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Federal Reserve Bank OF DALLAS ROBERT D. M c T E E R , J R . P R E S ID E N T AND C H IE F E X E C U T IV E O F F IC E R December 17 , 1992 d a lla s , te x a s 75222 Notice 92-121 TO: The Chief Executive Officer of each member bank and others concerned in the Eleventh Federal Reserve District SUBJECT A m e n d m e n t to R e g u l a t i o n C (Home M o r t g a g e D i s c l o s u r e ) DETAILS The Board of Governors of the Federal Reserve System has issued an amendment to Regulation C (Home Mortgage Disclosure), which will expand the regulation’s coverage of mortgage companies. The rule will require a mortgage company with an office in a metropolitan area to disclose data about home lending activity if its assets exceeded $10 million or if the company made 100 or more home purchase loans in the preceding calendar year. The new rule carries out a provision in the FDIC Improvement Act authorizing the Board to set a smal1-institution exemption standard for mortgage companies that is comparable to the exemption for depository institutions. The Board also has revised the instructions for reporting loan applications received through a loan broker or correspondent to conform the rule for reporting loan approvals to the existing rule for reporting loan denials. This revision applies to all lenders covered by the Home Mortgage Disclosure Act, not only nondepository mortgage lenders. ATTACHMENT A copy of the Board’s notice as it appears on pages 56963-68, Vol. 57, No. 232, of the Federal Register dated December 2, 1992, is attached. MORE INFORMATION For more information, please contact Marion White at (214) 922-6155. For additional copies of this Ban k ’s notice, please contact the Public Affairs Department at (214) 922-5254. Sincerely yours, For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) 58963 Rules and Regulations Federal Register Vol. 57, No. 232 Wednesday, December 2, 1992 FEDERAL RESERVE SYSTEM FOR FURTHER INFORMATION CONTACT: Jane Jensen Gell or W. Kurt Schum acher, Staff Attorneys, or John C. W ood, Senior Attorney, Division of Consum er and Com m unity Affairs, Board of Governors of the Federal Reserve System, W ashington, DC 20551, at (202) 4 5 2 2412 or (202) 452-3667. For the hearing im paired only, contact Dorothea T hom pson, T elecom m unications Device for the Deaf (TDD), at (202) 452-3544. 12CFR Part 203 SUPPLEMENTARY INFORMATION: [Docket No. R-0771; Regulation C] (1) B a c k g ro u n d Home Mortgage Disclosure; Final Regulatory Amendments E xem ption fo r S m a ll N ondepository Mortgage Lenders The Home Mortgage Disclosure Act (HMDA) requires lenders that have over $10 m illion in assets and have offices in m etropolitan areas to disclose their housing-related lending activity each year. A m end m en ts to HMDA in 1989 extended its scope to cover ind ep en d en t mortgage lenders— nondepository lenders that are unaffiliated w ith depository institu tion s or holding com panies. U nder Regulation C, nondepository mortgage lenders have been subject to the act if the volum e of th e ir h om e purchase loan originations equals or exceeds 10 percent of their total loan origination volum e in dollars. As a result, HMDA covers m any nondepository mortgage lenders th at make loans in m etropolitan areas, but only if th e ir assets exceed $10 m illion. M ost n on dep osito ry mortgage lenders originate loans a n d then sell them w ithin a short tim e, a n d their asset levels often can be relatively low (well u n d er $10 m illion). Because thB 1989 am end m ents failed to cover as many of these lenders as Congress h ad intended. Congress am en d e d HMDA again in 1991. T he Federal D eposit Insurance Corporation Im provem ent A ct of 1991 authorized th e Board, in consultation w ith the D epartm ent of H ousing and U rban D evelopm ent, to establish a new sm all institutio n exem ption standard for nondepository mortgage lenders in order to exem pt those lenders that are "com parable w ith in th e ir respective in d u stries” to depository institutions that are currently exempt. In A ugust 1992 th e Board published a proposal that in c lu d ed an explicit m easure of lending activity together w ith the existing asset-size test (57 FR 36024, A ugust 12,1992). T he Board received a bout 40 com m ent letters on its proposal. After review of these AGENCY: Board of Governors of th e Federal