Anyone familiar with the "Reasons or Denial" exception for OCC/FDIC institutions that were previously under OTS?

Reasons for Denial: Banks regulated by the OCC and those regulated by the FDIC that were previously OTS are required to report reasons for denial on their HMDA loan/application registers even if they qualify as a Small Filer. [12 CFR 27.3(a)(1)(i), 128.6, 390.147.]

I must admit that's a new one to me, so am looking for some background/information about it from those more familiar.

Thanks!

This has been in the OCC regulation since 1994 I believe.

§ 27.3 Recordkeeping requirements.
(a) Quarterly recordkeeping requirement. (1) A bank that is required to collect data on home loans under part 203 of this title shall present the data on Federal Reserve Form FR HMDA-LAR or in an automated format in accordance with the instructions, except that:

(i) A bank shall maintain the reason(s) it denied a loan application, using the codes provided in part 203 of this title; and

(ii) A bank shall record all information required by this paragraph and part 203 of this title within 30 calendar days after the end of each calendar quarter.

To add to what Randy said, the OCC and OTS were the two agencies that required denial reasons under their own rules. When the OTS was dismantled, some of the banks went to the OCC and some went to the FDIC (state savings banks). The OCC has continued to keep the requirement and the FDIC adopted the OTS rules for those banks that transferred over (i.e. thrifts/savings/mutuals). While I don't know all of the ins and outs of which charters it exactly applies to, it is my understanding that national banks and thrifts/savings/mutuals are the ones affected.

Okay, I don't see this question out there yet.

Most of our lending is in non-MSAs, which under the new rules meant we just had to report the address, not the CT information. So for the most part, we have not included the CT information on our LAR for 2018. We are also a small filer (<500 closed-end), which now appears that the property address is optional, but the CT information (State/County and CT) is now required. So, can we continue to just report the address and not the CT information or do we now need to report the CT information regardless of whether we report the address or not?

You will report the appropriate state 2 letter abbreviation and it is still your option to report the census tract information. See 1003.4(a)(9)(II)(C) and its OI.

Wouldn't the CT info (State/County/Census Tract) only need to be reported for properties in which you had a branch office in the MSA? If that occurred, I do think you'd have to report the CIT info and apparently not the Property Address (Street, City, State Name, Zip Code) info.

Actually I misread the state reporting requirement. The address, city, state, zip, county and census tract information is optional reporting if the property is not in a MSA/MD. See 4(a)(9)(ii) and its OI.

Here's how we explain it in our HMDA Training Manual. See the "*" below c. for specifics on the small filer requirements.

12. Property Address and Location:
a. Report the address of the property that secures (or is proposed to secure) the loan or line. [§1003.4(a)(9)]

b. Property Within Your MSA:
Include the following if the property is located in a metropolitan statistical area (MSA) where the bank has a home or branch office. [§1003.4(a)(9)(ii)] …financial institutions may report that the requirement is not applicable… (N/A) [Commentary to §1003.4(a)(9)(ii) #1]

i. Street Address (Small Filers – “Exempt”)
ii. City (Small Filers – “Exempt”)
iii. Zip Code (5 or 9 digit) (Small Filers – “Exempt”)
iv. State
v. County (5-digit code)
vi. Census Tract (only counties with populations of 30,000+)


c. Property Outside Your MSA
If the property is located outside a metropolitan statistical area (MSA) where the bank has a home or branch office, you need only report the following. You …may voluntarily report the…county, or census tract information [§1003.4(a)(9)(i)].
*Small Filers are Exempt from reporting address information for properties outside a MSA; however, if data is voluntarily provided for any field (e.g. street address), Small Filers must complete all fields for the data point (i.e. street address, city, zip, and state).

i. Street Address
ii. City
iii. Zip Code (5 or 9 digit)
iv. State
---------


Thus, if the property is within your MSA, small filers must report State, County & Census Tract. If the property is outside your MSA, you're exempt from all property address info. If you report any of the optional data, you must report it all.

I am in the same situation as S Ross. My origination count is very close to the threshold. It seems I am not able to just take the # of originations reported for HMDA in 2016 and 2017 because the definitions are different. Am I correct that I would have to re-evaluate my originated loans for 2016 and 2017 with the 2018 Closed End Definition to determine my # of Closed End Loan Originations?

2016 & 2017 HMDA Originations in LAR - Take Out
* Home Improvement Loans not Secured by Dwelling
* Refinance of Farmland with Dwellings

2016 & 2017 Origination NOT on LAR - Include
* Consumer RE Home Equity Loans for "Other Purpose"

That's the way I'm reading it. I guess we also have to go back and add in construction and bridge loans that were previously excluded but are no longer excluded? Has anyone gotten informal clarification?

Laurlee & Carolina Blue are correct that counting loans for the exemption status is not as easy as just looking at your prior LAR, at least not in 2018 and 2019. The problem in 2018 and 2019 is that you have to use the 2016 and 2017 data, which had different reporting requirements than we do now. To determine eligibility for the partial exemption, we have to count how many originations from 2016 and 2017 that would have been reported under today's standards, not how many were reported on the LAR.

So yes, this means that construction and bridge loans that were previously not reported but were not designed to be replaced by additional financing at a later time need to be added back in. Ag purpose refinances or home improvements need removed. "Other purpose" consumer mortgages need added in. HI loans not secured by a dwelling need removed. Ect.

In my training manual on this, I explain three different methods that can be used to calculate eligibility depending on how close to the exemption threshold a HMDA reporter is. Unfortunately, those who are very close to the threshold are going to probably have to start from scratch (using what I refer to as the Subtraction Method) and not use the LAR as a starting point. When doing this, you will start with all dwelling secured originations and then remove the following (as explained in my training manual on this):

"The second step for determining eligibility for the closed-end loan partial exemption in 2018 and 2019 is to remove all transactions from the initial list of originations secured by a dwelling. When doing this, the following types of loans - in accordance with the HMDA exclusions found in section 1003.3 of Regulation C - should be removed as they are excluded from 2018 HMDA reporting:
-Loans originated or purchased by the bank in a fiduciary capacity
-Loans secured by bare land
-Temporary financing loans including construction spec homes
-Loans purchased as a pool of interest
-Loans where only the servicing rights were purchased
-Loans purchased as part of a merger or acquisition
-Loans less than $500
-Loans purchased as a partial interest, such as a (partial) participation loan
-Loans primarily for agricultural purposes
-Loans primarily for business or commercial purposes that do not have a purpose of a purchase, refinance, or home improvement
-Loans subject to a New York State consolidation, extension, and modification agreement
-Modifications that are not considered an extension of credit under HMDA definitions, such as those that are not a new debt obligation"

This really isn't any different than how HMDA reporters calculate eligibility to determine if they had 25 closed-end or 500 open-end. Again, this problem should go away in a couple of years when the prior LAR was not created by using different rules than are used for determining eligibility.

Also, the CFPB has a decent flow chart to help determine if a transaction is reportable in 2018: https://s3.amazonaws.com/files.consumerf...al-coverage.pdf

Thank you Adam. Great summary! I always seem to have difficulty finding what I need on the BCFP website.

Yes, Thank you Adam!

I haven't come across another thread for this question: We are a small filer regulated by FDIC and reporting decline reasons, but we are still receiving a validity edit saying it should be reported Exempt: 1111. Anyone found a fix for this yet?

We are a small filer and we also report the denial reasons. When I tested my LAR a couple of weeks ago I got no errors for that category.

Those edits are coming from our third party reporting software, so maybe that's the problem.

I ran my test with the CFPB's File Formatting Verification tool.

Thank you!