved but not accepted. The 
Bureau recognizes that, where a financial institution provides a 
corrected version of the disclosures required under Regulation Z Sec.  
1026.19(a), pursuant to Sec.  1026.19(a)(2), under Regulation Z Sec.  
1026.19(f), pursuant to Sec.  1026.19(f)(2), or under Regulation Z 
Sec.  1026.6(a), it is often doing so for a covered loan. The Bureau 
also understands that such corrected disclosures under Regulation Z 
could be provided in situations where the application is approved but 
not accepted and the loan is not originated or the account is not 
opened. Final comment 4(a)(12)-9 does not specifically refer to 
preapproval requests, which are included in the definition of 
application, because, in contrast to comment 4(a)(12)-8, the Bureau 
believes the situations described in comment 4(a)(12)-9 are not likely 
to arise in connection with preapproval requests.
    Final comment 4(a)(12)-9 is also revised to explain that, for 
purposes of Sec.  1003.4(a)(12), the date the corrected disclosure was 
provided to the borrower is the date the disclosure was mailed or 
delivered to the borrower in person; the financial institution's method 
of delivery does not affect the date provided. It includes an 
illustrative example providing that, where a financial institution 
provides a corrected version of the disclosures required under 
Regulation Z Sec.  1026.19(f), pursuant to Sec.  1026.19(f)(2), the 
date provided is the date disclosed pursuant to Regulation Z Sec.  
1026.38(a)(3)(i). Final comment 4(a)(12)-9 thus provides guidance 
applicable to all of the Regulation Z disclosures discussed in the 
comment regarding the date the corrected version of the disclosures is 
provided to the borrower for purposes of Sec.  1003.4(a)(12).
    In addition, the Bureau is adopting comment 4(a)(12)-9 with a 
revision to explain that the provision of a corrected disclosure does 
not affect how a financial institution determines the rate-set date and 
to include a cross-reference to comment 4(a)(12)-5. The April 2017 HMDA 
Proposal explained that the corrected disclosure does not affect the 
rate-set date and cross-referenced comment 4(a)(12)-5. The Bureau 
recognizes, however, that the rate-set date may be affected in a 
situation where a corrected disclosure reflects a corrected APR that 
changed because of a change in the interest rate. Thus, while the 
provision of a corrected disclosure does not, on its own, affect the 
rate-set date, the circumstances necessitating the provision of a 
corrected disclosure could affect the rate-set date. The final rule 
makes clear that the provision of a corrected disclosure does not 
change how a financial institution applies the guidance in comment 
4(a)(12)-5 to determine the rate-set date.
    The Bureau declines to permit financial institutions to update 
their reporting when a corrected disclosure is provided to the borrower 
after the end of the reporting period in which final action is 
taken.\122\ Comment 4(a)(12)-9 establishes a clear, bright-line 
standard for reporting that is consistent with Regulation C's December 
31 cutoff date for data collection and recording for the calendar year. 
Additionally, the Bureau believes that the instances in which a 
corrected disclosure reflecting a corrected APR is provided to the 
borrower after the calendar year in which final action is taken but 
before the March 1 deadline in the following calendar year for a 
financial institution's submission of its annual loan/application 
register should be relatively limited and do not justify the potential 
inconsistencies in data that could result from permitting optional 
updates to data based on corrected disclosures provided after the end 
of the calendar year being reported. As to the burden associated with 
updating data when a corrected disclosure is provided before the end of 
the reporting period in which final action is taken, the guidance in 
final comment 4(a)(12)-9 is consistent with the guidance regarding 
corrected disclosures adopted in the 2015 HMDA Final Rule for the 
pricing data points in Sec.  1003.4(a)(17) through (20). The Bureau 
believes such guidance will generally provide for greater accuracy in 
reporting without requiring that financial institutions continue to 
update their reportable data if corrected disclosures are provided 
after the reporting period in which final action is taken.
---------------------------------------------------------------------------

    \122\ Effective January 1, 2020, when quarterly reporting 
begins, revised comment 4(a)(12)-9 will provide that a financial 
institution does not report on its quarterly loan/application 
register the difference between the corrected APR and the most 
recently available APOR that was in effect for a comparable 
transaction as of the rate-set date if the corrected disclosure was 
provided to the borrower after the end of the quarter in which final 
action is taken. However, a financial institution does report the 
difference between the corrected APR and the most recently available 
APOR that was in effect for a comparable transaction as of the rate-
set date on its annual loan/application register, provided that the 
corrected disclosure was provided to the borrower prior to the end 
of the calendar year in which final action is taken.
---------------------------------------------------------------------------

4(a)(15)
    Section 1094(3)(A)(iv) of the Dodd-Frank Act amended section 304(b) 
of HMDA to require financial institutions to report the credit scores 
of borrowers and applicants ``in such form as the Bureau may 
prescribe.'' \123\ Section 1003.4(a)(15), as adopted by the 2015 HMDA 
Final Rule, requires that a financial institution report, 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. Comment 4(a)(15)-2, as adopted by the 
2015 HMDA Final Rule, explains how to report the credit score and 
scoring model when there are multiple credit scores obtained or created 
by a financial institution. Comment 4(a)(15)-3, as adopted by the 2015 
HMDA Final Rule, explains how to report credit scores when there are 
multiple applicants or borrowers. To facilitate the reporting of credit 
scores and credit scoring models, the Bureau proposed to add clarifying 
language to comments 4(a)(15)-2 and -3.
---------------------------------------------------------------------------

    \123\ 12 U.S.C. 2803(b)(6)(I).
---------------------------------------------------------------------------

    During implementation of the 2015 HMDA Final Rule, the Bureau had 
become aware that comments 4(a)(15)-2 and -3 might not explain clearly 
how to report the scoring model for a composite credit score and how to 
report a single credit score when there are multiple applicants or 
borrowers. Consequently, the Bureau proposed to amend comment 4(a)(15)-
2 to clarify that, when a financial institution uses more than one 
credit scoring model and combines the scores into a composite credit 
score, the financial institution should report that score and report 
that more than one credit scoring model was used. In addition, the 
Bureau proposed

[[Page 43114]]

to amend comment 4(a)(15)-3 to clarify that, in a transaction involving 
two or more applicants or borrowers for which the financial institution 
obtains or creates a single credit score and relies on that credit 
score in making the credit decision for the transaction, the 
institution complies with Sec.  1003.4(a)(15) by reporting that credit 
score for the applicant and reporting that the requirement is not 
applicable for the first co-applicant or, alternatively, by reporting 
that credit score for the first co-applicant and reporting that the 
requirement is not applicable for the applicant.
    The Bureau received eight comments on the proposed changes to the 
credit score commentary. Four commenters expressed support for the 
changes, and no commenters expressed opposition to them. Two commenters 
stated that comment 4(a)(15)-3, which in certain situations requires a 
financial institution to report a credit score for the applicant or, 
alternatively, for the co-applicant, is not clear on whether the choice 
of the two alternatives is within the financial institution's 
discretion. Commenters also stated that, when there are more than two 
applicants, a median or middle credit score may be used and that our 
proposal did not address this situation. One commenter said that our 
proposal would add clarity, but that these clarifications may not 
reflect how some lenders are programming their systems, and urged the 
Bureau to allow flexibility in treatment of these issues until the 
Bureau can propose further amendments to the Regulation C commentary 
with adequate time for implementation.
    Commenters also asked for guidance on two issues not addressed in 
the April 2017 HMDA Proposal. Three commenters asked for guidance on 
reporting the credit score when a credit score is ordered but the 
applicant has no credit score. Another commenter asked that the Bureau 
adopt an exclusion from credit score reporting for loans to employees 
of the financial institution to protect their privacy.
    The Bureau is adopting the clarifying language to comments 
4(a)(15)-2 and -3 largely as proposed, with a small change to comment 
4(a)(15)-3 to clarify the discretion a financial institution has in 
reporting a score for the applicant or, alternatively, the co-
applicant, and a minor word edit. The commenters who expressed a 
position uniformly supported the proposed changes, and the Bureau 
believes that the adopted language will clarify and facilitate 
reporting of credit scores. Although there may be implementation 
challenges, the Bureau believes that financial institutions and their 
software vendors will have sufficient time to adjust to this minor 
change and that any such challenges will be outweighed by the 
implementation benefits of these clarifications.
    Comment 4(a)(15)-3 as adopted states that, in a transaction 
involving two or more applicants or borrowers for whom the financial 
institution obtains or creates a single credit score and relies on that 
credit score in making the credit decision for the transaction, the 
institution complies with Sec.  1003.4(a)(15) by reporting that credit 
score for the applicant and reporting that the requirement is not 
applicable for the first co-applicant or, at the institution's 
discretion, by reporting that credit score for the first co-applicant 
and reporting that the requirement is not applicable for the applicant. 
This change to the language of the proposed comment will clarify that a 
financial institution may use its discretion in deciding whether to 
disclose a single credit score as the applicant's or co-applicant's 
score. The Bureau believes that any minor loss in the exactness of 
credit score reporting caused by this decision will be outweighed by 
the compliance benefits gained by not requiring financial institutions 
to calibrate systems and engage in ongoing compliance to account for 
the various situations likely to arise.
    Regarding the comments discussing reporting when a median or middle 
credit score is relied on, the Bureau notes that comment 4(a)(15)-3 as 
adopted addresses this situation: A financial institution should report 
the median or middle credit score for the applicant or, at the 
financial institution's discretion, for the co-applicant.
    Regarding the request for guidance on reporting when a credit score 
is requested but none is available, Sec.  1003.4(a)(15) requires 
reporting the credit score or scores relied on in making the credit 
decision, so a financial institution would report that the requirement 
is not applicable if it did not rely on a credit score. In regard to 
the comment on employee loans, the Bureau did not propose or seek 
comment about an exclusion from credit score reporting for loans to 
employees, and declines to adopt one.
4(a)(17)
    Section 304(b)(5)(A) of HMDA \124\ provides for 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).'' \125\ Section 1003.4(a)(17), as adopted by the 2015 HMDA 
Final Rule, implements this provision and provides that, for covered 
loans subject to Regulation Z Sec.  1026.43(c), other than purchased 
covered loans, a financial institution shall report the amount of total 
loan costs, as disclosed pursuant to Regulation Z Sec.  1026.38(f)(4), 
if a disclosure is provided for the covered loan pursuant to Regulation 
Z Sec.  1026.19(f), or the total points and fees charged for the 
covered loan, expressed in dollars and calculated pursuant to 
Regulation Z Sec.  1026.32(b)(1), if the covered loan is not subject to 
the disclosure requirements in Regulation Z Sec.  1026.19(f). As 
adopted by the 2015 HMDA Final Rule, comment 4(a)(17)(i)-3 explains 
that, if the amount of total loan costs changes because a financial 
institution provides a revised version of the disclosures required 
under Regulation Z Sec.  1026.19(f), pursuant to Sec.  1026.19(f)(2), 
the financial institution complies with Sec.  1003.4(a)(17)(i) by 
reporting the revised amount, provided that the revised disclosure was 
provided to the borrower during the same reporting period in which 
closing occurred, and provides an illustrative example. Comments 
4(a)(18)-3, 4(a)(19)-3, and 4(a)(20)-3 provide identical guidance for 
reporting the other data points derived from the Closing Disclosure. 
The Bureau proposed to amend comment 4(a)(17)(i)-3, effective January 
1, 2018, to remove the references to quarterly reporting, and to again 
amend comment 4(a)(17)(i)-3, effective January 1, 2020, to 
reincorporate the references to quarterly reporting. The Bureau also 
proposed other minor clarifications to comment 4(a)(17)(i)-3.
---------------------------------------------------------------------------

    \124\ 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.
    \125\ 15 U.S.C. 1602(aa)(4) is part of the Truth in Lending Act. 
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. Section 1100A of the 
Dodd-Frank Act redesignated section 1602(aa)(4) as section 
1602(bb)(4), where it is currently codified. In light of that 
redesignation, the Bureau interprets HMDA section 304(b)(5)(A) 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 section 1602(aa)(4) is no longer relevant 
to a determination regarding points and fees.
---------------------------------------------------------------------------

    Two commenters stated that the proposal to refer to ``final 
action'' instead of the date that ``closing occurred'' regarding 
reporting total loan costs would create ambiguity in proposed comment 
4(a)(17)(i)-3. These commenters requested clarification on whether 
final action refers to: (1) The

[[Page 43115]]

date of disclosure; (2) the date of the corrected disclosure; (3) the 
date of the event that necessitated the corrected disclosure; or (4) 
the date the loan documents were recorded. One national trade 
association recommended that financial institutions be permitted to 
report corrected amounts reflected on a corrected disclosure so long as 
the disclosure was provided to the borrower before the financial 
institution's submission of its loan/application register.
    The Bureau is adopting comment 4(a)(17)(i)-3 effective January 1, 
2018, and as amended again effective January 1, 2020, substantially as 
proposed. The Bureau is not adopting the proposal to refer to the date 
``final action is taken'' instead of the date ``closing occurs.'' The 
Bureau explained in the April 2017 HMDA Proposal that it believed that 
referring to the reporting period in which final action is taken, 
rather than when closing occurred, would improve clarity and 
consistency with the language used in Regulation C.\126\ However, in 
light of comments indicating potential uncertainty regarding the 
significance of this proposed change, the Bureau is adopting comment 
4(a)(17)(i)-3 to include the phrase ``closing occurs,'' as adopted in 
the 2015 HMDA Final Rule. Because Sec.  1003.4(a)(17)(i) applies to 
covered loans for which a Closing Disclosure is provided pursuant to 
Regulation Z Sec.  1026.19(f), for purposes of comment 4(a)(17)(i)-3 
final action means the date that closing occurs. Thus, the Bureau 
believes it is appropriate to refer to the date closing occurs in 
comment 4(a)(17)(i)-3. Regarding the cutoff date for reporting 
corrected amounts as disclosed on a corrected disclosure, the Bureau 
refers to the discussion in the section-by-section analysis of Sec.  
1003.4(a)(12) above.
---------------------------------------------------------------------------

    \126\ April 2017 HMDA Proposal, 82 FR 19142, 19157 (Apr. 25, 
2017).
---------------------------------------------------------------------------

4(a)(18)
    Pursuant to HMDA sections 305(a) and 304(b)(5)(D), in the 2015 HMDA 
Final Rule the Bureau adopted Sec.  1003.4(a)(18) to require financial 
institutions to report, 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, as disclosed pursuant to Sec.  1026.38(f)(1). Comment 
4(a)(18)-3, as adopted by the 2015 HMDA Final Rule, provides the same 
guidance concerning reporting of the total of all itemized amounts that 
are designated borrower-paid at or before closing as provided in 
comment 4(a)(17)(i)-3 regarding reporting total loan costs in 
situations where a financial institution has issued a revised Closing 
Disclosure with a new amount of total borrower-paid origination 
charges. The Bureau proposed parallel amendments to comment 4(a)(18)-3 
to those proposed to comment 4(a)(17)(i)-3. For the reasons discussed 
above in the section-by-section analysis of Sec.  1003.4(a)(17), the 
Bureau is adopting comment 4(a)(18)-3 effective January 1, 2018, and as 
amended again effective January 1, 2020, substantially as proposed.
4(a)(19)
    Pursuant to HMDA sections 305(a) and 304(b)(5)(D), in the 2015 HMDA 
Final Rule the Bureau adopted Sec.  1003.4(a)(19) to require financial 
institutions to report, for covered loans subject to the disclosure 
requirements in Regulation Z Sec.  1026.19(f), the points paid to the 
creditor to reduce the interest rate, expressed in dollars, as 
described in Regulation Z Sec.  1026.37(f)(1)(i) and disclosed pursuant 
to Sec.  1026.38(f)(1). As adopted by the 2015 HMDA Final Rule, comment 
4(a)(19)-3 provides the same guidance concerning reporting of discount 
points as provided in comment 4(a)(17)(i)-3 regarding reporting total 
loan costs in situations where a financial institution has issued a 
revised Closing Disclosure with a new amount of discount points. The 
Bureau proposed parallel amendments to comment 4(a)(19)-3 to those 
proposed to comment 4(a)(17)(i)-3. For the reasons discussed above in 
the section-by-section analysis of Sec.  1003.4(a)(17), the Bureau is 
adopting comment 4(a)(19)-3 effective January 1, 2018, and as amended 
again effective January 1, 2020, substantially as proposed.
4(a)(20)
    Pursuant to HMDA sections 305(a) and 304(b)(5)(D), in the 2015 HMDA 
Final Rule the Bureau adopted Sec.  1003.4(a)(20) to require financial 
institutions to report, for covered loans subject to the disclosure 
requirements in Regulation Z Sec.  1026.19(f), the total amount of 
lender credits, as disclosed pursuant to Sec.  1026.38(h)(3). As 
adopted by the 2015 HMDA Final Rule, comment 4(a)(20)-3 provides the 
same guidance concerning reporting of lender credits as provided in 
comment 4(a)(17)(i)-3 regarding reporting total loan costs in 
situations where a financial institution has issued a revised Closing 
Disclosure with a new amount of lender credits. The Bureau proposed 
parallel edits to comment 4(a)(20)-3 to those proposed to comment 
4(a)(17)(i)-3. For the reasons discussed above in the section-by-
section analysis of Sec.  1003.4(a)(17), the Bureau is adopting comment 
4(a)(20)-3 effective January 1, 2018, and as amended again effective 
January 1, 2020, substantially as proposed.
4(a)(21)
    Pursuant to HMDA sections 305(a) and 304(b)(6)(J), the Bureau 
adopted Sec.  1003.4(a)(21) in the 2015 HMDA Final Rule to require 
financial institutions to report the interest rate applicable to the 
approved application or to the covered loan at closing or account 
opening. Comment 4(a)(21)-1 clarifies the interest rate that financial 
institutions must report for covered loans or applications subject to 
the disclosure requirements of Regulation Z Sec.  1026.19(e) or (f). 
The Bureau proposed to amend comment 4(a)(21)-1 to clarify that, if a 
financial institution provides a revised or corrected version of the 
disclosures required under Regulation Z Sec.  1026.19(e) or (f), as 
applicable, the financial institution complies with Sec.  1003.4(a)(21) 
by reporting the interest rate on the revised or corrected disclosure, 
provided that the revised or corrected disclosure was provided to the 
borrower before the end of the reporting period in which final action 
is taken. The Bureau also proposed certain other minor clarifications 
to comment 4(a)(21)-1. One national trade association recommended that 
financial institutions be permitted to report corrected amounts 
reflected on a corrected disclosure so long as the disclosure was 
provided to the borrower before the financial institution's submission 
of its loan/application register. See the discussion above in the 
section-by-section analysis of Sec.  1003.4(a)(12) concerning that 
comment. The Bureau is adopting comment 4(a)(21)-1 as proposed, with a 
minor clarification to specify the early and the final disclosure 
requirements in Regulation Z Sec.  1026.19(e) and (f) and to add an 
omitted ``the.''
4(a)(24)
    Pursuant to its authority under sections 304(b)(6)(J) and 305(a) of 
HMDA, the Bureau adopted Sec.  1003.4(a)(24) in the 2015 HMDA Final 
Rule to require, except for purchased covered loans, financial 
institutions to report the ratio of the total amount of debt secured by 
the property to the value of the property relied on in making the 
credit decision. The ratio of the total amount of debt secured by the 
property to the value of the property relied on in making the credit 
decision generally is referred to as the combined

[[Page 43116]]

loan-to-value (CLTV) ratio. The Bureau proposed a technical correction 
to comment 4(a)(24)-2 and to add new comment 4(a)(24)-6 to provide 
additional guidance on the requirement to report the CLTV ratio relied 
on in making the credit decision.
    A few commenters requested exemptions from the reporting 
requirements in Sec.  1003.4(a)(24) for reverse mortgages, assumptions, 
or loans made by credit unions, with one commenter suggesting that the 
data point be removed entirely. One national trade association 
requested the Bureau clarify that, in the case of reverse mortgages, 
the total amount of debt secured by the property is limited to mortgage 
liens, while another national trade association requested resubmission 
guidelines for reporting CLTV ratio.
    The Bureau is adopting comments 4(a)(24)-2 and -6 as proposed, with 
technical revisions for clarity. Regarding the calculation of the CLTV 
ratio, final comment 4(a)(24)-6 clarifies further that Sec.  
1003.4(a)(24) does not require a financial institution to use a 
particular CLTV ratio calculation method but instead requires financial 
institutions to report the CLTV ratio relied on in making the credit 
decision. As to commenters' requests for exemptions from Sec.  
1003.4(a)(24), the Bureau notes that Sec.  1003.4(a)(24) does not 
require a financial institution to calculate a CLTV ratio and does not 
require a financial institution to rely on a CLTV ratio in making a 
credit decision. If a financial institution makes a credit decision 
without relying on a CLTV ratio, the financial institution complies 
with Sec.  1003.4(a)(24) by reporting that the requirement is not 
applicable. The Bureau also notes that, as provided in comment 2(d)-
2.i, assumptions are considered extensions of credit even if the new 
borrower assumes an existing debt obligation. Thus, if a financial 
institution that grants an assumption of a debt obligation relies on a 
CLTV ratio in making the credit decision related to the application for 
the assumption, the financial institution complies with Sec.  
1003.4(a)(24) by reporting that CLTV ratio. A financial institution 
that grants an assumption of a debt obligation does not report the CLTV 
ratio relied on by the originating institution, unless it relied on 
that CLTV ratio in making the credit decision related to the 
application for the assumption. The same principles regarding reporting 
the CLTV ratio apply to reverse mortgages as defined under Sec.  
1003.2(q).
4(a)(26)
    The Bureau implemented HMDA section 304(b)(6)(B) in the 2015 HMDA 
Final Rule by adopting Sec.  1003.4(a)(26) to require that financial 
institutions collect and report data on the number of months, or 
proposed number of months in the case of an application, until the 
first date the interest rate may change after closing or account 
opening. The Bureau proposed additional commentary to Sec.  
1003.4(a)(26) to clarify reporting requirements for non-monthly 
introductory interest rate periods.
    A few commenters expressed support for the proposed clarification 
regarding non-monthly introductory rate periods, stating that the 
proposal would help facilitate implementation. A vendor that supported 
the proposal requested additional clarification on situations where a 
construction loan that converts to permanent financing features a 
different interest rate than the permanent financing and where a loan 
has a temporary buydown agreement that is separate from the note. A 
large financial institution expressed uncertainty regarding reporting 
when a variable-rate loan is tied to an index that can change at any 
time and requested that financial institutions be permitted to report 
``not applicable'' in such circumstances. One national trade 
association recommended that the Bureau exempt purchases and 
assumptions of loans secured by multifamily dwellings, stating that 
reporting such information would provide limited public policy 
benefits. This commenter also suggested referring to the ``initial rate 
period'' instead of to the ``introductory'' rate to reduce confusion. 
One national trade association requested that reverse mortgages be 
exempt from Sec.  1003.4(a)(26).
    The Bureau is adopting new comment 4(a)(26)-5 as proposed. Comment 
4(a)(26)-5 provides that if a covered loan or application includes an 
introductory interest rate period measured in a unit of time other than 
months, the financial institution complies with Sec.  1003.4(a)(26) by 
reporting the introductory interest rate period for the covered loan or 
application using an equivalent number of whole months without regard 
for any remainder and provides an example. Regarding requests for 
further clarifications, Sec.  1003.4(a)(26) requires a financial 
institution to report the number of months, or proposed number of 
months in the case of an application, from closing or account opening 
until the first date the interest rate may change. Regarding the 
request for additional guidance on reporting when a construction loan 
converts to permanent financing, Sec.  1003.4(a)(26) provides a single 
standard for reporting that does not depend on loan type or loan 
purpose and that applies regardless of how the interest rate adjustment 
is characterized. Regarding the request for additional guidance on 
reporting when a loan has a temporary buydown agreement, Sec.  
1003.4(a)(26) does not prescribe a specific method by which the change 
in interest rate must be reflected (i.e., on the note or in a separate 
agreement). As to situations where it is not known with certainty when 
the interest rate may change, Sec.  1003.4(a)(26) refers to the first 
date the interest rate may change, rather than will change, after 
closing or account opening. Comment 4(a)(26)-1 explains that Sec.  
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 at that time 
and even if the rates that will apply, or the periods for which they 
will apply, are not known at closing or account opening, and includes 
an illustrative example. The Bureau notes that Sec.  1003.4(a)(26) does 
not refer to ``introductory'' rates and that the commentary to Sec.  
1003.4(a)(26) uses this term solely to illustrate, and not to change, 
the substantive requirements in Sec.  1003.4(a)(26). The Bureau 
declines to adopt further exemptions from Sec.  1003.4(a)(26). As the 
Bureau explained in the 2015 HMDA Final Rule, interest rate variability 
can be an important feature in affordability, and having such 
information on covered loans and applications could be used to identify 
possible discriminatory lending patterns. The Bureau also notes that, 
as adopted in the 2015 HMDA Final Rule, comments 4(a)(26)-3 and -4 
exclude certain transactions from the reporting requirements in Sec.  
1003.4(a)(26).
4(a)(34)
    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'' the Secure and Fair 
Enforcement for Mortgage Licensing Act (SAFE Act).\127\ Section 
1003.4(a)(34) as adopted by the 2015 HMDA Final Rule implements this 
provision by requiring the reporting of the unique identifier assigned 
to the loan originator by the National Mortgage Licensing System and 
Registry (NMLSR ID) for covered loans and applications,

[[Page 43117]]

including purchased loans. Comment 4(a)(34)-2 as adopted by the 2015 
HMDA Final Rule explains that, 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. To avoid difficulties that purchasers of loans 
are likely to experience in reporting the NMLSR ID during the 
transition to the new reporting regime, the Bureau proposed new comment 
4(a)(34)-4, which would provide two transitional rules for loan 
purchases.
---------------------------------------------------------------------------

    \127\ Dodd-Frank Act section 1094(3)(A)(iv), 12 U.S.C. 
2803(b)(6)(F).
---------------------------------------------------------------------------

    The preamble to the 2015 HMDA Final Rule stated the Bureau's belief 
that reporting the NMLSR ID would impose little to no ongoing cost for 
financial institutions because the information is required to be 
provided on certain loan documents pursuant to Regulation Z (the loan 
originator rules).\128\ However, the Bureau had become aware that 
financial institutions reporting covered loans that they purchase may 
sometimes have difficulty reporting this information because the NMLSR 
ID may not be listed on the loan documents of purchased loans that were 
originated before the ID disclosure requirement took effect. In 
addition, the loan documents for purchased loans that are not covered 
by Regulation Z may not include the NMLSR ID even when the loan 
originator has been assigned an NMLSR ID. A later purchaser must report 
the NMLSR ID according to the interpretation in comment 4(a)(34)-2, as 
adopted by the 2015 HMDA Final Rule, if it is a covered loan (e.g., a 
commercial purpose home purchase loan). Consequently, the Bureau 
proposed two transitional rules for purchasers to facilitate the 
reporting of the NMLSR ID--one for loans covered by Regulation Z and 
originated before the effective date of the loan originator rules on 
January 10, 2014, and a second for loans not covered by Regulation Z 
and originated before January 1, 2018.
---------------------------------------------------------------------------

