CUNA Regulatory Comment Call


February 19, 2002

HMDA Revisions


(MAJOR RULE)

EXECUTIVE SUMMARY

Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Associate General Counsel Mary Dunn at mdunn@cuna.com and to Assistant General Counsel Jeffrey Bloch at jbloch@cuna.com; or mail them to Mary and Jeff in c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. If commenting directly to the Fed, you must refer to Docket No. R-1120. Due to current mail disruption at the Federal Reserve Board, it would be best if you would e-mail those comments to regs.comments@federalreserve.gov. You may also contact us at 800-356-9655, ext. 6032, if you would like a copy of the proposed rule, or you may access it on the Internet at the following address:
http://www.federalreserve.gov/boarddocs/press/boardacts/2002/20020207/attachment.pdf

BACKGROUND

HMDA requires financial institutions and certain other nondepository institutions to collect, report, and disclose data about originations and purchases of home mortgage and home improvement loans. Data about applications that do not result in originations must also be reported. The Fed’s Regulation C implements HMDA.

DESCRIPTION OF THE PROPOSAL

Thresholds for reporting loan pricing information

In the final rule that was recently issued, the Fed adopted a requirement that lenders report the spread between the APR of a loan and the yield on comparable U.S. Treasury securities if this spread exceeds a certain threshold. The Fed has proposed that the threshold be three percent for first lien loans and five percent for subordinate lien loans. These proposed thresholds are intended to ensure the reporting of pricing information for high-priced loans, while excluding prime loans from these reporting requirements.

To calculate these spreads, lenders must use the Treasury rates in effect as of the 15th day of the month proceeding the month in which the loan application was received. For “comparable Treasury securities,” lenders must use the Treasury security with the maturity date that is closest to the maturity date of the loan offered by the lender. If the date of such a loan is halfway between the maturity dates of two Treasury securities, the security with the lowest yield must be used.

Lien status

The Fed proposes to require lenders to report the lien status for all originated loans and applications, but not for purchased loans. The proposal would require lenders to report whether the loan is: 1) secured by a first lien on a dwelling; 2) secured by a subordinate lien on a dwelling; or 3) not secured by a lien on a dwelling.

Requesting applicant information in telephone applications

For an application made by telephone, the Fed proposes to require lenders to request information about the race, ethnicity, and gender of the applicant. This would be similar to the requirement when applications are completed by mail or by the Internet. The applicant must be advised that the collection of this information by the lender is required by the federal government to assist in the enforcement of fair lending laws. Applicants must also be advised that the lender is prohibited from discriminating on the basis of the information provided or because the applicant declined to provide this information.

QUESTIONS TO CONSIDER REGARDING THE FED’s REGULATION C PROPOSAL
(The Fed has specifically requested comment on most of the issues raised in these questions.)

Eric Richard • General Counsel • (202) 508-6742 • erichard@cuna.com
Mary Mitchell Dunn • SVP & Associate General Counsel • (202) 508-6736 • mdunn@cuna.com
Jeffrey Bloch • Assistant General Counsel • (202) 508-6732 • jbloch@cuna.com
Catherine Orr • Senior Regulatory Counsel • (202) 508-6743 • corr@cuna.com