Reserve System. ACTION: Final rule. SUMMARY: T he Board is publishing a final rule am ending Regulation C, w hich im plem ents the Home Mortgage Disclosure Act. T he F ederal D eposit Insurance Corporation Im provem ent Act of 1991 authorized the Board, in consultation w ith the D epartm ent of H ousing and U rban D evelopm ent, to develop a new exem ption standard for nondepository mortgage lenders that is com parable to the exem ption for depository institutions. U nder the standard that has been ado pted by the Board, a nondepository mortgage len der w ith an office in a m etropolitan area is covered if it m eets either a n asset-size test or a len ding activity test. A n ondepository mortgage lender continues to be covered if its assets exceed $10 m illion. Regardless of asset size, how ever, u n d er the final ra le a nondepository mortgage len der is also covered if it originated 100 or m ore hom e p urchase loans (w hich in clu des refinancings of ho m e purchase loans) in th e preceding calendar year. T his d ual standard m ain tains coverage for all nondepository mortgage lenders that currently report u n d er HMDA an d extends coverage to firms that are active mortgage lenders despite their sm aller asset size. The Board also has revised the instructions for reporting loan applications received through a loan broker or correspo nd en t to conform the rule for reporting loan approvals to the existing rule for reporting loan denials. T his revision app lies to all lenders covered by HMDA, no t only nondepository mortgage lenders. EFFECTIVE DATE: January 1,1993. 5 6 9 6 4 Federal Register / Vol. 57, No. 232 / Wednesday, December 2, 1992 / Rules and Regulations com m ents and u po n further analysis, the Board has adopted a final rule. The Board's proposal noted that nondepository mortgage lenders specialize in hom e loans, un like most sm all depository instructions, w hich engage prim arily in other types of retail lending. T he data reported by depository institutions currently covered by HMDA indicate that small savings and loan associations (the depository institutions m ost like nondepository mortgage lenders in the type of lending they do) extended an average of 40 hom e loans in 1991. Because nondepository mortgage lenders focus on hom e purchase loans, how ever, the Board believes it is appropriate to base the exclusion for small nondepository institu tion s on a higher threshold of loan activity than the average loan volum e for sm all depository institutions. In its proposal the Board solicited com m ent o.n w hether 100 hom e purchase loans is the appropriate level for the sm all-institution exem ption applicable to nondepository mortgage lenders. M ost com m enters addressing this issue agreed w ith the proposed level, although a few believed that the exem ption standard should be based on a sm aller n u m b er of transactions to expand the ac t’s coverage. Several com m enters suggested that the transactions com prising th e volum e test also sho uld be w id en ed to in clu de hom e im provem ent loans, refinancings of both hom e purchase and hom e im provem ent loans, an d even applications for these types of loans. In response to th e com m ents and upon further analysis, th e Board has determ ined th a t 100 loans is appropriate as the thresho ld for coverage of nondepository mortgage lenders, b u t the Board has b ro adened the stan dard by specifying that refinancings of ho m e purchase loans are to be co un ted in determ ining w h eth er a len der m eets the loan volum e test. The Board considered bu t decided against expanding the threshold to in clud e hom e im provem ent loans a n d applications. T he Board believes that keeping th e focus on hom e purchase loans (including refinancings) for determ ining initial coverage is more consistent w ith other provisions of the act and regulation. For instance, besides having assets of more th an $10 m illion and having offices in m etropolitan areas, a depository institutio n m ust have originated at least one first-lien, hom e purchase loan in the preceding calendar year to be covered by HMDA. Similarly, a nondepository in stitu tio n ’s originations of hom e p urchase loans m ust am o un t to 10 percent or m ore of its total loan originations, in dollars. before the institution becom es subject to HMDA. U nder the final rule, for-profit nondepository mortgage lenders are