    \128\ 2015 HMDA Final Rule, 80 FR 66128, 66231 (Oct. 28, 2015). 
See Regulation Z Sec.  1026.36(g).
---------------------------------------------------------------------------

    Seven commenters discussed the NMLSR ID transition rules and all of 
them expressed support for the changes. Three of these commenters 
requested that the Bureau extend or make permanent the transitional 
rule for non-Regulation Z loans. One commenter stated that there will 
be difficulties when purchasing loans from an originating seller that 
is not itself a HMDA reporter. Another commenter said that the 
practical difficulties that the non-Regulation Z transitional rule is 
meant to allay will still exist after January 1, 2018. A third 
commenter suggested that the Bureau allow purchasers to report that the 
requirement is not applicable whenever there is no NMLSR ID on the loan 
documents.
    Commenters also suggested that the transitional rules for 
purchasers be extended to data points beyond the NMLSR ID. One 
commenter suggested a transitional rule that would allow purchasers to 
report whatever data was originally reported on the loan. Another 
commenter requested a transitional rule for reporting of assumptions.
    The Bureau has carefully considered the comments submitted and is 
adopting comment 4(a)(34)-4 as proposed. Commenters have pointed out 
that they may purchase after the effective date of the 2015 HMDA Final 
Rule loans that were originated before Regulation Z's loan originator 
rules became effective on January 10, 2014. In such cases, the loan 
documents may not include the NMLSR ID, even when the loan originator 
had been assigned one. Comment 4(a)(34)-2, however, otherwise provides 
that Sec.  1003.4(a)(34) requires reporting the NMLSR ID for such 
loans. In such a circumstance, this reporting may impose considerable 
challenges to require purchasers to acquire this information. 
Therefore, the transitional rule in new comment 4(a)(34)-4 explains 
that, if a financial institution purchases a covered loan that 
satisfies the coverage criteria of Regulation Z Sec.  1026.36(g) and 
that was originated before January 10, 2014, the financial institution 
complies with Sec.  1003.4(a)(34) by reporting that the requirement is 
not applicable.
    As explained above, the loan documents for purchased loans that are 
not covered by Regulation Z but are nevertheless covered loans (e.g., a 
commercial purpose home purchase loan) also may not include the NMLSR 
ID, even when the loan originator has been assigned an NMLSR ID. 
Nevertheless, a later purchaser must report the NMLSR ID under comment 
4(a)(34)-2, as adopted by the 2015 HMDA Final Rule. The Bureau believes 
that it is appropriate to provide sufficient time for originators and 
purchasers to develop processes that will ensure compliance in this 
situation. The Bureau also believes that originators and purchasers of 
such loans will be able to arrange for compliance given the extra 
transitional period provided and therefore declines to extend or make 
permanent this transitional rule. Therefore, the Bureau adopts the 
second transitional rule in new comment 4(a)(34)-4 as proposed. The 
comment explains that, if a financial institution purchases a covered 
loan that does not satisfy the coverage criteria of Regulation Z Sec.  
1026.36(g) and that was originated before January 1, 2018, the 
financial institution complies with Sec.  1003.4(a)(34) by reporting 
that the requirement is not applicable.
    As adopted, new comment 4(a)(34)-4 also makes clear that purchasers 
of the loans exempted by the transitional rules discussed above may 
report the NMLSR ID voluntarily. The information may be useful, and the 
Bureau believes that, if the NMLSR ID is present in the loan data of 
purchased loans to which the transitional rules apply, it may add 
burden to require it to be removed.
    Commenters' suggestions about transitional rules for other data 
points and general treatment of purchased loans were not proposed, and 
the Bureau has not benefited from public comment concerning them. The 
transitional rules regarding the NMLSR ID are being adopted due to 
specific documentation issues that will create challenges for 
purchasers, and the absence of data that will result is reasonably well 
known and circumscribed. Commenters did not provide specific discussion 
of the challenges that other transitional rules would address and what 
potential burdens would exist.
    In addition, the Bureau notes that assumptions are reportable under 
the current HMDA rule and are treated as new extensions of credit, so 
reporting will not require data from the previous origination of the 
loan being assumed.
4(a)(35)
    In the 2015 HMDA Final Rule, pursuant to its authority under 
sections 305(a) and 304(b)(6)(J) of HMDA, the Bureau adopted Sec.  
1003.4(a)(35)(i) to require a financial institution to report, except 
for purchased covered loans, the name of the automated underwriting 
system (AUS) it used to evaluate the application and the result 
generated by that AUS. As adopted by the 2015 HMDA Final Rule, Sec.  
1003.4(a)(35)(ii) provides that an AUS means an electronic tool 
developed by a securitizer, Federal government insurer, or Federal 
government guarantor that provides a result regarding the credit risk 
of the applicant and whether the covered loan is eligible to be 
originated, purchased, insured, or guaranteed by that securitizer, 
Federal government insurer, or Federal government guarantor. The Bureau 
proposed to amend Sec.  1003.4(a)(35)(ii) to clarify

[[Page 43118]]

further the definition of AUS. The Bureau proposed conforming 
amendments to comment 4(a)(35)-2 and proposed new comment 4(a)(35)-7 to 
provide guidance regarding a financial institution's determination of 
whether the system it is using to evaluate an application is an AUS for 
purposes of Sec.  1003.4(a)(35).
    A few commenters supported the proposed clarifications to the 
definition of AUS and the additional guidance in proposed new comment 
4(a)(35)-7. One national trade association stated that the 2015 HMDA 
Final Rule uses the term securitizer in the present tense, thereby 
indicating that, if the financial institution that developed the 
electronic system is no longer securitizing loans, that system would 
not meet the definition of AUS. It asserted that the proposal to 
clarify that a person is a securitizer if it has ever securitized a 
loan is a substantive change that should result in an additional 
implementation period. A software vendor commenter requested additional 
guidance on reporting requirements when a financial institution uses 
Technology Open to Approved Lenders (TOTAL) Scorecard in conjunction 
with other AUSs.
    The Bureau is adopting Sec.  1003.4(a)(35)(ii) and comments 
4(a)(35)-2 and -7 as proposed, with minor amendments for clarity in 
comment 4(a)(12)-2. Accordingly, final Sec.  1003.4(a)(35)(ii) explains 
that, for purposes of Sec.  1003.4(a)(35), an AUS means an electronic 
tool developed by a securitizer, Federal government insurer, or Federal 
government guarantor of closed-end mortgage loans or open-end lines of 
credit that provides a result regarding the credit risk of the 
applicant and whether the covered loan is eligible to be originated, 
purchased, insured, or guaranteed by that securitizer, Federal 
government insurer, or Federal government guarantor. Final Sec.  
1003.4(a)(35)(ii) explains further that, a person is a securitizer, 
Federal government insurer, or Federal government guarantor of closed-
end mortgage loans or open-end lines of credit, respectively, if it has 
ever securitized, provided Federal government insurance, or provided a 
Federal government guarantee for a closed-end mortgage loan or open-end 
line of credit.
    The Bureau is adopting conforming amendments to comment 4(a)(35)-2 
to reflect final Sec.  1003.4(a)(35)(ii). Final comment 4(a)(35)-2 
clarifies that, to be covered by the AUS definition in Sec.  
1003.4(a)(35)(ii), a system must be an electronic tool that has been 
developed by a securitizer, Federal government insurer, or a Federal 
government guarantor of closed-end mortgage loans or open-end lines of 
credit. Final comment 4(a)(35)-2 provides further that, a person is a 
securitizer, Federal government insurer, or Federal government 
guarantor of closed-end mortgage loans or open-end lines of credit, 
respectively, if it has securitized, provided Federal government 
insurance, or provided a Federal government guarantee for a closed-end 
mortgage loan or open-end line of credit at any point in time. It 
provides still further that, a person may be a securitizer, Federal 
government insurer, or Federal government guarantor of closed-end 
mortgage loans or open-end lines of credit, respectively, for purposes 
of Sec.  1003.4(a)(35) even if it is not actively securitizing, 
insuring, or guaranteeing closed-end mortgage loans or open-end lines 
of credit at the time a financial institution uses the system in 
question. Additionally, final comment 4(a)(35)-2 clarifies that where 
the person that developed the electronic tool has never been a 
securitizer, Federal government insurer, or Federal government 
guarantor of closed-end mortgage loans or open-end lines of credit, 
respectively, at the time a financial institution uses the tool to 
evaluate an application, the financial institution complies with Sec.  
1003.4(a)(35) by reporting that the requirement is not applicable 
because an AUS was not used to evaluate the application. In addition to 
these conforming amendments, the Bureau is adopting final comment 
4(a)(35)-2 with minor technical revisions.
    The Bureau is adopting new comment 4(a)(35)-7 to add clarity 
regarding a financial institution's determination of whether the system 
it is using to evaluate an application is an electronic tool developed 
by a securitizer, Federal government insurer, or Federal government 
guarantor of closed-end mortgage loans or open-end lines of credit. 
Comment 4(a)(35)-7 sets forth the definition of AUS under final Sec.  
1003.4(a)(35)(ii). It clarifies that if a financial institution knows 
or reasonably believes that the system it is using to evaluate an 
application is an electronic tool that has been developed by a 
securitizer, Federal government insurer, or Federal government 
guarantor of closed-end mortgage loans or open-end lines of credit, 
then the financial institution complies with Sec.  1003.4(a)(35) by 
reporting the name of that system and the result generated by that 
system. Comment 4(a)(35)-7 explains that knowledge or reasonable belief 
could, for example, be based on a sales agreement or other related 
documents, the financial institution's previous transactions or 
relationship with the developer of the electronic tool, or 
representations made by the developer of the electronic tool 
demonstrating that the developer of the electronic tool is a 
securitizer, Federal government insurer, or Federal government 
guarantor of closed-end mortgage loans or open-end lines of credit.
    Additionally, comment 4(a)(35)-7 provides that if a financial 
institution does not know or reasonably believe that the system it is 
using to evaluate an application is an electronic tool that has been 
developed by a securitizer, Federal government insurer, or Federal 
government guarantor of closed-end mortgage loans or open-end lines of 
credit, the financial institution complies with Sec.  1003.4(a)(35) by 
reporting that the requirement is not applicable, provided that the 
financial institution maintains procedures reasonably adapted to 
determine whether the electronic tool it is using to evaluate an 
application meets the definition in Sec.  1003.4(a)(35)(ii). The 
comment explains that reasonably adapted procedures include attempting 
to determine with reasonable frequency, such as annually, whether the 
developer of the electronic tool is a securitizer, Federal government 
insurer, or Federal government guarantor of closed-end mortgage loans 
or open-end lines of credit. Finally, comment 4(a)(35)-7 includes 
illustrative examples demonstrating how a financial institution 
complies with Sec.  1003.4(a)(35) depending on whether it knows or 
reasonably believes that the system it is using to evaluate an 
application is an electronic tool that has been developed by a 
securitizer, Federal government insurer, or Federal government 
guarantor of closed-end mortgage loans or open-end lines of credit.
    As to one commenter's statement that the proposal would constitute 
a substantive change requiring a new implementation period, the Bureau 
notes that, as discussed in the April 2017 HMDA Proposal, the 2015 HMDA 
Final Rule did not define the timeframe relevant to the determination 
of whether a person is a securitizer, Federal government insurer, or 
Federal government guarantor for purposes of Sec.  1003.4(a)(35). Thus, 
the Bureau believes the final rule should facilitate implementation by 
addressing potential uncertainty while also ensuring the continued 
availability of reliable AUS data regardless of potential changes in 
the marketplace that may affect a person's status as an active 
securitizer, Federal government insurer, or Federal government 
guarantor of closed-end

[[Page 43119]]

mortgage loans or open-end lines of credit. To the extent the 
clarifications in this rule require financial institutions to make 
technical changes, those changes require only minor adjustments, not 
significant system updates. In addition, the Bureau has issued this 
final rule in August, four months before 2018, which the Bureau 
believes should afford ample time to implement any necessary minor 
system adjustments. The Bureau is releasing implementation aids with 
this final rule to facilitate implementation.
    The Bureau declines to clarify further reporting requirements when 
a financial institution uses TOTAL Scorecard to evaluate an application 
because that scenario is addressed in the 2015 HMDA Final Rule.\129\ 
The Bureau explained that TOTAL Scorecard works in conjunction with 
various AUSs, and that if a financial institution uses TOTAL Scorecard 
to evaluate an application, the Bureau had determined that the HMDA 
data's usefulness will be improved by requiring the financial 
institution to report that it used TOTAL Scorecard along with the 
result generated by that system.\130\
---------------------------------------------------------------------------

    \129\ Id. at 66233.
    \130\ Id.
---------------------------------------------------------------------------

Section 1003.5 Disclosure and Reporting

5(a) Reporting to Agency
5(a)(3)
    Pursuant to HMDA section 305(a), in the 2015 HMDA Final Rule the 
Bureau adopted Sec.  1003.5(a)(3), effective January 1, 2019, to 
require financial institutions to provide their Legal Entity Identifier 
(LEI) when reporting HMDA data and to set forth certain other 
requirements regarding the information a financial institution must 
include in its submission. Specifically, Sec.  1003.5(a)(3)(ii) 
requires a financial institution to provide with its submission the 
calendar year the data submission covers pursuant to Sec.  
1003.5(a)(1)(i) or calendar quarter and year the data submission covers 
pursuant to Sec.  1003.5(a)(1)(ii). The Bureau proposed to amend Sec.  
1003.5(a)(3)(ii) to reflect the different effective dates for annual 
reporting requirements in Sec.  1003.5(a)(1)(i) and quarterly reporting 
requirements in Sec.  1003.5(a)(1)(ii) adopted by the 2015 HMDA Final 
Rule. The Bureau received no comments regarding the proposed amendments 
and therefore is adopting Sec.  1003.5(a)(3)(ii) as proposed.

Section 1003.6--Enforcement

6(b) Bona Fide Errors
    Current Sec.  1003.6(b) provides that ``bona fide errors'' are not 
violations of HMDA and Regulation C and provides guidance about what 
qualifies as a bona fide error. Current Sec.  1003.6(b)(2) provides 
that an incorrect entry for a census tract number is deemed a bona fide 
error, and is not a violation of HMDA or Regulation C, if the financial 
institution maintains procedures reasonably adapted to avoid such 
errors. The Bureau proposed amendments to the commentary to Sec.  
1003.6(b) to clarify that incorrect entries reporting the census tract 
number of a property are not a violation of HMDA or Regulation C if the 
financial institution properly uses a geocoding tool made available 
through the Bureau's Web site, the financial institution enters an 
accurate property address, and the tool provides a census tract number 
for the property address entered.
    To ease the burden associated with reporting the census tract 
number required by Regulation C, the Bureau plans to make available on 
its Web site a geocoding tool to provide the census tract based on 
property addresses entered by users. The Bureau proposed new comment 
6(b)-2 to clarify that obtaining census tract information for covered 
loans and applications from the geocoding tool on the Bureau's Web site 
is an example of a procedure reasonably adapted to avoid incorrect 
entries for a census tract number under Sec.  1003.6(b)(2). The 
proposed comment stated that a census tract error is not a violation of 
HMDA or Regulation C if the financial institution obtained the census 
tract number from the geocoding tool on the Bureau's Web site after 
entering an accurate property address. The proposed comment stated, 
however, that a financial institution's failure to provide the required 
census tract information for a covered loan or application on its loan/
application register because the geocoding tool on the Bureau's Web 
site did not provide a census tract for the property address entered by 
the financial institution is not excused as a bona fide error. The 
proposed comment also explained that a census tract error caused by a 
financial institution entering an inaccurate property address into the 
geocoding tool on the Bureau's Web site is not excused as a bona fide 
error. The Bureau also proposed to add to comment 6(b)-1 a cross 
reference to proposed comment 6(b)-2.
    The Bureau received nine comments from trade associations, 
financial institutions, and other industry participants on the proposed 
amendments. One commenter supported the safe harbor protections 
provided by using the geocoding tool on the Bureau's Web site. Several 
commenters suggested that the bona fide error should include any error 
generated by the geocoding tool on the Bureau's Web site, including the 
tool's failure to return an address. One vendor commenter opposed 
providing a safe harbor for the geocoding tool on the Bureau's Web site 
unless other geocoding tools receive a similar safe harbor. Several 
commenters expressed concern that the geocoding tool on the Bureau's 
Web site would not be available in a timeframe that would allow for 
testing and implementation and suggested that the Bureau delay the 
effective date of the safe harbor provision.
    The Bureau is finalizing comments 6(b)-1 and -2 largely as 
proposed. The Bureau does not agree with commenters that the scope of 
proposed comment 6(b)-2 is too narrow. To provide protections for all 
errors generated through the use of the geocoding tool on the Bureau's 
Web site, regardless of the reason for the error, would be overbroad. 
Accurate information about the census tract of the property is 
essential to HMDA's purposes. Therefore, the Bureau believes that an 
accurate census tract should be reported in as many cases as possible. 
At the same time, however, a financial institution should not face 
compliance risk for inaccuracies resulting from information provided by 
the geocoding tool on the Bureau's Web site. The Bureau believes that 
proposed comment 6(b)-2 appropriately balances those concerns by 
requiring financial institutions to enter an accurate property address. 
For the same reason, in cases when the geocoding tool on the Bureau's 
Web site does not generate a census tract number for a particular 
address, the Bureau believes the burden is appropriately placed on 
financial institutions to, by other means, identify the census tract, 
as they do when using any other Geocoding Tool. Financial institutions 
bear the reporting responsibility under HMDA generally, to identify the 
census tract; financial institutions are in a better position to 
identify the census tract using other information that they have about 
property location, such as the local area or parcel number.
    The Bureau did not intend, as commenters appear to have inferred, 
that only census tract errors generated by the geocoding tool on the 
Bureau's Web site are bona fide errors. Current Sec.  1003.6 states 
that an error in

[[Page 43120]]

compiling or recording data for a covered loan or application is not a 
violation if the error was unintentional and occurred despite the 
maintenance of procedures reasonably adapted to avoid such an error, 
and neither the 2015 HMDA Final Rule nor this final rule changes that 
provision. New comment 6(b)-2 merely clarifies that the geocoding tool 
on the Bureau's Web site serves as one example of a procedure 
reasonably adapted to avoid incorrect entries for census tract numbers. 
Obtaining census tract numbers using other geocoding tools may 
constitute a procedure reasonably adapted to avoid geocoding errors, 
depending on the facts and circumstances. If a financial institution 
chooses to use an alternative geocoding tool that constitutes a 
procedure reasonably adapted to avoid census tract errors, the 
financial institution will receive the same safe harbor protections. 
The Bureau cannot extend safe harbor status to any and all such 
alternative geocoding tools, however, because it does not control the 
accuracy or reliability of such tools.
    The Bureau declines to delay the effective date of these bona fide 
error protections, and is making the protections available beginning 
with data collected during the 2018 calendar year.\131\ The Bureau 
believes that financial institutions should be able to take advantage 
of the safe harbor as soon as the Bureau makes a geocoding tool 
available on its Web site. While some financial institutions may not 
adopt its use immediately, for those that do so, the safe harbor should 
be available without any delay. However, to avoid any confusion in the 
event that the Bureau does not make the geocoding tool available on its 
Web site before financial institutions begin collecting 2018 calendar 
year data the Bureau is modifying the language in proposed comment 
6(b)-2 to clarify that the safe harbor is available only once the 
Bureau has made the geocoding tool available on its Web site. The 
Bureau also is making some technical changes to the comment for 
clarity.
---------------------------------------------------------------------------

    \131\ As noted below, the effective date for an amendment to the 
commentary to Sec.  1003.6(b)(1) is changed to January 1, 2019, to 
align with the effective date for the corresponding amendment in the 
2015 HMDA Final Rule. See 2015 HMDA Final Rule, 80 FR 66128, 66257 
(Oct. 28, 2015)(``The Bureau is adopting an effective date of 
January 1, 2019 for Sec.  1003.6, which concerns enforcement of HMDA 
and Regulation C. The amendments to Sec.  1003.6 adopted in this 
final rule apply to HMDA data reported beginning in 2019. Thus, 
current Sec.  1003.6 applies to data collected in 2017 and reported 
in 2018, and amended Sec.  1003.6 applies to 2018 data reported in 
2019.'').
---------------------------------------------------------------------------

6(c) Quarterly Recording and Reporting
    Current Sec.  1003.6(b)(3) provides that errors and omissions in 
data that a financial institution records on its loan/application 
register on a quarterly basis as required under Sec.  1003.4(a) are not 
violations of HMDA or Regulation C if the institution makes a good-
faith effort to record all required data fully and accurately within 
thirty calendar days after the end of each calendar quarter and 
corrects or completes the data before reporting the data to its 
appropriate Federal agency. In the 2015 HMDA Final Rule, the Bureau 
moved the substance of current Sec.  1003.6(b)(3) to new Sec.  
1003.6(c)(1) and added new Sec.  1003.6(c)(2) to provide that a similar 
safe harbor applies to data reported on a quarterly basis pursuant to 
Sec.  1003.5(a)(1)(ii). Pursuant to Sec.  1003.6(c)(2), errors and 
omissions in the data submitted pursuant to Sec.  1003.5(a)(1)(ii) will 
not be considered HMDA or Regulation C violations provided the same 
conditions that currently provide a safe harbor for errors and 
omissions in quarterly recorded data are satisfied. The Bureau proposed 
to amend Sec.  1003.6(c)(2) so that its effective date aligns with the 
effective date for the quarterly reporting requirements in Sec.  
1003.5(a)(1)(ii), for which Sec.  1003.6(c)(2) provides a safe harbor. 
Specifically, the Bureau proposed to remove Sec.  1003.6(c)(2) and to 
redesignate Sec.  [thinsp]1003.6(c)(1) as Sec.  1003.6(c) effective 
January 1, 2019. The Bureau proposed to add Sec.  1003.6(c)(2), as 
adopted by the 2015 HMDA Final Rule, and to redesignate Sec.  1003.6(c) 
as Sec.  1003.6(c)(1) effective January 1, 2020. The Bureau received no 
comments regarding this proposal and therefore is adopting the 
revisions to Sec.  1003.6(c) effective January 1, 2019, and effective 
January 1, 2020, as proposed.
Appendix B to Part 1003--Form and Instructions for Data Collection of 
Ethnicity, Race, and Sex
    HMDA and Regulation C currently require financial institutions to 
collect the ethnicity, race, and sex of an applicant or borrower for 
covered loans and applications.\132\ Current appendix B to Regulation C 
provides data collection instructions and a sample data collection form 
for use in collecting an applicant's or borrower's information. In the 
2015 HMDA Final Rule, the Bureau revised the ethnicity, race, and sex 
data collection requirements and instructions.\133\ Among other 
changes, revised appendix B requires financial institutions to collect 
disaggregated ethnic and racial categories beginning January 1, 2018. 
To facilitate compliance and make various corrections, the Bureau 
proposed certain amendments to the instructions and sample data 
collection form contained in revised appendix B.
---------------------------------------------------------------------------

    \132\ 12 U.S.C. 2803(b)(4); 12 CFR 1003.4(a)(10).
    \133\ Revised Sec.  1003.4(a)(10)(i); revised comment 
4(a)(10)(i)-1; revised appendix B to part 1003.
---------------------------------------------------------------------------

Ethnicity and Race Subcategories
    Instruction 8 in revised appendix B provides that financial 
institutions must report the ethnicity, race, and sex of an applicant 
as provided by the applicant. The instruction provides the example 
that, if an applicant selects the Mexican ethnicity subcategory, the 
financial institution reports Mexican for the ethnicity of the 
applicant. Instruction 9.i similarly provides that a financial 
institution must report each ethnicity category and subcategory 
selected by the applicant. Instruction 9.i further provides that, if an 
applicant selects the Hispanic or Latino ethnicity category, the 
applicant may select up to four ethnicity subcategories.
    To clarify the circumstances in which an applicant may select a 
subcategory and to address any perceived inconsistencies, the Bureau 
proposed to amend instructions 8 and 9.i. Specifically, the Bureau 
proposed to amend instruction 8 to provide that an applicant may select 
an ethnicity or race subcategory even if the applicant does not select 
an aggregate ethnicity or race category. The April 2017 HMDA Proposal 
also clarified that a financial institution should not report an 
aggregate category if not selected by the applicant. The Bureau further 
proposed to amend instruction 9.i to remove language suggesting that 
the selection of Hispanic or Latino is a precondition to selecting the 
ethnicity subcategories. For the reasons discussed below, the Bureau is 
adopting instructions 8 and 9.i concerning the selection of ethnicity 
and race subcategories as proposed with minor revisions for clarity.
    The majority of commenters addressing the proposed revisions to 
instruction 8 and 9.i expressed appreciation for the clarifications. 
Consumer advocacy groups and an industry commenter also supported the 
proposal because it would reflect an applicant's preferences and 
identity.
    Some industry commenters opposed the proposed revisions to 
instruction 8 and 9.i. One commenter argued that the proposed 
clarifications are contrary to the instructions in revised appendix B 
and would undermine implementation work already performed. The 
commenter further asserted that the proposed revisions would not 
promote

