HMDA and Company—Highlights for the Upcoming Year

Author: Sarah Sauceda

This past year has shaped up to be quite a ride but buckle up—2018 is fast approaching.

Highlights for 2018 include: (1) Home Mortgage Disclosure Act (HMDA) changes; (2) amendments to the Equal Credit Opportunity Act (ECOA); (3) an increased Truth-in-Lending (TIL) threshold; (4) Community Reinvestment Act (CRA) amendments; and (5) “sunset” provisions.

The time has come for the long-awaited changes affecting HMDA to hit the banking world with a bang. HMDA – version 2018 – includes changes relating to institutional and transactional coverage and data collection, recording, reporting, and disclosure.

As for institutional coverage, HMDA 2018 adopts a uniform loan-volume threshold for all institutions. This means that starting January 1, 2018, an institution will be subject to HMDA if it originated 25 or more covered closed-end mortgage loans in each of the preceding calendar years, or if it originated 100 or more covered open-end lines of credit in each of the past two years. Of course, the institutions making these loans also need to meet other applicable coverage requirements to be subject to HMDA.

As for the amendments to transactional coverage, HMDA 2018 modifies the types of transactions that are covered. Basically, the new version of HMDA adopts a dwelling-secured standard. As of January 1, 2018, covered loans will include both closed-end mortgage loans and open-end lines of credit secured by a dwelling. Another major change to this portion of HMDA concerns business-purpose loans. Starting January 1, 2018, dwelling-secured, business-purpose loans and lines of credit will constitute covered loans if they are home purchase loans, home improvement loans, or refinancings.

One other slightly understated change has to do with preapprovals. Under the new rule, covered institutions will be required to collect, record, and report information for approved but not accepted preapproval requests for home purchase loans. In contrast, preapproval requests for open-end lines of credit, home purchase loans to be secured by multifamily dwellings, and reverse mortgages will not be covered under HMDA.

Lastly and as most of you know, reportable data under HMDA has received a bit of a makeover. HMDA 2018 adds a few extra data points. These new data points include: (a) applicant/borrower age, (b) credit score, (c) automated underwriting system information, (d) unique loan identifier, (e) property value, (f) application channel, (g) borrower-paid origination charges, (h) points and fees, (i) lender credits, (j) discount points, (k) loan term, (l) prepayment penalty, (m) non-amortizing loan features, (n) interest rate, and (o) loan originator identifier as well as other data points.

Again, the effective date for these changes is January 1, 2018. Be sure to remember that, although the HMDA 2018 is upon us, you will still need to submit data collected in 2017 under the current rule with the slight change of submitting the 2017 data to the CFPB instead of the Federal Reserve Board.

 

The updates to HMDA can be found here: https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201708_cfpb_final-rule_home-mortgage-disclosure_regulation-c.pdf

Because the regulators know that changing one major regulation isn’t enough fun, they have also changed ECOA. ECOA’s current ethnicity and race information collection are updated in the 2018 version of the regulation. Additionally, the amendments add certain model forms and remove others. Thankfully the changes to HMDA and ECOA go hand-in-hand, as the purpose of the amendments to ECOA is to facilitate compliance with HMDA version 2018. Note that all these changes to ECOA come into effect on January 1, 2018 with the exception of the amendment that removes the Uniform Residential Loan Application. This particular amendment becomes effective on January 1, 2022.

The final ECOA rule can be found here: http://files.consumerfinance.gov/f/documents/201709_cfpb_final-rule_regulation-b.pdf

It didn’t happen for 2016…It didn’t happen 2017…but the time you have anxiously been awaiting…has finally arrived! The TIL exemption threshold has been adjusted. The exemption threshold will increase from $54,600 to $55,800, effective January 1, 2018.

