[Federal Register Volume 84, Number 92 (Monday, May 13, 2019)]
[Proposed Rules]
[Pages 20972-21041]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08983]



[[Page 20971]]

Vol. 84

Monday,

No. 92

May 13, 2019

Part II





 Bureau of Consumer Financial Protection





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12 CFR Part 1003





 Home Mortgage Disclosure (Regulation C); Proposed Rule

  Federal Register / Vol. 84 , No. 92 / Monday, May 13, 2019 / Proposed 
Rules  

[[Page 20972]]


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BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1003

[Docket No. CFPB-2019-0021]
RIN 3170-AA76


Home Mortgage Disclosure (Regulation C)

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Proposed rule with request for public comment.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is 
proposing two alternatives to amend Regulation C to increase the 
threshold for reporting data about closed-end mortgage loans so that 
institutions originating fewer than either 50 closed-end mortgage 
loans, or alternatively 100 closed-end mortgage loans, in either of the 
two preceding calendar years would not have to report such data as of 
January 1, 2020. The proposed rule would also adjust the threshold for 
reporting data about open-end lines of credit by extending to January 
1, 2022, the current temporary threshold of 500 open-end lines of 
credit and setting the threshold at 200 open-end lines of credit upon 
the expiration of the proposed extension of the temporary threshold. 
The Bureau is also proposing to incorporate into Regulation C the 
interpretations and procedures from the interpretive and procedural 
rule that the Bureau issued on August 31, 2018, and to implement 
further section 104(a) of the Economic Growth, Regulatory Relief, and 
Consumer Protection Act.

DATES: Comments on the proposed rule must be received on or before June 
12, 2019, except that comments on the Paperwork Reduction Act analysis 
in part VIII of the Supplementary Information must be received on or 
before July 12, 2019.

ADDRESSES: You may submit responsive information and other comments, 
identified by Docket No. CFPB-2019-0021 or RIN 3170-AA76, by any of the 
following methods:
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: [email protected]. Include Docket 
No. CFPB-2019-0021 or RIN 3170-AA76 in the subject line of the message.
     Mail: Comment Intake, Bureau of Consumer Financial 
Protection, 1700 G Street NW, Washington, DC 20552.
     Hand Delivery/Courier: Comment Intake, Bureau of Consumer 
Financial Protection, 1700 G Street NW, Washington, DC 20552.
    Instructions: The Bureau encourages the early submission of 
comments. All submissions should include the agency name and docket 
number or Regulatory Information Number (RIN) for this rulemaking. 
Because paper mail in the Washington, DC area and at the Bureau is 
subject to delay, commenters are encouraged to submit comments 
electronically. In general, all comments received will be posted 
without change to http://www.regulations.gov. In addition, comments 
will be available for public inspection and copying at 1700 G Street 
NW, Washington, DC 20552, on official business days between the hours 
of 10:00 a.m. and 5:00 p.m. Eastern Time. You can make an appointment 
to inspect the documents by telephoning 202-435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Proprietary information or sensitive personal information, such as 
account numbers or Social Security numbers, or names of other 
individuals, should not be included. Comments will not be edited to 
remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Jaydee DiGiovanni or Shaakira Gold-
Ramirez, Counsels; or Amanda Quester or Alexandra Reimelt, Senior 
Counsels, Office of Regulations, at 202-435-7700 or https://reginquiries.consumerfinance.gov/. If you require this document in an 
alternative electronic format, please contact 
[email protected].

SUPPLEMENTARY INFORMATION: 

I. Summary

    Regulation C, 12 CFR part 1003, implements the Home Mortgage 
Disclosure Act (HMDA), 12 U.S.C. 2801 through 2810, and includes 
institutional and transactional coverage thresholds that determine 
whether financial institutions are required to collect, record, and 
report any HMDA data on closed-end mortgage loans or open-end lines of 
credit (collectively, coverage thresholds).\1\ In the Economic Growth, 
Regulatory Relief, and Consumer Protection Act (EGRRCPA),\2\ Congress 
added partial exemptions from HMDA's requirements that exempt certain 
insured depository institutions and insured credit unions from 
reporting some but not all HMDA data for certain transactions. The 
proposed rule both adjusts Regulation C's institutional and 
transactional coverage thresholds and implements the new, separate 
EGRRCPA partial exemptions.\3\
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    \1\ HMDA requires financial institutions to collect, record, and 
report data. To simplify review of this document, the Bureau 
generally refers herein to the obligation to report data instead of 
listing all of these obligations in each instance.
    \2\ Public Law 115-174, 132 Stat. 1296 (2018).
    \3\ When amending commentary, the Office of the Federal Register 
requires reprinting of certain subsections being amended in their 
entirety rather than providing more targeted amendatory 
instructions. The sections of regulatory text and commentary 
included in this document show the language of those sections if the 
Bureau adopts its changes as proposed. In addition, the Bureau is 
releasing an unofficial, informal redline to assist industry and 
other stakeholders in reviewing the changes that it is proposing to 
make to the regulatory text and commentary of Regulation C. This 
redline can be found on the Bureau's regulatory implementation page 
for the HMDA Rule at https://www.consumerfinance.gov/policy-compliance/guidance/hmda-implementation/. If any conflicts exist 
between the redline and the text of Regulation C or this proposal, 
the documents published in the Federal Register and the Code of 
Federal Regulations are the controlling documents.
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    Coverage thresholds adjustments: In an October 2015 final rule 
(2015 HMDA Rule), the Bureau established institutional and 
transactional coverage thresholds in Regulation C, and these thresholds 
affect whether a financial institution needs to report any information 
under HMDA for a transaction.\4\ The 2015 HMDA Rule set the closed-end 
threshold at 25 loans in each of the two preceding calendar years, and 
the open-end threshold at 100 open-end lines of credit in each of the 
two preceding calendar years. In 2017, the Bureau temporarily increased 
the open-end threshold to 500 open-end lines of credit for two years 
(calendar years 2018 and 2019). The proposed rule provides two 
alternatives that would permanently raise the closed-end institutional 
and transactional coverage threshold to either 50 or 100 closed-end 
mortgage loans in each of the preceding two calendar years. The 
proposed rule would also extend to January 1, 2022, the current 
temporary threshold of 500 open-end lines of credit for open-end 
institutional and transactional coverage. Once that temporary extension 
expires, the proposed rule would set the open-end threshold permanently 
at 200 open-end lines of credit in each of the preceding two calendar 
years. The Bureau is proposing that the change to the closed-end 
coverage threshold and the temporary extension of the open-end coverage 
threshold would take effect on January 1, 2020, and the increase in the 
open-end coverage threshold to 200 open-end lines of credit would take 
effect on January 1, 2022.
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    \4\ Home Mortgage Disclosure (Regulation C), 80 FR 66128 (Oct. 
28, 2015).
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    Implementation of partial exemptions: The proposed rule also

[[Page 20973]]

implements the partial exemptions from HMDA's requirements that the 
EGRRCPA recently added to HMDA. In August 2018, the Bureau issued an 
interpretive and procedural rule to implement and clarify the EGRRCPA 
amendments to HMDA (2018 HMDA Rule).\5\ The 2018 HMDA Rule clarifies 
that insured depository institutions and insured credit unions covered 
by a partial exemption have the option of reporting exempt data fields 
as long as they report all data fields within any exempt data point for 
which they report data; clarifies that only loans and lines of credit 
that are otherwise HMDA reportable count toward the thresholds for the 
partial exemptions; clarifies which of the data points in Regulation C 
are covered by the partial exemptions; designates a non-universal loan 
identifier for partially exempt transactions for institutions that 
choose not to report a universal loan identifier; and clarifies the 
exception to the partial exemptions for insured depository institutions 
with less than satisfactory examination histories under the Community 
Reinvestment Act of 1977 (CRA). The proposed rule incorporates into 
Regulation C these interpretations and procedures, with minor 
adjustments, by adding new Sec.  1003.3(d) relating to the partial 
exemptions and making various amendments to the data compilation 
requirements in Sec.  1003.4. The proposed rule further implements the 
EGRRCPA by addressing certain additional interpretive issues relating 
to the partial exemptions that the 2018 HMDA Rule did not specifically 
address, such as how to determine whether a partial exemption applies 
to a transaction after a merger or acquisition. The Bureau is proposing 
that the amendments implementing the EGRRCPA would take effect on 
January 1, 2020.
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    \5\ Partial Exemptions from the Requirements of the Home 
Mortgage Disclosure Act Under the Economic Growth, Regulatory 
Relief, and Consumer Protection Act (Regulation C), 83 FR 45325 
(Sept. 7, 2018).
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II. Background

A. HMDA and Regulation C

    HMDA requires certain depository institutions and for-profit 
nondepository institutions to report 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). The purposes of HMDA are to provide the public 
with loan data that can be used: (i) To help determine whether 
financial institutions are serving the housing needs of their 
communities; (ii) to assist public officials in distributing public-
sector investment so as to attract private investment to areas where it 
is needed; and (iii) to assist in identifying possible discriminatory 
lending patterns and enforcing antidiscrimination statutes.\6\ Prior to 
enactment of the Dodd-Frank Wall Street Reform and Consumer Protection 
Act (Dodd-Frank Act), Regulation C required reporting of 22 data points 
and allowed for optional reporting of reasons an institution denied an 
application.\7\
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    \6\ 12 CFR 1003.1.
    \7\ As used in this proposed rule, the term ``data point'' 
refers to items of information that entities are required to compile 
and report, generally listed in separate paragraphs in Regulation C. 
Some data points are reported using multiple data fields.
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B. Dodd-Frank Act

    In 2010, Congress enacted the Dodd-Frank Act, which amended HMDA 
and transferred HMDA rulemaking authority and other functions from the 
Board of Governors of the Federal Reserve System (Board) to the 
Bureau.\8\ Among other changes, the Dodd-Frank Act expanded the scope 
of information relating to mortgage applications and loans that 
institutions must compile, maintain, and report under HMDA. 
Specifically, the Dodd-Frank Act amended HMDA section 304(b)(4) by 
adding one new data point, the age of loan applicants and mortgagors. 
The Dodd-Frank Act also added new HMDA section 304(b)(5) and (6), which 
requires the following additional new data points: Information relating 
to the total points and fees payable at origination (total loan costs 
or total points and fees); the difference between the annual percentage 
rate (APR) associated with the loan and a benchmark rate or rates for 
all loans (rate spread); 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 on the loan; the presence of contract 
terms allowing non-amortizing payments; the channel through which the 
application was made; and the credit scores of applicants and 
mortgagors.\9\ New HMDA section 304(b)(6) in addition authorizes the 
Bureau to require, ``as [it] may determine to be appropriate,'' a 
unique identifier that identifies the loan originator, a universal loan 
identifier (ULI), and the parcel number that corresponds to the real 
property pledged as collateral for the mortgage loan.\10\ New HMDA 
section 304(b)(5)(D) and (6)(J) further provides the Bureau with the 
authority to mandate reporting of ``such other information as the 
Bureau may require.'' \11\
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    \8\ Public Law 111-203, 124 Stat. 1376, 1980, 2035-38, 2097-101 
(2010).
    \9\ Dodd-Frank Act section 1094(3), amending HMDA section 
304(b), 12 U.S.C. 2803(b).
    \10\ Id.
    \11\ Id.
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C. 2015 HMDA Rule

    In October 2015, the Bureau issued the 2015 HMDA Rule implementing 
the Dodd-Frank Act amendments to HMDA.\12\ Most of the 2015 HMDA Rule 
took effect on January 1, 2018.\13\ The 2015 HMDA Rule implemented the 
new data points specified in the Dodd-Frank Act,\14\ added a number of 
additional data points pursuant to the Bureau's discretionary authority 
under HMDA section 304(b)(5) and (6),\15\ and made revisions to certain 
pre-existing data points to clarify their requirements, provide greater 
specificity in reporting, and align certain data points more closely 
with industry data standards,\16\ among other changes.
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    \12\ 80 FR 66128 (Oct. 28, 2015).
    \13\ Id. at 66128, 66256-58.
    \14\ The following 12 data points in 12 CFR 1003.4(a) implement 
specific provisions in HMDA section 304(b)(5)(A) through (C) or 
(b)(6)(A) through (I): ULI (1003.4(a)(1)(i)); property address 
(1003.4(a)(9)(i)); rate spread (1003.4(a)(12)); credit score 
(1003.4(a)(15)); total loan costs or total points and fees 
(1003.4(a)(17)); prepayment penalty term (1003.4(a)(22)); loan term 
(1003.4(a)(25)); introductory rate period (1003.4(a)(26)); non-
amortizing features (1003.4(a)(27)); property value (1003.4(a)(28)); 
application channel (1003.4(a)(33)); and mortgage loan originator 
identifier (1003.4(a)(34)). Id.
    \15\ For example, the 2015 HMDA Rule added a requirement to 
report debt-to-income ratio in Sec.  1003.4(a)(23). Id. at 66218-20.
    \16\ For example, the 2015 HMDA Rule replaced property type with 
number of total units and construction method in Sec.  1003.4(a)(5) 
and (31). Id. at 66180-81, 66227. It also requires disaggregation of 
ethnicity and race information in Sec.  1003.4(a)(10)(i). Id. at 
66187-94.
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    The 2015 HMDA Rule requires some financial institutions to report 
data on certain dwelling-secured, open-end lines of credit, including 
home-equity lines of credit. Prior to the 2015 HMDA Rule, Regulation C 
allowed, but did not require, reporting of home-equity lines of credit.
    The 2015 HMDA Rule also established institutional coverage 
thresholds based on loan volume that limit the definition of 
``financial institution'' to include only those institutions that 
either originated at least 25 closed-end mortgage loans in each of the 
two preceding calendar years or originated at least 100 open-end lines 
of credit in each of the two preceding calendar years.\17\ The 2015

[[Page 20974]]

HMDA Rule separately established transactional coverage thresholds that 
are part of the test for determining which loans are excluded from 
coverage and were designed to work in tandem with the institutional 
coverage thresholds.\18\
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    \17\ Id. at 66148-50, 66309 (codified at 12 CFR 
1003.2(g)(1)(v)). The 2015 HMDA Rule excludes certain transactions 
from the definition of covered loans, and those excluded 
transactions do not count towards the threshold. Id.
    \18\ Id. at 66173, 66310, 66322 (codified at 12 CFR 
1003.3(c)(11) and (12)).
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D. 2017 HMDA Rule and December 2017 Statement

    In April 2017, the Bureau issued a notice of proposed rulemaking to 
address certain technical errors in the 2015 HMDA Rule, ease the burden 
of reporting certain data requirements, and clarify key terms to 
facilitate compliance with Regulation C.\19\ In July 2017, the Bureau 
issued a notice of proposed rulemaking (July 2017 HMDA Proposal) to 
increase temporarily the 2015 HMDA Rule's open-end coverage threshold 
of 100 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 to commence 
collecting or reporting data on their open-end lines of credit until 
January 1, 2020.\20\ In August 2017, the Bureau issued the 2017 HMDA 
Rule, which, inter alia, temporarily increased the open-end threshold 
to 500 open-end lines of credit for calendar years 2018 and 2019.\21\ 
In doing so, the Bureau indicated that the two-year period would allow 
time for the Bureau to decide, through an additional rulemaking, 
whether any permanent adjustments to the open-end threshold are 
needed.\22\
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    \19\ Technical Corrections and Clarifying Amendments to the Home 
Mortgage Disclosure (Regulation C) October 2015 Final Rule, 82 FR 
19142 (Apr. 25, 2017).
    \20\ 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).
    \21\ Home Mortgage Disclosure (Regulation C), 82 FR 43088 (Sept. 
13, 2017).
    \22\ Id. at 43095. The 2017 HMDA Rule also, among other things, 
replaced ``each'' with ``either'' in Sec.  1003.3(c)(11) and (12) to 
correct a drafting error and to ensure that the exclusion provided 
in that section mirrors the loan-volume threshold for financial 
institutions in Sec.  1003.2(g). Id. at 43100, 43102.
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    Recognizing the significant systems and operations challenges 
needed to adjust to the revised regulation, the Bureau issued a 
statement in December 2017 (December 2017 Statement) indicating that, 
for HMDA data collected in 2018 and reported in 2019, the Bureau does 
not intend to require data resubmission unless data errors are 
material.\23\ The December 2017 Statement also explained that the 
Bureau does not intend to assess penalties with respect to errors in 
data collected in 2018 and reported in 2019.\24\ As explained in the 
statement, any supervisory examinations of 2018 HMDA data would be 
diagnostic to help institutions identify compliance weaknesses and 
would credit good-faith compliance efforts. In its December 2017 
Statement, the Bureau indicated that it intended to engage in a 
rulemaking to reconsider various aspects of the 2015 HMDA Rule, such as 
the institutional and transactional coverage tests and the rule's 
discretionary data points. The Board, the Federal Deposit Insurance 
Corporation (FDIC), the National Credit Union Administration (NCUA), 
and the Office of the Comptroller of the Currency (OCC) released 
similar statements relating to their supervisory examinations.\25\
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    \23\ Bureau of Consumer Fin. Prot., ``Statement with Respect to 
HMDA Implementation'' (Dec. 21, 2017), https://files.consumerfinance.gov/f/documents/cfpb_statement-with-respect-to-hmda-implementation_122017.pdf.
    \24\ The statement also indicated that collection and submission 
of the 2018 HMDA data will provide financial institutions an 
opportunity to identify any gaps in their implementation of amended 
Regulation C and make improvements in their HMDA compliance 
management systems for future years. Id.
    \25\ As part of its spring 2018 Call for Evidence series of 
Requests for Information, the Bureau issued a Request for 
Information Regarding the Bureau's Adopted Regulations and New 
Rulemaking Authorities, 83 FR 12286 (Mar. 21, 2018) (RFI on Adopted 
Regulations) and a Request for Information Regarding the Bureau's 
Inherited Regulations and Inherited Rulemaking Authorities, 83 FR 
12881 (Mar. 26, 2018). The RFI on Adopted Regulations did not 
request feedback on the 2015 HMDA Rule nor that rule's subsequent 
amendments because the Bureau had previously announced in the 
December 2017 Statement that it intended to engage in a rulemaking 
process to reconsider the 2015 HMDA Rule. However, as noted below in 
the section-by-section analysis of Sec.  1003.2(g)(1)(v) in part IV, 
the Bureau received a few comments relating to HMDA in response to 
the RFI on Adopted Regulations. The Bureau has considered these 
comments as well as other input it has received from stakeholders 
through its efforts to monitor and support industry implementation 
of the 2015 HMDA Rule and the 2017 HMDA Rule in developing this 
proposal and the Advance Notice of Proposed Rulemaking that the 
Bureau released simultaneously with this proposal. The Advance 
Notice of Proposed Rulemaking (FR Doc. 2019-08979) published in the 
Federal Register on May 8, 2019.
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E. EGRRCPA and 2018 HMDA Rule

    On May 24, 2018, the President signed into law the EGRRCPA.\26\ 
Section 104(a) of the EGRRCPA amends HMDA section 304(i) by adding 
partial exemptions from HMDA's requirements for certain insured 
depository institutions and insured credit unions.\27\ New HMDA section 
304(i)(1) provides that the requirements of HMDA section 304(b)(5) and 
(6) shall not apply with respect to closed-end mortgage loans of an 
insured depository institution or insured credit union if it originated 
fewer than 500 closed-end mortgage loans in each of the two preceding 
calendar years. New HMDA section 304(i)(2) provides that the 
requirements of HMDA section 304(b)(5) and (6) shall not apply with 
respect to open-end lines of credit of an insured depository 
institution or insured credit union if it originated fewer than 500 
open-end lines of credit in each of the two preceding calendar years. 
Notwithstanding the new partial exemptions, new HMDA section 304(i)(3) 
provides that an insured depository institution must comply with HMDA 
section 304(b)(5) and (6) if it has received a rating of ``needs to 
improve record of meeting community credit needs'' during each of its 
two most recent examinations or a rating of ``substantial noncompliance 
in meeting community credit needs'' on its most recent examination 
under section 807(b)(2) of the CRA.\28\
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    \26\ Public Law 115-174, 132 Stat. 1296 (2018).
    \27\ For purposes of HMDA section 104, the EGRRCPA provides that 
the term ``insured credit union'' has the meaning given the term in 
section 101 of the Federal Credit Union Act, 12 U.S.C. 1752, and the 
term ``insured depository institution'' has the meaning given the 
term in section 3 of the Federal Deposit Insurance Act, 12 U.S.C. 
1813.
    \28\ 12 U.S.C. 2906(b)(2).
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    On August 31, 2018, the Bureau issued an interpretive and 
procedural rule (2018 HMDA Rule) to implement and clarify section 
104(a) of the EGRRCPA and effectuate the purposes of the EGRRCPA and 
HMDA.\29\ The 2018 HMDA Rule clarifies that insured depository 
institutions and insured credit unions covered by a partial exemption 
have the option of reporting exempt data fields as long as they report 
all data fields within any exempt data point for which they report 
data; clarifies that only loans and lines of credit that are otherwise 
HMDA reportable count toward the thresholds

[[Page 20975]]

for the partial exemptions; clarifies which of the data points in 
Regulation C are covered by the partial exemptions; designates a non-
universal loan identifier for partially exempt transactions for 
institutions that choose not to report a ULI; and clarifies the 
exception to the partial exemptions for insured depository institutions 
with less than satisfactory CRA examination histories. The 2018 HMDA 
Rule also explains that, because the EGRRCPA does not provide a 
specific effective date for section 104(a) and because there are no 
other statutory indications that section 104(a) becomes effective upon 
regulatory action or some other event or condition, the best 
interpretation is that section 104(a) took effect when the EGRRCPA 
became law on May 24, 2018. In the 2018 HMDA Rule, the Bureau stated 
that it anticipated that, at a later date, it would initiate a notice-
and-comment rulemaking to incorporate the interpretations and 
procedures into Regulation C and further implement the EGRRCPA. This 
proposal commences that rulemaking. The Bureau also issued concurrently 
an Advance Notice of Proposed Rulemaking to solicit comment, data, and 
information from the public about the data points that the 2015 HMDA 
Rule added to Regulation C or revised to require additional information 
and Regulation C's coverage of certain business- or commercial-purpose 
transactions. The Advance Notice of Proposed Rulemaking (FR Doc. 2019-
08979) published in the Federal Register on May 8, 2019.
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    \29\ 83 FR 45325 (Sept. 7, 2018). Prior to issuing the 2018 HMDA 
Rule, the Bureau, the Board, the FDIC, the NCUA, and the OCC 
released statements on July 5, 2018, reiterating or referring to 
their December 2017 compliance statements and providing information 
about formatting and submission of 2018 loan/application registers. 
See, e.g., Bureau of Consumer Fin. Prot., ``Statement on the 
Implementation of the Economic Growth, Regulatory Relief, and 
Consumer Protection Act Amendments to the Home Mortgage Disclosure 
Act'' (July 25, 2018), https://www.consumerfinance.gov/about-us/newsroom/bureau-consumer-financial-protection-issues-statement-implementation-economic-growth-regulatory-relief-and-consumer-protection-act-amendments-home-mortgage-disclosure-act/.
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F. HMDA Coverage Under Current Regulation C

    The Bureau's estimates of HMDA coverage and the sources used in 
deriving those estimates are explained in detail in the Bureau's 
analysis under Dodd-Frank Act section 1022(b) in part VI below.\30\ As 
explained in more detail in part VI.E.3 and table 3 below, the Bureau 
estimates that currently there are about 4,960 financial institutions 
required to report their closed-end mortgage loans and applications 
under HMDA. The Bureau estimates that approximately 4,263 of these 
current reporters are depository institutions and approximately 697 are 
non-depository institutions. The Bureau estimates that together, these 
financial institutions originated about 7.0 million closed-end mortgage 
loans in calendar year 2017. The Bureau estimates that among those 
4,960 financial institutions that are currently required to report 
closed-end mortgage loans under HMDA, about 3,300 insured depository 
institutions and insured credit unions are partially exempt for closed-
end mortgage loans under the EGRRCPA and the 2018 HMDA Rule, and thus 
are not required to report a subset of the data points currently 
required by Regulation C for these transactions.
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    \30\ See infra part VI.D.1 & n.155.
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    As explained in more detail in part VI.E.4 and table 4 below, under 
the temporary 500 open-end line of credit coverage threshold set in the 
2017 HMDA Rule, the Bureau estimates that currently there are about 333 
financial institutions required to report about 1.23 million open-end 
lines of credit under HMDA. Of these institutions, approximately 318 
are depository institutions and approximately 15 are nondepository 
institutions. None of these 333 institutions are partially exempt.
    In comparison, if the open-end coverage threshold adjusts to 100 on 
January 1, 2020 pursuant to the 2017 HMDA Rule, the Bureau estimates 
that the number of reporters would be about 1,014, who in total 
originate about 1.41 million open-end lines of credit. The Bureau 
estimates that approximately 972 of these open-end reporters would be 
depository institutions and approximately 42 would be nondepository 
institutions. The Bureau estimates that, among the 1,014 financial 
institutions that would be required to report open-end lines of credit 
under a threshold of 100, about 618 insured depository institutions and 
insured credit unions are partially exempt for open-end lines of credit 
under the EGRRCPA and the 2018 HMDA Rule, and thus would not be 
required to report a subset of the data points currently required by 
Regulation C for these transactions.

III. Legal Authority

    The Bureau is issuing this proposal pursuant to its authority under 
the Dodd-Frank Act and HMDA. Section 1061 of the Dodd-Frank Act 
transferred to the Bureau the ``consumer financial protection 
functions'' previously vested in certain other Federal agencies, 
including the Board.\31\ 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.'' \32\ 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.'' \33\ Both HMDA and 
title X of the Dodd-Frank Act are Federal consumer financial laws.\34\ 
Accordingly, the Bureau has authority to issue regulations to implement 
HMDA.
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    \31\ 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.
    \32\ 12 U.S.C. 5581(a)(1)(A).
    \33\ 12 U.S.C. 5512(b)(1).
    \34\ 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.\35\ 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.\36\
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    \35\ 12 U.S.C. 2804(a).
    \36\ Id.
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IV. Section-by-Section Analysis

Section 1003.2 Definitions

2(g) Financial Institution
    Regulation C requires financial institutions to report HMDA data. 
Section 1003.2(g) defines financial institution for purposes of 
Regulation C and sets forth Regulation C's institutional coverage 
criteria for depository financial institutions and nondepository 
financial institutions.\37\ In the 2015 HMDA Rule, the Bureau adjusted 
the institutional coverage criteria under Regulation C so that 
depository institutions and nondepository institutions are required to 
report HMDA data if they: (1) Originated at least 25 closed-end 
mortgage loans or 100 open-end lines of credit in each of the two 
preceding calendar years, and (2) meet all of the other applicable 
criteria for reporting. In the 2017 HMDA Rule, the Bureau amended Sec.  
1003.2(g) and related commentary to increase temporarily from 100 to 
500 the number of open-end originations required to trigger reporting 
responsibilities.\38\ For the reasons discussed below, the Bureau 
proposes (1) to amend Sec. Sec.  1003.2(g)(1)(v)(A) and

[[Page 20976]]

(g)(2)(ii)(A) and 1003.3(c)(11) and related commentary to raise the 
closed-end coverage threshold to either 50 or 100 closed-end mortgage 
loans, and (2) to amend Sec. Sec.  1003.2(g)(1)(v)(B) and (g)(2)(ii)(B) 
and 1003.3(c)(12) and related commentary to extend to January 1, 2022, 
the current temporary open-end coverage threshold of 500 open-end lines 
of credit and then to set the threshold permanently at 200 open-end 
lines of credit beginning in calendar year 2022. The Bureau is also 
seeking comment on whether other closed- and open-end coverage 
thresholds may be appropriate. These proposed changes are discussed 
below in the order in which they appear in the proposed regulation text 
and commentary.
---------------------------------------------------------------------------

    \37\ 12 CFR 1003.2(g)(1) (definition of depository financial 
institution); Sec.  1003.2(g)(2) (definition of nondepository 
financial institution).
    \38\ 82 FR 43088, 43095 (Sept. 13, 2017).
---------------------------------------------------------------------------

    In the 2015 HMDA Rule, the Bureau adopted the thresholds for 
certain depository institutions in 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 in the judgment of 
the Bureau 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 Rule, the Bureau found that the exception in Sec.  1003.2(g)(1) is 
necessary and proper to effectuate the purposes of and facilitate 
compliance with HMDA. The Bureau found that the provision, by reducing 
burden on financial institutions and establishing a consistent loan-
volume test applicable to all financial institutions, would facilitate 
compliance with HMDA's requirements.\39\ Additionally, as discussed in 
the 2015 HMDA Rule, the Bureau adopted the thresholds for certain 
nondepository institutions in 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 number of mortgage 
loans.\40\ Pursuant to its authority under HMDA section 305(a), and for 
the reasons discussed below, the Bureau believes that the proposed 
threshold changes in Sec.  1003.2(g)(1) and (2) would be necessary and 
proper to effectuate the purposes of HMDA and facilitate compliance 
with HMDA by reducing burden and establishing a consistent loan-volume 
test.
---------------------------------------------------------------------------

    \39\ 80 FR 66128, 66150 (Oct. 28, 2015).
    \40\ Id. at 66153.
---------------------------------------------------------------------------

2(g)(1) Depository Financial Institution
2(g)(1)(v)
2(g)(1)(v)(A)
Closed-End Mortgage Loan Threshold for Institutional Coverage of 
Depository Institutions
    HMDA and its implementing regulation, Regulation C, require certain 
depository institutions (banks, savings associations, and credit 
unions) to report 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). 
In the 2015 HMDA Rule, the Bureau added the 25 closed-end coverage 
threshold to the preexisting regulatory coverage scheme for depository 
institutions.\41\ In adopting this threshold, the Bureau stated that it 
believed that the institutional coverage criteria should balance the 
burden on financial institutions of reporting HMDA data against the 
value of the data reported and that a threshold should be set that did 
not impair HMDA's ability to achieve its purposes but also did not 
impose burden on institutions if their data are of limited value.\42\
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    \41\ Prior to the 2015 HMDA Rule, a bank, savings association, 
or credit union was covered under Regulation C if: (1) On the 
preceding December 31, it satisfied an asset-size threshold; (2) on 
the preceding December 31, it had a home or branch office in a 
Metropolitan Statistical Area (MSA); (3) during the previous 
calendar year, it originated at least one home purchase loan or 
refinancing of a home purchase loan secured by a first lien on a 
one- to four-unit dwelling; and (4) the institution is federally 
insured or regulated, or the mortgage loan referred to in item (3) 
was insured, guaranteed, or supplemented by a Federal agency or 
intended for sale to the Federal National Mortgage Association or 
the Federal Home Loan Mortgage Corporation. 12 CFR 1003.2 (2016).
    \42\ 80 FR 66128, 66147 (Oct. 28, 2015).
---------------------------------------------------------------------------

    In the 2015 HMDA Rule, the Bureau also stated that in adopting the 
25 closed-end coverage threshold, it would meaningfully reduce burden 
by relieving an estimated 1,400 depository institutions, or 22 percent 
of depository institutions that previously reported HMDA data, of their 
obligations to report HMDA data on closed-end mortgage loans.\43\ The 
Bureau acknowledged that it would be possible to maintain reporting of 
a significant percentage of the national mortgage market with a closed-
end coverage threshold set higher than 25 loans annually and that data 
reported by some institutions that would satisfy the 25 closed-end 
coverage threshold may not be as useful for statistical analysis as 
data reported by institutions with much higher loan volumes.\44\ 
However, the Bureau determined that a higher closed-end coverage 
threshold would have a material negative impact on the availability of 
data about patterns and trends at the local level and the data about 
local communities are essential to achieve HMDA's purposes.\45\ The 
Bureau concluded that, if it were to set the closed-end coverage 
threshold higher than 25, the resulting loss of data at the local level 
would substantially impede the public's and public officials' ability 
to understand access to credit in their communities.\46\
---------------------------------------------------------------------------

    \43\ Id. at 66148, 66277.
    \44\ Id. at 66147.
    \45\ Id.
    \46\ Id. at 66148.
---------------------------------------------------------------------------

    However, since issuing the 2015 HMDA Rule and 2017 HMDA Rule, the 
Bureau has heard concerns that lower-volume institutions continue to 
experience significant burden at the 25 closed-end coverage 
threshold.\47\ Various industry stakeholders have advocated for an 
increase to the coverage threshold in order to reduce burden on 
additional lower-volume financial institutions. For example, although 
the 2015 HMDA Rule was outside the scope of the Bureau's 2018 Request 
for Information Regarding the Bureau's Adopted Regulations and New 
Rulemaking Authorities (RFI on Adopted Regulations),\48\ several 
depository institutions recommended in that context that the Bureau use 
its exemption authority to increase the 25-loan closed-end coverage 
threshold and stated that the costs associated with HMDA reporting and 
its impact on the operations of lower-volume financial institutions do 
not justify the small amount of data such institutions would report. 
The closed-end coverage threshold should not be so high as to impair 
HMDA's ability to achieve its purposes; however, the threshold should 
not be so low that institutions bear the burden of reporting data that 
would be of limited value. In light of the recent concerns expressed by 
industry stakeholders regarding the considerable burden associated with 
reporting the

[[Page 20977]]

new data points required by the 2015 HMDA Rule on closed-end mortgage 
loans, the Bureau is reconsidering whether the current 25-loan closed-
end coverage threshold for depository institutions appropriately 
balances the benefits of the HMDA data reported by lower-volume 
depository institutions in furthering HMDA's purposes with the burden 
on such institutions associated with reporting closed-end data. The 
Bureau believes that increasing the closed-end coverage threshold may 
provide meaningful burden relief for lower-volume depository 
institutions without reducing substantially the data reported under 
HMDA. Accordingly, based on its evaluation of more recent available 
data, the Bureau is proposing two alternative increases to the closed-
end coverage threshold and seeking comment on whether either of these 
alternatives, or some other alternative, would more appropriately 
balance the benefits and burdens of covering institutions based on 
their closed-end lending.
---------------------------------------------------------------------------

    \47\ The Bureau temporarily raised the threshold for open-end 
lines of credit in the 2017 HMDA Rule because of concerns that the 
Bureau may have underestimated in the 2015 HMDA Rule the number of 
institutions that would be required to report open-end lines of 
credit under the threshold adopted and that it also may have 
underestimated the cost of reporting. However, the Bureau declined 
to raise the threshold for closed-end mortgage loans and stated that 
in developing the 2015 HMDA Rule, it had robust data to make a 
determination about the number of transactions that would be 
reported at the 25 closed-end coverage threshold as well as the one-
time and ongoing costs to industry. 82 FR 43088, 43095-96 (Sept. 13, 
2017).
    \48\ 83 FR 12286, 12288 (Mar. 21, 2018).
---------------------------------------------------------------------------

    The Bureau recognizes that in the EGRRCPA, Congress provided a 
partial exemption to institutions that would be affected by this 
proposed increase to the threshold so that the benefit in terms of 
reduced burden would be less than it would have been absent the 
EGRRCPA. Even so, the Bureau believes that, for the depository 
institutions that would be relieved of all reporting obligations under 
either of the alternatives in this proposal, the burden reduction would 
be substantial and would outweigh the limited value of their data in 
achieving HMDA's purposes. The Bureau has also heard feedback 
suggesting that--consistent with its own estimates--a modest increase 
in the closed-end coverage threshold likely would have very little 
impact on the overall HMDA data, because the amount of data reported by 
the lower-volume depository institutions that would be excluded at such 
a higher threshold is insignificant as compared to the total HMDA data 
reported annually. The Bureau now believes a higher closed-end coverage 
threshold may more appropriately balance the burden on lower-volume 
depository institutions while at the same time maintaining sufficient 
reporting to achieve HMDA's purposes.
    As discussed below, the Bureau is proposing two alternatives to the 
closed-end coverage threshold. These proposed alternatives would 
maintain a uniform loan-volume threshold for depository and 
nondepository institutions.\49\ Alternative 1 proposes to set the 
closed-end coverage threshold at 50 while Alternative 2 proposes to set 
the closed-end coverage threshold at 100. The Bureau reviewed multiple 
data sources, including recent HMDA data \50\ and Reports of Condition 
and Income (Call Reports) and developed estimates for each proposal as 
described below.\51\
---------------------------------------------------------------------------

    \49\ For a discussion on the proposed closed-end coverage 
threshold for nondepository institutions, see the section-by-section 
analysis of Sec.  1003.2(g)(2)(ii)(A) below.
    \50\ As discussed further in the analysis under Dodd-Frank Act 
section 1022(b) in part VI, note 155, these estimates are based on 
HMDA data collected in 2016 and 2017 and other sources. The Bureau 
intends to review the 2018 HMDA data more closely in connection with 
this rulemaking once the 2018 submissions are more complete.
    \51\ The estimates described in each alternative proposal in 
this section cover only depository institutions. Estimates for 
nondepository institutions are described in the section-by-section 
analysis of Sec.  1003.2(g)(2)(ii)(A). For estimates that are 
comprehensive of depository and nondepository institutions, see part 
VI.E.3 below.
---------------------------------------------------------------------------

Alternative 1: Threshold Set at 50
    The Bureau estimates that if the closed-end coverage threshold were 
increased from 25 to 50 loans, approximately 3,518 out of approximately 
4,263 depository institutions covered under the current rule (or 
approximately 83 percent) would continue to be required to report HMDA 
data on closed-end mortgage loans. Approximately 745 depository 
institutions covered under the current rule (or approximately 17 
percent) would be relieved of their HMDA reporting responsibilities for 
closed-end mortgage loans. Further, the Bureau estimates that, with the 
proposed increase from 25 to 50 loans in the closed-end coverage 
threshold, about 99 percent of total originations of closed-end 
mortgage loans reported by depository institutions under the current 
Regulation C coverage criteria, or approximately 3.54 million closed-
end mortgage loan originations under the current market conditions, 
would continue to be reported.
    The Bureau noted in the 2015 HMDA Rule that any loan-volume 
threshold will affect individual markets differently, depending on the 
extent to which smaller creditors service individual markets and the 
market share of those creditors. In the 2015 HMDA Rule, the Bureau 
examined the extent to which varying thresholds would cause a loss of 
data at the census tract level. For this proposal the Bureau also 
reviewed estimates at varying closed-end coverage thresholds to examine 
the potential effect on available data at the census tract level.\52\ 
The Bureau estimates that, with the proposed increase to the closed-end 
coverage threshold from 25 to 50, just under 300 out of approximately 
74,000 total census tracts, or less than one-half of 1 percent of the 
total number of census tracts, would lose at least 20 percent of 
reportable HMDA data on closed-end mortgage loans relative to the 
current threshold.\53\ With respect to low-to-moderate income census 
tracts, the Bureau estimates that relative to the current threshold, 
there would be at least a 20 percent loss of reportable HMDA data on 
closed-end mortgage loans in less than 1 percent of such tracts if the 
closed-end coverage threshold were increased from 25 to the proposed 
50. In addition, the Bureau examined the effects on rural census tracts 
and estimates that relative to the current threshold, there would be at 
least a 20 percent loss of reportable HMDA data on closed-end mortgage 
loans in less than one-half of 1 percent of such tracts.
---------------------------------------------------------------------------

    \52\ The estimates of the effect on reportable HMDA data at the 
census tract level comprise both depository institutions and 
nondepository institutions. The effect of a closed-end coverage 
threshold set at 100 on reportable HMDA data at the census tract 
level is discussed in Alternative 2 below.
    \53\ The Bureau estimates that at least 80 percent of reportable 
HMDA data would be retained in over 73,500 tracts. In certain 
tracts, substantially more than 80 percent of reportable HMDA data 
would be retained.
---------------------------------------------------------------------------

    Ongoing cost reduction from proposed Alternative 1: Threshold set 
at 50. The proposed increase in the closed-end coverage threshold from 
25 to 50 would relieve institutions that originate between 25 and 49 
closed-end mortgage loans of the ongoing costs associated with 
reporting such loans that they might otherwise incur if the closed-end 
coverage threshold remained at the current 25. The Bureau estimates 
that the proposed increase in the closed-end coverage threshold to 50 
would result in aggregate savings on the operational costs associated 
with reporting closed-end mortgage loans of approximately $2.2 million 
per year.\54\
---------------------------------------------------------------------------

    \54\ These cost estimates reflect the combined ongoing reduction 
in costs for depository and nondepository institutions. These 
estimates also take into account the enactment of the EGRRCPA, which 
created partial exemptions from HMDA's requirements that certain 
insured depository institutions and insured credit unions may now 
use. See part VI.E.3 below for a more comprehensive analysis on cost 
estimates.
---------------------------------------------------------------------------

    Therefore, the Bureau believes that if the closed-end coverage 
threshold were raised from 25 to the proposed 50, the loss in data from 
these depository institutions and for this relatively small number of 
census tracts may be justified by the significant reduction in 
compliance costs for the approximately 745 lower-volume depository

[[Page 20978]]

institutions that would no longer be required to report HMDA data.
Alternative 2: Threshold Set at 100
    The Bureau estimates that if the closed-end coverage threshold were 
increased from 25 to 100 loans, approximately 2,581 out of about 4,263 
depository institutions covered under the current rule (or 
approximately 61 percent) would continue to be required to report HMDA 
data on closed-end mortgage loans. Approximately 1,682 depository 
institutions covered under the current rule (or approximately 39 
percent) would be relieved of their HMDA reporting responsibilities 
with respect to closed-end mortgage loans. The Bureau estimates that 
with this proposed increase to the closed-end coverage threshold, 
approximately 96 percent of total originations of closed-end mortgage 
loans reported by depository institutions under the current coverage 
criteria, or approximately 3.43 million closed-end mortgage loan 
originations under the current market conditions, would continue to be 
reported.
    With respect to the potential effect on available data at the 
census tract level, the Bureau estimates that if the closed-end 
coverage threshold were increased from 25 to the proposed 100, there 
would be a loss of at least 20 percent of reportable HMDA data in about 
1,100 out of approximately 74,000 total census tracts, or 1.5 percent 
of the total number of census tracts, relative to the current 
threshold.\55\ For low-to-moderate income census tracts, the Bureau 
estimates that if the closed-end coverage threshold were increased from 
25 to the proposed 100, there would be at least a 20 percent loss of 
reportable HMDA data in 3 percent of such tracts if the closed-end 
coverage threshold were set at the proposed 100. In addition, the 
Bureau examined the effects on rural census tracts and estimates that 
relative to the current threshold, there would be at least a 20 percent 
loss of reportable HMDA data in less than 3 percent of such tracts.
---------------------------------------------------------------------------

    \55\ The Bureau estimates that at least 80 percent of reportable 
HMDA data would be retained in approximately 73,000 tracts. In 
certain tracts, substantially more than 80 percent of reportable 
HMDA data would be retained.
---------------------------------------------------------------------------

    Ongoing cost reduction from proposed Alternative 2: Threshold set 
at 100. The proposed increase in the closed-end coverage threshold from 
25 to 100 would relieve institutions that originate between 25 and 99 
closed-end mortgage loans of the ongoing costs associated with 
reporting such loans that they might otherwise incur if the closed-end 
coverage threshold remained at the current 25. The Bureau estimates 
that the proposed increase in the closed-end coverage threshold to 100 
would result in aggregate savings on the operational costs associated 
with reporting closed-end mortgage loans of approximately $8.1 million 
per year.\56\
---------------------------------------------------------------------------

    \56\ These cost estimates reflect the combined ongoing reduction 
in costs for depository and nondepository institutions. These 
estimates also take into account the enactment of the EGRRCPA, which 
created partial exemptions from HMDA's requirements that certain 
insured depository institutions and insured credit unions may now 
use. See part VI.E.3 below for a more comprehensive analysis on cost 
estimates.
---------------------------------------------------------------------------

    Therefore, the Bureau believes that if the closed-end coverage 
threshold were set at the proposed 100 the loss in data from these 
depository institutions and for this relatively small number of census 
tracts, although greater than at the proposed 50 closed-end coverage 
threshold, may be justified by the significant reduction in compliance 
costs for the approximately 1,682 lower-volume depository institutions 
that would no longer be required to report HMDA data relative to the 
current threshold.
Estimates for Other Closed-End Coverage Thresholds
    The Bureau also generated estimates for closed-end coverage 
thresholds higher than the ones in the proposed alternatives. These 
estimates reflect that the decrease in the number of depository 
institutions that would be required to report HMDA data and the 
resulting decrease in the HMDA data that would be reported becomes more 
pronounced at thresholds higher than 100. For example, if the closed-
end coverage threshold were increased from 25 to 250 loans, the Bureau 
estimates that approximately 1,413 out of approximately 4,263 
depository institutions would continue to report HMDA data and 
approximately 2,850 depository institutions, or approximately 67 
percent of depository institutions covered under the current rule, 
would be relieved of their HMDA reporting responsibilities. The Bureau 
estimates that with an increase in the closed-end coverage threshold 
from 25 to 250, approximately 90 percent of total originations of 
closed-end mortgage loans reported by depository institutions under the 
current coverage criteria, or approximately 3.21 million closed-end 
mortgage loan originations under the current market conditions, would 
continue to be reported.
    Further, if the closed-end coverage threshold were increased from 
25 to 500 loans, the Bureau estimates that approximately 798 out of 
4,263 depository institutions would continue to be required to report 
HMDA data and approximately 3,465 depository institutions, or 
approximately 81 percent of depository institutions covered under the 
current coverage criteria, would be relieved of their HMDA reporting 
responsibilities. The Bureau estimates that with an increase in the 
closed-end coverage threshold to 500, approximately 83 percent of total 
originations of closed-end mortgage loans reported by depository 
institutions under the current Regulation C coverage criteria, or 
approximately 2.97 million closed-end mortgage loan originations under 
the current market conditions, would continue to be reported.
    The Bureau's estimates also reflect that the effect on data 
available at the census tract level would become more pronounced at 
closed-end mortgage loan coverage thresholds above 100. For example, 
the Bureau estimates that increasing the closed-end coverage threshold 
from 25 to 250 loans would result in a loss of at least 20 percent of 
reportable HMDA data on closed-end mortgage loans in over 4,000 out of 
approximately 74,000 total census tracts, or 5.4 percent of the total 
number census tracts. Of the approximately 4,000 census tracts where 
there would be a loss of at least 20 percent of reportable HMDA data on 
closed-end mortgage loans at such threshold, about 14 percent are rural 
tracts \57\ and just over 8 percent are low-to-moderate income tracts. 
Further, the Bureau estimates that increasing the closed-end coverage 
threshold from 25 to 500 loans would result in a loss of at least 20 
percent of reportable HMDA data on closed-end mortgage loans in 
approximately 11,000 out of approximately 74,000 total census tracts, 
or 14.9 percent of the total number of census tracts. Of the 
approximately 11,000 census tracts where there would be a loss of at 
least 20 percent of reportable HMDA data on closed-end mortgage loans 
at such threshold, about 32 percent are rural tracts and about 17 
percent are low-to-moderate income tracts.
---------------------------------------------------------------------------

    \57\ As discussed in part VI.F.2 below, recent research suggests 
that financial institutions that serve rural areas are generally not 
HMDA reporters. HMDA data do, however, contain information about 
some covered loans involving properties in rural areas and these 
higher thresholds would thus result in decreased information on such 
lending activity.
---------------------------------------------------------------------------

    The Bureau is not proposing these higher thresholds because of 
concerns that the resulting reduction in HMDA's overall coverage of the 
mortgage market may affect the usefulness of the HMDA data. For 
example, a reduction in

[[Page 20979]]

HMDA data may affect bank regulators' and the public's ability to use 
HMDA data to evaluate a depository institution's performance under the 
CRA. HMDA data are also used for identifying possible discriminatory 
lending patterns and potential violations of antidiscrimination 
statutes, such as the Equal Credit Opportunity Act and Fair Housing 
Act, including through redlining analyses, which aim to compare lenders 
and their peers. As noted in the 2015 HMDA Rule, data about local 
communities is essential to achieve HMDA's purposes.\58\ Among other 
things, public officials, community advocates, and researchers use HMDA 
data to analyze access to credit at the neighborhood level and to 
target programs to assist underserved communities and consumers.\59\ A 
reduction in HMDA's overall coverage of the mortgage market could thus 
reduce the usefulness of HMDA data for identifying opportunities for 
public and private investment, and for assessing whether lenders are 
meeting the housing needs of their communities.\60\ Therefore, the 
Bureau believes that if the closed-end coverage threshold were 
increased from 25 loans to a level above 100 loans, the more notable 
decrease in the number of institutions required to report HMDA data and 
the loss of reportable HMDA data, particularly at the local level, 
available to serve HMDA's purposes may not be justified by the 
significant reduction in compliance costs for the depository 
institutions that would no longer be required to report HMDA data at 
such higher thresholds.
---------------------------------------------------------------------------

    \58\ 80 FR 66128, 66147 (Oct. 28, 2015). The 2015 HMDA Rule 
explained that public officials, community advocates, and 
researchers rely on HMDA data to analyze access to credit at the 
neighborhood level and to target programs to assist underserved 
communities and consumers. It explained that, for example, local and 
state officials have used HMDA data to identify and target relief to 
localities impacted by high-cost lending or discrimination. Id.
    \59\ Id. at 66280.
    \60\ Id. at 66276.
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Request for Feedback
    For the reasons discussed above, the Bureau proposes to increase 
the closed-end coverage threshold for depository institutions in Sec.  
1003.2(g)(1)(v)(A) from 25 to 50 in Alternative 1 or from 25 to 100 in 
Alternative 2, and to make conforming amendments to comments (2)(g)-1 
and -5. The Bureau seeks comment on whether the data that would be 
reported at thresholds of 50 or 100 closed-end mortgage loans would 
achieve the purposes of HMDA.\61\ The Bureau also seeks comment on 
whether the value of the data that would be reported by institutions 
that originate between 25 and 50 closed-end mortgage loans, or 
alternatively between 25 and 100 closed-end mortgage loans, is 
outweighed by the burden on those institutions of reporting HMDA data 
and undergoing examinations to validate the accuracy of their 
submissions. The Bureau seeks comment on these alternative proposals as 
well as any other closed-end coverage threshold, including any 
threshold significantly above 100, that would more appropriately 
balance the burden of reporting with the value of the data reported to 
achieving the purposes of HMDA. Specifically, the Bureau seeks comment 
on: (1) How the proposed increase to the closed-end coverage threshold 
to 50, 100, or another number would affect the number of depository 
institutions required to report data on closed-end mortgage loans; (2) 
the significance of the data that would not be available for achieving 
HMDA's purposes as a result of the proposed increase to the closed-end 
coverage threshold to 50, 100, or another number, including (a) 
whether, and under what circumstances, the proposed increase would 
prevent public officials and the public from understanding if 
depository institutions excluded by the proposed 50, 100, or another 
closed-end coverage threshold are serving the needs of their community, 
(b) whether, and under what circumstances, the proposed increase to the 
closed-end coverage threshold to 50, 100, or another number would 
negatively impact the ability of public officials to make 
determinations with respect to the distribution of public sector 
investments in a manner designed to improve the private investment 
environment, and (c) whether, and under what circumstances, the 
proposed 50, 100, or another number for the closed-end coverage 
threshold would exclude data that would be valuable for identifying 
possible fair lending violations or enforcing antidiscrimination laws; 
and (3) the reduction in burden that would result from the proposed 
increase for institutions that would not be required to report 
(addressing separately the burden reduction for depository institutions 
that are eligible for the EGRRCPA's partial exemption for closed-end 
mortgage loans and the burden reduction for depository institutions 
that are not).
---------------------------------------------------------------------------

    \61\ As originally adopted, HMDA identifies its purposes as 
providing the public and public officials with information to help 
determine whether financial institutions are serving the housing 
needs of the communities in which they are located, and assisting 
public officials in their determination of the distribution of 
public sector investments in a manner designed to improve the 
private investment environment. Following Congress's expansion of 
HMDA, the Board recognized a third purpose of identifying possible 
discriminatory lending patterns and enforcing antidiscrimination 
statutes.
---------------------------------------------------------------------------