[[Page 43121]]

self-identification or other benefits, as consumers submitting 
applications online know how to navigate through a variety of menu 
options. The commenter expressed the view that the proposed changes 
could instead have negative effects on consumers by providing too much 
information. The commenter further argued that the proposed revisions 
would require additional engineering and software development that may 
delay implementation. The commenter suggested that the Bureau defer 
making any amendments until the Bureau reviews ethnicity and race data 
submitted under revised appendix B.
    Another industry commenter argued that the proposed revisions would 
not align with lender systems, which in some cases are programmed to 
trigger automatically the selection of a main category when a 
subcategory is selected. The industry commenter explained that 
permitting automatic selection of the aggregate category would also be 
important for data analysis. The commenter suggested that, if an 
applicant selects only a subcategory, the financial institution must 
also report the aggregate category to which the subcategory belongs.
    The Bureau disagrees that the proposed revisions are inconsistent 
with the 2015 HMDA Final Rule, as revised appendix B does not 
definitively address the reporting of subcategories alone. Rather, as 
described above and in the April 2017 HMDA Proposal, the Bureau finds 
that revised appendix B instructions 8 and 9.i provide potentially 
inconsistent instructions that may cause uncertainty on whether an 
applicant may select only a subcategory without the corresponding 
aggregate category. The Bureau therefore finds it necessary to provide 
certainty, and indeed several commenters have expressed support for the 
Bureau's clarification of this issue. The clarification is also 
consistent with informal guidance provided to date by the Bureau.
    The Bureau believes financial institutions can implement and test 
any adjustments that might be required as a result of the clarification 
before the effective date. To the extent the clarification requires 
certain financial institutions to make technical changes, those changes 
will require only minor adjustments rather than significant system 
updates. Moreover, commenters who expressed concern about the 
implementation period may not have expected this rule to be finalized 
so quickly, providing industry more than four months time for 
implementation. For these reasons, the Bureau concludes that financial 
institutions will be capable of making the required changes in the 
several months remaining before the effective date of January 1, 2018.
    The Bureau also disagrees that providing applicants the opportunity 
to select a subcategory alone will be confusing to applicants, and 
notes that the commenter provides no testing results or data for such a 
conclusion. Rather, the Bureau believes that providing applicants with 
the opportunity to view and select the enumerated subcategories will 
increase optionality for the applicant and promote self-identification. 
For example, an applicant may identify as Mexican, but not Hispanic or 
Latino, and providing the applicant the option to view and choose only 
Mexican therefore may increase the response rate. The Bureau believes 
that applicants should always be able to select only a subcategory if 
it best reflects their self-identification preferences.
    The Bureau also declines to adopt the alternative proposed by an 
industry commenter to require a financial institution to report the 
corresponding aggregate category if an applicant selects only a 
subcategory. While the Bureau understands that such a requirement may 
reflect some institutions' systems, it may not reflect all financial 
institutions' practices. The Bureau declines as part of this rulemaking 
to impose an additional requirement on financial institutions to report 
the aggregate category if a subcategory is selected. Moreover, as 
discussed above, the Bureau believes that some applicants may self-
identify as a subcategory but not the corresponding aggregate category, 
thus reporting only what the applicant selects would better reflect 
applicant identity and may increase the response rate. The Bureau also 
does not believe that such an alternative is necessary for data 
analysis, as users may roll up the subcategories into their 
corresponding categories when analyzing the data, irrespective of how 
the data are reported.
    One industry commenter argued that the proposed clarification would 
result in inconsistent reporting. The commenter noted that the same 
applicant could be reported as an aggregate category before the 
effective date and a subcategory after the effective date. The 
commenter further noted that by removing a requirement to report the 
aggregate categories, many additional subcategories will be created and 
therefore dilute the data being reported. The commenter argued that 
inconsistent reporting would undermine HMDA's purposes and requested 
that the Bureau provide guidance on how to analyze data collected 
before and after the effective date.
    The Bureau declines to provide such guidance. As noted above, 
reporting requirements may differ from data analysis methods, and 
nothing in the revisions to instructions 8 and 9.i would preclude a 
financial institution from rolling up the subcategories into their 
corresponding aggregate categories for purposes of data analysis. 
Moreover, the Bureau sought comment only on the reporting requirements. 
The Bureau disagrees that the clarification will dilute the data being 
reported and notes that the commenter provides no evidence to support 
this conclusion. To the extent the clarification may result in 
differing reporting before and after the effective date, the Bureau 
notes that some variation is common during any transition period.
    Several commenters asked for clarification concerning how the 
revisions to instructions 8 and 9.i may affect other requirements of 
revised appendix B. One industry commenter requested confirmation that 
the amendments would not alter the requirements in revised appendix B 
concerning the collection of ethnicity, race, and sex information on 
the basis of visual observation or surname. The Bureau agrees that the 
proposed amendments would not alter revised appendix B in this respect.
    Another industry commenter requested guidance on how the 
clarifications would affect applications dated before January 1, 2018. 
The Bureau believes the commenter is referring to a Bureau approval 
notice issued on September 23, 2016, concerning the collection of 
ethnicity and race information in 2017 (Bureau Approval Notice), which 
provides that, at any time from January 1, 2017, through December 31, 
2017, a creditor may, at its option, permit applicants to self-identify 
using disaggregated ethnic and racial categories as instructed in 
revised appendix B.\134\ Specifically, the Bureau Approval Notice 
provides that, for any application in which final action is taken in 
2017, a financial institution that chooses to collect disaggregated 
information should report the aggregate ethnicity and race categories 
that ``correspond'' with the disaggregated categories.\135\ The Bureau 
Approval Notice provides further that for

[[Page 43122]]

purposes of submitting HMDA data for applications received on or after 
January 1, 2017, and before January 1, 2018, and on which final action 
is taken on or after January 1, 2018, the financial institution, at its 
option, may submit the information concerning ethnicity and race using 
disaggregated categories if the applicant provided such information 
instead of using the transition rule set forth in comment 4(a)(10)(i)-2 
as adopted by the 2015 HMDA Final Rule, or it may submit the 
information in accordance with that transition rule.\136\ The Bureau's 
clarifications to instructions 8 and 9.i do not affect the Bureau 
Approval Notice or the transition rule for reporting ethnicity and race 
information collected in 2017 for which final action is taken in 2017 
or 2018; where a financial institution collects disaggregated 
information in 2017, but reports only aggregate information, the 
financial institution should report the categories that correspond to 
any selected subcategories.
---------------------------------------------------------------------------

    \134\ Status of New Uniform Residential Loan Application and 
Collection of Expanded Home Mortgage Disclosure Information About 
Ethnicity and Race in 2017, 81 FR 66930 (Sep 29, 2016).
    \135\ Id. at 66931.
    \136\ Id.
---------------------------------------------------------------------------

    For the reasons given above, the Bureau is adopting the amendments 
in instructions 8 and 9.i concerning the selection of ethnicity and 
race subcategories as proposed with minor revisions for clarity.
Other Ethnicity and Other Race Subcategories and the American Indian or 
Alaska Native Race Category
    Instructions 9.ii and 9.iv in revised appendix B provide 
instructions for collecting and reporting an Other ethnicity or race 
subcategory and free-form field. Specifically, instruction 9.ii 
provides that, if an applicant selects the Other Hispanic or Latino 
ethnicity subcategory, the applicant may also provide a particular 
Hispanic or Latino ethnicity not listed in the standard subcategories. 
Instruction 9.iv similarly provides that, if an applicant selects the 
Other Asian race subcategory or the Other Pacific Islander race 
subcategory, the applicant may also provide a particular Other Asian or 
Other Pacific Islander race not listed in the standard subcategories. 
The sample data collection form included in revised appendix B provides 
for an Other ethnicity or race subcategory the applicant can select and 
a free-form field in which an applicant can provide a particular 
ethnicity or race. The sample data collection form also includes an 
American Indian or Alaska Native race category an applicant can select 
and a free-form field in which an applicant can provide a particular 
American Indian or Alaska Native enrolled or principal tribe. 
Instruction 8 provides that only an applicant may self-identify as a 
particular American Indian or Alaska Native enrolled or principal 
tribe.
    The Bureau proposed to revise instructions 9.ii and 9.iv to clarify 
that an applicant may provide a particular ethnicity or race in the 
free-form field, whether or not the applicant selects the Other 
Hispanic or Latino, Other Asian, or Other Pacific Islander subcategory. 
Specifically, the Bureau proposed to amend instruction 9.ii to provide 
that an applicant may select the Other Hispanic or Latino ethnicity 
subcategory, an applicant may provide a particular Hispanic or Latino 
ethnicity not listed in the standard subcategories, or an applicant may 
do both. The Bureau proposed similar revisions to instructions 9.iv, as 
related to the Other race subcategories.
    Several commenters opposed the proposed amendments to instructions 
9.ii and 9.iv. Some commenters stated that the proposal is a departure 
from revised appendix B and the 2018 FIG, which both indicate that an 
applicant may provide an Other race or ethnicity in the free-form field 
if (and arguably, by implication, only if) the applicant selects the 
associated Other race or ethnicity subcategory. Some commenters also 
argued that the proposed amendments would be inconsistent with existing 
industry practice and programming already conducted in preparation for 
the January 1, 2018, effective date. Another industry commenter stated 
that the proposal could potentially delay implementation and would not 
have consumer benefits.
    Some commenters expressed particular concern about reporting only a 
free-form Other ethnicity or race. One commenter expressed uncertainty 
about how such information would be reported and concern about sending 
a free-form field with no code or, alternatively, improperly reporting 
an Other ethnicity or race subcategory code that was not selected by 
the applicant. A commenter suggested the Bureau amend the rule to 
provide that, when an applicant provides a specific Other ethnicity or 
race in the free-form field without selecting the Other ethnicity or 
race subcategory, a financial institution is permitted to report the 
associated Other ethnicity or race subcategory in addition to the 
information the applicant provided.
    After consideration of the comments, the Bureau concludes that 
amendments to instructions 9.ii and 9.iv remain necessary. The Bureau 
finds that ensuring an applicant has the opportunity to provide a 
specific Other ethnicity or race not listed in the standard 
subcategories will encourage self-identification and further the 
purposes of HMDA by improving the data. While the Bureau acknowledges 
that the proposed amendments are somewhat of a departure from revised 
appendix B and certain industry practice, the Bureau believes that an 
applicant should be provided an opportunity to provide a specific Other 
ethnicity or race without any preconditions or restrictions. To the 
extent revised appendix B implied otherwise, it did not do so 
intentionally.
    In response to commenter concerns about reporting a free-form field 
that is not linked to any associated code, the Bureau will permit a 
financial institution to select automatically and to report the Other 
ethnicity or race subcategory if an applicant provides a specific Other 
ethnicity or race in the free-form field but does not actively select 
the Other ethnicity or race subcategory. The Bureau finds that the need 
for such flexibility is greater in the case of the Other race and 
ethnicity subcategory, as compared to the aggregate category and 
subcategory issue discussed above, given commenters' concerns and 
questions about maintaining and reporting a free-form field without 
linking that field to any associated code. The Bureau believes that 
such increased burden and uncertainty may undermine the purposes of 
HMDA and the quality of the data. Accordingly, the Bureau will permit, 
but not require, financial institutions to report the corresponding 
Other race or ethnicity subcategory when an applicant provides an Other 
race or ethnicity not listed in the standard subcategories, even where 
the applicant did not actively select the Other race or ethnicity 
subcategory, and final instructions 9.ii and 9.iv so provide. The 
Bureau believes that such a permissive standard will address industry 
concerns without imposing any additional regulatory burden on financial 
institutions.
    The Bureau concludes that similar conforming revisions are also 
necessary in connection with the American Indian or Alaska Native race 
category and free-form field. Similar to the Other ethnicity or race 
subcategory, the Bureau believes that an applicant should be provided 
an opportunity to provide a particular American Indian or Alaska Native 
enrolled or principal tribe without any preconditions or restrictions. 
The Bureau further concludes that the same concerns about reporting a 
free-form field that is not linked to any associated code would also 
apply to the American

[[Page 43123]]

Indian or Alaska Native free-form field. Accordingly, the Bureau is 
adding a new instruction 9.v that mirrors the instructions for 
reporting the Other race or ethnicity subcategories set forth in final 
instruction 9.ii and 9.iv.
    One commenter requested additional clarification on how to count 
the Other race or ethnicity subcategory for purposes of the five-race 
or -ethnicity maximum. As described in instructions 9.ii and 9.iv, the 
Other race or ethnicity field will always constitute one selection for 
purposes of the five-race or -ethnicity maximum. For example, if an 
applicant selects only the Other Hispanic or Latino subcategory and 
does not provide a specific Other race or ethnicity in the free-form 
field, that selection counts as one selection for purposes of the 
maximum. Similarly, if an applicant selects the Other Hispanic or 
Latino ethnicity subcategory and also provides a specific Hispanic or 
Latino ethnicity in the free-form field, these selections together 
constitute only one selection. As set forth in final instruction 9.v, 
the American Indian or Alaska Native field will also always constitute 
one selection for purposes of the five-race maximum.
    For the reasons discussed above, the Bureau is adopting certain 
revisions to instructions 9.ii and 9.iv to address industry comments 
and adding instruction 9.v to provide conforming changes to the 
American Indian and Alaska Native field. Specifically, the Bureau is 
amending instructions 9.ii and 9.iv to permit, but not require, a 
financial institution to report an Other Hispanic or Latino, Other 
Asian, or Other Pacific Islander subcategory, as applicable, if an 
applicant provides a specific Hispanic or Latino, Asian, or Pacific 
Islander ethnicity or race in the free-form field. The Bureau is also 
amending instructions 9.ii and 9.iv to provide examples. Otherwise, the 
Bureau is adopting the amendments to instructions 9.ii and 9.iv as 
proposed, with certain other, technical revisions for clarity. The 
Bureau is also adding instruction 9.v to provide guidance on the 
collection and reporting of the American Indian and Alaska Native race 
category and free-form field that mirror the guidance in final 
instructions 9.ii and 9.iv concerning the reporting of the Other race 
and ethnicity subcategories, as well as a technical revision to 
instruction 9.iii.
Five-Ethnicity Maximum
    Instruction 9 in revised appendix B requires that an applicant be 
offered the option to select more than one ethnicity or race. 
Instruction 9.i sets forth two aggregate ethnicity categories and four 
ethnicity subcategories that may be selected by an applicant (for a 
total of six categories and subcategories). Instruction 9.i requires 
that a financial institution report each aggregate ethnicity category 
and each ethnicity subcategory selected by the applicant. As reflected 
in the 2018 FIG, however, a financial institution may report up to only 
five-ethnicity codes. While revised appendix B includes a five-race 
maximum and related instructions for reporting race, revised appendix B 
did not include a similar five-ethnicity maximum and instructions.
    Accordingly, the Bureau proposed to amend instruction 9.i to 
provide instructions to financial institutions on how to report 
ethnicity if an applicant selects both aggregate categories and all 
four subcategories. The proposed revisions mirror the instructions for 
how to report race when an applicant has selected a total of more than 
five aggregate race categories and race subcategories. Specifically, 
the Bureau proposed to revise instruction 9.i to provide that a 
financial institution must report every aggregate ethnicity category 
selected by the applicant. The proposed instruction states that a 
financial institution must also report every ethnicity subcategory 
selected by the applicant, except that a financial institution must not 
report more than a total of five aggregate ethnicity categories and 
ethnicity subcategories combined. The Bureau also proposed amendments 
to instruction 9.ii to provide that, if an applicant selects the Other 
Hispanic or Latino subcategory and provides a particular Hispanic or 
Latino subcategory not listed in the standard subcategories, the 
financial institution should count the information as one selection for 
purposes of reporting only up to the five-ethnicity maximum.
    Although the Bureau did not receive comments that pertained 
specifically to ethnicity, it received numerous comments from industry 
on the maximum generally. The commenters expressed unease about picking 
for the applicant which subcategories to report where the applicant 
selects more than five categories and subcategories combined. Some 
commenters noted that such a limitation is in conflict with other 
instructions in revised appendix B, which generally permit an applicant 
to choose as many selections as desired. Commenters expressed concern 
that, without further guidance, financial institutions may be subject 
to compliance scrutiny or liability. Other commenters were concerned 
that allowing the financial institution to choose which subcategories 
to report could lead to inaccurate results, underreporting, or failure 
to identify discrimination against specific groups. The commenters 
requested that the Bureau either permit a financial institution to 
report all ethnicity and race selections made by the applicant or 
provide further guidance to financial institutions on how to pick which 
five-ethnicity or -race selections to report.
    For the reasons discussed below, the Bureau is adopting 
instructions 9.i and 9.ii as proposed. Initially, the Bureau notes that 
many of the commenters' concerns pertain to the five-race maximum, 
which was not the subject of the April 2017 HMDA Proposal. As discussed 
in the 2015 HMDA Final Rule, to facilitate compliance, the Bureau 
limited the number of racial designations a financial institution may 
report.\137\ The Bureau reviewed 2010 Census data to consider the 
occurrence of respondents that self-identify as being more than one 
particular race and found that, for example, where only Asian was 
reported as the respondents' race, only 0.11 percent of those 
respondents self-identified as being of three particular Asian races, 
and only 0.02 percent self-identified as being of seven particular 
Asian races. Accordingly, the Bureau concluded in the 2015 HMDA Final 
Rule that the likelihood of applicants self-identifying as more than 
five-racial designations is extremely low.
---------------------------------------------------------------------------

    \137\ 2015 HMDA Final Rule, 80 FR 66128, 66192 (Oct. 28, 2015).
---------------------------------------------------------------------------

    The Bureau similarly concludes that the likelihood that an 
applicant will report more than five-ethnicities is also very low. 
Although 2010 Census reports do not provide data on the number of 
instances in which a respondent chose multiple ethnicity selections, 
based on Census race reporting, the Bureau expects that the number of 
occurrences in which an applicant will select both aggregate ethnicity 
categories and all four ethnicity subcategories will be extremely low. 
For example, according to 2010 Census data, 97.1 percent of respondents 
reported only one aggregate race category.\138\ Among respondents 
reporting two or more aggregate race categories, less than 1 percent 
reported four or more races, and only 0.1 percent of respondents 
identified as five races.\139\ Given that there are fewer ethnicity 
categories and subcategories compared to race categories and 
subcategories, the Bureau expects the likelihood an applicant will 
select more than five-ethnicity selections to be even

[[Page 43124]]

lower than the likelihood that an applicant will select more than five-
race selections.
---------------------------------------------------------------------------

    \138\ U.S. Census Bureau, C2010BR-02, ``Overview of Race and 
Hispanic Origin: 2010,'' at 4 (2011), available at https://www.census.gov/prod/cen2010/briefs/c2010br-02.pdf.
    \139\ Id. at 8-9.
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    The Bureau declines to permit unlimited ethnicity category and 
subcategory reporting. Permitting unlimited reporting would require 
adding a data field for each additional possible subcategory, therefore 
expanding the total number of data fields within the HMDA loan/
application register. The Bureau believes that doing so would add 
additional complexity to reporting that may undermine the quality of 
the data. Given that the Bureau expects an applicant will rarely select 
more than five-ethnicity designations, the Bureau does not believe the 
risks and complexity of additional data fields are justified in these 
circumstances.
    Similarly, the Bureau declines to impose additional requirements on 
how to report ethnicity categories and subcategories when an applicant 
has selected a total of more than five. Proposed instruction 9.i (as 
well as instruction 9.iii as related to race) provides substantial 
guidance. Under those instructions, a financial institution would 
report all the aggregate categories first, and then any subcategories 
up to a combined five-ethnicity maximum (or five-race maximum, as 
applicable to race).
    Several commenters submitted comments requesting guidance on 
whether a particular method of choosing which categories and 
subcategories to report would be acceptable. Other than as described 
above, the rule does not place any additional limitations on which five 
categories and subcategories to report. Thus, to the extent the total 
categories and subcategories exceed five, a financial institution may 
choose any method for determining which additional subcategories to 
choose for reporting, so long as the financial institution initially 
complies with the instructions provided in revised appendix B. In light 
of the Bureau's conclusion that applicants will very rarely choose a 
total of more than five categories and subcategories, the Bureau 
declines at this time to impose additional reporting limitations and 
requirements on financial institutions.
Sample Data Collection Form
    Revised appendix B includes a sample data collection form for use 
in collecting ethnicity, race, and sex information about the applicant. 
The Bureau proposed to make various technical revisions to the sample 
data collection form. The Bureau proposed to revise the applicant 
instructions to provide that an applicant may select one or more 
designations for ``Ethnicity,'' rather than one or more Hispanic or 
Latino origins. The Bureau also proposed to move the instruction to 
``check one or more'' next to the ``Ethnicity'' heading, rather than 
next to the Hispanic or Latino category. The Bureau also proposed to 
add the ``check one or more'' instructions on the side of the form 
designated for the collection of a co-applicant's ethnicity and race 
information, rather than only on the side of the form for the 
applicant. The Bureau received one comment opposing the additional 
``check one or more'' language added to the sample data collection 
form. Although the commenter noted generally that the proposed changes 
to revised appendix B are contrary to the 2015 HMDA Final Rule, will 
undo work already performed, and would not be in the interests of 
consumers, the commenter did not provide any specific examples, data, 
or reasoning as related to the sample data collection form. 
Accordingly, the Bureau is adopting the corrections to the sample data 
collection form as proposed.

VI. Effective Dates

    In the April 2017 HMDA Proposal, the Bureau proposed that the 
amendments take effect when the related amendments to Regulation C 
adopted by the 2015 HMDA Final Rule take effect. As discussed more 
fully above, these amendments to Regulation C make technical 
corrections to and address certain areas to facilitate implementation 
of the 2015 HMDA Final Rule. For the proposed amendments to have the 
intended effect, the amendments' effective dates must be synchronized 
with the related effective dates in the 2015 HMDA Final Rule. In the 
July 2017 HMDA Proposal, the Bureau proposed successive amendments to 
the provisions in Sec. Sec.  1003.2(g) and 1003.3(c)(12) and associated 
commentary to effectuate a temporary increase in the open-end 
threshold. Accordingly, the Bureau proposed to raise the open-end 
threshold to 500 loans effective January 1, 2018, and then to lower the 
open-end threshold back to 100 loans effective January 1, 2020. For the 
reasons discussed below, the Bureau is adopting the effective dates for 
this final rule as proposed.
    Concerning the proposed effective dates included in the April 2017 
HMDA Proposal, one national trade association stated that scheduled 
updates to loan origination software cannot proceed until the proposal 
is finalized and recommended that the Bureau finalize the proposed 
amendments quickly if any meaningful burden reduction is to be 
achieved. A national and State trade association recommended that the 
effective date for the 2015 HMDA Final Rule be delayed because, they 
posited, the proposal would not be finalized before January 1, 2018. 
One national trade association noted that the proposal would provide 
effective dates of January 1, 2019, or January 1, 2020, to correspond 
to related effective dates for certain amendments included in the 2015 
HMDA Final Rule, but recommended that the Bureau delay the effective 
date of the 2015 HMDA Final Rule until it finalized the clarifications 
or for at least one year.
    Many national and State trade associations, financial institutions, 
and industry commenters, when commenting on both the April and July 
2017 HMDA Proposals, recommended that the Bureau delay the effective 
date for most amendments included in the 2015 HMDA Final Rule from 
January 1, 2018, to January 1, 2019. Several of these commenters argued 
that a delay of the general January 1, 2018, effective date for the 
2015 HMDA Final Rule was necessary because questions remained regarding 
collection and reporting of data, the Bureau had not yet released the 
geocoding tool, edits, or platforms necessary for financial 
institutions to update their software and run tests, and questions 
remained regarding implementation of the new Uniform Residential Loan 
Application (URLA). Some commenters stated that the effective date of 
the 2015 HMDA Final Rule should be delayed until the Bureau has 
addressed public disclosure and data resubmission standards for data 
collected and reported under amended Regulation C. One national trade 
association recommended that financial institutions have the option to 
delay reporting of the new data points adopted in the 2015 HMDA Final 
Rule for one year, while one State trade association recommended that 
the effective date be delayed for one year but that optional early 
compliance be permitted. A State trade association suggested the Bureau 
look for good faith efforts at HMDA compliance as the Bureau explained 
it would do during implementation of the Integrated Mortgage 
Disclosures Under the Real Estate Settlement Procedures Act (Regulation 
X) and the Truth in Lending Act (Regulation Z) final rule (TILA-RESPA 
Final Rule). Some trade associations requested that transactional 
coverage for the 2018 data collection be based on the date an 
application was received, instead of the final action taken date, so as 
to allow more time in

[[Page 43125]]

2017 to prepare for the January 1, 2018, effective date in response to 
the clarifications in this rule.
    The Bureau largely is adopting the effective dates for this final 
rule as proposed.\140\ The 2015 HMDA Final Rule takes effect in stages 
between January 1, 2017, and January 1, 2020, with most of the 
amendments included in the 2015 HMDA Final Rule taking effect on 
January 1, 2018. Accordingly, as provided in the amendatory 
instructions below, the Bureau is adopting most of the amendments 
included in this final rule to take effect on January 1, 2018. The 
Bureau is adopting some of the amendments included in this final rule 
to take effect on January 1, 2019, or January 1, 2020, respectively, to 
correspond to related effective dates of amendments in the 2015 HMDA 
Final Rule. The amendments that will take effect on January 1, 2019, or 
January 1, 2020, respectively, are noted in the applicable section-by-
section discussion in part V above, in the Dates section above, and in 
the amendatory instructions below. The amendatory instructions are 
organized sequentially by effective date, starting with all amendments 
that will take effect on January 1, 2018.
---------------------------------------------------------------------------

    \140\ The effective date for an amendment to the commentary to 
Sec.  1003.6(b)(1) is changed to January 1, 2019, to align with the 
effective date for the corresponding amendment in the 2015 HMDA 
Final Rule. See 2015 HMDA Final Rule, 80 FR 66128, 66257 (Oct. 28, 
2015)(``The Bureau is adopting an effective date of January 1, 2019 
for Sec.  1003.6, which concerns enforcement of HMDA and Regulation 
C. The amendments to Sec.  1003.6 adopted in this final rule apply 
to HMDA data reported beginning in 2019. Thus, current Sec.  1003.6 
applies to data collected in 2017 and reported in 2018, and amended 
Sec.  1003.6 applies to 2018 data reported in 2019.'').
---------------------------------------------------------------------------

    Apart from the temporary adjustment to the open-end threshold, the 
Bureau did not propose, and declines in this final rule, to delay the 
effective dates for the amendments included in the 2015 HMDA Final Rule 
or to provide for optional compliance for the 2018 calendar year. As 
explained in the 2015 HMDA Final Rule, ``the Bureau believes that these 
effective dates, which provide an extended implementation period of 
over two years, is appropriate and will provide industry with 
sufficient time to revise and update policies and procedures; implement 
comprehensive systems change; and train staff.'' \141\ The Bureau 
believes that the clarifications, technical corrections, minor 
amendments, and temporary adjustment to the open-end threshold adopted 
in this final rule will facilitate implementation of the 2015 HMDA 
Final Rule. To the extent the clarifications in this rule require 
financial institutions to make technical changes, those changes require 
only minor adjustments, not significant system updates. In addition, 
the Bureau has issued this final rule in August, four months before 
2018, which the Bureau believes should afford ample time to implement 
any necessary minor system adjustments. The Bureau is releasing 
implementation aids with this final rule to facilitate implementation.
---------------------------------------------------------------------------

    \141\ 2015 HMDA Final Rule, 80 FR 66128, 66257 (Oct. 28, 2015).
---------------------------------------------------------------------------

    Morever, commenters' concerns the timing of the release of certain 
Bureau materials do not justify delaying the effective date. In July of 
2017 the Bureau published updates to the 2018 FIG for HMDA data 
collected in 2018, which includes HMDA edits, and the Bureau is issuing 
updates to the 2018 FIG related to the amendments adopted in this final 
rule simultaneous to the release of this rule. Furthermore, the FFIEC 
agencies published on August 22, 2017, the HMDA Examination Transaction 
Testing Guidelines for data collected in or after 2018. In addition, 
the Bureau's new HMDA filing platform is being demonstrated widely 
through webinars, conferences, and in-person user testing sessions. The 
platform will be available for wider testing in the Fall of 2017 as an 
open beta release prior to the start of filing season in 2018. In 
addition, commenters' concerns about the timing of the Bureau's 
decisions related to the public disclosure of the HMDA data do not 
provide a logistical reason to delay the effective date of the new data 
collection requirements, because, under changes adopted in the 2015 
HMDA Final Rule, financial institutions will no longer have 
responsibility for disclosure of the data beginning with data collected 
for the 2017 calendar year.\142\
---------------------------------------------------------------------------