The rule updating the threshold can be found here: https://www.federalregister.gov/documents/2017/11/09/2017-24445/truth-in-lending-regulation-z

The regulators are at it again and are making more changes—this time to the CRA. Once again, these changes are aimed at helping banks transition to the new version of HMDA. The new rule updates the definitions of “home mortgage loan” and “consumer loan,” and the public file content requirements to conform HMDA 2018. The amendments also cleanup the CRA by removing now obsolete references to the Neighborhood Stabilization Program. The comments closed on October 20, 2017, and the final rule becomes effective on January 1, 2018.

The updates to the CRA may be found here: https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20170913a1.pdf

Finally: When I think of sunsets, I picture beaches, long walks, and OF COURSE regulations that are up for renewal. (This is normal, right?) This last topic concerns the regulations that are set to expire in the near future. These are often referred to as “sunset” provisions because the regulatory sun is quickly setting on them. Some of the major sunset provisions include: sections 531 (maximum rent) and 533 (foreclosure) of the Servicemembers Civil Relief Act (SCRA); the U.S. Department of Housing and Urban Development (HUD) SCRA notice; the National Flood Insurance Program (NFIP); and the Federal Home Loan Mortgage Corporation loan limit of $424,100. These provisions are all set to expire at the very end of 2017, with the exception of the NFIP. NFIP authorization was set to expire on December 8, 2017, but received a two-week extension by Congress (currently set to expire on December 22, 2017). As of now, none of the provisions have been extended past 2017. So, be sure to keep an eye on these regulations towards the end of the year.

In conclusion, there are a great many changes in store for 2018, but if you are prepared, you should be able to handle them with ease and confidence.

For any questions or concerns, feel free to give us a call at (888) 353-3933, chat with us on the website (https://www.compliancealliance.com), or email us at hotline@compliancealliance.com

New Associate Member – IBIS

Economic Outlook by Alan Blinder

November 2017
Alan S. Blinder

Vice Chairman and Co-Founder, Promontory Interfinancial Network
Professor of Economics and Public Affairs, Princeton University

Did anyone really expect the Federal Open Market Committee (FOMC) to raise interest rates on November 1, or even to make news with its statement? If they did, they were sorely—and predictably—disappointed.

The Fed is in no rush to raise rates. (Why should they be? Inflation is still below target.) And the Committee appears to be on track to move up another 25 basis points in December. Besides, Janet Yellen, her colleagues, every Fed watcher, and anyone else who pays attention to the Fed were all eagerly awaiting President Trump’s announcement, due the next day, of his pick to lead the central bank after February. Why, at such a delicate time, would Yellen want to rock the boat?

She didn’t, of course. Almost the only words that changed from the September 20 FOMC statement to the November 1 FOMC statement pertained to the economic impacts of the hurricanes. The Committee needed to show it was awake and sentient—and knew it was November, not September.

President Trump’s expected announcement did indeed come the next day. He selected Jerome (“Jay”) Powell to succeed Yellen. There can be little doubt that Powell will be confirmed by the Senate though I, for one, would not want to predict how long this will take. What can we expect from the new Fed chair?

Regarding bank regulation, Chairman Powell will probably have a lighter touch than Chair Yellen. Everyone is saying this, but don’t exaggerate the differences. Just as she was not a fanatic regulator, he will not be a fanatic deregulator. We are talking about shades of difference, not black vs. white.

Regarding monetary policy, it will be hard to see any differences at all between the outgoing and incoming Fed chairs. As a governor for five years, Powell’s monetary policy was straight Bernanke and then straight Yellen. Expect that attitude to continue as Powell assumes the top spot. Furthermore, Yellen leaves office with the FOMC already moving along a gradual path to higher interest rates and a very gradual path to a smaller balance sheet. Expect those two trends to continue, too.

If there is going to be a difference between Yellen-led monetary policy and Powell-led monetary policy, we won’t see it until something about the economic outlook changes. Almost by definition, no such thing is on the horizon now.