covered regardless of lending volum e if their assets (including those of any parent com pany) exceeded $10 m illion at the end of the previous calendar year. In addition, firms that have assets of $10 million or less are covered if they originated 100 or m ore hom e purchase loans (including refinancings of such loans) in the previous calendar year. T his dual standard m aintains coverage for all nondepository mortgage lenders that currently report u n d er HMDA and extends coverage to firms that are active mortgage lenders despite th e ir sm aller asset size. T he Board believes that this dual standard establishes a smallinstitution exem ption for nondepository mortgage lenders com parable to the current exem ption for depository institutions. A pplica tio n s R eceived Through Loan Brokers or Correspondents Since 1990 the instructions to the HMDA L oan/A pplication Register (HMDA-LAR) have required that covered lenders report as loan originations only those loans that actually clo sed in the len d er’s name. But for ap plicatio ns received through loan brokers or correspondents, institu tion s reported data for all applications they d enied, w h eth er or no t the loans w ou ld have closed in th e ir nam e. If a loan closed in th e nam e of a loan broker or correspondent and was im m ediately p urch ased by the ' institution, the institution reported the transaction as a loan purchase— even if it h ad m ade th e initial credit decision approving the loan application prior to closing. In A ugust the Board proposed to conform the rule for reporting loan approvals to the rule for reporting loan denials. T h at is, a lend er that preapproved a loan w h ich then closed in an o th er’s nam e, an d acquired the loan at or after closing, w o u ld report the loan as a loan origination rather than as a loan purchase. Most com m enters agreed w ith th e Board's position that this change w o uld m ore accurately reflect an in stitu tio n ’s overall credit decisions. U nder the final version of the revised instructions, if an institution receives an application through a loan broker or correspondent, approves it, and then by pre-arrangem ent w ith th e broker or correspondent acquires the loan at closing or thereafter, that institution w ill report th e loan as an origination, w h eth er or not th e loan closed in that in stitu tio n ’s nam e. T his change affects all lenders covered by HMDA, not just nondepository mortgage lenders. As has been the case since 1990, lenders w ill report denials of applications (and other actions taken besides originations, such as applications w ithdraw n) even if the same applications are denied by other institutions to w hich they are referred by a loan broker or correspondent. Institutions that purchase a loan from another entity w ill continue to report the loan as a loan purchase, as long as they did not approve the corresponding application prior to loan origination. If an institution approves an application for a loan, but does not acquire the resulting loan (because it is sold to another lender, for example), the institution w ill report the loan as “ approved b u t not a ccepted.’’ (2) Revisions T his section describes the changes that have been m ade to th e regulatory provisions and the instructions. Section 203.2 D efinitions (g) Home P urchase Loan T he Board h ad proposed, for purposes of defining coverage of lenders, to exclude refinancings from the definition of a hom e purchase loan. Some com m enters noted that nondepository institu tion s m ight originate a significant nu m b er of h om e p urchase refinancings yet could en d u p not being covered u n d er the B oard’s proposed 100 hom e purchase loan test. Based on the com m ents and u po n further analysis, the Board has ado pted a rule that includ es refinancings of hom e purchase loans in defining the threshold. Consequently, the Board did not adopt the proposed change to paragraph 203.2(g). Section 203.3 E xem p t Institutions (a) Exem ption Based on Location, Asset Size, or N um ber of H om e P urchase Loans T he Board is adopting in final form its proposal that the exem ption standard for no ndepository mortgage lending institu tion s be based on asset size and nu m b er o f hom e purchase loan originations. As discussed above, the Board has established 100 loans as the threshold for th e coverage of nondepository mortgage lenders. However, the