    \142\ Id. at 66252-53 (Oct. 28, 2015).
---------------------------------------------------------------------------

    Furthermore, the Bureau does not believe that commenters' concerns 
about the URLA implementation provide a reason to delay the effective 
date of the data collection requirements. The Federal Home Loan 
Mortgage Corporation and the Federal National Mortgage Association 
(collectively, the Enterprises), under the conservatorship of FHFA, 
issued a revised and redesigned Uniform Residential Loan Application on 
August 23, 2016. The Enterprises have not yet provided a date when 
lenders may begin using the 2016 URLA or the date lenders are required 
to use the 2016 URLA (the cutover date), but have stated their 
intention to collaborate with industry stakeholders to help shape the 
implementation timeline for the 2016 URLA, with a goal to provide 
lenders with more precise information in 2017 regarding the cutover 
date.\143\
---------------------------------------------------------------------------

    \143\ Press Release, Uniform Mortgage Data Program, Fannie Mae 
and Freddie Mac at the direction of the FHFA, ``URLA Implementation 
Guidance and Update,'' (Nov. 1, 2016), available at https://www.fanniemae.com/content/news/urla-announcement-november-2016.pdf. 
Uniform Mortgage Data Program, Fannie Mae and Freddie Mac at the 
direction of the FHFA, ``Uniform Residential Loan Application 
(URLA)/Uniform Loan Application Dataset (ULAD) FAQs'', at ] 6 (Nov. 
1, 2016), available at https://www.fanniemae.com/content/faq/urla-ulad-faqs.pdf.
---------------------------------------------------------------------------

    The Bureau did not propose and also declines to amend the 2015 HMDA 
Final Rule to provide that data collected in 2018 include only 
applications received in 2018. The Bureau believes, as stated in the 
2015 HMDA Final Rule, that collection of the new data should begin with 
transactions for which final action is taken in 2018. This collection 
timeframe is consistent with how financial institutions currently 
determine in which calendar year's data to include a transaction. 
Moreover, financial institutions already have significant flexibility 
concerning the collection of the new disaggregated ethnicity and race 
fields adopted in the 2015 HMDA Final Rule. For example, revised 
comment 4(a)(10)(i)-2 allows financial institutions to collect 
ethnicity, race, and sex information in accordance with the 
requirements in effect at that the time the information is collected, 
even if final action is taken on or after January 1, 2018. The Bureau 
also issued an approval notice in October 2016 that provides financial 
institutions the alternative option to begin collecting disaggregated 
categories in 2017.\144\ As stated above, the Bureau believes there is 
sufficient time to prepare to collect data in 2018 for all covered 
transactions, including those with applications received in 2017, for 
which final action is taken in 2018. Given all of these considerations, 
and the over two years to prepare for the January 1, 2018, effective 
date provided by the 2015 HMDA Final Rule, the Bureau declines to 
change the timing of the new requirements' coverage as suggested by 
commenters.
---------------------------------------------------------------------------

    \144\ Status of New Uniform Residential Loan Application and 
Collection of Expanded Home Mortgage Disclosure Act of Information 
About Ethnicity and Race in 2017, 81 FR 66930 (Sept. 29, 2016). The 
options for collection and reporting of HMDA information about 
ethnicity and race are summarized in a chart available on the 
Bureau's Web site. See Bureau of Consumer Fin. Prot., ``Collection 
and Reporting of HMDA Information About Ethnicity and Race,'' (Jan. 
1, 2017), available at https://www.consumerfinance.gov/documents/2507/201701_cfpb_HMDA-Ethnicity-and-Race-Collection.pdf.
---------------------------------------------------------------------------

    Additionally, as discussed in the section-by-section analysis of 
Sec.  1003.6(b) above, the Bureau is not

[[Page 43126]]

delaying the effective date of the safe harbor for the geocoder because 
the Bureau believes that financial institutions should be able to take 
advantage of the safe harbor as soon as the Bureau makes the geocoding 
tool available on its Web site.\145\
---------------------------------------------------------------------------

    \145\ As noted above, the effective date for an amendment to the 
commentary to Sec.  1003.6(b)(1) is changed to January 1, 2019, to 
align with the effective date for the corresponding amendment in the 
2015 HMDA Final Rule. See 2015 HMDA Final Rule, 80 FR 66128, 66257 
(Oct. 28, 2015)(``The Bureau is adopting an effective date of 
January 1, 2019 for Sec.  1003.6, which concerns enforcement of HMDA 
and Regulation C. The amendments to Sec.  1003.6 adopted in this 
final rule apply to HMDA data reported beginning in 2019. Thus, 
current Sec.  1003.6 applies to data collected in 2017 and reported 
in 2018, and amended Sec.  1003.6 applies to 2018 data reported in 
2019.'').
---------------------------------------------------------------------------

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

    HMDA provides 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. It assists public 
officials in their determination of the distribution of public sector 
investments in a manner designed to improve the private investment 
environment.\146\ It also provides the public with information to 
assist in identifying possible discriminatory lending patterns and 
enforcing antidiscrimination statutes.\147\
---------------------------------------------------------------------------

    \146\ HMDA section 302(b), 12 U.S.C. 2801(b); see also 12 CFR 
1003.1(b)(1)(i) and (ii).
    \147\ Fair Housing Loan Data System, 54 FR 51356, 51357 (Dec. 
15, 1989), codified at 12 CFR 1003.1(b)(1).
---------------------------------------------------------------------------

    In 2010, Congress enacted the Dodd-Frank Act, which amended HMDA 
and also transferred HMDA rulemaking authority and other functions from 
the Board to the Bureau.\148\ In October 2015, the Bureau issued the 
2015 HMDA Final Rule which implemented the Dodd-Frank Act amendments to 
HMDA.\149\ The 2015 HMDA Final Rule modifies the types of institutions 
and transactions subject to Regulation C, the types of data that 
institutions are required to collect, and the processes for reporting 
and disclosing the required data.
---------------------------------------------------------------------------

    \148\ Public Law 111-203, 124 Stat. 1376, 1980, 2035-38, 2097-
101 (2010).
    \149\ 2015 HMDA Final Rule, 80 FR 66128 (Oct. 28, 2015).
---------------------------------------------------------------------------

    Since issuing the 2015 HMDA Final Rule, the Bureau has identified 
certain technical errors in the 2015 HMDA Final Rule as well as ways to 
ease the burden of reporting certain data requirements and 
clarifications of key terms that will facilitate compliance with the 
Final Rule. On April 25, 2017, the Bureau issued a notice of proposed 
rulemaking (April 2017 HMDA Proposal) proposing amendments to 
Regulation C to make technical corrections to and to clarify certain 
requirements of the 2015 HMDA Final Rule. In the April 2017 HMDA 
Proposal, the Bureau also proposed a new reporting exclusion. Since 
issuing the 2015 HMDA Final Rule, the Bureau also has heard concerns 
that the open-end threshold, which the Bureau set at 100 transactions, 
is too low. On July 20, 2017, the Bureau published a second proposal 
(July 2017 HMDA Proposal) to seek comment on addressing the threshold 
for reporting open-end lines of credit.\150\ After reviewing the 
comments received on the April 2017 HMDA Proposal and the July 2017 
HMDA Proposal, the Bureau is publishing final amendments to Regulation 
C pursuant to the April 2017 HMDA Proposal and the July 2017 HMDA 
Proposal. Comments on the benefits and costs of the rule are also 
discussed above in the section-by-section analysis of the preamble.
---------------------------------------------------------------------------

    \150\ July 2017 HMDA Proposal, 82 FR 33455 (July 20, 2017).
---------------------------------------------------------------------------

    In developing this final rule, the Bureau has considered the 
potential benefits, costs, and impacts.\151\ As discussed in Section 
III above, the Bureau has consulted with, or offered to consult with, 
the Board, the Federal Deposit Insurance Corporation (FDIC), the Office 
of the Comptroller of the Currency, the National Credit Union 
Administration (NCUA), the Department of Housing and Urban Development 
(HUD), the Securities and Exchange Commission, the Department of 
Justice, the Department of Veterans Affairs, the Federal Housing 
Finance Agency, the Department of the Treasury, the Department of 
Agriculture, the Federal Trade Commission, and the Federal Financial 
Institutions Examination Council.
---------------------------------------------------------------------------

    \151\ 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 or 
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.
---------------------------------------------------------------------------

    This final rule amends Regulation C to make technical corrections 
and clarify certain requirements under the 2015 HMDA Final Rule 
amending Regulation C. As part of these amendments, the final rule 
corrects a drafting error and revises both the open-end and closed-end 
thresholds so that only financial institutions that meet the threshold 
for two years in a row are required to collect data in the following 
calendar years. The final rule also temporarily increases the open-end 
reporting threshold to 500 or more open-end lines of credit for two 
years (calendar years 2018 and 2019). With these amendments, financial 
institutions that originated between 100 and 499 open-end lines of 
credit in either of the two preceding calendar years will not be 
required to begin collecting data on their open-end lending before 
January 1, 2020. This temporary increase will provide time for the 
Bureau to consider the appropriate level for the open-end threshold 
without requiring financial institutions originating fewer than 500 
open-end lines of credit per year to collect and report data with 
respect to open-end lending in the meanwhile.
    In the 2015 HMDA Final Rule, the Bureau conducted an in-depth 
Section 1022(b)(2) analysis of the costs and benefits of the 2015 HMDA 
Final Rule. The Bureau used as a baseline for that analysis the state 
of the world before the implementation in Regulation C of the Dodd-
Frank Act provisions. The baseline for the analysis below assumes that 
the 2015 HMDA Final Rule took effect absent the amendments in this 
final rule. In other words, the potential benefits and costs of the 
provisions contained in this final rule are evaluated relative to the 
state of the world defined by the 2015 HMDA Final Rule.\152\
---------------------------------------------------------------------------

    \152\ Because the analysis of the 2015 HMDA Final Rule reflected 
the Bureau's intended transactional thresholds, rather than those 
created by the drafting error in Sec.  1003.3(c)(11), (12), the 2015 
HMDA Final Rule baseline incorporates this rulemaking's proposed 
correction of the error.
---------------------------------------------------------------------------

Changes Adopted From April 2017 HMDA Proposal

    The amendments that were proposed in the April 2017 HMDA Proposal 
and adopted substantially in this final rule are largely clarifications 
and technical corrections that do not change the compliance 
requirements of the 2015 HMDA Final Rule and should reduce burden by 
easing compliance. The few minor substantive changes will all reduce 
burden on industry \153\ and have

[[Page 43127]]

either a positive or neutral effect on consumers.
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    \153\ Some commenters on the April 2017 HMDA Proposal noted that 
even though in the long run, the proposed changes would reduce the 
burden on the HMDA reporters, like any changes in regulatory 
requirements, it could be possible that some institutions may incur 
a transitory cost to adapt to such changes in the short run, as they 
might need to invest certain time and resources updating policies 
and procedures, audits, and adjusting programming in their systems. 
The Bureau acknowledges that such transitory costs could occur. No 
commenters however have provided specific estimates on such 
transitory costs. Overall, it is the Bureau's belief that compared 
to long run reduction in compliance costs as the results of the 
changes contained in this final rule, the transitory costs for 
financial institutions to adapt to the changes is minimal.
---------------------------------------------------------------------------

    To ease the burden associated with obtaining certain information 
about purchased loans, the final rule establishes certain transitional 
rules for reporting purchased loans. Financial institutions report that 
the requirement is not applicable for the loan purpose if the financial 
institution is reporting a purchased covered loan that was originated 
prior to January 1, 2018. Financial institutions also may opt not to 
report that the requirement is not applicable for the unique identifier 
for the loan originator when reporting purchased loans that were 
originated prior to January 10, 2014.\154\ The final rule also provides 
that financial institutions have the option to report open-end lines of 
credit or closed-end mortgage loans, even if the financial institution 
may exclude those loans pursuant to the transactional thresholds 
included in Sec.  1003.3(c)(11) or (12) under the 2015 HMDA Final Rule 
and this final rule, as discussed above in the section-by-section 
analysis of Sec.  1003.3(c)(11) and (12). In addition, the final rule 
provides assurances to financial institutions that obtain the census 
tract number from a forthcoming geocoding tool on the Bureau's Web 
site, provided that the tool returned a census tract number for the 
address entered and that the financial institution entered an accurate 
property address into the tool. The final rule also clarifies certain 
key terms, including temporary financing, automated underwriting 
system, multifamily dwelling, extension of credit, income, and mixed-
use property. The proposal also excludes preliminary transactions 
associated with New York CEMAs, which reduces burden by avoiding double 
reporting.
---------------------------------------------------------------------------

    \154\ There is a third transitional rule that eases NMLSR ID 
reporting requirements for purchases of commercial loans originated 
prior to January 1, 2018, but it is expected to apply to only a very 
small number of loans.
---------------------------------------------------------------------------

    The final rule corrects a drafting error and aligns the 
transactional thresholds included in Sec.  1003.3(c)(11) and (12) under 
the 2015 HMDA Final Rule with the institutional coverage thresholds in 
Sec.  1003.2(g). The final rule addresses certain technical aspects of 
reporting, such as how the reporting requirements for certain data 
points relate to disclosures required by the Bureau's Regulation Z and 
how to collect and report certain information about an applicant's race 
and ethnicity. The final rule also includes a variety of minor changes 
and technical corrections.
    The Bureau sought comment on data to quantify costs and benefits 
and any associated burden with the proposed changes in its April 2017 
HMDA Proposal. Specifically, the Bureau sought information on the 
projected number of loans that would be originated prior to January 1, 
2018, and then purchased by financial institutions after January 1, 
2018, and which would be required to be reported according to the 2015 
HMDA Final Rule. Similarly, the Bureau sought information on the 
projected number of loans that would be originated prior to January 10, 
2014, and then purchased by financial institutions after January 1, 
2018, and which would be required to be reported according to the 2015 
HMDA Final Rule. The Bureau also sought information on the projected 
numbers and characteristics of financial institutions that would opt to 
report open-end lines of credit or closed-end loans under HMDA even 
though they would have fallen below the respective loan-volume 
threshold. The Bureau requested any other data that would assist in 
quantifying the costs and benefits of the proposal. As described in 
greater detail below, the Bureau received some public comments 
estimating the costs of the proposed changes for financial 
institutions. These comments have been considered in revising the cost-
benefit analyses contained in this part. In general, the comments did 
not provide specific data.

Changes Adopted From July 2017 HMDA Proposal

    The Bureau believes that the temporary increase in the open-end 
transactional coverage threshold, as proposed in July 2017 HMDA 
Proposal and finalized in this rule, generally will benefit financial 
institutions that originate between 100 and 499 open-end lines of 
credit in either of the two preceding calendar years by, at a minimum, 
allowing them to delay incurring one-time costs and delay the start of 
ongoing compliance costs associated with collecting and reporting data 
on open-end lines of credit, compared to the baseline established by 
the 2015 HMDA Final Rule. The Bureau estimates that roughly 690 such 
institutions will be able to take advantage of the two-year temporary 
increase in the open-end transactional coverage threshold. The Bureau 
estimates that the savings on the ongoing costs from the collection and 
reporting of open-end lines of credit by financial institutions 
temporarily exempted under this final rule will be at least $6 million 
per year for two years. The Bureau believes that temporarily increasing 
the open-end transactional coverage threshold for two years will reduce 
the benefits to consumers from the open-end reporting provisions of the 
2015 HMDA Final Rule as those benefits are described in the rule. 
However, any such impact should be minimal because approximately three-
quarters of all open-end lines of credit will still be reported.
    The Bureau sought comment on data that would help to quantify costs 
and benefits and any associated burden with the proposed temporary 
increase in open-end reporting threshold in its April 2017 HMDA 
Proposal. In general, the comments did not provide specific data.
A. Potential Benefits and Costs to Consumers and Covered Persons
Temporary Increase of Open-End Line of Credit Threshold
    Under the final rule, the open-end reporting threshold will be 
temporarily increased to 500 for two years (calendar years 2018 and 
2019). Compared to the baseline established by the 2015 HMDA Final 
Rule, the proposed temporary increase in the open-end transactional 
coverage threshold will generally benefit financial institutions that 
originate between 100 and 499 open-end lines of credit in either of the 
two preceding calendar years. Such financial institutions will be able 
to delay the start of ongoing compliance costs associated with 
collecting and reporting data on open-end lines of credit for two 
years. They are also likely able to delay incurring one-time costs of 
commencing implementation of open-end reporting.
    The Bureau can estimate the number of depository institutions that 
will be able to take advantage of the two-year temporary increase in 
the open-end transactional coverage threshold and the amount that each 
of these institutions will save in costs. In the July 2017 HMDA 
Proposal, the Bureau estimated that, in 2015, 289 depository 
institutions originated 500 or more open-end lines of credit and 980 
depository institutions originated at least 100 open-end lines of 
credit.\155\ Thus, roughly 690 depository institutions will be able to 
take advantage of the two-year temporary increase in the open-end 
transactional

[[Page 43128]]

coverage threshold. On average, the institutions that will be able to 
take advantage of the two-year temporary increase originated fewer than 
250 open-end lines of credit per year, with their median origination 
volume slightly below 200.\156\
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    \155\ The 2015 HMDA Final Rule contained aggregated estimates 
for credit unions, banks, and thrifts. In developing the estimates 
for the July 2017 HMDA Proposal, the Bureau had constructed separate 
estimates for credit unions using the credit union Call Report data 
and assumed the parallel trend exists in the overall market. 
Specifically, the Bureau estimated that in 2013 there were 534 
credit unions that originated 100 or more open-end lines of credit. 
Based on 2015 credit union Call Report data, that number is now 699. 
The estimates contained in the 2015 HMDA Final Rule and those stated 
in text are based on origination volumes for a single-year, and may 
overstate coverage.
    \156\ See July 2017 HMDA Proposal, 82 FR 33459, 33459 n.57 (July 
20, 2017). The median loan volume discussed above is based on the 
same credit union call report data that the Bureau used for the July 
2017 HMDA Proposal.
---------------------------------------------------------------------------

    The amount that each of these depository institutions will save in 
costs depends on the level of complexity of their compliance operations 
as defined in the 2015 HMDA Final Rule. The level of complexity in turn 
is related to the number of loans that an institution must report. In 
the 2015 HMDA Final Rule, the Bureau assumed a representative low-
complexity (tier 3) open-end reporter would have 150 open-end lines of 
credit records reportable to HMDA, while the number of open-end lines 
of credit records for a representative moderate-complexity (tier 2) 
open-end reporter would be at 1,000. Specifically, in estimating costs 
specific to collecting and reporting data for open-end lines of credit 
in the 2015 HMDA Final Rule, the Bureau assumed that institutions that 
originate more than 7,000 open-end lines of credit are high-complexity 
or tier 1 institutions; those that originate between 200 and 7,000 such 
lines of credit are moderate-complexity or tier 2 institutions; and 
those that originate fewer than 200 such lines of credit are low-
complexity or tier 3 institutions. Given the previous results, the 
Bureau believes that most of the financial institutions that will 
benefit from the two year temporary increase of the open-end lines of 
credit threshold are tier 3 institutions, some are tier 2 institutions, 
and none are tier 1 institutions. Further, the tier 2 institutions most 
likely to benefit from the final rule are among the smaller ones in 
tier 2 in terms of open-end lines of credit volume.
    In the 2015 HMDA Final Rule, the Bureau estimated that, for the 
average tier 3 institution, the ongoing operational costs of open-end 
reporting will be $8,600 per year; and for the average tier 2 
institution, the ongoing operational costs will be $43,400 per 
year.\157\ Thus, if all 690 financial institutions that will benefit 
from the temporary threshold increase are in tier 3, the Bureau 
estimates that the savings in the ongoing costs from collecting and 
reporting open-end lines of credit will be roughly $6 million in each 
of two years (approximately $12 million total). Assuming instead that 
all 690 financial institutions that will benefit from the temporary 
threshold increase are in tier 2, the Bureau estimates that the savings 
in the ongoing costs from collecting and reporting open-end lines of 
credit will be roughly $30 million in each of two years (approximately 
$60 million total). Since the tier 2 institutions most likely to 
benefit from the final rule are among the smaller ones in tier 2 in 
terms of open-end lines of credit volume, the Bureau believes that the 
savings in ongoing costs will be closer to the lower estimate ($6 
million per year for two years) than the higher estimate ($30 million 
per year for two years). On the other hand, as stated in Section V, the 
Bureau may have underestimated the average ongoing costs for low-
complexity institutions in the 2015 HMDA Final Rule. If so, the 
estimate of $6 million per year in savings would understate the actual 
savings.
---------------------------------------------------------------------------

    \157\ 2015 HMDA Final Rule, 80 FR 66128, 66286 (Oct. 28, 2015).
---------------------------------------------------------------------------

    The Bureau recognized that the one-time costs of reporting open-end 
lines of credit could be substantial because most financial 
institutions do not currently report open-end lines of credit and thus 
will have to develop completely new reporting infrastructures to begin 
reporting these data. As a result, there will be one-time costs to 
create processes and systems to report open-end lines of credit in 
addition to the one-time costs to modify processes and systems for 
other mortgage products.\158\ In the July 2017 HMDA Proposal, the 
Bureau acknowledged that the Bureau might have underestimated the one-
time costs of open-end lines of credit reporting in the 2015 HMDA Final 
Rule, in addition to possible under-estimation of on-going costs of 
open-end reporting, as the Bureau was handicapped by the lack of 
available data concerning open-end lending.
---------------------------------------------------------------------------

    \158\ Id. at 66264; see also id. at 66284-85.
---------------------------------------------------------------------------

    The Bureau believes the temporary increase of the open-end 
threshold will allow the financial institutions that have open-end 
lines of credit volume between 100 and 499 per year to delay incurring 
one-time costs associated with open-end lines of credit reporting. 
However, for the purpose of this impact analysis, the Bureau is not 
counting such delay as one-time net cost savings because the threshold 
increase is only temporary. The Bureau will have the opportunity over 
the ensuing two-year period to assess whether to adjust the threshold 
permanently, and, if the Bureau were to adjust the threshold 
permanently as the result of that reassessment, the permanent reduction 
in one-time costs of open-end reporting for exempted institutions would 
be in the scope of a new impact analysis for any such potential 
rulemaking in the future. If the Bureau were not to adjust the 
threshold permanently, those temporarily exempted reporters would still 
incur the one-time costs of open-end reporting.
    Some financial institutions may incur costs attributable to the 
temporary open-end lines of credit reporting threshold increase, 
because they have already planned to report open-end lines of credit 
and now will need to change their systems to delay reporting. To the 
extent institutions that already have incurred costs in preparing for 
compliance elect to take advantage of the two-year temporary increase 
in the open-end transactional coverage threshold, unless the Bureau 
elects during the two-year review period to make the increase 
permanent, these institutions will incur one-time expenses that, when 
added to expenses already incurred, may be greater than the one-time 
costs that would have been incurred had the institutions completed 
their compliance work by January 1, 2018. As noted above, the Bureau 
estimates that roughly 690 such institutions will be able to take 
advantage of the two-year temporary increase in the open-end 
transactional coverage threshold. As explained in the July 2017 HMDA 
Proposal, the Bureau does not have a reliable basis to estimate those 
costs. However, as discussed in the section-by-section analysis of 
Sec.  1003.3(c)(11) and (12), financial institutions may opt to report 
open-end lines of credit or closed-end mortgage loans even if the 
institution may exclude those loans pursuant to the transactional 
thresholds included in Sec.  1003.3(c)(11) or (12) under the 2015 HMDA 
Final Rule. Thus, a temporary increase in the open-end transactional 
coverage threshold will obviate the need for institutions that are 
prepared to report open-end lines of credit to change their 
systems.\159\ As explained in the

[[Page 43129]]

analysis of the optional reporting below, the Bureau believes that 
financial institutions that choose to exercise the option may incur 
benefits and costs but must benefit on net. No commenter on the July 
2017 HMDA Proposal has provided data or discussion regarding such 
costs.
---------------------------------------------------------------------------

    \159\ As noted above, the Bureau recently proposed to amend 
Regulation B to add Sec.  1002.5(a)(4)(i), which would permit a 
creditor that is a financial institution under 12 CFR 1003.2(g) to 
collect information regarding the ethnicity, race, and sex of an 
applicant for a closed-end mortgage loan that is an excluded 
transaction under 12 CFR 1003.3(c)(11) or (12) if it submits HMDA 
data concerning such closed-end mortgage loans and applications or 
if it submitted HMDA data concerning closed-end mortgage loans for 
any of the preceding five calendar years. The Bureau is in the 
process of reviewing the comments and considering whether to issue a 
final rule, which the Bureau expects would be issued soon after the 
date this rule is issued. The option to voluntarily report analyzed 
in these impact analyses is conditional on the Bureau finalizing the 
proposed amendments to Regulation B. In the July 2017 HMDA Proposal 
the Bureau noted that it did not have reliable estimates of costs 
some institutions would incur because they have already planned to 
report open-end lines of credit and would be required to change 
their systems if they were not able to voluntarily report. The 
Bureau did not receive comments providing estimates of these costs.
---------------------------------------------------------------------------

    The Bureau believes that temporarily increasing the open-end 
transactional coverage threshold for two years will reduce the benefits 
to consumers from the open-end reporting provisions of the 2015 HMDA 
Final Rule as those benefits are described in the rule. However, the 
Bureau believes that such impact should be minimal because the 
temporary increase in the open-end transactional coverage threshold 
will still result in reporting on approximately three-quarters of all 
open-end lines of credit. The Bureau recognizes that there may be 
particular localities where the impact of the temporary increase in the 
open-end transactional coverage threshold will be more pronounced. The 
Bureau lacks data to be able to estimate the extent to which that may 
be true. No commenter on the July 2017 HMDA Proposal has provided data 
or discussion regarding such costs.
Allowing Optional Reporting for Financial Institutions When Below Loan-
Volume Thresholds
    This Bureau recognizes that some financial institutions that meet 
only one threshold may prefer to report loans even if they fall under 
the other transactional threshold in certain years. Thus, the final 
rule provides that financial institutions may opt to report open-end 
lines of credit or closed-end mortgage loans even if the institution 
may exclude those loans pursuant to the transactional thresholds 
included in Sec.  1003.3(c)(11) or (12) under the final rule.\160\
---------------------------------------------------------------------------

    \160\ As noted above, the Bureau recently proposed to amend 
Regulation B to add Sec.  1002.5(a)(4)(i), which would permit a 
creditor that is a financial institution under 12 CFR 1003.2(g) to 
collect information regarding the ethnicity, race, and sex of an 
applicant for a closed-end mortgage loan that is an excluded 
transaction under 12 CFR 1003.3(c)(11) or (12) if it submits HMDA 
data concerning such closed-end mortgage loans and applications or 
if it submitted HMDA data concerning closed-end mortgage loans for 
any of the preceding five calendar years. The Bureau is in the 
process of reviewing the comments and considering whether to issue a 
final rule, which the Bureau expects would be issued soon after the 
date this rule is issued. The option to voluntarily report analyzed 
in these impact analyses is conditional on the Bureau finalizing the 
proposed amendments to Regulation B.
---------------------------------------------------------------------------

    Economic theory predicts that a firm will exercise an option when 
(and only when) the firm benefits from doing so. Thus, an option 
granted to a financial institution has no impact on those that choose 
not to exercise the option, i.e., they are no better or worse off than 
if the option had not been granted. Financial institutions that choose 
to exercise the option may incur benefits and costs but must benefit on 
net.
    The Bureau believes the financial institutions most likely to 
choose to report when not required to do so will be low-volume, low-
complexity institutions that may have made a one-time investment in 
reporting infrastructure and prefer to utilize it even though the 
volatility in their loan production volume may cause them to fall below 
the relevant mandatory reporting threshold in certain years. Such 
institutions will only choose to report if the ongoing costs of 
reporting are less than the costs of switching off their open-end 
reporting systems but having to maintain the systems and potentially 
switching them back. In the April 2017 HMDA Proposal, the Bureau sought 
comments on the data related to the potential number and 
characteristics of financial institutions that may be interested in 
opting into either closed-end or open-end HMDA reporting, even if they 
are not required to report under the 2015 HMDA Final Rule. However, the 
Bureau received no comments or data to this specific request.
    Consumers may benefit from the optional reporting clarification to 
the extent that low-volume, low-complexity institutions achieve cost 
reductions and pass them on to their customers. The Bureau believes 
that any such consumer savings will be small. Consumers may also 
benefit if low-volume, low-complexity institutions are more willing to 
originate loans because passing the thresholds will not increase burden 
if the institutions are already reporting HMDA information.
Transitional Rules on Purchased Loans
    Three separate amendments provide for some flexibility with regard 
to reporting on purchased loans. Each of the proposed transitional 
rules directs or permits reporting that the requirement is not 
applicable for purchased loans that were originated in a time period 
prior to the January 1, 2018, effective date for the reportable data 
points in the 2015 HMDA Final Rule. Under the final rule, financial 
institutions report that the requirement to report the loan purpose 
under Sec.  1003.4(a)(3) is not applicable if the financial institution 
is reporting a purchased covered loan that was originated prior to 
January 1, 2018. The final rule will also provide financial 
institutions with the option to report that the requirement to report 
the unique identifier for the loan originator is not applicable when 
reporting purchased loans that were originated prior to January 10, 
2014, when Regulation Z's requirement to include the loan originator's 
unique identifier on loan documents went into effect. Finally, there is 
a transitional rule that eases NMLSR ID reporting requirements for 
purchases of commercial loans originated prior to January 1, 2018. The 
Bureau believes providing these options to financial institutions will 
not add costs to financial institutions but will be burden reducing. 
Without such temporary relief, it would be burdensome for financial 
institutions to obtain the relevant information on the loan purpose and 
NMLSR ID of the loans originated during the respective transitional 
periods.
    The extent to which the transitional rules will reduce burden 
depends on the complexity of the financial institutions and the number 
of loans affected. The Bureau believes most of the financial 
institutions that purchase loans and are required to report under HMDA 
are in the high-complexity tier, with some possibly in the moderate-
complexity tier, and very few in the low-complexity tier.
    In the April 2017 HMDA Proposal, the Bureau specifically sought 
information on the projected number of loans that would be originated 
prior to January 1, 2018, and then purchased by financial institutions 
after January 1, 2018, and which would be required to be reported 
according to the 2015 HMDA Final Rule. The Bureau also sought 
information on the projected number of loans that would be originated 
prior to January 10, 2014, and then purchased by financial institutions 
after January 1, 2018, and which would be required to be reported 
according to the 2015 HMDA Final Rule. However, the Bureau received no 
comments or data corresponding to these requests.
    The Bureau believes that the number of reportable loans purchased 
after January 1, 2018, and originated before January 1, 2018, will be 
relatively large in the beginning of 2018 but will diminish over time. 
The Bureau understands that typically there is some delay between loan 
origination by small creditors and loan purchase by larger financial 
institutions. Providing a transitional rule to exempt these purchased 
loans from loan purpose reporting will therefore reduce the burden on 
those financial institutions. This will be particularly true during the

[[Page 43130]]

first few years after January 1, 2018. Further, the Bureau believes 
that the number of reportable loans purchased after January 1, 2018, 
and originated before January 10, 2014, will be relatively small and 
will diminish over time. Providing a transitional rule to exempt those 
eligible purchased loans from NMLSR ID reporting reduces the ongoing 
reporting cost on those financial institutions where this change is 
applicable.
    Regarding benefits to consumers, the Bureau expects the effects of 
the transitional rules for purchased loans to be small or nonexistent. 
HMDA reporting by purchasers does not directly affect consumers. To the 
extent that the rules create cost reductions relative to the baseline 
established by the 2015 HMDA Final Rule, those reductions may be 
indirectly passed on to consumers. Standard economic theory predicts 
that in a market where financial institutions are profit maximizers, 
the affected financial institutions will pass on to consumers the cost 
saving per application or origination (i.e., the reduction in marginal 
cost) and would retain the one-time cost saving and saving on fixed 
costs of complying with the rule.
Deem Census Tract Errors as Bona Fide Errors if a Geocoding Tool That 
the Bureau Makes Available on Its Web Site Is Used
    The final rule treats a census tract error as a bona fide error and 
not a violation of HMDA or Regulation C if the financial institution 
obtained the incorrect census tract number from the geocoding tool that 
the Bureau makes available on its Web site, provided that the financial 
institution entered an accurate property address into the tool and the 
tool returned a census tract number for the property address.
    In the impact analyses in the 2015 HMDA Final Rule, the Bureau 
discussed implementing several operational enhancements, including 
working to improve the geocoding process to reduce the burden on 
financial institutions. The Bureau provided cost estimates on financial 
institutions with or without those operational enhancements. This final 
rule further extends the burden reduction by providing a safe harbor 
for the use of the geocoding tool on the Bureau's Web site. In the 
impact analyses of the 2015 HMDA Final Rule, the Bureau breaks down the 
typical HMDA operational process of financial institutions into 18 
operational tasks. The Bureau believes this final rule will reduce the 
costs of financial institutions on the following tasks: completion of 
geocoding data, standard annual edit and internal check, internal 
audit, external audit, exam preparation, and exam assistance on the 
issues related to geocoding. The Bureau believes the financial 
institutions that will benefit most from this provision are low-
complexity institutions that lack the resources to adopt commercially 
available geocoding tools.
    The Bureau believes that the provision of the safe harbor to 
financial institutions using the geocoding tool on the Bureau's Web 
site will have a small impact on consumers. Consumers will benefit 
indirectly from the geocoding safe harbor to the extent that low-
complexity institutions pass on any cost savings.
Clarifying Certain Key Terms and Other Minor Changes/Corrections
    The final rule clarifies certain key terms, including temporary 
financing, automated underwriting system, multifamily dwelling, 
extension of credit, income, and mixed-use property. The proposal 
excludes preliminary transactions associated with New York CEMAs to 
avoid double reporting. The final rule also addresses certain technical 
aspects of reporting, such as how the reporting requirements for 
certain data points relate to disclosures required by the Bureau's 
Regulation Z and how to collect and report certain information about an 
applicant's race and ethnicity. The final rule also includes a variety 
of minor changes and technical corrections.
    These are all minor or clarifying changes that follow the meaning 
of the 2015 HMDA Final Rule as issued. The Bureau believes that these 
clarifications and technical corrections have the potential to reduce 
reporting burdens on financial institutions, as these amendments will 
reduce potential confusion related to certain data points and 
transactions. In particular, the Bureau believes these changes will 
help reduce the ongoing costs associated with researching questions and 
resolving question responses.
    Some commenters on the proposal noted that even though, in the long 
run, the proposed changes would reduce the burden on the HMDA 
reporters, like any changes in regulatory requirements, some 
institutions could incur a cost to adapt to such changes in the short 
run, as they might need to invest certain time and resources updating 
policies and procedures, performing audits, and adjusting system 
programming. The Bureau acknowledges that such costs could occur. No 
commenters, however, provided specific estimates on such costs. 
Overall, the Bureau believes that there will be long-term reduction in 
compliance costs resulting from this final rule and that the costs for 
financial institutions to adapt to the changes are minimal. The impact 
on consumers will also be small. Consumers will benefit to the extent 
to which financial institutions pass on any cost savings to consumers.
B. Impact on Depository Institutions and Credit Unions With No More 
Than $10 Billion in Assets
    To the extent there are benefits to covered persons resulting from 
the temporary increase in the open-end transactional coverage 
threshold, the Bureau believes those benefits flow almost exclusively 
to depository institutions and credit unions with no more than $10 
billion in assets, as described in section 1026 of the Dodd-Frank Act. 
As discussed above, the institutions that will be temporarily excluded 
by the open-end threshold change originate between 100 and 499 open-end 
lines of credit and average fewer than 250 open-end lines of credit per 
year. In the 2015 HMDA Final Rule, the Bureau assumed a representative 
low-complexity, tier 3, open-end reporter would have 150 open-end lines 
of credit records reportable to HMDA, a representative moderate-
complexity, tier 2, financial institutions would have 1000 open-end 
lines of credit records, while the number of open-end lines of credit 
records for a representative high-complexity, tier 1, open-end 
reporters would be at 30,000. Hence, the Bureau believes that, of the 
financial institutions that would most likely benefit from the two year 
temporary increase of the open-end lines of credit threshold, some, 
most likely most, belong to low-complexity, tier 3 institutions, some 
belong to moderate-complexity, tier 2 institutions, and none belong to 
high-complexity, tier 1 institutions. The Bureau believes none of the 
impacted depository institutions have assets over $10 billion. Using 
the credit union Call Report data, the Bureau was able to verify that 
none of the credit unions that may benefit from this temporary increase 
in open-end reporting threshold have assets over $10 billion.
    The Bureau believes that some of the other changes in the final 
rule could benefit depository institutions and credit unions with no 
more than $10 billion in assets more than larger financial 
institutions. For instance, the safe harbor for use of the geocoding 
tool on the Bureau's Web site mostly benefits financial institutions 
with assets of $10 billion or less, because those institutions may not 
use a commercially available geocoder. Furthermore, the

[[Page 43131]]

Bureau believes that the provision that permits that financial 
institutions to have the option to report open-end lines of credit or 
closed-end loans even if they fall under the other transactional 
threshold mostly benefits financial institutions that have assets no 
more than $10 billion. Financial institutions that are most likely to 
exercise such options will be low-volume, low-complexity institutions 
that may have made a one-time investment in reporting infrastructure 
and prefer to utilize it even though the volatility in their loan 
production volume may cause them to fall below the relevant mandatory 
reporting threshold in certain years. As explained above, the Bureau 
believes financial institutions would only choose to report if doing so 
was burden reducing. To the extent that the majority of such small 
financial institutions have $10 billion or less in assets, the changes 
mentioned above create a disproportional benefit for those institutions 
with assets of $10 billion or less.
    The only changes that could potentially benefit financial 
institutions with assets over $10 billion relatively more than 
financial institutions with assets of no more than $10 billion are the 
transitional rules related to reporting certain data points for 
purchased loans. Larger institutions will benefit relatively more 
because they are more likely to be purchasers of loans.
C. Impact on Access to Credit
    The Bureau does not believe that the proposed temporary increase in 
the open-end transactional coverage threshold will reduce consumer 
access to consumer financial products and services. It may increase 
consumer access by decreasing the possibility that certain financial 
institutions increase their pricing as a result of the requirements of 
the 2015 HMDA Final Rule or seek to cap the number of open-end lines of 
credit they originate to stay under the open-end transactional coverage 
threshold.
    As discussed above, the Bureau believes that none of the other 
changes in this final rule will add additional net costs to financial 
institutions. Furthermore, the clarifications in the final rule should 
reduce costs to financial institutions by easing implementation. Thus, 
all changes have the potential to reduce the costs of HMDA reporting 
for financial institutions. Further, as discussed above, standard 
economic theory predicts that in a market where financial institutions 
are profit maximizers, the affected financial institutions will pass on 
to consumers the cost saving per application or origination (i.e., the 
reduction in marginal cost) and will retain the one-time cost saving 
and saving on fixed costs of complying with the rule. Thus, the Bureau 
believes the impacts on consumers' access to credit will be neutral or 
beneficial. In no event does the Bureau anticipate that consumers will 
experience reduced access to credit as a result of these changes.
D. Impact on Consumers in Rural Areas
    The Bureau believes that none of the changes is likely to have an 
adverse impact on consumers in rural areas. The Bureau believes that, 
to the extent that consumers in rural areas are more likely to be 
served by smaller depository institutions and credit unions and the 
temporary increase in open-end reporting threshold is expected to 
affect mainly small financial institutions, the benefits from the 
temporary open-end threshold increase will affect consumers in rural 
areas positively. The Bureau asked for comments as to the impact on 
consumers in rural areas in the July 2017 HMDA Proposal. None of the 
comments the Bureau received has led the Bureau to question this 
assessment.
    The Bureau believes that smaller financial institutions that may 
opt to report HMDA information even though they fall below the other 
transaction threshold in certain years are more likely to be located in 
rural areas. If so, financial institutions and consumers in rural areas 
may benefit disproportionately from the clarification of options 
allowing lenders to choose to report. In the April 2017 HMDA Proposal, 
the Bureau requested comment and data on the likelihood that smaller 
financial institutions that may opt to report HMDA information even 
though they may fall below transaction thresholds in certain years are 
relatively more likely to be located in rural areas. The Bureau 
received no comment to this request.
    The Bureau also believes that rural consumers may benefit more than 
consumers in urban areas from the safe harbor created for use of the 
geocoding tool on the Bureau's Web site because properties located in 
rural areas may face more geocoding challenges. The safe harbor 
alleviates some of that potential burden. In the April 2017 HMDA 
Proposal, the Bureau requested comment and data on whether properties 
located in rural areas face more geocoding challenges and whether the 
safe harbor would alleviate some of that burden. The Bureau received no 
comment on this specific request. For the rest of the changes contained 
in the final rule, the Bureau believes financial institutions based in 
rural areas and consumers will not face higher burdens.

VIII. Regulatory Flexibility Act

    The Regulatory Flexibility Act (the RFA), as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996, requires each 
agency to consider the potential impact of its regulations on small 
entities, including small businesses, small governmental units, and 
small nonprofit organizations. The RFA defines a ``small business'' as 
a business that meets the size standard developed by the Small Business 
Administration pursuant to the Small Business Act.
    The 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, unless the agency certifies that the rule will 
not have a significant economic impact on a substantial number of small 
entities. In the absence of such a certification, 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.
    In the April 2017 HMDA Proposal, the Bureau concluded that the 
proposal, if adopted, would not have a significant economic impact on a 
substantial number of small entities and that an IRFA was therefore not 
required. The Bureau requested comment on the analysis under the RFA 
and any relevant data. The Bureau did not receive any comments on the 
analysis or data. This final rule adopts the proposed rule 
substantially as proposed, and, as discussed above, the Bureau believes 
that none of the changes will create a significant economic impact on 
any covered persons, including small entities. Therefore, a FRFA is not 
required.
    In the July 2017 HMDA Proposal, the Bureau concluded that the 
proposal, if adopted, would not have a significant economic impact on a 
substantial number of small entities and that an IRFA was therefore not 
required. The Bureau requested comment on the analysis under the RFA 
and any relevant data. The Bureau did not receive any comments on the 
analysis or data. This final rule adopts the proposed rule as proposed, 
and as discussed above, the Bureau believes that none of the changes 
would create a significant economic impact on any covered persons, 
including small entities. Therefore, a FRFA is not required.

[[Page 43132]]

    Accordingly, the undersigned certifies that this final rule will 
not have a significant economic impact on a substantial number of small 
entities.

IX. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), Federal agencies are generally required to seek the Office of 
Management and Budget (OMB) approval for information collection 
requirements prior to implementation. Under the PRA, the Bureau may not 
conduct or sponsor, and, notwithstanding any other provision of law, a 
person is not required to respond to an information collection unless 
the information collection displays a valid control number assigned by 
OMB. The information collection requirements contained in Regulation C 
have been previously approved by OMB and assigned OMB control number 
3170-0008. You may access this information collection on 
www.reginfo.gov by selecting ``Information Collection Review'' from the 
main menu, clicking on ``Search,'' and then entering the OMB control 
number.
    The Bureau has determined that the final rule will not impose any 
new recordkeeping, reporting, or disclosure requirements on members of 
the public that will constitute collections of information requiring 
approval under the PRA. The final rule does, however, make a temporary 
modification to a previously-approved information collection by 
including a temporary increase in the open-end reporting threshold for 
two years. The Bureau estimates that this temporary modification will 
save financial institutions between $6 million and $30 million per year 
for two years on ongoing operational cost related to open-end lines of 
credit reporting to HMDA. Using the hourly wage of $33 that was used in 
2015 Final Rule and its PRA analysis, the Bureau estimates that the 
final rule will reduce the recordkeeping, reporting, or disclosure 
requirements on members of the public associated with open-end 
reporting by approximately between 180,000 and 900,000 hours each year 
for two years during which the temporary threshold change is in effect.
    The Bureau has a continuing interest in the public's opinions 
regarding this determination. At any time, comments regarding this 
determination may be sent to: The Consumer Financial Protection Bureau 
(Attention: PRA Office), 1700 G Street NW., Washington, DC 20552, or by 
email to CFPB_Public_PRA@cfpb.gov.

List of Subjects in 12 CFR Part 1003

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

Authority and Issuance

    For the reasons set forth above, the Bureau amends Regulation C, 12 
CFR part 1003, as set forth below:

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. Effective January 1, 2018, Sec.  1003.2, as amended at 80 FR 66128, 
is further amended by revising paragraphs (g)(1)(v)(A) and (B) and 
(g)(2)(ii)(A) and (B) to read as follows:


Sec.  1003.2  Definitions.

* * * * *
    (g) * * *
    (1) * * *
    (v) * * *
    (A) In each of the two preceding calendar years, originated at 
least 25 closed-end mortgage loans that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10) or (13); or
    (B) In each of the two preceding calendar years, originated at 
least 500 open-end lines of credit that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10); and
    (2) * * *
    (ii) * * *
    (A) In each of the two preceding calendar years, originated at 
least 25 closed-end mortgage loans that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10) or (13); or
    (B) In each of the two preceding calendar years, originated at 
least 500 open-end lines of credit that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10).
* * * * *

0
3. Effective January 1, 2018, Sec.  1003.3, as amended at 80 FR 66128, 
is further amended by revising paragraphs (c)(11) and (12) and adding 
paragraph (c)(13) to read as follows:


Sec.  1003.3  Exempt institutions and excluded transactions.

* * * * *
    (c) * * *
    (11) A closed-end mortgage loan, if the financial institution 
originated fewer than 25 closed-end mortgage loans in either of the two 
preceding calendar years; a financial institution may collect, record, 
report, and disclose information, as described in Sec. Sec.  1003.4 and 
1003.5, for such an excluded closed-end mortgage loan as though it were 
a covered loan, provided that the financial institution complies with 
such requirements for all applications for closed-end mortgage loans 
that it receives, closed-end mortgage loans that it originates, and 
closed-end mortgage loans that it purchases that otherwise would have 
been covered loans during the calendar year during which final action 
is taken on the excluded closed-end mortgage loan;
    (12) An open-end line of credit, if the financial institution 
originated fewer than 500 open-end lines of credit in either of the two 
preceding calendar years; a financial institution may collect, record, 
report, and disclose information, as described in Sec. Sec.  1003.4 and 
1003.5, for such an excluded open-end line of credit as though it were 
a covered loan, provided that the financial institution complies with 
such requirements for all applications for open-end lines of credit 
that it receives, open-end lines of credit that it originates, and 
open-end lines of credit that it purchases that otherwise would have 
been covered loans during the calendar year during which final action 
is taken on the excluded open-end line of credit; or
    (13) A transaction that provided or, in the case of an application, 
proposed to provide new funds to the applicant or borrower in advance 
of being consolidated in a New York State consolidation, extension, and 
modification agreement classified as a supplemental mortgage under New 
York Tax Law section 255; the transaction is excluded only if final 
action on the consolidation was taken in the same calendar year as 
final action on the new funds transaction.

0
4. Effective January 1, 2018, Sec.  1003.4, as amended at 80 FR 66128, 
is further amended by revising paragraphs (a)(2), (12), and (35) to 
read as follows:


Sec.  1003.4  Compilation of reportable data.

    (a) * * *
    (2) Whether the covered loan is, or in the case of an application 
would have been, insured by the Federal Housing Administration, 
guaranteed by the Department of Veterans Affairs, or guaranteed by the 
Rural Housing Service or the Farm Service Agency.
* * * * *
    (12)(i) For covered loans and applications that are approved but 
not accepted, and that are subject to Regulation Z, 12 CFR part 1026, 
other than assumptions, purchased covered loans, and reverse mortgages, 
the

[[Page 43133]]

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.
    (ii) ``Average prime offer rate'' means an annual percentage rate 
that is derived from average interest rates and other loan pricing 
terms currently offered to consumers by a set of creditors for mortgage 
loans that have low-risk pricing characteristics. The Bureau publishes 
tables of average prime offer rates by transaction type at least weekly 
and also publishes the methodology it uses to derive these rates.
* * * * *
    (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 result generated by that automated 
underwriting system.
    (ii) For purposes of this paragraph (a)(35), an ``automated 
underwriting system'' means an electronic tool developed by a 
securitizer, Federal government insurer, or Federal government 
guarantor of closed-end mortgage loans or open-end lines of credit that 
provides a result regarding the credit risk of the applicant and 
whether the covered loan is eligible to be originated, purchased, 
insured, or guaranteed by that securitizer, Federal government insurer, 
or Federal government guarantor. A person is a securitizer, Federal 
government insurer, or Federal government guarantor of closed-end 
mortgage loans or open-end lines of credit, respectively, if it has 
ever securitized, provided Federal government insurance, or provided a 
Federal government guarantee for a closed-end mortgage loan or open-end 
line of credit.
* * * * *

0
5. Effective January 1, 2018, appendix B to part 1003, as amended at 80 
FR 66128, is further amended by revising paragraphs 8 and 9.i through 
9.iv, adding paragraph 9.v, and revising the Sample Data Collection 
Form at the end of the appendix to read as follows:

Appendix B to Part 1003--Form and Instructions for Data Collection on 
Ethnicity, Race, and Sex

* * * * *
    8. You must report the ethnicity, race, and sex of an applicant as 
provided by the applicant. For example, if an applicant selects the 
``Asian'' box the institution reports ``Asian'' for the race of the 
applicant. Only an applicant may self-identify as being of a particular 
Hispanic or Latino subcategory (Mexican, Puerto Rican, Cuban, Other 
Hispanic or Latino) or of a particular Asian subcategory (Asian Indian, 
Chinese, Filipino, Japanese, Korean, Vietnamese, Other Asian) or of a 
particular Native Hawaiian or Other Pacific Islander subcategory 
(Native Hawaiian, Guamanian or Chamorro, Samoan, Other Pacific 
Islander) or of a particular American Indian or Alaska Native enrolled 
or principal tribe. An applicant may select an ethnicity or race 
subcategory even if the applicant does not select an aggregate 
ethnicity or aggregate race category. For example, if an applicant 
selects only the ``Mexican'' box, the institution reports ``Mexican'' 
for the ethnicity of the applicant but does not also report ``Hispanic 
or Latino.''
    9. * * *
    i. Ethnicity--Aggregate categories and subcategories. There are two 
aggregate ethnicity categories: Hispanic or Latino; and Not Hispanic or 
Latino. The Hispanic or Latino category has four subcategories: 
Mexican; Puerto Rican; Cuban; and Other Hispanic or Latino. You must 
report every aggregate ethnicity category selected by the applicant. If 
the applicant also selects one or more ethnicity subcategories, you 
must report each ethnicity subcategory selected by the applicant, 
except that you must not report more than a total of five aggregate 
ethnicity categories and ethnicity subcategories combined. For example, 
if the applicant selects both aggregate ethnicity categories and also 
selects all four ethnicity subcategories, you must report Hispanic or 
Latino, Not Hispanic or Latino, and any three, at your option, of the 
four ethnicity subcategories selected by the applicant. To determine 
how to report the Other Hispanic or Latino ethnicity subcategory for 
purposes of the five-ethnicity maximum, see paragraph 9.ii below.
    ii. Ethnicity--Other subcategories. An applicant may select the 
Other Hispanic or Latino ethnicity subcategory, an applicant may 
provide a particular Hispanic or Latino ethnicity not listed in the 
standard subcategories, or an applicant may do both. If the applicant 
provides only a particular Hispanic or Latino ethnicity in the space 
provided, you are permitted, but are not required, to report Other 
Hispanic or Latino in addition to reporting the particular Hispanic or 
Latino ethnicity provided by the applicant. For example, if an 
applicant provides only ``Dominican,'' you should report ``Dominican.'' 
You are permitted, but not required, to report Other Hispanic or Latino 
as well. If an applicant selects the Other Hispanic or Latino ethnicity 
subcategory and also provides a particular Hispanic or Latino ethnicity 
not listed in the standard subcategories, you must report both the 
selection of Other Hispanic or Latino and the additional information 
provided by the applicant, subject to the five-ethnicity maximum. For 
purposes of the maximum of five reportable ethnicity categories and 
ethnicity subcategories combined, as set forth in paragraph 9.i, the 
Other Hispanic or Latino subcategory and additional information 
provided by the applicant together constitute only one selection. For 
example, if the applicant selects Other Hispanic or Latino and enters 
``Dominican'' in the space provided, Other Hispanic or Latino and 
``Dominican'' are considered one selection. Similarly, if the applicant 
only enters ``Dominican'' in the space provided and you report both 
``Dominican'' and Other Hispanic or Latino as permitted by this 
paragraph 9.ii, the reported items together are considered one 
selection.
    iii. Race--Aggregate categories and subcategories. There are five 
aggregate race categories: American Indian or Alaska Native; Asian; 
Black or African American; Native Hawaiian or Other Pacific Islander; 
and White. The Asian and the Native Hawaiian or Other Pacific Islander 
aggregate categories have seven and four subcategories, respectively. 
The Asian race subcategories are: Asian Indian; Chinese; Filipino; 
Japanese; Korean; Vietnamese; and Other Asian. The Native Hawaiian or 
Other Pacific Islander race subcategories are: Native Hawaiian; 
Guamanian or Chamorro; Samoan; and Other Pacific Islander. You must 
report every aggregate race category selected by the applicant. If the 
applicant also selects one or more race subcategories, you must report 
each race subcategory selected by the applicant, except that you must 
not report more than a total of five aggregate race categories and race 
subcategories combined. For example, if the applicant selects all five 
aggregate race categories and also selects some race subcategories, you 
report only the five aggregate race categories. On the other hand, if 
the applicant selects the White, Asian, and Native Hawaiian or Other 
Pacific Islander aggregate race categories, and the applicant also 
selects the Korean, Vietnamese, and Samoan race subcategories, you must 
report White, Asian, Native Hawaiian or Other Pacific Islander, and any 
two, at your option, of the three race subcategories selected by the 
applicant. In this example, you must report White, Asian, and Native 
Hawaiian or Other Pacific Islander, and in addition you must report (at 
your option) either Korean

[[Page 43134]]

and Vietnamese, Korean and Samoan, or Vietnamese and Samoan. To 
determine how to report an Other race subcategory and the American 
Indian or Alaska Native category for purposes of the five-race maximum, 
see paragraphs 9.iv and 9.v below.
    iv. Race--Other subcategories. An applicant may select the Other 
Asian race subcategory or the Other Pacific Islander race subcategory, 
an applicant may provide a particular Asian race or Pacific Islander 
race not listed in the standard subcategories, or an applicant may do 
both. If the applicant provides only a particular Asian race or Pacific 
Islander race in the space provided, you are permitted, but are not 
required, to report Other Asian or Other Pacific Islander, as 
applicable, in addition to reporting the particular Asian race or 
Pacific Islander race provided by the applicant. For example, if an 
applicant provides only ``Hmong,'' you should report ``Hmong.'' You are 
permitted, but not required, to report Other Asian as well. If an 
applicant selects the Other Asian race or the Other Pacific Islander 
race subcategory and provides a particular Asian race or Pacific 
Islander race not listed in the standard subcategories, you must report 
both the selection of Other Asian or Other Pacific Islander, as 
applicable, and the additional information provided by the applicant, 
subject to the five-race maximum. For purposes of the maximum of five 
reportable race categories and race subcategories combined, as set 
forth in paragraph 9.iii, the Other race subcategory and additional 
information provided by the applicant together constitute only one 
selection. Thus, using the same facts in the example offered in 
paragraph 9.iii above, if the applicant also selects Other Asian and 
enters ``Thai'' in the space provided, Other Asian and Thai are 
considered one selection. Similarly, if the applicant enters only 
``Thai'' in the space provided and you report both ``Thai'' and Other 
Asian as permitted by this paragraph 9.iv, the reported items together 
are considered one selection. In the same example, you must report any 
two (at your option) of the four race subcategories selected by the 
applicant, Korean, Vietnamese, Other Asian-Thai, and Samoan, in 
addition to the three aggregate race categories selected by the 
applicant.
    v. Race--American Indian or Alaska Native category. An applicant 
may select the American Indian or Alaska Native race category, an 
applicant may provide a particular American Indian or Alaska Native 
enrolled or principal tribe, or an applicant may do both. If the 
applicant provides only a particular American Indian or Alaska Native 
enrolled or principal tribe in the space provided, you are permitted, 
but are not required, to report American Indian or Alaska Native in 
addition to reporting the particular American Indian or Alaska Native 
enrolled or principal tribe provided by the applicant. For example, if 
an applicant provides only ``Navajo,'' you should report ``Navajo.'' 
You are permitted, but not required, to report American Indian or 
Alaska Native as well. If an applicant selects the American Indian or 
Alaska Native race category and also provides a particular American 
Indian or Alaska Native enrolled or principal tribe, you must report 
both the selection of American Indian or Alaska Native and the 
additional information provided by the applicant. For purposes of the 
maximum of five reportable race categories and race subcategories 
combined, as set forth in paragraph 9.iii, the American Indian or 
Alaska Native category and additional information provided by the 
applicant together constitute only one selection.
* * * * *
BILLING CODE 4810-AM-P

[[Page 43135]]

[GRAPHIC] [TIFF OMITTED] TR13SE17.000

BILLING CODE 4810-AM-C

0
6. Effective January 1, 2018, appendix C to part 1003, as amended at 80 
FR 66128, is further amended by revising ``Generating a Check Digit'' 
and the ``Example'' to ``Generating a Check Digit'' to read as follows:

Appendix C to Part 1003--Procedures for Generating a Check Digit and 
Validating a ULI

* * * * *

Generating a Check Digit

    Step 1: Starting with the leftmost character in the string that 
consists of the combination of the Legal Entity Identifier (LEI) 
pursuant to Sec.  1003.4(a)(1)(i)(A) and the additional characters 
identifying the covered loan or application pursuant to Sec.  
1003.4(a)(1)(i)(B), replace each alphabetic character with numbers in

[[Page 43136]]

accordance with Table I below to obtain all numeric values in the 
string.

Table I--Alphabetic to Numeric Conversion Table

    The alphabetic characters are not case-sensitive and each letter, 
whether it is capitalized or in lower-case, is equal to the same value 
as each letter illustrates in the conversion table. For example, A and 
a are each equal to 10.

A = 10
B = 11
C = 12
D = 13
E = 14
F = 15
G = 16
H = 17
I = 18
J = 19
K = 20
L = 21
M = 22
N = 23
O = 24
P = 25
Q = 26
R = 27
S = 28
T = 29
U = 30
V = 31
W = 32
X = 33
Y = 34
Z = 35

    Step 2: After converting the combined string of characters to all 
numeric values, append two zeros to the rightmost positions.
    Step 3: Apply the mathematical function mod = (n,97) where n = the 
number obtained in step 2 above and 97 is the divisor.
    Alternatively, to calculate without using the modulus operator, 
divide the numbers in step 2 above by 97. Truncate the remainder to 
three digits and multiply it by 97. Round the result to the nearest 
whole number.
    Step 4: Subtract the result in step 3 from 98. If the result is one 
digit, add a leading 0 to make it two digits.
    Step 5: The two digits in the result from step 4 is the check 
digit. Append the resulting check digit to the rightmost position in 
the combined string of characters described in step 1 above to generate 
the ULI.

Example

    For example, assume the LEI for a financial institution is 
10Bx939c5543TqA1144M and the financial institution assigned the 
following string of characters to identify the covered loan: 999143X. 
The combined string of characters is 10Bx939c5543TqA1144M999143X.
    Step 1: Starting with the leftmost character in the combined string 
of characters, replace each alphabetic character with numbers in 
accordance with Table I above to obtain all numeric values in the 
string. The result is 10113393912554329261011442299914333.
    Step 2: Append two zeros to the rightmost positions in the combined 
string. The result is 1011339391255432926101144229991433300.
    Step 3: Apply the mathematical function mod = (n,97) where n = the 
number obtained in step 2 above and 97 is the divisor. The result is 
60.
    Alternatively, to calculate without using the modulus operator, 
divide the numbers in step 2 above by 97. The result is 
1042617929129312294946332267952920.618556701030928. Truncate the 
remainder to three digits, which is .618, and multiply it by 97. The 
result is 59.946. Round this result to the nearest whole number, which 
is 60.
    Step 4: Subtract the result in step 3 from 98. The result is 38.
    Step 5: The two digits in the result from step 4 is the check 
digit. Append the check digit to the rightmost positions in the 
combined string of characters that consists of the LEI and the string 
of characters assigned by the financial institution to identify the 
covered loan to obtain the ULI. In this example, the ULI would be 
10Bx939c5543TqA1144M999143X38.
* * * * *

0
7. Effective January 1, 2018, Supplement I to Part 1003--Official 
Interpretations, as amended at 80 FR 66128, is further amended as 
follows:
0
a. Under Section 1003.2--Definitions:
0
i. Under 2(d) Closed-end Mortgage Loan, paragraph 2 is revised;
0
ii. Under 2(f) Dwelling, paragraph 2 is revised;
0
iii. Under 2(g) Financial Institution, paragraphs 3 and 5 are revised;
0
iv. Under 2(i) Home Improvement Loan, paragraph 4 is revised;
0
v. Under 2(j) Home Purchase Loan, paragraph 3 is revised; and
0
vi. Under 2(n) Multifamily Dwelling, paragraph 3 is added;
0
b. Under Section 1003.3--Exempt Institutions and Excluded Transactions, 
under 3(c)(3) Excluded Transactions:
0
i. Paragraph 3(c)(3) is revised;
0
ii. Under Paragraph 3(c)(10), paragraph 3 is revised;
0
iii. Paragraph 3(c)(11) and Paragraph 3(c)(12) are revised; and
0
iv. After the entry for Paragraph 3(c)(12), the heading Paragraph 
3(c)(13) is added and paragraph 1 is added under that heading.
0
c. Under Section 1003.4--Compilation of Reportable Data, under 4(a) 
Data Format and Itemization:
0
i. Under Paragraph 4(a)(1)(i), paragraphs 3 and 4 are revised;
0
ii. Paragraph 4(a)(2) is revised;
0
iii. Under Paragraph 4(a)(3), paragraph 6 is added;
0
iv. Under Paragraph 4(a)(8)(i), paragraphs 6 and 9 are revised;
0
v. Under Paragraph 4(a)(9)(i), paragraph 3 is revised;
0
vi. After the entry for Paragraph 4(a)(9)(i), add the heading Paragraph 
4(a)(9)(ii) and paragraph 1 under that heading is added;
0
vii. After the entry for Paragraph 4(a)(9)(ii), add the heading 
Paragraph 4(a)(9)(ii)(A) and paragraph 1 under that heading is added;
0
viii. Under Paragraph 4(a)(9)(ii)(B), paragraph 2 is added;
0
ix. Under Paragraph 4(a)(9)(ii)(C), paragraph 2 is added;
0
x. Under Paragraph 4(a)(10)(ii), paragraph 3 is revised;
0
xi. Under Paragraph 4(a)(10)(iii), paragraph 4 is revised;
0
xii. Under Paragraph 4(a)(12), paragraphs 1, 2, 3, 5, and 8 are revised 
and paragraph 9 is added;
0
xiii. Under Paragraph 4(a)(15), paragraphs 2 and 3 are revised;
0
xiv. Under Paragraph 4(a)(17)(i), paragraph 3 is revised;
0
xv. Under Paragraph 4(a)(18), paragraph 3 is revised;
0
xvi. Under Paragraph 4(a)(19), paragraph 3 is revised;
0
xvii. Under Paragraph 4(a)(20), paragraph 3 is revised;
0
xviii. Under Paragraph 4(a)(21), paragraph 1 is revised;
0
xix. Under Paragraph 4(a)(24), paragraph 2 is revised and paragraph 6 
is added;
0
xx. Under Paragraph 4(a)(26), paragraph 5 is added;
0
xxi. Under Paragraph 4(a)(34), paragraph 4 is added; and
0
xxii. Under Paragraph 4(a)(35) paragraph 2 is revised and paragraph 7 
is added.
    The revisions and addition read as follows:

Supplement I to Part 1003--Official Interpretations

* * * * *

Section 1003.2--Definitions

* * * * *
2(d) Closed-end Mortgage Loan
* * * * *
    2. Extension of credit. Under Sec.  1003.2(d), a dwelling-secured 
loan is

[[Page 43137]]

not a closed-end mortgage loan unless it involves an extension of 
credit. For example, some transactions completed pursuant to 
installment sales contracts, such as some land contracts, depending on 
the facts and circumstances, may or may not involve extensions of 
credit rendering the transactions closed-end mortgage loans. In 
general, extension of credit under Sec.  1003.2(d) refers to the 
granting of credit only pursuant to a new debt obligation. Thus, except 
as described in comments 2(d)-2.i and .ii, if a transaction modifies, 
renews, extends, or amends the terms of an existing debt obligation, 
but the existing debt obligation is not satisfied and replaced, the 
transaction is not a closed-end mortgage loan under Sec.  1003.2(d) 
because there has been no new extension of credit. The phrase extension 
of credit thus is defined differently under Regulation C than under 
Regulation B, 12 CFR part 1002.
    i. Assumptions. For purposes of Regulation C, an assumption is a 
transaction in which an institution enters into a written agreement 
accepting a new borrower in place of an existing borrower as the 
obligor on an existing debt obligation. For purposes of Regulation C, 
assumptions include successor-in-interest transactions, in which an 
individual succeeds the prior owner as the property owner and then 
assumes the existing debt secured by the property. Under Sec.  
1003.2(d), assumptions are extensions of credit even if the new 
borrower merely assumes the existing debt obligation and no new debt 
obligation is created. See also comment 2(j)-5.
    ii. New York State consolidation, extension, and modification 
agreements. A transaction completed pursuant to a New York State 
consolidation, extension, and modification agreement and classified as 
a supplemental mortgage under New York Tax Law section 255, such that 
the borrower owes reduced or no mortgage recording taxes, is an 
extension of credit under Sec.  1003.2(d). Comments 2(i)-1, 2(j)-5, and 
2(p)-2 clarify whether such transactions are home improvement loans, 
home purchase loans, or refinancings, respectively. Section 
1003.3(c)(13) provides an exclusion from the reporting requirement for 
a preliminary transaction providing or, in the case of an application, 
proposing to provide new funds to the borrower in advance of being 
consolidated within the same calendar year into a supplemental mortgage 
under New York Tax Law section 255. See comment 3(c)(13)-1 concerning 
how to report a supplemental mortgage under New York Tax Law section 
255 in this situation.
2(f) Dwelling
* * * * *
    2. Multifamily residential structures and communities. A dwelling 
also includes a multifamily residential structure or community such as 
an apartment, condominium, cooperative building or housing complex, or 
a manufactured home community. A loan related to a manufactured home 
community is secured by a dwelling for purposes of Sec.  1003.2(f) even 
if it is not secured by any individual manufactured homes, but only by 
the land that constitutes the manufactured home community including 
sites for manufactured homes. However, a loan related to a multifamily 
residential structure or community that is not a manufactured home 
community is not secured by a dwelling for purposes of Sec.  1003.2(f) 
if it is not secured by any individual dwelling units and is, for 
example, instead secured only by property that only includes common 
areas, or is secured only by an assignment of rents or dues.
* * * * *
2(g) Financial Institution
* * * * *
    3. Merger or acquisition--coverage of surviving or newly formed 
institution. After a merger or acquisition, the surviving or newly 
formed institution is a financial institution under Sec.  1003.2(g) if 
it, considering the combined assets, location, and lending activity of 
the surviving or newly formed institution and the merged or acquired 
institutions or acquired branches, satisfies the criteria included in 
Sec.  1003.2(g). For example, A and B merge. The surviving or newly 
formed institution meets the loan threshold described in Sec.  
1003.2(g)(1)(v)(B) if the surviving or newly formed institution, A, and 
B originated a combined total of at least 500 open-end lines of credit 
in each of the two preceding calendar years. Likewise, the surviving or 
newly formed institution meets the asset-size threshold in Sec.  
1003.2(g)(1)(i) if its assets and the combined assets of A and B on 
December 31 of the preceding calendar year exceeded the threshold 
described in Sec.  1003.2(g)(1)(i). Comment 2(g)-4 discusses a 
financial institution's responsibilities during the calendar year of a 
merger.
* * * * *
    5. Originations. Whether an institution is a financial institution 
depends in part on whether the institution originated at least 25 
closed-end mortgage loans in each of the two preceding calendar years 
or at least 500 open-end lines of credit in each of the two preceding 
calendar years. Comments 4(a)-2 through -4 discuss whether activities 
with respect to a particular closed-end mortgage loan or open-end line 
of credit constitute an origination for purposes of Sec.  1003.2(g).
* * * * *
2(i) Home Improvement Loan
* * * * *
    4. Mixed-use property. A closed-end mortgage loan or an open-end 
line of credit to improve a multifamily dwelling used for residential 
and commercial purposes (for example, a building containing apartment 
units and retail space), or the real property on which such a dwelling 
is located, is a home improvement loan if the loan's proceeds are used 
either to improve the entire property (for example, to replace the 
heating system), or if the proceeds are used primarily to improve the 
residential portion of the property. An institution may use any 
reasonable standard to determine the primary use of the loan proceeds. 
An institution may select the standard to apply on a case-by-case 
basis. See comment 3(c)(10)-3.ii for guidance on loans to improve 
primarily the commercial portion of a dwelling other than a multifamily 
dwelling.
* * * * *
    2(j) Home Purchase Loan
* * * * *
    3. Construction and permanent financing. A home purchase loan 
includes both a combined construction/permanent loan or line of credit, 
and the separate permanent financing that replaces a construction-only 
loan or line of credit for the same borrower at a later time. A home 
purchase loan does not include a construction-only loan or line of 
credit that is designed to be replaced by separate permanent financing 
extended by any financial institution to the same borrower at a later 
time or that is extended to a person exclusively to construct a 
dwelling for sale, which are excluded from Regulation C as temporary 
financing under Sec.  1003.3(c)(3). Comments 3(c)(3)-1 and -2 provide 
additional details about transactions that are excluded as temporary 
financing.
* * * * *
2(n) Multifamily Dwelling
* * * * *
    3. Separate dwellings. A covered loan secured by five or more 
separate dwellings, which are not multifamily dwellings, in more than 
one location is not a loan secured by a multifamily dwelling. For 
example, assume a landlord uses a covered loan to improve

[[Page 43138]]

five or more dwellings, each with one individual dwelling unit, located 
in different parts of a town, and the loan is secured by those 
properties. The covered loan is not secured by a multifamily dwelling 
as defined by Sec.  1003.2(n). Likewise, a covered loan secured by five 
or more separate dwellings that are located within a multifamily 
dwelling, but which is not secured by the entire multifamily dwelling 
(e.g., an entire apartment building or housing complex), is not secured 
by a multifamily dwelling as defined by Sec.  1003.2(n). For example, 
assume that an investor purchases 10 individual unit condominiums in a 
100-unit condominium complex using a covered loan. The covered loan 
would not be secured by a multifamily dwelling as defined by Sec.  
1003.2(n). In both of these situations, a financial institution 
reporting a covered loan or application secured by these separate 
dwellings would not be subject to the additional reporting requirements 
for covered loans secured by or applications proposed to be secured by 
multifamily dwellings under Sec.  1003.4(a)(32). However, a financial 
institution would report the information required by Sec.  
1003.4(a)(4), (a)(10)(iii), and (a)(23), (29), and (30), which is not 
applicable to covered loans secured by and applications proposed to be 
secured by multifamily dwellings. See comment 2(n)-2. In addition, in 
both of these situations, the financial institution reports the number 
of individual dwelling units securing the covered loan or proposed to 
secure a covered loan as required by Sec.  1003.4(a)(31). See comment 
4(a)(31)-3.
* * * * *

Section 1003.3--Exempt Institutions and Excluded Transactions

3(c) Excluded Transactions
* * * * *
Paragraph 3(c)(3)
    1. Temporary financing. Section 1003.3(c)(3) provides that closed-
end mortgage loans or open-end lines of credit obtained for temporary 
financing are excluded transactions. A loan or line of credit is 
considered temporary financing and excluded under Sec.  1003.3(c)(3) if 
the loan or line of credit is designed to be replaced by separate 
permanent financing extended by any financial institution to the same 
borrower at a later time. For example:
    i. Lender A extends credit in the form of a bridge or swing loan to 
finance a borrower's down payment on a home purchase. The borrower pays 
off the bridge or swing loan with funds from the sale of his or her 
existing home and obtains permanent financing for his or her new home 
from Lender A or from another lender. The bridge or swing loan is 
excluded as temporary financing under Sec.  1003.3(c)(3).
    ii. Lender A extends credit to a borrower to finance construction 
of a dwelling. The borrower will obtain a new extension of credit for 
permanent financing for the dwelling, either from Lender A or from 
another lender, and either through a refinancing of the initial 
construction loan or a separate loan. The initial construction loan is 
excluded as temporary financing under Sec.  1003.3(c)(3).
    iii. Assume the same scenario as in comment 3(c)(3)-1.ii, except 
that the initial construction loan is, or may be, renewed one or more 
times before the separate permanent financing is obtained. The initial 
construction loan, including any renewal thereof, is excluded as 
temporary financing under Sec.  1003.3(c)(3).
    iv. Lender A extends credit to finance construction of a dwelling. 
The loan automatically will convert to permanent financing extended to 
the same borrower with Lender A once the construction phase is 
complete. Under Sec.  1003.3(c)(3), the loan is not designed to be 
replaced by separate permanent financing extended to the same borrower, 
and therefore the temporary financing exclusion does not apply. See 
also comment 2(j)-3.
    v. Lender A originates a loan with a nine-month term to enable an 
investor to purchase a home, renovate it, and re-sell it before the 
term expires. Under Sec.  1003.3(c)(3), the loan is not designed to be 
replaced by separate permanent financing extended to the same borrower, 
and therefore the temporary financing exclusion does not apply. Such a 
transaction is not temporary financing under Sec.  1003.3(c)(3) merely 
because its term is short.
    2. Loan or line of credit to construct a dwelling for sale. A 
construction-only loan or line of credit is considered temporary 
financing and excluded under Sec.  1003.3(c)(3) if the loan or line of 
credit is extended to a person exclusively to construct a dwelling for 
sale. See comment 3(c)(3)-1.ii through .iv for examples of the 
reporting requirement for construction loans that are not extended to a 
person exclusively to construct a dwelling for sale.
* * * * *
Paragraph 3(c)(10)
* * * * *
    3. Examples--covered business- or commercial-purpose transactions. 
The following are examples of closed-end mortgage loans and open-end 
lines of credit that are not excluded from reporting under Sec.  
1003.3(c)(10) because, although they primarily are for a business or 
commercial purpose, they also meet the definition of a home improvement 
loan under Sec.  1003.2(i), a home purchase loan under Sec.  1003.2(j), 
or a refinancing under Sec.  1003.2(p):
    i. A closed-end mortgage loan or an open-end line of credit to 
purchase or to improve a multifamily dwelling or a single-family 
investment property, or a refinancing of a closed-end mortgage loan or 
an open-end line of credit secured by a multifamily dwelling or a 
single-family investment property;
    ii. A closed-end mortgage loan or an open-end line of credit to 
improve a doctor's office or a daycare center that is located in a 
dwelling other than a multifamily dwelling; and
    iii. A closed-end mortgage loan or an open-end line of credit to a 
corporation, if the funds from the loan or line of credit will be used 
to purchase or to improve a dwelling, or if the transaction is a 
refinancing.
* * * * *
Paragraph 3(c)(11)
    1. General. Section 1003.3(c)(11) provides that a closed-end 
mortgage loan is an excluded transaction if a financial institution 
originated fewer than 25 closed-end mortgage loans in either of the two 
preceding calendar years. For example, assume that a bank is a 
financial institution in 2018 under Sec.  1003.2(g) because it 
originated 600 open-end lines of credit in 2016, 650 open-end lines of 
credit in 2017, and met all of the other requirements under Sec.  
1003.2(g)(1). Also assume that the bank originated 10 and 20 closed-end 
mortgage loans in 2016 and 2017, respectively. The open-end lines of 
credit that the bank originated or purchased, or for which it received 
applications, during 2018 are covered loans and must be reported, 
unless they otherwise are excluded transactions under Sec.  1003.3(c). 
However, the closed-end mortgage loans that the bank originated or 
purchased, or for which it received applications, during 2018 are 
excluded transactions under Sec.  1003.3(c)(11) and need not be 
reported. See comments 4(a)-2 through -4 for guidance about the 
activities that constitute an origination.
    2. Optional reporting. A financial institution may report 
applications for, originations of, or purchases of closed-end mortgage 
loans that are excluded transactions because the financial institution 
originated fewer than 25 closed-end mortgage loans in either of the two 
preceding calendar years.

[[Page 43139]]

However, a financial institution that chooses to report such excluded 
applications for, originations of, or purchases of closed-end mortgage 
loans must report all such applications for closed-end mortgage loans 
that it receives, closed-end mortgage loans that it originates, and 
closed-end mortgage loans that it purchases that otherwise would be 
covered loans for a given calendar year. Note that applications which 
remain pending at the end of a calendar year are not reported, as 
described in comment 4(a)(8)(i)-14.
Paragraph 3(c)(12)
    1. General. Section 1003.3(c)(12) provides that an open-end line of 
credit is an excluded transaction if a financial institution originated 
fewer than 500 open-end lines of credit in either of the two preceding 
calendar years. For example, assume that a bank is a financial 
institution in 2018 under Sec.  1003.2(g) because it originated 50 
closed-end mortgage loans in 2016, 75 closed-end mortgage loans in 
2017, and met all of the other requirements under Sec.  1003.2(g)(1). 
Also assume that the bank originated 75 and 85 open-end lines of credit 
in 2016 and 2017, respectively. The closed-end mortgage loans that the 
bank originated or purchased, or for which it received applications, 
during 2018 are covered loans and must be reported, unless they 
otherwise are excluded transactions under Sec.  1003.3(c). However, the 
open-end lines of credit that the bank originated or purchased, or for 
which it received applications, during 2018 are excluded transactions 
under Sec.  1003.3(c)(12) and need not be reported. See comments 4(a)-2 
through -4 for guidance about the activities that constitute an 
origination.
    2. Optional reporting. A financial institution may report 
applications for, originations of, or purchases of open-end lines of 
credit that are excluded transactions because the financial institution 
originated fewer than 500 open-end lines of credit in either of the two 
preceding calendar years. However, a financial institution that chooses 
to report such excluded applications for, originations of, or purchases 
of open-end lines of credit must report all such applications for open-
end lines of credit on which it receives, open-end lines of credit that 
it originates, and open-end lines of credit that it purchases that 
otherwise would be covered loans for a given calendar year. Note that 
applications which remain pending at the end of a calendar year are not 
reported, as described in comment 4(a)(8)(i)-14.
Paragraph 3(c)(13)
    1. New funds extended before consolidation. Section 1003.3(c)(13) 
provides an exclusion for a transaction that provided or, in the case 
of an application, proposed to provide new funds to the borrower in 
advance of being consolidated in a New York State consolidation, 
extension, and modification agreement classified as a supplemental 
mortgage under New York Tax Law section 255 (New York CEMA) and for 
which final action is taken on both transactions within the same 
calendar year. The excluded transaction provides or proposes to provide 
funds that are not part of any existing debt obligation of the borrower 
and that are then consolidated or proposed to be consolidated with an 
existing debt obligation or obligations as part of the supplemental 
mortgage. The new funds are reported only insofar as they form part of 
the total amount of the reported New York CEMA, and not as a separate 
amount. This exclusion applies only if, at the time the transaction 
that provided new funds was originated, the financial institution 
intended to consolidate the loan into a New York CEMA. If a New York 
CEMA that consolidates an excluded preliminary transaction is carried 
out in a transaction involving an assumption, the financial institution 
reports the New York CEMA and does not report the preliminary 
transaction separately. The Sec.  1003.3(c)(13) exclusion does not 
apply to similar preliminary transactions that provide or propose to 
provide new funds to be consolidated not pursuant to New York Tax Law 
section 255 but under some other law in a transaction that is not an 
extension of credit. For example, assume a financial institution 
extends new funds to a consumer in a preliminary transaction that is 
then consolidated as part of a consolidation, extension and 
modification agreement pursuant to the law of a State other than New 
York. If the preliminary extension of new funds is a covered loan, it 
must be reported. If the consolidation, extension and modification 
agreement pursuant to the law of a State other than New York is not an 
extension of credit pursuant to Regulation C, it may not be reported. 
For discussion of how to report a cash-out refinancing, see comment 
4(a)(3)-2.