2(g)(1)(v)(B)
Background on Reporting Data Concerning Open-End Lines of Credit Under 
the 2015 HMDA Rule and the 2017 HMDA Rule
    By its terms, the definition of ``mortgage loan'' in HMDA covers 
all loans secured by residential real property and home improvement 
loans whether open- or closed-end.\62\ However, home-equity lines of 
credit were uncommon in the 1970s and early 1980s when Regulation C was 
first issued, and the Board's definition covered only closed-end loans. 
In 2000, in response to the increasing importance of open-end lending 
in the housing market, the Board proposed to revise Regulation C to 
require mandatory reporting of all home-equity lines of credit, which 
were optionally reported.\63\ However, the Board's 2002 final rule left 
open-end reporting voluntary, as the Board determined that the benefits 
of mandatory reporting relative to other then proposed changes (such as 
collecting information about higher-priced loans) did not justify the 
increased burden.\64\
---------------------------------------------------------------------------

    \62\ HMDA section 303(2), 12 U.S.C. 2802(2).
    \63\ 65 FR 78656, 78659-60 (Dec. 15, 2000). In 1988, the Board 
had amended Regulation C to permit, but not require, financial 
institutions to report certain home-equity lines of credit. 53 FR 
31683, 31685 (Aug. 19, 1988).
    \64\ 67 FR 7222, 7225 (Feb. 15, 2002).
---------------------------------------------------------------------------

    As discussed in the 2015 HMDA Rule, open-end mortgage lending 
continued to increase in the years following the Board's 2002 final 
rule, particularly in areas with high home-price appreciation.\65\ In 
light of that development and the role that open-end lines of credit 
played in contributing to the financial crisis,\66\ the Bureau decided 
in the 2015 HMDA Rule to require reporting of dwelling-secured, 
consumer purpose open-end lines of credit,\67\ concluding that doing so 
was a

[[Page 20980]]

reasonable interpretation of ``mortgage loan'' in HMDA and necessary 
and proper to effectuate the purposes of HMDA and prevent evasions 
thereof.\68\
---------------------------------------------------------------------------

    \65\ 80 FR 66128, 66160 (Oct. 28, 2015).
    \66\ Id. As the Bureau explained in the 2015 HMDA Rule, research 
indicated that some real estate investors used open-end, home-
secured lines of credit to purchase non-owner occupied properties, 
which correlated with higher first-mortgage defaults and home-price 
depreciation during the financial crisis. Id. In the years leading 
up to the crisis, such home-equity lines of credit often were made 
and fully drawn more or less simultaneously with first-lien home 
purchase loans, essentially creating high loan-to-value home 
purchase transactions that were not visible in the HMDA dataset. Id.
    \67\ The Bureau also required reporting of applications for, and 
originations of, dwelling-secured commercial-purpose lines of credit 
for home purchase, home improvement, or refinancing purposes. Id. at 
66171.
    \68\ Id. at 66157-62. 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 investment so as to attract private 
investment to areas where it is needed, and to assist in identifying 
possible discriminatory lending patterns and enforcing 
antidiscrimination statutes. The Bureau believes that collecting 
information about all dwelling-secured, consumer-purpose open-end 
lines of credit serves these purposes.
---------------------------------------------------------------------------

    As noted in the 2015 HMDA 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 their open-end lending volume.\69\ 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.\70\ In seeking to draw such a line, the Bureau 
acknowledged that it was handicapped by the lack of available data 
concerning open-end lending.\71\ 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 institutions of various sizes would incur in reporting data on 
open-end lending.
---------------------------------------------------------------------------

    \69\ 80 FR 66128, 66161 (Oct. 28, 2015).
    \70\ Id. at 66149.
    \71\ Id.
---------------------------------------------------------------------------

    To estimate the one-time and ongoing costs of reporting data under 
HMDA in the 2015 HMDA 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).\72\ The Bureau then sought to estimate one-time and 
ongoing costs for a representative institution in each tier.\73\
---------------------------------------------------------------------------

    \72\ Id. at 66261, 66269-70. In the 2015 HMDA Rule and the 2017 
HMDA Rule, the Bureau assigned financial institutions to tiers by 
adopting cutoffs based on the estimated open-end line of credit 
volume. Id. at 66285; 82 FR 43088, 43128 (Sept. 13, 2017). 
Specifically, the Bureau assumed the lenders that originated fewer 
than 200 but more than 100 open-end lines of credit were tier 3 
(low-complexity) open-end reporters; lenders that originate between 
200 and 7,000 open-lines of credit were tier 2 (moderate-complexity) 
open-end reporters; and lenders that originated more than 7,000 
open-end lines of credit were tier 1 (high-complexity) open-end 
reporters. 80 FR 66128, 66285 (Oct. 28, 2015); 82 FR 43088, 43128 
(Sept. 13, 2017). As explained below in part VI.D.1, for purposes of 
this proposal, the Bureau has used a more precise methodology to 
assign eligible financial institutions to tiers 2 and 3 for their 
open-end reporting, which relies on constraints relating to the 
estimated numbers of impacted institutions and loan/application 
register records for the applicable provision.
    \73\ 80 FR 66128, 66264-65 (Oct. 28, 2015); see also id. at 
66284.
---------------------------------------------------------------------------

    The Bureau recognized in the 2015 HMDA Rule that the one-time cost 
of reporting open-end lines of credit could be substantial because most 
financial institutions had not reported open-end lines of credit 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.\74\ 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 they may process open-end 
lines of credit on the same system and in the same business unit as 
closed-end mortgage loans, 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.\75\
---------------------------------------------------------------------------

    \74\ Id. at 66264; see also id. at 66284-85.
    \75\ Id. at 66265; see also id. at 66284.
---------------------------------------------------------------------------

    The Bureau acknowledged in the 2015 HMDA Rule that ongoing 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.\76\ 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.\77\ Thus, using the ongoing cost estimates developed for 
closed-end reporting, the Bureau estimated that for a representative 
tier 1 institution the ongoing operational costs would be $273,000 per 
year; for a representative tier 2 institution $43,400 per year; and for 
a representative tier 3 institution $8,600 per year.\78\ These 
translated into costs per HMDA record of approximately $9, $43, and $57 
respectively.\79\ 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 these estimates were 
reasonably reliable.\80\
---------------------------------------------------------------------------

    \76\ Id. at 66285.
    \77\ Id.
    \78\ Id. at 66264, 66286.
    \79\ Id.
    \80\ Id. at 66162.
---------------------------------------------------------------------------

    Drawing on all of these estimates, the Bureau decided in the 2015 
HMDA Rule to establish an open-end coverage threshold that would 
require institutions that originate 100 or more open-end lines of 
credit in each of the two preceding calendar years to report data on 
such lines of credit. The Bureau estimated that this threshold would 
avoid imposing the burden of establishing mandatory open-end reporting 
on approximately 3,000 predominantly smaller-sized institutions with 
low-volume open-end lending \81\ and would require reporting by 749 
financial institutions, all but 24 of which would also report data on 
their closed-end mortgage lending.\82\ The Bureau explained that it 
believed this threshold appropriately balanced the benefits and burdens 
of covering institutions based on their open-end mortgage lending.\83\ 
However, as discussed in the 2017 HMDA Rule, the Bureau lacked robust 
data for the estimates that it used to establish the open-end threshold 
in the 2015 HMDA Rule.\84\
---------------------------------------------------------------------------

    \81\ Id. The estimate of the number of institutions that would 
be excluded from reporting open-end lines of credit by the 
transactional coverage threshold was relative to the number that 
would have been covered under the Bureau's proposal that led to the 
2015 HMDA 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).
    \82\ 80 FR 66128, 66281 (Oct. 28, 2015).
    \83\ Id. at 66162.
    \84\ 82 FR 43088, 43094 (Sept. 13, 2017).
---------------------------------------------------------------------------

    The 2017 HMDA Rule explained that, between 2013 and 2017, the 
number of dwelling-secured open-end lines of credit financial 
institutions originated had increased by 36 percent.\85\ The Bureau 
noted that, to the extent institutions that had been originating fewer 
than 100 open-end lines of credit shared in that growth, the number of 
institutions at the margin that would be required to report under an 
open-end threshold of 100 lines of credit would

[[Page 20981]]

also increase.\86\ Additionally, in the 2017 HMDA Rule, the Bureau 
explained that information received by the Bureau since issuing the 
2015 HMDA Rule had caused the Bureau to question its assumption that 
certain low-complexity institutions \87\ process home-equity lines of 
credit on the same data platforms as closed-end mortgages, on which the 
Bureau based its assumption that the one-time costs for these 
institutions would be minimal.\88\ After issuing the 2015 HMDA Rule, 
the Bureau had heard anecdotes suggesting that one-time costs to begin 
reporting open-end lines of credit could be as high as $100,000 for 
such institutions.\89\ The Bureau likewise had heard anecdotes 
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 than the Bureau had estimated.\90\
---------------------------------------------------------------------------

    \85\ Id.
    \86\ Id.
    \87\ See supra notes 72-75 and accompanying text.
    \88\ 82 FR 43088, 43094 (Sept. 13, 2017).
    \89\ Id.
    \90\ Id.
---------------------------------------------------------------------------

    Based on this information 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 Rule, the Bureau proposed in 2017 to increase 
temporarily the open-end threshold to 500 for two years, until January 
1, 2020.\91\ This temporary increase was intended to allow for 
additional data collection and assessment as to what threshold would 
best balance the benefits and burdens of covering institutions based on 
their open-end mortgage lending. The Bureau finalized the proposal 
after notice and comment in the 2017 HMDA Rule.\92\
---------------------------------------------------------------------------

    \91\ 82 FR 33455 (July 20, 2017).
    \92\ 82 FR 43088 (Sept. 13, 2017). Comments received on the July 
2017 HMDA Proposal to change temporarily the open-end threshold are 
discussed in the 2017 HMDA Rule. Id. at 43094-95.
---------------------------------------------------------------------------

    Since the Bureau issued the 2017 HMDA Rule, various trade 
associations and smaller financial institutions have urged the Bureau 
to increase permanently the open-end line of credit coverage threshold 
in order to reduce the burden on smaller institutions. For example, 
some Federal credit unions suggested in response to the Bureau's March 
2018 RFI on Adopted Regulations that the Bureau consider increasing 
both the open- and closed-end thresholds that trigger the applicability 
of HMDA requirements to credit unions.
Open-End Line of Credit Threshold for Institutional Coverage of 
Depository Institutions
    As explained above, the 2015 HMDA Rule established an institutional 
coverage threshold in Sec.  1003.2(g) for open-end lines of credit of 
at least 100 open-end lines of credit in each of the two preceding 
calendar years.\93\ In the 2017 HMDA Rule, the Bureau amended Sec.  
1003.2(g)(1)(v)(B) and comments 2(g)-3 and -5, effective January 1, 
2018, to increase temporarily the open-end threshold from 100 to 500 
and, effective January 1, 2020, to restore a permanent threshold of 
100.\94\ For the reasons discussed below, the Bureau now proposes to 
amend Sec.  1003.2(g)(1)(v)(B) and comments 2(g)-3 and -5, effective 
January 1, 2020, to extend until January 1, 2022, the temporary open-
end institutional coverage threshold for depository institutions of 500 
open-end lines of credit. When this temporary threshold expires, the 
Bureau is proposing to set a permanent threshold at 200 open-end lines 
of credit. The Bureau is also proposing conforming changes to the 
institutional coverage threshold for nondepository institutions in 
Sec.  1003.2(g)(2)(ii)(B) and to the transactional coverage threshold 
in Sec.  1003.3(c)(12), as discussed below.
---------------------------------------------------------------------------

    \93\ The 2015 HMDA Rule established complementary thresholds 
that determine whether a financial institution is required to report 
data on closed-end mortgage loans or open-end lines of credit, 
respectively. 80 FR 66128, 66146, 66149, 66162 (Oct. 28, 2015). The 
2017 HMDA Rule corrected a drafting error to ensure the 
institutional coverage threshold and the transactional coverage 
threshold were complementary. 82 FR 43088, 43100, 43102 (Sept. 13, 
2017). These institutional and transactional coverage thresholds are 
distinct from the thresholds for the EGRRCPA partial exemptions in 
proposed Sec.  1003.3(d)(2) and (3).
    \94\ 82 FR 43088, 43094 (Sept. 13, 2017). In the 2015 HMDA Rule 
and 2017 HMDA Rule, the Bureau declined to retain optional reporting 
of open-end lines of credit, after concluding that improved 
visibility into this 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. Id. at 43095; 80 FR 66128, 66160-61 (Oct. 28, 2015). 
However, Regulation C as amended by the 2017 HMDA Rule permits 
voluntary reporting by financial institutions that do not meet the 
open-end threshold. 12 CFR 1003.3(c)(12).
---------------------------------------------------------------------------

    Several developments since the Bureau issued the 2015 HMDA Rule 
have affected the Bureau's analyses of the costs and benefits 
associated with the open-end line of credit coverage threshold. As the 
2017 HMDA Rule explained, the Bureau is concerned that, in establishing 
a 100-loan threshold for open-end lines of credit in the 2015 HMDA 
Rule, it may have underestimated the number of institutions that would 
be covered and the reporting burden on smaller covered institutions. In 
the 2017 HMDA Rule, the Bureau noted that there had been a 36 percent 
increase in the number of dwelling-secured open-end lines of credit 
originated between 2013 (the most recent data cited by the Bureau for 
its analysis of the 2015 HMDA Rule) and 2016.\95\ The number of 
dwelling-secured open-end line of credit originations in 2018 was again 
approximately 36 percent higher than the number of such originations in 
2013.\96\ Table 4 in the Bureau's analysis under Dodd-Frank Act section 
1022(b) in part VI.E.4 below provides the Bureau's updated coverage 
estimates for reporting thresholds of 100, 200, and 500 open-end lines 
of credit.\97\ As explained in more detail in part VI.E.4, the Bureau's 
updated coverage estimates indicate that the total number of 
institutions exceeding the open-end coverage threshold of 100 open-end 
lines of credit in 2018 would be approximately 1,014, which is 
significantly higher than the estimate of 749 in the 2015 HMDA Rule 
that was based on 2013 data.\98\
---------------------------------------------------------------------------

    \95\ 82 FR 43088, 43094 (Sept. 13, 2017) (citing July 2017 HMDA 
Proposal, 82 FR 33455, 33459 (July 20, 2017)).
    \96\ Experian-Oliver Wyman Market Intelligence Reports show that 
in 2013 there were 1.14 million home-equity lines of credit 
originated. Experian & Oliver Wyman, 2015 Q1 Experian-Oliver Wyman 
Market Intelligence Report: Home Equity Lines Report, at 6 fig. 1 
(2015). In 2018 that number grew to 1.555 million. Experian & Oliver 
Wyman, 2018 Q4 Experian-Oliver Wyman Market Intelligence Report: 
Home Equity Lines Report, at 6 fig. 1 (2019).
    \97\ As discussed further in the analysis under Dodd-Frank Act 
section 1022(b) in part VI, in note 172 below, the Bureau's analyses 
in this proposal are based on HMDA data collected in 2016 and 2017 
and other sources. The Bureau intends to review the 2018 HMDA data 
more closely in connection with this rulemaking once the 2018 
submissions are more complete.
    \98\ 82 FR 43088, 43094 (Sept. 13, 2017).
---------------------------------------------------------------------------

    As explained in more detail in part VI below, the estimates the 
Bureau used in the 2015 HMDA Rule may understate the burden that open-
end reporting would impose on smaller institutions if they were 
required to begin reporting on January 1, 2020. For example, in 
developing the one-time cost estimates for open-end lines of credit in 
the 2015 HMDA Rule, the Bureau had envisioned that there would be cost 
sharing between the line of business that conducts open-end lending and 
the line of business that conducts closed-end lending at the corporate 
level, as the implementation of open-end reporting that became 
mandatory under the 2015 HMDA Rule would coincide with the 
implementation of the changes to closed-end reporting under the 2015 
HMDA Rule. However, this type of cost

[[Page 20982]]

sharing is less likely now since financial institutions have already 
implemented almost all of the closed-end reporting changes required 
under the 2015 HMDA Rule.
    Another development since the Bureau finalized the 2015 HMDA Rule 
is the enactment of the EGRRCPA, which created partial exemptions from 
HMDA's requirements that certain insured depository institutions and 
insured credit unions may now use.\99\ The partial exemption for open-
end lines of credit under the EGRRCPA relieves certain insured 
depository institutions and insured credit unions that originated fewer 
than 500 open-end mortgage loans in each of the two preceding calendar 
years of the obligation to report many of the data points generally 
required by Regulation C.\100\ The partial exemptions are available to 
the vast majority of the financial institutions that would be excluded 
by the proposed increases in the open-end coverage threshold.\101\ The 
EGRRCPA has thus changed the costs and benefits associated with 
different possible coverage thresholds, as discussed in more detail 
below.
---------------------------------------------------------------------------

    \99\ Public Law 115-174, 132 Stat. 1296 (2018).
    \100\ See the section-by-section analysis of Sec.  1003.3(d) in 
part IV above.
    \101\ See infra part VI.E.4.
---------------------------------------------------------------------------

    The Bureau has considered the appropriate open-end threshold in 
light of these developments and believes that the proposed changes to 
the open-end threshold would reduce one-time and ongoing costs and 
provide other benefits, while still providing significant market 
coverage. These considerations are discussed in turn below, and 
additional explanation of the Bureau's cost estimates is provided in 
the Bureau's analysis under Dodd-Frank Act section 1022(b) in part 
VI.E.4 below.\102\
---------------------------------------------------------------------------

    \102\ As explained in part VI below, the Bureau derived these 
estimates using estimates of savings for open-end lines of credit 
for representative financial institutions.
---------------------------------------------------------------------------

    One-time cost reduction from proposed threshold of 200. The 
Bureau's proposed increase of the open-end coverage threshold to 200 
open-end lines of credit after the proposed temporary extension expires 
in 2022 would avoid imposing one-time costs of reporting open-end lines 
of credit on institutions originating between 100 and 199 open-end 
lines of credit. The Bureau estimates that setting the coverage 
threshold at 200 rather than 100 would exclude 401 institutions from 
reporting open-end lines of credit starting in 2022. According to the 
Bureau's estimates, about 391 of those 401 financial institutions are 
low-complexity tier 3 open-end reporters, about 10 are moderate-
complexity tier 2 open-end reporters, and none are high-complexity tier 
1 reporters.\103\
---------------------------------------------------------------------------

    \103\ For an explanation of the Bureau's assumptions in 
assigning institutions to tiers 1, 2, and 3, see supra note 72 and 
infra part VI.D.1.
---------------------------------------------------------------------------

    The Bureau recognizes that many financial institutions, especially 
larger and more complex institutions, process applications for open-end 
lines of credit in their consumer lending departments using procedures, 
policies, and data systems that are separate from those used for 
closed-end loans. Some institutions that would have to report with a 
threshold of 100 after the proposed extension of the temporary 
threshold of 500 expires in 2022 do not currently report open-end lines 
of credit. These institutions might have to develop completely new 
reporting infrastructures to comply with mandatory reporting if the 
threshold of 100 lines of credit were to take effect. As a result, 
these institutions would incur one-time costs to create processes and 
systems for open-end lines of credit in addition to the one-time costs 
to modify processes and systems used for other mortgage products. As 
explained in part VI below, the Bureau estimates that increasing the 
open-end coverage threshold from 100 to 200 starting in 2022 would 
result in an aggregate savings of about $3.8 million in avoided one-
time costs associated with open-end lines of credit.
    Ongoing cost reduction from proposed threshold of 200. The proposed 
increase of the open-end coverage threshold from 100 to 200 starting in 
2022 would permanently relieve institutions that originate between 100 
and 199 open-end lines of credit of the ongoing costs associated with 
reporting open-end lines of credit that they might otherwise incur if 
the 2017 HMDA Rule's permanent threshold of 100 were to take effect. 
The Bureau estimates that the proposed increase in the permanent 
threshold would result in aggregate savings on the operational costs 
associated with open-end lines of credit of about $2.1 million per year 
starting in 2022.
    Benefits of two-year extension. The proposed two-year extension of 
the temporary coverage threshold of 500 open-end lines of credit would 
ensure that any institutions that would be required to report under the 
proposed threshold of 200 open-end lines of credit but that are not 
required to report under the current temporary threshold of 500 would 
have time to adapt their systems and prepare for compliance. The Bureau 
estimates that there are 280 institutions that fall within this 
category. Industry stakeholders provided feedback in connection with 
the 2015 HMDA Rule and the 2017 HMDA Rule indicating that they strongly 
prefer a long implementation period when coverage changes result in new 
institutions having open-end reporting obligations under HMDA. The 
Bureau believes that the two-year extension of the temporary threshold 
of 500 lines of credit would provide any newly covered institutions 
with sufficient time to revise and update policies and procedures, 
implement any necessary systems changes, and train staff before the 
proposed threshold of 200 lines of credit would take effect in 2022.
    The proposed extension of the temporary coverage threshold would 
also provide the Bureau with additional time to assess how a 
requirement to report open-end lines of credit would affect 
institutions whose origination volume falls just above the proposed 
threshold of 200 open-end lines of credit. The Bureau is reviewing HMDA 
data on open-end lines of credit submitted in 2019 by financial 
institutions that originated 500 or more open-end lines of credit in 
2016 and 2017 and invites comment on financial institutions' 
experiences with collecting and reporting these open-end data. The 
Bureau will also continue to monitor HMDA data in the future. A two-
year temporary extension of the current coverage threshold would ensure 
the Bureau has time to consider further the open-end data submitted for 
2018 and 2019 and any additional information stakeholders provide 
before any permanent threshold established through this rulemaking 
takes effect.
    The proposed extension of the temporary coverage threshold would 
also relieve institutions that originate between 100 and 499 open-end 
lines of credit of ongoing costs associated with reporting open-end 
lines of credit over the next two years. In total, the Bureau estimates 
that extending the temporary open-end coverage threshold for two years 
would reduce operational costs for institutions by about $5.6 million 
per year in the years 2020 and 2021.
    Effect on market coverage. While the proposed permanent and 
temporary threshold increases would reduce market coverage, information 
about a sizeable portion of the market would still be available in the 
next two years under the proposed temporary threshold of 500 and 
thereafter under the proposed threshold of 200. The Bureau has used 
multiple data sources, including credit union Call Reports, Call 
Reports for banks and thrifts, HMDA

[[Page 20983]]

data, and Consumer Credit Panel data, in order to develop updated 
estimates for this proposal about open-end originations for 
institutions that are active in the market and to assess the impact of 
various thresholds on the numbers of institutions which report and the 
number of loans about which they report under various scenarios.\104\ 
Based on this information, the Bureau estimates that, as of 2018, 
approximately 613 financial institutions originated at least 200 open-
end lines of credit in both of the two preceding years, as compared to 
approximately 333 financial institutions that originated at least 500 
open-end lines of credit in both of the two preceding years, and about 
1,014 financial institutions that originated at least 100 open-end 
lines of credit in both of the two preceding years.\105\ Under the 
temporary 500-loan open-end threshold, the Bureau estimates about 1.23 
million lines of credit or approximately 78 percent of origination 
volume would reported by about 5 percent of all institutions in the 
open-end line of credit market.\106\ Under a permanent 200-loan open-
end threshold, the Bureau estimates about 1.34 million lines of credit 
or approximately 84 percent of origination volume would be reported by 
approximately 9 percent of all institutions in the open-end line of 
credit market.\107\ As compared to a 100-loan threshold, the 200-loan 
threshold would reduce the number of institutions reporting by 
approximately 40 percent (from 1,014 to 613), while reducing coverage 
of originations by approximately 5 percentage points from approximately 
89 percent to 84 percent.
---------------------------------------------------------------------------

    \104\ Because collection of data on open-end lines of credit 
only became mandatory starting in 2018 under the 2015 HMDA Rule and 
2017 HMDA Rule, no single data source exists as of the time of this 
proposal that can accurately capture the number of originations of 
open-end lines of credit in the entire market and by lenders. For 
information about the HMDA data used in updating the Bureau 
estimates, see infra note 172.
    \105\ See infra part VI.E.4 at Table 4 for estimates of coverage 
among all lenders that are active in the open-end line of credit 
market at various open-end coverage thresholds.
    \106\ Id.
    \107\ Id.
---------------------------------------------------------------------------

    Extending the temporary threshold of 500 open-end lines of credit 
for two years and raising the open-end threshold from 100 to 200 after 
the temporary threshold expires in 2022 would decrease visibility into 
the open-end line of credit market relative to the visibility that 
would be obtained if the Bureau were to allow the 100-loan threshold to 
take effect on January 1, 2020. However, the effect of these threshold 
increases would be limited, because the EGRRCPA now provides a partial 
exemption that exempts almost all of the institutions that the proposed 
increases would affect from any obligation to report many of the data 
points generally required by Regulation C for their open-end lines of 
credit. In light of the EGRRCPA's partial exemption from reporting 
certain data for open-end lines of credit for certain insured 
depository institutions and insured credit unions, increasing the open-
end line of credit coverage threshold to 500 temporarily and to 200 
permanently would result in a much smaller loss of data than the Bureau 
anticipated when it adopted a permanent threshold of 100 open-end lines 
of credit in the 2015 HMDA Rule or when it revisited the open-end line 
of credit coverage threshold in the 2017 HMDA Rule. The Bureau believes 
that the limited decrease in visibility occasioned by the proposed 
adjustments to the open-end threshold would appear to be justified by 
the benefits discussed above of reducing the burden on smaller 
institutions. This burden reduction is greater than the Bureau 
anticipated in the 2015 HMDA Rule, because the number of institutions 
affected and the costs per institution associated with reporting are 
higher than anticipated, as explained above and in part VI below. The 
Bureau now proposes to set the open-end line of credit coverage 
threshold at 200 after a two-year extension of the temporary increase. 
Using a threshold of 200 as compared to 100 loans would better balance 
the benefits and burdens of covering institutions based on their open-
end mortgage lending. As noted above, the Bureau is particularly 
interested in comments on how a requirement to report open-end lines of 
credit would affect institutions whose origination volume falls just 
above the proposed threshold of 200 open-end lines of credit.
    For the reasons discussed above, the Bureau proposes to amend Sec.  
1003.2(g)(1)(v)(B) and comments 2(g)-3 and -5, to set the open-end 
institutional coverage threshold for depository institutions at 500, 
effective January 1, 2020, and at 200, effective January 1, 2022. The 
Bureau seeks comment on whether it should extend the temporary 
institutional coverage threshold of 500 open-end lines of credit as 
proposed and, if so, for how long. The Bureau also seeks comment on 
whether to increase permanently the open-end institutional coverage 
threshold when the proposed temporary extension expires and, if so, 
whether a threshold of 200 or another threshold would most 
appropriately balance the benefits and burdens of covering institutions 
based on their open-end lending beginning in 2022. The Bureau also 
seeks comment specifically on: (1) How the proposed temporary and 
permanent increases would affect the number of financial institutions 
required to report data on open-end lines of credit; (2) the 
significance of the data that would not be available as a result of the 
proposed temporary and permanent increases (including (a) whether, and 
under what circumstances, the proposed temporary and permanent 
increases would prevent public officials and the public from 
understanding if financial institutions excluded by the proposed 
temporary and permanent increases are serving the needs of their 
community, (b) whether, and under what circumstances, the proposed 
temporary and permanent increases would negatively impact the ability 
of public officials to make determinations with respect to the 
distribution of public sector investments in a manner designed to 
improve the private investment environment, and (c) whether, and under 
what circumstances, the proposed temporary and permanent increases 
would exclude data that would be valuable for identifying possible fair 
lending violations or enforcing antidiscrimination laws); and (3) the 
reduction in burden that would result from the proposed temporary and 
permanent increases for institutions that would not be required to 
report their open-end lines of credit (addressing separately the burden 
reduction for institutions that are eligible for the EGRRCPA's partial 
exemption for open-end lines of credit and for institutions that are 
not).
2(g)(2) Nondepository Financial Institution
2(g)(2)(ii)(A)
Closed-End Mortgage Loan Threshold for Institutional Coverage of 
Nondepository Institutions
    HMDA extends reporting responsibilities to certain nondepository 
institutions, defined as any person engaged for profit in the business 
of mortgage lending other than a bank, savings association, or credit 
union.\108\ HMDA section 309(a) authorizes the Bureau to adopt an 
exemption for covered nondepository institutions that are comparable 
within their respective industries to banks, savings associations, and 
credit unions with $10

[[Page 20984]]

million or less in assets in the previous fiscal year.\109\ Regulation 
C implements HMDA's coverage criteria for nondepository institutions in 
Sec.  1003.2(g)(2). The Bureau revised the coverage criteria for 
nondepository institutions in the 2015 HMDA Rule by requiring such 
institutions to report HMDA data if they met the statutory location 
test and exceeded either the closed-end or open-end line of credit 
coverage thresholds.\110\
---------------------------------------------------------------------------

    \108\ HMDA section 303(5) (defining ``other lending 
institutions'').
    \109\ HMDA section 309(a), 12 U.S.C. 2808(a).
    \110\ Prior to the 2015 HMDA Rule, for-profit nondepository 
institutions that met the location test only had to report if: (1) 
In the preceding calendar year, the institution originated home 
purchase loans, including refinancings of home purchase loans, that 
equaled either at least 10 percent of its loan-origination volume, 
measured in dollars, or at least $25 million; and (2) On the 
preceding December 31, the institution had total assets of more than 
$10 million, counting the assets of any parent corporation; or in 
the preceding calendar year, the institution originated at least 100 
home purchase loans, including refinancings of home purchase loans. 
12 CFR 1003.2 (2017).
---------------------------------------------------------------------------

    HMDA sections 303(3)(B) and 303(5) 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. As 
the Bureau stated in the 2015 HMDA Rule, the Bureau interpreted 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.\111\ In the 2015 HMDA Rule, the Bureau interpreted ``engaged for 
profit in the business of mortgage lending'' to include nondepository 
institutions that originated at least 25 closed-end mortgage loans or 
100 open-end lines of credit in each of the two preceding calendar 
years. Due to the questions raised about potential risks posed to 
applicants and borrowers by nondepository institutions and the lack of 
other publicly available data sources about nondepository institutions, 
the Bureau believed that requiring additional nondepository 
institutions to report HMDA data would better effectuate HMDA's 
purposes. The Bureau estimated in 2015 that these changes could result 
in HMDA coverage for up to an additional 450 nondepository 
institutions. The Bureau stated in the 2015 HMDA Rule its belief that 
it was important to increase visibility into the lending practices of 
nondepository institutions because of their history of making riskier 
loans than depository institutions, including their role in the 
financial crisis and lack of available data about the mortgage lending 
practices of lower-volume nondepository institutions. The Bureau also 
stated that expanded coverage of nondepository institutions would 
ensure more equal visibility into the practices of nondepository 
institutions and depository institutions.
---------------------------------------------------------------------------

    \111\ 80 FR 66128, 66153 (Oct. 28, 2015) (citing 54 FR 51356, 
51358-59 (Dec. 15, 1989)).
---------------------------------------------------------------------------

    Since issuing the 2015 Final Rule and 2017 HMDA Rule, the Bureau 
has heard concerns that lower-volume institutions continue to 
experience significant burden at a 25 closed-end coverage 
threshold.\112\ Various industry stakeholders have advocated for an 
increase to the closed-end coverage threshold in order to reduce burden 
on additional lower-volume financial institutions. In light of the 
concerns raised by industry stakeholders, the Bureau is considering 
whether a higher closed-end coverage threshold would more appropriately 
cover nondepository institutions that are ``engaged for profit in the 
business of mortgage lending'' and maintain sufficient visibility into 
the lending practices of such institutions. The Bureau believes that 
increasing the closed-end coverage threshold may provide meaningful 
burden relief for lower-volume nondepository institutions without 
reducing substantially the data reported under HMDA, and more 
appropriately exclude lower-volume mortgage lenders. Therefore, the 
Bureau seeks comment on whether an increase to this threshold would 
more appropriately balance the benefits and burdens of covering lower-
volume nondepository institutions based on their closed-end lending.
---------------------------------------------------------------------------

    \112\ The Bureau temporarily raised the threshold for open-end 
lines of credit in the 2017 HMDA Rule because of concerns that the 
Bureau may have underestimated in the 2015 HMDA Rule the number of 
institutions that would be required to report open-end lines of 
credit under the threshold adopted and that it also may have 
underestimated the cost of reporting. However, the Bureau declined 
to raise the threshold for closed-end mortgage loans and stated that 
in developing the 2015 HMDA Rule, it had robust data to make a 
determination about the number of transactions that would be 
reported at the 25 closed-end coverage threshold as well as the one-
time and ongoing costs to industry. 82 FR 43088, 43095-96 (Sept. 13, 
2017).
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    As discussed below, the Bureau is proposing two alternatives to the 
closed-end mortgage loan coverage threshold. These proposals would 
maintain a uniform closed-end coverage threshold for depository and 
nondepository institutions.\113\ Alternative 1 proposes to set the 
closed-end coverage threshold at 50 while Alternative 2 proposes to set 
the closed-end coverage threshold at 100. The Bureau reviewed multiple 
data sources, including recent HMDA data \114\ and Call Reports and 
developed estimates for each proposal as described below.
---------------------------------------------------------------------------

    \113\ For a discussion on the proposed closed-end coverage 
threshold for depository institutions, see the section-by-section 
analysis of Sec.  1003.2(g)(1)(v)(A) above.
    \114\ For further discussion of the recent HMDA data used, see 
infra note 155.
---------------------------------------------------------------------------

Alternative 1: Threshold Set at 50
    The Bureau estimates that if the closed-end coverage threshold were 
increased from 25 to 50 loans, approximately 683 out of about 697 
nondepository institutions covered under the current rule (or 
approximately 98 percent) would continue to be required to report HMDA 
data on closed-end mortgage loans. Approximately 14 nondepository 
institutions covered under the current rule (or approximately 2 
percent) would be relieved of their HMDA reporting responsibilities on 
closed-end mortgage loans. Further, the Bureau estimates that with this 
proposed increase to the closed-end coverage threshold, over 99 percent 
of total originations of closed-end mortgage loans reported by 
nondepository institutions under the current coverage criteria, or 
approximately 3.44 million closed-end mortgage loan originations under 
the current market conditions, would continue to be reported. The loss 
of data from these approximately 14 nondepository institutions would 
amount to an estimated 1,000 closed-end mortgage loan originations or 
less than one-half of 1 percent of closed-end mortgage loan 
originations reportable under the current market conditions.
    At the census tract level the Bureau estimates that, as noted above 
in the section-by section analysis of Sec.  1003.2(g)(1)(v)(A), 
increasing the closed-end coverage threshold from 25 to the proposed 50 
loans for both depository and nondepository institutions would result 
in a loss of at least 20 percent of reportable HMDA data in just under 
300 out of approximately 74,000 total census tracts, or less than one-
half of 1 percent of the total number of census tracts.\115\ With 
respect to low-to-moderate income census tracts, the Bureau estimates 
if the closed-end threshold were increased from 25 to 50 loans, there 
would be at least a 20 percent loss of reportable HMDA data in less 
than 1 percent of such tracts. In addition, the Bureau examined the 
effects of an increase in the closed-end threshold from 25 to 50 loans 
and estimates that such a change would result in at least a 20 percent 
loss

[[Page 20985]]

of reportable HMDA data in less than one-half of 1 percent of such 
tracts.
---------------------------------------------------------------------------

    \115\ The estimates of the effect on reportable HMDA data at the 
census tract level comprise both depository institutions and 
nondepository institutions. The Bureau estimates that at least 80 
percent of reportable HMDA data would be retained in over 73,500 
tracts. In certain tracts, substantially more than 80 percent of 
reportable HMDA data would be retained.
---------------------------------------------------------------------------

    Therefore, the Bureau believes that it is reasonable to interpret 
``engaged for profit in the business of mortgage lending'' to include 
nondepository institutions that originated at least 50 closed-end 
mortgage loans in each of the two preceding calendar years. The Bureau 
believes that the proposed increase to the closed-end coverage 
threshold for nondepository institutions would effectuate the purposes 
of HMDA by ensuring significant coverage of nondepository mortgage 
lending, while facilitating compliance with HMDA by reducing burden on 
smaller institutions and excluding nondepository institutions that are 
not engaged for profit in the business of mortgage lending. The Bureau 
believes that the reasons provided for the proposed changes to the 
closed-end coverage threshold for depository institutions in the 
section-by-section analysis of Sec.  1003.2(g)(1)(v)(A) above apply to 
the threshold for nondepository institutions as well. Additionally, the 
proposed increase to the closed-end coverage threshold would promote 
consistency by subjecting nondepository institutions to the same 
threshold that applies to depository institutions.
Alternative 2: Threshold Set at 100
    The Bureau estimates that if the closed-end mortgage loan threshold 
were increased from 25 to 100, approximately 661 out of about 697 
nondepository institutions covered under the current rule (or 
approximately 95 percent) would continue to be required to report HMDA 
data on closed-end mortgage loans. Approximately 36 nondepository 
institutions covered under the current rule (or approximately 5 
percent) would be relieved of their HMDA reporting responsibilities on 
closed-end mortgage loans. In terms of the effect on the total number 
of originations, the Bureau estimates that with an increase in the 
closed-end mortgage threshold from 25 to the proposed 100 loans, over 
99 percent of total originations of closed-end mortgage loans reported 
by nondepository institutions under the current Regulation C coverage 
criteria, or approximately 3.44 million closed-end mortgage loan 
originations under the current market conditions, would continue to be 
reported. The loss of data from these approximately 36 nondepository 
institutions would amount to about 3,000 closed-end mortgage 
originations under the current market conditions, or less than 1 
percent of closed-end mortgage loan originations reportable under the 
current market conditions.
    With respect to the potential effect on available data at the 
census tract level and as noted above in the section-by section 
analysis of Sec.  1003.2(g)(1)(v)(A), the Bureau estimates that if the 
closed-end coverage threshold were increased from 25 to the proposed 
100, there would be a loss of at least 20 percent of reportable HMDA 
data in about 1,100 out of approximately 74,000 total census tracts, or 
1.5 percent of the total number of census tracts.\116\ For low-to-
moderate income census tracts, the Bureau estimates that if the closed-
end threshold were increased from 25 to 100 loans, there would be a 
loss of at least 20 percent of reportable HMDA data in approximately 3 
percent of such tracts. In addition, the Bureau examined the effects on 
rural census tracts and estimates that relative to the current 
threshold, there would be at least a 20 percent loss of reportable HMDA 
data in less than 3 percent of such tracts.
---------------------------------------------------------------------------

    \116\ The Bureau estimates that at least 80 percent of 
reportable HMDA data would be retained in approximately 73,000 
tracts. In certain tracts, substantially more than 80 percent of 
reportable HMDA data would be retained.
---------------------------------------------------------------------------

    Therefore, the Bureau believes that it is reasonable to interpret 
``engaged for profit in the business of mortgage lending'' to include 
nondepository institutions that originated at least 100 closed-end 
mortgage loans in each of the two preceding calendar years. The Bureau 
believes that the proposed increase to the closed-end coverage 
threshold for nondepository institutions would effectuate the purposes 
of HMDA by ensuring significant coverage of nondepository mortgage 
lending, while facilitating compliance with HMDA by reducing burden on 
smaller institutions and excluding nondepository institutions that are 
not engaged for profit in the business of mortgage lending. The Bureau 
believes that the reasons provided for the proposed changes to the 
closed-end coverage threshold for depository institutions in the 
section-by-section analysis of Sec.  1003.2(g)(1)(v)(A) above apply to 
the threshold for nondepository institutions as well. Additionally, the 
proposed increase to the threshold would promote consistency by 
subjecting nondepository institutions to the same threshold that 
applies to depository institutions.
Estimates for Other Closed-End Coverage Thresholds
    The Bureau also generated estimates for closed-end coverage 
thresholds higher than those in the proposed alternatives. Similar to 
the estimates for depository institutions, these estimates reflect that 
the decrease in the number of nondepository institutions that would be 
required to report HMDA data becomes more pronounced at thresholds 
higher than 100. Moreover, such thresholds would decrease visibility 
into nondepository institutions relative to the coverage criteria that 
pre-dated the 2015 HMDA Rule.\117\ For example, if the closed-end 
coverage threshold were increased from 25 to 250 loans, the Bureau 
estimates that approximately 573 out of about 697 nondepository 
institutions would continue to be required to report HMDA data and 
approximately 124 nondepository institutions, or about 18 percent of 
nondepository institutions covered under the current rule, would be 
relieved of their HMDA reporting responsibilities. The Bureau estimates 
that with an increase in the closed-end coverage threshold to 250, 
about 99 percent of total originations of closed-end mortgage loans 
reported by nondepository institutions under the current Regulation C 
coverage criteria, or approximately 3.42 million closed-end mortgage 
loan originations under the current market conditions, would continue 
to be reported.
---------------------------------------------------------------------------

    \117\ The Bureau noted in the 2015 HMDA Rule that any closed-end 
reporting threshold set at 100 loans would not provide enhanced 
insight into lending practices of nondepository institutions and 
that a threshold above 100 closed-end mortgage loans would decrease 
visibility into nondepository institutions' practices. At the time, 
the Bureau explained its belief that, due to the questions raised 
about potential risks posed to applicants and borrowers by 
nondepository institutions and the lack of other publicly available 
data sources about nondepository institutions, requiring additional 
nondepository institutions to report HMDA data will better 
effectuate HMDA's purposes. 80 FR 66128, 66153, 66281 (Oct. 28, 
2015).
---------------------------------------------------------------------------

    Further, if the closed-end coverage threshold were increased from 
25 to 500 loans, for example, the Bureau estimates that approximately 
477 out of about 697 nondepository institutions would continue to be 
required to report HMDA data and approximately 220 nondepository 
institutions, or about 32 percent of nondepository institutions covered 
under the current coverage criteria, would be relieved of their HMDA 
reporting responsibilities. The Bureau estimates that with an increase 
of the closed-end coverage threshold to 500, about 98 percent of total 
originations of closed-end mortgage loans reported by nondepository 
institutions under the current Regulation C coverage criteria, or 
approximately 3.38 million closed-end mortgage loan originations under 
the current market conditions, would continue to be reported.
    The Bureau's estimates also reflect that the effect on data 
available at the

[[Page 20986]]

census tract level would become more pronounced at closed-end mortgage 
loan coverage thresholds above 100. For example, the Bureau estimates 
that increasing the closed-end coverage threshold from 25 to 250 would 
result in a loss of at least 20 percent of reportable HMDA data in over 
4,000 out of approximately 74,000 total census tracts, or 5.4 percent 
of the total number census tracts. Of the approximately 4,000 census 
tracts where there would be a loss of at least 20 percent of reportable 
HMDA data at such threshold, about 14 percent are rural tracts and just 
over 8 percent are low-to-moderate income tracts. Further, the Bureau 
estimates that increasing the closed-end coverage threshold from 25 to 
500 would result in a loss of at least 20 percent of reportable HMDA 
data in approximately 11,000 out of approximately 74,000 total census 
tracts, or 14.9 percent of the total number census tracts. Of the 
approximately 11,000 census tracts where there would be a loss of at 
least 20 percent of reportable HMDA data at such threshold, about 32 
percent are rural tracts and about 17 percent are low-to-moderate 
income tracts.
    Although the estimates for these higher closed-end coverage 
thresholds reflect that a high percentage of total originations of 
closed-end mortgage loans would continue to be reported by 
nondepository institutions, the Bureau believes that the decrease in 
coverage of nondepository institutions relative to the level of 
coverage that pre-dated the 2015 HMDA Rule could make it more difficult 
for the public and public officials to analyze whether lower-volume 
nondepository institutions are serving the housing needs of their 
communities. Therefore, the Bureau believes that if the closed-end 
coverage threshold were increased to a level above 100 loans, the loss 
of visibility into nondepository lending and the loss of reportable 
HMDA data at the census tract level available to serve HMDA's purposes 
may not be justified by the significant reduction in compliance costs 
for the nondepository institutions that would no longer be required to 
report HMDA data at such higher thresholds.
Request for Feedback
    For the reasons discussed above, the Bureau proposes to increase 
the closed-end mortgage loan-volume threshold in Sec.  
1003.2(g)(2)(ii)(A) from 25 to 50 in Alternative 1, or from 25 to 100 
in Alternative 2, and to make conforming amendments to comments 2(g)-1 
and -5. The Bureau requests comment on the proposed changes to the 
closed-end coverage threshold for institutional coverage of 
nondepository institutions in Sec.  1003.2(g)(2)(ii)(A).
    Specifically, the Bureau solicits feedback on the proposed 
increase, including comments on: (1) How the proposed increase to the 
closed-end coverage threshold to 50, 100, or another number, including 
any threshold significantly above 100, would affect the number of 
nondepository financial institutions required to report data on closed-
end mortgage loans; (2) the significance of the data that would not be 
available as a result of the proposed increase to the closed-end 
coverage threshold to 50, 100, or another number, including (a) 
whether, and under what circumstances, the proposed increase would 
prevent public officials and the public from understanding if 
nondepository financial institutions excluded by the proposed 50, 100, 
or another closed-end coverage threshold are serving the needs of their 
community, (b) whether, and under what circumstances, the proposed 
increase to the closed-end coverage threshold to 50, 100, or another 
number would negatively impact the ability of public officials to make 
determinations with respect to the distribution of public sector 
investments in a manner designed to improve the private investment 
environment, and (c) whether, and under what circumstances, the 
proposed increase to the closed-end coverage threshold would exclude 
data that would be valuable for identifying possible fair lending 
violations or enforcing antidiscrimination laws; and (3) the reduction 
in burden that would result from the proposed increase to the closed-
end coverage threshold for institutions that would not be required to 
report.
2(g)(2)(ii)(B)
Open-End Line of Credit Threshold for Institutional Coverage of 
Nondepository Institutions
    The 2015 HMDA Rule established a coverage threshold of 100 open-end 
lines of credit in Sec.  1003.2(g)(2)(ii)(B) as part of the definition 
of nondepository financial institution. As discussed in more detail in 
the section-by-section analysis of Sec.  1003.2(g)(1)(v)(B) above, the 
2017 HMDA Rule amended Sec. Sec.  1003.2(g)(1)(v)(B) and (g)(2)(ii)(B) 
and 1003.3(c)(12) and related commentary to raise temporarily the open-
end coverage threshold to 500 loans for calendar years 2018 and 
2019.\118\ For the reasons discussed in the section-by-section analysis 
of Sec.  1003.2(g)(1)(v)(B), and to ensure the thresholds are 
consistent for depository and nondepository institutions, the Bureau is 
now proposing to extend to January 1, 2022, Regulation C's temporary 
open-end threshold of 500 open-end lines of credit for institutional 
and transactional coverage of both depository and nondepository 
institutions and then set the threshold at 200 open-end lines of credit 
upon the expiration in 2022 of the proposed extension of the temporary 
threshold. The Bureau is therefore proposing to set the open-end line 
of credit threshold for institutional coverage of nondepository 
institutions in Sec.  1003.2(g)(2)(ii)(B) at 500 effective January 1, 
2020, and then at 200 effective January 1, 2022. These changes would 
conform to the changes that the Bureau is proposing with respect to the 
open-end threshold for institutional coverage for depository 
institutions in Sec.  1003.2(g)(1)(v)(B) and the open-threshold for 
transactional coverage in Sec.  1003.3(c)(12).
---------------------------------------------------------------------------

    \118\ 82 FR 43088, 43095 (Sept. 13, 2017).
---------------------------------------------------------------------------

    The Bureau believes that these proposed changes to the threshold in 
Sec.  1003.2(g)(2)(ii)(B) would effectuate the purposes of HMDA by 
ensuring significant coverage of nondepository mortgage lending, while 
facilitating compliance with HMDA by reducing burden on smaller 
institutions and excluding nondepository institutions that are not 
engaged for profit in the business of mortgage lending. The Bureau 
believes that the reasons provided for the proposed changes to the 
open-end threshold for depository institutions in the section-by-
section analysis of Sec.  1003.2(g)(1)(v)(B) above apply to the 
threshold for nondepository institutions as well. Additionally, the 
proposed changes to the threshold in Sec.  1003.2(g)(2)(ii)(B) would 
promote consistency by subjecting nondepository institutions to the 
same threshold that applies to the depository institutions that make up 
the bulk of the open-end line of credit market. According to the 
Bureau's estimates, nondepository institutions account for only a small 
percentage of the institutions and loans in the open-end line of credit 
market.\119\ Table 4 in the Bureau's analysis under Dodd-Frank Act 
section 1022(b) in part VI.E.4 below provides coverage estimates for 
nondepository institutions at the current temporary threshold of 500 
open-end lines of credit that the Bureau proposes to extend and at the 
proposed threshold of 200 open-end lines of credit that would take 
effect when the temporary threshold expires.