Board has broadened this standard by specifying that refinancings of hom e purchase loans are to be counted in determ ining w h eth er a lender m eets the loan volum e test. T hus, u n d er the final rule a nondepository mortgage lender, like a depository institution, is covered if its Federal Register / Vol. 57, No. 232 / Wednesday. December 2, 1992 / Rules and Regulations 5 6985 assets exceeded $10 m illion at the end of the previous calendar year. A dditionally, regardless of asset size, a nondepository mortgage lender is also covered if it originated 100 or more home purchase loans (w hich includes refinancings of hom e purchase loans) in the prior calendar year. To better differentiate between the exem ption criteria that apply to depository in stitutio ns and those that apply to nondepository mortgage lenders, § 203.3(a) sets forth the criteria for exem ption in separate subparagraphs. A ppendix A to P art 203— Form an d Instructions for C om pletion o f HMDA Loan/A pplication Register I. Who M ust File a Report The Board is am ending A ppendix A— Form and Instructions for Com pletion of HMDA L oan/A pplication Register—to reflect the new exem ption standard for nondepository mortgage lenders. The criteria for these institu tion s are set forth in a separate paragraph to clearly distinguish this standard from the exem ption criteria for depository institutions. IV. Types o f Loans a n d A pplications Covered a n d E xclud ed by HMDA The Board has revised the instructions in paragraph IV.A.3 and has added a new paragraph as IV.A.4 to reflect the requirem ents for reporting loan applications that are received through a loan broker or correspondent As discussed above, the Board has conform ed the rule for reporting loan approvals to the rule for reporting applications th at did not result in originations—for exam ple, loan denials and applications w ithdraw n. New language in paragraph IV.A.4 clarifies that a loan origination is only reported once. V. Instructions fo r Com pletion o f Loan/ A pplication Register Several com m enters pointed out that un d er the previous rule, th e category of the action taken w as actually "application approved bu t not accepted by a p p lica n t" (em phasis added). Accordingly, the Board has revised this category—found in paragraph V .B.l. of the instructions—to read “application approved but not accepted.” It has also revised the explanation in paragraph V.B.2.a. to m ake clear that this code applies w hen either the applicant or the broker or correspondent does not respond to a le n d er’s d eadline regarding an approved application. L oan/A pplication Register Code Sheet The Board has revised the Loan/ A pplication Register Code Sheet to reflect the change to the category of the action taken code “application approved but not accep ted” discussed above. A copy of th e revised Code Sheet accom panies this final rule. (c) Loss o f exem ption. (1) An institution losing an exem ption that was based on the criteria set forth in paragraph (a) of this section shall com ply w ith this part beginning with the calend ar year following the year in w hich it lost its exemption. * * * * * (3) Regulatory Flexibility A nalysis The Board's Division of Research and Statistics has prepared a Regulatory Flexibility A nalysis of the revisions to Regulation C. A copy may be obtained from P ublications Services, Board of Governors of th e Federal Reserve System, W ashington, DC 20551, at (202) 452-3245. 3. A ppendix A to part 203 is am ended by revising paragraphs I:A. through I D., by revising paragraph IV.A.3, by redesignating paragraph IV.A.4 as IV.A.5 and republishing it, by adding a new paragraph IV.A.4, and by revising paragraphs V.B.l. and V.B.2.a. to read as follows: List of Subjects in 12 CFR P art 203 Banks, banking, Federal Reserve System, Mortgages, Reporting and recordkeeping requirem ents. For the reasons set forth in this final rule and pu rsuan t to the B oard’s authority u n d er section 305(a) of the Home Mortgage Disclosure Act (12 U.S.C. 2804(a)), the Board am ends Regulation C, Home Mortgage Disclosure (12 CFR part 203) as set forth below. PA RT 203— H O M E M O R T G A G E D IS C L O S U R E 1. The authority citation for part 203 continues to read as follows: Authority: 12 U.S.C. 2801-2810. 