For non face-to-face applications received after 1/1/2018, how should the fields for whether the race, sex, and ethnicity were collected via visual observation or surname be reported? Should it be code 2 - not collected on the basis of visual observation or surname or code 3- not applicable?

I was entering, code 2 for internet, telephone, and mail applications. However, one of our LOS's is defaulting to code 3 for these applications. I'm not sure what analysis went into that default by the vendor, but I can see the rationale. I'm hesitant though since the language in the FIG on page 82 about the use of code 3 is unclear. Do I use code 3 because the requirement to report the applicant's or borrower race does not apply to the covered loan or application because it's not a face-to-face application and therefore, not applicable? However, it also notes to use code 3 if the application received the application prior to January 1st, 2018, and the financial institution chooses not to report whether the information was collected on the basis of visual observation or surname. Does that mean for non-face-to-face applications taken after 1/1/2018, code 2 should be reported?

Code 3 is for all applications not taken face to face.
Google found this thread quite easily. Read Kathleen's post. There's plenty more if you google your search and add 'bankersonline' to the end of it.

Isn't this the issue that the CFPB was okay with 2 or 3 on non FTF due to the ambiguity in the rule?

FWIW, I still have 2 on all of these.

From Kathleen's post in the linked thread, she admits it could be clearer. You have to back into what to report.
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The application says answer the yes/no questions IF the application was taken face to face.
If it's not, then that section is NA and that's what I report on my LAR.
I'm going with 3 and QuestSoft is good with it.

We also report Code 3.

Here's another thread on the topic.

My problem with this logic is that the application is not the regulation.

This is in the August 2018 "Reportable HMDA Data: A Regulatory and Reporting Overview Reference Chart" concerning ethnicity. This is found on page 10. You'll find similar wording on page 15 (for race) and page 17 (for sex):
https://s3.amazonaws.com/files.consumerf...rence-chart.pdf


ETHNICITY COLLECTED ON THE BASIS OF VISUAL OBSERVATION OR SURNAME. Indicate whether the ethnicity of the applicant or borrower, or of the first co-applicant or co-borrower, as applicable, was collected on the basis of visual observation or surname by entering:
 Code 1—Collected on the basis of visual observation or surname
 Code 2—Not collected on the basis of visual observation or
surname
 Code 3—Not applicable
NOTE: Use Code 3 if the requirement to report the applicant’s or borrower’s ethnicity does not apply to the covered loan or application that your institution is reporting.
 Code 4—No co-applicant
NOTE: Use Code 4 in the co-applicant field if there are no co- applicants or co-borrowers

NOTE: Use Code 3 if the applicant or borrower, or co-applicant or co-borrower does not provide the information in an application taken by mail, internet, or telephone.

Code 3 is used for purchase loans and where ethnicity (race or sex too) is not applicable - like an entity. If you have an in-person application and the applicant's complete the demographic info, then Code 3 doesn't fit. Code 2 is the only one left standing, although I agree NA seems logical.

This ^^^

So, Katherine, you have two of us on each side of the question.
As stated in the threads linked, even the CFPB doesn't clearly speak to this in the Reg, their webinars, charts or in answer to direct communications.
The best you get is Pick One and Be Consistent.

I am with David. However, I agree with what seems like everyone's opinion and none of this is well thought out or executed...

I agree that NA makes the most sense for applications not taken in person. However, my reporting software automatically changes all "taken by" responses to 2 when the application method is marked as something other than face to face, so I guess that's how we'll be reporting them.

It's not cool that LOS systems are dictating how we respond to this, especially when every single examiner will tell you that how the system works is not a valid reason for doing something a certain way. Trust me. I've had first hand experience with being made to do battle with the LOS provider at the behest of examiners. That's one of the reasons I didn't push for HMDA software before 2018. I can't tell you how happy I am with the software we chose doing things the way we want them to be done.

Good point Truffle. If the LOS system dictates how you respond, they should also be ready to back it up with examiners that disagree.

I'm a little late to this thread, but FWIW I would still chose NA. Joker is right that this is the issue the CFPB said that either option would work due to the ambiguity in the Regulation. As you can see, we are pretty split on this topic but Truffle makes a great point about how the LOS should not be dictating reporting.