[[Page 20987]]

The Bureau requests comment on the proposed changes to the open-end 
line of credit threshold for institutional coverage of nondepository 
institutions in Sec.  1003.2(g)(2)(ii)(B).
---------------------------------------------------------------------------

    \119\ See infra part VI.E.4 at Table 4.
---------------------------------------------------------------------------

Section 1003.3 Exempt Institutions and Excluded and Partially Exempt 
Transactions

3(c) Excluded Transactions
3(c)(11)
    As adopted in the 2015 HMDA Rule, Sec.  1003.3(c)(11) provides an 
exclusion from the requirement to report closed-end mortgage loans for 
institutions that did not originate at least 25 closed-end mortgage 
loans in each of the two preceding calendar years. This transactional 
coverage threshold was intended to complement a closed-end mortgage 
loan reporting threshold included in the definition of financial 
institution in Sec.  1003.2(g). The 2017 HMDA Rule replaced ``each'' 
with ``either'' in Sec.  1003.3(c)(11) to correct a drafting error and 
to ensure that the exclusion provided in that section mirrors the loan-
volume threshold for financial institutions in Sec.  1003.2(g).\120\ 
For the reasons discussed in the section-by-section analysis of Sec.  
1003.2(g), the Bureau is now proposing to increase Regulation C's 
closed-end threshold for institutional and transactional coverage from 
25 to 50 under Alternative 1 and from 25 to 100 under Alternative 2. 
Therefore, the Bureau proposes to increase the closed-end threshold for 
transactional coverage from 25 to 50 under Alternative 1 in Sec.  
1003.3(c)(11) and comments 3(c)(11)-1 and -2, and from 25 to 100 under 
Alternative 2 in Sec.  1003.3(c)(11) and comments 3(c)(11)-1 and -2. 
This proposed change would conform to the related changes the Bureau is 
proposing with respect to the closed-end threshold for institutional 
coverage in Sec.  1003.2(g).
---------------------------------------------------------------------------

    \120\ 82 FR 43088, 43100 (Sept. 13, 2017).
---------------------------------------------------------------------------

3(c)(12)
    As adopted in the 2015 HMDA 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 transactional coverage 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 2017 HMDA Rule 
replaced ``each'' with ``either'' in Sec.  1003.3(c)(12) to correct a 
drafting error and to ensure that the exclusions provided in that 
section mirror the loan-volume thresholds for financial institutions in 
Sec.  1003.2(g).\121\ As discussed in more detail in the section-by-
section analysis of Sec.  1003.2(g), in the 2017 HMDA Rule the Bureau 
also amended Sec. Sec.  1003.2(g) and 1003.3(c)(12) and related 
commentary to raise temporarily the open-end threshold in those 
provisions to 500 loans for calendar years 2018 and 2019.\122\ For the 
reasons discussed in the section-by-section analysis of Sec.  
1003.2(g), the Bureau is now proposing to extend to January 1, 2022, 
Regulation C's current temporary open-end threshold for institutional 
and transactional coverage of 500 open-end lines of credit and then to 
set the threshold at 200 open-end lines of credit upon the expiration 
of the proposed extension of the temporary threshold. The Bureau 
therefore proposes to adjust the open-end line of credit threshold for 
transactional coverage in Sec.  1003.3(c)(12) and comments 3(c)(12)-1 
and -2 to 500 effective January 1, 2020, and to 200 effective January 
1, 2022.\123\ These changes would conform to the changes that the 
Bureau is proposing with respect to the open-end threshold for 
institutional coverage in Sec.  1003.2(g).
---------------------------------------------------------------------------

    \121\ 82 FR 43088, 43102 (Sept. 13, 2017).
    \122\ Id. at 43095.
    \123\ The proposal would also make minor changes to an example 
in comment 3(c)(12)-1 effective January 1, 2020, to conform to the 
proposed change to the closed-end coverage threshold that is 
discussed in the section-by-section analysis of Sec.  
1003.2(g)(1)(v)(A) above.
---------------------------------------------------------------------------

3(d) Partially Exempt Transactions
    Section 104(a) of the EGRRCPA amended HMDA section 304(i) by adding 
partial exemptions from HMDA's requirements that apply to certain 
transactions of eligible insured depository institutions and insured 
credit unions. In the 2018 HMDA Rule, the Bureau implemented and 
clarified HMDA section 304(i) by addressing a set of interpretive and 
procedural questions relating to the partial exemptions. Proposed Sec.  
1003.3(d) and related commentary would incorporate the partial 
exemptions and the interpretations and procedures from the 2018 HMDA 
Rule into Regulation C and further implement HMDA section 304(i) by 
addressing additional questions that have arisen with respect to the 
partial exemptions.\124\
---------------------------------------------------------------------------

    \124\ This proposed rule includes related amendments in Sec.  
1003.4 and its commentary referencing Sec.  1003.3(d) that are 
discussed in the section-by-section analysis of Sec.  1003.4. The 
Filing Instructions Guide for HMDA Data Collected in 2019 (2019 FIG) 
provides guidance to financial institutions on how to indicate in 
their HMDA submissions if they are invoking a partial exemption. See 
Fed. Fin. Insts. Examination Council (FFIEC), ``Filing Instructions 
Guide for HMDA Data Collected in 2019,'' at 21-54 (Oct. 2018), 
https://s3.amazonaws.com/cfpb-hmda-public/prod/help/2019-hmda-fig.pdf.
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    Proposed Sec.  1003.3(d)(1) sets forth definitions relating to the 
partial exemptions, including a definition of optional data that 
delineates which data points are covered by the partial exemptions. 
Proposed Sec.  1003.3(d)(2) and (3) provides the general tests for when 
the partial exemptions apply for closed-end mortgage loans and open-end 
lines of credit, respectively. Proposed Sec.  1003.3(d)(4) addresses 
voluntary reporting of data that are covered by a partial exemption for 
a partially exempt transaction. Proposed Sec.  1003.3(d)(5) relates to 
the non-universal loan identifier that financial institutions must 
report for a partially exempt transaction if a ULI is not provided. 
Proposed Sec.  1003.3(d)(6) implements the statutory exception to the 
partial exemptions for insured depository institutions with certain 
less than satisfactory examination histories under the CRA. Each of 
these paragraphs and related commentary are discussed in more detail 
below.
    The loan thresholds added by the EGRRCPA to HMDA section 304(i) 
resemble in many respects the loan thresholds that determine 
institutional and transactional coverage in Regulation C. For example, 
both sets of thresholds relate to originations (rather than 
applications or purchases) and apply separately to closed-end mortgage 
loans and open-end lines of credit. In light of these similarities, the 
Bureau has used the institutional and transactional coverage thresholds 
in existing Regulation C as a model in interpreting certain aspects of 
the partial exemption thresholds in both the 2018 HMDA Rule and this 
proposed rule. The Bureau recognizes that there are advantages to 
industry stakeholders and others from using consistent language to 
describe similar requirements and therefore has used language in the 
proposed rule that parallels language in existing Regulation C wherever 
appropriate.
    Proposed comments 3(d)-1 through -5 address certain issues relating 
to the partial exemptions that the 2018 HMDA Rule does not specifically 
discuss. Proposed comments 3(d)-1 through -3 explain how to determine 
whether a partial exemption applies to a transaction after a merger or 
acquisition. Proposed comment 3(d)-1 describes the application of the 
partial exemption thresholds to a surviving or newly formed 
institution. Proposed comment 3(d)-2 describes how CRA examination 
history is handled in the event of a

[[Page 20988]]

merger or acquisition for purposes of proposed Sec.  1003.3(d)(6), 
which implements the exception to the partial exemptions for certain 
less than satisfactory CRA examination histories in HMDA section 
304(i)(3). Proposed comment 3(d)-3 describes the applicability of 
partial exemptions during the calendar year of a merger or acquisition 
and provides various examples. These proposed comments are modeled 
closely on existing comments 2(g)-3 and -4, which explain how to 
determine whether an institution satisfies the definition of financial 
institution in Sec.  1003.2(g) after a merger or acquisition.
    Proposed comment 3(d)-4 relates to whether activities with respect 
to a particular closed-end mortgage loan or open-end line of credit 
constitute an origination for purposes of the partial exemption loan 
thresholds. Given the similarities between the coverage thresholds 
currently in Regulation C \125\ and the partial exemption thresholds 
under the EGRRCPA, the Bureau believes that the same guidance for 
determining whether activities constitute an origination that applies 
for purposes of the coverage thresholds in Regulation C's definition of 
financial institution should apply with respect to the partial 
exemption thresholds. Consistent with the approach taken in existing 
comment 2(g)-5 for the definition of financial institution, proposed 
comment 3(d)-4 refers to comments 4(a)-2 through -4 for guidance on 
this issue in the context of the partial exemptions.
---------------------------------------------------------------------------

    \125\ See 12 CFR 1003.2(g)(1)(v) and (g)(2)(ii) and 
1003.3(c)(11) and (12).
---------------------------------------------------------------------------

    Proposed comment 3(d)-5 addresses questions about whether a 
financial institution that does not itself meet the requirements for a 
partial exemption can claim an exemption if an affiliate or parent 
company meets the requirements. It clarifies that a financial 
institution that is not itself an insured credit union or an insured 
depository institution \126\ is not eligible for a partial exemption 
under Sec.  1003.3(d)(2) and (3), even if it is owned by or affiliated 
with an insured credit union or an insured depository institution. This 
approach is consistent with HMDA section 304(i)(1) and (2), which by 
its terms applies ``[w]ith respect to an insured depository institution 
or insured credit union'' as defined in HMDA section 304(o). To clarify 
further the EGRRCPA's partial exemptions, the proposed comment also 
provides an example describing when a subsidiary of an insured credit 
union or insured depository institution could claim a partial exemption 
under Sec.  1003.3(d) for its closed-end mortgage loans.
---------------------------------------------------------------------------

    \126\ For purposes of this proposed comment, insured credit 
union and insured depository institution are defined in proposed 
Sec.  1003.3(d)(1)(i) and (ii), which, as explained below, mirrors 
how those terms are defined in HMDA section 304(o).
---------------------------------------------------------------------------

    The Bureau requests comment on these proposed additions and the 
other proposed provisions of Sec.  1003.3(d) that are discussed below, 
including whether these amendments appropriately implement section 
104(a) of the EGRRCPA and whether there are any additional issues under 
the EGRRCPA that the Bureau should address in Regulation C.
3(d)(1)
    Proposed Sec.  1003.3(d)(1) and proposed comment 3(d)(1)(iii)-1 
define terms related to the partial exemptions for purposes of proposed 
Sec.  1003.3(d). Proposed Sec.  1003.3(d)(1)(i) defines the term 
``insured credit union'' to mean an insured credit union as defined in 
section 101 of the Federal Credit Union Act (12 U.S.C. 1752), and 
proposed Sec.  1003.3(d)(1)(ii) defines the term ``insured depository 
institution'' to mean an insured depository institution as defined in 
section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813). These 
definitions are consistent with the way HMDA section 304(o) defines the 
two terms for purposes of HMDA section 304.
    Proposed Sec.  1003.3(d)(1)(iii) and proposed comment 3(d)(1)(iii)-
1 define the term ``optional data'' for purposes of proposed Sec.  
1003.3(d). For the reasons discussed below, proposed Sec.  
1003.3(d)(1)(iii) generally defines optional data as the data 
identified in Sec.  1003.4(a)(1)(i), (a)(9)(i), and (a)(12), (15) 
through (30), and (32) through (38). Proposed comment 3(d)(1)(iii)-1 
explains that the definition of optional data in Sec.  
1003.3(d)(1)(iii) identifies the data that are covered by the partial 
exemptions for certain transactions of insured depository institutions 
and insured credit unions under Sec.  1003.3(d). It also clarifies 
that, if a transaction is not partially exempt under Sec.  1003.3(d)(2) 
or (3), a financial institution must collect, record, and report 
optional data as otherwise required under part 1003.
    The EGRRCPA added partial exemptions to HMDA section 304(i), and 
the definition of optional data in proposed Sec.  1003.3(d)(1)(iii) 
specifies the data points covered by the partial exemptions. As the 
2018 HMDA Rule explains, if a transaction qualifies for one of the 
EGRRCPA's partial exemptions, HMDA section 304(i) provides that the 
requirements of HMDA section 304(b)(5) and (6) shall not apply. In the 
2018 HMDA Rule, the Bureau interpreted the requirements of HMDA section 
304(b)(5) and (6) to include the 26 data points listed in Table 1 in 
the 2018 HMDA Rule, which are found in Sec.  1003.4(a)(1)(i), 
(a)(9)(i), and (a)(12), (15) through (30), and (32) through (38).
    The Dodd-Frank Act added HMDA section 304(b)(5) and (6), which 
requires reporting of certain data points and provides the Bureau 
discretion to require additional data points.\127\ In the 2015 HMDA 
Rule, the Bureau implemented the new data points specified in the Dodd-
Frank Act (including those added in HMDA section 304(b)(5) and (6)), 
added a number of additional data points pursuant to the Bureau's 
discretionary authority, and made revisions to certain pre-existing 
data points to clarify their requirements, provide greater specificity 
in reporting, and align certain data points more closely with industry 
data standards.
---------------------------------------------------------------------------

    \127\ HMDA section 304(b)(5) requires disclosure of the number 
and dollar amount of mortgage loans grouped according to 
measurements of:
     The total points and fees payable at origination in 
connection with the mortgage as determined by the Bureau;
     The difference between the APR associated with the loan 
and a benchmark rate or rates for all loans;
     The term in months of any prepayment penalty or other 
fee or charge payable on repayment of some portion of principal or 
the entire principal in advance of scheduled payments; and
     Such other information as the Bureau may require.
    HMDA section 304(b)(6) requires disclosure of the number and 
dollar amount of mortgage loans and completed applications grouped 
according to measurements of:
     The value of the real property pledged or proposed to 
be pledged as collateral;
     The actual or proposed term in months of any 
introductory period after which the rate of interest may change;
     The presence of contractual terms or proposed 
contractual terms that would allow the mortgagor or applicant to 
make payments other than fully amortizing payments during any 
portion of the loan term;
     The actual or proposed term in months of the mortgage 
loan;
     The channel through which application was made;
     As the Bureau may determine to be appropriate, a unique 
identifier that identifies the loan originator as set forth in 
section 5102 of this title;
     As the Bureau may determine to be appropriate, a 
universal loan identifier;
     As the Bureau may determine to be appropriate, the 
parcel number that corresponds to the real property pledged or 
proposed to be pledged as collateral;
     The credit score of mortgage applicants and mortgagors, 
in such form as the Bureau may prescribe; and
     Such other information as the Bureau may require.
---------------------------------------------------------------------------

    As explained in the 2018 HMDA Rule, the Bureau interprets the 
requirements

[[Page 20989]]

of HMDA section 304(b)(5) and (6) for purposes of HMDA section 304(i) 
to include the 12 data points that the Bureau added to Regulation C in 
the 2015 HMDA Rule to implement data points specifically identified in 
HMDA section 304(b)(5)(A) through (C) or (b)(6)(A) through (I), which 
are the following: ULI; property address; rate spread; credit score; 
total loan costs or total points and fees; prepayment penalty term; 
loan term; introductory rate period; non-amortizing features; property 
value; application channel; and mortgage loan originator 
identifier.\128\ As the 2018 HMDA Rule explains, the Bureau also 
interprets the requirements of HMDA section 304(b)(5) and (6) to 
include the 14 data points that were not found in Regulation C prior to 
the Dodd-Frank Act and that the Bureau required in the 2015 HMDA Rule 
citing its discretionary authority under HMDA section 304(b)(5)(D) and 
(b)(6)(J). Specifically, these data points are the following: The total 
origination charges associated with the loan; the total points paid to 
the lender to reduce the interest rate of the loan (discount points); 
the amount of lender credits; the interest rate applicable at closing 
or account opening; the debt-to-income ratio; the ratio of the total 
amount of debt secured by the property to the value of the property 
(combined loan-to-value ratio); for transactions involving manufactured 
homes, whether the loan or application is or would have been secured by 
a manufactured home and land or by a manufactured home and not land 
(manufactured home secured property type); the land property interest 
for loans or applications related to manufactured housing (manufactured 
home land property interest); the number of individual dwellings units 
that are income-restricted pursuant to Federal, State, or local 
affordable housing programs (multifamily affordable units); information 
related to the automated underwriting system used in evaluating an 
application and the result generated by the automated underwriting 
system; whether the loan is a reverse mortgage; whether the loan is an 
open-end line of credit; whether the loan is primarily for a business 
or commercial purpose; and the reasons for denial of a loan 
application, which were optionally reported under the Board's rule but 
became mandatory in the 2015 HMDA Rule.\129\ The 2018 HMDA Rule 
indicates that insured depository institutions and insured credit 
unions need not report these 26 data points for transactions that 
qualify for a partial exemption, unless otherwise required by their 
regulator.\130\
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    \128\ 12 CFR 1003.4(a)(1)(i), (a)(9)(i), and (a)(12), (15), 
(17), (22), (25) through (28), and (33) and (34).
    \129\ 12 CFR 1003.4(a)(16), (18) through (21), (23) and (24), 
(29) and (30), (32), and (35) through (38).
    \130\ Financial institutions regulated by the OCC are required 
to report reasons for denial on their HMDA loan/application 
registers pursuant to 12 CFR 27.3(a)(1)(i) and 128.6. Similarly, 
pursuant to regulations transferred from the Office of Thrift 
Supervision, certain financial institutions supervised by the FDIC 
are required to report reasons for denial on their HMDA loan/
application registers. 12 CFR 390.147.
---------------------------------------------------------------------------

    As the 2018 HMDA Rule explains, the Bureau interprets the 
requirements of HMDA section 304(b)(5) and (6) not to include four 
other data points that are similar or identical to data points added to 
Regulation C by the Board and that the Bureau re-adopted in the 2015 
HMDA Rule: Lien status of the subject property; whether the loan is 
subject to the Home Ownership and Equity Protection Act of 1994 
(HOEPA); construction method for the dwelling related to the subject 
property; and the total number of individual dwelling units contained 
in the dwelling related to the loan (number of units).\131\ The 2015 
HMDA Rule did not alter the pre-existing Regulation C HOEPA status and 
lien status data requirements.\132\ Construction method and total 
units, together, replaced the pre-existing Regulation C property type 
data point; the information required by the new data points is very 
similar to what the Board required, but institutions now must report 
the precise number of units rather than categorizing dwellings into 
one- to four-family dwellings and multifamily dwellings.\133\
---------------------------------------------------------------------------

    \131\ 12 CFR 1003.4(a)(5), (13) and (14), and (31).
    \132\ The 2015 HMDA Rule extended the requirement to report lien 
status to purchased loans and no longer requires reporting of 
information about unsecured loans. 80 FR 66128, 66201 (Oct. 28, 
2015).
    \133\ Prior to 2018, Regulation C required reporting of property 
type as one- to four-family dwelling (other than manufactured 
housing), manufactured housing, or multifamily dwelling, whereas the 
current rule requires reporting of whether the dwelling is site-
built or a manufactured home, together with the number of individual 
dwelling units.
---------------------------------------------------------------------------

    The Board adopted its versions of these data points before HMDA 
section 304(b)(5) and (6) was added to HMDA by the Dodd-Frank Act, 
pursuant to HMDA authority that pre-existed section 304(b)(5) and (6). 
Although the Bureau cited HMDA section 304(b)(5) and (6) as additional 
support for these four data points in the 2015 HMDA Rule, the Bureau 
relied on HMDA section 305(a), which pre-dates the Dodd-Frank Act and 
independently provides legal authority for their adoption.\134\ Given 
that these data points were not newly added by the Dodd-Frank Act or 
the Bureau, the Bureau concluded in the 2018 HMDA Rule that the 
EGRRCPA's amendments to HMDA section 304 do not affect them.\135\
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    \134\ 80 FR 66128, 66180-81, 66199-201, 66227 (Oct. 28, 2015).
    \135\ This interpretation is consistent with the EGRRCPA's 
legislative history, which suggests that Congress was focused on 
relieving regulatory burden associated with the Dodd-Frank Act. See, 
e.g., 164 Cong. Rec. S1423-24 (daily ed. Mar. 7, 2018) (statement of 
Sen. Crapo), S1529-30 (statement of Sen. McConnell), S1532-33 
(statement of Sen. Cornyn), S1537-39 (statement of Sen. Lankford), 
S1619-20 (statement of Sen. Cornyn).
---------------------------------------------------------------------------

    The requirements of HMDA section 304(b)(5) and (6), and thus the 
partial exemptions, also do not include 17 other data points included 
in the 2015 HMDA Rule that are similar or identical to pre-existing 
Regulation C data points established by the Board and that were not 
required by HMDA section 304(b)(5) and (6) or promulgated by the Bureau 
using discretionary authority under HMDA section 304(b)(5)(D) and 
(b)(6)(J). These are: The Legal Entity Identifier (which replaced the 
pre-existing respondent identifier); application date; loan type; loan 
purpose; preapproval; occupancy type; loan amount; action taken; action 
taken date; State; county; census tract; ethnicity; race; sex; income; 
and type of purchaser.\136\ Additionally, the requirements of HMDA 
section 304(b)(5) and (6), and thus the partial exemptions, do not 
include age because the Dodd-Frank Act added that requirement instead 
to HMDA section 304(b)(4).\137\
---------------------------------------------------------------------------

    \136\ 12 CFR 1003.4(a)(1)(ii), (a)(2) through (4) and (6) 
through (8), (a)(9)(ii), and (a)(10) and (11) and 1003.5(a)(3).
    \137\ Dodd-Frank Act section 1094(3)(A)(i).
---------------------------------------------------------------------------

    Consistent with the scope of the new partial exemptions as 
explained in the 2018 HMDA Rule, the proposed general definition of 
optional data in Sec.  1003.3(d)(1)(iii) encompasses 26 of the 48 data 
points currently set forth in Regulation C.
    For ease of reference throughout Sec.  1003.3(d), proposed Sec.  
1003.3(d)(1)(iv) defines partially exempt transaction as a covered loan 
or application that is partially exempt under Sec.  1003.3(d)(2) or 
(3).
3(d)(2)
    HMDA section 304(i)(1) provides that the requirements of HMDA 
section 304(b)(5) and (6) shall not apply with respect to closed-end 
mortgage loans of an insured depository institution or insured credit 
union if it originated fewer than 500 closed-end mortgage loans in each 
of the two preceding calendar years. Proposed Sec.  1003.3(d)(2) and 
proposed comment 3(d)(2)-1 implement this provision. Proposed

[[Page 20990]]

Sec.  1003.3(d)(2) states that, except as provided in Sec.  
1003.3(d)(6), an insured depository institution or insured credit union 
that, in each of the two preceding calendar years, originated fewer 
than 500 closed-end mortgage loans that are not excluded from part 1003 
pursuant to Sec.  1003.3(c)(1) through (10) or (c)(13) is not required 
to collect, record, or report optional data as defined in Sec.  
1003.3(d)(1)(iii) for applications for closed-end mortgage loans that 
it receives, closed-end mortgage loans that it originates, and closed-
end mortgage loans that it purchases.
    The EGRRCPA and HMDA do not define the term ``closed-end mortgage 
loan'' for purposes of HMDA section 304(i). They also do not specify 
whether the term includes loans that would otherwise not be subject to 
HMDA reporting under Regulation C, such as loans used primarily for 
agricultural purposes.\138\ The Bureau explained in the 2018 HMDA Rule 
that the term ``closed-end mortgage loan'' as used in HMDA section 
304(i) is best interpreted to include only those closed-end mortgage 
loans that would otherwise be reportable under HMDA. This 
interpretation is consistent with how loans are counted for purposes of 
the thresholds in Regulation C's existing institutional and 
transactional coverage provisions, which are independent of the new 
partial exemptions and unaffected by the EGRRCPA.\139\ Accordingly, in 
the 2018 HMDA Rule, the Bureau interpreted the term ``closed-end 
mortgage loan'' to include any closed-end mortgage loan as defined in 
Sec.  1003.2(d) that is not excluded from Regulation C pursuant to 
Sec.  1003.3(c)(1) through (10) or (c)(13). Proposed Sec.  1003.3(d)(2) 
would incorporate that interpretation into Regulation C.
---------------------------------------------------------------------------

    \138\ 12 CFR 1003.3(c)(9).
    \139\ As discussed above in the section-by-section analysis of 
Sec. Sec.  1003.2(g) and 1003.3(c), the current definition of 
``depository financial institution'' in Sec.  1003.2(g)(1)(v) is 
limited to institutions that either (1) originated in each of the 
two preceding calendar years at least 25 closed-end mortgage loans 
that are not excluded from Regulation C pursuant to Sec.  
1003.3(c)(1) through (10) or (c)(13); or (2) originated in each of 
the two preceding calendar years at least 500 open-end lines of 
credit that are not excluded from Regulation C pursuant to Sec.  
1003.3(c)(1) through (10). See also 12 CFR 1003.3(c)(11), (12) 
(excluding closed-end mortgage loans from the requirements of 
Regulation C if the financial institution originated fewer than 25 
closed-end mortgage loans in either of the two preceding calendar 
years, and excluding open-end lines of credit from the requirements 
of Regulation C if the financial institution originated fewer than 
500 open-end lines of credit in either of the two preceding calendar 
years). The threshold of 500 open-end lines of credit for 
institutional and transactional coverage in Regulation C is 
temporary.
---------------------------------------------------------------------------

    Proposed comment 3(d)(2)-1 provides an illustrative example of how 
the closed-end partial exemption threshold works. For the reasons 
stated in the section-by-section analysis of Sec.  1003.3(d) above, 
proposed comment 3(d)(2)-1 also provides a cross-reference to comments 
4(a)-2 through -4 for guidance about the activities that constitute an 
origination.
3(d)(3)
    HMDA section 304(i)(2) provides that the requirements of HMDA 
section 304(b)(5) and (6) shall not apply with respect to open-end 
lines of credit of an insured depository institution or insured credit 
union if it originated fewer than 500 open-end lines of credit in each 
of the two preceding calendar years. Proposed Sec.  1003.3(d)(3) and 
proposed comment 3(d)(3)-1 implement this provision. Proposed Sec.  
1003.3(d)(3) provides that, except as provided in Sec.  1003.3(d)(6), 
an insured depository institution or insured credit union that, in each 
of the two preceding calendar years, originated fewer than 500 open-end 
lines of credit that are not excluded from part 1003 pursuant to Sec.  
1003.3(c)(1) through (10) is not required to collect, record, report, 
or disclose optional data as defined in Sec.  1003.3(d)(1)(iii) for 
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.
    The EGRRCPA and HMDA do not define the term ``open-end line of 
credit'' for purposes of HMDA section 304(i). They also do not specify 
whether the term includes lines of credit that would otherwise not be 
subject to HMDA reporting under Regulation C, such as loans used 
primarily for agricultural purposes.\140\ The Bureau explained in the 
2018 HMDA Rule its belief that the term ``open-end line of credit'' as 
used in HMDA section 304(i) is best interpreted to include only those 
open-end lines of credit that would otherwise be reportable under HMDA. 
This interpretation is consistent with how lines of credit are counted 
for purposes of the thresholds in Regulation C's existing institutional 
and transactional coverage provisions, which are independent of the new 
partial exemptions and unaffected by the EGRRCPA. Accordingly, in the 
2018 HMDA Rule, the Bureau interpreted the term ``open-end line of 
credit'' to include any open-end line of credit as defined in Sec.  
1003.2(o) that is not excluded from Regulation C pursuant to Sec.  
1003.3(c)(1) through (10). Proposed Sec.  1003.3(d)(3) would 
incorporate that interpretation into Regulation C.
---------------------------------------------------------------------------

    \140\ See 12 CFR 1003.3(c)(9).
---------------------------------------------------------------------------

    Proposed comment 3(d)(3)-1 provides a cross-reference to Sec.  
1003.3(c)(12) and comments 3(c)(12)-1 and -2, which provide an 
exclusion for certain open-end lines of credit from Regulation C and 
permit voluntary reporting of such transactions under certain 
circumstances. While the temporary threshold of 500 open-end lines of 
credit is in place for institutional and transactional coverage, all of 
the open-end lines of credit that are covered by the partial exemption 
for open-end lines of credit in HMDA section 304(i)(2) are completely 
excluded from the requirements of part 1003 under current Sec. Sec.  
1003.2(g)(1)(v) and 1003.3(c)(12). For the reasons stated in the 
section-by-section analysis of Sec.  1003.3(d) above, proposed comment 
3(d)(3)-1 also provides a cross-reference to comments 4(a)-2 through -4 
for guidance about the activities that constitute an origination.
3(d)(4)
    Some data points required under Regulation C are reported using 
multiple data fields, such as the property address data point, which 
consists of street address, city, State, and Zip Code data fields. The 
2018 HMDA Rule provides that insured depository institutions and 
insured credit unions covered by a partial exemption have the option of 
reporting exempt data fields as long as they report all data fields 
within any exempt data point for which they report data. Proposed Sec.  
1003.3(d)(4) and proposed comments 3(d)(4)-1 to -3 and 3(d)(4)(i)-1 
would incorporate this aspect of the 2018 HMDA Rule into Regulation C 
and provide additional clarity regarding voluntary reporting of the 
property address data point.
    As the 2018 HMDA Rule explains, whether a partial exemption applies 
to an institution's lending activity for a particular calendar year 
depends on an institution's origination activity in each of the 
preceding two years and, in some cases, cannot be determined until just 
before data collection must begin for that particular calendar year. 
For example, whether a partial exemption applies to closed-end mortgage 
loans for which final action is taken in 2020 depends on the number of 
closed-end mortgage loans originated by the insured depository 
institution or insured credit union in 2018 and 2019. Thus, an insured 
depository institution or insured credit union might not know until the 
end of 2019 what information it needs to collect in 2020 and report in 
2021. Some insured depository institutions and insured credit unions

[[Page 20991]]

eligible for a partial exemption under the EGRRCPA may therefore find 
it less burdensome to report all of the data, including the exempt data 
points, than to separate the exempt data points from the required data 
points and exclude the exempt data points from their submissions.\141\ 
Even when insured depository institutions and insured credit unions 
have had time to adjust their systems to implement the partial 
exemptions, some may still find it less burdensome to report data 
covered by a partial exemption, especially if their loan volumes tend 
to fluctuate just above or below the threshold from year to year. The 
Bureau concluded in the 2018 HMDA Rule that section 104(a) is best 
interpreted as permitting optional reporting of data covered by the 
EGRRCPA's partial exemptions. Section 104(a) provides that certain 
requirements do not apply to affected institutions but does not 
prohibit those affected institutions from voluntarily reporting data. 
This interpretation is consistent not only with the statutory text but 
also with the apparent congressional intent to reduce burden on certain 
institutions. Accordingly, the Bureau interpreted the EGRRCPA in the 
2018 HMDA Rule to permit insured depository institutions and insured 
credit unions voluntarily to report data that are covered by the 
partial exemptions.
---------------------------------------------------------------------------

    \141\ The Bureau recognized in the 2018 HMDA Rule that this 
might be particularly true with respect to data submission in 2019, 
as collection of 2018 data was already underway when the EGRRCPA 
took effect, and system changes implementing the new partial 
exemptions may take time to complete. In the 2018 HMDA Rule, the 
Bureau interpreted the EGRRCPA to apply to data that are collected 
or reported under HMDA on or after May 24, 2018. Because data 
collected from January 1, 2018, to May 23, 2018, would not be 
reported until early 2019, the EGRRCPA relieves insured depository 
institutions and insured credit unions that are eligible for a 
partial exemption of the obligation to report certain data in 2019 
that may have been collected before May 24, 2018. If optional 
reporting of data covered by a partial exemption were not permitted, 
such institutions would have had to remove exempt data previously 
collected before submitting their 2018 data in early 2019, a process 
that could have been burdensome for some institutions.
---------------------------------------------------------------------------

    Aspects of the Bureau's current HMDA platform used for receiving 
HMDA submissions, including edit checks \142\ performed on incoming 
submissions, are set up with the expectation that HMDA reporters will 
provide data for an entire data point when data are reported for any 
data field within that data point. The Bureau explained in the 2018 
HMDA Rule that adjusting the HMDA platform to accept submissions in 
which affected institutions report some, but not all, data fields in a 
data point covered by a partial exemption for a specific transaction 
would increase operational complexity and costs associated with 
changing the HMDA edits in the Filing Instructions Guide for HMDA Data 
Collected. Doing so would result in a less efficient implementation and 
submission process for the Bureau, HMDA reporters, their vendors, and 
other key stakeholders. Accordingly, the Bureau indicated in the 2018 
HMDA Rule that the HMDA platform would continue to accept submissions 
of a data field that is covered by a partial exemption under the 
EGRRCPA for a specific loan or application as long as insured 
depository institutions and insured credit unions that choose to 
voluntarily report the data include all other data fields that the data 
point comprises.
---------------------------------------------------------------------------

    \142\ The HMDA edit checks are rules to assist filers in 
checking the accuracy of HMDA data prior to submission. The 2019 
FIG, a compendium of resources to help financial institutions file 
HMDA data collected in 2019 with the Bureau in 2020, explains that 
there are four types of edit checks: Syntactical, validity, quality, 
and macro quality. Table 2 (Loan/Application Register) in the 2019 
FIG identifies the data fields currently associated with each data 
point. See FFIEC, ``Filing Instructions Guide for HMDA Data 
Collected in 2019,'' at 15-65 (Oct. 2018), https://s3.amazonaws.com/cfpb-hmda-public/prod/help/2019-hmda-fig.pdf.
---------------------------------------------------------------------------

    Proposed Sec.  1003.3(d)(4) incorporates the voluntary reporting 
interpretations and procedures from the 2018 HMDA Rule into Regulation 
C. Since issuing the 2018 HMDA Rule, the Bureau has also received 
questions relating to voluntary reporting of property address under 
Sec.  1003.4(a)(9)(i) because the property address data point under 
Sec.  1003.4(a)(9)(i) is covered by the partial exemptions and includes 
State as a data field, and State is also a separate data point under 
Sec.  1003.4(a)(9)(ii)(A) that is not covered by the partial 
exemptions. To address possible confusion, the Bureau has included 
additional detail in proposed Sec.  1003.3(d)(4) and proposed comment 
3(d)(4)(i)-1 about voluntary reporting of property address.
    Proposed Sec.  1003.3(d)(4) provides that a financial institution 
eligible for a partial exemption under Sec.  1003.3(d)(2) or (3) may 
collect, record, and report optional data as defined in Sec.  
1003.3(d)(1)(iii) for a partially exempt transaction as though the 
institution were required to do so, provided that: (i) If the 
institution reports the street address, city name, or Zip Code for the 
property securing a covered loan, or in the case of an application, 
proposed to secure a covered loan pursuant to Sec.  1003.4(a)(9)(i), it 
reports all data that would be required by Sec.  1003.4(a)(9)(i) if the 
transaction were not partially exempt; and (ii) If the institution 
reports any data for the transaction pursuant to Sec.  1003.4(a)(15), 
(16), (17), (27), (33), or (35), it reports all data that would be 
required by Sec.  1003.4(a)(15), (16), (17), (27), (33), or (35), 
respectively, if the transaction were not partially exempt.
    Proposed comment 3(d)(4)-1 provides an example of voluntary 
reporting that is permitted under proposed Sec.  1003.3(d)(4). Proposed 
comment 3(d)(4)-2 addresses how financial institutions may handle 
partially exempt transactions within the same loan/application 
register. It explains that a financial institution may collect, record, 
and report optional data for some partially exempt transactions under 
Sec.  1003.3(d) in the manner specified in Sec.  1003.3(d)(4), even if 
it does not collect, record, and report optional data for other 
partially exempt transactions under Sec.  1003.3(d).
    Proposed comment 3(d)(4)-3 addresses how to handle a transaction 
that is partially exempt pursuant to Sec.  1003.3(d) and for which a 
particular requirement to report optional data is not applicable to the 
transaction. The proposed comment explains that, in that circumstance, 
the insured depository institution or insured credit union complies 
with the particular requirement by reporting either that the 
transaction is exempt from the requirement or that the requirement is 
not applicable.\143\ It also explains that an institution is considered 
as reporting data in a data field for purposes of Sec.  1003.3(d)(4)(i) 
and (ii) if it reports not applicable for that data field for a 
partially exempt transaction. The proposed comment also provides 
examples.
---------------------------------------------------------------------------

    \143\ As noted above, the 2019 FIG provides guidance to 
financial institutions on how to indicate in their HMDA submissions 
if they are invoking a partial exemption. See supra note 124.
---------------------------------------------------------------------------

    Proposed comment 3(d)(4)(i)-1 explains that, if an institution 
eligible for a partial exemption under Sec.  1003.3(d)(2) or (3) 
reports the street address, city name, or Zip Code for a partially 
exempt transaction pursuant to Sec.  1003.4(a)(9)(i), it reports all 
data that would be required by Sec.  1003.4(a)(9)(i) if the transaction 
were not partially exempt, including the State. The proposed comment 
also explains that an insured depository institution or insured credit 
union that reports the State pursuant to Sec.  1003.4(a)(9)(ii) or 
comment 4(a)(9)(ii)-1 for a partially exempt transaction without 
reporting any other data required by Sec.  1003.4(a)(9)(i) is not 
required to report the street address, city name, or Zip Code pursuant 
to Sec.  1003.4(a)(9)(i). The Bureau believes that this proposed 
comment would help to clarify that, even though State is a property 
address

[[Page 20992]]

data field under Sec.  1003.4(a)(9)(i), reporting State does not 
trigger the requirement to report other property address data fields 
under Sec.  1003.3(d)(4)(i), because State is also a stand-alone data 
point under Sec.  1003.4(a)(9)(ii)(A) that is not covered by the 
partial exemptions.
3(d)(5)
    Pursuant to HMDA section 304(i), insured depository institutions 
and insured credit unions are not required to report a ULI for 
partially exempt transactions.\144\ To ensure that partially exempt 
transactions can be identified in the HMDA data, the 2018 HMDA Rule 
requires financial institutions to provide a non-universal loan 
identifier (NULI) that meets certain requirements for any partially 
exempt transaction for which they do not report a ULI. For the reasons 
that follow, proposed Sec.  1003.3(d)(5) and proposed comments 3(d)(5)-
1 and -2 would incorporate the NULI requirements from the 2018 HMDA 
Rule into Regulation C, with minor adjustments for clarity.
---------------------------------------------------------------------------

    \144\ Prior to the passage of the Dodd-Frank Act, the Board 
required reporting of an identifying number for the loan or 
application but did not require that the identifier be universal. 
HMDA section 304(b)(6)(G) requires reporting of, ``as the Bureau may 
determine to be appropriate, a universal loan identifier.''
---------------------------------------------------------------------------

    In the 2015 HMDA Rule, the Bureau interpreted ULI as used in HMDA 
section 304(b)(6)(G) to mean an identifier that is unique within the 
industry and required that the ULI include the Legal Entity Identifier 
of the institution that assigned the ULI. Although the EGRRCPA exempts 
certain transactions from the ULI requirement, loans and applications 
must be identifiable in the HMDA data to ensure proper HMDA submission, 
processing, and compliance.\145\ The EGRRCPA did not change this 
baseline component of data reporting, which pre-dates the Dodd-Frank 
Act's HMDA amendments and existed under Regulation C prior to the 2015 
HMDA Rule. Accordingly, while insured depository institutions and 
insured credit unions do not have to report a ULI for a partially 
exempt transaction, they must continue to provide certain information 
so that each loan and application they report for HMDA purposes is 
identifiable. The ability to identify individual loans and applications 
is necessary to facilitate efficient and orderly submission of HMDA 
data and communications between the institution, the Bureau, and other 
applicable regulators. For example, identification of loans and 
applications is necessary to ensure that it is possible to address 
problems identified when edit checks are done upon submission or 
questions that arise when HMDA submissions are otherwise reviewed by 
regulators.
---------------------------------------------------------------------------

    \145\ HMDA requires that covered loans and applications be 
``itemized in order to clearly and conspicuously disclose'' the 
applicable data for each loan or application. 12 U.S.C. 2803(a)(2).
---------------------------------------------------------------------------

    To ensure the orderly administration of the HMDA program, proposed 
Sec.  1003.3(d)(5) and proposed comments 3(d)(5)-1 and -2 would 
incorporate the NULI requirements of the 2018 HMDA Rule into Regulation 
C with minor adjustments. As the 2018 HMDA Rule explains, a NULI does 
not need to be unique within the industry and therefore does not need 
to include a Legal Entity Identifier as the ULI does. A check digit is 
not required as part of a NULI, as it is for a ULI under Sec.  
1003.4(a)(1)(i)(C), but may be voluntarily included in a NULI provided 
that the NULI, including the check digit, does not exceed 22 
characters. Beyond these important differences, there are a number of 
similarities between the requirements for the ULI and those for the 
NULI. To the extent that NULI requirements resemble requirements for 
the ULI, the Bureau has attempted to conform proposed Sec.  
1003.3(d)(5) and its proposed commentary to the corresponding text of 
existing Sec.  1003.4(a)(1)(i) and its commentary for ease of reference 
and consistency.
    Proposed Sec.  1003.3(d)(5) provides that, if, pursuant to Sec.  
1003.3(d)(2) or (3), a financial institution does not report a ULI 
pursuant to Sec.  1003.4(a)(1)(i) for an application for a covered loan 
that it receives, a covered loan that it originates, or a covered loan 
that it purchases, the financial institution shall assign and report a 
NULI. It further provides that, to identify the covered loan or 
application, the NULI must be composed of up to 22 characters, which:
     May be letters, numerals, or a combination of letters and 
numerals;
     Must be unique within the annual loan/application register 
in which the covered loan or application is included; and
     Must not include any information that could be used to 
directly identify the applicant or borrower.
    Proposed comment 3(d)(5)-1 explains the requirement that the NULI 
must be unique within the annual loan/application register in which the 
covered loan or application is included. Proposed comment 3(d)(5)-2 
clarifies the scope of information that could be used to directly 
identify the applicant or borrower for purposes of Sec.  
1003.3(d)(5)(iii), using the same language that appears in comment 
4(a)(1)(i)-2 with respect to the ULI.
    The proposed rule's requirements for the NULI are consistent with 
those in the 2018 HMDA Rule. However, the 2018 HMDA Rule states that 
the NULI must be ``unique within the insured depository institution or 
credit union,'' whereas proposed Sec.  1003.3(d)(5)(ii) states that the 
NULI must be ``unique within the annual loan/application register in 
which the covered loan or application is included.'' This adjustment 
and similar adjustments that appear in proposed comment 3(d)(5)-1 are 
intended to clarify that the NULI must be unique within a financial 
institution's yearly HMDA submission but the NULI does not need to be 
unique across reporting years. For the same reason, the proposed rule 
does not incorporate the portion of the 2018 HMDA Rule stating that a 
financial institution may not use a NULI previously reported if the 
institution reinstates or reconsiders an application that was reported 
in a prior calendar year.\146\ Thus, the proposed rule would allow a 
financial institution to use the same NULI for a partially exempt 
transaction in its 2021 loan/application register that the institution 
used for a different partially exempt transaction in its 2020 loan/
application register. Because final action on an application may be 
taken in a different year than the year in which a NULI is assigned 
(for example, for applications received late in the year), insured 
depository institutions and insured credit unions may opt not to 
reassign NULIs that they have assigned previously in order to ensure 
that all NULIs included in their annual loan/application register are 
unique within that annual loan/application register.
---------------------------------------------------------------------------

    \146\ 83 FR 45325, 45330 (Sept. 7, 2018).
---------------------------------------------------------------------------

    The Bureau recognizes that some insured depository institutions and 
insured credit unions may prefer to report a ULI for partially exempt 
transactions even if they are not required to do so. As explained in 
the 2018 HMDA Rule and in the section-by-section analysis of Sec.  
1003.3(d)(4) above and of Sec.  1003.4(a)(1)(i) below, voluntary 
reporting of ULIs for partially exempt transactions is permissible 
under the EGRRCPA, and no NULI is required if a ULI is provided.
3(d)(6)
    Notwithstanding the EGRRCPA's partial exemptions, new HMDA section 
304(i)(3) provides that an insured depository institution shall comply 
with HMDA section 304(b)(5) and (6) if the insured depository 
institution has received a rating of ``needs to improve record of 
meeting community credit

[[Page 20993]]

needs'' during each of its two most recent examinations or a rating of 
``substantial noncompliance in meeting community credit needs'' on its 
most recent examination under section 807(b)(2) of the CRA. To 
implement this provision, proposed Sec.  1003.3(d)(6) provides that 
Sec.  1003.3(d)(2) and (3) do not apply to an insured depository 
institution that, as of the preceding December 31, had received a 
rating of ``needs to improve record of meeting community credit needs'' 
during each of its two most recent examinations or a rating of 
``substantial noncompliance in meeting community credit needs'' on its 
most recent examination under section 807(b)(2) of the CRA.
    As the Bureau explained in the 2018 HMDA Rule, the EGRRCPA does not 
specify the date as of which an insured depository institution's two 
most recent CRA examinations must be assessed for purposes of the 
exception in HMDA section 304(i)(3). In the 2018 HMDA Rule, the Bureau 
interpreted HMDA section 304(i)(3) to require that this assessment be 
made as of December 31 of the preceding calendar year. This timing is 
consistent with the timing for assessing Regulation C's asset-size 
threshold and requirement that a financial institution have a home or 
branch office located in a Metropolitan Statistical Area (MSA), which 
are both assessed as of the preceding December 31.\147\ It also ensures 
that financial institutions can determine before they begin collecting 
information in any given calendar year whether they are eligible for a 
partial exemption for information collected for certain transactions in 
that year. Proposed Sec.  1003.3(d)(6) would incorporate this 
interpretation into Regulation C.
---------------------------------------------------------------------------

    \147\ 12 CFR 1003.2(g)(1)(i) and (ii) and (g)(2)(i); comment 
2(g)-1.
---------------------------------------------------------------------------

    Proposed comment 3(d)(6)-1 explains that the preceding December 31 
means the December 31 preceding the current calendar year. It includes 
the same example that was provided in the 2018 HMDA Rule to illustrate 
how the exception works, with minor wording changes for clarity.

Section 1003.4 Compilation of Reportable Data

4(a) Data Format and Itemization
    Section 1003.4(a) requires financial institutions to collect 
specific data about covered loans, applications for covered loans, and 
purchases of covered loans. The EGRRCPA provides partial exemptions 
from this requirement for certain transactions of insured depository 
institutions and insured credit unions. To conform to the EGRRCPA, the 
Bureau proposes to amend the introductory paragraph of Sec.  1003.4(a) 
to indicate that the requirement to collect the data identified in 
Sec.  1003.4(a) is applicable except as specified in proposed Sec.  
1003.3(d), which implements the new partial exemptions. The proposed 
rule would also make a similar change to comment 4(a)-1. The Bureau 
requests comment on these proposed amendments and the other proposed 
amendments to Sec.  1003.4(a) relating to the partial exemptions that 
are discussed below, including whether these amendments would 
appropriately implement section 104(a) of the EGRRCPA and whether there 
are any additional issues under the EGRRCPA that the Bureau should 
address in Sec.  1003.4(a).
4(a)(1)(i)
    Section 1003.4(a)(1)(i) generally requires a financial institution 
to assign and report a ULI for the covered loan or application that can 
be used to identify and retrieve the covered loan or application file. 
As explained in the 2018 HMDA Rule and the section-by-section analysis 
of Sec.  1003.3(d)(5) above, a financial institution is not required to 
assign and report a ULI for a partially exempt transaction if it 
instead assigns and reports a NULI. The Bureau therefore proposes to 
amend Sec.  1003.4(a)(1)(i) to indicate that, for a partially exempt 
transaction under Sec.  1003.3(d), the data collected shall include 
either a ULI or a NULI as described in Sec.  1003.3(d)(5), and that a 
financial institution does not need to assign and report a ULI for a 
partially exempt transaction for which a NULI is assigned and reported 
under Sec.  1003.3(d).
    The Bureau also proposes to amend comment 4(a)(1)(i)-3 to indicate 
that the requirement to report the same ULI that was previously 
assigned or reported for purchased covered loans does not apply if the 
purchase of the covered loan is a partially exempt transaction under 
Sec.  1003.3(d). Because the partial exemptions are only available to 
insured depository institutions that are not disqualified by their CRA 
examination histories and insured credit unions for certain 
transactions as set forth in Sec.  1003.3(d), it is possible that a 
financial institution's purchase of a covered loan that was partially 
exempt when originated would not be a partially exempt transaction and 
that the purchasing financial institution would therefore need to 
assign a ULI. Comment 4(a)(1)(i)-3 would therefore clarify that a 
financial institution that purchases a covered loan and is ineligible 
for a partial exemption with respect to the purchased covered loan must 
assign a ULI and record and submit it in its loan/application register 
pursuant to Sec.  1003.5(a)(1) if the financial institution that 
originated the loan did not assign a ULI. Consistent with the 2018 HMDA 
Rule, the proposed amendment to comment 4(a)(1)(i)-3 would clarify that 
this may occur, for example, if the loan was assigned a NULI under 
Sec.  1003.3(d)(5) rather than a ULI by the loan originator.
    The Bureau also proposes to amend comment 4(a)(1)(i)-4 to clarify 
the example provided in that comment of how ULIs are assigned if a 
financial institution reconsiders an application that was reported in a 
prior calendar year. The amendments clarify that the example assumes 
that the financial institution reported a ULI rather than a NULI in 
2020 for the initial denied application and that the financial 
institution then made an origination that is not partially exempt when 
it reconsidered in 2021 the previously denied application.
    The Bureau also proposes to add a new comment 4(a)(1)(i)-6 
explaining that, for a partially exempt transaction under Sec.  
1003.3(d), a financial institution may report a ULI or a NULI. The 
proposed comment cross-references Sec.  1003.3(d)(5) and comments 
3(d)(5)-1 and -2 for guidance on the NULI. The Bureau believes that 
these proposed changes would help clarify financial institutions' 
responsibilities in assigning identifiers to partially exempt 
transactions.
4(a)(1)(ii)
    Section 1003.4(a)(1)(ii) generally requires financial institutions 
to collect the date the application was received or the date shown on 
the application form. Comment 4(a)(1)(ii)-3 explains that, if, within 
the same calendar year, an applicant asks a financial institution to 
reinstate a counteroffer that the applicant previously did not accept 
(or asks the institution to reconsider an application that was denied, 
withdrawn, or closed for incompleteness), the institution may treat 
that request as the continuation of the earlier transaction using the 
same ULI or as a new transaction with a new ULI. The Bureau believes 
that it is appropriate to apply the same approach with respect to 
NULIs. The Bureau is therefore proposing to amend comment 4(a)(1)(ii)-3 
to reference both ULIs and NULIs.
4(a)(9)
    Section 1003.4(a)(9) generally requires a financial institution to 
report the

[[Page 20994]]

property address of the location of the property securing a covered 
loan or, in the case of an application, proposed to secure a covered 
loan (property address), as well as the State, the county, and in some 
cases the census tract of the property if the property is located in an 
MSA or Metropolitan Division (MD) in which the financial institution 
has a home or branch office, or if the institution is subject to Sec.  
1003.4(e). Comment 4(a)(9)-2 addresses situations involving multiple 
properties with more than one property taken as security. The comment 
explains that, if an institution is required to report specific 
information about the property identified in Sec.  1003.4(a)(9) by 
another section of Regulation C such as, for example, Sec.  
1003.4(a)(29) or (30), the institution reports the information that 
relates to the property identified in Sec.  1003.4(a)(9). The Bureau 
proposes to amend comment 4(a)(9)-2 to clarify that, in this 
circumstance, if the transaction is partially exempt under Sec.  
1003.3(d) and no data are reported pursuant to Sec.  1003.4(a)(9), the 
institution reports the information that relates to the property that 
the institution would have identified in Sec.  1003.4(a)(9) if the 
transaction were not partially exempt. This would mean that, for a 
partially exempt transaction in which more than one property is taken 
as security and no data are reported under Sec.  1003.4(a)(9), a 
financial institution should choose one of the properties taken as a 
security that contains a dwelling and provide information about that 
property if the institution is required to report specific information 
about the property identified in Sec.  1003.4(a)(9) by one or more 
other sections of Regulation C. The Bureau believes that this proposed 
amendment would assist financial institutions in applying comment 
4(a)(9)-2 to partially exempt transactions.
4(a)(9)(i)
    Section 1003.4(a)(9)(i) generally requires a financial institution 
to report the property address. To implement the EGRRCPA's partial 
exemptions, the Bureau proposes to amend comment 4(a)(9)(i)-1 to 
clarify that the requirement to report property address does not apply 
to partially exempt transactions under Sec.  1003.3(d).
4(a)(12)
    Section 1003.4(a)(12) generally requires a financial institution to 
report the rate spread 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. To implement the EGRRCPA's partial exemptions, the proposed 
rule would amend comment 4(a)(12)-7 to provide that Sec.  1003.4(a)(12) 
does not apply to transactions that are partially exempt under proposed 
Sec.  1003.3(d).
4(a)(15)
    Section 1003.4(a)(15) generally requires financial institutions to 
report the credit score or scores relied on in making the credit 
decision and information about the scoring model used to generate each 
score. To implement the EGRRCPA's partial exemptions, the proposed rule 
would amend comment 4(a)(15)-1 to clarify that the requirement to 
report the credit score or scores relied on in making the credit 
decision and information about the scoring model used to generate each 
score does not apply to transactions that are partially exempt under 
proposed Sec.  1003.3(d).
4(a)(16)
    Section 1003.4(a)(16) generally requires financial institutions to 
report the principal reason(s) for denial of an application. To 
implement the EGRRCPA's partial exemptions, the proposed rule would 
amend comment 4(a)(16)-4 to clarify that the requirement to report the 
principal reason(s) for denial of an application does not apply to 
transactions that are partially exempt under proposed Sec.  1003.3(d).
4(a)(17)
    Section 1003.4(a)(17) generally requires that, for covered loans 
subject to Regulation Z Sec.  1026.43(c), a financial institution shall 
report the amount of total loan costs if a disclosure is provided for 
the covered loan pursuant to Regulation Z Sec.  1026.19(f), or the 
total points and fees charged in connection with the covered loan if 
the covered loan is not subject to the disclosure requirements in 
Regulation Z Sec.  1026.19(f). To implement the EGRRCPA's partial 
exemptions, the proposed rule would amend comments 4(a)(17)(i)-1 and 
(ii)-1 to clarify that the requirement to report total loan costs or 
total points and fees, as applicable, does not apply to transactions 
that are partially exempt under proposed Sec.  1003.3(d).
4(a)(18)
    Section 1003.4(a)(18) generally requires financial institutions to 
report, for covered loans subject to the disclosure requirements in 
Regulation Z Sec.  1026.19(f), the total of all borrower-paid 
origination charges. To implement the EGRRCPA's partial exemptions, the 
proposed rule would amend comment 4(a)(18)-1 to clarify that the 
requirement to report borrower-paid origination charges does not apply 
to transactions that are partially exempt under proposed Sec.  
1003.3(d).
4(a)(19)
    Section 1003.4(a)(19) generally requires 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. To implement the EGRRCPA's partial 
exemptions, the proposed rule would amend comment 4(a)(19)-1 to clarify 
that the requirement to report discount points does not apply to 
transactions that are partially exempt under proposed Sec.  1003.3(d).
4(a)(20)
    Section 1003.4(a)(20) generally requires financial institutions to 
report, for covered loans subject to the disclosure requirements in 
Regulation Z Sec.  1026.19(f), the amount of lender credits. To 
implement the EGRRCPA's partial exemptions, the proposed rule would 
amend comment 4(a)(20)-1 to clarify that the requirement to report 
lender credits does not apply to transactions that are partially exempt 
under proposed Sec.  1003.3(d).
4(a)(21)
    Section 1003.4(a)(21) generally requires financial institutions to 
report the interest rate applicable to the approved application or to 
the covered loan at closing or account opening. To implement the 
EGRRCPA's partial exemptions, the proposed rule would amend comment 
4(a)(21)-1 to clarify that the requirement to report interest rate does 
not apply to transactions that are partially exempt under proposed 
Sec.  1003.3(d).
4(a)(22)
    Section 1003.4(a)(22) generally requires financial institutions to 
report the term in months of any prepayment penalty for covered loans 
or applications subject to Regulation Z, 12 CFR part 1026. To implement 
the EGRRCPA's partial exemptions, the proposed rule would amend comment 
4(a)(22)-1 to clarify that the requirement to report the term of any 
prepayment penalty does not apply to transactions that are partially 
exempt under proposed Sec.  1003.3(d).
4(a)(23)
    Section 1003.4(a)(23) generally requires financial institutions to 
report