2. Section 203.3 is am ended by revising paragraph (a) and by revising paragraph (c)(1) to read as follows: §203.3 Exempt Institutions. (a) E xem ption based on location, asset size, or nu m ber o f h o m e purchase loans. (1) A bank, savings association, or credit union is exem pt from the requirem ents of this part for a given calen dar year if on the preceding December 31: (1) The institution h ad n either a hom e office nor a branch office in an MSA; or (ii) The in stitu tio n ’s total assets were $10 m illion or less. (2) A for-profit mortgage lending institution (other th an a bank, savings association, or credit u nion) is exem pt from the requirem ents of this part for a given calendar year if: (i) The institution h ad neither a hom e office nor a branch office in an MSA on the preceding December 31; or (ii) The in stitu tio n ’s total assets com bined w ith those of any parent corporation w ere $10 m illion or less on the preceding December 31, and the institution originated fewer than 100 hom e purchase loans in the preceding calendar year. * * .* * * A ppendix A to P art 203—Form and Instructions for Com pletion o f HMDA Loan/A pplication Register * * * * * ! Who Must File a Beport A. Depository Institutions Subject to the exception discussed beiow. banks, savings associations, and credit unions must complete a register listing data about loan applications rereived, loans originated, and loans purchased if on the preceding December 31 an institution: 1. Had assets of more than $10 million, and 2. Had a home or a branch office in a "metropolitan statistical area” or a "primary metropolitan statistical area” (both are referred to in these instructions by the term "MSA”). Example: If on December 31 you had a home or a branch office in an MSA and your assets exceeded S10 million, you must complete a register that lists the home purchase and home improvement loans that you originate or purchase (and also lists applications that did not result in an origination) beginning January 1. B. Depository Institutions—Exception You need not complete a register—even if you meet the tests for asset size and location—if your institution is a bank, savings association, or credit union that made n o first-lien home purchase loans (including refinancings) on one-to-fcurfamily dwellings in the preceding calendar year. This exception does not apply in the case of nondepository institutions. C. Other Lending Institutions Subject to the exception discussed below, for-profit mortgage lending institutions (other than banks, savings associations, and credit unions) must complete a register listing data about loan applications received, loans originated, and loans purchased if the institution had a home or branch office in & n MSA on the preceding December 31, and 1. Had assets of more than S10 million (based on the combined assets of the institution and any parent corporation) on the preceding December 31, of 2. Originated 100 or more home purchase loans (including refinancings of such loans) during the preceding calendar year, regardless of asset size. 5 6 9 6 6 Federal Register / Vol. 57, No. 232 / Wednesday, December 2. 1992 / Rules and Regulations D. Other Lending Institutions—Exception You need not complete a register—even if you meet the tests for location and asset size or number of home purchase loans—if your institution is a for-profit mortgage lender (other than a bank, savings association, or credit union) and home purchase loans that you originated in the preceding calendar year (including refinancings) came to less than 10 percent of your total loan origination volume, measured in dollars. have closed in your institution's name). For all of these loans and applications, report the race or national origin, sex, and income information, unless your institution is a bank, savings association, or credit union with assets of $30 million or less on the preceding December 31. 4. Originations are to be reported only once. If you are the loan broker or correspondent, do not report as originations loans that you forwarded to another lender for approval prior to closing, and that were approved and subsequently acquired by that [V. T\pes of Loans and Applications Covered lender (whether or not they closed in your name). and Excluded by HMDA 5. Report applications that were received A. Types of Loans and Applications to be in the previous calendar year but were acted Reported upon during the calendar vear covered by the * * * * * current register 3. !n the case of brokered loan applications * * * * * or applications forwarded to you through a correspondent, report as originations loans I'. Instructions for Completion of Loan/ that you approved and subsequently acquired Application Register according to a pre-closing arrangement * * * * * (whether or not they closed in your B. Action Taken institution's name). Additionally, report the data for all applications that did not result in 1. Type of action. Indicate the type of originations—for example, applications that action taken on the application or loan by your institution denied or that the applicant using one of the following codes. Do not withdrew during the calendar year covered report any loan application still pending at by the report (whether or not they would the end of the calendar year; you will report that application on your register for the year ir. which final action is taken. 1—Loan originated 2—Application approved but not accepted 3—Application denied 4—Application withdrawn 5—File closed for incompleteness 6—Loan purchased by your institution 2. Explanation of codes, a. Use code 2 when an application is approved but the applicant (or a loan broker or correspondent! fails to respond to your notification of approval or your commitment letter within the specified time. * * * * * A ppendix A [Amended] 4. T he Loan/A pplication Register Code Sheet that appears at th e end of a ppen dix A is revised to read as follows: BILUNG COOE 8 2 1 0 -0 1 -M LOAN/APPLICATION REGISTER CODE SHEET Application or Loan Information Applicant Information Type: Type of Purchaser R a c e or N atio n a l Origin: 0 - Loan w a s not originated or w a s not 1 -- C on ven tio nal (a ny loan o th er th a n F H A , 2 V A or F m H A loans) -- F H A -insu re d (F ede ra l H ou sin g Administration) 3 -- V A -g u a ra n te e d (V e te ra n s Adm inistration) 4 -- F m H A -in s u re d (F a r m e r s H o m e Administration) 1 -- A m e ric a n Indian or A las kan N ative 1 -- F N M A (F e d e ra l N ational M o rtg a g e A ssociation) 3 -- Black 2 - - G N M A (G o v e r n m e n t N ational M o r t g a g e A ssocia tio n) 4 - His panic 5 -W h ite 6 --O th e r 3 -- F H L M C (F e d e ra l H o m e Loan M o rt g a g e 7 - In form atio n not prov ide d by applicant 4 -• F m H A (F a r m e r s H o m e A dm inistration) in mail or te le p h o n e application Purpose: sold in c a le n d a r y e a r c o vered by regis ter 2 -- A sian or P acific Islander 8 - Not applicable C o rpo ra tion ) 5 -- C o m m e rc ia l b a n k 6 - S a v in g s b a n k or savings association 7 -- L ife in suran ce c o m p a n y 1 -- H o m e pu rc h a s e (o n e-to -fo u r fam ily) 2 S ex: 8 - Affiliate institution 9 - - O t h e r t y p e of pu rc h a s e r -- H o m e im p ro ve m e n t (o n e -to -fo u r fam ily) 3 -- Refinancin g (h o m e p u rc h a s e or h o m e im provem ent, on e-to -fo u r fam ily) 4 -- Multifamily dwellin g (h o m e p u rc h a s e , h o m e im provem ent, an d refin ancin gs) 1 --M a le 2 - F e m a le 3 -- In form atio n not provided by applicant 4 -- Not applicable O w n e r-O c c u p a n c y : Reasons for Denial (optional) in mail or te le p h o n e application 1 -- D e b t-to -in c o m e ratio 2 -- E m p lo y m e n t history 3 -- C redit history 1 - O w n er-o c cu p ied a s a principal dwellin g 4 -• Collateral 2 5 -- Insufficient ca s h (d o w n p a y m e n t, closing costs) -• Not o w ner-o ccu pied 6 -- U nverifiab le information 7 -- C r e d it application in com ple te Action Taken: 1 - Loan originated - Application a p p ro v e d but not a c c e p te d 2 3 - Application de n ie d by financial institution 4 - Application w ithdraw n by applicant 5 -- File clo sed for in com ple ten ess 6 -- Loan p u rc h as ed by your institution BILUNQ CODE M 10-01-C 8 - M o rtg a g e in suran ce d e nie d 9 - O th e r / Rules and Regulations 3 -- Not applicable Federal Register / Vol. 57, No. 232 I W e d n e s d a y , D ecem ber 2,1992 Use the following codes to complete the Loan/Application Register. The instructions to the HMDA-LAR explain the proper use of each code. 56967 SCSfifl Federal Register / Vol. 57, No. 232 J Wednesday, December 2. 1992 V Rules And Regulations By order of the Board of Governors of the Federal Reserve System, November 24. 1992 William W. Wiles, Secretary of the Board [FR Doc. 92-29088 Filed 12-1-92; 8:45 am| BILLING CODE 6210-01-M
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