State Associations Call for Continued Bipartisan Work on Reg Reform

LEGISLATIVE NEWS

Fifty-one state bankers associations yesterday wrote to members of the Senate Banking Committee encouraging lawmakers to continue pursuing the goal of bipartisan regulatory reform. The associations called on the committee to include in its overall proposal for regulatory reform several bills that are part of ABA’s Blueprint for Growth, including those that would allow regulators to tailor actions based on banks’ business models and risk profile, revise capital and liquidity requirements and allow mortgage loans held in portfolios to be considered “qualified mortgages.”

In addition, the associations noted that several other legislative proposals for regulatory reform have support on both sides of the aisle, such as a bill to recalibrate the systemic risk designation process and a bill to allow banks to hold municipal bonds and accept municipal deposits. They also called for legislative action on stress testing and the Volcker Rule, both of which were highlighted in the recent Treasury Department report on regulatory reform.

“The cumulative weight of thousands of pages of new regulations and guidance has overwhelmed many of America’s financial institutions, resulting in the loss of 2,800 banks — most of them community banks — in the last decade,” the associations wrote. “It is of the utmost importance that our remaining member banks are able to provide products and services to consumers that are affordable and help grow communities.”

Read the letter.

2018 Executive Development Program

2018 Executive Development Program

 

Cost: WBA/IBA Members: $3,750 per student until September 30, $4,050 thereafter

 

2018 Registration Form

2018 Brochure

 

The Executive Development Program (EDP) is a comprehensive twelve-month course, designed to cultivate the next generation of banking leaders, is an ideal opportunity for aspiring executives to step up their career and for institutions to invest in the strong bank leaders of tomorrow.

Exceptional instructors, with years of industry insights and experience, facilitate interactive course sessions that focus on the important economic, regulatory and competitive pressures facing the industry today including:

  • Today’s banking environment
  • Applied banking strategies
  • Leadership and management
  • Financial profitability, liability and sales
  • Credit and risk review
  • Legislation and politics
  • Audit and compliance with standards
  • Negotiations and conflict resolution
  • Communications best practices
  • Credibility and ethics

EDP also provides a special one-on-one mentorship program – one of only a few such opportunities in the country – pairing student participants with executives from their institutions. Mentorship is vital to student success and offers bank executives an opportunity to be directly involved in the development of future.

Mentors support their mentee on a monthly basis by reinforcing the classroom learning experience, making introductions to key executives within the bank and pairing students with business experts for assistance in their homework preparation.

 

Additionally, we ensure your bankers participating in EDP are provided with:

  • A convenient schedule designed with the busy professional in mind. Classes take place once a month over a twelve-month course period and only 6-8 hours of homework prior to each class
  • Many opportunities to network with class peers, as well as program alumni.
  • Practical skills and lessons that can be put into immediate practice.
  • A solid foundation for their career and an excellent precursor to financial educational opportunities such as the Pacific Coast Banking School.

 

To date, nearly 150 bankers from 22 banks have benefited from this intensive learning experience, graduating with the increased knowledge of banking and all functions of a financial institution. And more than half of EDP graduates have been recognized and promoted within their institutions.

 

SBA Seeks Temporary Loan Processors for Harvey Relief

As you can imagine, many businesses, nonprofits and others are turning to the federal government for financial help to recover from the devastation wreaked by Hurricanes Harvey and Irma. In fact, the demand for disaster loans is overwhelming, and the Small Business Administration is asking for the banking industry’s help – in the form of temporary personnel – to meet it.

The SBA is most interested in filling the following positions (descriptions are below or click here):

  • Loan Specialists
  • Lawyers, Paralegals and Legal Assistants

The agency is in particular need of loan specialists and damage verifiers and is asking banks to consider lending staff to help meet the extraordinary demand. As you will see in the note below from SBA’s general counsel, the personnel would be expected to go to work in specific SBA centers, but the agency is also open to working with banks interested in hosting a group of personnel at their own locations.

Please give thought to this request and also forward it broadly to colleagues who may be able to assist. The SBA – and, no doubt, the thousands who are depending on SBA for disaster assistance – will no doubt be deeply appreciative of any help America’s banks can provide.


Loan Specialists

Locations – