HMDA 2018 Challenges with Taking Applications Part II – Commercial Applications
Are you prepared for these sweeping changes?
HMDA reporters must follow the new rules for applications when final action is taken on or after January 1, 2018.
Many banks do not have a formal “application” form for commercial and agricultural loan requests. While the reporting process may be more streamlined in the mortgage and consumer area, there will be significant changes for business purpose applications. The “dwelling secured” standard was generally adopted for closed-end loans and lines of credit for consumers. Business or commercial loans have both the loan purpose test and the dwelling secured test. Business or commercial purpose loans and lines of credit are reportable only if the purpose of the loan is for home purchase, home improvement, or refinance and the loan is secured by a dwelling.
What type of business purpose loans will be reported? What factors are considered in the purpose test? What if the collateral is a “mixed use” property? Lenders must request applicants and co-applicants who are “natural persons” to identify their ethnicity, race, and sex; this requirement does not apply to a corporation, partnership, LLC, or guarantors. Will the data collection forms you are currently using provide all the required fields for the new reporting requirements?
There are approximately 48+ “working days” from this presentation until January 1, 2018. There are very few parts of the existing rules that will remain unchanged and there are 110 data elements in the new rule. Will you be ready for these extensive changes? Attend this session and learn more about application processing for commercial loans under the new rules and gain valuable tips that will help your bank prepare for 2018.
(Note: Consumer Applications will be covered in Part 1 on October 12th, 2017)
- Coverage issues – Which COMMERCIAL applications are covered loans that require data to be collected at the time of application? What types of dwellings are included? Best practices for documenting that applications for agriculturalpurpose are EXEMPT!
- What data will be reported? What data will be excluded for business applications? Business purpose loans have many fields that are “not applicable”.
- What is the correct application date?
- Identifying the correct loan purpose – there are FIVE options and rules for multi-purpose loans.
- What does the front-line need to know about these changes?
- Suggestions for potential problems with collecting, reporting, and validating the data fields for “applicant” and applications in these required fields and understanding when they may NOT be reported:
- Age for applicants who are “natural persons”, for example a sole proprietor
- Income – when is reporting required?
- Reasons for denial
- Application date
- Ethnicity, race and sex
- Disaggregation of ethnicity and race
- Explanation for 13 KEY points about data collection including loan applications that begin in 2017 but final action is taken on or after January 1, 2018.
This informative session is designed for lenders, personal bankers, loan assistants and processors, loan operations staff, compliance officers, fair lending officers, IT staff, and auditors.
Susan Costonis is a compliance consultant and trainer. She specializes in compliance management along with deposit and lending regulatory training.
Susan has successfully managed compliance programs and exams for institutions that ranged from a community bank to large multi-state bank holding companies. She has been a compliance officer for institutions supervised by the OCC, FDIC, and Federal Reserve. Susan has been a Certified Regulatory Compliance Manager since 1998, completed the ABA Graduate Compliance School, and graduated from the University of Akron and the Graduate Banking School of the University of Colorado. She regularly presents to financial institution audiences in several states and “translates” complex regulations into simple concepts by using humor and real life examples.
Institute of Certified Bankers: Visit http://www.icbmembers.org/login.aspx for instructions regarding self-reporting. Estimated credits: 2.5 CE Credits
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