Federal Regulatory Update

Federal Regulatory Update

On October 9, 2013, the Consumer Financial Protection Bureau (the “Bureau”) issued a bulletin addressing mortgage lenders’ compliance with the Home Mortgage Disclosure Act (“HMDA”) and its implementing regulation, Regulation C.




HMDA and Regulation C require certain lenders to collect and report information about most mortgage applications as well as most originated and purchased mortgage loans (“HMDA data”).  The Bureau is committed to ensuring that Bureau-supervised mortgage lenders, whether depository or non-depository institutions, develop and/or maintain appropriate HMDA compliance management systems designed to ensure the accuracy of HMDA data.



Effective HMDA compliance management systems frequently include:

  • Comprehensive policies, procedures, and internal controls to ensure ongoing compliance with the collection and reporting requirements set forth in HMDA and Regulation C;
  • As appropriate to the size and complexity of the institution, comprehensive and regular internal, pre-submission HMDA audits, to test and evaluate data accuracy, and that include a reasonable amount of transactional analysis, written reports detailing findings, and recommendations for corrective actions;
  • Reviews of any regulatory changes that may have occurred since the prior examination and/or data collection and reporting cycle;
  • Reporting systems that are appropriate given the volume of the institution’s lending operations;
  • One or more individuals assigned responsibility for oversight, data entry, and data updates, including the timely and accurate reporting of the institution’s data;
  • Appropriate, sufficient, and periodic employee training to ensure that responsible personnel understand HMDA and Regulation C standards and reporting requirements;
  • Effective corrective action in response to previously identified deficiencies; and
  • As appropriate, board and management oversight.


Each institution should ensure that its HMDA compliance management system is tailored appropriately to its operations.  The Bureau also encourages institutions to apply the Bureau’s HMDA Resubmission Schedule and Guidelines, which are discussed below, to manage HMDA compliance and facilitate effective corrective action on self-identified errors.



The Bureau’s HMDA Resubmission Schedule and Guidelines (“Resubmission Schedule”) take an approach that is similar to the approach taken by other federal regulators: examination teams should ask institutions to correct and resubmit the HMDA Loan Application Register (“LAR”) when the number of errors in a sample exceeds a resubmission threshold.  However, the Bureau’s guidelines will apply different standards depending on whether or not the institution has 100,000 or more HMDA LAR entries.



Under the Resubmission Schedule, which sets forth guidance to the Bureau’s examination teams, institutions reporting fewer than 100,000 HMDA LAR entries should correct and resubmit HMDA data when 10% or more of a sample of HMDA LAR entries contains errors.  In certain cases, sample error rates below 10%— or below 5% in an individual data field — may call for resubmission if the errors prevent an accurate analysis of the institution’s lending.



Given the significance of their impact on access to mortgage credit, institutions reporting 100,000 or more HMDA LAR entries should correct and resubmit HMDA data when at least 4% or more of a sample of entries from the HMDA LAR contains errors.  Resubmission thresholds are lower at institutions with 100,000 or more HMDA LAR entries because a lower sample error rate at these institutions could nonetheless reflect a larger number of HMDA LAR entries with errors than a comparable error rate at an institution with a smaller HMDA LAR.  In certain cases, error rates below the 4% threshold, or below 2% in an individual field, may call for resubmission if the errors prevent an accurate analysis of the institution’s lending.



The Bureau will take appropriate corrective action to ensure that the institution’s HMDA data set is accurate, and that any compliance management weaknesses that led to the errors are corrected.



The Bureau may take public enforcement action.  In determining whether to pursue a public enforcement action, the Bureau will consider relevant factors, including:

  • The size of an institution’s HMDA LAR and the observed error rate;
  • Whether an institution self-identified its HMDA errors outside the context of an active examination or examination-related activity, and independently took appropriate corrective action; and
  • If the institution has previously been on notice regarding high HMDA LAR errors such that the institution should have known of ongoing HMDA LAR error rates in excess of the resubmission threshold:
    • Whether error rates observed during the current exam are sufficiently lower such that they should be viewed as a sign of substantial progress in improving HMDA compliance management; or
    • Whether, despite notice, error rates have remained high or have increased.


Through a public enforcement action, the Bureau may seek civil money penalties and other corrective action as appropriate.  In determining the appropriate size of any penalty it seeks, the Bureau will consider the factors set forth above as well as the following factors, as appropriate, which are set forth in the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010:

  • The size of financial resources and good faith of the person charged;
  • The gravity of the violation or failure to pay;
  • The severity of risks to or losses of the consumer, which may take into account the number of products or services sold or provided;
  • The history of previous violations; and
  • Such other matters as justice may require.