REGULATORY NEWS

2004 HMDA Changes and Transition Rules

April 29, 2004

Loan Purpose

The Multi-Family category has been removed from the Loan Purpose field and is now considered a Property Type. Likewise the definitions for Home Improvement and Refinance loans have been changed for 2004 HMDA reporting.

 

2004 Definition

2003 Definition

Home Improvement

Report as home improvement loan if any part of proceeds will be used for home improvement regardless of lenders classification.

Report as home improvement loan if any part of the loan proceeds is used home improvement and the lender classifies it as a home improvement loan.

Refinance

New loan that satisfies and replaces existing loan; and both the existing loan and the new loan are secured by lien on dwelling.

New loan that satisfies and replaces existing loan, if the lender determines the purpose of existing loan, or the lender relies on applicant’s statement about existing loan, or the
existing loan is dwelling secured, or the new loan will be dwelling secured.

For applications received in 2003, it is optional of the lender to enforce the revised 2004 definitions, however if implemented it must be consistent on all applications.

For applications received in 2003, it is optional of the lender to enforce the revised 2004 definitions, however if implemented it must be consistent on all applications.
 

Property Type

The Property Type field is new for 2004 HMDA reporting.

 

Definition

1-4 Family

Report as home improvement loan if any part of proceeds will be used for home improvement regardless of lenders classification.

Manufactured Housing

New loan that satisfies and replaces existing loan; and both the existing loan and the new loan are secured by lien on dwelling.

Multi-Family

For applications related to a dwelling housing 5 or more families.

For applications received in 2003, it is optional of the lender to report manufactured housing; however if the lender chooses to report manufactured housing for 2003 applications, it must be consistent on all applications.
 

Preapproval Status

The Preapproval field is new for 2004 HMDA reporting.

 

Definition

Preapproval

A preapproval is an application for credit where the lender has a program and an analysis of the applicants creditworthiness is performed and a written commitment is extended by the lender for a given amount, for a specific period of time and with limited conditions.

Any applications for home purchase that are originated or denied are required to have their preapproval status reported. Applications that are approved but not accepted may optionally be reported. Preapprovals that were withdrawn or closed for incompleteness are not reported.  Applications received in 2003 are reported with preapproval status of N/A.
 

Rate Spread

The Rate Spread field is new for 2004 HMDA reporting.

 

Definition

Rate Spread

Pricing data for mortgage loans, used to address fair lending concerns addressing loan pricing, especially in the sub-prime market.

Only report rate spread where the loan was originated and the difference between the APR and treasury yield exceeds 3% or 5% for 1st Lien Loans or Subordinate Loans respectively.  Applications received in 2003 are reported with Rate Spread of N/A.
 

HOEPA Status

The HOEPA Status field is new for 2004 HMDA reporting.

 

Definition

HOEPA Status

Home Ownership and Equity Protection Act covers high cost loans secured by the primary dwelling for loans subject to regulation Z.

Only reported for originated or purchased loans subject to regulation Z where the Points and Fees exceed the Points and Fees trigger; or 8% or 10% of the loan amount for 1st Lien Loans or Subordinate Loans respectively.
 

Race/Sex/Ethnicity

The Hispanic classification has been removed from the Race field and is now considered Ethnicity for 2004 HMDA reporting. The Pacific Islander race category has been split from the Asian race category.

Conversion of 2003 Race Codes to 2004 Race/Ethnicity:

2003 Race

2004 Ethnicity

2003 Race

Code 1 – American Indian or Alaskan Native

Code 4 – Not Applicable

Code 1 – American Indian or Alaskan Native

Code 2 – Asian or Pacific Islander

Code 4 – Not Applicable

Code 2 – Asian

Code 3 – Black

Code 4 – Not Applicable

Code 3 – Black or African American

Code 4 – Hispanic

Code 1 – Hispanic or Latino

Code 7 – Not Applicable

Code 5 – White

Code 4 – Not Applicable

Code 5 – White

Code 6 – Other

Code 4 – Not Applicable

Code 7 – Not Applicable

Code 7 – Mail or Telephone

Code 3 – Mail, Internet or Telephone

Code 6 – Mail, Internet or Telephone

Code 8 – Not Applicable

Code 4 – Not Applicable

Code 7 – Not Applicable

Lenders must convert race for application taken in 2003 to the new race/ethnicity codes for all applications.
 

5 Digit MSA/MD’s

The Office of Management and Budget (OMB) published the Standards for Defining Metropolitan and Metropolitan Divisions in a Federal Register Notice (65 FR 82228 - 82238) on December 27, 2000. 

MSA’s are defined as having an urbanized are of 50,000 or more population and are defined in whole county (or equivalent entity) groupings.

MD’s are defined as smaller subsets of MSA’s in whole county (or equivalent entity) groupings wherein the population exceeds 2.5 million persons.

The new definitions and rules used in creating MSA/MD’s incorporates 83 percent of the nations population verses 80% under the former rules.  Another statistic of the new definitions is that 1,090 counties will reside in MSA/MD’s verses only 847 previously.

All CRA or HMDA data collected for reporting in the 2004 reporting year must be geocoded using the new 5 digit MSA/MD numbers.