Section 1003.4--Compilation of Reportable Data

4(a) Data Format and Itemization
* * * * *
Paragraph 4(a)(1)(i)
* * * * *
    3. ULI--purchased covered loan. If a financial institution has 
previously assigned a covered loan with a ULI or reported a covered 
loan with a ULI under this part, a financial institution that purchases 
that covered loan must report the same ULI that was previously assigned 
or reported. For example, if a loan origination previously was reported 
under this part with a ULI, the financial institution that purchases 
the covered loan would report the purchase of the covered loan using 
the same ULI. A financial institution that purchases a covered loan 
must use the ULI that was assigned by the financial institution that 
originated the covered loan. A financial institution that purchases a 
covered loan assigns a ULI and records and submits it in its loan/
application register pursuant to Sec.  1003.5(a)(1) if the covered loan 
was not assigned a ULI by the financial institution that originated the 
loan because, for example, the loan was originated prior to January 1, 
2018, or the loan was originated by an institution not required to 
report under this part.
    4. ULI--reinstated or reconsidered application. A financial 
institution may not use a ULI previously reported if it reinstates or 
reconsiders an application that was reported in a prior calendar year. 
For example, if a financial institution reports a denied application in 
its annual 2020 data submission, pursuant to Sec.  1003.5(a)(1), but 
then reconsiders the application, resulting in an origination in 2021, 
the financial institution reports a denied application under the 
original ULI in its annual 2020 data submission and an origination with 
a different ULI in its annual 2021 data submission, pursuant to Sec.  
1003.5(a)(1).
* * * * *
Paragraph 4(a)(2)
    1. Loan type--general. If a covered loan is not, or in the case of 
an application would not have been, insured by the Federal Housing 
Administration, guaranteed by the Department of Veterans Affairs, or 
guaranteed by the Rural Housing Service or the Farm Service Agency, an 
institution complies with Sec.  1003.4(a)(2) by reporting the covered 
loan as not insured or guaranteed by the Federal Housing 
Administration, Department of Veterans Affairs, Rural Housing Service, 
or Farm Service Agency.
Paragraph 4(a)(3)
* * * * *
    6. Purpose--purchased loans. For purchased covered loans where 
origination took place prior to January 1, 2018, a financial 
institution complies

[[Page 43140]]

with Sec.  1003.4(a)(3) by reporting that the requirement is not 
applicable.
* * * * *
Paragraph 4(a)(8)(i)
* * * * *
    6. Action taken--file closed for incompleteness. A financial 
institution reports that the file was closed for incompleteness if the 
financial institution sent a written notice of incompleteness under 
Regulation B, 12 CFR 1002.9(c)(2), and the applicant did not respond to 
the request for additional information within the period of time 
specified in the notice before the applicant satisfies all underwriting 
or creditworthiness conditions. See comment 4(a)(8)(i)-13. If a 
financial institution then provides a notification of adverse action on 
the basis of incompleteness under Regulation B, 12 CFR 1002.9(c)(1)(i), 
the financial institution may report the action taken as either file 
closed for incompleteness or application denied. A preapproval request 
that is closed for incompleteness is not reportable under HMDA. See 
Sec.  1003.4(a) and comment 4(a)-1.ii.
* * * * *
    9. 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, with a different 
interest rate, or in a different amount) and the applicant declines to 
proceed with the counteroffer or fails to respond, the institution 
reports the action taken as a denial on the original terms requested by 
the applicant. If the applicant agrees to proceed with consideration of 
the financial institution's counteroffer, the financial institution 
reports the action taken as the disposition of the application based on 
the terms of the counteroffer. For example, assume a financial 
institution makes a counteroffer, the applicant agrees to proceed with 
the terms of the counteroffer, and the financial institution then makes 
a credit decision approving the application conditional on satisfying 
underwriting or creditworthiness conditions, and 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 financial 
institution reports that the action taken as application withdrawn in 
accordance with comment 4(a)(8)(i)-13.i. Similarly, assume a financial 
institution makes a counteroffer, the applicant agrees to proceed with 
consideration of the counteroffer, and the financial institution 
provides a conditional approval stating the conditions to be met to 
originate the counteroffer. The financial institution reports the 
action taken on the application in accordance with comment 4(a)(8)(i)-
13 regarding conditional approvals.
* * * * *
Paragraph 4(a)(9)(i)
* * * * *
    3. Property address--not applicable. A financial institution 
complies with Sec.  1003.4(a)(9)(i) by reporting that the requirement 
is not applicable if the property address of the property securing the 
covered loan is not known. For example, if the property did not have a 
property address at closing or if the applicant did not provide the 
property address of the property to the financial institution before 
the application was denied, withdrawn, or closed for incompleteness, 
the financial institution complies with Sec.  1003.4(a)(9)(i) by 
reporting that the requirement is not applicable.
Paragraph 4(a)(9)(ii)
    1. Optional reporting. Section 1003.4(a)(9)(ii) requires a 
financial institution to report the State, county, and census tract of 
the property securing the covered loan or, in the case of an 
application, proposed to secure the covered loan if the property is 
located in an MSA or MD in which the financial institution has a home 
or branch office or if the institution is subject to Sec.  1003.4(e). 
Section 1003.4(a)(9)(ii)(C) further limits the requirement to report 
census tract to covered loans secured by or applications proposed to be 
secured by properties located in counties with a population of more 
than 30,000 according to the most recent decennial census conducted by 
the U.S. Census Bureau. For transactions for which State, county, or 
census tract reporting is not required under Sec.  1003.4(a)(9)(ii) or 
(e), financial institutions may report that the requirement is not 
applicable, or they may voluntarily report the State, county, or census 
tract information.
Paragraph 4(a)(9)(ii)(A)
    1. Applications--State not provided. When reporting an application, 
a financial institution complies with Sec.  1003.4(a)(9)(ii)(A) by 
reporting that the requirement is not applicable if the State in which 
the property is located was not known before the application was 
denied, withdrawn, or closed for incompleteness.
Paragraph 4(a)(9)(ii)(B)
* * * * *
    2. Applications--county not provided. When reporting an 
application, a financial institution complies with Sec.  
1003.4(a)(9)(ii)(B) by reporting that the requirement is not applicable 
if the county in which the property is located was not known before the 
application was denied, withdrawn, or closed for incompleteness.
Paragraph 4(a)(9)(ii)(C)
* * * * *
    2. Applications--census tract not provided. When reporting an 
application, a financial institution complies with Sec.  
1003.4(a)(9)(ii)(C) by reporting that the requirement is not applicable 
if the census tract in which the property is located was not known 
before the application was denied, withdrawn, or closed for 
incompleteness.
* * * * *
Paragraph 4(a)(10)(ii)
* * * * *
    3. Applicant data--purchased loan. A financial institution complies 
with Sec.  1003.4(a)(10)(ii) by reporting that the requirement is not 
applicable when reporting a purchased loan for which the institution 
chooses not to report the age.
* * * * *
Paragraph 4(a)(10)(iii)
* * * * *
    4. Income data--assets. A financial 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 underwriting calculations of the potential annuitization 
or depletion of an applicant's remaining assets. Actual distributions 
from retirement accounts or other assets that are relied on by the 
financial institution as income should be reported as income. The 
interpretation of income in this paragraph does not affect Sec.  
1003.4(a)(23), which requires, except for purchased covered loans, the 
collection of the ratio of the applicant's or borrower's total monthly 
debt to the total monthly income relied on in making the credit 
decision.
* * * * *
Paragraph 4(a)(12)
    1. Average prime offer rate. Average prime offer rates are annual 
percentage rates derived from average interest rates and other loan 
pricing terms offered to borrowers by a set of creditors for

[[Page 43141]]

mortgage loans that have low-risk pricing characteristics. Other loan 
pricing terms may include commonly used indices, margins, and initial 
fixed-rate periods for variable-rate transactions. Relevant pricing 
characteristics may include a consumer's credit history and transaction 
characteristics such as the loan-to-value ratio, owner-occupant status, 
and purpose of the transaction. To obtain average prime offer rates, 
the Bureau uses creditor data by transaction type.
    2. Bureau tables. The Bureau publishes tables of current and 
historic average prime offer rates by transaction type on the FFIEC's 
Web site (https://www.ffiec.gov/hmda) and the Bureau's Web site (https://www.consumerfinance.gov). The Bureau calculates an annual percentage 
rate, consistent with Regulation Z (see 12 CFR 1026.22 and 12 CFR part 
1026, appendix J), for each transaction type for which pricing terms 
are available from the creditor data described in comment 4(a)(12)-1. 
The Bureau uses loan pricing terms available in the creditor data and 
other information to estimate annual percentage rates for other types 
of transactions for which the creditor data are limited or not 
available. The Bureau publishes on the FFIEC's Web site and the 
Bureau'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 determine average prime offer rates itself 
by employing the methodology published on the FFIEC's Web site and the 
Bureau's 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. For closed-end mortgage loans, 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 or 1026.38. For 
open-end lines of credit, 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 1026.6. If multiple annual percentage rates are calculated and 
disclosed pursuant to Regulation Z, 12 CFR 1026.6, a financial 
institution relies on the annual percentage rate in effect at the time 
of account opening. If an open-end line of credit has a variable-rate 
feature and a fixed-rate and -term payment option during the draw 
period, a financial institution relies on the annual percentage rate in 
effect at the time of account opening under the variable-rate feature, 
which would be a discounted initial rate if one is offered under the 
variable-rate feature. See comment 4(a)(12)-8 for guidance regarding 
the annual percentage rate a financial institution relies on in the 
case of an application or preapproval request that was approved but not 
accepted.
* * * * *
    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 
interest rate was set by the financial institution for the final time 
before final action is taken (i.e., the application was approved but 
not accepted or the covered loan was originated).
    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 final action is taken. 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 final action is 
taken.
    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 five-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 an application for a covered loan that it received 
from a broker, as discussed in comment 4(a)-2 (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.
* * * * *
    8. Application or preapproval request approved but not accepted. In 
the case of an application or preapproval request that was approved but 
not accepted, Sec.  1003.4(a)(12) requires a financial institution to 
report the applicable rate spread. In such cases, the financial 
institution would provide early disclosures under Regulation Z, 12 CFR 
1026.18 or 1026.37 (for closed-end mortgage loans), or 1026.40 (for 
open-end lines of credit), but might never provide any subsequent 
disclosures. In such cases where no subsequent disclosures are 
provided, a financial institution complies with Sec.  1003.4(a)(12)(i) 
by relying on the annual percentage rate for the application or 
preapproval request, as calculated and disclosed pursuant to Regulation 
Z, 12 CFR 1026.18 or 1026.37 (for closed-end mortgage loans), or 
1026.40 (for open-end lines of credit), as applicable. For transactions 
subject to Regulation C for which no disclosures under Regulation Z are 
required, a financial institution complies with Sec.  1003.4(a)(12)(i) 
by reporting that the requirement is not applicable.

[[Page 43142]]

    9. Corrected disclosures. In the case of a covered loan or an 
application that was approved but not accepted, if the annual 
percentage rate changes because a financial institution provides a 
corrected version of the disclosures required under Regulation Z, 12 
CFR 1026.19(a), pursuant to 12 CFR 1026.19(a)(2), under 12 CFR 
1026.19(f), pursuant to 12 CFR 1026.19(f)(2), or under 12 CFR 
1026.6(a), the financial institution complies with Sec.  
1003.4(a)(12)(i) by comparing the corrected and disclosed annual 
percentage rate to the most recently available average prime offer rate 
that was in effect for a comparable transaction as of the rate-set 
date, provided that the corrected disclosure was provided to the 
borrower prior to the end of the reporting period in which final action 
is taken. For purposes of Sec.  1003.4(a)(12), the date the corrected 
disclosure was provided to the borrower is the date the disclosure was 
mailed or delivered to the borrower in person; the financial 
institution's method of delivery does not affect the date provided. For 
example, where a financial institution provides a corrected version of 
the disclosures required under 12 CFR 1026.19(f), pursuant to 12 CFR 
1026.19(f)(2), the date provided is the date disclosed pursuant to 
Regulation Z, 12 CFR 1026.38(a)(3)(i). The provision of a corrected 
disclosure does not affect how a financial institution determines the 
rate-set date. See comment 4(a)(12)-5. For example, in the case of a 
financial institution's annual loan/application register submission 
made pursuant to Sec.  1003.5(a)(1), if the financial institution 
provides a corrected disclosure to the borrower pursuant to Regulation 
Z, 12 CFR 1026.19(f)(2)(v), that reflects a corrected annual percentage 
rate, the financial institution reports the difference between the 
corrected annual percentage rate and the most recently available 
average prime offer rate that was in effect for a comparable 
transaction as of the rate-set date if the corrected disclosure was 
provided to the borrower prior to the end of the calendar year in which 
final action is taken.
* * * * *
Paragraph 4(a)(15)
* * * * *
    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 uses more 
than one credit scoring model and combines the scores into a composite 
credit score that it relies on, the financial institution reports that 
score and reports that more than one credit scoring model was 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 applicant or 
borrower 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 whom the financial 
institution obtains or creates a single credit score and relies on that 
credit score in making the credit decision for the transaction, the 
institution complies with Sec.  1003.4(a)(15) by reporting that credit 
score for the applicant and reporting that the requirement is not 
applicable for the first co-applicant or, at the financial 
institution's discretion, by reporting that credit score for the first 
co-applicant and reporting that the requirement is not applicable for 
the applicant. Otherwise, a financial institution complies with Sec.  
1003.4(a)(15) by reporting a credit score for the applicant that it 
relied on in making the credit decision, if any, and a credit score for 
the first co-applicant 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 a 
single credit score that is 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 for the applicant and reporting that the 
requirement is not applicable for the first co-applicant or, at the 
financial institution's discretion, by reporting the data for the first 
co-applicant and reporting that the requirement is not applicable for 
the applicant. 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.
* * * * *
Paragraph 4(a)(17)(i)
* * * * *
    3. Corrected disclosures. If the amount of total loan costs changes 
because a financial institution provides a corrected version of the 
disclosures required under Regulation Z, 12 CFR 1026.19(f), pursuant to 
12 CFR 1026.19(f)(2), the financial institution complies with Sec.  
1003.4(a)(17)(i) by reporting the corrected amount, provided that the 
corrected disclosure was provided to the borrower prior to the end of 
the reporting period in which closing occurs. For purposes of Sec.  
1003.4(a)(17)(i), the date the corrected disclosure was provided to the 
borrower is the date disclosed pursuant to Regulation Z, 12 CFR 
1026.38(a)(3)(i). For example, in the case of a financial institution's 
annual loan/application register submission made pursuant to Sec.  
1003.5(a)(1), if the financial institution provides a corrected 
disclosure to the borrower to reflect a refund made pursuant to 
Regulation Z, 12 CFR 1026.19(f)(2)(v), the financial institution 
reports the corrected amount of total loan costs only if the corrected 
disclosure was provided to the borrower prior to the end of the 
calendar year in which closing occurs.
* * * * *
Paragraph 4(a)(18)
* * * * *

[[Page 43143]]

    3. Corrected disclosures. If the total amount of borrower-paid 
origination charges changes because a financial institution provides a 
corrected version of the disclosures required under Regulation Z, 12 
CFR 1026.19(f), pursuant to 12 CFR 1026.19(f)(2), the financial 
institution complies with Sec.  1003.4(a)(18) by reporting the 
corrected amount, provided that the corrected disclosure was provided 
to the borrower prior to the end of the reporting period in which 
closing occurs. For purposes of Sec.  1003.4(a)(18), the date the 
corrected disclosure was provided to the borrower is the date disclosed 
pursuant to Regulation Z, 12 CFR 1026.38(a)(3)(i). For example, in the 
case of a financial institution's annual loan/application register 
submission made pursuant to Sec.  1003.5(a)(1), if the financial 
institution provides a corrected disclosure to the borrower to reflect 
a refund made pursuant to Regulation Z, 12 CFR 1026.19(f)(2)(v), the 
financial institution reports the corrected amount of borrower-paid 
origination charges only if the corrected disclosure was provided to 
the borrower prior to the end of the calendar year in which closing 
occurs.
Paragraph 4(a)(19)
* * * * *
    3. Corrected disclosures. If the amount of discount points changes 
because a financial institution provides a corrected version of the 
disclosures required under Regulation Z, 12 CFR 1026.19(f), pursuant to 
12 CFR 1026.19(f)(2), the financial institution complies with Sec.  
1003.4(a)(19) by reporting the corrected amount, provided that the 
corrected disclosure was provided to the borrower prior to the end of 
the reporting period in which closing occurs. For purposes of Sec.  
1003.4(a)(19), the date the corrected disclosure was provided to the 
borrower is the date disclosed pursuant to Regulation Z, 12 CFR 
1026.38(a)(3)(i). For example, in the case of a financial institution's 
annual loan/application register submission made pursuant to Sec.  
1003.5(a)(1), if the financial institution provides a corrected 
disclosure to the borrower to reflect a refund made pursuant to 
Regulation Z, 12 CFR 1026.19(f)(2)(v), the financial institution 
reports the corrected amount of discount points only if the corrected 
disclosure was provided to the borrower prior to the end of the 
calendar year in which closing occurs.
Paragraph 4(a)(20)
* * * * *
    3. Corrected disclosures. If the amount of lender credits changes 
because a financial institution provides a corrected version of the 
disclosures required under Regulation Z, 12 CFR 1026.19(f), pursuant to 
12 CFR 1026.19(f)(2), the financial institution complies with Sec.  
1003.4(a)(20) by reporting the corrected amount, provided that the 
corrected disclosure was provided to the borrower prior to the end of 
the reporting period in which closing occurs. For purposes of Sec.  
1003.4(a)(20), the date the corrected disclosure was provided to the 
borrower is the date disclosed pursuant to Regulation Z, 12 CFR 
1026.38(a)(3)(i). For example, in the case of a financial institution's 
annual loan/application register submission made pursuant to Sec.  
1003.5(a)(1), if the financial institution provides a corrected 
disclosure to the borrower to reflect a refund made pursuant to 
Regulation Z, 12 CFR 1026.19(f)(2)(v), the financial institution 
reports the corrected amount of lender credits only if the corrected 
disclosure was provided to the borrower prior to the end of the 
calendar year in which closing occurs.
Paragraph 4(a)(21)
    1. Interest rate--disclosures. Section 1003.4(a)(21) requires a 
financial institution to identify the interest rate applicable to the 
approved application, or to the covered loan at closing or account 
opening. For covered loans or applications subject to the integrated 
mortgage disclosure requirements of Regulation Z, 12 CFR 1026.19(e) and 
(f), a financial institution complies with Sec.  1003.4(a)(21) by 
reporting the interest rate disclosed on the applicable disclosure. For 
covered loans or approved applications for which disclosures were 
provided pursuant to both the early and the final disclosure 
requirements in Regulation Z, 12 CFR 1026.19(e) and (f), a financial 
institution reports the interest rate disclosed pursuant to 12 CFR 
1026.19(f). A financial institution may rely on the definitions and 
commentary to the sections of Regulation Z relevant to the disclosure 
of the interest rate pursuant to 12 CFR 1026.19(e) or (f). If a 
financial institution provides a revised or corrected version of the 
disclosures required under Regulation Z, 12 CFR 1026.19(e) or (f), 
pursuant to 12 CFR 1026.19(e)(3)(iv) or (f)(2), as applicable, the 
financial institution complies with Sec.  1003.4(a)(21) by reporting 
the interest rate on the revised or corrected disclosure, provided that 
the revised or corrected disclosure was provided to the borrower prior 
to the end of the reporting period in which final action is taken. For 
purposes of Sec.  1003.4(a)(21), the date the revised or corrected 
disclosure was provided to the borrower is the date disclosed pursuant 
to Regulation Z, 12 CFR 1026.37(a)(4) or 1026.38(a)(3)(i), as 
applicable.
* * * * *
Paragraph 4(a)(24)
* * * * *
    2. Transactions for which a combined loan-to-value ratio was one of 
multiple factors. A financial institution relies on the ratio of the 
total amount of debt secured by the property to the value of the 
property (combined loan-to-value ratio) in making the credit decision 
if the combined loan-to-value ratio was a factor in the credit 
decision, even if it was not a dispositive factor. For example, if the 
combined loan-to-value ratio is one of multiple factors in a financial 
institution's credit decision, the financial institution has relied on 
the combined loan-to-value ratio and complies with Sec.  1003.4(a)(24) 
by reporting the combined loan-to-value ratio, even if the financial 
institution denies the application because one or more underwriting 
requirements other than the combined loan-to-value ratio are not 
satisfied.
* * * * *
    6. Property. A financial institution reports the combined loan-to-
value ratio relied on in making the credit decision, regardless of 
which property or properties it used in the combined loan-to-value 
ratio calculation. The property used in the combined loan-to-value 
ratio calculation does not need to be the property identified in Sec.  
1003.4(a)(9) and may include more than one property and non-real 
property. For example, if a financial institution originated a covered 
loan for the purchase of a multifamily dwelling, the loan was secured 
by the multifamily dwelling and by non-real property, such as 
securities, and the financial institution used the multifamily dwelling 
and the non-real property to calculate the combined loan-to-value ratio 
that it relied on in making the credit decision, Sec.  1003.4(a)(24) 
requires the financial institution to report the relied upon ratio. 
Section 1003.4(a)(24) does not require a financial institution to use a 
particular combined loan-to-value ratio calculation method but instead 
requires financial institutions to report the combined loan-to-value 
ratio relied on in making the credit decision.
* * * * *
Paragraph 4(a)(26)
* * * * *
    5. Non-monthly introductory periods. If a covered loan or 
application includes an introductory interest rate period

[[Page 43144]]

measured in a unit of time other than months, the financial institution 
complies with Sec.  1003.4(a)(26) by reporting the introductory 
interest rate period for the covered loan or application using an 
equivalent number of whole months without regard for any remainder. For 
example, assume an open-end line of credit contains an introductory 
interest rate for 50 days 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 ``1.'' The financial institution must report one month for 
any introductory interest rate period that totals less than one whole 
month.
* * * * *
Paragraph 4(a)(34)
* * * * *
    4. Purchased loans. If a financial institution purchases a covered 
loan that satisfies the coverage criteria of Regulation Z, 12 CFR 
1026.36(g), and that was originated prior to January 10, 2014, the 
financial institution complies with Sec.  1003.4(a)(34) by reporting 
that the requirement is not applicable. In addition, if a financial 
institution purchases a covered loan that does not satisfy the coverage 
criteria of Regulation Z, 12 CFR 1026.36(g), and that was originated 
prior to January 1, 2018, the financial institution complies with Sec.  
1003.4(a)(34) by reporting that the requirement is not applicable. 
Purchasers of both such types of covered loans may report the NMLSR ID.
Paragraph 4(a)(35)
* * * * *
    2. Definition of automated underwriting system. A financial 
institution must report the information required by Sec.  
1003.4(a)(35)(i) if the financial institution uses an automated 
underwriting system (AUS), as defined in Sec.  1003.4(a)(35)(ii), to 
evaluate an application. To be covered by the definition in Sec.  
1003.4(a)(35)(ii), a system must be an electronic tool that has been 
developed by a securitizer, Federal government insurer, or a Federal 
government guarantor of closed-end mortgage loans or open-end lines of 
credit. A person is a securitizer, Federal government insurer, or 
Federal government guarantor of closed-end mortgage loans or open-end 
lines of credit, respectively, if it has securitized, provided Federal 
government insurance, or provided a Federal government guarantee for a 
closed-end mortgage loan or open-end line of credit at any point in 
time. A person may be a securitizer, Federal government insurer, or 
Federal government guarantor of closed-end mortgage loans or open-end 
lines of credit, respectively, for purposes of Sec.  1003.4(a)(35) even 
if it is not actively securitizing, insuring, or guaranteeing closed-
end mortgage loans or open-end lines of credit at the time a financial 
institution uses the AUS to evaluate an application. Where the person 
that developed the electronic tool has never been a securitizer, 
Federal government insurer, or Federal government guarantor of closed-
end mortgage loans or open-end lines of credit, respectively, at the 
time a financial institution uses the tool to evaluate an application, 
the financial institution complies with Sec.  1003.4(a)(35) by 
reporting that the requirement is not applicable because an AUS was not 
used to evaluate the application. If a financial institution has 
developed its own proprietary system that it uses to evaluate an 
application and the financial institution is also a securitizer, then 
the financial institution complies with Sec.  1003.4(a)(35) by 
reporting the name of that system and the result generated by that 
system. On the other hand, if a financial institution has developed its 
own proprietary system that it uses to evaluate an application and the 
financial institution is not a securitizer, then the financial 
institution is not required by Sec.  1003.4(a)(35) to report the use of 
that system and the result generated by that system. In addition, for 
an AUS to be covered by the definition in Sec.  1003.4(a)(35)(ii), the 
system must provide a result regarding both the credit risk of the 
applicant and the eligibility of the covered loan to be originated, 
purchased, insured, or guaranteed by the securitizer, Federal 
government insurer, or Federal government guarantor that developed the 
system being used to evaluate the application. For example, if a system 
is an electronic tool that provides a determination of the eligibility 
of the covered loan to be originated, purchased, insured, or guaranteed 
by the securitizer, Federal government insurer, or Federal government 
guarantor that developed the system being used by a financial 
institution to evaluate the application, but the system does not also 
provide an assessment of the creditworthiness of the applicant--such as 
an evaluation of the applicant's income, debt, and credit history--then 
that system does not qualify as an AUS, as defined in Sec.  
1003.4(a)(35)(ii). A financial institution that uses a system that is 
not an AUS, as defined in Sec.  1003.4(a)(35)(ii), to evaluate an 
application does not report the information required by Sec.  
1003.4(a)(35)(i).
* * * * *
    7. Determination of securitizer, Federal government insurer, or 
Federal government guarantor. Section 1003.4(a)(35)(ii) provides that 
an ``automated underwriting system'' means an electronic tool developed 
by a securitizer, Federal government insurer, or Federal government 
guarantor of closed-end mortgage loans or open-end lines of credit that 
provides a result regarding the credit risk of the applicant and 
whether the covered loan is eligible to be originated, purchased, 
insured, or guaranteed by that securitizer, Federal government insurer, 
or Federal government guarantor. A person is a securitizer, Federal 
government insurer, or Federal government guarantor of closed-end 
mortgage loans or open-end lines of credit, respectively, if it has 
ever securitized, insured, or guaranteed a closed-end mortgage loan or 
open-end line of credit. If a financial institution knows or reasonably 
believes that the system it is using to evaluate an application is an 
electronic tool that has been developed by a securitizer, Federal 
government insurer, or Federal government guarantor of closed-end 
mortgage loans or open-end lines of credit, then the financial 
institution complies with Sec.  1003.4(a)(35) by reporting the name of 
that system and the result generated by that system. Knowledge or 
reasonable belief could, for example, be based on a sales agreement or 
other related documents, the financial institution's previous 
transactions or relationship with the developer of the electronic tool, 
or representations made by the developer of the electronic tool 
demonstrating that the developer of the electronic tool is a 
securitizer, Federal government insurer, or Federal government 
guarantor of closed-end mortgage loans or open-end lines of credit. If 
a financial institution does not know or reasonably believe that the 
system it is using to evaluate an application is an electronic tool 
that has been developed by a securitizer, Federal government insurer, 
or Federal government guarantor of closed-end mortgage loans or open-
end lines of credit, the financial institution complies with Sec.  
1003.4(a)(35) by reporting that the requirement is not applicable, 
provided that the financial institution maintains procedures reasonably 
adapted to determine whether the electronic tool it is using to 
evaluate an application meets the definition in Sec.  
1003.4(a)(35)(ii). Reasonably adapted procedures include attempting to

[[Page 43145]]

determine with reasonable frequency, such as annually, whether the 
developer of the electronic tool is a securitizer, Federal government 
insurer, or Federal government guarantor of closed-end mortgage loans 
or open-end lines of credit. For example:
    i. In the course of renewing an annual sales agreement the 
developer of the electronic tool represents to the financial 
institution that it has never been a securitizer, Federal government 
insurer, or Federal government guarantor of closed-end mortgage loans 
or open-end lines of credit. On this basis, the financial institution 
does not know or reasonably believe that the system it is using to 
evaluate an application is an electronic tool that has been developed 
by a securitizer, Federal government insurer, or Federal government 
guarantor of closed-end mortgage loans or open-end lines of credit and 
complies with Sec.  1003.4(a)(35) by reporting that the requirement is 
not applicable.
    ii. Based on their previous transactions a financial institution is 
aware that the developer of the electronic tool it is using to evaluate 
an application has securitized a closed-end mortgage loan or open-end 
line of credit in the past. On this basis, the financial institution 
knows or reasonably believes that the developer of the electronic tool 
is a securitizer and complies with Sec.  1003.4(a)(35) by reporting the 
name of that system and the result generated by that system.
* * * * *

0
8. Effective January 1, 2019, Sec.  1003.5, as amended at 80 FR 66128, 
is further amended by revising paragraph (a)(3)(ii) to read as follows:


Sec.  1003.5  Disclosure and reporting.

