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Thursday, August 11, 2016

HMDA and TRID

QUESTION: We are working to improve our HMDA reporting policy and wonder how, if at all, does the TRID rule definition of application trigger or affect HMDA reporting?

ANSWER: The short answer is that receipt of some or all of the six pieces of TRID application information does not necessarily trigger an “application” for purposes of HMDA reporting.

Under Regulation C, an application for HMDA reporting purposes is defined as an oral or written request for a home purchase loan, a home improvement loan, or a refinancing that is made in accordance with procedures used by a financial institution for the type of credit requested. [12 CFR §1003.2] Pursuant to TRID, if a consumer submits an application, a requirement to provide the Loan Estimate is triggered under §1026.19(e).

An application under TRID is defined as the submission of the six pieces of information with which we are now so familiar: (1) the consumer’s name, (2) the consumer’s income, (3) the consumer’s Social Security number to obtain a credit report (4) the property address, (5) an estimate of the value of the property, and (6) the mortgage loan amount sought. Unlike the TRID rule, Regulation C does not contain a clear, succinct definition of the term application. Rather, the Regulation C definition of application depends on a creditor’s particular policy and procedures, which may or not mirror receipt of the six pieces of application under the TRID rule.

The term “application” is defined differently across most regulations. One should always be mindful to consider the purpose of any regulation, and particularly the various regulations that define what a mortgage application is and what it triggers. Under the TRID rule, the goal is to provide consumers disclosures that enable them to shop for and compare different loan and settlement cost options in a timely manner. Hence receipt of an application triggers the loan estimate. The purpose of HMDA is to prevent discrimination and insure that the housing needs of communities are being met. Thus, receipt of an application under HMDA triggers reporting about the disposition of that application, demographics, the applicant’s characteristics, and so forth.

The CFPB has stated that the TRID definition of an application does not change the current Regulation C definition of application, nor does it supersede it. While it is important for a creditor to create and comply with a clear and concise HMDA reporting policy and application definition, it may be just as important to consider the regulatory purpose of HMDA when creating that policy.

Michael Goldhirsh, Esq.
Director/Legal & Regulatory Compliance
Lenders Compliance Group