[[Page 20995]]

the ratio of the applicant's or borrower's total monthly debt to the 
total monthly income relied on in making the credit decision (debt-to-
income ratio). To implement the EGRRCPA's partial exemptions, the 
proposed rule would amend comment 4(a)(23)-1 to clarify that the 
requirement to report the debt-to-income ratio does not apply to 
transactions that are partially exempt under proposed Sec.  1003.3(d).
4(a)(24)
    Section 1003.4(a)(24) generally requires 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 
(combined loan-to-value ratio). To implement the EGRRCPA's partial 
exemptions, the proposed rule would amend comment 4(a)(24)-1 to clarify 
that the requirement to report the combined loan-to-value ratio does 
not apply to transactions that are partially exempt under proposed 
Sec.  1003.3(d).
4(a)(25)
    Section 1003.4(a)(25) generally requires financial institutions to 
report the scheduled number of months after which the legal obligation 
will mature or terminate or would have matured or terminated (loan 
term). To implement the EGRRCPA's partial exemptions, the proposed rule 
would amend comment 4(a)(25)-5 to clarify that the requirement to 
report loan term does not apply to transactions that are partially 
exempt under proposed Sec.  1003.3(d).
4(a)(26)
    Section 1003.4(a)(26) generally requires financial institutions to 
report the number of months, or proposed number of months in the case 
of an application, from the closing or account opening until the first 
date the interest rate may change. To implement the EGRRCPA's partial 
exemptions, the proposed rule would amend comment 4(a)(26)-1 to clarify 
that the requirement 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 does not 
apply to transactions that are partially exempt under proposed Sec.  
1003.3(d).
4(a)(27)
    Section 1003.4(a)(27) generally requires financial institutions to 
report contractual features that would allow payments other than fully 
amortizing payments. To implement the EGRRCPA's partial exemptions, the 
proposed rule would amend comment 4(a)(27)-1 to clarify that the 
requirement to report contractual features that would allow payments 
other than fully amortizing payments does not apply to transactions 
that are partially exempt under proposed Sec.  1003.3(d).
4(a)(28)
    Section 1003.4(a)(28) generally requires financial institutions to 
report the value of the property securing the covered loan or, in the 
case of an application, proposed to secure the covered loan relied on 
in making the credit decision. To implement the EGRRCPA's partial 
exemptions, the proposed rule would amend comment 4(a)(28)-1 to clarify 
that the requirement to report the property value relied on in making 
the credit decision does not apply to transactions that are partially 
exempt under proposed Sec.  1003.3(d).
4(a)(29)
    Section 1003.4(a)(29) generally requires financial institutions to 
report whether a covered loan or application is or would have been 
secured by a manufactured home and land or by a manufactured home and 
not land. To implement the EGRRCPA's partial exemptions, the proposed 
rule would amend comment 4(a)(29)-4 to clarify that the requirement to 
report whether a covered loan or application is or would have been 
secured by a manufactured home and land or by a manufactured home and 
not land does not apply to transactions that are partially exempt under 
proposed Sec.  1003.3(d).
4(a)(30)
    Section 1003.4(a)(30) generally requires financial institutions to 
report whether the applicant or borrower owns the land on which a 
manufactured home is or will be located through a direct or indirect 
ownership interest or leases the land through a paid or unpaid 
leasehold interest. To implement the EGRRCPA's partial exemptions, the 
proposed rule would amend comment 4(a)(30)-6 to clarify that the 
requirement to report ownership or leasing information on the 
manufactured home land property interest does not apply to transactions 
that are partially exempt under proposed Sec.  1003.3(d).
4(a)(32)
    Section 1003.4(a)(32) generally requires financial institutions to 
report information on the number of individual dwelling units in 
multifamily dwellings that are income-restricted pursuant to Federal, 
State, or local affordable housing programs. To implement the EGRRCPA's 
partial exemptions, the proposed rule would amend comment 4(a)(32)-6 to 
clarify that the requirement to report information on the number of 
individual dwelling units in multifamily dwellings that are income-
restricted pursuant to Federal, State, or local affordable housing 
programs does not apply to transactions that are partially exempt under 
proposed Sec.  1003.3(d).
4(a)(33)
    Section 1003.4(a)(33) generally requires financial institutions to 
report whether the applicant or borrower submitted the application for 
the covered loan directly to the financial institution and whether the 
obligation arising from the covered loan was, or in the case of an 
application, would have been initially payable to the financial 
institution. To implement the EGRRCPA's partial exemptions, the 
proposed rule would amend comments 4(a)(33)(i)-1 and 4(a)(33)(ii)-1 to 
clarify that the requirement for financial institutions to report 
whether the applicant or borrower submitted the application for the 
covered loan directly to the financial institution and whether the 
obligation arising from the covered loan was, or in the case of an 
application, would have been initially payable to the financial 
institution, does not apply to transactions that are partially exempt 
under proposed Sec.  1003.3(d).
4(a)(34)
    Section 1003.4(a)(34) generally requires financial institutions to 
report the unique identifier assigned by the Nationwide Mortgage 
Licensing System and Registry (NMLSR ID) for the mortgage loan 
originator. To implement the EGRRCPA's partial exemptions, the proposed 
rule would amend comment 4(a)(34)-1 to clarify that the requirement for 
financial institutions to report the NMLSR ID does not apply to 
transactions that are partially exempt under proposed Sec.  1003.3(d).
4(a)(35)
    Section 1003.4(a)(35) generally requires financial institutions to 
report the name of the automated underwriting system (AUS) used by the 
financial institution to evaluate the application and the result 
generated by that AUS. To implement the EGRRCPA's partial exemptions, 
the proposed rule would amend comment 4(a)(35)-1 to clarify that the 
requirement for financial institutions to report the name of the AUS 
used to evaluate the application and the result generated by that AUS 
does not apply to transactions that are

[[Page 20996]]

partially exempt under proposed Sec.  1003.3(d).
4(a)(37)
    Section 1003.4(a)(37) requires financial institutions to identify 
whether the covered loan or the application is for an open-end line of 
credit. To implement the EGRRCPA's partial exemptions, the proposed 
rule would amend comment 4(a)(37)-1 to clarify that the requirement for 
financial institutions to identify whether the covered loan or the 
application is for an open-end line of credit does not apply to 
transactions that are partially exempt under proposed Sec.  1003.3(d).
4(a)(38)
    Section 1003.4(a)(38) requires financial institutions to identify 
whether the covered loan is, or the application is for a covered loan 
that will be, made primarily for a business or commercial purpose. To 
implement the EGRRCPA's partial exemptions, the proposed rule would 
amend comment 4(a)(38)-1 to clarify that the requirement for financial 
institutions to identify whether the covered loan is, or the 
application is for a covered loan that will be, made primarily for a 
business or commercial purpose does not apply to transactions that are 
partially exempt under proposed Sec.  1003.3(d).
4(e) Data Reporting for Banks and Savings Associations That Are 
Required To Report Data on Small Business, Small Farm, and Community 
Development Lending Under CRA
    Section 1003.4(e) provides that banks and savings associations that 
are required to report data on small business, small farm, and 
community development lending under regulations that implement the CRA 
shall also collect the information required by Sec.  1003.4(a)(9) for 
property located outside MSAs and MDs in which the institution has a 
home or branch office, or outside any MSA. Section 1003.4(e) requires 
collection only of the information required by Sec.  1003.4(a)(9)(ii) 
regarding the location of the property by State, county, and census 
tract because Sec.  1003.4(a)(9)(i) itself requires collection of 
property address regardless of whether the property is located in an 
MSA or MD.\148\ The proposed rule would amend Sec.  1003.4(e) by 
changing the cross-reference from Sec.  1003.4(a)(9) to Sec.  
1003.4(a)(9)(ii) in order to clarify that Sec.  1003.4(e) only relates 
to the information required by Sec.  1003.4(a)(9)(ii) without making 
any substantive changes. The Bureau believes that this proposed 
clarification of Sec.  1003.4(e) would assist financial institutions 
and other stakeholders by making it clear that Sec.  1003.4(e) does not 
require reporting of property address information required by Sec.  
1003.4(a)(9)(i) when a partial exemption applies.
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    \148\ When the Board added Sec.  1003.4(e) to Regulation C, the 
property address information that is now specified in Sec.  
1003.4(a)(9)(i) was not yet required. See 80 FR 66128, 66186 (Oct. 
28, 2015) (noting that Sec.  1003.4(e) predates the 2015 HMDA Rule, 
which added the property address requirement now in Sec.  
1003.4(a)(9)(i)).
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V. Effective Dates for Proposed Rule

    The Bureau proposes that the amendments included in this proposal 
take effect in stages, as provided in the proposed amendatory 
instructions below. The Bureau proposes that the proposed amendments 
that incorporate the interpretations and procedures from the 2018 HMDA 
Rule into Regulation C and further implement section 104(a) of the 
EGRRCPA take effect on January 1, 2020. This would allow stakeholders 
to benefit without significant delay from the additional certainty and 
clarity that the Regulation C amendments will provide regarding the 
EGRRCPA partial exemptions that are already in effect.\149\
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    \149\ As noted, many of the proposed amendments would merely 
incorporate into Regulation C provisions of the EGRRCPA and the 2018 
HMDA Rule that are already in effect. If the proposed rule is 
finalized, compliance with such amendments prior to the proposed 
rule's effective date would not violate Regulation C.
---------------------------------------------------------------------------

    The Bureau proposes that the proposed adjustment to the closed-end 
threshold for institutional and transactional coverage take effect on 
January 1, 2020. Making this adjustment at the beginning of the 
calendar year would assist lenders in complying with data collection 
requirements, and making this adjustment at the beginning of 2020 would 
result in a decrease sooner in the significant compliance burden 
associated with data reporting for closed-end mortgage loans than if 
the adjustment were to be made in 2021 or later years. The Bureau 
proposes that the proposed temporary threshold of 500 open-end lines of 
credit for institutional and transactional coverage take effect on 
January 1, 2020. This effective date corresponds to the date when the 
initial temporary open-end coverage threshold established in the 2017 
HMDA Rule is otherwise set to expire. The Bureau proposes that the 
threshold of 200 open-end lines of credit for institutional and 
transactional coverage take effect when the proposed temporary 
threshold expires on January 1, 2022, to allow affected institutions 
time to prepare to begin reporting and to provide the Bureau with 
additional time to assess how a requirement to report open-end lines of 
credit would affect institutions whose origination volume falls just 
above the proposed threshold of 200 open-end lines of credit.
    The Bureau solicits comment on the proposed effective dates.

VI. Dodd-Frank Act Section 1022(b) Analysis of Proposed Rule

    The Bureau is considering the potential benefits, costs, and 
impacts of this proposed rule.\150\ The Bureau requests comment on the 
preliminary discussion presented below as well as submissions of 
additional data that could inform the Bureau's consideration of the 
benefits, costs, and impacts of this proposed rule. In developing this 
proposed rule, the Bureau has consulted with or offered to consult with 
the prudential regulators (the Board, the FDIC, the NCUA, and the OCC), 
the Department of Agriculture, the Department of Housing and Urban 
Development (HUD), the Department of Justice, the Department of the 
Treasury, the Department of Veterans Affairs, the Federal Housing 
Finance Agency, the Federal Trade Commission, and the Securities and 
Exchange Commission regarding, among other things, consistency with any 
prudential, market, or systemic objectives administered by such 
agencies.
---------------------------------------------------------------------------

    \150\ Specifically, section 1022(b)(2)(A) of the Dodd-Frank Act 
calls for the Bureau to consider the potential benefits and costs of 
a regulation to consumers and covered persons, including the 
potential reduction of access by consumers to consumer financial 
products or services; the impact on depository institutions and 
credit unions with $10 billion or less in total assets as described 
in section 1026 of the Dodd-Frank Act; and the impact on consumers 
in rural areas.
---------------------------------------------------------------------------

    As discussed in greater detail elsewhere throughout this 
supplementary information, in this proposed rulemaking the Bureau is 
proposing to incorporate into Regulation C, which implements HMDA, the 
interpretations and procedures from the 2018 HMDA Rule and to implement 
further section 104(a) of the EGRRCPA. The Bureau is also proposing to 
amend Regulation C, effective January 1, 2020, to increase the 
threshold for reporting data about closed-end mortgage loans to either 
50 or 100 originated closed-end mortgage loans in each of the two 
preceding years. The Bureau in addition is proposing to amend 
Regulation C to extend for a period of two additional years the current 
data reporting threshold of 500 open-end lines of credit and then to 
set that threshold at 200 open-end lines of credit beginning in 
calendar year 2022. As a result, financial institutions originating 
fewer

[[Page 20997]]

than 500 open-end lines of credit in either of the preceding two years 
but at least 200 open-end lines of credit in each of the two preceding 
years would not be required to collect such data until calendar year 
2022 and financial institutions originating fewer than 200 open-end 
lines of credit in either of the preceding two years would be excluded 
from reporting data on open-end lines of credit.

A. Provisions To Be Analyzed

    The proposal contains regulatory or commentary language (proposed 
provisions). The discussion below considers the benefits, costs, and 
impacts of the following major proposed provisions to:
    1. Incorporate the interpretations and procedures from the 2018 
HMDA Rule into Regulation C and further implement section 104(a) of the 
EGRRCPA, which grants eligible financial institutions partial 
exemptions from HMDA's requirements for certain transactions;
    2. Increase the threshold for reporting data about closed-end 
mortgage loans from 25 to 50 or 100 originations in each of the two 
preceding calendar years; and
    3. Extend for a period of two years, specifically calendar years 
2020 and 2021, the current data reporting threshold of 500 open-end 
lines of credit in each of the two preceding calendar years and 
permanently set the threshold for reporting data about open-end lines 
of credit at 200 open-end lines of credit in each of the two preceding 
calendar years starting in calendar year 2022.
    With respect to each major proposed provision, the discussion 
considers the benefits, costs, and impacts to consumers and covered 
persons. The discussion also addresses certain alternative provisions 
that were considered by the Bureau in the development of this proposed 
rule. The Bureau requests comment on the consideration of the potential 
benefits, costs, and impacts of this proposed rule.

B. Baselines for Consideration of Costs and Benefits

    The Bureau has discretion in any rulemaking to choose an 
appropriate scope of analysis with respect to potential benefits, 
costs, and impacts and an appropriate baseline. Each of the three sets 
of provisions included in this proposed rule are distinct from the 
others and hence the Bureau has chosen a different baseline for each of 
the three provisions: (1) To avoid double counting the impacts assessed 
for each of the three sets of provisions, and (2) to provide the 
clearest exposition of the effects of the Bureau's actions in this 
proposed rule and in implementing the EGRRCPA in the 2018 HMDA Rule. 
However, summed together, the impact estimates for each of the three 
sets of provisions as analyzed in this part form the total estimated 
impact for the proposed rule corresponding to a baseline where the 2015 
HMDA Rule and the 2017 HMDA Rule were in effect but prior to the 
EGRRCPA.
    The first set of provisions under consideration would incorporate 
the interpretations and procedures from the 2018 HMDA Rule into 
Regulation C and further implement section 104(a) of the EGRRCPA, which 
grants eligible financial institutions partial exemptions from HMDA's 
requirements for certain transactions. In the analysis under section 
1022(b) of the Dodd-Frank Act in the 2018 HMDA Rule, the Bureau adopted 
a post-statute baseline to assess the impact of the 2018 HMDA Rule 
because that rule merely interprets and provides guidance regarding 
what Congress required in section 104(a) of the EGRRCPA and provides 
procedures related to applying those requirements.\151\ By contrast, 
the Bureau is proposing in this rulemaking to use its legislative 
rulemaking authority to amend Regulation C to implement the statutory 
provisions. For the consideration of benefits and costs of the first 
set of provisions in this proposed rule, the Bureau is therefore using 
a pre-statute baseline, i.e., evaluating the benefits, costs, and 
impacts of the provisions implementing the EGRRCPA as compared to the 
state of the world prior to when the EGRRCPA took effect. The Bureau 
believes such a pre-statute baseline provides the public and the Bureau 
a more complete picture of the impacts of the EGRRCPA changes that were 
implemented by the Bureau's 2018 HMDA Rule and would be further 
implemented by the relevant provisions in this proposed rule.
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    \151\ The Bureau has discretion in any rulemaking to choose an 
appropriate scope of analysis with respect to potential benefits, 
costs, and impacts and an appropriate baseline. In the 2018 HMDA 
Rule, the Bureau noted that it anticipated an upcoming notice-and-
comment rulemaking and expected that the accompanying analysis under 
Dodd-Frank Act section 1022(b) would assess the benefits, costs, and 
impacts of the statute as well as the implementing regulation. 83 FR 
45325, 45332 n.57 (Sept. 7, 2018).
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    The second set of provisions in this proposed rule would increase 
the closed-end loan coverage threshold from 25 originations to either 
50 or 100 originations in each of the two preceding calendar years. 
Because the EGRRCPA predates this proposed provision, and the burden 
reduction from this provision, if adopted, would be in addition to, and 
would not replace the burden reduction for financial institutions 
already implemented under the EGRRCPA, the Bureau believes the 
appropriate baseline for this provision is a post-EGRRCPA world in 
which eligible financial institutions under the EGRRCPA are already 
partially exempt from the reporting of certain data points for closed-
end mortgages.
    The third set of provisions in this proposed rule would extend for 
two years, until January 1, 2022, the current temporary threshold for 
reporting data about open-end lines of credit of 500 open-end lines of 
credit in each of the two preceding calendar years, and set the 
permanent threshold for reporting data about open-end lines of credit 
at 200 open-end lines of credit in each of the two preceding calendar 
years when the temporary threshold expires. In the 2017 HMDA Rule, the 
Bureau granted two-year temporary relief (specifically, for 2018 and 
2019) for financial institutions that originate fewer than 500 open-end 
lines of credit in either of the two preceding calendar years. The 2017 
HMDA Rule provides that, absent any future rulemaking, the open-end 
coverage threshold will revert to 100 open-end lines of credit, as in 
the 2015 HMDA Rule, starting in 2020. This proposed rule proposes to 
extend the current temporary coverage threshold for open-end lines of 
credit of 500 for two more years (specifically, 2020 and 2021) and then 
set the coverage threshold for open-end lines of credit at 200 
permanently.
    Meanwhile, the EGRRCPA's partial exemption for open-end lines of 
credit of eligible insured depository institutions and insured credit 
unions took effect on May 24, 2018. Because the temporary increase in 
the open-end coverage threshold adopted in the 2017 HMDA Rule would 
automatically expire without this or other rulemaking effort and some 
insured depository institutions and insured credit unions are now 
eligible for a partial exemption for open-end lines of credit, for the 
consideration of benefits and costs of this provision the Bureau is 
adopting a baseline in which the open-end coverage threshold starting 
in year 2020 is reset at 100 open-end lines of credit in each of the 
two preceding calendar years with some depository institutions and 
credit unions partially exempt under the EGRRCPA.

C. Coverage of the Proposed Rule

    Each set of proposed provisions applies to certain financial 
institutions and relieves these financial institutions from HMDA's 
requirements for either all or certain data points regarding closed-

[[Page 20998]]

end mortgage loans or open-end lines of credit that they originate or 
purchase, or for which they receive applications, as described further 
in each section below. In short, the implementation of the EGRRCPA 
would affect certain insured depository institutions and insured credit 
unions with origination volumes below certain thresholds, while the 
rest of the proposed rule would affect all financial institutions below 
certain thresholds and not just insured depository institutions and 
insured credit unions.

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

    This discussion relies on data that the Bureau has obtained from 
industry, other regulatory agencies, and publicly available sources. 
However, as discussed further below, the Bureau's ability to fully 
quantify the potential costs, benefits, and impacts of this proposed 
rule is limited in some instances by a scarcity of necessary data.
1. Benefits to Covered Persons
    This proposed rule relates to which financial institutions, 
transactions, and data points are exempted or excluded from HMDA's 
reporting requirements. All three sets of provisions in this proposed 
rule are designed to reduce the regulatory burdens on covered persons 
while maintaining sufficient HMDA data to serve the statute's purposes. 
Therefore, the benefits of these proposed provisions to covered persons 
are mainly the reduction of the costs to covered persons relative to 
the compliance costs the covered persons would have to incur under each 
baseline scenario. The costs to covered persons and others derive from 
the diminished availability of data to address the statutory purposes 
of HMDA.
    The Bureau's 2015 HMDA Rule, as well as the 2014 proposed rule for 
the 2015 HMDA Rule and the material provided to the Small Business 
Review Panel leading to the 2015 HMDA Rule, presented a basic framework 
of analyzing compliance costs for HMDA reporting, including ongoing 
costs and one-time costs of financial institutions. Based on the 
Bureau's study of the HMDA compliance process and costs, with the help 
of additional information gathered and verified through the Small 
Business Review Panel process, the Bureau classified the operational 
activities that financial institutions use for HMDA data collection and 
reporting into 18 discrete compliance ``tasks'' which can be grouped 
into four ``primary tasks.'' \152\ Recognizing that the cost per loan 
of complying with HMDA's requirements differs by financial institution, 
the Bureau further identified seven key dimensions of compliance 
operations that were significant drivers of compliance costs, including 
the reporting system used, the degree of system integration, the degree 
of system automation, the compliance program, and the tools for 
geocoding, performing completeness checks, and editing. The Bureau 
found that financial institutions tended to have similar levels of 
complexity in compliance operations across all seven dimensions. For 
example, if a given financial institution had less system integration, 
then it tended to use less automation and less complex tools for 
geocoding. Financial institutions generally did not use less complex 
approaches on one dimension and more complex approaches on another. The 
small entity representatives validated this perspective during the 
Small Business Review Panel meeting convened under the Small Business 
Regulatory Enforcement Fairness Act.\153\
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    \152\ These tasks include: (1) Data collection: Transcribing 
data, resolving reportability questions, and transferring data to 
HMDA Management System (HMS); (2) Reporting and resubmission: 
Geocoding, standard annual edit and internal checks, researching 
questions, resolving question responses, checking post-submission 
edits, filing post-submission documents, creating modified loan/
application register, distributing modified loan/application 
register, distributing disclosure statement, and using vendor HMS 
software; (3) Compliance and internal audits: Training, internal 
audits, and external audits; and (4) HMDA-related exams: Examination 
preparation and examination assistance.
    \153\ See Bureau of Consumer Fin. Prot., ``Final Report of the 
Small Business Review Panel on the CFPB's Proposals Under 
Consideration for the Home Mortgage Disclosure Act (HMDA) 
Rulemaking'' 22, 37 (Apr. 24, 2014), http://files.consumerfinance.gov/f/201407_cfpb_report_hmda_sbrefa.pdf.
---------------------------------------------------------------------------

    The Bureau realizes that costs vary by institution due to many 
factors, such as size, operational structure, and product complexity, 
and that this variance exists on a continuum that is impossible to 
fully represent. To consider costs in a practical and meaningful way, 
in the 2015 HMDA Rule the Bureau adopted an approach that focused on 
three representative tiers of financial institutions. In particular, to 
capture the relationships between operational complexity and compliance 
cost, the Bureau used these seven dimensions to define three broadly 
representative financial institutions according to the overall level of 
complexity of their compliance operations. Tier 1 denotes a 
representative financial institution with the highest level of 
complexity, tier 2 denotes a representative financial institution with 
a moderate level of complexity, and tier 3 denotes a representative 
financial institution with the lowest level of complexity. For each 
tier, the Bureau developed a separate set of assumptions and cost 
estimates.
    Table 1 below provides an overview of all three representative 
tiers across the seven dimensions of compliance operations: \154\
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    \154\ The Bureau notes this description has taken into account 
the operational improvements the Bureau has implemented regarding 
HMDA reporting since issuing the 2015 HMDA Rule and differs slightly 
from the original taxonomy in the 2015 HMDA Rule that reflected the 
technology at the time of the study.

                                      Table 1--Types of HMDA Reporters \1\
----------------------------------------------------------------------------------------------------------------
                                    Tier 3 FIs tend to . . .  Tier 2 FIs tend to . . .  Tier 1 FIs tend to . . .
 
----------------------------------------------------------------------------------------------------------------
Systems...........................  Enter data in Excel LAR   Use LOS and HMS; Submit   Use multiple LOS,
                                     Formatting Tool.          data via the HMDA         central SoR, HMS;
                                                               Platform.                 Submit data via the
                                                                                         HMDA Platform.
Integration.......................  (None)..................  Have forward integration  Have backward and
                                                               (LOS to HMS).             forward integration;
                                                                                         Integration with public
                                                                                         HMDA APIs.
Automation........................  Manually enter data into  LAR file produced by      LAR file produced by
                                     LAR Formatting Tool;      HMS; review edits in      HMS; high automation
                                     review and verify edits   HMS and HMDA platform;    compiling file and
                                     in the HMDA Platform.     verify edits via HMDA     reviewing edits; verify
                                                               Platform.                 edits via the HMDA
                                                                                         platform.

[[Page 20999]]

 
Geocoding.........................  Use FFIEC tool (manual).  Use batch processing....  Use batch processing
                                                                                         with multiple sources.
Completeness Checks...............  Check in HMDA Platform    Use LOS, which includes   Use multiple stages of
                                     only.                     completeness checks.      checks.
Edits.............................  Use FFIEC Edits only....  Use FFIEC and customized  Use FFIEC and customized
                                                               edits.                    edits run multiple
                                                                                         times.
Compliance Program................  Have a joint compliance   Have basic internal and   Have in-depth accuracy
                                     and audit office.         external accuracy audit.  and fair lending audit.
----------------------------------------------------------------------------------------------------------------
\1\ FI is ``financial institution''; LOS is ``Loan Origination System''; HMS is ``HMDA Data Management
  Software''; SoR is ``System of Record.''

    For a representative institution in each tier, in the 2015 HMDA 
Rule, the Bureau produced a series of estimates of the costs of 
compliance, including the ongoing costs that financial institutions 
incurred prior to the implementation of the 2015 HMDA Rule, and the 
changes to the ongoing costs due to the 2015 HMDA Rule. The Bureau 
further provided the breakdown of the changes to the ongoing costs due 
to each major provision in the 2015 HMDA Rule, which includes the 
changes to the scope of the institutional coverage, the change to the 
scope of the transactional coverage, the revisions to the existing data 
points (as before the 2015 HMDA Rule) and the addition of new data 
points by the 2015 HMDA Rule.
    For the impact analysis in this proposed rule, the Bureau is 
utilizing the cost estimates provided in the 2015 HMDA Rule for the 
representative financial institution in each of the three tiers, with 
some updates, mainly to reflect the inflation rate, and in the case of 
the set of provisions implementing the partial exemptions under the 
EGRRCPA, to align the partially exempt data points (and data fields 
used to report these data points) with the cost impact analyses 
discussed in the impact analyses for the 2015 HMDA Rule. The Bureau's 
analyses below also take into account the operational improvements that 
have been implemented by the Bureau regarding HMDA reporting since the 
issuance of the 2015 HMDA Rule. The details of such analyses are 
contained in the following sections addressing all three major sets of 
provisions of this proposed rule. The Bureau emphasizes that through 
the issuance of this proposal it is soliciting information relating to 
the costs financial institutions incurred in collecting and reporting 
2018 data in compliance with the 2015 HMDA Rule and that such 
information may be valuable in estimating costs in the Dodd-Frank Act 
section 1022(b) analysis issued with the final rule.
    The next step of the Bureau's consideration of the reduction of 
costs for covered persons involved aggregating the institution-level 
estimates of the cost reduction under each set of proposed provisions 
up to the market-level. This aggregation required estimates of the 
total number of potentially impacted financial institutions and the 
total number of loan/application register records by those potentially 
impacted institutions. The Bureau used a wide range of data in 
conducting this task, including recent HMDA data,\155\ Call Reports, 
and Consumer Credit Panel data. These analyses were challenging, 
because no single data source provided complete coverage of all the 
financial institutions that could be impacted and because there is 
varying data quality among the different sources.
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    \155\ The majority of the analyses in this section were 
conducted prior to the official submission deadline of the 2018 HMDA 
data on March 1, 2019. As of the date of the issuance of this 
proposed rule, the modified HMDA aggregate file is not ready for 
public release, as the Bureau is still processing the 2018 HMDA 
loan/application register submissions and checking data quality. 
Some financial institutions are continuing to revise and resubmit 
their 2018 HMDA data, and the modified loan/application register for 
2018, which was first made public on March 29, 2019, will be updated 
on a rolling basis for resubmissions and subject to change. The 
Bureau intends to review the 2018 HMDA data more closely in 
connection with this rulemaking once the 2018 submissions are more 
complete. The most recent year of HMDA data the Bureau has used for 
these analyses is from the 2017 HMDA data. The Bureau notes the 
market may fluctuate from year to year and the Bureau's rulemaking 
is not geared towards such transitory changes on an annual basis. 
The Bureau does not expect large differences from these estimates 
had the 2018 HMDA data been used for this cost-benefit analysis, 
because the Bureau has considered past years' data and taken into 
account other market data in its estimates.
---------------------------------------------------------------------------

    To perform the aggregation, the Bureau mapped the potentially 
impacted financial institutions to the three tiers described above. For 
each of the three major proposed provisions analyzed, the Bureau 
assumed none of the proposed changes would affect the high-complexity 
tier 1 reporters. The Bureau then assigned the potentially impacted 
financial institutions to either tier 2 or tier 3. In doing so, the 
Bureau relied on two constraints: (1) The estimated number of impacted 
institutions in tiers 2 and 3, combined, must equal the estimated 
number of impacted institutions for the applicable provision, and (2) 
the number of loan/application register records submitted annually by 
the impacted financial institutions in tiers 2 and 3, combined, must 
equal the estimated number of loan/application register records for the 
applicable provision. As in the 2015 HMDA Rule, the Bureau assumed for 
closed-end reporting that a representative low-complexity, tier 3 
financial institution has 50 closed-end mortgage loan HMDA loan/
application register records per year and a representative tier 2 
financial institution has 1,000 closed-end mortgage loan HMDA loan/
application register records per year. Similarly, the Bureau assumed 
for open-end reporting that a representative low-complexity, tier 3 
financial institution has 150 open-end HMDA loan/application register 
records per year and a representative tier 2 financial institution has 
1,000 open-end HMDA loan/application register records per year. 
Constraining the total number of impacted institutions and the number 
of impacted loan/application register records across tier 2 and tier 3 
to the aggregate estimates thus enables the Bureau to calculate the 
approximate numbers of impacted institutions in tiers 2 and 3 for each 
set of provisions.\156\
---------------------------------------------------------------------------

    \156\ See supra note 72.
---------------------------------------------------------------------------

    Multiplying the impact estimates for representative financial 
institutions in each tier by the estimated number of impacted 
institutions, the Bureau arrived at the market-level estimates.
2. Costs to Covered Persons
    In general all three sets of provisions in this proposed rule, if 
adopted, would reduce the ongoing costs associated with HMDA reporting 
for the affected covered persons. The set of provisions relating to the 
open-end thresholds would also delay for two additional years the one-
time costs that excluded

[[Page 21000]]

institutions would otherwise incur if the 500 open-end coverage 
threshold were restored to 100 open-end lines of credit in 2020 absent 
this proposed rule. Those proposed provisions would also ultimately 
remove the one-time costs for excluded institutions that originated 
fewer than 200 open-end lines of credit but more than 100 open-end 
lines of credit in either of the two preceding calendar years starting 
in 2022. In the interim, it is possible that to adapt to the rule, 
covered persons may incur certain one-time costs. Such one-time costs 
are mostly related to training and system changes in covered persons' 
HMDA reporting/loan origination systems. Based on the Bureau's outreach 
to industry, however, the Bureau believes that such one-time costs are 
fairly small.
3. Benefits to Consumers
    Having generated estimates of the changes in ongoing costs and one-
time costs to covered financial institutions, the Bureau then can 
attempt to estimate the potential pass-through of such cost reduction 
from these institutions to consumers, which could benefit consumers. 
According to economic theory, in a perfectly competitive market where 
financial institutions are profit maximizers, the affected financial 
institutions would pass on to consumers the marginal, i.e., variable, 
cost savings per application or origination, and absorb the one-time 
and increased fixed costs of complying with the rule. The Bureau 
estimated in the 2015 HMDA Rule the impacts on the variable costs of 
the representative financial institutions in each tier due to various 
provisions of that rule. Similarly, the estimates of the pass-through 
effect from covered persons to consumers due to the provisions under 
this proposed rule are based on the relevant estimates of the changes 
to the variable costs in the 2015 HMDA Rule with some updates. The 
Bureau notes that the market structure in the consumer mortgage lending 
markets may differ from that of a perfectly competitive market in which 
case the pass-through to the consumers would most likely be smaller 
than the pass-through under the perfect competition assumption. The 
Bureau seeks additional comments on the potential pass-through from 
financial institutions to consumers due to the reduction in reporting 
costs.
4. Cost to Consumers
    HMDA is a sunshine statute. The purposes of HMDA are to provide the 
public with loan data that can be used: (i) To help determine whether 
financial institutions are serving the housing needs of their 
communities; (ii) to assist public officials in distributing public-
sector investment so as to attract private investment to areas where it 
is needed; and (iii) to assist in identifying possible discriminatory 
lending patterns and enforcing antidiscrimination statutes.\157\ The 
provisions in this proposed rule, if adopted, would lessen the 
reporting requirements for eligible financial institutions by either 
completely relieving them of the obligation to report all data points 
related to closed-end mortgage loans or open-end lines of credit or by 
implementing the partial exemptions from reporting certain data points 
for certain transactions for some covered persons as provided by the 
EGRRCPA. As a sunshine statute regarding data reporting and disclosure, 
most of the benefits of HMDA are realized indirectly. With less data 
required to be collected and reported under HMDA, the HMDA data 
available to serve HMDA's statutory purposes would decline.\158\ 
However, to quantify the reduction of such benefits to consumers 
presents substantial challenges. The Bureau seeks comment on the 
magnitude of the loss of HMDA benefits from these changes to the 
available data and/or methodologies for measuring these effects.
---------------------------------------------------------------------------

    \157\ 12 CFR 1003.1(b).
    \158\ The changes in this proposal would generally either 
relieve financial institutions from their reporting requirements 
under Regulation C or implement the reduction in the data fields 
required to be reported for certain transactions of certain 
financial institutions as provided by the EGRRCPA. The data fields 
covered by the EGRRCPA include information about the type of loans 
and the types of borrowers applying for and being granted credit, 
which can help determine whether financial institutions are serving 
the housing needs of their communities and assist in identifying 
possible discriminatory lending patterns and enforcing 
antidiscrimination statutes. Similarly, raising the reporting 
thresholds so that fewer institutions report data would reduce the 
public information regarding whether financial institutions are 
serving the needs of their communities. To the extent that these 
data are used for other purposes, the loss of data could result in 
other costs.
---------------------------------------------------------------------------

    Because quantifying and monetizing benefits of HMDA to consumers 
would require identifying all possible uses of HMDA data, establishing 
causal links to the resulting public benefits, and then quantifying the 
magnitude of these benefits, the Bureau mostly presented qualitative 
analyses regarding HMDA benefits in the 2015 HMDA Rule. For instance, 
quantification would require measuring the impact of increased 
transparency on financial institution behavior, the need for public and 
private investment, the housing needs of communities, the number of 
financial institutions potentially engaging in discriminatory or 
predatory behavior, and the number of consumers currently being 
unfairly disadvantaged and the level of quantifiable damage from such 
disadvantage. Similarly for the impact analyses of this proposed rule, 
the Bureau is unable to readily quantify the loss of some of the HMDA 
benefits to consumers with precision, both because the Bureau does not 
have the data to quantify all HMDA benefits and because the Bureau is 
not able to assess completely how this proposed rule will reduce those 
benefits.
    In light of these data limitations, the discussion below generally 
provides a qualitative consideration of the costs, i.e., the potential 
loss of HMDA benefits to consumers from the proposed rule. The Bureau 
seeks comment on the appropriateness of the approach described above, 
including additional data relevant to the benefits and costs to 
consumers and covered persons.

E. Potential Benefits and Costs to Consumers and Covered Persons

1. Overall Summary
    In this section, the Bureau presents a concise, high-level table 
summarizing the benefits and costs considered in the remainder of the 
discussion. This table is not intended to capture all details and 
nuances that are provided both in the rest of the analysis and in the 
section-by-section discussion above, but rather to provide an overview 
of the major benefits and costs of the proposed rule, including the 
provisions to be analyzed, the baseline chosen for each set of 
provisions, the sub-provisions to be analyzed, the actual or proposed 
implementation dates of the sub-provisions, the annual savings on the 
operational costs of covered persons due to the sub-provision, the 
changes to the one-time costs of covered persons due to the sub-
provision, and generally how the proposed provisions affect HMDA's 
benefits.

[[Page 21001]]

[GRAPHIC] [TIFF OMITTED] TP13MY19.000

2. Provisions To Implement the EGRRCPA
Scope of the Provisions
    The proposed rule would incorporate the 2018 HMDA Rule into 
Regulation C and further implement the EGRRCPA provision that adds 
partial exemptions from HMDA's requirements for certain insured 
depository institutions and insured credit unions.\159\ With respect to 
closed-end mortgage loans, HMDA section 304(i)(1) as amended by the 
EGRRCPA provides that, if an insured depository institution or insured 
credit union originated fewer than 500 closed-end mortgage loans in 
each of the two preceding calendar years, the insured depository 
institution or insured credit union is generally exempt from reporting 
certain data points on the closed-end mortgage loans that it would have 
otherwise reported under HMDA. Similarly, with respect to open-end 
lines of credit, HMDA section 304(i)(1) as amended by the EGRRCPA 
provides that, if an insured depository institution or insured credit 
union originated fewer than 500 open-end lines of credit in each of the 
two preceding calendar years, the insured depository institution or 
insured credit union is generally exempt from reporting certain data 
points on the open-end lines of credit that it would have otherwise 
reported under HMDA.\160\
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    \159\ For purposes of HMDA section 104, the EGRRCPA provides 
that the term ``insured credit union'' has the meaning given the 
term in section 101 of the Federal Credit Union Act, 12 U.S.C. 1752, 
and the term ``insured depository institution'' has the meaning 
given the term in section 3 of the Federal Deposit Insurance Act, 12 
U.S.C. 1813.
    \160\ Notwithstanding the new partial exemptions, new HMDA 
section 304(i)(3) provides that an insured depository institution 
must comply with HMDA section 304(b)(5) and (6) if it has received a 
rating of ``needs to improve record of meeting community credit 
needs'' during each of its two most recent examinations or a rating 
of ``substantial noncompliance in meeting community credit needs'' 
on its most recent examination under section 807(b)(2) of the CRA.
---------------------------------------------------------------------------

    For the closed-end mortgage loans, after applying all current HMDA 
reporting requirements, including Regulation C's existing complete 
exclusion for institutions that originated fewer than 25 closed-end 
mortgage loans in either of the two preceding calendar years, the 
Bureau estimates that section 104(a) of the EGRRCPA, as implemented by 
the 2018 HMDA Rule and further implemented by this proposed rule, 
provides a partial exemption with respect to collection, recording, and 
reporting of 2018 HMDA data to approximately 3,300 institutions.\161\ 
As a point of reference, 5,852 institutions reported 2017 HMDA data. 
The Bureau estimates that the insured depository institutions and 
insured credit unions that are eligible for a partial exemption for 
some or all of their covered loans and applications consist of about 56 
percent of all reporting institutions, and 63 percent of all depository 
institutions and credit unions that reported HMDA data for 2017. The 
Bureau estimates that the total number of closed-end mortgage loans 
originated by these partially

[[Page 21002]]

exempt institutions would be about 531,000 per year.
---------------------------------------------------------------------------

    \161\ To generate this estimate, the Bureau first identified all 
depository institutions (including credit unions) that met all 
reporting requirements and reported 2017 HMDA data in 2018. From 
this set of depository institutions, the Bureau then excluded all 
depository institutions that do not have to report 2018 HMDA data in 
2019 because they originated fewer than 25 closed-end mortgage loans 
in either 2016 or 2017. Of the remaining depository institutions, 
approximately 3,300 originated fewer than 500 closed-end mortgage 
loans in each of 2016 and 2017. For purposes of this estimate, the 
Bureau assumes that these institutions are insured, do not have a 
less than satisfactory CRA examination history, and thus estimates 
that they are partially exempt.
---------------------------------------------------------------------------

    For the open-end lines of credit, the 2017 HMDA Rule grants a 
complete exclusion for two years (specifically, 2018 and 2019) for 
open-end lines of credit for all institutions that originated fewer 
than 500 open-end lines of credit in either of the two preceding 
calendar years. As such, insured depository institutions or insured 
credit unions that originated fewer than 500 open-end lines of credit 
in each of the two preceding calendar years and are partially exempt 
under the EGRRCPA are already completely excluded from HMDA's 
requirements for open-end lines of credit during 2018 and 2019 under 
the 2017 HMDA Rule. In other words, for the years 2018 to 2019, the 
partial exemption regarding open-end lines of credit under the EGRRCPA 
would have no immediate effects given the 2017 HMDA Rule.
    The 2017 HMDA Rule provides that, absent any future rulemaking, the 
open-end coverage threshold will revert to 100 open-end lines of credit 
as established in the 2015 HMDA Rule, starting in 2020. Therefore, with 
the 2017 HMDA Rule and pre-EGRRCPA as the baseline, the effects of the 
EGRRCPA on open-end reporting would manifest starting in 2020. The 
Bureau estimates that, by 2020, about 595 insured depository 
institutions or credit unions would have been required to report open-
end lines of credit at the 100 open-end coverage threshold and are 
eligible for a partial exemption under the EGRRCPA. This is before this 
proposed rule's proposal to extend the coverage threshold for open-end 
lines of credit at 500 for calendar years 2020 and 2021 and set the 
coverage threshold for open-end lines of credit at 200 starting in 
2022, which is analyzed separately in another section.
Benefits to Covered Persons
Partial Exemption for Closed-End Mortgage Loans
    The partial exemption for closed-end mortgage loans in the EGRRCPA 
that would be implemented by this proposed rule conveys a direct 
benefit to the covered persons who are eligible for such exemption by 
reducing the ongoing costs of having to report certain data points that 
were previously required.
    The Bureau's 2015 HMDA Rule and 2017 HMDA Rule, which define the 
rules under the baseline for the analyses of this set of provisions, 
require financial institutions to report a total of 48 data points 
beginning with the data collected in 2018 and reported in 2019. These 
data points contain 110 data fields.\162\ The EGRRCPA grants partial 
exemptions for certain transactions of eligible financial institutions 
from reporting 26 of the 48 data points, which consist of 54 of the 110 
data fields. Because this proposed rule would require insured 
depository institutions and insured credit unions to provide a NULI if 
they opt not to report a ULI for a partially exempt transaction, the 
actual reduction in the number of data fields that financial 
institutions need to report for partially exempt transactions would be 
53. In addition, even though property address is a partially exempt 
data point, financial institutions must still report the State in which 
the property that secures the covered loan (or, in the case of an 
application, is proposed to secure the loan) is located for partially 
exempt transactions, because State is an individual data point that is 
not exempt under the EGRRCPA in addition to being one of the data 
fields associated with property address, which is exempt under the 
EGRRCPA. Therefore the total number of data fields that the eligible 
covered person must report for a partially exempt transaction would be 
reduced by 52.
---------------------------------------------------------------------------

    \162\ See FFIEC, ``Filing Instructions Guide for HMDA Data 
Collected in 2019,'' at 13-65 (Oct. 2018), https://s3.amazonaws.com/cfpb-hmda-public/prod/help/2019-hmda-fig.pdf.
---------------------------------------------------------------------------

    With the exception of denial reasons (which were previously 
optionally reported prior to the 2015 HMDA Rule, except that certain 
financial institutions supervised by the OCC and the FDIC were required 
to report denial reasons) and rate spread, all of the data points (and 
data fields) that are partially exempt under the EGRRCPA as implemented 
by the 2018 HMDA Rule and this proposal correspond to data points (and 
data fields) that the Bureau added to the HMDA reporting as mandated by 
the Dodd-Frank Act or with the Bureau's discretionary authority granted 
under the Dodd-Frank Act.\163\
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    \163\ On the other hand, as explained in the section-by-section 
analysis of Sec.  1003(d)(1)(i) in part IV above, age and number of 
units are not partially exempt under the EGRRCPA even though they 
were added to Regulation C in the 2015 HMDA Rule.
---------------------------------------------------------------------------

    The analysis under section 1022(b) of the Dodd-Frank Act in the 
2015 HMDA Rule noted that the Bureau was adding 50 new data fields with 
new data points that previously did not exist under Regulation C. To 
estimate the costs that financial institutions would incur in 
collecting and reporting these data, the Bureau used a cost-accounting, 
case-study methodology which involved an extensive set of interviews 
with financial institutions and their vendors through which the Bureau 
identified 18 component tasks involved in collecting and reporting HMDA 
data and estimated the number of person-hours required and the costs of 
each task for institutions of various levels of complexity. The Bureau 
augmented this information through the Small Business Review Panel 
process and through notice and comment on its proposed cost estimates, 
as well as through a review of academic literature and public data. 
Based on the information gathered in this process, the Bureau estimated 
that the impact of the additional 50 data fields on annual operational 
costs of covered person for closed-end reporting would be approximately 
$2,100, $10,900, and $31,000 per year for representative tier 3, tier 
2, and tier 1 financial institutions, respectively, after accounting 
for the operational improvements that the Bureau was planning to 
implement regarding how the Bureau receives and processes submitted 
data.\164\ Since issuing the 2015 HMDA Rule, the Bureau has modernized 
the HMDA submission system, improved its regulatory HMDA help 
functions, and made other operational changes that were initially 
discussed in the impact analyses of the 2015 HMDA Rule. The Bureau has 
not obtained new information with respect to the component tasks or 
costs set forth in the 2015 HMDA Rule. Therefore, it is reasonable to 
adopt these cost estimates, which reflect the operational improvements 
described in the 2015 HMDA Rule, with certain adjustments that reflect 
the newly proposed rule. To do so, the Bureau takes the 2015 estimates 
on the annual ongoing costs associated with the new additional data 
points added in the 2015 HMDA Rule, prorates the amount to account for 
the reduced number of data fields required due to the EGRRCPA partial 
exemptions, adjusts those for inflation, and arrives at a set of 
estimates for the savings on the operational costs due to the partial 
exemptions for representative firms in each of the three tiers.\165\

[[Page 21003]]

Specifically the Bureau estimates that the savings on annual 
operational costs from not reporting the 52 data fields for closed-end 
mortgage loans that are exempt under the EGRRCPA and this proposed rule 
would be approximately $2,300, $11,900, and $33,900 per year for 
representative tier 3, tier 2, and tier 1 financial institutions that 
are eligible for the partial exemption. The Bureau specifically 
requests information relating to the costs financial institutions 
incurred in collecting and reporting 2018 data in compliance with the 
2015 HMDA Rule that may be valuable in estimating costs in the Dodd-
Frank Act section 1022(b) analysis issued with the final rule.
---------------------------------------------------------------------------

    \164\ For example, the Bureau planned to create a web-based 
submission tool with automated edit checks and to otherwise 
streamline the submission and editing process to make it more 
efficient for filers. In addition, the Bureau planned to consolidate 
the outlets for assistance, provide implementation support, and 
improve points of contact processes for help inquiries. These 
changes were implemented in 2018 for the 2017 filing year. The 
Bureau has received feedback from reporting entities on the new 
systems, which generally indicate substantial costs savings.
    \165\ The Bureau used a wage rate of $33 per hour in its 2015 
HMDA Rule impact analyses, which is the national average wage for 
compliance officers based on the National Compensation Survey from 
the Bureau of Labor Statistics in May 2014. The May 2017 National 
Compensation Survey reported an average wage rate for compliance 
officers of $34.39. The Bureau has used a wage rate of $34 for the 
impact analyses for the proposed rule.
---------------------------------------------------------------------------

    In the 2015 HMDA Rule, the Bureau assumed a representative low-
complexity, tier 3 financial institution that reports closed-end 
mortgage loans had 50 HMDA loan/application register records per year, 
a representative medium-complexity, tier 2 financial institution had 
1,000 HMDA loan/application register records per year, while a high-
complexity, tier 1 financial institution had 50,000 HMDA loan/
application register records per year. The partial exemption for 
closed-end mortgage loans granted under the EGRRCPA and implemented by 
this proposed rule only applies to insured depository institutions and 
insured credit unions that originated less than 500 closed-end mortgage 
loans in each of the two preceding calendar years prior to the HMDA 
collection year. Given that and the Bureau's characterization of 
representative financial institutions in the three tiers, the Bureau 
believes that none of the tier 1 institutions are partially exempt for 
closed-end reporting. Some of the estimated 3,300 partially exempt 
covered persons would be low-complexity/tier 3 institutions, while some 
would belong to tier 2. The Bureau estimates that approximately 2,640 
institutions eligible for the partial exemption from closed-end 
reporting are similar to the representative tier 3 financial 
institutions and approximately 660 eligible institutions belong to tier 
2. Based on these counts, the Bureau estimates that the aggregate 
savings in ongoing costs for covered persons due to the EGRRCPA's 
partial exemption from closed-end reporting would be approximately 
$13.9 million annually.
Partial Exemption for Open-End Lines of Credit
    Starting in 2020,\166\ absent the changes to the open-end coverage 
threshold in this proposal, which will be analyzed separately, the 
partial exemption for open-end lines of credit in the EGRRCPA that 
would be implemented by this proposed rule would convey a direct 
benefit to covered persons who are eligible for such exemption by 
reducing the ongoing costs of having to report certain data points that 
were previously required.
---------------------------------------------------------------------------

    \166\ As noted above, for the years 2018 and 2019, the partial 
exemption regarding open-end lines of credit would have no immediate 
effects given the temporary coverage threshold of 500 open-end lines 
of credit established in the 2017 HMDA Rule.
---------------------------------------------------------------------------