    (a) * * *
    (3) * * *
    (ii) The calendar year the data submission covers pursuant to 
paragraph (a)(1)(i) of this section;
* * * * *

0
9. Effective January 1, 2019, Sec.  1003.6, as amended at 80 FR 66128, 
is further amended by revising paragraph (c) to read as follows:


Sec.  1003.6  Enforcement.

* * * * *
    (c) Quarterly recording and reporting. If a financial institution 
makes a good-faith effort to record all data required to be recorded 
pursuant to Sec.  1003.4(f) fully and accurately within 30 calendar 
days after the end of each calendar quarter, and some data are 
nevertheless inaccurate or incomplete, the inaccuracy or omission is 
not a violation of the Act or this part provided that the institution 
corrects or completes the data prior to submitting its annual loan/
application register pursuant to Sec.  1003.5(a)(1)(i).

0
10. Effective January 1, 2019, Supplement I to Part 1003--Official 
Interpretations, as amended at 80 FR 66128, is further amended under 
Section 1003.6--Enforcement by revising 6(b) Bona Fide Errors to read 
as follows:

Supplement I to Part 1003--Official Interpretations

* * * * *

Section 1003.6--Enforcement

6(b) Bona Fide Errors
    1. Information from third parties. Section 1003.6(b) provides that 
an error in compiling or recording data for a covered loan or 
application is not a violation of the Act or this part if the error was 
unintentional and occurred despite the maintenance of procedures 
reasonably adapted to avoid such an error. A financial institution that 
obtains the required data, such as property-location information, from 
third parties is responsible for ensuring that the information reported 
pursuant to Sec.  1003.5 is correct. See comment 6(b)-2 concerning 
obtaining census tract information from a geocoding tool that the 
Bureau makes available on its Web site.
    2. Information from the Bureau. Section 1003.6(b)(2) provides that 
an incorrect entry for census tract number is deemed a bona fide error, 
and is not a violation of the Act or this part, provided that the 
financial institution maintains procedures reasonably adapted to avoid 
an error. Obtaining the census tract numbers for covered loans and 
applications from a geocoding tool available on the Bureau's Web site 
that identifies the census tract of a property using property addresses 
entered by users is an example of a procedure reasonably adapted to 
avoid errors under Sec.  1003.6(b)(2). Accordingly, a census tract 
error is not a violation of the Act or this part if the financial 
institution obtained the census tract number from the geocoding tool on 
the Bureau's Web site. However, a financial institution's failure to 
provide the correct census tract number for a covered loan or 
application on its loan/application register, as required by Sec.  
1003.4(a)(9)(ii)(C) or (e), because the geocoding tool on the Bureau's 
Web site did not provide a census tract number for the property address 
entered by the financial institution is not excused as a bona fide 
error. In addition, a census tract error caused by a financial 
institution entering an inaccurate property address into the geocoding 
tool on the Bureau's Web site is not excused as a bona fide error.

0
11. Effective January 1, 2020, Sec.  1003.2, as amended at 80 FR 66128, 
is further amended by revising paragraphs (g)(1)(v)(B) and 
(g)(2)(ii)(B) to read as follows:


Sec.  1003.2  Definitions.

* * * * *
    (g) * * *
    (1) * * *
    (v) * * *
    (B) In each of the two preceding calendar years, originated at 
least 100 open-end lines of credit that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10); and
    (2) * * *
    (ii) * * *
    (B) In each of the two preceding calendar years, originated at 
least 100 open-end lines of credit that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10).
* * * * *

0
12. Effective January 1, 2020, Sec.  1003.3, as amended at 80 FR 66128, 
is further amended by revising paragraph (c)(12) to read as follows:


Sec.  1003.3  Exempt institutions and excluded transactions.

* * * * *
    (c) * * *
    (12) An open-end line of credit, if the financial institution 
originated fewer than 100 open-end lines of credit in either of the two 
preceding calendar years; a financial institution may collect, record, 
report, and disclose information, as described in Sec. Sec.  1003.4 and 
1003.5, for such an excluded open-end line of credit as though it were 
a covered loan, provided that the financial institution complies with 
such requirements for all applications for open-end lines of credit 
that it receives, open-end lines of credit that it originates, and 
open-end lines of credit that it purchases that otherwise would have 
been covered loans during the calendar year during which final action 
is taken on the excluded open-end line of credit; or
* * * * *

0
13. Effective January 1, 2020, Sec.  1003.5, as amended at 80 FR 66128, 
is further amended by revising paragraph (a)(3)(ii) to read as follows:


Sec.  1003.5  Disclosure and reporting.

    (a) * * *
    (3) * * *
    (ii) The calendar year the data submission covers pursuant to

[[Page 43146]]

paragraph (a)(1)(i) of this section or calendar quarter and year the 
data submission covers pursuant to paragraph (a)(1)(ii) of this 
section;
* * * * *

0
14. Effective January 1, 2020, Sec.  1003.6, as amended at 80 FR 66128, 
is further amended by revising paragraph (c) to read as follows:


Sec.  1003.6  Enforcement.

* * * * *
    (c) Quarterly recording and reporting. (1) If a financial 
institution makes a good-faith effort to record all data required to be 
recorded pursuant to Sec.  1003.4(f) fully and accurately within 30 
calendar days after the end of each calendar quarter, and some data are 
nevertheless inaccurate or incomplete, the inaccuracy or omission is 
not a violation of the Act or this part provided that the institution 
corrects or completes the data prior to submitting its annual loan/
application register pursuant to Sec.  1003.5(a)(1)(i).
    (2) If a financial institution required to comply with Sec.  
1003.5(a)(1)(ii) makes a good-faith effort to report all data required 
to be reported pursuant to Sec.  1003.5(a)(1)(ii) fully and accurately 
within 60 calendar days after the end of each calendar quarter, and 
some data are nevertheless inaccurate or incomplete, the inaccuracy or 
omission is not a violation of the Act or this part provided that the 
institution corrects or completes the data prior to submitting its 
annual loan/application register pursuant to Sec.  1003.5(a)(1)(i).

0
15. Effective January 1, 2020, Supplement I to Part 1003--Official 
Interpretations, as amended at 80 FR 66128, is further amended as 
follows:
0
a. Under Section 1003.2--Definitions, under 2(g) Financial Institution, 
paragraphs 3 and 5 are revised.
0
b. Under Section 1003.3--Exempt institutions and excluded transactions, 
under 3(c) Excluded transactions, Paragraph 3(c)(12) is revised.
0
c. Under Section 1003.4--Compilation of Reportable Data, under 4(a) 
Data Format and Itemization:
0
i. Under Paragraph 4(a)(1)(i), paragraphs 3 and 4 are revised;
0
ii. Under Paragraph 4(a)(12), paragraph 9 is revised;
0
iii. Under Paragraph 4(a)(17)(i), paragraph 3 is revised;
0
iv. Under Paragraph 4(a)(18), paragraph 3 is revised;
0
v. Under Paragraph 4(a)(19), paragraph 3 is revised; and
0
vi. Under Paragraph 4(a)(20), paragraph 3 is revised.
    The revisions read as follows:

Supplement I to Part 1003--Official Interpretations

* * * * *

Section 1003.2--Definitions

* * * * *
2(g) Financial Institution
* * * * *
    3. Merger or acquisition--coverage of surviving or newly formed 
institution. After a merger or acquisition, the surviving or newly 
formed institution is a financial institution under Sec.  1003.2(g) if 
it, considering the combined assets, location, and lending activity of 
the surviving or newly formed institution and the merged or acquired 
institutions or acquired branches, satisfies the criteria included in 
Sec.  1003.2(g). For example, A and B merge. The surviving or newly 
formed institution meets the loan threshold described in Sec.  
1003.2(g)(1)(v)(B) if the surviving or newly formed institution, A, and 
B originated a combined total of at least 100 open-end lines of credit 
in each of the two preceding calendar years. Likewise, the surviving or 
newly formed institution meets the asset-size threshold in Sec.  
1003.2(g)(1)(i) if its assets and the combined assets of A and B on 
December 31 of the preceding calendar year exceeded the threshold 
described in Sec.  1003.2(g)(1)(i). Comment 2(g)-4 discusses a 
financial institution's responsibilities during the calendar year of a 
merger.
* * * * *
    5. Originations. Whether an institution is a financial institution 
depends in part on whether the institution originated at least 25 
closed-end mortgage loans in each of the two preceding calendar years 
or at least 100 open-end lines of credit in each of the two preceding 
calendar years. Comments 4(a)-2 through -4 discuss whether activities 
with respect to a particular closed-end mortgage loan or open-end line 
of credit constitute an origination for purposes of Sec.  1003.2(g).
* * * * *

Section 1003.3--Exempt Institutions and Excluded Transactions

3(c) Excluded Transactions
* * * * *
Paragraph 3(c)(12)
    1. General. Section 1003.3(c)(12) provides that an open-end line of 
credit is an excluded transaction if a financial institution originated 
fewer than 100 open-end lines of credit in either of the two preceding 
calendar years. For example, assume that a bank is a financial 
institution in 2018 under Sec.  1003.2(g) because it originated 50 
closed-end mortgage loans in 2016, 75 closed-end mortgage loans in 
2017, and met all of the other requirements under Sec.  1003.2(g)(1). 
Also assume that the bank originated 75 and 85 open-end lines of credit 
in 2016 and 2017, respectively. The closed-end mortgage loans that the 
bank originated or purchased, or for which it received applications, 
during 2018 are covered loans and must be reported, unless they 
otherwise are excluded transactions under Sec.  1003.3(c). However, the 
open-end lines of credit that the bank originated or purchased, or for 
which it received applications, during 2018 are excluded transactions 
under Sec.  1003.3(c)(12) and need not be reported. See comments 4(a)-2 
through -4 for guidance about the activities that constitute an 
origination.
    2. Optional reporting. A financial institution may report 
applications for, originations of, or purchases of open-end lines of 
credit that are excluded transactions because the financial institution 
originated fewer than 100 open-end lines of credit in either of the two 
preceding calendar years. However, a financial institution that chooses 
to report such excluded applications for, originations of, or purchases 
of open-end lines of credit must report all such applications for open-
end lines of credit which it receives, open-end lines of credit that it 
originates, and open-end lines of credit that it purchases that 
otherwise would be covered loans for a given calendar year. Note that 
applications which remain pending at the end of a calendar year are not 
reported, as described in comment 4(a)(8)(i)-14.
* * * * *

Section 1003.4--Compilation of Reportable Data

4(a) Data Format and Itemization
* * * * *
Paragraph 4(a)(1)(i)
* * * * *
    3. ULI--purchased covered loan. If a financial institution has 
previously assigned a covered loan with a ULI or reported a covered 
loan with a ULI under this part, a financial institution that purchases 
that covered loan must report the same ULI that was previously assigned 
or reported. For example, if a financial institution that submits an 
annual loan/application register pursuant to Sec.  1003.5(a)(1)(i) 
originates a covered loan that is purchased by a financial institution 
that also submits an annual loan/application register pursuant to Sec.  
1003.5(a)(1)(i), the

[[Page 43147]]

financial institution that purchases the covered loan must report the 
purchase of the covered loan using the same ULI that was reported by 
the originating financial institution. If a financial institution that 
originates a covered loan has previously assigned the covered loan with 
a ULI under this part but has not yet reported the covered loan, a 
financial institution that purchases that covered loan must report the 
same ULI that was previously assigned. For example, if a financial 
institution that submits an annual loan/application register pursuant 
to Sec.  1003.5(a)(1)(i) (Institution A) originates a covered loan that 
is purchased by a financial institution that submits a quarterly loan/
application register pursuant to Sec.  1003.5(a)(1)(ii) (Institution 
B), then Institution B must report the ULI that was assigned by 
Institution A on Institution B's quarterly loan/application register 
pursuant to Sec.  1003.5(a)(1)(ii), even though Institution A has not 
yet submitted its annual loan/application register pursuant to Sec.  
1003.5(a)(1)(i). A financial institution that purchases a covered loan 
must assign it a ULI pursuant to Sec.  1003.4(a)(1)(i) and report it 
pursuant to Sec.  1003.5(a)(1)(i) or (ii), whichever is applicable, if 
the covered loan was not assigned a ULI by the financial institution 
that originated the loan because, for example, the loan was originated 
prior to January 1, 2018, or the loan was originated by an institution 
not required to report under this part.
    4. ULI--reinstated or reconsidered application. A financial 
institution may, at its option, report a ULI previously reported under 
this part if, during the same calendar year, an applicant asks the 
institution to reinstate a counteroffer that the applicant previously 
did not accept or asks the financial institution to reconsider an 
application that was previously denied, withdrawn, or closed for 
incompleteness. For example, if a financial institution reports a 
denied application in its second-quarter 2020 data submission, pursuant 
to Sec.  1003.5(a)(1)(ii), but then reconsiders the application, 
resulting in an origination in the third quarter of 2020, the financial 
institution may report the origination in its third-quarter 2020 data 
submission using the same ULI that was reported for the denied 
application in its second-quarter 2020 data submission, so long as the 
financial institution treats the origination as the same transaction 
for reporting. However, a financial institution may not use a ULI 
previously reported if it reinstates or reconsiders an application that 
was reported in a prior calendar year. For example, if a financial 
institution reports a denied application in its fourth-quarter 2020 
data submission, pursuant to Sec.  1003.5(a)(1)(ii), but then 
reconsiders the application, resulting in an origination in the first 
quarter of 2021, the financial institution reports a denied application 
under the original ULI in its fourth-quarter 2020 data submission and 
an origination with a different ULI in its first-quarter 2021 data 
submission, pursuant to Sec.  1003.5(a)(1)(ii).
* * * * *
Paragraph 4(a)(12)
* * * * *
    9. Corrected disclosures. In the case of a covered loan or an 
application that was approved but not accepted, if the annual 
percentage rate changes because a financial institution provides a 
corrected version of the disclosures required under Regulation Z, 12 
CFR 1026.19(a), pursuant to 12 CFR 1026.19(a)(2), under 12 CFR 
1026.19(f), pursuant to 12 CFR 1026.19(f)(2), or under 12 CFR 
1026.6(a), the financial institution complies with Sec.  
1003.4(a)(12)(i) by comparing the corrected and disclosed annual 
percentage rate to the most recently available average prime offer rate 
that was in effect for a comparable transaction as of the rate-set 
date, provided that the corrected disclosure was provided to the 
borrower prior to the end of the reporting period in which final action 
is taken. For purposes of Sec.  1003.4(a)(12), the date the corrected 
disclosure was provided to the borrower is the date the disclosure was 
mailed or delivered to the borrower in person; the financial 
institution's method of delivery does not affect the date provided. For 
example, where a financial institution provides a corrected version of 
the disclosures required under 12 CFR 1026.19(f), pursuant to 12 CFR 
1026.19(f)(2), the date provided is the date disclosed pursuant to 
Regulation Z, 12 CFR 1026.38(a)(3)(i). The provision of a corrected 
disclosure does not affect how a financial institution determines the 
rate-set date. See comment 4(a)(12)-5. For example:
    i. In the case of a financial institution's annual loan/application 
register submission made pursuant to Sec.  1003.5(a)(1)(i), if the 
financial institution provides a corrected disclosure pursuant to 
Regulation Z, 12 CFR 1026.19(f)(2)(v), that reflects a corrected annual 
percentage rate, the financial institution reports the difference 
between the corrected annual percentage rate and the most recently 
available average prime offer rate that was in effect for a comparable 
transaction as of the rate-set date only if the corrected disclosure 
was provided to the borrower prior to the end of the calendar year in 
which final action is taken.
    ii. In the case of a financial institution's quarterly submission 
made pursuant to Sec.  1003.5(a)(1)(ii), if the financial institution 
provides a corrected disclosure pursuant to Regulation Z, 12 CFR 
1026.19(f)(2)(v), that reflects a corrected annual percentage rate, the 
financial institution reports the difference between the corrected 
annual percentage rate and the most recently available average prime 
offer rate that was in effect for a comparable transaction as of the 
rate-set date only if the corrected disclosure was provided to the 
borrower prior to the end of the quarter in which final action is 
taken. The financial institution does not report the difference between 
the corrected annual percentage rate and the most recently available 
average prime offer rate that was in effect for a comparable 
transaction as of the rate-set date if the corrected disclosure was 
provided to the borrower after the end of the quarter in which final 
action is taken, even if the corrected disclosure was provided to the 
borrower prior to the deadline for timely submission of the financial 
institution's quarterly data. However, the financial institution 
reports the difference between the corrected annual percentage rate and 
the most recently available average prime offer rate that was in effect 
for a comparable transaction as of the rate-set date on its annual 
loan/application register, provided that the corrected disclosure was 
provided to the borrower prior to the end of the calendar year in which 
final action is taken.
* * * * *
Paragraph 4(a)(17)(i)
* * * * *
    3. Corrected disclosures. If the amount of total loan costs changes 
because a financial institution provides a corrected version of the 
disclosures required under Regulation Z, 12 CFR 1026.19(f), pursuant to 
12 CFR 1026.19(f)(2), the financial institution complies with Sec.  
1003.4(a)(17)(i) by reporting the corrected amount, provided that the 
corrected disclosure was provided to the borrower prior to the end of 
the reporting period in which closing occurs. For purposes of Sec.  
1003.4(a)(17)(i), the date the corrected disclosure was provided to the 
borrower is the date disclosed pursuant to

[[Page 43148]]

Regulation Z, 12 CFR 1026.38(a)(3)(i). For example:
    i. In the case of a financial institution's annual loan/application 
register submission made pursuant to Sec.  1003.5(a)(1)(i), if the 
financial institution provides a corrected disclosure to the borrower 
to reflect a refund made pursuant to Regulation Z, 12 CFR 
1026.19(f)(2)(v), the financial institution reports the corrected 
amount of total loan costs only if the corrected disclosure was 
provided to the borrower prior to the end of the calendar year in which 
closing occurs.
    ii. In the case of a financial institution's quarterly submission 
made pursuant to Sec.  1003.5(a)(1)(ii), if the financial institution 
provides a corrected disclosure to the borrower to reflect a refund 
made pursuant to Regulation Z, 12 CFR 1026.19(f)(2)(v), the financial 
institution reports the corrected amount of total loan costs only if 
the corrected disclosure was provided to the borrower prior to the end 
of the quarter in which closing occurs. The financial institution does 
not report the corrected amount of total loan costs in its quarterly 
submission if the corrected disclosure was provided to the borrower 
after the end of the quarter in which closing occurs, even if the 
corrected disclosure was provided to the borrower prior to the deadline 
for timely submission of the financial institution's quarterly data. 
However, the financial institution reports the corrected amount of 
total loan costs on its annual loan/application register, provided that 
the corrected disclosure was provided to the borrower prior to the end 
of the calendar year in which closing occurs.
* * * * *
Paragraph 4(a)(18)
* * * * *
    3. Corrected disclosures. If the total amount of borrower-paid 
origination charges changes because a financial institution provides a 
corrected version of the disclosures required under Regulation Z, 12 
CFR 1026.19(f), pursuant to 12 CFR 1026.19(f)(2), the financial 
institution complies with Sec.  1003.4(a)(18) by reporting the 
corrected amount, provided that the corrected disclosure was provided 
to the borrower prior to the end of the reporting period in which 
closing occurs. For purposes of Sec.  1003.4(a)(18), the date the 
corrected disclosure was provided to the borrower is the date disclosed 
pursuant to Regulation Z, 12 CFR 1026.38(a)(3)(i). For example:
    i. In the case of a financial institution's annual loan/application 
register submission made pursuant to Sec.  1003.5(a)(1)(i), if the 
financial institution provides a corrected disclosure to the borrower 
to reflect a refund made pursuant to Regulation Z, 12 CFR 
1026.19(f)(2)(v), the financial institution reports the corrected 
amount of borrower-paid origination charges only if the corrected 
disclosure was provided to the borrower prior to the end of the 
calendar year in which closing occurs.
    ii. In the case of a financial institution's quarterly submission 
made pursuant to Sec.  1003.5(a)(1)(ii), if the financial institution 
provides a corrected disclosure to the borrower to reflect a refund 
made pursuant to Regulation Z, 12 CFR 1026.19(f)(2)(v), the financial 
institution reports the corrected amount of borrower-paid origination 
charges only if the corrected disclosure was provided to the borrower 
prior to the end of the quarter in which closing occurs. The financial 
institution does not report the corrected amount of borrower-paid 
origination charges in its quarterly submission if the corrected 
disclosure was provided to the borrower after the end of the quarter in 
which closing occurs, even if the corrected disclosure was provided to 
the borrower prior to the deadline for timely submission of the 
financial institution's quarterly data. However, the financial 
institution reports the corrected amount of borrower-paid origination 
charges on its annual loan/application register, provided that the 
corrected disclosure was provided to the borrower prior to the end of 
the calendar year in which closing occurs.
Paragraph 4(a)(19)
* * * * *
    3. Corrected disclosures. If the amount of discount points changes 
because a financial institution provides a corrected version of the 
disclosures required under Regulation Z, 12 CFR 1026.19(f), pursuant to 
12 CFR 1026.19(f)(2), the financial institution complies with Sec.  
1003.4(a)(19) by reporting the corrected amount, provided that the 
corrected disclosure was provided to the borrower prior to the end of 
the reporting period in which closing occurs. For purposes of Sec.  
1003.4(a)(19), the date the corrected disclosure was provided to the 
borrower is the date disclosed pursuant to Regulation Z, 12 CFR 
1026.38(a)(3)(i). For example:
    i. In the case of a financial institution's annual loan/application 
register submission made pursuant to Sec.  1003.5(a)(1)(i), if the 
financial institution provides a corrected disclosure to the borrower 
to reflect a refund made pursuant to Regulation Z, 12 CFR 
1026.19(f)(2)(v), the financial institution reports the corrected 
amount of discount points only if the corrected disclosure was provided 
to the borrower prior to the end of the calendar year in which closing 
occurred.
    ii. In the case of a financial institution's quarterly submission 
made pursuant to Sec.  1003.5(a)(1)(ii), if the financial institution 
provides a corrected disclosure to the borrower to reflect a refund 
made pursuant to Regulation Z, 12 CFR 1026.19(f)(2)(v), the financial 
institution reports the corrected amount of discount points only if the 
corrected disclosure was provided to the borrower prior to the end of 
the quarter in which closing occurred. The financial institution does 
not report the corrected amount of discount points in its quarterly 
submission if the corrected disclosure was provided to the borrower 
after the end of the quarter in which closing occurred, even if the 
corrected disclosure was provided to the borrower prior to the deadline 
for timely submission of the financial institution's quarterly data. 
However, the financial institution reports the corrected amount of 
discount points on its annual loan/application register, provided that 
the corrected disclosure was provided to the borrower prior to the end 
of the calendar year in which closing occurred.
Paragraph 4(a)(20)
* * * * *
    3. Corrected disclosures. If the amount of lender credits changes 
because a financial institution provides a corrected version of the 
disclosures required under Regulation Z, 12 CFR 1026.19(f), pursuant to 
12 CFR 1026.19(f)(2), the financial institution complies with Sec.  
1003.4(a)(20) by reporting the corrected amount, provided that the 
corrected disclosure was provided to the borrower prior to the end of 
the reporting period in which closing occurred. For purposes of Sec.  
1003.4(a)(20), the date the corrected disclosure was provided to the 
borrower is the date disclosed pursuant to Regulation Z, 12 CFR 
1026.38(a)(3)(i). For example:
    i. In the case of a financial institution's annual loan/application 
register submission made pursuant to Sec.  1003.5(a)(1)(i), if the 
financial institution provides a corrected disclosure to the borrower 
to reflect a refund made pursuant to Regulation Z, 12 CFR 
1026.19(f)(2)(v), the financial institution reports the corrected 
amount of lender credits only if the corrected disclosure was provided 
to the borrower prior to the end of the calendar year in which closing 
occurred.

[[Page 43149]]

    ii. In the case of a financial institution's quarterly submission 
made pursuant to Sec.  1003.5(a)(1)(ii), if the financial institution 
provides a corrected disclosure to the borrower to reflect a refund 
made pursuant to Regulation Z, 12 CFR 1026.19(f)(2)(v), the financial 
institution reports the corrected amount of lender credits only if the 
corrected disclosure was provided to the borrower prior to the end of 
the quarter in which closing occurred. The financial institution does 
not report the corrected amount of lender credits in its quarterly 
submission if the corrected disclosure was provided to the borrower 
after the end of the quarter in which closing occurred, even if the 
corrected disclosure was provided to the borrower prior to the deadline 
for timely submission of the financial institution's quarterly data. 
However, the financial institution reports the corrected amount of 
lender credits on its annual loan/application register, provided that 
the corrected disclosure was provided to the borrower prior to the end 
of the calendar year in which closing occurred.
* * * * *

    Dated: August 23, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2017-18284 Filed 9-12-17; 8:45 am]
 BILLING CODE 4810-AM-P