    In the impact analysis of the 2015 HMDA Rule, the Bureau estimated 
that, accounting for the Bureau's planned operational improvements, the 
estimated impact of the 2015 HMDA Rule on ongoing operational costs on 
open-end reporters would be approximately $8,600, $43,400, and $273,000 
per year, for representative low-, moderate-, and high-complexity 
financial institutions, respectively. The Bureau takes such 2015 
estimates on the annual ongoing costs associated with open-end 
reporting, prorates the amount to account for the reduced number of 
data fields required due to the EGRRCPA partial exemption, adjusts 
those for inflation, and arrives at a set of estimates for the savings 
on the operational costs of reporting information on open-end lines of 
credit due to the partial exemption for representative firms in each of 
the three tiers. Specifically the Bureau estimates that the impact on 
the savings on annual operational costs from not reporting the 52 data 
fields for open-end mortgage loans that are exempt under the EGRRCPA 
would be approximately $4,500, $22,800, and $144,000 per year for 
representative tier 3, tier 2, and tier 1 open-end reporting financial 
institutions that are eligible for the partial exemption.
    The Bureau estimates that, absent the changes to the open-end 
coverage in this proposal, about 595 financial institutions would be 
partially exempt from reporting certain data points on open-end lines 
of credit under the EGRRCPA. According to the Bureau's estimates, about 
545 of those 595 partially-exempt open-end reporters are low-complexity 
tier 3 open-end reporters, about 50 are moderate-complexity tier 2 
open-end reporters, and none are high-complexity tier 1 reporters. 
Using these estimates, the Bureau estimates that by granting a partial 
exemption to most insured depository institutions and insured credit 
unions that originate fewer than 500 open-end lines of credit in each 
of two preceding years, absent the proposed changes in the open-end 
coverage threshold in this proposal that would take effect starting in 
2020, the EGRRCPA would provide an aggregate reduction in operational 
costs associated with open-end lines of credit for eligible financial 
institutions of about $3.6 million per year. The Bureau notes that 
these impacts would not begin until 2020, given the temporary 
provisions in the 2017 HMDA Rule.
Costs to Covered Persons
    It is possible that, like any new regulation or revision to the 
existing regulations, financial institutions would incur certain one-
time costs adapting to the changes of the proposed rule. Based on the 
Bureau's early outreach to stakeholders, the Bureau understands that 
most such one-time costs would result from interpreting and 
implementing the regulatory changes, but not from purchasing software 
upgrades or turning off the existing reporting functionality that the 
eligible institutions already built or purchased prior to the EGRRCPA 
taking effect.
    The Bureau seeks comment on any costs to eligible financial 
institutions associated with the proposals relating to the 
incorporation of the EGRRCPA into Regulation C.
Benefits to Consumers
    Having generated estimates of the reduction in ongoing costs for 
closed-end mortgage loans on financial institutions due to the EGRRCPA 
partial exemption for closed-end mortgage loans implemented in this 
proposed rule, the Bureau can estimate the potential pass-through of 
such cost reduction from these institutions to consumers,\167\ which 
could benefit consumers. According to economic theory, in a perfectly 
competitive market where financial institutions are profit maximizers, 
the affected financial institutions would pass on to consumers the 
marginal, i.e., variable, cost savings per application or origination, 
and

[[Page 21004]]

absorb the one-time and increased fixed costs of complying with the 
rule.
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    \167\ Note that throughout this cost-benefit analysis, the 
Bureau discusses such pass-through in order to present a complete 
picture of the benefits that are the result of the proposal. 
However, such pass-through from the financial institution to 
consumers as a result of the proposal is a direct flow from the 
savings to the financial institutions, and should not be interpreted 
as a gain in addition to the savings to the financial institutions 
from a general equilibrium perspective for the calculation of total 
social benefit.
---------------------------------------------------------------------------

    The Bureau estimated in the 2015 HMDA Rule that the 50 data fields 
of the new data points required under the 2015 HMDA Rule would add 
variable costs per application for closed-end mortgage loans of 
approximately $22 for a representative tier 3 financial institution, 
$0.62 for a representative tier 2 financial institution, and $0.05 for 
a representative tier 1 financial institution.\168\ As explained above, 
the partial exemption in the EGRRCPA and this proposed rule will reduce 
the number of data fields that have to be reported by 52 and almost all 
those partially exempt data fields correspond to data fields for new 
data points added by the 2015 HMDA Rule. Adjusting these figures to 
account for the difference in the number of the data fields that are 
partially exempt under the EGRRCPA and the number of data fields of new 
data points added by the 2015 HMDA Rule, and adjusting for inflation, 
the Bureau estimates that the partial exemption under the EGRRCPA and 
this proposed rule would reduce the variable cost per closed-end 
mortgage loan application for a representative tier 3 financial 
institution by about $24 and for a representative tier 2 financial 
institution by about $0.68. This potential reduction in the expense 
facing consumers when applying for a closed-end mortgage will be 
amortized over the life of the loan and represents a very small 
decrease in the cost of a mortgage loan. Therefore, the Bureau does not 
anticipate any material effect on credit access in the long or short 
term if financial institutions pass on these cost savings to consumers.
---------------------------------------------------------------------------

    \168\ 80 FR 66128, 66291 (Oct. 28, 2015).
---------------------------------------------------------------------------

    Similarly, having generated estimates of the reduction in ongoing 
costs for open-end mortgage loans on financial institutions due to the 
EGRRCPA partial exemption for open-end lines of credit implemented in 
this proposed rule, the Bureau can estimate the potential pass-through 
of such cost reduction from these institutions to consumers, which 
could benefit consumers.
    The Bureau estimated in the 2015 HMDA Rule that the rule would 
increase variable costs by $41.50 per open-end line of credit 
application for representative low-complexity institutions and $6.20 
per open-end line of credit application for representative moderate-
complexity institutions. Accounting for the difference in the number of 
the data fields that are partially exempt under the EGRRCPA and the 
total number of data fields that comprise all data points under the 
2015 HMDA Rule, and adjusting for inflation, the Bureau estimates that 
the partial exemption under the EGRRCPA and this proposed rule would 
reduce the variable cost per open-end line of credit application for a 
representative tier 3 financial institution by about $22 and for a 
representative tier 2 financial institution by about $3. These savings 
on the variable costs by the partially-exempt open-end reporters could 
potentially be passed through to consumers, under the assumption of a 
perfectly competitive market with profit maximizing firms. These 
expenses will be amortized over the life of a loan and represent a very 
small amount relative to the cost of a mortgage loan. The Bureau notes 
that the market structure in the consumer mortgage lending market may 
differ from that of a perfectly competitive market in which case the 
pass-through to the consumers would most likely be smaller than the 
pass-through under the perfect competition assumption. Therefore, the 
Bureau does not anticipate any material effect on credit access in the 
long or short term even if financial institutions pass on these reduced 
costs to consumers.
Costs to Consumers
    The partial exemptions under the EGRRCPA and further implemented 
through this proposed rule remove the reporting requirements for 26 
data points for certain transactions of eligible insured depository 
institutions and insured credit unions. As a result, regulators, public 
officials, and members of the public will lose some insights into the 
credit offered by these partially exempt institutions and overall 
credit in the communities they serve. The decreased insight into 
partially exempt financial institutions may lead to adverse outcomes 
for some consumers. For instance, some of the exempt data points could 
have helped the regulators and public officials better understand the 
type of funds that are flowing from lenders to consumers and the needs 
of consumers for mortgage credit. Additionally, some exempt data points 
could improve the processes used to identify possible discriminatory 
lending patterns and enforce antidiscrimination statutes. In addition, 
without the exempt data regarding, for example, underwriting and 
pricing, some lenders with low fair lending risk may be initially 
misidentified as high risk, potentially increasing their associated 
compliance burden. Finally, to the extent that some covered persons may 
use the information reported by other financial institutions for market 
research purposes, the partial exemptions may potentially lead to less 
vigorous competition from these institutions.
3. Provisions To Increase the Closed-End Coverage Threshold
Scope of the Provisions
    This proposal would increase the thresholds for reporting data 
about closed-end mortgage loans so that financial institutions 
originating fewer than either 50 closed-end mortgage loans, or 
alternatively 100 closed-end mortgage loans, in either of the two 
preceding calendar years would be excluded from HMDA's requirements for 
closed-end mortgage loans starting in 2020.
    The 2015 HMDA Rule requires institutions that originated at least 
25 closed-end mortgage loans in each of the two preceding calendar 
years and meet all other reporting criteria to report their closed-end 
mortgage applications and loans. The EGRRCPA provides a partial 
exemption for insured depository institutions and insured credit unions 
that originated fewer than 500 closed-end mortgage loans in each of the 
two preceding years. This proposed rule contains provisions that 
incorporate the 2018 HMDA Rule into Regulation C and further implement 
the EGRRCPA. The previous section in this impact analysis specifically 
addresses the partial exemptions under the EGRRCPA. This section 
considers increasing the closed-end loan coverage threshold to either 
50 or 100 so that only financial institutions that originated at least 
50 or 100 closed-end mortgage loans in each of the two preceding years 
must report data on their closed-end mortgage applications and loans 
under HMDA.
    Using data from various sources, including past HMDA submissions, 
Call Reports, Credit Union Call Reports, Summary of Deposits, and the 
National Information Center (NIC), the Bureau applied all current HMDA 
reporting requirements, including Regulation C's existing complete 
regulatory exclusion for institutions that originated fewer than 25 
closed-end mortgage loans in either of the two preceding calendar 
years, and estimates that currently there are about 4,960 financial 
institutions required to report their closed-end mortgage loans and 
applications under HMDA. Together, these financial institutions 
originated about 7.0 million closed-end mortgage loans in calendar year 
2017. The Bureau observes that the total number of financial 
institutions that were engaged in closed-mortgage lending in 2017, 
regardless of whether they met all HMDA reporting criteria, is

[[Page 21005]]

about 12,700, and the total number of closed-end mortgage originations 
in 2017 was about 8.2 million. In other words, under the current 25 
closed-end loan coverage threshold, about 39 percent of all mortgage 
lenders are required to report HMDA data, and they account for about 
85.6 percent of all closed-end mortgage originations in the country. 
The Bureau estimates that among those 4,960 financial institutions that 
are currently required to report closed-end mortgage loans under HMDA, 
about 3,300 insured depository institutions and insured credit unions 
are partially exempt for closed-end mortgage loans under the EGRRCPA 
and the 2018 HMDA Rule, and thus are not required to report a subset of 
the data points currently required by Regulation C for these 
transactions.
Alternative 1: 50 Closed-End Coverage Threshold
    The Bureau estimates that if the closed-end loan coverage threshold 
were increased to 50, under one of the two options proposed in this 
proposed rule, the total number of financial institutions that would be 
required to report closed-end mortgages would drop to about 4,200, a 
decrease of about 760 financial institutions compared to the current 
level. These 760 newly excluded institutions originated about 37,000 
closed-end mortgage loans in 2017. There would be about 6.98 million 
closed-end mortgage originations reported under the 50 closed-end loan 
coverage threshold, which would account for about 85.1 percent of all 
closed-end mortgage loan originations in the entire mortgage market.
    The Bureau further estimates that all but about 20 \169\ of the 760 
newly excluded closed-end mortgage reporters under the proposed 50 
closed-end loan coverage threshold would be eligible for a partial 
exemption for closed-end mortgage loans as provided by the EGRRCPA and 
the 2018 HMDA Rule.
---------------------------------------------------------------------------

    \169\ Those financial institutions either had a closed-end loan 
origination volume of 500 or more in at least one of the preceding 
two calendar years or are not insured depository institutions or 
insured credit unions, and therefore are not eligible for a partial 
exemption for closed-end mortgage loans as provided by the EGRRCPA 
and the 2018 HMDA Rule.
---------------------------------------------------------------------------

Alternative 2: 100 Closed-End Coverage Threshold
    The Bureau estimates that if the closed-end loan coverage threshold 
were increased to 100, as another of the two options proposed in this 
proposed rule, the total number of financial institutions that would be 
required to report closed-end mortgages would drop to about 3,240, a 
decrease of about 1,720 financial institutions compared to the current 
level. These 1,720 newly excluded institutions originated about 147,000 
closed-end mortgage loans in 2017. There would be about 6.87 million 
closed-end mortgage loan originations reported under the 100 closed-end 
loan coverage threshold, which would account for about 83.7 percent of 
all closed-end mortgage originations in the entire mortgage market.
    The Bureau further estimates that all but about 50 of the 1,720 
newly excluded closed-end mortgage loan reporters that would be 
excluded under the proposed 100 closed-end coverage threshold would be 
eligible for a partial exemption for closed-end mortgage loans as 
provided by the EGRRCPA and the 2018 HMDA Rule.
    Table 3 below shows the Bureau's estimates of the number of closed-
end reporters that would be required to report under various potential 
thresholds, and the number of closed-end originations reported by these 
financial institutions, both in total and broken down by the type of 
financial institution and HMDA submission agency as was done in the 
2015 HMDA Rule.\170\
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    \170\ Regulation C applies to financial institutions as defined 
in Sec.  1003.2(g) and requires a financial institution to submit 
data to the appropriate Federal agency for the financial 
institution. See 12 CFR 1003.1(c); 1003.5(a). (Nondepository 
institutions generally designate HUD as their appropriate Federal 
agency, while depository institutions and their subsidiaries 
designate one of the other federal regulators as their appropriate 
Federal agency.) For more information about determining the 
appropriate Federal agency for a financial institution, see Sec.  
1003.5(a)(4). The numbers in tables 3 and 4 reflect the estimated 
number of institutions that would designate each agency as their 
appropriate Federal agency for data submission under Regulation C 
(see Sec.  1003.5(a)(3)(iv)). These tables are limited to that 
narrow purpose and do not attempt to determine whether any of these 
institutions may otherwise be subject to the rulemaking, 
supervisory, or enforcement authorities of multiple regulators.

                                                     Table 3
----------------------------------------------------------------------------------------------------------------
                                                                          Closed-End Reporting Threshold
                             Agency                              -----------------------------------------------
                                                                       >=25            >=50            >=100
----------------------------------------------------------------------------------------------------------------
                         Number of Reporting Financial Institutions by Submission Agency
----------------------------------------------------------------------------------------------------------------
Total...........................................................           4,960           4,201           3,242
CFPB............................................................             107             105             101
FDIC............................................................           1,769           1,442           1,039
FRS.............................................................             441             378             298
NCUA............................................................           1,329           1,073             764
OCC.............................................................             617             520             379
HUD.............................................................             697             683             661
----------------------------------------------------------------------------------------------------------------
                            Number of Reported Loans (in 1000's) by Submission Agency
----------------------------------------------------------------------------------------------------------------
Total...........................................................           7,019           6,982           6,872
CFPB............................................................           1,693           1,693           1,669
FDIC............................................................             763             748             713
FRS.............................................................             260             258             250
NCUA............................................................             562             548             519
OCC.............................................................             300             295             283
HUD.............................................................           3,440           3,439           3,437
----------------------------------------------------------------------------------------------------------------


[[Page 21006]]

Benefits to Covered Persons
    The complete exclusion from closed-end mortgage reporting for 
institutions that originated fewer than 50 or 100 closed-end mortgage 
loans in either of the two preceding calendar years, as proposed in 
this proposed rule, would convey a direct benefit to the covered 
persons who are eligible for such exclusion by reducing the ongoing 
costs of having to report closed-end mortgage loans and applications 
that were previously required.
    In the impact analysis of the 2015 HMDA Rule, prior to the adoption 
of the changes in the 2015 HMDA Rule and implementation of the Bureau's 
operational improvements, the Bureau estimated that the annual 
operational costs for financial institutions of reporting under HMDA 
were approximately $2,500 for a representative low-complexity financial 
institution with a loan/application register size of 50 records; 
$35,600 for a representative moderate-complexity financial institution 
with a loan/application register size of 1,000 records; and $313,000 
for a representative high-complexity financial institution with a loan/
application register size of 50,000 records. The Bureau estimated that 
accounting for the operational improvements, the net impact of the 2015 
HMDA Rule on ongoing operational costs for closed-end reporters would 
be approximately $1,900, $7,800, and $20,000 \171\ per year, for 
representative low-, moderate-, and high-complexity financial 
institutions, respectively. This means that with all components of the 
2015 HMDA Rule implemented and accounting for the Bureau's operational 
improvements, the estimated annual operational costs for closed-end 
mortgage reporting would be approximately $4,400 for a representative 
tier 3 reporter, $43,400 for a representative tier 2 reporter, and 
$333,000 for a representative tier 1 reporter. Updating these numbers 
with inflation, the Bureau estimates that if a financial institution is 
required to report under the 2015 HMDA Rule and is not partially exempt 
under the EGRRCPA, i.e., it must report all data points specified in 
Regulation C for its closed-end mortgage loans, the savings on the 
annual operational costs from not reporting any closed-end mortgage 
data if it were completely excluded under one of two proposed loan 
thresholds, would be approximately $4,500 for a representative low-
complexity tier 3 institution, $44,700 for a representative moderate-
complexity tier 2 institution, and $343,000 for a representative high-
complexity tier 1 institution. On the other hand, as explained in the 
previous section, the Bureau estimates that had a financial institution 
been eligible for a partial exemption on its closed-end mortgage loans 
under the EGRRCPA and 2018 HMDA Rule, the annual savings in the ongoing 
costs from the partial exemption alone would be approximately $2,300 
for a representative tier 3 institution, $11,900 for a representative 
tier 2 institution and $33,900 for a representative tier 1 institution. 
Therefore, the Bureau estimates that if a financial institution is 
required to report under the 2015 HMDA Rule, but is partially exempt 
under the EGRRCPA, i.e., it only needs to report a subset of all 
Regulation C data points for its closed-end mortgage loans, the savings 
in the annual operational costs from not reporting any closed-end 
mortgage data, if it is completely excluded, would be approximately 
$2,200 for a representative low-complexity tier 3 institution, $32,800 
for a representative moderate-complexity tier 2 institution, and 
$309,000 for a representative high-complexity tier 1 institution. These 
estimates have already been adjusted for inflation.
---------------------------------------------------------------------------

    \171\ This does not include the costs of quarterly reporting for 
financial institutions that have annual origination volume greater 
than 60,000. Those quarterly reporters are all high-complexity tier 
1 institutions, and the Bureau estimates none of the quarterly 
reporters would be excluded under this proposal.
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Alternative 1: 50 Closed-End Coverage Threshold
    Using the methodology discussed above in part VI.D.1, the Bureau 
estimates that with the proposed 50 closed-end coverage threshold, 
about 760 institutions would be completely excluded from reporting 
closed-end mortgage data compared to the current level. All but about 
20 of these 760 institutions would be eligible for a partial exemption 
under the EGRRCPA and the 2018 HMDA Rule.
    The Bureau estimates that, of the approximately 740 financial 
institutions that are (1) required to report closed-end mortgages under 
the 2015 HMDA Rule, (2) partially exempt under the EGRRCPA, and (3) 
completely excluded under the proposed 50 loan threshold, about 727 are 
similar to the representative low-complexity tier 3 institution and 
about 13 are similar to the representative moderate-complexity tier 2 
institution. Of the approximately 20 remaining financial institutions 
that are required to report closed-end mortgages under the 2015 HMDA 
Rule and are not partially exempt under the EGRRCPA but would be 
completely excluded under the proposed 50 closed-end coverage 
threshold, about 19 are similar to the representative low-complexity 
tier 3 institution and only one is similar to the representative 
moderate-complexity tier 2 institution.
    Based on the estimates of the savings of annual ongoing costs for 
closed-end reporting per representative institution, grouped by whether 
or not it is partially exempt for closed-end reporting under the 
EGRRCPA, and the estimated tier distribution of these institutions that 
would be excluded under the proposed 50 closed-end loan coverage 
threshold, the Bureau estimates that, the total savings in annual 
ongoing costs from HMDA reporting by fully excluded institutions that 
are already partially exempt under the EGRRCPA would be about $2 
million, and the total savings in the annual ongoing costs from HMDA 
reporting by fully excluded firms that previously were not eligible for 
a partial exemption under the EGRRCPA would be about $140,000. Together 
the annual savings in the operational costs of firms excluded under the 
proposed 50 closed-end loan coverage threshold would be about $2.2 
million.
Alternative 2: 100 Closed-End Coverage Threshold
    Using methodology discussed above in part VI.D.1, the Bureau 
estimates that with the proposed 100 closed-end coverage threshold, 
about 1,720 institutions would be completely excluded from reporting 
closed-end mortgage data compared to the current level. All but about 
50 of the 1,720 would be eligible for the partial exemption for closed-
end mortgage loans under the EGRRCPA and the 2018 HMDA Rule.
    The Bureau estimates that, of the approximately 1,670 institutions 
that are (1) required to report closed-end mortgage loans under the 
2015 HMDA Rule, (2) partially exempt under the EGRRCPA, and (3) 
completely excluded under the proposed 100 closed-end coverage 
threshold, about 1,540 are similar to the representative low-complexity 
tier 3 institution and about 130 are similar to the representative 
moderate-complexity tier 2 institution. Of the approximately 50 
remaining institutions that are required to report closed-end mortgage 
data under the 2015 HMDA Rule and are not partially exempt under the 
EGRRCPA but would be completely excluded under the proposed 100 closed-
end coverage threshold, about 45 are similar to the representative low-
complexity tier 3 institution and only five are similar to the 
representative moderate-complexity tier 2 institution.

[[Page 21007]]

    Based on the estimates of the savings of annual ongoing costs for 
closed-end reporting per representative institution, grouped by whether 
or not it is partially exempt under the EGRRCPA, and the estimated tier 
distribution of these financial institutions that would be excluded 
under the proposed 100 closed-end loan coverage threshold, the Bureau 
estimates that, the total savings in the annual ongoing costs from HMDA 
reporting by excluded firms that are already partially exempt for 
closed-end mortgage loans under the EGRRCPA would be about $7.7 
million, and the total savings in the annual ongoing costs from HMDA 
reporting by fully excluded firms that are not eligible for a partial 
exemption under the EGRRCPA would be about $400,000. Together the 
annual savings in the operational costs of firms newly excluded under 
the proposed 100 closed-end coverage threshold would be about $8.1 
million.
Costs to Covered Persons
    It is possible that, like any new regulation or revision to an 
existing regulation, financial institutions would incur certain one-
time costs adapting to the changes to the regulation. Based on the 
Bureau's early outreach to stakeholders, the Bureau understands that 
most of these one-time costs consists of interpreting and implementing 
the regulatory changes and not from purchasing software upgrades or 
turning off the existing reporting functionality that the newly 
excluded institutions already built or purchased prior to the new 
changes taking effect.
    The Bureau seeks comments on any costs to institutions that would 
be newly excluded under either of the alternative proposed increases to 
the closed-end coverage threshold.
Benefits to Consumers
    Having generated estimates of the reduction in ongoing costs on 
covered financial institutions due to the proposed increase in the 
closed-end loan coverage threshold, the Bureau then attempts to 
estimate the potential pass-through of such cost reduction from these 
institutions to consumers, which could benefit consumers. According to 
economic theory, in a perfectly competitive market where financial 
institutions are profit maximizers, the affected financial institutions 
would pass on to consumers the marginal, i.e., variable, cost savings 
per application or origination, and absorb the one-time and increased 
fixed costs of complying with the rule.
    The Bureau estimated in the 2015 HMDA Rule that the final rule 
would increase variable costs by $23 per closed-end mortgage 
application for representative low-complexity institutions and $0.20 
per closed-end mortgage application for representative moderate-
complexity institutions. The Bureau estimated that prior to the 2015 
HMDA Rule, the variable costs of HMDA reporting were about $18 per 
closed-end mortgage application for representative low-complexity 
institutions, $6 per closed-end mortgage application for representative 
moderate-complexity institutions, and $3 per closed-end mortgage 
application for representative high-complexity institutions. Adjusting 
for inflation, the Bureau estimates the savings on the variable cost 
per closed-end application for a representative tier 3 financial 
institution that is not partially exempt under the EGRRCPA but excluded 
from closed-end reporting under this proposal would be about $42 per 
application; the savings on the variable cost per application for a 
representative tier 2 financial institution that is not partially 
exempt under the EGRRCPA but excluded from closed-end reporting under 
this proposal would be about $6.40 per application.
    The Bureau estimates that the partial exemption for closed-end 
mortgage loans under the EGRRCPA for eligible insured depository 
institutions and insured credit unions would reduce the variable costs 
of HMDA reporting by approximately $24 per closed-end mortgage 
application for representative low-complexity institutions, $0.68 per 
closed-end mortgage application for representative moderate-complexity 
institutions, and $0.05 per closed-end mortgage application for 
representative high-complexity institutions. The savings on the 
variable cost per application for a representative tier 3 financial 
institution that is partially exempt under the EGRRCPA and fully 
excluded from closed-end reporting under this proposal would be about 
$18.30 per application. The savings on the variable cost per 
application for a representative tier 2 financial institution that is 
partially exempt under the EGRRCPA and fully excluded from closed-end 
reporting under this proposal would be about $5.70 per application. 
These are the cost reductions that excluded institutions under this 
proposed rule might pass through to their consumers and assuming the 
market is perfectly competitive. This potential reduction in the 
expense consumers face when applying for a mortgage would be amortized 
over the life of the loan and would represent a very small amount 
relative to the cost of a mortgage loan. The Bureau notes that the 
market structure in the consumer mortgage lending market may differ 
from that of a perfectly competitive market in which case the pass-
through to the consumers would most likely be smaller than the pass-
through under the perfect competition assumption. Therefore, the Bureau 
does not anticipate any material effect on credit access in the long or 
short term if financial institutions pass on these cost savings to 
consumers.
Costs to Consumers
    The proposed increase to the closed-end coverage threshold would 
relieve eligible financial institutions from the reporting requirements 
for all closed-end mortgage loans and applications. As a result, HMDA 
data on these institutions' closed-end mortgage loans and applications 
would no longer be available to regulators, public officials, and 
members of the public. The decreased insight into excluded institutions 
may lead to adverse outcomes for some consumers. For instance, HMDA 
data, if reported, could help regulators and public officials better 
understand the type of funds that are flowing from lenders to consumers 
and consumers' needs for mortgage credit. The data may also help 
improve the processes used to identify possible discriminatory lending 
patterns and enforce antidiscrimination statutes.
    The Bureau recognizes that the costs to consumers would be higher 
if the closed-end coverage threshold were increased to 100 loans rather 
than if it were increased to 50 loans, but currently lacks sufficient 
data to quantify such loss other than the estimated numbers of covered 
loans and covered institutions under the two alternative proposed 
thresholds, as reported in Table 3. The Bureau seeks comment on the 
costs to consumers associated with the proposed alternative increases 
to the closed-end coverage threshold.
4. Provisions To Increase the Open-End Coverage Threshold
Scope of the Provisions
    The proposed rule would extend the temporary open-end coverage 
threshold of 500 open-end lines of credit for two additional years 
(2020 and 2021), and permanently set the threshold for reporting data 
about open-end lines of credit at 200 open-end lines of credit in each 
of the preceding two calendar years starting in 2022.
    The 2015 HMDA Rule generally requires financial institutions that 
originated at least 100 open-end lines of

[[Page 21008]]

credit in each of the two preceding years to report data about their 
open-end lines of credit and applications. The 2017 HMDA Rule 
temporarily increased the open-end coverage threshold to 500 for two 
years, meaning only financial institutions that originated at least 500 
open-end lines of credit in each of the two preceding years are subject 
to HMDA's requirements for their open-end lines of credit for 2018 and 
2019. The EGRRCPA generally provides a partial exemption for insured 
depository institutions and insured credit unions that originated less 
than 500 open-end lines of credit in each of the two preceding years. 
However, for 2018 and 2019, all insured depository institutions and 
insured credit unions that are granted a partial exemption for open-end 
lines of credit by the EGRRCPA are fully excluded from HMDA's 
requirements for their open-end lines of credit by the 2017 HMDA Rule. 
Absent any further changes via a rulemaking process, according to the 
2015 HMDA Rule and the 2017 HMDA Rule, starting in 2020 the open-end 
coverage threshold will adjust to 100, and institutions that exceed the 
coverage threshold of 100 open-end lines of credit will be able to use 
the EGRRCPA's open-end partial exemption if they originated less than 
500 open-end lines of credit in each of the two preceding years. Thus, 
the appropriate baseline for the consideration of benefits and costs of 
the proposed changes to the open-end coverage threshold, including the 
two-year extension of the temporary threshold of 500 open-end lines of 
credit and then setting the permanent threshold at 200 starting in 
2022, is a situation starting in 2020 in which the open-end coverage 
threshold is set at 100 for each of two preceding years and the partial 
exemption with a threshold of 500 open-end lines of credit applies.
    Because collection of data on open-end lines of credit only became 
mandatory starting in 2018 under the 2015 HMDA Rule and 2017 HMDA Rule, 
no single data source exists as of the time of this proposal that can 
accurately report the number of originations of open-end lines of 
credit in the entire market and by lender.\172\ The Bureau therefore 
has used multiple data sources, including credit union Call Reports, 
Call Reports for banks and thrifts, HMDA data, and Consumer Credit 
Panel data, to develop estimates about open-end originations for 
lenders that offer open-end lines of credit and assess the impact of 
various thresholds on the numbers of reporters and market coverage 
under various scenarios.\173\ The Table below provides estimates of 
coverage among all lenders that are active in the open-end line of 
credit market at various open-end coverage thresholds broken down by 
submission agency as was done in the 2015 HMDA Rule.\174\
---------------------------------------------------------------------------

    \172\ As discussed supra note 155, the most recent year of HMDA 
data the Bureau has used for these analyses is the 2017 HMDA data. 
The Bureau intends to review the 2018 HMDA data more closely in 
connection with this rulemaking once the 2018 submissions are more 
complete. The 2018 HMDA data is the first year where open-end lines 
of credit were required to be reported, unlike in previous years 
when open-end lines of credit were reported only voluntarily. Even 
so, the Bureau does not expect large differences from these 
estimates had the 2018 HMDA data been used for this cost-benefit 
analysis, because the Bureau has taken into account other market 
data in its estimates.
    \173\ In general, credit union Call Reports provide the number 
of originations of open-end lines of credit secured by real estate 
but exclude lines of credit in the first-lien status. Call Reports 
for banks and thrifts report only the balance of the home-equity 
lines of credit at the end of the reporting period but not the 
number of originations in the period.
    \174\ See supra note 170.

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[[Page 21009]]

[GRAPHIC] [TIFF OMITTED] TP13MY19.001

    The Bureau estimates that there were about 1.59 million open-end 
lines of credit originated in 2017 by about 6,615 lenders. Under the 
temporary 500 open-end line of credit coverage threshold set in the 
2017 HMDA Rule, there would be about 1.23 million open-end lines of 
credit reported by about 333 financial institutions. This would 
represent about 77.4 percent of all originations and 5 percent of all 
lenders in the open-end line of credit market. In comparison, if the 
open-end coverage threshold were set at 100, the Bureau estimates that 
the number of reporters would be about 1,014, who in total originate 
about 1.41 million open-end lines of credit, representing about 88.7 
percent of all originations and 15.3 percent of all lenders in the 
market. In other words, if the coverage threshold is increased to 500 
for another two years (in 2020 and 2021) as proposed by this proposed 
rule, in comparison to the default baseline where the threshold is set 
at 100 in 2020, the Bureau estimates that the number of institutions 
affected would be about 681, who in total originated about 177,000 
open-end lines of credit. Among those 681 open-end lines of credit 
lenders, the Bureau estimates that about 618 already qualify for a 
partial exemption for their open-end lines of credit under the EGRRCPA 
and in total they originate about 136,000 open-end lines of credit.
    If the permanent open-end line of credit coverage threshold is set 
at 200, for 2022 and beyond, as proposed, the Bureau estimates there 
would be about 1.34 million open-end lines of credit reported by about 
613 reporters. In terms of market coverage, this would represent about 
84.2 percent of all originations and 9.2 percent of all lenders in the 
open-end line of credit market. In other words, if the coverage 
threshold is increased to 200 for year

[[Page 21010]]

2022 and beyond as proposed, in comparison to a baseline threshold set 
at 100, the Bureau estimates that 401 reporters, who in total 
originated about 69,000 open-end lines of credit, would be affected. 
Among the 401 institutions that the 200 loan threshold would completely 
exclude, the Bureau estimates that about 378 already qualify for a 
partial exemption for their open-end lines of credit under the EGRRCPA 
and in total they originate about 61,000 open-end lines of credit.
Benefits to Covered Persons
    The proposed extension of the temporary open-end coverage threshold 
of 500 for two additional years, as compared to having the threshold 
adjust to 100, conveys a direct benefit to covered persons that 
originated fewer than 500 open-end lines of credit in either of the two 
preceding years but originated no less than 100 open-end lines of 
credit in each of the two preceding years in reducing the ongoing costs 
associated with open-end lines of credit during 2020 and 2021.
    In the impact analysis of the 2015 HMDA Rule, the Bureau estimated 
that, accounting for Bureau's planned operational improvements, the 
ongoing operational costs on open-end reporters for all data points 
required under the 2015 HMDA Rule would be approximately $8,600, 
$43,400, and $273,000 per year, for representative low-, moderate-, and 
high-complexity financial institutions, respectively. Adjusting for 
inflation, this is equivalent to approximately $8,800, $44,700, and 
$281,100 per year currently. On the other hand, accounting for the 
reduced number of required data points and inflation, the Bureau now 
estimates that the ongoing costs of open-end reporting would be about 
$4,300, $21,900, and $138,000 per year, for representative low-, 
moderate-, and high-complexity financial institutions, respectively 
that are eligible for a partial exemption for open-end lines of credit 
under the EGRRCPA.
    The Bureau estimates that, with the proposed coverage threshold 
increased to 500 as compared to reverting to 100 for 2020 and 2021, 
about 681 financial institutions would be excluded from reporting open-
end lines of credit during the two years. About 618 of those 681 
financial institutions would be eligible for the partial exemption for 
open-end lines of credit under the EGRRCPA and further implemented by 
the 2018 HMDA Rule and this proposed rule if adopted, and about 63 of 
them would not have been eligible for the partial exemption for open-
end lines of credit because in one of the preceding two years their 
open-end origination volume exceeded 500. Of the 618 institutions that 
are already eligible for a partial exemption under the EGRRCPA but 
would be fully excluded for two additional years from open-end 
reporting by this proposed rule, the Bureau estimates that about 567 
are low-complexity tier 3 open-end reporters, about 51 are moderate-
complexity tier 2 open-end reporters, and none are high-complexity tier 
1 reporters. In addition, of the 63 institutions that are not eligible 
for the partial exemption under the EGRRCPA but would be fully excluded 
for two additional years from open-end reporting by this proposed rule, 
the Bureau estimates that about 26 are low-complexity tier 3 open-end 
reporters, about 37 are moderate-complexity tier 2 open-end reporters, 
and none are high-complexity tier 1 reporters. Using the estimates of 
savings on ongoing costs for open-end lines of credit for 
representative financial institutions, grouped by whether the lender is 
already eligible for the partial exemption under the EGRRCPA, as 
described above, the Bureau estimates that by extending the temporary 
500 open-end coverage threshold for two years, the eligible financial 
institutions that are already partially exempt under the EGRRCPA would 
receive an aggregate reduction in operational cost associated with 
open-end lines of credit of about $3.5 million per year in the years 
2020 and 2021, while the eligible financial institutions that are not 
already partially exempt under the EGRRCPA would receive an aggregate 
reduction in operational cost associated with open-end lines of credit 
of about $2.1 million per year in the years 2020 and 2021. In total 
extending the 500 loan threshold for two additional years would result 
in operational cost savings of about $5.6 million per year in the years 
2020 and 2021.
    The proposed increase of the permanent open-end coverage threshold 
to 200 open-end lines of credit in each of the two preceding calendar 
years starting in 2022, as compared to having the threshold adjust to 
100, conveys a direct benefit to covered persons that originated fewer 
than 200 open-end lines of credit in either of the two preceding years 
but originated no less than 100 open-end lines of credit in each of the 
two preceding years in reducing the ongoing costs of having to report 
their open-end lines of credit.
    The Bureau estimates that, with the proposed coverage threshold 
increased to 200 as compared to reverting to 100 starting in 2022, 
about 401 financial institutions would be excluded from reporting open-
end lines of credit starting in 2022. About 378 of those 401 financial 
institutions are eligible for the partial exemption for open-end lines 
of credit under the EGRRCPA, and about 23 of them are not eligible for 
the partial exemption for open-end lines of credit because in one of 
the preceding two years its open-end origination volume exceeded 500. 
Of the 378 institutions that are already partially exempt under the 
EGRRCPA but would be fully excluded from open-end reporting starting in 
2022 under the proposal, the Bureau estimates that about 373 are low-
complexity tier 3 open-end reporters, about five are moderate-
complexity tier 2 open-end reporters, and none are high-complexity tier 
1 reporters. In addition, of the 23 institutions that are not eligible 
for the partial exemption under the EGRRCPA but would be fully excluded 
from open-end reporting starting in 2022 by this proposed rule, the 
Bureau estimates that about 18 are low-complexity tier 3 open-end 
reporters, about five are moderate-complexity tier 2 open-end 
reporters, and none are high-complexity tier 1 reporters. Using the 
estimates of savings on ongoing costs for open-end lines of credit for 
representative financial institutions, grouped by whether the lender is 
already eligible for the partial exemption under the EGRRCPA, as 
described above, the Bureau estimates that by raising the open-end 
coverage threshold to 200 open-end lines of credit starting in 2022, 
the eligible financial institutions that are already partially exempt 
under the EGRRCPA would receive an aggregate reduction in operational 
cost associated with open-end lines of credit of about $1.7 million per 
year starting in 2022, while the eligible financial institutions that 
are not already partially exempt under the EGRRCPA would receive an 
aggregate reduction in operational cost associated with open-end lines 
of credit of about $38,000 per year starting in 2022. In total, 
increasing the open-end threshold from 100 to 200 would result in 
savings on the operational costs associated with open-end lines of 
credit of about $2.1 million per year starting in 2022.
    The proposed increase of the open-end coverage threshold to 200 
starting in calendar year 2022, as compared to having the threshold 
adjust to 100, would also convey a direct benefit to covered persons 
that originated fewer than 200 open-end lines of credit in either of 
the two preceding years but originated no less than 100 open-end lines 
of credit in each of the two preceding years in removing the one-time 
costs of having to report their open-end lines of credit, had the

[[Page 21011]]

reporting threshold adjusted to 100 according to the 2017 HMDA Rule.
    It is the Bureau's understanding that most of the financial 
institutions that were temporarily excluded for 2018 and 2019 under the 
2017 HMDA rule have not fully prepared for open-end reporting because 
they are waiting for the Bureau to decide on the open-end reporting 
threshold that would apply after the temporary threshold of 500 loans 
expires in 2020. Under the baseline in this impact analysis, absent 
this proposed rule, those financial institutions would have to start 
reporting their open-end lines of credit starting in 2020, and hence 
incur one-time costs to create processes and systems for open-end lines 
of credit. The proposed extension of the 500 open-end coverage 
threshold for 2020 and 2021 in this proposal would delay incurrence of 
such one-time costs for two more years. If the second proposal to 
increase the open-end threshold to 200 starting in 2022 is not 
finalized, financial institutions that originated fewer than 200 open-
end lines of credit in either of the two preceding years but originated 
no less than 100 open-end lines of credit in each of the two preceding 
years would eventually incur one-time costs of having to report their 
open-end lines of credit, once the reporting threshold reverted to the 
permanent threshold of 100.
    As noted in the 2015 HMDA Rule, the Bureau recognizes that many 
financial institutions, especially larger and more complex 
institutions, process applications for open-end lines of credit in 
their consumer lending departments using procedures, policies, and data 
systems separate from those used for closed-end loans.
    In the 2015 HMDA Rule, the Bureau assumed that the one-time costs 
for reporting information on open-end lines of credit required under 
the Rule would be roughly equal to 50 percent of the one-time costs of 
reporting information on closed-end mortgages. This translates to one-
time costs of about $400,000 and $125,000 for open-end reporting for 
representative high- and moderate-complexity financial institutions, 
respectively, that will be required to report open-end lines of credit 
while also reporting closed-end mortgage loans. This assumption 
accounted for the fact that reporting open-end lines of credit will 
require some new systems, extra start-up training, and new compliance 
procedures and manuals, while recognizing that some fixed, one-time 
costs would need to be incurred anyway in making systemic changes to 
bring institutions into compliance with Regulation C and could be 
shared with closed-end lines of business. The assumption was consistent 
with the Bureau's estimate that an overwhelming majority of open-end 
reporters would also be reporting simultaneously closed-end mortgage 
loans and applications. In the 2015 HMDA Rule, the Bureau also assumed 
that the additional one-time costs of open-end reporting would be 
relatively low for low-complexity financial institutions because they 
are less reliant on information technology systems for HMDA reporting 
and may process open-end lines of credit on the same system and in the 
same business unit as closed-end mortgage loans. Therefore, for low-
complexity financial institutions, the Bureau had assumed that the 
additional one-time cost created by open-end reporting is minimal and 
is derived mostly from new training and procedures adopted for the 
overall changes in the 2015 HMDA Rule.
    In the proposal leading to the 2015 HMDA Rule, the Bureau had asked 
for public comments and specific data regarding the one-time cost of 
reporting open-end lines of credit. Although some commenters provided 
generic feedback on the additional burden of reporting data on these 
products, very few provided specific estimates of the potential one-
time costs of reporting open-end lines of credit. Since issuing the 
2015 HMDA Rule, the Bureau has heard anecdotal reports that one-time 
costs to begin reporting information on open-end lines of credit could 
be higher than the Bureau's estimates in the 2015 HMDA Rule. The Bureau 
has reviewed the 2015 estimates and believes that the one-time cost 
estimates for open-end lines of credit provided in 2015, if applied to 
this proposed rule, would most likely be underestimates, for two 
reasons.
    First, in developing the one-time cost estimates for open-end lines 
of credit in the 2015 HMDA Rule, the Bureau had envisioned that there 
would be cost sharing between the line of business that conducts open-
end lending and the line of business that conducts closed-end lending 
at the corporate level, as the implementation of open-end reporting 
that became mandatory under the 2015 HMDA Rule would coincide with the 
implementation of the changes to closed-end reporting under the 2015 
HMDA Rule. For instance, the resources of the corporate compliance 
department and information technology department could be shared and 
utilized simultaneously across different lines of business within the 
same lender in its efforts to set up processes and systems adapting to 
the 2015 HMDA Rule. Therefore the Bureau assumed the one-time cost due 
to open-end reporting would be about one-half of the one-time costs due 
to closed-end reporting, in order to both reasonably count for the 
costs for open-end lines of credit and avoid double counting. However, 
the circumstances have somewhat changed due to the 2017 HMDA Rule and 
would be changed further under this proposed rule. The 2017 HMDA Rule 
temporarily increased the open-end lines of credit threshold from 100 
to 500 for two years. This proposal would further extend the temporary 
threshold of 500 for two additional years. Thus, there would be a 
considerable lag between the implementation of closed-end reporting 
changes under the 2015 HMDA Rule and the implementation of mandatory 
open-end reporting for those open-end lenders that have been 
temporarily excluded under the 2017 HMDA Rule and would be excluded for 
two more years under the proposal, but would be required to comply with 
HMDA's requirements for their open-end lines of credit starting in 2022 
with the proposed 200 origination threshold taking effect. As a result, 
the efficiency gain from one-time cost sharing between the closed-end 
and open-end reporting that was envisioned in the cost-benefit analysis 
of the 2015 HMDA Rule likely would not be applicable, if some of the 
temporarily excluded open-end reporters under the 2017 HMDA Rule and 
the proposal were to start preparing for open-end reporting several 
years after the implementation of closed-end changes. Therefore the 
Bureau now believes the one-time costs of starting reporting 
information on open-end lines of credit, if the financial institution 
is to start reporting open-end lines of credit in 2022 and beyond, 
would be higher than the Bureau's initial estimates of one-time costs 
of open-end reporting provided in the HMDA 2015 Rule. For this impact 
analysis, hence the Bureau assumes for a representative tier 2 open-end 
reporters, the one-time costs of starting open-end reporting in 2022 
would be approximately equal to the one-time cost estimate for closed-
end reporting that Bureau estimated in the 2015 HMDA Rule, instead of 
being about one half of the one-time cost estimate for closed-end 
reporting. This translates to about $250,000 per representative tier 2 
open-end reporter, instead of $125,000 as the Bureau estimated in the 
2015 HMDA Rule regarding the one-time costs of open-end reporting. This 
is the case regardless whether the open-end reporters also report 
closed-end mortgage loans under HMDA. The Bureau notes that the tier 2 
financial institutions that would be permanently

[[Page 21012]]

excluded from open-end reporting under this proposal would no longer 
have to incur such one-time costs, if it is adopted.
    Secondly, the delay in open-end reporting for those tier 3 
financial institutions that originated between 100 and 499 open-end 
lines of credit in either of the two preceding years as the result of 
the 2017 HMDA Rule would mean that, those institution would have to 
restart the training process for staff directly responsible for open-
end data collection reporting and update compliance procedures and 
manuals, if the open-end threshold is set to 100 starting in 2020, and 
incur a one-time cost. In the 2015 HMDA Rule, the Bureau estimated the 
total one-time cost estimate for low-complexity financial institutions 
would be approximately $3,000 regardless of whether the financial 
institution reports open-end lines of credit. Under this proposal, the 
Bureau assumes that the low-complexity financial institutions that 
would be completely excluded from open-end reporting hence would be 
able to avoid incurring a one-time cost of about $3,000.
    The Bureau estimates that, with the proposed coverage threshold 
increased to 200 starting in 2022 as compared to reverting to 100, 
about 401 more institutions would be excluded from reporting open-end 
lines of credit starting in 2022. About 391 of those 401 institutions 
are low-complexity tier 3 open-end reporters, about 10 are moderate-
complexity tier 2 open-end reporters, and none are high-complexity tier 
1 reporters. Using the estimates of savings on one-time costs for open-
end lines of credit for representative financial institutions discussed 
above, the Bureau estimates that with the proposed increase in the 
open-end coverage threshold to 200 starting in 2022, the eligible 
institutions would receive an aggregate savings in avoided one-time 
cost associated with open-end lines of credit of about $3.8 million.
Costs To Covered Persons
    It is possible that, like any new regulation or revision to the 
existing regulations, financial institutions may incur certain one-time 
costs adapting to the changes to the regulation. Based on the Bureau's 
early outreach to stakeholders, the Bureau understands that most of 
such one-time costs would result from interpreting and implementing the 
regulatory changes, but not from purchasing software upgrades or 
turning off the existing reporting functionality that the eligible 
institutions already built or purchased prior to the new changes taking 
its effect.
    The Bureau seeks comment on the costs and benefits to institutions 
that would be excluded pursuant to the proposed increases to the open-
end coverage threshold.
Benefits to Consumers
    Having generated estimates of the reduction in ongoing costs on 
covered financial institutions due to the proposed temporary increase 
in the open-end coverage threshold, the Bureau then attempts to 
estimate the potential pass-through of such cost reduction from the 
lenders to consumers, which could benefit consumers. According to 
economic theory, in a perfectly competitive market where financial 
institutions are profit maximizers, the affected financial institutions 
would pass on to consumers the marginal, i.e. variable, cost savings 
per application or origination, and absorb the one-time and increased 
fixed costs of complying with the rule.
    The Bureau estimated in the 2015 HMDA Rule that the rule would 
increase variable costs by $41.50 per open-end line of credit 
application for representative low-complexity institutions and $6.20 
per open-end line of credit application for representative moderate-
complexity institutions. These savings on variable costs by the 
excluded open-end reporters could potentially be passed through to the 
consumers, if the market is perfectly competitive. These expenses will 
be amortized over the life of a loan and represent a negligible 
reduction in the cost of a mortgage loan. The Bureau notes that the 
market structure in the consumer mortgage lending market may differ 
from that of a perfectly competitive market in which case the pass-
through to the consumers would most likely be smaller than the pass-
through under the perfect competition assumption. Therefore, the Bureau 
does not anticipate any material effect on credit access in the long or 
short term even if financial institutions pass on these reduced costs 
to consumers.
Costs to Consumers
    The proposed extension of the temporary coverage threshold of 500 
for open-end lines of credit for 2020 and 2021 and setting the proposed 
permanent open-end threshold at 200 starting in 2022 would reduce the 
open-end data submitted under HMDA. As a result, HMDA data on these 
institutions' open-end loans and applications would no longer be 
available to regulators, public officials, and members of the public. 
The decreased oversight over affected financial institutions may lead 
to adverse outcomes for some consumers. For instance, reporting data on 
open-end line of credit applications and originations and on certain 
demographic characteristics of applicants and borrowers could help the 
regulators and public officials better understand the type of funds 
that are flowing from lenders to consumers and consumers' need for 
mortgage credit. Open-end line of credit data that may be relevant to 
underwriting decisions may also help improve the processes used to 
identify possible discriminatory lending patterns and enforce 
antidiscrimination statutes.

F. Potential Specific Impacts of the Proposed Rule

1. Depository Institutions and Credit Unions With $10 Billion or Less 
in Total Assets, as Described in Section 1026
    As discussed above, the proposed rule would incorporate the 
interpretations and procedures from the 2018 HMDA Rule into Regulation 
C and further implement section 104(a) of the EGRRCPA, which grants 
eligible financial institutions partial exemptions from HMDA's 
requirements for certain transactions; increase the threshold for 
reporting data about closed-end mortgage loans from 25 to either 50 or 
100 originations in both of the preceding two calendar years; and 
extend for a period of two years the current temporary threshold for 
reporting data about open-end lines of credit of 500 open-end lines of 
credit and increase the permanent threshold for reporting data about 
open-end lines of credit from 100 to 200 open-end lines of credit in 
both of the preceding two calendar years starting in 2022.
    All three sets of proposed provisions focus on burden reduction for 
smaller institutions. Therefore, the Bureau believes that the benefits 
of this proposed rule to depository institutions and credit unions with 
$10 billion or less in total assets will be similar to the benefit to 
creditors as a whole, as discussed above.
    Specifically the Bureau estimates that the reduction in annual 
operational costs from the partial exemption for closed-end reporting 
under the EGRRCPA and further implemented by the 2018 HMDA Rule and 
this proposed rule if adopted would be approximately $2,300, $11,900, 
and $33,900 per year for representative tier 3, tier 2, and tier 1 
depository institutions and credit unions with $10 billion or less in 
total assets that are eligible for the partial exemptions of closed-end 
reporting. The Bureau estimates that all but about eight

[[Page 21013]]

of the approximately 3,300 institutions that are eligible for the 
partial exemption from closed-end reporting are small depository 
institutions or credit unions with assets at or below $10 billion. 
About 2,672 of the partially-exempt closed-end reporting small 
depository institutions or credit unions are low-complexity tier 3 
closed-end reporters, with the rest being moderate-complexity tier 2 
closed-end reporters, and none are high-complexity tier 1 reporters. 
Based on these calculations, the Bureau estimates that the aggregate 
savings on ongoing costs for these institutions would be approximately 
$13.5 million annually.
    The Bureau estimates that the reduction in annual operational costs 
starting in calendar year 2020 from the partial exemption from open-end 
reporting under the EGRRCPA, absent the proposed open-end threshold 
changes, would be approximately $4,500, $22,800, and $144,000 per year 
for representative tier 3, tier 2, and tier 1 depository institutions 
and credit unions with $10 billion or less in total assets that are 
eligible for the partial exemptions of open-end reporting. The Bureau 
estimates that about 578 out of the 595 financial institutions that 
would be partially exempt from reporting certain data points on open-
end lines of credit under the EGRRCPA are small depository institutions 
or credit unions with assets at or below $10 billion. According to the 
Bureau's estimates, about 531 of those 578 partially-exempt small 
depository institutions or credit union are low-complexity tier 3 open-
end reporters, about 47 are moderate-complexity tier 2 open-end 
reporters, and none are high-complexity tier 1 reporters. Based on 
these counts, the Bureau estimates that the aggregate savings on 
ongoing costs for these small depository institutions or credit unions 
due to the partial exemption from open-end reporting would be 
approximately $3.5 million annually, starting in calendar year 2020.
    For the closed-end coverage threshold proposed provision, the 
Bureau estimates that for depository institutions and credit unions 
with $10 billion in assets or less that would have been required to 
report under the 2015 HMDA Rule, and are not partially exempt under the 
EGRRCPA, the savings on the annual operational costs from being 
excluded from closed-end reporting under the proposal would be 
approximately $4,500 for a representative low-complexity tier 3 
institution, $44,700 for a representative moderate-complexity tier 2 
institution, and $343,000 for a representative high-complexity tier 1 
institution that fall below the proposed coverage threshold of either 
50 or 100, whichever is adopted in the final rule. For depository 
institutions and credit unions with $10 billion in assets or less that 
would have been required to report under the 2015 HMDA Rule, but are 
partially exempt under the EGRRCPA, the savings on the annual 
operational costs from not reporting any closed-end mortgage data under 
the proposal, would be approximately $2,200 for a representative low-
complexity tier 3 institution, $32,800 for a representative moderate-
complexity tier 2 institution, and $309,000 for a representative high-
complexity tier 1 institution. The Bureau estimates that about 738 of 
the approximately 760 institutions that would be excluded from the 
proposed 50 loan closed-end reporting threshold are small depository 
institutions or credit unions with assets at or below $10 billion, and 
all but one of them are already partially exempt under the EGRRCPA and 
2018 HMDA Rule. About 724 of them are similar to representative low-
complexity tier 3 institution, with the rest being moderate-complexity 
tier 2 institutions. Combined, the annual saving on operational costs 
for depository institutions and credit unions with $10 billion or less 
in assets newly excluded under the proposed 50 closed-end threshold 
would be about $1.9 million. Similarly, the Bureau estimates that about 
1,666 of the approximately 1,720 institutions that would be excluded 
from the proposed alternative 100 loan closed-end reporting threshold 
are small depository institutions or credit unions with assets at or 
below $10 billion, and all but two of them are already partially exempt 
under the EGRRCPA and 2018 HMDA Rule. About 1,573 of them are similar 
to representative low-complexity tier 3 institution, with the rest 
being moderate-complexity tier 2 institutions. Combined, the annual 
saving on operational costs for depository institutions and credit 
unions with $10 billion or less in assets newly excluded under the 
proposed 100 closed-end threshold would be about $4.8 million.
    For the proposed open-end coverage threshold provision, the Bureau 
estimates that for depository institutions and credit unions with $10 
billion in assets or less that would not have to report open-end lines 
of credit under the proposal, the reduction in annual ongoing 
operational costs for the excluded institutions not eligible for the 
partial exemption for open-end lines of credit under the EGRRCPA would 
be approximately $8,800, $44,700, and $28,100 per year, for 
representative low-, moderate-, and high-complexity financial 
institutions, respectively, and the reduction in annual ongoing 
operational costs for excluded institutions already partially exempt 
for open-end lines of credit under the EGRRCPA would be approximately 
$4,300, $21,900, and $138,000 annually, for representative low-, 
moderate-, and high-complexity financial institutions, respectively. 
The Bureau estimates that about 633 of the approximately 681 
institutions that would be temporarily excluded from open-end reporting 
in 2020 and 2021 under this proposed rule are small depository 
institutions or credit unions with assets at or below $10 billion, and 
about 578 of them are already partially exempt under the EGRRCPA. 
Combined, the Bureau estimates that the annual saving on operational 
costs for depository institutions and credit unions with $10 billion or 
less in assets receiving the temporary exclusion for open-end reporting 
for two additional years under the proposed rule would be about $5 
million per year in the years 2020 and 2021. Similarly, the Bureau 
estimates that about 378 of the approximately 400 institutions that 
would be excluded from open-end reporting starting in 2022 under the 
proposal are small depository institutions or credit unions with assets 
at or below $10 billion, and about 372 of them are already partially 
exempt under the EGRRCPA. Combined, the Bureau estimates that the 
annual saving on operational costs for depository institutions and 
credit unions with $10 billion or less in assets receiving the 
temporary exclusion for open-end reporting for two additional years 
under this proposed rule would be about $1.9 million per year starting 
in 2022. Using the estimates of savings on one-time costs for open-end 
lines of credit for representative financial institutions discussed 
above, the Bureau further estimates that by increasing the open-end 
coverage threshold to 200 starting in 2022, the eligible depository 
institutions and credit unions with $10 billion or less in assets would 
receive an aggregate savings in avoided one-time cost associated with 
open-end lines of credit of about $3.8 million.
2. Impact of the Proposed Provisions on Consumers in Rural Areas
    The proposed provisions will not directly impact consumers in rural 
areas. However, as with all consumers, consumers in rural areas may be 
impacted indirectly. This would occur if financial institutions serving 
rural areas are HMDA reporters (in which case the proposal will lead to 
decreased information in rural areas) and if these

[[Page 21014]]

institutions pass on some or all of the cost reduction to consumers (in 
which case, some consumers could benefit).
    Recent research suggests that financial institutions that primarily 
serve rural areas are generally not HMDA reporters.\175\ The Housing 
Assistance Council (HAC) suggests that the current asset and geographic 
coverage criteria already in place disproportionately exempt small 
lenders operating in rural communities. For example, HAC uses 2009 Call 
Report data to show that approximately 700 FDIC-insured lending 
institutions had assets totaling less than the HMDA institutional 
coverage threshold and were headquartered in rural communities. These 
institutions, which would not be HMDA reporters, may represent one of 
the few sources of credit for many rural areas. Research by economists 
at the Board also suggests that HMDA's coverage of rural areas is 
limited, especially areas further from MSAs.\176\ If a large portion of 
the rural housing market is serviced by financial institutions that are 
already not HMDA reporters, any indirect impact of the proposed changes 
on consumers in rural areas would be limited, as the proposed changes 
directly involve none of those financial institutions.
---------------------------------------------------------------------------

    \175\ See, e.g., Keith Wiley, ``What Are We Missing? HMDA Asset-
Excluded Filers,'' Hous. Assistance Council (2011), http://ruralhome.org/storage/documents/smallbanklending.pdf; Lance George & 
Keith Wiley, ``Improving HMDA: A Need to Better Understand Rural 
Mortgage Markets,'' Hous. Assistance Council (2010), http://www.ruralhome.org/storage/documents/notehmdasm.pdf.
    \176\ See Robert B. Avery et al., ``Opportunities and Issues in 
Using HMDA Data,'' 29 J. of Real Est. Res. 352 (2007).
---------------------------------------------------------------------------

    However, although some research suggests that HMDA currently does 
not cover a significant number of financial institutions serving the 
rural housing market, HMDA data do contain information for some covered 
loans involving properties in rural areas. These data can be used to 
estimate the number of HMDA reporters servicing rural areas, and the 
number of consumers in rural areas that might potentially be affected 
by the proposed changes to Regulation C. For this analysis, the Bureau 
uses non-MSA areas as a proxy for rural areas, with the understanding 
that portions of MSAs and non-MSAs may contain urban and rural 
territory and populations. In 2017, 5,207 HMDA reporters reported 
applications or purchased loans for property located in geographic 
areas outside of an MSA. In total, these 5,207 financial institutions 
reported 1,794,248 applications or purchased loans for properties in 
non-MSA areas. This number provides an upper-bound estimate of the 
number of consumers in rural areas that could be impacted indirectly by 
the proposed changes. In general, individual financial institutions 
report small numbers of covered loans from non-MSAs, as approximately 
72 percent reported fewer than 100 covered loans from non-MSAs.
    Following microeconomic principles, the Bureau believes that 
financial institutions will pass on reduced variable costs to future 
mortgage applicants, but absorb one-time costs and increased fixed 
costs if financial institutions are profit maximizers and the market is 
perfectly competitive.\177\ The Bureau defines variable costs as costs 
that depend on the number of applications received. Based on initial 
outreach efforts, the following five operational steps affect variable 
costs: Transcribing data, resolving reportability questions, 
transferring data to an HMS, geocoding, and researching questions. The 
primary impact of the proposed rule on these operational steps is a 
reduction in time spent per task. Overall, the Bureau estimates that 
the impact of the proposed rule on variable costs per application is to 
reduce variable costs by no more than $42 for a representative tier 3 
financial institution, $6 for a representative tier 2 financial 
institution, and $3 for a representative tier 1 financial 
institution.\178\ The 5,507 financial institutions that serviced rural 
areas could attempt to pass these reduced variable costs on to all 
future mortgage customers, including the estimated 1.8 million 
consumers from rural areas. Amortized over the life of the loan, this 
expense would represent a negligible reduction in the cost of a 
mortgage loan. The Bureau notes that the market structure in the 
consumer mortgage lending market may differ from that of a perfectly 
competitive market in which case the pass-through to the consumers 
would most likely be smaller than the pass-through under the perfect 
competition assumption. Therefore, the Bureau does not anticipate any 
material adverse effect on credit access in the long or short term even 
if these financial institutions pass on these reduced costs to 
consumers.
---------------------------------------------------------------------------

    \177\ If markets are not perfectly competitive or financial 
institutions are not profit maximizers then what financial 
institutions pass on may differ. For example, they may attempt to 
pass on one-time costs and increases in fixed costs, or they may not 
be able to pass on variable costs.
    \178\ These cost estimates represent the highest estimates among 
the estimates presented in previous sections and form the upper 
bound of possible savings.
---------------------------------------------------------------------------

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

G. Additional Analysis Being Considered and Request for Information

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

VII. Regulatory Flexibility Act Analysis

    The Regulatory Flexibility Act \179\ as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996 \180\ (RFA) 
requires each agency to consider the potential impact of its 
regulations on small entities, including small businesses, small 
governmental units, and small not-for-profit organizations.\181\ The 
RFA defines a ``small business'' as a business that meets the size 
standard developed by

[[Page 21015]]

the Small Business Administration pursuant to the Small Business 
Act.\182\
---------------------------------------------------------------------------

    \179\ Public Law 96-354, 94 Stat. 1164 (1980).
    \180\ Public Law 104-21, section 241, 110 Stat. 847, 864-65 
(1996).
    \181\ 5 U.S.C. 601-612. The term `` `small organization' means 
any not-for-profit enterprise which is independently owned and 
operated and is not dominant in its field, unless an agency 
establishes [an alternative definition under notice and comment].'' 
5 U.S.C. 601(4). The term `` `small governmental jurisdiction' means 
governments of cities, counties, towns, townships, villages, school 
districts, or special districts, with a population of less than 
fifty thousand, unless an agency establishes [an alternative 
definition after notice and comment].'' 5 U.S.C. 601(5).
    \182\ 5 U.S.C. 601(3). The Bureau may establish an alternative 
definition after consulting with the Small Business Administration 
and providing an opportunity for public comment. Id.
---------------------------------------------------------------------------

    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.\183\ 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.\184\
---------------------------------------------------------------------------

    \183\ 5 U.S.C. 601-612.
    \184\ 5 U.S.C. 609.
---------------------------------------------------------------------------

    As discussed above, this proposal would incorporate the 
interpretations and procedures from the 2018 HMDA Rule into Regulation 
C and further implement section 104(a) of the EGRRCPA, which grants 
eligible financial institutions partial exemptions from HMDA's 
requirements for certain transactions; it would increase the threshold 
for reporting data about closed-end mortgage loans from 25 to 50 or 100 
originations in each of the two preceding calendar years; and it would 
extend the temporary threshold of 500 open-end lines of credit for 
reporting data about open-end lines of credit for two years and then 
would set the permanent open-end threshold at 200 when the proposed 
temporary threshold expires. The section 1022(b)(2) analysis above 
describes how, if adopted, this proposal would reduce the costs and 
burdens on covered persons, including small entities. Additionally, as 
described in the analysis above, a small entity that is in compliance 
with the law at such time when this proposal might be adopted would not 
need to take any additional action to remain in compliance other than 
choosing to switch off all or parts of reporting systems and functions. 
Based on these considerations, the proposed rule would not have a 
significant economic impact on any small entities.
    Accordingly, the undersigned hereby certifies that this proposed 
rule, if adopted, would not have a significant economic impact on a 
substantial number of small entities. Thus, neither an IRFA nor a small 
business review panel is required for this proposal. The Bureau 
requests comments on this analysis and any relevant data.

VIII. 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 approval from the 
Office of Management and Budget (OMB) 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 proposed rule would amend 12 CFR part 1003 (Regulation C), 
which implements HMDA. The Bureau's OMB control number for Regulation C 
is 3170-0008. This proposed rule would revise the information 
collection requirements contained in Regulation C that are currently 
approved by OMB under that OMB control number as follows: (1) The 
proposed rule would adjust Regulation C's institutional and 
transactional coverage thresholds, and (2) implement the new, separate 
EGRRCPA partial exemptions that apply to some HMDA reporting 
requirements.
    The proposed rule contains revised information collection 
requirements regarding:

12 CFR 1003.4 et seq. Reporting, Recordkeeping, and Disclosure 
Requirements

    The collections of information contained in this proposed rule, and 
identified as such, have been submitted to OMB for review under section 
3507(d) of the PRA. A complete description of the information 
collection requirements, including the burden estimate methods, is 
provided in the information collection request (ICR) that the Bureau 
has submitted to OMB under the requirements of the PRA. Please send 
your comments to the Office of Information and Regulatory Affairs, OMB, 
Attention: Desk Officer for the Bureau of Consumer Financial 
Protection. Send these comments by email to [email protected] 
or by fax to 202-395-6974. If you wish to share your comments with the 
Bureau, please send a copy of these comments to the Bureau at 
[email protected]. The ICR submitted to OMB requesting approval 
under the PRA for the information collection requirements contained 
herein is available at www.regulations.gov as well as OMB's public-
facing docket at www.reginfo.gov.
    Title of Collection: Home Mortgage Disclosure Act (Regulation C).
    OMB Control Number: 3170-0008.
    Type of Review: Revision of a currently approved information 
collection.
    Affected Public: Private Sector.
    Estimated Number of Respondents: 105.
    Estimated Total Annual Burden Hours: 1,290,000.
    Comments are invited on: (a) Whether the collection of information 
is necessary for the proper performance of the functions of the Bureau, 
including whether the information will have practical utility; (b) the 
accuracy of the Bureau's estimate of the burden of the collection of 
information, including the validity of the methods and the assumptions 
used; (c) ways to enhance the quality, utility, and clarity of the 
information to be collected; and (d) ways to minimize the burden of the 
collection of information on respondents, including through the use of 
automated collection techniques or other forms of information 
technology. Comments submitted in response to this document will be 
summarized and/or included in the request for OMB approval. All 
comments will become a matter of public record. If applicable, the 
notice of final rulemaking will display the control number assigned by 
OMB to any information collection requirements proposed herein and 
adopted in the final rule.

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 proposes to amend 
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.

    [The following amendments would be effective January 1, 2020, 
further amending the part as amended at September 13, 2017, at 82 FR 
43088, effective January 1, 2020.]

0
2. Section 1003.2 is amended by revising paragraphs (g)(1)(v) and 
(g)(2)(ii) to read as follows:


Sec.  1003.2  Definitions.

* * * * *
    (g) * * *
    (1) * * *

[[Page 21016]]

Alternative 1--Paragraphs (g)(1)(v) and (g)(2)(ii)

    (v) Meets at least one of the following criteria:
    (A) In each of the two preceding calendar years, originated at 
least 50 closed-end mortgage loans that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10) or (c)(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) Meets at least one of the following criteria:
    (A) In each of the two preceding calendar years, originated at 
least 50 closed-end mortgage loans that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10) or (c)(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).

Alternative 2--Paragraphs (g)(1)(v) and (g)(2)(ii)

    (v) Meets at least one of the following criteria:
    (A) In each of the two preceding calendar years, originated at 
least 100 closed-end mortgage loans that are not excluded from this 
part pursuant to Sec.  1003.3(c)(1) through (10) or (c)(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) Meets at least one of the following criteria:
    (A) In each of the two preceding calendar years, originated at 
least 100 closed-end mortgage loans that are not excluded from this 
part pursuant to Sec.  1003.3(c)(1) through (10) or (c)(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. Section 1003.3 is amended by revising the section heading and 
paragraphs (c)(11) and (12) and adding paragraph (d) to read as 
follows:


Sec.  1003.3  Exempt institutions and excluded and partially exempt 
transactions.

* * * * *
    (c) * * *

Alternative 1--Paragraph (c)(11)

    (11) A closed-end mortgage loan, if the financial institution 
originated fewer than 50 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;

Alternative 2--Paragraph (c)(11)

    (11) A closed-end mortgage loan, if the financial institution 
originated fewer than 100 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
* * * * *
    (d) Partially exempt transactions. (1) For purposes of this 
paragraph (d), the following definitions apply:
    (i) Insured credit union means an insured credit union as defined 
in section 101 of the Federal Credit Union Act (12 U.S.C. 1752).
    (ii) Insured depository institution means an insured depository 
institution as defined in section 3 of the Federal Deposit Insurance 
Act (12 U.S.C. 1813).
    (iii) Optional data means the data identified in Sec.  
1003.4(a)(1)(i), (a)(9)(i), and (a)(12), (15) through (30), and (32) 
through (38).
    (iv) Partially exempt transaction means a covered loan or 
application that is partially exempt under paragraph (d)(2) or (3) of 
this section.
    (2) Except as provided in paragraph (d)(6) of this section, an 
insured depository institution or insured credit union that, in each of 
the two preceding calendar years, originated fewer than 500 closed-end 
mortgage loans that are not excluded from this part pursuant to 
paragraphs (c)(1) through (10) or paragraph (c)(13) of this section is 
not required to collect, record, or report optional data as defined in 
paragraph (d)(1)(iii) of this section for applications for closed-end 
mortgage loans that it receives, closed-end mortgage loans that it 
originates, and closed-end mortgage loans that it purchases.
    (3) Except as provided in paragraph (d)(6) of this section, an 
insured depository institution or insured credit union that, in each of 
the two preceding calendar years, originated fewer than 500 open-end 
lines of credit that are not excluded from this part pursuant to 
paragraphs (c)(1) through (10) of this section is not required to 
collect, record, or report optional data as defined in paragraph 
(d)(1)(iii) of this section for 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.
    (4) A financial institution eligible for a partial exemption under 
paragraph (d)(2) or (3) of this section may collect, record, and report 
optional data as defined in paragraph (d)(1)(iii) of this section for a 
partially exempt transaction as though the institution were required to 
do so, provided that:
    (i) If the institution reports the street address, city name, or 
Zip Code for the property securing a covered loan, or in the case of an 
application, proposed to secure a covered loan pursuant to Sec.  
1003.4(a)(9)(i), it reports all data that would be required by Sec.  
1003.4(a)(9)(i) if the transaction were not partially exempt;
    (ii) If the institution reports any data for the transaction 
pursuant to Sec.  1003.4(a)(15), (16), (17), (27), (33), or (35), it 
reports all data that would be required by Sec.  1003.4(a)(15), (16), 
(17), (27), (33), or (35), respectively, if the transaction were not 
partially exempt.
    (5) If, pursuant to paragraph (d)(2) or (3) of this section, a 
financial institution

[[Page 21017]]

does not report a universal loan identifier (ULI) pursuant to Sec.  
1003.4(a)(1)(i) for an application for a covered loan that it receives, 
a covered loan that it originates, or a covered loan that it purchases, 
the financial institution shall assign and report a non-universal loan 
identifier (NULI). The NULI must be composed of up to 22 characters to 
identify the covered loan or application, which:
    (i) May be letters, numerals, or a combination of letters and 
numerals;
    (ii) Must be unique within the annual loan/application register in 
which the covered loan or application is included; and
    (iii) Must not include any information that could be used to 
directly identify the applicant or borrower.
    (6) Paragraphs (d)(2) and (3) of this section do not apply to an 
insured depository institution that, as of the preceding December 31, 
had received a rating of ``needs to improve record of meeting community 
credit needs'' during each of its two most recent examinations or a 
rating of ``substantial noncompliance in meeting community credit 
needs'' on its most recent examination under section 807(b)(2) of the 
Community Reinvestment Act of 1977 (12 U.S.C. 2906(b)(2)).
0
4. Section 1003.4 is amended by revising paragraphs (a) introductory 
text, (a)(1)(i) introductory text, and (e) to read as follows:


Sec.  1003.4  Compilation of reportable data.

    (a) Data format and itemization. A financial institution shall 
collect data regarding applications for covered loans that it receives, 
covered loans that it originates, and covered loans that it purchases 
for each calendar year. A financial institution shall collect data 
regarding requests under a preapproval program, as defined in Sec.  
1003.2(b)(2), only if the preapproval request is denied, is approved by 
the financial institution but not accepted by the applicant, or results 
in the origination of a home purchase loan. Except as provided in Sec.  
1003.3(d), the data collected shall include the following items:
    (1)(i) A universal loan identifier (ULI) or, for a partially exempt 
transaction under Sec.  1003.3(d), either a ULI or a non-universal loan 
identifier (NULI) as described in Sec.  1003.3(d)(5) for the covered 
loan or application that can be used to identify and retrieve the 
covered loan or application file. Except for a purchased covered loan 
or application described in paragraphs (a)(1)(i)(D) and (E) of this 
section or a partially exempt transaction for which a NULI is assigned 
and reported under Sec.  1003.3(d), the financial institution shall 
assign and report a ULI that:
* * * * *
    (e) Data reporting for banks and savings associations that are 
required to report data on small business, small farm, and community 
development lending under CRA. 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 of 1977 (12 U.S.C. 2901 et seq.) shall also collect 
the information required by paragraph (a)(9)(ii) of this section for 
property located outside MSAs and MDs in which the institution has a 
home or branch office, or outside any MSA.
* * * * *
0
5. In supplement I to part 1003:
0
a. Under Section 1003.2--Definitions, revise 2(g) Financial 
Institution.
0
b. Revise the heading to Section 1003.3.
0
c. Under Section 1003.3:
0
i. Revise Paragraph 3(c)(11) and Paragraph 3(c)(12).
0
iii. Add 3(d) Partially exempt transactions after Paragraph 3(c)(13).
0
d. Under Section 1003.4--Compilation of Reportable Data, revise 4(a) 
Data Format and Itemization.
    The revisions and addition read as follows:

Supplement I to Part 1003--Official Interpretations

* * * * *

Section 1003.2--Definitions

* * * * *

2(g) Financial Institution

Alternative 1--Paragraph 2(g)-1

    1. Preceding calendar year and preceding December 31. The 
definition of financial institution refers both to the preceding 
calendar year and the preceding December 31. These terms refer to 
the calendar year and the December 31 preceding the current calendar 
year. For example, in 2020, the preceding calendar year is 2019 and 
the preceding December 31 is December 31, 2019. Accordingly, in 
2020, Financial Institution A satisfies the asset-size threshold 
described in Sec.  1003.2(g)(1)(i) if its assets exceeded the 
threshold specified in comment 2(g)-2 on December 31, 2019. 
Likewise, in 2020, Financial Institution A does not meet the loan-
volume test described in Sec.  1003.2(g)(1)(v)(A) if it originated 
fewer than 50 closed-end mortgage loans during either 2018 or 2019.

Alternative 2--Paragraph 2(g)-1

    1. Preceding calendar year and preceding December 31. The 
definition of financial institution refers both to the preceding 
calendar year and the preceding December 31. These terms refer to 
the calendar year and the December 31 preceding the current calendar 
year. For example, in 2020, the preceding calendar year is 2019 and 
the preceding December 31 is December 31, 2019. Accordingly, in 
2020, Financial Institution A satisfies the asset-size threshold 
described in Sec.  1003.2(g)(1)(i) if its assets exceeded the 
threshold specified in comment 2(g)-2 on December 31, 2019. 
Likewise, in 2020, Financial Institution A does not meet the loan-
volume test described in Sec.  1003.2(g)(1)(v)(A) if it originated 
fewer than 100 closed-end mortgage loans during either 2018 or 2019.
    2. [Reserved]
    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.
    4. Merger or acquisition--coverage for calendar year of merger 
or acquisition. The scenarios described below illustrate a financial 
institution's responsibilities for the calendar year of a merger or 
acquisition. For purposes of these illustrations, a ``covered 
institution'' means a financial institution, as defined in Sec.  
1003.2(g), that is not exempt from reporting under Sec.  1003.3(a), 
and ``an institution that is not covered'' means either an 
institution that is not a financial institution, as defined in Sec.  
1003.2(g), or an institution that is exempt from reporting under 
Sec.  1003.3(a).
    i. Two institutions that are not covered merge. The surviving or 
newly formed institution meets all of the requirements necessary to 
be a covered institution. No data collection is required for the 
calendar year of the merger (even though the merger creates an 
institution that meets all of the requirements necessary to be a 
covered institution). When a branch office of an institution that is 
not covered is acquired by another institution that is not covered, 
and the acquisition results in a covered institution, no data 
collection is required for the calendar year of the acquisition.
    ii. A covered institution and an institution that is not covered 
merge. The covered institution is the surviving institution, or a 
new covered institution is formed. For the calendar year of the 
merger, data collection is required for covered loans and 
applications handled in the offices of the merged institution that 
was previously covered and is optional for covered loans and

[[Page 21018]]

applications handled in offices of the merged institution that was 
previously not covered. When a covered institution acquires a branch 
office of an institution that is not covered, data collection is 
optional for covered loans and applications handled by the acquired 
branch office for the calendar year of the acquisition.
    iii. A covered institution and an institution that is not 
covered merge. The institution that is not covered is the surviving 
institution, or a new institution that is not covered is formed. For 
the calendar year of the merger, data collection is required for 
covered loans and applications handled in offices of the previously 
covered institution that took place prior to the merger. After the 
merger date, data collection is optional for covered loans and 
applications handled in the offices of the institution that was 
previously covered. When an institution remains not covered after 
acquiring a branch office of a covered institution, data collection 
is required for transactions of the acquired branch office that take 
place prior to the acquisition. Data collection by the acquired 
branch office is optional for transactions taking place in the 
remainder of the calendar year after the acquisition.
    iv. Two covered institutions merge. The surviving or newly 
formed institution is a covered institution. Data collection is 
required for the entire calendar year of the merger. The surviving 
or newly formed institution files either a consolidated submission 
or separate submissions for that calendar year. When a covered 
institution acquires a branch office of a covered institution, data 
collection is required for the entire calendar year of the merger. 
Data for the acquired branch office may be submitted by either 
institution.

Alternative 1--Paragraph 2(g)-5

    5. Originations. Whether an institution is a financial 
institution depends in part on whether the institution originated at 
least 50 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).

Alternative 2--Paragraph 2(g)-5

    5. Originations. Whether an institution is a financial 
institution depends in part on whether the institution originated at 
least 100 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).
    6. Branches of foreign banks--treated as banks. A Federal branch 
or a State-licensed or insured branch of a foreign bank that meets 
the definition of a ``bank'' under section 3(a)(1) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(a)) is a bank for the purposes 
of Sec.  1003.2(g).
    7. Branches and offices of foreign banks and other entities--
treated as nondepository financial institutions. A Federal agency, 
State-licensed agency, State-licensed uninsured branch of a foreign 
bank, commercial lending company owned or controlled by a foreign 
bank, or entity operating under section 25 or 25A of the Federal 
Reserve Act, 12 U.S.C. 601 and 611 (Edge Act and agreement 
corporations) may not meet the definition of ``bank'' under the 
Federal Deposit Insurance Act and may thereby fail to satisfy the 
definition of a depository financial institution under Sec.  
1003.2(g)(1). An entity is nonetheless a financial institution if it 
meets the definition of nondepository financial institution under 
Sec.  1003.2(g)(2).
* * * * *

Section 1003.3--Exempt Institutions and Excluded and Partially 
Exempt Transactions

* * * * *

3(c) Excluded Transactions

* * * * *

Paragraph 3(c)(11)

Alternative 1--Paragraph 3(c)(11)-1

    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 50 closed-end mortgage loans in either of the 
two preceding calendar years. For example, assume that a bank is a 
financial institution in 2020 under Sec.  1003.2(g) because it 
originated 600 open-end lines of credit in 2018, 650 open-end lines 
of credit in 2019, and met all of the other requirements under Sec.  
1003.2(g)(1). Also assume that the bank originated 30 and 45 closed-
end mortgage loans in 2018 and 2019, respectively. The open-end 
lines of credit that the bank originated or purchased, or for which 
it received applications, during 2020 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 2020 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.

Alternative 2--Paragraph 3(c)(11)-1

    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 100 closed-end mortgage loans in either of the 
two preceding calendar years. For example, assume that a bank is a 
financial institution in 2020 under Sec.  1003.2(g) because it 
originated 600 open-end lines of credit in 2018, 650 open-end lines 
of credit in 2019, and met all of the other requirements under Sec.  
1003.2(g)(1). Also assume that the bank originated 75 and 90 closed-
end mortgage loans in 2018 and 2019, respectively. The open-end 
lines of credit that the bank originated or purchased, or for which 
it received applications, during 2020 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 2020 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.

Alternative 1--Paragraph 3(c)(11)-2

    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 50 closed-end mortgage loans 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 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.

Alternative 2--Paragraph 3(c)(11)-2

    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 100 closed-end mortgage loans 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 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 2020 under Sec.  1003.2(g) because it 
originated 100 closed-end mortgage loans in 2018, 175 closed-end 
mortgage loans in 2019, 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 2018 and 2019, respectively. The closed-
end mortgage loans that the bank originated or purchased, or for 
which it received applications, during 2020 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 2020 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,

[[Page 21019]]

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 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.
* * * * *

3(d) Partially Exempt Transactions

    1. Merger or acquisition--application of partial exemption 
thresholds to surviving or newly formed institution. After a merger 
or acquisition, the surviving or newly formed institution falls 
below the loan threshold described in Sec.  1003.3(d)(2) or (3) if 
it, considering the combined lending activity of the surviving or 
newly formed institution and the merged or acquired institutions or 
acquired branches, falls below the loan threshold described in Sec.  
1003.3(d)(2) or (3). For example, A and B merge. The surviving or 
newly formed institution falls below the loan threshold described in 
Sec.  1003.3(d)(2) if the surviving or newly formed institution, A, 
and B originated a combined total of fewer than 500 closed-end 
mortgage loans that are not excluded from this part pursuant to 
Sec.  1003.3(c)(1) through (10) or (13) in each of the two preceding 
calendar years. Comment 3(d)-3 discusses eligibility for partial 
exemptions during the calendar year of a merger.
    2. Merger or acquisition--Community Reinvestment Act examination 
history. After a merger or acquisition, the surviving or newly 
formed institution is deemed to be ineligible for the partial 
exemptions pursuant to Sec.  1003.3(d)(6) if either it or any of the 
merged or acquired institutions received a rating of ``needs to 
improve record of meeting community credit needs'' during each of 
its two most recent examinations or a rating of ``substantial 
noncompliance in meeting community credit needs'' on its most recent 
examination under section 807(b)(2) of the Community Reinvestment 
Act of 1977 (12 U.S.C. 2906(b)(2)). Comment 3(d)-3.iii discusses 
eligibility for partial exemptions during the calendar year of a 
merger when an institution that is eligible for a partial exemption 
merges with an institution that is ineligible for the partial 
exemption (including, for example, an institution that is ineligible 
for the partial exemptions pursuant to Sec.  1003.3(d)(6)) and the 
surviving or newly formed institution is ineligible for the partial 
exemption.
    3. Merger or acquisition--applicability of partial exemptions 
during calendar year of merger or acquisition. The scenarios 
described below illustrate the applicability of partial exemptions 
under Sec.  1003.3(d) during the calendar year of a merger or 
acquisition. For purposes of these illustrations, ``institution'' 
means a financial institution, as defined in Sec.  1003.2(g), that 
is not exempt from reporting under Sec.  1003.3(a). Although the 
scenarios below refer to the partial exemption for closed-end 
mortgage loans under Sec.  1003.3(d)(2), the same principles apply 
with respect to the partial exemption for open-end lines of credit 
under Sec.  1003.3(d)(3).
    i. Assume two institutions that are eligible for the partial 
exemption for closed-end mortgage loans merge and the surviving or 
newly formed institution meets all of the requirements for the 
partial exemption. The partial exemption for closed-end mortgage 
loans applies for the calendar year of the merger.
    ii. Assume two institutions that are eligible for the partial 
exemption for closed-end mortgage loans merge and the surviving or 
newly formed institution does not meet the requirements for the 
partial exemption. Collection of optional data for closed-end 
mortgage loans is permitted but not required for the calendar year 
of the merger (even though the merger creates an institution that 
does not meet the requirements for the partial exemption for closed-
end mortgage loans). When a branch office of an institution that is 
eligible for the partial exemption is acquired by another 
institution that is eligible for the partial exemption, and the 
acquisition results in an institution that is not eligible for the 
partial exemption, data collection for closed-end mortgage loans is 
permitted but not required for the calendar year of the acquisition.
    iii. Assume an institution that is eligible for the partial 
exemption for closed-end mortgage loans merges with an institution 
that is ineligible for the partial exemption and the surviving or 
newly formed institution is ineligible for the partial exemption. 
For the calendar year of the merger, collection of optional data as 
defined in Sec.  1003.3(d)(1)(iii) for closed-end mortgage loans is 
required for covered loans and applications handled in the offices 
of the merged institution that was previously ineligible for the 
partial exemption. For the calendar year of the merger, collection 
of optional data for closed-end mortgage loans is permitted but not 
required for covered loans and applications handled in the offices 
of the merged institution that was previously eligible for the 
partial exemption. When an institution that is ineligible for the 
partial exemption for closed-end mortgage loans acquires a branch 
office of an institution that is eligible for the partial exemption, 
collection of optional data for closed-end mortgage loans is 
permitted but not required for covered loans and applications 
handled by the acquired branch office for the calendar year of the 
acquisition.
    iv. Assume an institution that is eligible for the partial 
exemption for closed-end mortgage loans merges with an institution 
that is ineligible for the partial exemption and the surviving or 
newly formed institution is eligible for the partial exemption. For 
the calendar year of the merger, collection of optional data for 
closed-end mortgage loans is required for covered loans and 
applications handled in the offices of the previously ineligible 
institution that took place prior to the merger. After the merger 
date, collection of optional data for closed-end mortgage loans is 
permitted but not required for covered loans and applications 
handled in the offices of the institution that was previously 
ineligible for the partial exemption. When an institution remains 
eligible for the partial exemption for closed-end mortgage loans 
after acquiring a branch office of an institution that is ineligible 
for the partial exemption, collection of optional data for closed-
end mortgage loans is required for transactions of the acquired 
branch office that take place prior to the acquisition. Collection 
of optional data for closed-end mortgage loans by the acquired 
branch office is permitted but not required for transactions taking 
place in the remainder of the calendar year after the acquisition.
    4. Originations. Whether applications for covered loans that an 
insured depository institution or insured credit union receives, 
covered loans that it originates, or covered loans that it purchases 
are partially exempt transactions under Sec.  1003.3(d) depends, in 
part, on whether the institution originated fewer than 500 closed-
end mortgage loans that are not excluded from this part pursuant to 
Sec.  1003.3(c)(1) through (10) or (c)(13) in each of the two 
preceding calendar years or fewer than 500 open-end lines of credit 
that are not excluded from this part pursuant to Sec.  1003.3(c)(1) 
through (10) in each of the two preceding calendar years. See 
comments 4(a)-2 through -4 for guidance about the activities that 
constitute an origination for purposes of Sec.  1003.3(d).
    5. Affiliates. A financial institution that is not itself an 
insured credit union or an insured depository institution as defined 
in Sec.  1003.3(d)(1)(i) and (ii) is not eligible for the partial 
exemptions under Sec.  1003.3(d)(1) through (3), even if it is owned 
by or affiliated with an insured credit union or an insured 
depository institution. For example, an institution that is a 
subsidiary of an insured credit union or insured depository 
institution may not claim a partial exemption under Sec.  1003.3(d) 
for its closed-end mortgage loans unless the subsidiary institution 
itself:
    i. Is an insured credit union or insured depository institution,
    ii. In each of the two preceding calendar years originated fewer 
than 500 closed-end mortgage loans that are not excluded from this 
part pursuant to Sec.  1003.3(c)(1) through (10) or (c)(13), and
    iii. If the subsidiary is an insured depository institution, had 
not received as of the preceding December 31 a rating of ``needs to 
improve record of meeting community credit needs'' during each of 
its two most recent examinations or a rating of ``substantial 
noncompliance in meeting community credit needs'' on its most recent 
examination under section 807(b)(2) of the Community Reinvestment 
Act of 1977 (12 U.S.C. 2906(b)(2)).

Paragraph 3(d)(1)(iii)

    1. Optional data. The definition of optional data in Sec.  
1003.3(d)(1)(iii) identifies the data that are covered by the 
partial exemptions for certain transactions of insured depository 
institutions and insured credit unions under Sec.  1003.3(d). If a 
transaction is not partially exempt under Sec.  1003.3(d)(2) or (3), 
a

[[Page 21020]]

financial institution must collect, record, and report optional data 
as otherwise required under this part.

Paragraph 3(d)(2)

    1. General. Section 1003.3(d)(2) provides that, except as 
provided in Sec.  1003.3(d)(6), an insured depository institution or 
insured credit union that, in each of the two preceding calendar 
years, originated fewer than 500 closed-end mortgage loans that are 
not excluded from this part pursuant to Sec.  1003.3(c)(1) through 
(10) or (c)(13) is not required to collect, record, or report 
optional data as defined in Sec.  1003.3(d)(1)(iii) for applications 
for closed-end mortgage loans that it receives, closed-end mortgage 
loans that it originates, and closed-end mortgage loans that it 
purchases. For example, assume that an insured credit union is a 
financial institution in 2020 under Sec.  1003.2(g) and originated, 
in 2018 and 2019 respectively, 100 and 200 closed-end mortgage loans 
that are not excluded from this part pursuant to Sec.  1003.3(c)(1) 
through (10) or (c)(13). The closed-end mortgage loans that the 
insured credit union originated or purchased, or for which it 
received applications, during 2020 are not excluded transactions 
under Sec.  1003.3(c)(11). However, due to the partial exemption in 
Sec.  1003.3(d)(2), the insured credit union is not required to 
collect, record, or report optional data as defined in Sec.  
1003.3(d)(1)(iii) for the closed-end mortgage loans that it 
originated or purchased, or for which it received applications, for 
which final action is taken during 2020. See comments 4(a)-2 through 
-4 for guidance about the activities that constitute an origination.

Paragraph 3(d)(3)

    1. General. Section 1003.3(d)(3) provides that, except as 
provided in Sec.  1003.3(d)(6), an insured depository institution or 
insured credit union that, in each of the two preceding calendar 
years, originated fewer than 500 open-end lines of credit that are 
not excluded from this part pursuant to Sec.  1003.3(c)(1) through 
(10) is not required to collect, record, or report optional data as 
defined in Sec.  1003.3(d)(1)(iii) for 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. See 
Sec.  1003.3(c)(12) and comments 3(c)(12)-1 and -2, which provide an 
exclusion for certain open-end lines of credit from this part and 
permit voluntary reporting of such transactions under certain 
circumstances. See also comments 4(a)-2 through -4 for guidance 
about the activities that constitute an origination.

Paragraph 3(d)(4)

    1. General. Section 1003.3(d)(4) provides that an insured 
depository institution or insured credit union may collect, record, 
and report optional data as defined in Sec.  1003.3(d)(1)(iii) for a 
partially exempt transaction as though the institution were required 
to do so, provided that, if an institution voluntarily reports any 
data pursuant to any of the seven paragraphs identified in Sec.  
1003.3(d)(4)(i) and (ii) (Sec.  1003.4(a)(9)(i) and (a)(15), (16), 
(17), (27), (33), and (35)), it also must report all other data for 
the covered loan or application that would be required by that 
applicable paragraph if the transaction were not partially exempt. 
For example, an insured depository institution or insured credit 
union may voluntarily report the existence of a balloon payment for 
a partially exempt transaction pursuant to Sec.  1003.4(a)(27), but, 
if it does so, it must also report all other data for the 
transaction that would be required by Sec.  1003.4(a)(27) if the 
transaction were not partially exempt (i.e., whether the transaction 
has interest-only payments, negative amortization, or other non-
amortizing features).
    2. Partially exempt transactions within the same loan/
application register. A financial institution may collect, record, 
and report optional data for some partially exempt transactions 
under Sec.  1003.3(d) in the manner specified in Sec.  1003.3(d)(4), 
even if it does not collect, record, and report optional data for 
other partially exempt transactions under Sec.  1003.3(d).
    3. Exempt or not applicable. i. If a financial institution would 
otherwise report that a transaction is partially exempt pursuant to 
Sec.  1003.3(d) and a particular requirement to report optional data 
is not applicable to the transaction, the insured depository 
institution or insured credit union complies with the particular 
requirement by reporting either that the transaction is exempt from 
the requirement or that the requirement is not applicable. For 
example, assume that an insured depository institution or insured 
credit union originates a partially exempt reverse mortgage. The 
requirement to report lender credits is not applicable to reverse 
mortgages, as comment 4(a)(20)-1 explains. Accordingly, the 
institution could report either exempt or not applicable for lender 
credits for the reverse mortgage transaction.
    ii. An institution is considered as reporting data in a data 
field for purposes of Sec.  1003.3(d)(4)(i) and (ii) when it reports 
not applicable for that data field for a partially exempt 
transaction. For example, assume an insured depository institution 
or insured credit union originates a covered loan that is eligible 
for a partial exemption and is made primarily for business or 
commercial purposes. The requirement to report total loan costs or 
total points and fees is not applicable to loans made primarily for 
business or commercial purposes, as comments 4(a)(17)(i)-1 and (ii)-
1 explain. The institution can report not applicable for both total 
loan costs and total points and fees, or it can report exempt for 
both total loan costs and total points and fees for the loan. 
Pursuant to Sec.  1003.3(d)(4)(ii), the institution is not permitted 
to report not applicable for total loan costs and report exempt for 
total points and fees for the business or commercial purpose loan.

Paragraph 3(d)(4)(i)

    1. State. Section 1003.3(d)(4)(i) provides that if an 
institution eligible for a partial exemption under Sec.  
1003.3(d)(2) or (3) reports the street address, city name, or Zip 
Code for a partially exempt transaction pursuant to Sec.  
1003.4(a)(9)(i), it reports all data that would be required by Sec.  
1003.4(a)(9)(i) if the transaction were not partially exempt, 
including the State. An insured depository institution or insured 
credit union that reports the State pursuant to Sec.  
1003.4(a)(9)(ii) or comment 4(a)(9)(ii)-1 for a partially exempt 
transaction without reporting any other data required by Sec.  
1003.4(a)(9)(i) is not required to report the street address, city 
name, or Zip Code pursuant to Sec.  1003.4(a)(9)(i).

Paragraph 3(d)(5)

    1. NULI--uniqueness. For a partially exempt transaction under 
Sec.  1003.3(d), a financial institution may report a ULI or a NULI. 
Section 1003.3(d)(5)(ii) requires an insured depository institution 
or insured credit union that assigns a NULI to a covered loan or 
application to ensure that the character sequence it assigns is 
unique within the institution's annual loan/application register in 
which it appears. A financial institution should assign only one 
NULI to any particular covered loan or application within each 
annual loan/application register, and each NULI should correspond to 
a single application and ensuing loan within the annual loan/
application register in which the NULI appears in the case that the 
application is approved and a loan is originated. A financial 
institution may use a NULI more than once within an annual loan/
application register only if the NULI refers to the same loan or 
application or a loan that ensues from an application referred to 
elsewhere in the annual loan/application register. Refinancings or 
applications for refinancing that are included in same annual loan/
application register as the loan that is being refinanced should be 
assigned a different NULI than the loan that is being refinanced. An 
insured depository institution or insured credit union with multiple 
branches must ensure that its branches do not use the same NULI to 
refer to multiple covered loans or applications within the 
institution's same annual loan/application register.
    2. NULI--privacy. Section 1003.3(d)(5)(iii) prohibits an insured 
depository institution or insured credit union from including 
information in the NULI that could be used to directly identify the 
applicant or borrower. Information that could be used to directly 
identify the applicant or borrower includes, but is not limited to, 
the applicant's or borrower's name, date of birth, Social Security 
number, official government-issued driver's license or 
identification number, alien registration number, government 
passport number, or employer or taxpayer identification number.

Paragraph 3(d)(6)

    1. Preceding calendar year. Section 1003.3(d)(6) refers to the 
preceding December 31, which means the December 31 preceding the 
current calendar year. For example, in 2020, the preceding December 
31 is December 31, 2019. Assume that, as of December 31, 2019, an 
insured depository institution received ratings of ``needs to 
improve record of meeting community credit needs'' during its two 
most recent examinations under section 807(b)(2) of the Community 
Reinvestment Act (12 U.S.C. 2906(b)(2)) in 2018 and 2014. 
Accordingly, in 2020, the insured depository institution's 
transactions are not partially exempt pursuant to Sec.  1003.3(d).

[[Page 21021]]

Section 1003.4--Compilation of Reportable Data

4(a) Data Format and Itemization

    1. General. Except as otherwise provided in Sec.  1003.3, Sec.  
1003.4(a) describes a financial institution's obligation to collect 
data on applications it received, on covered loans that it 
originated, and on covered loans that it purchased during the 
calendar year covered by the loan/application register.
    i. A financial institution reports these data even if the 
covered loans were subsequently sold by the institution.
    ii. A financial institution reports data for applications that 
did not result in an origination but on which actions were taken-for 
example, an application that the institution denied, that it 
approved but that was not accepted, that it closed for 
incompleteness, or that the applicant withdrew during the calendar 
year covered by the loan/application register. A financial 
institution is required to report data regarding requests under a 
preapproval program (as defined in Sec.  1003.2(b)(2)) only if the 
preapproval request is denied, results in the origination of a home 
purchase loan, or was approved but not accepted.
    iii. If a financial institution acquires covered loans in bulk 
from another institution (for example, from the receiver for a 
failed institution), but no merger or acquisition of an institution, 
or acquisition of a branch office, is involved, the acquiring 
financial institution reports the covered loans as purchased loans.
    iv. A financial institution reports the data for an application 
on the loan/application register for the calendar year during which 
the application was acted upon even if the institution received the 
application in a previous calendar year.
    2. Originations and applications involving more than one 
institution. Section 1003.4(a) requires a financial institution to 
collect certain information regarding applications for covered loans 
that it receives and regarding covered loans that it originates. The 
following provides guidance on how to report originations and 
applications involving more than one institution. The discussion 
below assumes that all of the parties are financial institutions as 
defined by Sec.  1003.2(g). The same principles apply if any of the 
parties is not a financial institution. Comment 4(a)-3 provides 
examples of transactions involving more than one institution, and 
comment 4(a)-4 discusses how to report actions taken by agents.
    i. Only one financial institution reports each originated 
covered loan as an origination. If more than one institution was 
involved in the origination of a covered loan, the financial 
institution that made the credit decision approving the application 
before closing or account opening reports the loan as an 
origination. It is not relevant whether the loan closed or, in the 
case of an application, would have closed in the institution's name. 
If more than one institution approved an application prior to 
closing or account opening and one of those institutions purchased 
the loan after closing, the institution that purchased the loan 
after closing reports the loan as an origination. If a financial 
institution reports a transaction as an origination, it reports all 
of the information required for originations, even if the covered 
loan was not initially payable to the financial institution that is 
reporting the covered loan as an origination.
    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 if it made a credit decision on 
the application or was reviewing the application when the 
application was withdrawn or closed for incompleteness. 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 and reported an 
action taken on the same application.
    3. Examples--originations and applications involving more than 
one institution. The following scenarios illustrate how an 
institution reports a particular application or covered loan. The 
illustrations assume that all of the parties are financial 
institutions as defined by Sec.  1003.2(g). However, the same 
principles apply if any of the parties is not a financial 
institution.
    i. Financial Institution A received an application for a covered 
loan from an applicant and forwarded that application to Financial 
Institution B. Financial Institution B reviewed the application and 
approved the loan prior to closing. The loan closed in Financial 
Institution A's name. Financial Institution B purchased the loan 
from Financial Institution A after closing. Financial Institution B 
was not acting as Financial Institution A's agent. Since Financial 
Institution B made the credit decision prior to closing, Financial 
Institution B reports the transaction as an origination, not as a 
purchase. Financial Institution A does not report the transaction.
    ii. Financial Institution A received an application for a 
covered loan from an applicant and forwarded that application to 
Financial Institution B. Financial Institution B reviewed the 
application before the loan would have closed, but the application 
did not result in an origination because Financial Institution B 
denied the application. Financial Institution B was not acting as 
Financial Institution A's agent. Since Financial Institution B made 
the credit decision, Financial Institution B reports the application 
as a denial. Financial Institution A does not report the 
application. If, under the same facts, the application was withdrawn 
before Financial Institution B made a credit decision, Financial 
Institution B would report the application as withdrawn and 
Financial Institution A would not report the application.
    iii. Financial Institution A received an application for a 
covered loan from an applicant and approved the application before 
closing the loan in its name. Financial Institution A was not acting 
as Financial Institution B's agent. Financial Institution B 
purchased the covered loan from Financial Institution A. Financial 
Institution B did not review the application before closing. 
Financial Institution A reports the loan as an origination. 
Financial Institution B reports the loan as a purchase.
    iv. Financial Institution A received an application for a 
covered loan from an applicant. If approved, the loan would have 
closed in Financial Institution B's name. Financial Institution A 
denied the application without sending it to Financial Institution B 
for approval. Financial Institution A was not acting as Financial 
Institution B's agent. Since Financial Institution A made the credit 
decision before the loan would have closed, Financial Institution A 
reports the application. Financial Institution B does not report the 
application.
    v. Financial Institution A reviewed an application and made the 
credit decision to approve a covered loan using the underwriting 
criteria provided by a third party (e.g., another financial 
institution, Fannie Mae, or Freddie Mac). The third party did not 
review the application and did not make a credit decision prior to 
closing. Financial Institution A was not acting as the third party's 
agent. Financial Institution A reports the application or 
origination. If the third party purchased the loan and is subject to 
Regulation C, the third party reports the loan as a purchase whether 
or not the third party reviewed the loan after closing. Assume the 
same facts, except that Financial Institution A approved the 
application, and the applicant chose not to accept the loan from 
Financial Institution A. Financial Institution A reports the 
application as approved but not accepted and the third party, 
assuming the third party is subject to Regulation C, does not report 
the application.
    vi. Financial Institution A reviewed and made the credit 
decision on an application based on the criteria of a third-party 
insurer or guarantor (for example, a government or private insurer 
or guarantor). Financial Institution A reports the action taken on 
the application.
    vii. Financial Institution A received an application for a 
covered loan and forwarded it to Financial Institutions B and C. 
Financial Institution A made a credit decision, acting as Financial 
Institution D's agent, and approved the application. The applicant 
did not accept the loan from Financial Institution D. Financial 
Institution D reports the application as approved but not accepted. 
Financial Institution A does not report the application. Financial 
Institution B made a credit decision, approving the application, the 
applicant accepted the offer of credit from Financial Institution B, 
and credit was extended. Financial Institution B reports the 
origination. Financial Institution C made a credit decision and 
denied the application. Financial Institution C reports the 
application as denied.
    4. Agents. If a financial institution made the credit decision 
on a covered loan or application through the actions of an agent, 
the institution reports the application or origination. State law 
determines whether one party is the agent of another. For example, 
acting as Financial Institution A's agent, Financial Institution B 
approved an application prior to closing and a covered loan was 
originated. Financial Institution A reports the loan as an 
origination.
    5. Purchased loans. i. A financial institution is required to 
collect data

[[Page 21022]]

regarding covered loans it purchases. For purposes of Sec.  
1003.4(a), a purchase includes a repurchase of a covered loan, 
regardless of whether the institution chose to repurchase the 
covered loan or was required to repurchase the covered loan because 
of a contractual obligation and regardless of whether the repurchase 
occurs within the same calendar year that the covered loan was 
originated or in a different calendar year. For example, assume that 
Financial Institution A originates or purchases a covered loan and 
then sells it to Financial Institution B, who later requires 
Financial Institution A to repurchase the covered loan pursuant to 
the relevant contractual obligations. Financial Institution B 
reports the purchase from Financial Institution A, assuming it is a 
financial institution as defined under Sec.  1003.2(g). Financial 
Institution A reports the repurchase from Financial Institution B as 
a purchase.
    ii. In contrast, for purposes of Sec.  1003.4(a), a purchase 
does not include a temporary transfer of a covered loan to an 
interim funder or warehouse creditor as part of an interim funding 
agreement under which the originating financial institution is 
obligated to repurchase the covered loan for sale to a subsequent 
investor. Such agreements, often referred to as ``repurchase 
agreements,'' are sometimes employed as functional equivalents of 
warehouse lines of credit. Under these agreements, the interim 
funder or warehouse creditor acquires legal title to the covered 
loan, subject to an obligation of the originating institution to 
repurchase at a future date, rather than taking a security interest 
in the covered loan as under the terms of a more conventional 
warehouse line of credit. To illustrate, assume Financial 
Institution A has an interim funding agreement with Financial 
Institution B to enable Financial Institution B to originate loans. 
Assume further that Financial Institution B originates a covered 
loan and that, pursuant to this agreement, Financial Institution A 
takes a temporary transfer of the covered loan until Financial 
Institution B arranges for the sale of the covered loan to a 
subsequent investor and that Financial Institution B repurchases the 
covered loan to enable it to complete the sale to the subsequent 
investor (alternatively, Financial Institution A may transfer the 
covered loan directly to the subsequent investor at Financial 
Institution B's direction, pursuant to the interim funding 
agreement). The subsequent investor could be, for example, a 
financial institution or other entity that intends to hold the loan 
in portfolio, a GSE or other securitizer, or a financial institution 
or other entity that intends to package and sell multiple loans to a 
GSE or other securitizer. In this example, the temporary transfer of 
the covered loan from Financial Institution B to Financial 
Institution A is not a purchase, and any subsequent transfer back to 
Financial Institution B for delivery to the subsequent investor is 
not a purchase, for purposes of Sec.  1003.4(a). Financial 
Institution B reports the origination of the covered loan as well as 
its sale to the subsequent investor. If the subsequent investor is a 
financial institution under Sec.  1003.2(g), it reports a purchase 
of the covered loan pursuant to Sec.  1003.4(a), regardless of 
whether it acquired the covered loan from Financial Institution B or 
directly from Financial Institution A.

Paragraph 4(a)(1)(i)

    1. ULI--uniqueness. Section 1003.4(a)(1)(i)(B)(2) requires a 
financial institution that assigns a universal loan identifier (ULI) 
to each covered loan or application (except as provided in Sec.  
1003.4(a)(1)(i)(D) and (E)) to ensure that the character sequence it 
assigns is unique within the institution and used only for the 
covered loan or application. 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 in 
the case that the application is approved and a loan is originated. 
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. A financial institution may not report 
an application for a covered loan in 2030 using the same ULI that 
was reported for a covered loan that was originated in 2020. 
Similarly, refinancings or applications for refinancing should be 
assigned a different ULI than the loan that is being refinanced. A 
financial institution with multiple branches must ensure that its 
branches do not use the same ULI to refer to multiple covered loans 
or applications.
    2. ULI--privacy. Section 1003.4(a)(1)(i)(B)(3) prohibits a 
financial institution from including information that could be used 
to directly identify the applicant or borrower in the identifier 
that it assigns for the application or covered loan of the applicant 
or borrower. Information that could be used to directly identify the 
applicant or borrower includes, but is not limited to, the 
applicant's or borrower's name, date of birth, Social Security 
number, official government-issued driver's license or 
identification number, alien registration number, government 
passport number, or employer or taxpayer identification number.
    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 unless the purchase of the covered 
loan is a partially exempt transaction under Sec.  1003.3(d). 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 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 the purchase is not a partially exempt transaction. 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 if the purchase is not a partially exempt transaction. 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) and Institution A 
assigned a ULI to the loan, then unless the purchase is a partially 
exempt transaction 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 and is ineligible for a partial 
exemption with respect to the purchased 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, the loan was originated by an 
institution not required to report under this part, or the loan was 
assigned a non-universal loan identifier (NULI) under Sec.  
1003.3(d)(5) rather than a ULI by the loan originator.
    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 that is not partially exempt in its fourth-
quarter 2020 data submission, pursuant to Sec.  1003.5(a)(1)(ii), 
but then reconsiders the application, resulting in an origination 
that is not partially exempt 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).
    5. ULI--check digit. Section 1003.4(a)(1)(i)(C) requires that 
the two right-most characters in the ULI represent the check digit. 
Appendix C prescribes the

[[Page 21023]]

requirements for generating a check digit and validating a ULI.
    6. NULI. For a partially exempt transaction under Sec.  
1003.3(d), a financial institution may report a ULI or a NULI. See 
Sec.  1003.3(d)(5) and comments 3(d)(5)-1 and -2 for guidance on the 
NULI.

Paragraph 4(a)(1)(ii)

    1. Application date--consistency. Section 1003.4(a)(1)(ii) 
requires that, in reporting the date of application, a financial 
institution report the date it received the application, as defined 
under Sec.  1003.2(b), or the date shown on the application form. 
Although a financial institution need not choose the same approach 
for its entire HMDA submission, it should be generally consistent 
(such as by routinely using one approach within a particular 
division of the institution or for a category of loans). If the 
financial institution chooses to report the date shown on the 
application form and the institution retains multiple versions of 
the application form, the institution reports the date shown on the 
first application form satisfying the application definition 
provided under Sec.  1003.2(b).
    2. Application date--indirect application. For an application 
that was not submitted directly to the financial institution, the 
institution may report the date the application was received by the 
party that initially received the application, the date the 
application was received by the institution, or the date shown on 
the application form. Although an institution need not choose the 
same approach for its entire HMDA submission, it should be generally 
consistent (such as by routinely using one approach within a 
particular division of the institution or for a category of loans).
    3. Application date--reinstated application. If, within the same 
calendar year, an applicant asks a financial institution to 
reinstate a counteroffer that the applicant previously did not 
accept (or asks the institution to reconsider an application that 
was denied, withdrawn, or closed for incompleteness), the 
institution may treat that request as the continuation of the 
earlier transaction using the same ULI or NULI or as a new 
transaction with a new ULI or NULI. If the institution treats the 
request for reinstatement or reconsideration as a new transaction, 
it reports the date of the request as the application date. If the 
institution does not treat the request for reinstatement or 
reconsideration as a new transaction, it reports the original 
application date.

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)

    1. Purpose--statement of applicant. A financial institution may 
rely on the oral or written statement of an applicant regarding the 
proposed use of covered loan proceeds. For example, a lender could 
use a check-box or a purpose line on a loan application to determine 
whether the applicant intends to use covered loan proceeds for home 
improvement purposes. If an applicant provides no statement as to 
the proposed use of covered loan proceeds and the covered loan is 
not a home purchase loan, cash-out refinancing, or refinancing, a 
financial institution reports the covered loan as for a purpose 
other than home purchase, home improvement, refinancing, or cash-out 
refinancing for purposes of Sec.  1003.4(a)(3).
    2. Purpose--refinancing and cash-out refinancing. Section 
1003.4(a)(3) requires a financial institution to report whether a 
covered loan is, or an application is for, a refinancing or a cash-
out refinancing. A financial institution reports a covered loan or 
an application as a cash-out refinancing if it is a refinancing as 
defined by Sec.  1003.2(p) and the institution considered it to be a 
cash-out refinancing in processing the application or setting the 
terms (such as the interest rate or origination charges) under its 
guidelines or an investor's guidelines. For example:
    i. Assume a financial institution considers an application for a 
loan product to be a cash-out refinancing under an investor's 
guidelines because of the amount of cash received by the borrower at 
closing or account opening. Assume also that under the investor's 
guidelines, the applicant qualifies for the loan product and the 
financial institution approves the application, originates the 
covered loan, and sets the terms of the covered loan consistent with 
the loan product. In this example, the financial institution would 
report the covered loan as a cash-out refinancing for purposes of 
Sec.  1003.4(a)(3).
    ii. Assume a financial institution does not consider an 
application for a covered loan to be a cash-out refinancing under 
its own guidelines because the amount of cash received by the 
borrower does not exceed a certain threshold. Assume also that the 
institution approves the application, originates the covered loan, 
and sets the terms of the covered loan consistent with its own 
guidelines applicable to refinancings other than cash-out 
refinancings. In this example, the financial institution would 
report the covered loan as a refinancing for purposes of Sec.  
1003.4(a)(3).
    iii. Assume a financial institution does not distinguish between 
a cash-out refinancing and a refinancing under its own guidelines, 
and sets the terms of all refinancings without regard to the amount 
of cash received by the borrower at closing or account opening, and 
does not offer loan products under investor guidelines. In this 
example, the financial institution reports all covered loans and 
applications for covered loans that are defined by Sec.  1003.2(p) 
as refinancings for purposes of Sec.  1003.4(a)(3).
    3. Purpose--multiple-purpose loan. Section 1003.4(a)(3) requires 
a financial institution to report the purpose of a covered loan or 
application. If a covered loan is a home purchase loan as well as a 
home improvement loan, a refinancing, or a cash-out refinancing, an 
institution complies with Sec.  1003.4(a)(3) by reporting the loan 
as a home purchase loan. If a covered loan is a home improvement 
loan as well as a refinancing or cash-out refinancing, but the 
covered loan is not a home purchase loan, an institution complies 
with Sec.  1003.4(a)(3) by reporting the covered loan as a 
refinancing or a cash-out refinancing, as appropriate. If a covered 
loan is a refinancing or cash-out refinancing as well as for another 
purpose, such as for the purpose of paying educational expenses, but 
the covered loan is not a home purchase loan, an institution 
complies with Sec.  1003.4(a)(3) by reporting the covered loan as a 
refinancing or a cash-out refinancing, as appropriate. See comment 
4(a)(3)-2. If a covered loan is a home improvement loan as well as 
for another purpose, but the covered loan is not a home purchase 
loan, a refinancing, or cash-out refinancing, an institution 
complies with Sec.  1003.4(a)(3) by reporting the covered loan as a 
home improvement loan. See comment 2(i)-1.
    4. Purpose--other. If a covered loan is not, or an application 
is not for, a home purchase loan, a home improvement loan, a 
refinancing, or a cash-out refinancing, a financial institution 
complies with Sec.  1003.4(a)(3) by reporting the covered loan or 
application as for a purpose other than home purchase, home 
improvement, refinancing, or cash-out refinancing. For example, if a 
covered loan is for the purpose of paying educational expenses, the 
financial institution complies with Sec.  1003.4(a)(3) by reporting 
the covered loan as for a purpose other than home purchase, home 
improvement, refinancing, or cash-out refinancing. Section 
1003.4(a)(3) also requires an institution to report a covered loan 
or application as for a purpose other than home purchase, home 
improvement, refinancing, or cash-out refinancing if it is a 
refinancing but, under the terms of the agreement, the financial 
institution was unconditionally obligated to refinance the 
obligation subject to conditions within the borrower's control.
    5. Purpose--business or commercial purpose loans. If a covered 
loan primarily is for a business or commercial purpose as described 
in Sec.  1003.3(c)(10) and comment 3(c)(10)-2 and is a home purchase 
loan, home improvement loan, or a refinancing, Sec.  1003.4(a)(3) 
requires the financial institution to report the applicable loan 
purpose. If a loan primarily is for a business or commercial purpose 
but is not a home purchase loan, home improvement loan, or a 
refinancing, the loan is an excluded transaction under Sec.  
1003.3(c)(10).
    6. Purpose--purchased loans. For purchased covered loans where 
origination took place prior to January 1, 2018, a financial 
institution complies with Sec.  1003.4(a)(3) by reporting that the 
requirement is not applicable.

Paragraph 4(a)(4)

    1. Request under a preapproval program. Section 1003.4(a)(4) 
requires a financial institution to report whether an application or 
covered loan involved a request for a preapproval of a home purchase 
loan under a preapproval program as defined by Sec.  1003.2(b)(2). 
If an application or covered loan did not involve a request for a

[[Page 21024]]

preapproval of a home purchase loan under a preapproval program as 
defined by Sec.  1003.2(b)(2), a financial institution complies with 
Sec.  1003.4(a)(4) by reporting that the application or covered loan 
did not involve such a request, regardless of whether the 
institution has such a program and the applicant did not apply 
through that program or the institution does not have a preapproval 
program as defined by Sec.  1003.2(b)(2).
    2. Scope of requirement. A financial institution reports that 
the application or covered loan did not involve a preapproval 
request for a purchased covered loan; an application or covered loan 
for any purpose other than a home purchase loan; an application for 
a home purchase loan or a covered loan that is a home purchase loan 
secured by a multifamily dwelling; an application or covered loan 
that is an open-end line of credit or a reverse mortgage; or an 
application that is denied, withdrawn by the applicant, or closed 
for incompleteness.

Paragraph 4(a)(5)

    1. Modular homes and prefabricated components. Covered loans or 
applications related to modular homes should be reported with a 
construction method of site-built, regardless of whether they are 
on-frame or off-frame modular homes. Modular homes comply with local 
or other recognized buildings codes rather than standards 
established by the National Manufactured Housing Construction and 
Safety Standards Act, 42 U.S.C. 5401 et seq. Modular homes are not 
required to have HUD Certification Labels under 24 CFR 3280.11 or 
data plates under 24 CFR 3280.5. Modular homes may have a 
certification from a State licensing agency that documents 
compliance with State or other applicable building codes. On-frame 
modular homes are constructed on permanent metal chassis similar to 
those used in manufactured homes. The chassis are not removed on 
site and are secured to the foundation. Off-frame modular homes 
typically have floor construction similar to the construction of 
other site-built homes, and the construction typically includes 
wooden floor joists and does not include permanent metal chassis. 
Dwellings built using prefabricated components assembled at the 
dwelling's permanent site should also be reported with a 
construction method of site-built.
    2. Multifamily dwelling. For a covered loan or an application 
for a covered loan related to a multifamily dwelling, the financial 
institution should report the construction method as site-built 
unless the multifamily dwelling is a manufactured home community, in 
which case the financial institution should report the construction 
method as manufactured home.
    3. Multiple properties. See comment 4(a)(9)-2 regarding 
transactions involving multiple properties with more than one 
property taken as security.

Paragraph 4(a)(6)

    1. Multiple properties. See comment 4(a)(9)-2 regarding 
transactions involving multiple properties with more than one 
property taken as security.
    2. Principal residence. Section 1003.4(a)(6) requires a 
financial institution to identify whether the property to which the 
covered loan or application relates is or will be used as a 
residence that the applicant or borrower physically occupies and 
uses, or will occupy and use, as his or her principal residence. For 
purposes of Sec.  1003.4(a)(6), an applicant or borrower can have 
only one principal residence at a time. Thus, a vacation or other 
second home would not be a principal residence. However, if an 
applicant or borrower buys or builds a new dwelling that will become 
the applicant's or borrower's principal residence within a year or 
upon the completion of construction, the new dwelling is considered 
the principal residence for purposes of applying this definition to 
a particular transaction.
    3. Second residences. Section 1003.4(a)(6) requires a financial 
institution to identify whether the property to which the loan or 
application relates is or will be used as a second residence. For 
purposes of Sec.  1003.4(a)(6), a property is a second residence of 
an applicant or borrower if the property is or will be occupied by 
the applicant or borrower for a portion of the year and is not the 
applicant's or borrower's principal residence. For example, if a 
person purchases a property, occupies the property for a portion of 
the year, and rents the property for the remainder of the year, the 
property is a second residence for purposes of Sec.  1003.4(a)(6). 
Similarly, if a couple occupies a property near their place of 
employment on weekdays, but the couple returns to their principal 
residence on weekends, the property near the couple's place of 
employment is a second residence for purposes of Sec.  1003.4(a)(6).
    4. Investment properties. Section 1003.4(a)(6) requires a 
financial institution to identify whether the property to which the 
covered loan or application relates is or will be used as an 
investment property. For purposes of Sec.  1003.4(a)(6), a property 
is an investment property if the borrower does not, or the applicant 
will not, occupy the property. For example, if a person purchases a 
property, does not occupy the property, and generates income by 
renting the property, the property is an investment property for 
purposes of Sec.  1003.4(a)(6). Similarly, if a person purchases a 
property, does not occupy the property, and does not generate income 
by renting the property, but intends to generate income by selling 
the property, the property is an investment property for purposes of 
Sec.  1003.4(a)(6). Section 1003.4(a)(6) requires a financial 
institution to identify a property as an investment property if the 
borrower or applicant does not or will not occupy the property, even 
if the borrower or applicant does not consider the property as owned 
for investment purposes. For example, if a corporation purchases a 
property that is a dwelling under Sec.  1003.2(f), that it does not 
occupy, but that is for the long-term residential use of its 
employees, the property is an investment property for purposes of 
Sec.  1003.4(a)(6), even if the corporation considers the property 
as owned for business purposes rather than investment purposes, does 
not generate income by renting the property, and does not intend to 
generate income by selling the property at some point in time. If 
the property is for transitory use by employees, the property would 
not be considered a dwelling under Sec.  1003.2(f). See comment 
2(f)-3.
    5. Purchased covered loans. For purchased covered loans, a 
financial institution may report principal residence unless the loan 
documents or application indicate that the property will not be 
occupied as a principal residence.

Paragraph 4(a)(7)

    1. Covered loan amount--counteroffer. If an applicant accepts a 
counteroffer for an amount different from the amount for which the 
applicant applied, the financial institution reports the covered 
loan amount granted. If an applicant does not accept a counteroffer 
or fails to respond, the institution reports the amount initially 
requested.
    2. Covered loan amount--application approved but not accepted or 
preapproval request approved but not accepted. A financial 
institution reports the covered loan amount that was approved.
    3. Covered loan amount--preapproval request denied, application 
denied, closed for incompleteness or withdrawn. For a preapproval 
request that was denied, and for an application that was denied, 
closed for incompleteness, or withdrawn, a financial institution 
reports the amount for which the applicant applied.
    4. Covered loan amount--multiple-purpose loan. A financial 
institution reports the entire amount of the covered loan, even if 
only a part of the proceeds is intended for home purchase, home 
improvement, or refinancing.
    5. Covered loan amount--closed-end mortgage loan. For a closed-
end mortgage loan, other than a purchased loan, an assumption, or a 
reverse mortgage, a financial institution reports the amount to be 
repaid as disclosed on the legal obligation. For a purchased closed-
end mortgage loan or an assumption of a closed-end mortgage loan, a 
financial institution reports the unpaid principal balance at the 
time of purchase or assumption.
    6. Covered loan amount--open-end line of credit. For an open-end 
line of credit, a financial institution reports the entire amount of 
credit available to the borrower under the terms of the open-end 
plan, including a purchased open-end line of credit and an 
assumption of an open-end line of credit, but not for a reverse 
mortgage open-end line of credit.
    7. Covered loan amount--refinancing. For a refinancing, a 
financial institution reports the amount of credit extended under 
the terms of the new debt obligation.
    8. Covered loan amount--home improvement loan. A financial 
institution reports the entire amount of a home improvement loan, 
even if only a part of the proceeds is intended for home 
improvement.
    9. Covered loan amount--non-federally insured reverse mortgage. 
A financial institution reports the initial principal limit of a 
non-federally insured reverse mortgage as set forth in Sec.  
1003.4(a)(7)(iii).

Paragraph 4(a)(8)(i)

    1. Action taken--covered loan originated. A financial 
institution reports that the covered loan was originated if the 
financial

[[Page 21025]]

institution made a credit decision approving the application before 
closing or account opening and that credit decision results in an 
extension of credit. The same is true for an application that began 
as a request for a preapproval that subsequently results in a 
covered loan being originated. See comments 4(a)-2 through -4 for 
guidance on transactions in which more than one institution is 
involved.
    2. Action taken--covered loan purchased. A financial institution 
reports that the covered loan was purchased if the covered loan was 
purchased by the financial institution after closing or account 
opening and the financial institution did not make a credit decision 
on the application prior to closing or account opening, or if the 
financial institution did make a credit decision on the application 
prior to closing or account opening, but is repurchasing the loan 
from another entity that the loan was sold to. See comment 4(a)-5. 
See comments 4(a)-2 through -4 for guidance on transactions in which 
more than one financial institution is involved.
    3. Action taken--application approved but not accepted. A 
financial institution reports application approved but not accepted 
if the financial institution made a credit decision approving the 
application before closing or account opening, subject solely to 
outstanding conditions that are customary commitment or closing 
conditions, but the applicant or the party that initially received 
the application fails to respond to the financial institution's 
approval within the specified time, or the closed-end mortgage loan 
was not otherwise consummated or the account was not otherwise 
opened. See comment 4(a)(8)(i)-13.
    4. Action taken--application denied. A financial institution 
reports that the application was denied if it made a credit decision 
denying the application before an applicant withdraws the 
application or the file is closed for incompleteness. See comments 
4(a)-2 through -4 for guidance on transactions in which more than 
one institution is involved.
    5. Action taken--application withdrawn. A financial institution 
reports that the application was withdrawn when the application is 
expressly withdrawn by the applicant before the financial 
institution makes a credit decision denying the application, before 
the financial institution makes a credit decision approving the 
application, or before the file is closed for incompleteness. A 
financial institution also reports application withdrawn if the 
financial institution provides a conditional approval specifying 
underwriting or creditworthiness conditions, pursuant to comment 
4(a)(8)(i)-13, and the application is expressly withdrawn by the 
applicant before the applicant satisfies all specified underwriting 
or creditworthiness conditions. A preapproval request that is 
withdrawn is not reportable under HMDA. See Sec.  1003.4(a).
    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.
    7. Action taken--preapproval request denied. A financial 
institution reports that the preapproval request was denied if the 
application was a request for a preapproval under a preapproval 
program as defined in Sec.  1003.2(b)(2) and the institution made a 
credit decision denying the preapproval request.
    8. Action taken--preapproval request approved but not accepted. 
A financial institution reports that the preapproval request was 
approved but not accepted if the application was a request for a 
preapproval under a preapproval program as defined in Sec.  
1003.2(b)(2) and the institution made a credit decision approving 
the preapproval request but the application did not result in a 
covered loan originated by the financial institution.
    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.
    10. Action taken--rescinded transactions. If a borrower rescinds 
a transaction after closing and before a financial institution is 
required to submit its loan/application register containing the 
information for the transaction under Sec.  1003.5(a), the 
institution reports the transaction as an application that was 
approved but not accepted.
    11. Action taken--purchased covered loans. An institution 
reports the covered loans that it purchased during the calendar 
year. An institution does not report the covered loans that it 
declined to purchase, unless, as discussed in comments 4(a)-2 
through -4, the institution reviewed the application prior to 
closing, in which case it reports the application or covered loan 
according to comments 4(a)-2 through -4.
    12. Action taken--repurchased covered loans. See comment 4(a)-5 
regarding reporting requirements when a covered loan is repurchased 
by the originating financial institution.
    13. Action taken--conditional approvals. If an institution 
issues an approval other than a commitment pursuant to a preapproval 
program as defined under Sec.  1003.2(b)(2), and that approval is 
subject to the applicant meeting certain conditions, the institution 
reports the action taken as provided below dependent on whether the 
conditions are solely customary commitment or closing conditions or 
if the conditions include any underwriting or creditworthiness 
conditions.
    i. Action taken examples. If the approval is conditioned on 
satisfying underwriting or creditworthiness conditions and they are 
not met, the institution reports the action taken as a denial. If, 
however, the conditions involve submitting additional information 
about underwriting or creditworthiness that the institution needs to 
make the credit decision, and the institution has sent a written 
notice of incompleteness under Regulation B, 12 CFR 1002.9(c)(2), 
and the applicant did not respond within the period of time 
specified in the notice, the institution reports the action taken as 
file closed for incompleteness. See comment 4(a)(8)(i)-6. If the 
conditions are solely customary commitment or closing conditions and 
the conditions are not met, the institution reports the action taken 
as approved but not accepted. If all the conditions (underwriting, 
creditworthiness, or customary commitment or closing conditions) are 
satisfied and the institution agrees to extend credit but the 
covered loan is not originated, the institution reports the action 
taken as application approved but not accepted. If the applicant 
expressly withdraws before satisfying all underwriting or 
creditworthiness conditions and before the institution denies the 
application or closes the file for incompleteness, the institution 
reports the action taken as application withdrawn. If all 
underwriting and creditworthiness conditions have been met, and the 
outstanding conditions are solely customary commitment or closing 
conditions and the applicant expressly withdraws before the covered 
loan is originated, the institution reports the action taken as 
application approved but not accepted.
    ii. Customary commitment or closing conditions. Customary 
commitment or closing conditions include, for example: a clear-title 
requirement, an acceptable property survey, acceptable title 
insurance

[[Page 21026]]

binder, clear termite inspection, a subordination agreement from 
another lienholder, and, where the applicant plans to use the 
proceeds from the sale of one home to purchase another, a settlement 
statement showing adequate proceeds from the sale.
    iii. Underwriting or creditworthiness conditions. Underwriting 
or creditworthiness conditions include, for example: conditions that 
constitute a counter-offer, such as a demand for a higher down-
payment; satisfactory debt-to-income or loan-to-value ratios, a 
determination of need for private mortgage insurance, or a 
satisfactory appraisal requirement; or verification or confirmation, 
in whatever form the institution requires, that the applicant meets 
underwriting conditions concerning applicant creditworthiness, 
including documentation or verification of income or assets.
    14. Action taken--pending applications. An institution does not 
report any covered loan application still pending at the end of the 
calendar year; it reports that application on its loan/application 
register for the year in which final action is taken.

Paragraph 4(a)(8)(ii)

    1. Action taken date--general. A financial institution reports 
the date of the action taken.
    2. Action taken date--applications denied and files closed for 
incompleteness. For applications, including requests for a 
preapproval, that are denied or for files closed for incompleteness, 
the financial institution reports either the date the action was 
taken or the date the notice was sent to the applicant.
    3. Action taken date--application withdrawn. For applications 
withdrawn, the financial institution may report the date the express 
withdrawal was received or the date shown on the notification form 
in the case of a written withdrawal.
    4. Action taken date--approved but not accepted. For a covered 
loan approved by an institution but not accepted by the applicant, 
the institution reports any reasonable date, such as the approval 
date, the deadline for accepting the offer, or the date the file was 
closed. Although an institution need not choose the same approach 
for its entire HMDA submission, it should be generally consistent 
(such as by routinely using one approach within a particular 
division of the institution or for a category of covered loans).
    5. Action taken date--originations. For covered loan 
originations, including a preapproval request that leads to an 
origination by the financial institution, an institution generally 
reports the closing or account opening date. For covered loan 
originations that an institution acquires from a party that 
initially received the application, the institution reports either 
the closing or account opening date, or the date the institution 
acquired the covered loan from the party that initially received the 
application. If the disbursement of funds takes place on a date 
later than the closing or account opening date, the institution may 
use the date of initial disbursement. For a construction/permanent 
covered loan, the institution reports either the closing or account 
opening date, or the date the covered loan converts to the permanent 
financing. Although an institution need not choose the same approach 
for its entire HMDA submission, it should be generally consistent 
(such as by routinely using one approach within a particular 
division of the institution or for a category of covered loans). 
Notwithstanding this flexibility regarding the use of the closing or 
account opening date in connection with reporting the date action 
was taken, the institution must report the origination as occurring 
in the year in which the origination goes to closing or the account 
is opened.
    6. Action taken date--loan purchased. For covered loans 
purchased, a financial institution reports the date of purchase.

Paragraph 4(a)(9)

    1. Multiple properties with one property taken as security. If a 
covered loan is related to more than one property, but only one 
property is taken as security (or, in the case of an application, 
proposed to be taken as security), a financial institution reports 
the information required by Sec.  1003.4(a)(9) for the property 
taken as or proposed to be taken as security. A financial 
institution does not report the information required by Sec.  
1003.4(a)(9) for the property or properties related to the loan that 
are not taken as or proposed to be taken as security. For example, 
if a covered loan is secured by property A, and the proceeds are 
used to purchase or rehabilitate (or to refinance home purchase or 
home improvement loans related to) property B, the institution 
reports the information required by Sec.  1003.4(a)(9) for property 
A and does not report the information required by Sec.  1003.4(a)(9) 
for property B.
    2. Multiple properties with more than one property taken as 
security. If more than one property is taken or, in the case of an 
application, proposed to be taken as security for a single covered 
loan, a financial institution reports the covered loan or 
application in a single entry on its loan/application register and 
provides the information required by Sec.  1003.4(a)(9) for one of 
the properties taken as security that contains a dwelling. A 
financial institution does not report information about the other 
properties taken as security. If an institution is required to 
report specific information about the property identified in Sec.  
1003.4(a)(9), the institution reports the information that relates 
to the property identified in Sec.  1003.4(a)(9) (or, if the 
transaction is partially exempt under Sec.  1003.3(d) and no data 
are reported pursuant to Sec.  1003.4(a)(9), the property that the 
institution would have identified in Sec.  1003.4(a)(9) if the 
transaction were not partially exempt). For example, Financial 
Institution A originated a covered loan that is secured by both 
property A and property B, each of which contains a dwelling. 
Financial Institution A reports the loan as one entry on its loan/
application register, reporting the information required by Sec.  
1003.4(a)(9) for either property A or property B. If Financial 
Institution A elects to report the information required by Sec.  
1003.4(a)(9) about property A, Financial Institution A also reports 
the information required by Sec.  1003.4(a)(5), (6), (14), (29), and 
(30) related to property A. For aspects of the entries that do not 
refer to the property identified in Sec.  1003.4(a)(9) (i.e., Sec.  
1003.4(a)(1) through (4), (7), (8), (10) through (13), (15) through 
(28), and (31) through (38)), Financial Institution A reports the 
information applicable to the covered loan or application and not 
information that relates only to the property identified in Sec.  
1003.4(a)(9).
    3. Multifamily dwellings. A single multifamily dwelling may have 
more than one postal address. For example, three apartment 
buildings, each with a different street address, comprise a single 
multifamily dwelling that secures a covered loan. For the purposes 
of Sec.  1003.4(a)(9), a financial institution reports the 
information required by Sec.  1003.4(a)(9) in the same manner 
described in comment 4(a)(9)-2.
    4. Loans purchased from another institution. The requirement to 
report the property location information required by Sec.  
1003.4(a)(9) applies not only to applications and originations but 
also to purchased covered loans.
    5. Manufactured home. If the site of a manufactured home has not 
been identified, a financial institution complies by reporting that 
the information required by Sec.  1003.4(a)(9) is not applicable.

Paragraph 4(a)(9)(i)

    1. General. Except for partially exempt transactions under Sec.  
1003.3(d), Sec.  1003.4(a)(9)(i) requires a financial institution to 
report the property address of the location of the property securing 
a covered loan or, in the case of an application, proposed to secure 
a covered loan. The address should correspond to the property 
identified on the legal obligation related to the covered loan. For 
applications that did not result in an origination, the address 
should correspond to the location of the property proposed to secure 
the loan as identified by the applicant. For example, assume a loan 
is secured by a property located at 123 Main Street, and the 
applicant's or borrower's mailing address is a post office box. The 
financial institution should not report the post office box, and 
should report 123 Main Street.
    2. Property address--format. A financial institution complies 
with the requirements in Sec.  1003.4(a)(9)(i) by reporting the 
following information about the physical location of the property 
securing the loan.
    i. Street address. When reporting the street address of the 
property, a financial institution complies by including, as 
applicable, the primary address number, the predirectional, the 
street name, street prefixes and/or suffixes, the postdirectional, 
the secondary address identifier, and the secondary address, as 
applicable. For example, 100 N Main ST Apt 1.
    ii. City name. A financial institution complies by reporting the 
name of the city in which the property is located.
    iii. State name. A financial institution complies by reporting 
the two letter State code for the State in which the property is 
located, using the U.S. Postal Service official State abbreviations.

[[Page 21027]]

    iv. Zip Code. A financial institution complies by reporting the 
five or nine digit Zip Code in which the property is located.
    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)

    1. General. A financial institution complies by reporting the 
five-digit Federal Information Processing Standards (FIPS) numerical 
county code.
    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)

    1. General. Census tract numbers are defined by the U.S. Census 
Bureau. A financial institution complies with Sec.  
1003.4(a)(9)(ii)(C) if it uses the boundaries and codes in effect on 
January 1 of the calendar year covered by the loan/application 
register that it is reporting.
    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)(i)

    1. Applicant data--general. Refer to appendix B to this part for 
instructions on collection of an applicant's ethnicity, race, and 
sex.
    2. Transition rule for applicant data collected prior to January 
1, 2018. If a financial institution receives an application prior to 
January 1, 2018, but final action is taken on or after January 1, 
2018, the financial institution complies with Sec.  1003.4(a)(10)(i) 
and (b) if it collects the information in accordance with the 
requirements in effect at the time the information was collected. 
For example, if a financial institution receives an application on 
November 15, 2017, collects the applicant's ethnicity, race, and sex 
in accordance with the instructions in effect on that date, and 
takes final action on the application on January 5, 2018, the 
financial institution has complied with the requirements of Sec.  
1003.4(a)(10)(i) and (b), even though those instructions changed 
after the information was collected but before the date of final 
action. However, if, in this example, the financial institution 
collected the applicant's ethnicity, race, and sex on or after 
January 1, 2018, Sec.  1003.4(a)(10)(i) and (b) requires the 
financial institution to collect the information in accordance with 
the amended instructions.

Paragraph 4(a)(10)(ii)

    1. Applicant data--completion by financial institution. 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. For example, if 
an applicant provides a date of birth of 01/15/1970 on the 
application form that the financial institution receives on 01/14/
2015, the institution reports 44 as the applicant's age.
    2. Applicant data--co-applicant. If there are no co-applicants, 
the financial institution reports that there is no co-applicant. If 
there is more than one co-applicant, the financial institution 
reports the age only for the first co-applicant listed on the 
application form. A co-applicant may provide an absent co-
applicant's age on behalf of the absent co-applicant.
    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.
    4. Applicant data--non-natural person. A financial institution 
complies with Sec.  1003.4(a)(10)(ii) by reporting that the 
requirement is not applicable if the applicant or co-applicant is 
not a natural person (for example, a corporation, partnership, or 
trust). For example, for a transaction involving a trust, a 
financial institution reports that the requirement to report the 
applicant's age is not applicable if the trust is the applicant. On 
the other hand, if the applicant is a natural person, and is the 
beneficiary of a trust, a financial institution reports the 
applicant's age.
    5. Applicant data--guarantor. For purposes of Sec.  
1003.4(a)(10)(ii), if a covered loan or application includes a 
guarantor, a financial institution does not report the guarantor's 
age.

Paragraph 4(a)(10)(iii)

    1. Income data--income relied on. When a financial institution 
evaluates income as part of a credit decision, it reports the gross 
annual income relied on in making the credit decision. For example, 
if an institution relies on an applicant's salary to compute a debt-
to-income ratio but also relies on the applicant's annual bonus to 
evaluate creditworthiness, the institution reports the salary and 
the bonus to the extent relied upon. If an institution relies on 
only a portion of an applicant's income in its determination, it 
does not report that portion of income not relied on. For example, 
if an institution, pursuant to lender and investor guidelines, does 
not rely on an applicant's commission income because it has been 
earned for less than 12 months, the institution does not include the 
applicant's commission income in the income reported. Likewise, if 
an institution relies on the verified gross income of the applicant 
in making the credit decision, then the institution reports the 
verified gross income. Similarly, if an institution relies on the 
income of a cosigner to evaluate creditworthiness, the institution 
includes the cosigner's income to the extent relied upon. An 
institution, however, does not include the income of a guarantor who 
is only secondarily liable.
    2. Income data--co-applicant. If two persons jointly apply for a 
covered loan and both list income on the application, but the 
financial institution relies on the income of only one applicant in 
evaluating creditworthiness, the institution reports only the income 
relied on.
    3. Income data--loan to employee. A financial institution 
complies with Sec.  1003.4(a)(10)(iii) by reporting that the 
requirement is not applicable for a covered loan to, or an 
application from, its employee to protect the employee's privacy, 
even though the institution relied on the employee's income in 
making the credit decision.
    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.

[[Page 21028]]

    5. Income data--credit decision not made. Section 
1003.4(a)(10)(iii) requires a financial institution to report the 
gross annual income relied on in processing the application if a 
credit decision was not made. For example, assume an institution 
received an application that included an applicant's self-reported 
income, but the application was withdrawn before a credit decision 
that would have considered income was made. The financial 
institution reports the income information relied on in processing 
the application at the time that the application was withdrawn or 
the file was closed for incompleteness.
    6. Income data--credit decision not requiring consideration of 
income. A financial institution complies with Sec.  
1003.4(a)(10)(iii) by reporting that the requirement is not 
applicable if the application did not or would not have required a 
credit decision that considered income under the financial 
institution's policies and procedures. For example, if the financial 
institution's policies and procedures do not consider income for a 
streamlined refinance program, the institution reports that the 
requirement is not applicable, even if the institution received 
income information from the applicant.
    7. Income data--non-natural person. A financial institution 
reports that the requirement is not applicable when the applicant or 
co-applicant is not a natural person (e.g., a corporation, 
partnership, or trust). For example, for a transaction involving a 
trust, a financial institution reports that the requirement to 
report income data is not applicable if the trust is the applicant. 
On the other hand, if the applicant is a natural person, and is the 
beneficiary of a trust, a financial institution is required to 
report the information described in Sec.  1003.4(a)(10)(iii).
    8. Income data--multifamily properties. A financial institution 
complies with Sec.  1003.4(a)(10)(iii) by reporting that the 
requirement is not applicable when the covered loan is secured by, 
or application is proposed to be secured by, a multifamily dwelling.
    9. Income data--purchased loans. A financial institution 
complies with Sec.  1003.4(a)(10)(iii) by reporting that the 
requirement is not applicable when reporting a purchased covered 
loan for which the institution chooses not to report the income.
    10. Income data--rounding. A financial institution complies by 
reporting the dollar amount of the income in thousands, rounded to 
the nearest thousand ($500 rounds up to the next $1,000). For 
example, $35,500 is reported as 36.

Paragraph 4(a)(11)

    1. Type of purchaser--loan-participation interests sold to more 
than one entity. A financial institution that originates a covered 
loan, and then sells it to more than one entity, reports the ``type 
of purchaser'' based on the entity purchasing the greatest interest, 
if any. For purposes of Sec.  1003.4(a)(11), if a financial 
institution sells some interest or interests in a covered loan but 
retains a majority interest in that loan, it does not report the 
sale.
    2. Type of purchaser--swapped covered loans. Covered loans 
``swapped'' for mortgage-backed securities are to be treated as 
sales; the purchaser is the entity receiving the covered loans that 
are swapped.
    3. Type of purchaser--affiliate institution. For purposes of 
complying with Sec.  1003.4(a)(11), the term ``affiliate'' means any 
company that controls, is controlled by, or is under common control 
with, another company, as set forth in the Bank Holding Company Act 
of 1956 (12 U.S.C. 1841 et seq.).
    4. Type of purchaser--private securitizations. A financial 
institution that knows or reasonably believes that the covered loan 
it is selling will be securitized by the entity purchasing the 
covered loan, other than by one of the government-sponsored 
enterprises, reports the purchasing entity type as a private 
securitizer regardless of the type or affiliation of the purchasing 
entity. Knowledge or reasonable belief could, for example, be based 
on the purchase agreement or other related documents, the financial 
institution's previous transactions with the purchaser, or the 
purchaser's role as a securitizer (such as an investment bank). If a 
financial institution selling a covered loan does not know or 
reasonably believe that the purchaser will securitize the loan, and 
the seller knows that the purchaser frequently holds or disposes of 
loans by means other than securitization, then the financial 
institution should report the covered loan as purchased by, as 
appropriate, a commercial bank, savings bank, savings association, 
life insurance company, credit union, mortgage company, finance 
company, affiliate institution, or other type of purchaser.
    5. Type of purchaser--mortgage company. For purposes of 
complying with Sec.  1003.4(a)(11), a mortgage company means a 
nondepository institution that purchases covered loans and typically 
originates such loans. A mortgage company might be an affiliate or a 
subsidiary of a bank holding company or thrift holding company, or 
it might be an independent mortgage company. Regardless, a financial 
institution reports the purchasing entity type as a mortgage 
company, unless the mortgage company is an affiliate of the seller 
institution, in which case the seller institution should report the 
loan as purchased by an affiliate institution.
    6. Purchases by subsidiaries. A financial institution that sells 
a covered loan to its subsidiary that is a commercial bank, savings 
bank, or savings association, should report the covered loan as 
purchased by a commercial bank, savings bank, or savings 
association. A financial institution that sells a covered loan to 
its subsidiary that is a life insurance company, should report the 
covered loan as purchased by a life insurance company. A financial 
institution that sells a covered loan to its subsidiary that is a 
credit union, mortgage company, or finance company, should report 
the covered loan as purchased by a credit union, mortgage company, 
or finance company. If the subsidiary that purchases the covered 
loan is not a commercial bank, savings bank, savings association, 
life insurance company, credit union, mortgage company, or finance 
company, the seller institution should report the loan as purchased 
by other type of purchaser. The financial institution should report 
the covered loan as purchased by an affiliate institution when the 
subsidiary is an affiliate of the seller institution.
    7. Type of purchaser--bank holding company or thrift holding 
company. When a financial institution sells a covered loan to a bank 
holding company or thrift holding company (rather than to one of its 
subsidiaries), it should report the loan as purchased by other type 
of purchaser, unless the bank holding company or thrift holding 
company is an affiliate of the seller institution, in which case the 
seller institution should report the loan as purchased by an 
affiliate institution.
    8. Repurchased covered loans. See comment 4(a)-5 regarding 
reporting requirements when a covered loan is repurchased by the 
originating financial institution.
    9. Type of purchaser--quarterly recording. For purposes of 
recording the type of purchaser within 30 calendar days after the 
end of the calendar quarter pursuant to Sec.  1003.4(f), a financial 
institution records that the requirement is not applicable if the 
institution originated or purchased a covered loan and did not sell 
it during the calendar quarter for which the institution is 
recording the data. If the financial institution sells the covered 
loan in a subsequent quarter of the same calendar year, the 
financial institution records the type of purchaser on its loan/
application register for the quarter in which the covered loan was 
sold. If a financial institution sells the covered loan in a 
succeeding year, the financial institution should not record the 
sale.
    10. Type of purchaser--not applicable. A financial institution 
reports that the requirement is not applicable for applications that 
were denied, withdrawn, closed for incompleteness or approved but 
not accepted by the applicant; and for preapproval requests that 
were denied or approved but not accepted by the applicant. A 
financial institution also reports that the requirement is not 
applicable if the institution originated or purchased a covered loan 
and did not sell it during that same calendar year.

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 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 website (http://www.ffiec.gov/hmda) and the Bureau's website 
(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),

[[Page 21029]]

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 website and the 
Bureau's website 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 
website and the Bureau's website. 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.
    4. Rate spread calculation--comparable transaction. The rate 
spread calculation in Sec.  1003.4(a)(12)(i) is defined by reference 
to a comparable transaction, which is determined according to the 
covered loan's amortization type (i.e., fixed- or variable-rate) and 
loan term. For covered loans that are open-end lines of credit, 
Sec.  1003.4(a)(12)(i) requires a financial institution to identify 
the most closely comparable closed-end transaction. The tables of 
average prime offer rates published by the Bureau (see comment 
4(a)(12)-2) provide additional detail about how to identify the 
comparable transaction.
    i. Fixed-rate transactions. For fixed-rate covered loans, the 
term for identifying the comparable transaction is the transaction's 
maturity (i.e., the period until the last payment will be due under 
the closed-end mortgage loan contract or open-end line of credit 
agreement). If an open-end credit plan has a fixed rate but no 
definite plan length, a financial institution complies with Sec.  
1003.4(a)(12)(i) by using a 30-year fixed-rate loan as the most 
closely comparable closed-end transaction. Financial institutions 
may refer to the table on the FFIEC website entitled ``Average Prime 
Offer Rates-Fixed'' when identifying a comparable fixed-rate 
transaction.
    ii. Variable-rate transactions. For variable-rate covered loans, 
the term for identifying the comparable transaction is the initial, 
fixed-rate period (i.e., the period until the first scheduled rate 
adjustment). For example, five years is the relevant term for a 
variable-rate transaction with a five-year, fixed-rate introductory 
period that is amortized over thirty years. Financial institutions 
may refer to the table on the FFIEC website entitled ``Average Prime 
Offer Rates-Variable'' when identifying a comparable variable-rate 
transaction. If an open-end line of credit has a variable rate and 
an optional, fixed-rate feature, a financial institution uses the 
rate table for variable-rate transactions.
    iii. Term not in whole years. When a covered loan's term to 
maturity (or, for a variable-rate transaction, the initial fixed-
rate period) is not in whole years, the financial institution uses 
the number of whole years closest to the actual loan term or, if the 
actual loan term is exactly halfway between two whole years, by 
using the shorter loan term. For example, for a loan term of ten 
years and three months, the relevant term is ten years; for a loan 
term of ten years and nine months, the relevant term is 11 years; 
for a loan term of ten years and six months, the relevant term is 
ten years. If a loan term includes an odd number of days, in 
addition to an odd number of months, the financial institution 
rounds to the nearest whole month, or rounds down if the number of 
odd days is exactly halfway between two months. The financial 
institution rounds to one year any covered loan with a term shorter 
than six months, including variable-rate covered loans with no 
initial, fixed-rate periods. For example, if an open-end covered 
loan has a rate that varies according to an index plus a margin, 
with no introductory, fixed-rate period, the transaction term is one 
year.
    iv. Amortization period longer than loan term. If the 
amortization period of a covered loan is longer than the term of the 
transaction to maturity, Sec.  1003.4(a)(12)(i) requires a financial 
institution to use the loan term to determine the applicable average 
prime offer rate. For example, assume a financial institution 
originates a closed-end, fixed-rate loan that has a term to maturity 
of five years and a thirty-year amortization period that results in 
a balloon payment. The financial institution complies with Sec.  
1003.4(a)(12)(i) by using the five-year loan term.
    5. Rate-set date. The relevant date to use to determine the 
average prime offer rate for a comparable transaction is the date on 
which the 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.
    6. Compare the annual percentage rate to the average prime offer 
rate. Section 1003.4(a)(12)(i) requires a financial institution to 
compare the covered loan's annual percentage rate to the most 
recently available average prime offer rate that was in effect for 
the comparable transaction as of the rate-set date. For purposes of 
Sec.  1003.4(a)(12)(i), the most recently available

[[Page 21030]]

rate means the average prime offer rate set forth in the applicable 
table with the most recent effective date as of the date the 
interest rate was set. However, Sec.  1003.4(a)(12)(i) does not 
permit a financial institution to use an average prime offer rate 
before its effective date.
    7. Rate spread--scope of requirement. If the covered loan is an 
assumption, reverse mortgage, a purchased loan, or is not subject to 
Regulation Z, 12 CFR part 1026, a financial institution complies 
with Sec.  1003.4(a)(12) by reporting that the requirement is not 
applicable. If the application did not result in an origination for 
a reason other than the application was approved but not accepted by 
the applicant, a financial institution complies with Sec.  
1003.4(a)(12) by reporting that the requirement is not applicable. 
For partially exempt transactions under Sec.  1003.3(d), an insured 
depository institution or insured credit union is not required to 
report the rate spread. See Sec.  1003.3(d) and related commentary.
    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.
    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)(13)

    1. HOEPA status--not applicable. If the covered loan is not 
subject to the Home Ownership and Equity Protection Act of 1994, as 
implemented in Regulation Z, 12 CFR 1026.32, a financial institution 
complies with Sec.  1003.4(a)(13) by reporting that the requirement 
is not applicable. If an application did not result in an 
origination, a financial institution complies with Sec.  
1003.4(a)(13) by reporting that the requirement is not applicable.

Paragraph 4(a)(14)

    1. Determining lien status for applications and covered loans 
originated and purchased. i. Financial institutions are required to 
report lien status for covered loans they originate and purchase and 
applications that do not result in originations (preapproval 
requests that are approved but not accepted, preapproval requests 
that are denied, applications that are approved but not accepted, 
denied, withdrawn, or closed for incompleteness). For covered loans 
purchased by a financial institution, lien status is determined by 
reference to the best information readily available to the financial 
institution at the time of purchase. For covered loans that a 
financial institution originates and applications that do not result 
in originations, lien status is determined by reference to the best 
information readily available to the financial institution at the 
time final action is taken and to the financial institution's own 
procedures. Thus, financial institutions may rely on the title 
search they routinely perform as part of their underwriting 
procedures--for example, for home purchase loans. Regulation C does 
not require financial institutions to perform title searches solely 
to comply with HMDA reporting requirements. Financial institutions 
may rely on other information that is readily available to them at 
the time final action is taken and that they reasonably believe is 
accurate, such as the applicant's statement on the application or 
the applicant's credit report. For example, where the applicant 
indicates on the application that there is a mortgage on the 
property or where the applicant's credit report shows that the 
applicant has a mortgage--and that mortgage will not be paid off as 
part of the transaction--the financial institution may assume that 
the loan it originates is secured by a subordinate lien. If the same 
application did not result in an origination--for example, because 
the application was denied or withdrawn--the financial institution 
would report the application as an application for a subordinate-
lien loan.
    ii. Financial institutions may also consider their established 
procedures when determining lien status for applications that do not 
result in originations. For example, assume an applicant applies to 
a financial institution to refinance a $100,000 first mortgage; the 
applicant also has an open-end line of credit for $20,000. If the 
financial institution's practice in such a case is to ensure that it 
will have first-lien position--through a subordination agreement 
with the holder of the lien securing the open-end line of credit--
then the financial institution should report the application as an 
application for a first-lien covered loan.
    2. Multiple properties. See comment 4(a)(9)-2 regarding 
transactions involving multiple properties with more than one 
property taken as security.

Paragraph 4(a)(15)

    1. Credit score--relied on. Except for purchased covered loans 
and partially exempt transactions under Sec.  1003.3(d), Sec.  
1003.4(a)(15) requires a financial institution to report the credit 
score or scores relied on in making the credit decision and 
information about the scoring model used to generate each score. A 
financial institution relies on a credit score in making the credit 
decision if the credit score was a factor in the credit decision 
even if it was not a

[[Page 21031]]

dispositive factor. For example, if a credit score is one of 
multiple factors in a financial institution's credit decision, the 
financial institution has relied on the credit score even if the 
financial institution denies the application because one or more 
underwriting requirements other than the credit score are not 
satisfied.
    2. Credit score--multiple credit scores. When a financial 
institution obtains or creates two or more credit scores for a 
single applicant or borrower but relies on only one score in making 
the credit decision (for example, by relying on the lowest, highest, 
most recent, or average of all of the scores), the financial 
institution complies with Sec.  1003.4(a)(15) by reporting that 
credit score and information about the scoring model used. When a 
financial institution 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.
    4. Transactions for which no credit decision was made. If a file 
was closed for incompleteness or the application was withdrawn 
before a credit decision was made, the financial institution 
complies with Sec.  1003.4(a)(15) by reporting that the requirement 
is not applicable, even if the financial institution had obtained or 
created a credit score for the applicant or co-applicant. For 
example, if a file is closed for incompleteness and is so reported 
in accordance with Sec.  1003.4(a)(8), the financial institution 
complies with Sec.  1003.4(a)(15) by reporting that the requirement 
is not applicable, even if the financial institution had obtained or 
created a credit score for the applicant or co-applicant. Similarly, 
if an application was withdrawn by the applicant before a credit 
decision was made and is so reported in accordance with Sec.  
1003.4(a)(8), the financial institution complies with Sec.  
1003.4(a)(15) by reporting that the requirement is not applicable, 
even if the financial institution had obtained or created a credit 
score for the applicant or co-applicant.
    5. Transactions for which no credit score was relied on. If a 
financial institution makes a credit decision without relying on a 
credit score for the applicant or borrower, the financial 
institution complies with Sec.  1003.4(a)(15) by reporting that the 
requirement is not applicable.
    6. Purchased covered loan. A financial institution complies with 
Sec.  1003.4(a)(15) by reporting that the requirement is not 
applicable when the covered loan is a purchased covered loan.
    7. Non-natural person. When the applicant and co-applicant, if 
applicable, are not natural persons, a financial institution 
complies with Sec.  1003.4(a)(15) by reporting that the requirement 
is not applicable.

Paragraph 4(a)(16)

    1. Reason for denial--general. A financial institution complies 
with Sec.  1003.4(a)(16) by reporting the principal reason or 
reasons it denied the application, indicating up to four reasons. 
The financial institution should report only the principal reason or 
reasons it denied the application, even if there are fewer than four 
reasons. For example, if a financial institution denies the 
application because of the applicant's credit history and debt-to-
income ratio, the financial institution need only report these two 
principal reasons. The reasons reported must be specific and 
accurately describe the principal reason or reasons the financial 
institution denied the application.
    2. Reason for denial--preapproval request denied. Section 
1003.4(a)(16) requires a financial institution to report the 
principal reason or reasons it denied the application. A request for 
a preapproval under a preapproval program as defined by Sec.  
1003.2(b)(2) is an application. If a financial institution denies a 
preapproval request, the financial institution complies with Sec.  
1003.4(a)(16) by reporting the reason or reasons it denied the 
preapproval request.
    3. Reason for denial--adverse action model form or similar form. 
If a financial institution chooses to provide the applicant the 
reason or reasons it denied the application using the model form 
contained in appendix C to Regulation B (Form C-1, Sample Notice of 
Action Taken and Statement of Reasons) or a similar form, Sec.  
1003.4(a)(16) requires the financial institution to report the 
reason or reasons that were specified on the form by the financial 
institution, which includes reporting the ``Other'' reason or 
reasons that were specified on the form by the financial 
institution, if applicable. If a financial institution chooses to 
provide a disclosure of the applicant's right to a statement of 
specific reasons using the model form contained in appendix C to 
Regulation B (Form C-5, Sample Disclosure of Right to Request 
Specific Reasons for Credit Denial) or a similar form, or chooses to 
provide the denial reason or reasons orally under Regulation B, 12 
CFR 1002.9(a)(2)(ii), the financial institution complies with Sec.  
1003.4(a)(16) by entering the principal reason or reasons it denied 
the application.
    4. Reason for denial--scope of requirement. A financial 
institution complies with Sec.  1003.4(a)(16) by reporting that the 
requirement is not applicable if the action taken on the 
application, pursuant to Sec.  1003.4(a)(8), is not a denial. For 
example, a financial institution complies with Sec.  1003.4(a)(16) 
by reporting that the requirement is not applicable if the loan is 
originated or purchased by the financial institution, or the 
application or preapproval request was approved but not accepted, or 
the application was withdrawn before a credit decision was made, or 
the file was closed for incompleteness. For partially exempt 
transactions under Sec.  1003.3(d), an insured depository 
institution or insured credit union is not required to report the 
principal reason or reasons it denied an application. See Sec.  
1003.3(d) and related commentary.

Paragraph 4(a)(17)(i)

    1. Total loan costs--scope of requirement. Section 
1003.4(a)(17)(i) does not require financial institutions to report 
the total loan costs for applications, or for transactions not 
subject to Regulation Z, 12 CFR 1026.43(c), and 12 CFR 1026.19(f), 
such as open-end lines of credit, reverse mortgages, or loans or 
lines of credit made primarily for business or commercial purposes. 
In these cases, a

[[Page 21032]]

financial institution complies with Sec.  1003.4(a)(17)(i) by 
reporting that the requirement is not applicable to the transaction. 
For partially exempt transactions under Sec.  1003.3(d), an insured 
depository institution or insured credit union is not required to 
report the total loan costs. See Sec.  1003.3(d) and related 
commentary.
    2. Purchased loans--applications received prior to the 
integrated disclosure effective date. For purchased covered loans 
subject to this reporting requirement for which applications were 
received by the selling entity prior to the effective date of 
Regulation Z, 12 CFR 1026.19(f), a financial institution complies 
with Sec.  1003.4(a)(17)(i) by reporting that the requirement is not 
applicable to the transaction.
    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:
    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)(17)(ii)

    1. Total points and fees--scope of requirement. Section 
1003.4(a)(17)(ii) does not require financial institutions to report 
the total points and fees for transactions not subject to Regulation 
Z, 12 CFR 1026.43(c), such as open-end lines of credit, reverse 
mortgages, or loans or lines of credit made primarily for business 
or commercial purposes, or for applications or purchased covered 
loans. In these cases, a financial institution complies with Sec.  
1003.4(a)(17)(ii) by reporting that the requirement is not 
applicable to the transaction. For partially exempt transactions 
under Sec.  1003.3(d), an insured depository institution or insured 
credit union is not required to report the total points and fees. 
See Sec.  1003.3(d) and related commentary.
    2. Total points and fees cure mechanism. For covered loans 
subject to this reporting requirement, if a financial institution 
determines that the transaction's total points and fees exceeded the 
applicable limit and cures the overage pursuant to Regulation Z, 12 
CFR 1026.43(e)(3)(iii) and (iv), a financial institution complies 
with Sec.  1003.4(a)(17)(ii) by reporting the correct amount of 
total points and fees, provided that the cure was effected during 
the same reporting period in which closing occurred. For example, in 
the case of a financial institution's quarterly submission, the 
financial institution reports the revised amount of total points and 
fees only if it cured the overage prior to the end of the quarter in 
which closing occurred. The financial institution does not report 
the revised amount of total points and fees in its quarterly 
submission if it cured the overage after the end of the quarter, 
even if the cure was effected prior to the deadline for timely 
submission of the financial institution's quarterly data. However, 
the financial institution reports the revised amount of total points 
and fees on its annual loan/application register.

Paragraph 4(a)(18)

    1. Origination charges--scope of requirement. Section 
1003.4(a)(18) does not require financial institutions to report the 
total borrower-paid origination charges for applications, or for 
transactions not subject to Regulation Z, 12 CFR 1026.19(f), such as 
open-end lines of credit, reverse mortgages, or loans or lines of 
credit made primarily for business or commercial purposes. In these 
cases, a financial institution complies with Sec.  1003.4(a)(18) by 
reporting that the requirement is not applicable to the transaction. 
For partially exempt transactions under Sec.  1003.3(d), an insured 
depository institution or insured credit union is not required to 
report the total borrower-paid origination charges. See Sec.  
1003.3(d) and related commentary.
    2. Purchased loans--applications received prior to the 
integrated disclosure effective date. For purchased covered loans 
subject to this reporting requirement for which applications were 
received by the selling entity prior to the effective date of 
Regulation Z, 12 CFR 1026.19(f), a financial institution complies 
with Sec.  1003.4(a)(18) by reporting that the requirement is not 
applicable to the transaction.
    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)

    1. Discount points--scope of requirement. Section 1003.4(a)(19) 
does not require financial institutions to report the discount 
points for applications, or for transactions not subject to 
Regulation Z, 12 CFR 1026.19(f), such as open-end lines of credit, 
reverse mortgages, or loans or lines of credit made primarily for 
business or commercial purposes. In these cases, a financial 
institution complies with Sec.  1003.4(a)(19) by reporting that the 
requirement is not applicable to the transaction. For partially 
exempt transactions under Sec.  1003.3(d), an insured depository 
institution or insured credit union is not required to report the 
discount points. See Sec.  1003.3(d) and related commentary.
    2. Purchased loans--applications received prior to the 
integrated disclosure effective date. For purchased covered loans 
subject to this reporting requirement for which applications were 
received by the selling entity prior to the effective date of 
Regulation Z, 12 CFR 1026.19(f), a financial institution complies 
with Sec.  1003.4(a)(19) by reporting that the requirement is not 
applicable to the transaction.

[[Page 21033]]

    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)

    1. Lender credits--scope of requirement. Section 1003.4(a)(20) 
does not require financial institutions to report lender credits for 
applications, or for transactions not subject to Regulation Z, 12 
CFR 1026.19(f), such as open-end lines of credit, reverse mortgages, 
or loans or lines of credit made primarily for business or 
commercial purposes. In these cases, a financial institution 
complies with Sec.  1003.4(a)(20) by reporting that the requirement 
is not applicable to the transaction. For partially exempt 
transactions under Sec.  1003.3(d), an insured depository 
institution or insured credit union is not required to report lender 
credits. See Sec.  1003.3(d) and related commentary.
    2. Purchased loans--applications received prior to the 
integrated disclosure effective date. For purchased covered loans 
subject to this reporting requirement for which applications were 
received by the selling entity prior to the effective date of 
Regulation Z, 12 CFR 1026.19(f), a financial institution complies 
with Sec.  1003.4(a)(20) by reporting that the requirement is not 
applicable to the transaction.
    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.
    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.

Paragraph 4(a)(21)

    1. Interest rate--disclosures. Except for partially exempt 
transactions under Sec.  1003.3(d), Sec.  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.
    2. Applications. In the case of an application, Sec.  
1003.4(a)(21) requires a financial institution to report the 
applicable interest rate only if the application has been approved 
by the financial institution but not accepted by the borrower. In 
such cases, a financial institution reports the interest rate 
applicable at the time that the application was approved by the 
financial institution. A financial institution may report the 
interest rate appearing on the disclosure provided pursuant to 12 
CFR 1026.19(e) or (f) if such disclosure accurately reflects the 
interest rate at the time the application was approved. For 
applications that have been denied or withdrawn, or files closed for 
incompleteness, a financial institution reports that no interest 
rate was applicable to the application.
    3. Adjustable rate--interest rate unknown. Except as provided in 
comment 4(a)(21)-1, for adjustable-rate covered loans or 
applications, if the interest rate is unknown at the time that the 
application was approved, or at closing or account opening, a 
financial institution reports the fully-indexed rate based on the 
index applicable to the covered loan or application. For purposes of 
Sec.  1003.4(a)(21), the fully-indexed rate is the index value and 
margin at the time that the application was approved, or, for 
covered loans, at closing or account opening.

Paragraph 4(a)(22)

    1. Prepayment penalty term--scope of requirement. Section 
1003.4(a)(22) does not require financial institutions to report the 
term of any prepayment penalty for transactions not subject to 
Regulation Z, 12 CFR part 1026, such as loans or lines of credit 
made primarily for business or commercial purposes, or for reverse 
mortgages or purchased covered loans. In these cases, a financial 
institution complies with Sec.  1003.4(a)(22) by reporting that the 
requirement is not applicable to the transaction. For partially 
exempt transactions under Sec.  1003.3(d), an insured depository 
institution or insured credit union is not required to report the 
term of any prepayment penalty. See Sec.  1003.3(d) and related 
commentary.
    2. Transactions for which no prepayment penalty exists. For 
covered loans or applications that have no prepayment penalty, a 
financial institution complies with

[[Page 21034]]

Sec.  1003.4(a)(22) by reporting that the requirement is not 
applicable to the transaction. A financial institution may rely on 
the definitions and commentary to Regulation Z, 12 CFR 
1026.32(b)(6)(i) or (ii) in determining whether the terms of a 
transaction contain a prepayment penalty.

Paragraph 4(a)(23)

    1. General. For covered loans that are not purchased covered 
loans and that are not partially exempt under Sec.  1003.3(d), Sec.  
1003.4(a)(23) requires a financial institution to report the ratio 
of the applicant's or borrower's total monthly debt to total monthly 
income (debt-to-income ratio) relied on in making the credit 
decision. For example, if a financial institution calculated the 
applicant's or borrower's debt-to-income ratio twice--once according 
to the financial institution's own requirements and once according 
to the requirements of a secondary market investor--and the 
financial institution relied on the debt-to-income ratio calculated 
according to the secondary market investor's requirements in making 
the credit decision, Sec.  1003.4(a)(23) requires the financial 
institution to report the debt-to-income ratio calculated according 
to the requirements of the secondary market investor.
    2. Transactions for which a debt-to-income ratio was one of 
multiple factors. A financial institution relies on the ratio of the 
applicant's or borrower's total monthly debt to total monthly income 
(debt-to-income ratio) in making the credit decision if the debt-to-
income ratio was a factor in the credit decision even if it was not 
a dispositive factor. For example, if the debt-to-income ratio was 
one of multiple factors in a financial institution's credit 
decision, the financial institution has relied on the debt-to-income 
ratio and complies with Sec.  1003.4(a)(23) by reporting the debt-
to-income ratio, even if the financial institution denied the 
application because one or more underwriting requirements other than 
the debt-to-income ratio were not satisfied.
    3. Transactions for which no credit decision was made. If a file 
was closed for incompleteness, or if an application was withdrawn 
before a credit decision was made, a financial institution complies 
with Sec.  1003.4(a)(23) by reporting that the requirement is not 
applicable, even if the financial institution had calculated the 
ratio of the applicant's total monthly debt to total monthly income 
(debt-to-income ratio). For example, if a file was closed for 
incompleteness and was so reported in accordance with Sec.  
1003.4(a)(8), the financial institution complies with Sec.  
1003.4(a)(23) by reporting that the requirement is not applicable, 
even if the financial institution had calculated the applicant's 
debt-to-income ratio. Similarly, if an application was withdrawn by 
the applicant before a credit decision was made, the financial 
institution complies with Sec.  1003.4(a)(23) by reporting that the 
requirement is not applicable, even if the financial institution had 
calculated the applicant's debt-to-income ratio.
    4. Transactions for which no debt-to-income ratio was relied on. 
Section 1003.4(a)(23) does not require a financial institution to 
calculate the ratio of an applicant's or borrower's total monthly 
debt to total monthly income (debt-to-income ratio), nor does it 
require a financial institution to rely on an applicant's or 
borrower's debt-to-income ratio in making a credit decision. If a 
financial institution made a credit decision without relying on the 
applicant's or borrower's debt-to-income ratio, the financial 
institution complies with Sec.  1003.4(a)(23) by reporting that the 
requirement is not applicable since no debt-to-income ratio was 
relied on in connection with the credit decision.
    5. Non-natural person. A financial institution complies with 
Sec.  1003.4(a)(23) by reporting that the requirement is not 
applicable when the applicant and co-applicant, if applicable, are 
not natural persons.
    6. Multifamily dwellings. A financial institution complies with 
Sec.  1003.4(a)(23) by reporting that the requirement is not 
applicable for a covered loan secured by, or an application proposed 
to be secured by, a multifamily dwelling.
    7. Purchased covered loans. A financial institution complies 
with Sec.  1003.4(a)(23) by reporting that the requirement is not 
applicable when reporting a purchased covered loan.

Paragraph 4(a)(24)

    1. General. Except for purchased covered loans and partially 
exempt transactions under Sec.  1003.3(d), Sec.  1003.4(a)(24) 
requires a financial institution to report the ratio of the total 
amount of debt secured by the property to the value of the property 
(combined loan-to-value ratio) relied on in making the credit 
decision. For example, if a financial institution calculated a 
combined loan-to-value ratio twice--once according to the financial 
institution's own requirements and once according to the 
requirements of a secondary market investor--and the financial 
institution relied on the combined loan-to-value ratio calculated 
according to the secondary market investor's requirements in making 
the credit decision, Sec.  1003.4(a)(24) requires the financial 
institution to report the combined loan-to-value ratio calculated 
according to the requirements of the secondary market investor.
    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.
    3. Transactions for which no credit decision was made. If a file 
was closed for incompleteness, or if an application was withdrawn 
before a credit decision was made, a financial institution complies 
with Sec.  1003.4(a)(24) by reporting that the requirement is not 
applicable, even if the financial institution had calculated the 
ratio of the total amount of debt secured by the property to the 
value of the property (combined loan-to-value ratio). For example, 
if a file is closed for incompleteness and is so reported in 
accordance with Sec.  1003.4(a)(8), the financial institution 
complies with Sec.  1003.4(a)(24) by reporting that the requirement 
is not applicable, even if the financial institution had calculated 
a combined loan-to-value ratio. Similarly, if an application was 
withdrawn by the applicant before a credit decision was made and is 
so reported in accordance with Sec.  1003.4(a)(8), the financial 
institution complies with Sec.  1003.4(a)(24) by reporting that the 
requirement is not applicable, even if the financial institution had 
calculated a combined loan-to-value ratio.
    4. Transactions for which no combined loan-to-value ratio was 
relied on. Section 1003.4(a)(24) does not require a financial 
institution to calculate the ratio of the total amount of debt 
secured by the property to the value of the property (combined loan-
to-value ratio), nor does it require a financial institution to rely 
on a combined loan-to-value ratio in making a credit decision. If a 
financial institution makes a credit decision without relying on a 
combined loan-to-value ratio, the financial institution complies 
with Sec.  1003.4(a)(24) by reporting that the requirement is not 
applicable since no combined loan-to-value ratio was relied on in 
making the credit decision.
    5. Purchased covered loan. A financial institution complies with 
Sec.  1003.4(a)(24) by reporting that the requirement is not 
applicable when the covered loan is a purchased covered loan.
    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)(25)

    1. Amortization and maturity. For a fully amortizing covered 
loan, the number of months after which the legal obligation matures 
is the number of months in the amortization schedule, ending with 
the final

[[Page 21035]]

payment. Some covered loans do not fully amortize during the 
maturity term, such as covered loans with a balloon payment; such 
loans should still be reported using the maturity term rather than 
the amortization term, even in the case of covered loans that mature 
before fully amortizing but have reset options. For example, a 30-
year fully amortizing covered loan would be reported with a term of 
``360,'' while a five year balloon covered loan would be reported 
with a loan term of ``60.''
    2. Non-monthly repayment periods. If a covered loan or 
application includes a schedule with repayment periods measured in a 
unit of time other than months, the financial institution should 
report the covered loan or application term using an equivalent 
number of whole months without regard for any remainder.
    3. Purchased loans. For a covered loan that was purchased, a 
financial institution reports the number of months after which the 
legal obligation matures as measured from the covered loan's 
origination.
    4. Open-end line of credit. For an open-end line of credit with 
a definite term, a financial institution reports the number of 
months from origination until the account termination date, 
including both the draw and repayment period.
    5. Loan term--scope of requirement. For a covered loan or 
application without a definite term, such as a reverse mortgage, a 
financial institution complies with Sec.  1003.4(a)(25) by reporting 
that the requirement is not applicable. For partially exempt 
transactions under Sec.  1003.3(d), an insured depository 
institution or insured credit union is not required to report the 
loan term. See Sec.  1003.3(d) and related commentary.

Paragraph 4(a)(26)

    1. Types of introductory rates. Except for partially exempt 
transactions under Sec.  1003.3(d), 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. 
For example, assume an open-end line of credit contains an 
introductory or ``teaser'' interest rate for two months after the 
date of account opening, after which the interest rate may adjust. 
In this example, the financial institution complies with Sec.  
1003.4(a)(26) by reporting the number of months as ``2.'' Section 
1003.4(a)(26) requires a financial institution to report the number 
of months based on when the first interest rate adjustment may 
occur, even if an interest rate adjustment is not required to occur 
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. For example, if a closed-end mortgage loan with a 30-year 
term has an adjustable-rate product with an introductory interest 
rate for the first 60 months, after which the interest rate is 
permitted, but not required to vary, according to the terms of an 
index rate, the financial institution complies with Sec.  
1003.4(a)(26) by reporting the number of months as ``60.'' 
Similarly, if a closed-end mortgage loan with a 30-year term is a 
step-rate product with an introductory interest rate for the first 
24 months, after which the interest rate will increase to a 
different known interest rate for the next 36 months, the financial 
institution complies with Sec.  1003.4(a)(26) by reporting the 
number of months as ``24.''
    2. Preferred rates. Section 1003.4(a)(26) does not require 
reporting of introductory interest rate periods based on preferred 
rates unless the terms of the legal obligation provide that the 
preferred rate will expire at a certain defined date. Preferred 
rates include terms of the legal obligation that provide that the 
initial underlying rate is fixed but that it may increase or 
decrease upon the occurrence of some future event, such as an 
employee leaving the employ of the financial institution, the 
borrower closing an existing deposit account with the financial 
institution, or the borrower revoking an election to make automated 
payments. In these cases, because it is not known at the time of 
closing or account opening whether the future event will occur, and 
if so, when it will occur, Sec.  1003.4(a)(26) does not require 
reporting of an introductory interest rate period.
    3. Loan or application with a fixed rate. A financial 
institution complies with Sec.  1003.4(a)(26) by reporting that the 
requirement is not applicable for a covered loan with a fixed rate 
or an application for a covered loan with a fixed rate.
    4. Purchased loan. A financial institution complies with Sec.  
1003.4(a)(26) by reporting that requirement is not applicable when 
the covered loan is a purchased covered loan with a fixed rate.
    5. Non-monthly introductory periods. 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. 
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)(27)

    1. General. Except for partially exempt transactions under Sec.  
1003.3(d), Sec.  1003.4(a)(27) requires reporting of contractual 
features that would allow payments other than fully amortizing 
payments. Section 1003.4(a)(27) defines the contractual features by 
reference to Regulation Z, 12 CFR part 1026, but without regard to 
whether the covered loan is consumer credit, as defined in Sec.  
1026.2(a)(12), is extended by a creditor, as defined in Sec.  
1026.2(a)(17), or is extended to a consumer, as defined in Sec.  
1026.2(a)(11), and without regard to whether the property is a 
dwelling as defined in Sec.  1026.2(a)(19). For example, assume that 
a financial institution originates a business-purpose transaction 
that is exempt from Regulation Z pursuant to 12 CFR 1026.3(a)(1), to 
finance the purchase of a multifamily dwelling, and that there is a 
balloon payment, as defined by Regulation Z, 12 CFR 
1026.18(s)(5)(i), at the end of the loan term. The multifamily 
dwelling is a dwelling under Sec.  1003.2(f), but not under 
Regulation Z, 12 CFR 1026.2(a)(19). In this example, the financial 
institution should report the business-purpose transaction as having 
a balloon payment under Sec.  1003.4(a)(27)(i), assuming the other 
requirements of this part are met. Aside from these distinctions, 
financial institutions may rely on the definitions and related 
commentary provided in the appropriate sections of Regulation Z 
referenced in Sec.  1003.4(a)(27) of this part in determining 
whether the contractual feature should be reported.

Paragraph 4(a)(28)

    1. General. Except for partially exempt transactions under Sec.  
1003.3(d), Sec.  1003.4(a)(28) requires a financial institution to 
report the property value relied on in making the credit decision. 
For example, if the institution relies on an appraisal or other 
valuation for the property in calculating the loan-to-value ratio, 
it reports that value; if the institution relies on the purchase 
price of the property in calculating the loan-to-value ratio, it 
reports that value.
    2. Multiple property values. When a financial institution 
obtains two or more valuations of the property securing or proposed 
to secure the covered loan, the financial institution complies with 
Sec.  1003.4(a)(28) by reporting the value relied on in making the 
credit decision. For example, when a financial institution obtains 
an appraisal, an automated valuation model report, and a broker 
price opinion with different values for the property, it reports the 
value relied on in making the credit decision. Section Sec.  
1003.4(a)(28) does not require a financial institution to use a 
particular property valuation method, but instead requires a 
financial institution to report the valuation relied on in making 
the credit decision.
    3. Transactions for which no credit decision was made. If a file 
was closed for incompleteness or the application was withdrawn 
before a credit decision was made, the financial institution 
complies with Sec.  1003.4(a)(28) by reporting that the requirement 
is not applicable, even if the financial institution had obtained a 
property value. For example, if a file is closed for incompleteness 
and is so reported in accordance with Sec.  1003.4(a)(8), the 
financial institution complies with Sec.  1003.4(a)(28) by reporting 
that the requirement is not applicable, even if the financial 
institution had obtained a property value. Similarly, if an 
application was withdrawn by the applicant before a credit decision 
was made and is so reported in accordance with Sec.  1003.4(a)(8), 
the financial institution complies with Sec.  1003.4(a)(28) by 
reporting that the requirement is not applicable, even if the 
financial institution had obtained a property value.
    4. Transactions for which no property value was relied on. 
Section 1003.4(a)(28) does not require a financial institution to 
obtain a property valuation, nor does it

[[Page 21036]]

require a financial institution to rely on a property value in 
making a credit decision. If a financial institution makes a credit 
decision without relying on a property value, the financial 
institution complies with Sec.  1003.4(a)(28) by reporting that the 
requirement is not applicable since no property value was relied on 
in making the credit decision.

Paragraph 4(a)(29)

    1. Classification under State law. A financial institution 
should report a covered loan that is or would have been secured only 
by a manufactured home but not the land on which it is sited as 
secured by a manufactured home and not land, even if the 
manufactured home is considered real property under applicable State 
law.
    2. Manufactured home community. A manufactured home community 
that is a multifamily dwelling is not considered a manufactured home 
for purposes of Sec.  1003.4(a)(29).
    3. Multiple properties. See comment 4(a)(9)-2 regarding 
transactions involving multiple properties with more than one 
property taken as security.
    4. Scope of requirement. A financial institution reports that 
the requirement is not applicable for a covered loan where the 
dwelling related to the property identified in Sec.  1003.4(a)(9) is 
not a manufactured home. For partially exempt transactions under 
Sec.  1003.3(d), an insured depository institution or insured credit 
union is not required to report the information specified in Sec.  
1003.4(a)(29). See Sec.  1003.3(d) and related commentary.

Paragraph 4(a)(30)

    1. Indirect land ownership. Indirect land ownership can occur 
when the applicant or borrower is or will be a member of a resident-
owned community structured as a housing cooperative in which the 
occupants own an entity that holds the underlying land of the 
manufactured home community. In such communities, the applicant or 
borrower may still have a lease and pay rent for the lot on which 
his or her manufactured home is or will be located, but the property 
interest type for such an arrangement should be reported as indirect 
ownership if the applicant is or will be a member of the cooperative 
that owns the underlying land of the manufactured home community. If 
an applicant resides or will reside in such a community but is not a 
member, the property interest type should be reported as a paid 
leasehold.
    2. Leasehold interest. A leasehold interest could be formalized 
in a lease with a defined term and specified rent payments, or could 
arise as a tenancy at will through permission of a land owner 
without any written, formal arrangement. For example, assume a 
borrower will locate the manufactured home in a manufactured home 
community, has a written lease for a lot in that park, and the lease 
specifies rent payments. In this example, a financial institution 
complies with Sec.  1003.4(a)(30) by reporting a paid leasehold. 
However, if instead the borrower will locate the manufactured home 
on land owned by a family member without a written lease and with no 
agreement as to rent payments, a financial institution complies with 
Sec.  1003.4(a)(30) by reporting an unpaid leasehold.
    3. Multiple properties. See comment 4(a)(9)-2 regarding 
transactions involving multiple properties with more than one 
property taken as security.
    4. Manufactured home community. A manufactured home community 
that is a multifamily dwelling is not considered a manufactured home 
for purposes of Sec.  1003.4(a)(30).
    5. Direct ownership. An applicant or borrower has a direct 
ownership interest in the land on which the dwelling is or is to be 
located when it has a more than possessory real property ownership 
interest in the land such as fee simple ownership.
    6. Scope of requirement. A financial institution reports that 
the requirement is not applicable for a covered loan where the 
dwelling related to the property identified in Sec.  1003.4(a)(9) is 
not a manufactured home. For partially exempt transactions under 
Sec.  1003.3(d), an insured depository institution or insured credit 
union is not required to report the information specified in Sec.  
1003.4(a)(30). See Sec.  1003.3(d) and related commentary.

Paragraph 4(a)(31)

    1. Multiple properties. See comment 4(a)(9)-2 regarding 
transactions involving multiple properties with more than one 
property taken as security.
    2. Manufactured home community. For an application or covered 
loan secured by a manufactured home community, the financial 
institution should include in the number of individual dwelling 
units the total number of manufactured home sites that secure the 
loan and are available for occupancy, regardless of whether the 
sites are currently occupied or have manufactured homes currently 
attached. A financial institution may include in the number of 
individual dwelling units other units such as recreational vehicle 
pads, manager apartments, rental apartments, site-built homes or 
other rentable space that are ancillary to the operation of the 
secured property if it considers such units under its underwriting 
guidelines or the guidelines of an investor, or if it tracks the 
number of such units for its own internal purposes. For a loan 
secured by a single manufactured home that is or will be located in 
a manufactured home community, the financial institution should 
report one individual dwelling unit.
    3. Condominium and cooperative projects. For a covered loan 
secured by a condominium or cooperative property, the financial 
institution reports the total number of individual dwelling units 
securing the covered loan or proposed to secure the covered loan in 
the case of an application. For example:
    i. Assume that a loan is secured by the entirety of a 
cooperative property. The financial institution would report the 
number of individual dwelling units in the cooperative property.
    ii. Assume that a covered loan is secured by 30 individual 
dwelling units in a condominium property that contains 100 
individual dwelling units and that the loan is not exempt from 
Regulation C under Sec.  1003.3(c)(3). The financial institution 
reports 30 individual dwelling units.
    4. Best information available. A financial institution may rely 
on the best information readily available to the financial 
institution at the time final action is taken and on the financial 
institution's own procedures in reporting the information required 
by Sec.  1003.4(a)(31). Information readily available could include, 
for example, information provided by an applicant that the financial 
institution reasonably believes, information contained in a property 
valuation or inspection, or information obtained from public 
records.

Paragraph 4(a)(32)

    1. Affordable housing income restrictions. For purposes of Sec.  
1003.4(a)(32), affordable housing income-restricted units are 
individual dwelling units that have restrictions based on the income 
level of occupants pursuant to restrictive covenants encumbering the 
property. Such income levels are frequently expressed as a 
percentage of area median income by household size as established by 
the U.S. Department of Housing and Urban Development or another 
agency responsible for implementing the applicable affordable 
housing program. Such restrictions are frequently part of compliance 
with programs that provide public funds, special tax treatment, or 
density bonuses to encourage development or preservation of 
affordable housing. Such restrictions are frequently evidenced by a 
use agreement, regulatory agreement, land use restriction agreement, 
housing assistance payments contract, or similar agreement. Rent 
control or rent stabilization laws, and the acceptance by the owner 
or manager of a multifamily dwelling of Housing Choice Vouchers (24 
CFR part 982) or other similar forms of portable housing assistance 
that are tied to an occupant and not an individual dwelling unit, 
are not affordable housing income-restricted dwelling units for 
purposes of Sec.  1003.4(a)(32).
    2. Federal affordable housing sources. Examples of Federal 
programs and funding sources that may result in individual dwelling 
units that are reportable under Sec.  1003.4(a)(32) include, but are 
not limited to:
    i. Affordable housing programs pursuant to Section 8 of the 
United States Housing Act of 1937 (42 U.S.C. 1437f);
    ii. Public housing (42 U.S.C. 1437a(b)(6));
    iii. The HOME Investment Partnerships program (24 CFR part 92);
    iv. The Community Development Block Grant program (24 CFR part 
570);
    v. Multifamily tax subsidy project funding through tax-exempt 
bonds or tax credits (26 U.S.C. 42; 26 U.S.C. 142(d));
    vi. Project-based vouchers (24 CFR part 983);
    vii. Federal Home Loan Bank affordable housing program funding 
(12 CFR part 1291); and
    viii. Rural Housing Service multifamily housing loans and grants 
(7 CFR part 3560).
    3. State and local government affordable housing sources. 
Examples of State and local sources that may result in individual 
dwelling units that are reportable under

[[Page 21037]]

Sec.  1003.4(a)(32) include, but are not limited to: State or local 
administration of Federal funds or programs; State or local funding 
programs for affordable housing or rental assistance, including 
programs operated by independent public authorities; inclusionary 
zoning laws; and tax abatement or tax increment financing contingent 
on affordable housing requirements.
    4. Multiple properties. See comment 4(a)(9)-2 regarding 
transactions involving multiple properties with more than one 
property taken as security.
    5. Best information available. A financial institution may rely 
on the best information readily available to the financial 
institution at the time final action is taken and on the financial 
institution's own procedures in reporting the information required 
by Sec.  1003.4(a)(32). Information readily available could include, 
for example, information provided by an applicant that the financial 
institution reasonably believes, information contained in a property 
valuation or inspection, or information obtained from public 
records.
    6. Scope of requirement. A financial institution reports that 
the requirement is not applicable if the property securing the 
covered loan or, in the case of an application, proposed to secure 
the covered loan is not a multifamily dwelling. For partially exempt 
transactions under Sec.  1003.3(d), an insured depository 
institution or insured credit union is not required to report the 
information specified in Sec.  1003.4(a)(32). See Sec.  1003.3(d) 
and related commentary.

Paragraph 4(a)(33)

    1. Agents. If a financial institution is reporting actions taken 
by its agent consistent with comment 4(a)-4, the agent is not 
considered the financial institution for the purposes of Sec.  
1003.4(a)(33). For example, assume that an applicant submitted an 
application to Financial Institution A, and Financial Institution A 
made the credit decision acting as Financial Institution B's agent 
under State law. A covered loan was originated and the obligation 
arising from a covered loan was initially payable to Financial 
Institution A. Financial Institution B purchased the loan. Financial 
Institution B reports the origination and not the purchase, and 
indicates that the application was not submitted directly to the 
financial institution and that the transaction was not initially 
payable to the financial institution.

Paragraph 4(a)(33)(i)

    1. General. Except for partially exempt transactions under Sec.  
1003.3(d), Sec.  1003.4(a)(33)(i) requires a financial institution 
to indicate whether the applicant or borrower submitted the 
application directly to the financial institution that is reporting 
the covered loan or application. The following scenarios demonstrate 
whether an application was submitted directly to the financial 
institution that is reporting the covered loan or application.
    i. The application was submitted directly to the financial 
institution if the mortgage loan originator identified pursuant to 
Sec.  1003.4(a)(34) was an employee of the reporting financial 
institution when the originator performed the origination activities 
for the covered loan or application that is being reported.
    ii. The application was also submitted directly to the financial 
institution reporting the covered loan or application if the 
reporting financial institution directed the applicant to a third-
party agent (e.g., a credit union service organization) that 
performed loan origination activities on behalf of the financial 
institution and did not assist the applicant with applying for 
covered loans with other institutions.
    iii. If an applicant contacted and completed an application with 
a broker or correspondent that forwarded the application to a 
financial institution for approval, an application was not submitted 
to the financial institution.

Paragraph 4(a)(33)(ii)

    1. General. Except for partially exempt transactions under Sec.  
1003.3(d), Sec.  1003.4(a)(33)(ii) requires financial institutions 
to report whether the obligation arising from a covered loan was or, 
in the case of an application, would have been initially payable to 
the institution. An obligation is initially payable to the 
institution if the obligation is initially payable either on the 
face of the note or contract to the financial institution that is 
reporting the covered loan or application. For example, if a 
financial institution reported an origination of a covered loan that 
it approved prior to closing, that closed in the name of a third-
party, such as a correspondent lender, and that the financial 
institution purchased after closing, the covered loan was not 
initially payable to the financial institution.
    2. Applications. A financial institution complies with Sec.  
1003.4(a)(33)(ii) by reporting that the requirement is not 
applicable if the institution had not determined whether the covered 
loan would have been initially payable to the institution reporting 
the application when the application was withdrawn, denied, or 
closed for incompleteness.

Paragraph 4(a)(34)

    1. NMLSR ID. Except for partially exempt transactions under 
Sec.  1003.3(d), Sec.  1003.4(a)(34) requires a financial 
institution to report the Nationwide Mortgage Licensing System and 
Registry unique identifier (NMLSR ID) for the mortgage loan 
originator, as defined in Regulation G, 12 CFR 1007.102, or 
Regulation H, 12 CFR 1008.23, as applicable. The NMLSR ID is a 
unique number or other identifier generally assigned to individuals 
registered or licensed through NMLSR to provide loan originating 
services. For more information, see the Secure and Fair Enforcement 
for Mortgage Licensing Act of 2008, title V of the Housing and 
Economic Recovery Act of 2008 (S.A.F.E. Act), 12 U.S.C. 5101 et 
seq., and its implementing regulations (12 CFR part 1007 and 12 CFR 
part 1008).
    2. Mortgage loan originator without NMLSR ID. An NMLSR ID for 
the mortgage loan originator is not required by Sec.  1003.4(a)(34) 
to be reported by a financial institution if the mortgage loan 
originator is not required to obtain and has not been assigned an 
NMLSR ID. For example, certain individual mortgage loan originators 
may not be required to obtain an NMLSR ID for the particular 
transaction being reported by the financial institution, such as a 
commercial loan. However, some mortgage loan originators may have 
obtained an NMLSR ID even if they are not required to obtain one for 
that particular transaction. If a mortgage loan originator has been 
assigned an NMLSR ID, a financial institution complies with Sec.  
1003.4(a)(34) by reporting the mortgage loan originator's NMLSR ID 
regardless of whether the mortgage loan originator is required to 
obtain an NMLSR ID for the particular transaction being reported by 
the financial institution. In the event that the mortgage loan 
originator is not required to obtain and has not been assigned an 
NMLSR ID, a financial institution complies with Sec.  1003.4(a)(34) 
by reporting that the requirement is not applicable.
    3. Multiple mortgage loan originators. If more than one 
individual associated with a covered loan or application meets the 
definition of a mortgage loan originator, as defined in Regulation 
G, 12 CFR 1007.102, or Regulation H, 12 CFR 1008.23, a financial 
institution complies with Sec.  1003.4(a)(34) by reporting the NMLSR 
ID of the individual mortgage loan originator with primary 
responsibility for the transaction as of the date of action taken 
pursuant to Sec.  1003.4(a)(8)(ii). A financial institution that 
establishes and follows a reasonable, written policy for determining 
which individual mortgage loan originator has primary responsibility 
for the reported transaction as of the date of action taken complies 
with Sec.  1003.4(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)

    1. Automated underwriting system data--general. Except for 
purchased covered loans and partially exempt transactions under 
Sec.  1003.3(d), Sec.  1003.4(a)(35) requires a financial 
institution to report the name of the automated underwriting system 
(AUS) used by the financial institution to evaluate the application 
and the result generated by that AUS. The following scenarios 
illustrate when a financial institution reports the name of the AUS 
used by the financial institution to evaluate the application and 
the result generated by that AUS.
    i. A financial institution that uses an AUS, as defined in Sec.  
1003.4(a)(35)(ii), to evaluate an application, must report the name 
of the AUS used by the financial institution to evaluate the 
application and the result generated by that system, regardless of 
whether the AUS was used in its

[[Page 21038]]

underwriting process. For example, if a financial institution uses 
an AUS to evaluate an application prior to submitting the 
application through its underwriting process, the financial 
institution complies with Sec.  1003.4(a)(35) by reporting the name 
of the AUS it used to evaluate the application and the result 
generated by that system.
    ii. A financial institution that uses an AUS, as defined in 
Sec.  1003.4(a)(35)(ii), to evaluate an application, must report the 
name of the AUS it used to evaluate the application and the result 
generated by that system, regardless of whether the financial 
institution intends to hold the covered loan in its portfolio or 
sell the covered loan. For example, if a financial institution uses 
an AUS developed by a securitizer to evaluate an application and 
intends to sell the covered loan to that securitizer but ultimately 
does not sell the covered loan and instead holds the covered loan in 
its portfolio, the financial institution complies with Sec.  
1003.4(a)(35) by reporting the name of the securitizer's AUS that 
the institution used to evaluate the application and the result 
generated by that system. Similarly, if a financial institution uses 
an AUS developed by a securitizer to evaluate an application to 
determine whether to originate the covered loan but does not intend 
to sell the covered loan to that securitizer and instead holds the 
covered loan in its portfolio, the financial institution complies 
with Sec.  1003.4(a)(35) by reporting the name of the securitizer's 
AUS that the institution used to evaluate the application and the 
result generated by that system.
    iii. A financial institution that uses an AUS, as defined in 
Sec.  1003.4(a)(35)(ii), that is developed by a securitizer to 
evaluate an application, must report the name of the AUS it used to 
evaluate the application and the result generated by that system, 
regardless of whether the securitizer intends to hold the covered 
loan it purchased from the financial institution in its portfolio or 
securitize the covered loan. For example, if a financial institution 
uses an AUS developed by a securitizer to evaluate an application 
and the financial institution sells the covered loan to that 
securitizer but the securitizer holds the covered loan it purchased 
in its portfolio, the financial institution complies with Sec.  
1003.4(a)(35) by reporting the name of the securitizer's AUS that 
the institution used to evaluate the application and the result 
generated by that system.
    iv. A financial institution, which is also a securitizer, that 
uses its own AUS, as defined in Sec.  1003.4(a)(35)(ii), to evaluate 
an application, must report the name of the AUS it used to evaluate 
the application and the result generated by that system, regardless 
of whether the financial institution intends to hold the covered 
loan it originates in its portfolio, purchase the covered loan, or 
securitize the covered loan. For example, if a financial 
institution, which is also a securitizer, has developed its own AUS 
and uses that AUS to evaluate an application that it intends to 
originate and hold in its portfolio and not purchase or securitize 
the covered loan, the financial institution complies with Sec.  
1003.4(a)(35) by reporting the name of its AUS that it used to 
evaluate the application and the result generated by that system.
    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).
    3. Reporting automated underwriting system data--multiple 
results. When a financial institution uses one or more automated 
underwriting systems (AUS) to evaluate the application and the 
system or systems generate two or more results, the financial 
institution complies with Sec.  1003.4(a)(35) by reporting, except 
for purchased covered loans, the name of the AUS used by the 
financial institution to evaluate the application and the result 
generated by that AUS as determined by the following principles. To 
determine what AUS (or AUSs) and result (or results) to report under 
Sec.  1003.4(a)(35), a financial institution follows each of the 
principles that is applicable to the application in question, in the 
order in which they are set forth below.
    i. If a financial institution obtains two or more AUS results 
and the AUS generating one of those results corresponds to the loan 
type reported pursuant to Sec.  1003.4(a)(2), the financial 
institution complies with Sec.  1003.4(a)(35) by reporting that AUS 
name and result. For example, if a financial institution evaluates 
an application using the Federal Housing Administration's (FHA) 
Technology Open to Approved Lenders (TOTAL) Scorecard and 
subsequently evaluates the application with an AUS used to determine 
eligibility for a non-FHA loan, but ultimately originates an FHA 
loan, the financial institution complies with Sec.  1003.4(a)(35) by 
reporting TOTAL Scorecard and the result generated by that system. 
If a financial institution obtains two or more AUS results and more 
than one of those AUS results is generated by a system that 
corresponds to the loan type reported pursuant to Sec.  
1003.4(a)(2), the financial institution identifies which AUS result 
should be reported by following the principle set forth below in 
comment 4(a)(35)-3.ii.
    ii. If a financial institution obtains two or more AUS results 
and the AUS generating one of those results corresponds to the 
purchaser, insurer, or guarantor, if any, the financial institution 
complies with Sec.  1003.4(a)(35) by reporting that AUS name and 
result. For example, if a financial institution evaluates an 
application with the AUS of Securitizer A and subsequently evaluates 
the application with the AUS of Securitizer B, but the financial 
institution ultimately originates a covered loan that it sells 
within the same calendar year to Securitizer A, the financial 
institution complies with Sec.  1003.4(a)(35) by reporting the name 
of Securitizer A's AUS and the result generated by that system. If a 
financial institution obtains two or more AUS results and more than 
one of those AUS results is generated by a system that corresponds 
to the purchaser, insurer, or guarantor, if any, the financial 
institution identifies which AUS result should be reported by 
following the principle set forth below in comment 4(a)(35)-3.iii.
    iii. If a financial institution obtains two or more AUS results 
and none of the systems

[[Page 21039]]

generating those results correspond to the purchaser, insurer, or 
guarantor, if any, or the financial institution is following this 
principle because more than one AUS result is generated by a system 
that corresponds to either the loan type or the purchaser, insurer, 
or guarantor, the financial institution complies with Sec.  
1003.4(a)(35) by reporting the AUS result generated closest in time 
to the credit decision and the name of the AUS that generated that 
result. For example, if a financial institution evaluates an 
application with the AUS of Securitizer A, subsequently again 
evaluates the application with Securitizer A's AUS, the financial 
institution complies with Sec.  1003.4(a)(35) by reporting the name 
of Securitizer A's AUS and the second AUS result. Similarly, if a 
financial institution obtains a result from an AUS that requires the 
financial institution to underwrite the loan manually, but the 
financial institution subsequently processes the application through 
a different AUS that also generates a result, the financial 
institution complies with Sec.  1003.4(a)(35) by reporting the name 
of the second AUS that it used to evaluate the application and the 
AUS result generated by that system.
    iv. If a financial institution obtains two or more AUS results 
at the same time and the principles in comment 4(a)(35)-3.i through 
.iii do not apply, the financial institution complies with Sec.  
1003.4(a)(35) by reporting the name of all of the AUSs used by the 
financial institution to evaluate the application and the results 
generated by each of those systems. For example, if a financial 
institution simultaneously evaluates an application with the AUS of 
Securitizer A and the AUS of Securitizer B, the financial 
institution complies with Sec.  1003.4(a)(35) by reporting the name 
of both Securitizer A's AUS and Securitizer B's AUS and the results 
generated by each of those systems. In any event, however, the 
financial institution does not report more than five AUSs and five 
results. If more than five AUSs and five results meet the criteria 
in this principle, the financial institution complies with Sec.  
1003.4(a)(35) by choosing any five among them to report.
    4. Transactions for which an automated underwriting system was 
not used to evaluate the application. Section 1003.4(a)(35) does not 
require a financial institution to evaluate an application using an 
automated underwriting system (AUS), as defined in Sec.  
1003.4(a)(35)(ii). For example, if a financial institution only 
manually underwrites an application and does not use an AUS to 
evaluate the application, the financial institution complies with 
Sec.  1003.4(a)(35) by reporting that the requirement is not 
applicable since an AUS was not used to evaluate the application.
    5. Purchased covered loan. A financial institution complies with 
Sec.  1003.4(a)(35) by reporting that the requirement is not 
applicable when the covered loan is a purchased covered loan.
    6. Non-natural person. When the applicant and co-applicant, if 
applicable, are not natural persons, a financial institution 
complies with Sec.  1003.4(a)(35) by reporting that the requirement 
is not applicable.
    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 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.

Paragraph 4(a)(37)

    1. Open-end line of credit. Except for partially exempt 
transactions under Sec.  1003.3(d), Sec.  1003.4(a)(37) requires a 
financial institution to identify whether the covered loan or the 
application is for an open-end line of credit. See comments 2(o)-1 
and -2 for a discussion of open-end line of credit and extension of 
credit.

Paragraph 4(a)(38)

    1. Primary purpose. Except for partially exempt transactions 
under Sec.  1003.3(d), Sec.  1003.4(a)(38) requires a financial 
institution to identify whether the covered loan is, or the 
application is for a covered loan that will be, made primarily for a 
business or commercial purpose. See comment 3(c)(10)-2 for a 
discussion of how to determine the primary purpose of the 
transaction and the standard applicable to a financial institution's 
determination of the primary purpose of the transaction. See 
comments 3(c)(10)-3 and -4 for examples of excluded and reportable 
business- or commercial-purpose transactions.
* * * * *
[The following amendments would be effective January 1, 2022, 
further amending the part as proposed to be amended as of January 1, 
2020.]

0
6. Section 1003.2 is 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 200 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 200 open-end lines of credit that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10).
* * * * *
0
7. Section 1003.3 is amended by revising paragraph (c)(12) to read as 
follows:


Sec.  1003.3  Exempt institutions and excluded and partially exempt 
transactions.

* * * * *
    (c) * * *

[[Page 21040]]

    (12) An open-end line of credit, if the financial institution 
originated fewer than 200 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
8. In supplement I to part 1003:
0
a. Under Section 1003.2--Definitions, revise 2(g) Financial 
Institution; and
0
b. Under Section 1003.3--Exempt Institutions and Excluded and Partially 
Exempt Transactions, under 3(c) Excluded Transactions, revise Paragraph 
3(c)(12).
    The revisions read as follows:

Supplement I to Part 1003--Official Interpretations

* * * * *

Section 1003.2--Definitions

* * * * *

2(g) Financial Institution

    1. Preceding calendar year and preceding December 31. The 
definition of financial institution refers both to the preceding 
calendar year and the preceding December 31. These terms refer to 
the calendar year and the December 31 preceding the current calendar 
year. For example, in 2019, the preceding calendar year is 2018 and 
the preceding December 31 is December 31, 2018. Accordingly, in 
2019, Financial Institution A satisfies the asset-size threshold 
described in Sec.  1003.2(g)(1)(i) if its assets exceeded the 
threshold specified in comment 2(g)-2 on December 31, 2018. 
Likewise, in 2020, Financial Institution A does not meet the loan-
volume test described in Sec.  1003.2(g)(1)(v)(A) if it originated 
fewer than 25 closed-end mortgage loans during either 2018 or 2019.
    2. [Reserved]
    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 
200 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.
    4. Merger or acquisition--coverage for calendar year of merger 
or acquisition. The scenarios described below illustrate a financial 
institution's responsibilities for the calendar year of a merger or 
acquisition. For purposes of these illustrations, a ``covered 
institution'' means a financial institution, as defined in Sec.  
1003.2(g), that is not exempt from reporting under Sec.  1003.3(a), 
and ``an institution that is not covered'' means either an 
institution that is not a financial institution, as defined in Sec.  
1003.2(g), or an institution that is exempt from reporting under 
Sec.  1003.3(a).
    i. Two institutions that are not covered merge. The surviving or 
newly formed institution meets all of the requirements necessary to 
be a covered institution. No data collection is required for the 
calendar year of the merger (even though the merger creates an 
institution that meets all of the requirements necessary to be a 
covered institution). When a branch office of an institution that is 
not covered is acquired by another institution that is not covered, 
and the acquisition results in a covered institution, no data 
collection is required for the calendar year of the acquisition.
    ii. A covered institution and an institution that is not covered 
merge. The covered institution is the surviving institution, or a 
new covered institution is formed. For the calendar year of the 
merger, data collection is required for covered loans and 
applications handled in the offices of the merged institution that 
was previously covered and is optional for covered loans and 
applications handled in offices of the merged institution that was 
previously not covered. When a covered institution acquires a branch 
office of an institution that is not covered, data collection is 
optional for covered loans and applications handled by the acquired 
branch office for the calendar year of the acquisition.
    iii. A covered institution and an institution that is not 
covered merge. The institution that is not covered is the surviving 
institution, or a new institution that is not covered is formed. For 
the calendar year of the merger, data collection is required for 
covered loans and applications handled in offices of the previously 
covered institution that took place prior to the merger. After the 
merger date, data collection is optional for covered loans and 
applications handled in the offices of the institution that was 
previously covered. When an institution remains not covered after 
acquiring a branch office of a covered institution, data collection 
is required for transactions of the acquired branch office that take 
place prior to the acquisition. Data collection by the acquired 
branch office is optional for transactions taking place in the 
remainder of the calendar year after the acquisition.
    iv. Two covered institutions merge. The surviving or newly 
formed institution is a covered institution. Data collection is 
required for the entire calendar year of the merger. The surviving 
or newly formed institution files either a consolidated submission 
or separate submissions for that calendar year. When a covered 
institution acquires a branch office of a covered institution, data 
collection is required for the entire calendar year of the merger. 
Data for the acquired branch office may be submitted by either 
institution.

Alternative 1--Paragraph 2(g)-5

    5. Originations. Whether an institution is a financial 
institution depends in part on whether the institution originated at 
least 50 closed-end mortgage loans in each of the two preceding 
calendar years or at least 200 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).

Alternative 2--Paragraph 2(g)-5

    5. Originations. Whether an institution is a financial 
institution depends in part on whether the institution originated at 
least 100 closed-end mortgage loans in each of the two preceding 
calendar years or at least 200 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).
    6. Branches of foreign banks--treated as banks. A Federal branch 
or a State-licensed or insured branch of a foreign bank that meets 
the definition of a ``bank'' under section 3(a)(1) of the Federal 
Deposit Insurance Act (12 U.S.C. 1813(a)) is a bank for the purposes 
of Sec.  1003.2(g).
    7. Branches and offices of foreign banks and other entities--
treated as nondepository financial institutions. A Federal agency, 
State-licensed agency, State-licensed uninsured branch of a foreign 
bank, commercial lending company owned or controlled by a foreign 
bank, or entity operating under section 25 or 25A of the Federal 
Reserve Act, 12 U.S.C. 601 and 611 (Edge Act and agreement 
corporations) may not meet the definition of ``bank'' under the 
Federal Deposit Insurance Act and may thereby fail to satisfy the 
definition of a depository financial institution under Sec.  
1003.2(g)(1). An entity is nonetheless a financial institution if it 
meets the definition of nondepository financial institution under 
Sec.  1003.2(g)(2).
* * * * *

Section 1003.3--Exempt Institutions and Excluded and Partially 
Exempt 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 200 open-end lines of

[[Page 21041]]

credit in either of the two preceding calendar years. For example, 
assume that a bank is a financial institution in 2022 under Sec.  
1003.2(g) because it originated 100 closed-end mortgage loans in 
2020, 175 closed-end mortgage loans in 2021, 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 2020 and 2021, 
respectively. The closed-end mortgage loans that the bank originated 
or purchased, or for which it received applications, during 2022 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 2022 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 200 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.
* * * * *

     Dated: April 26, 2019.
Kathleen L. Kraninger,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2019-08983 Filed 5-10-19; 8:45 am]
BILLING CODE 4810-AM-P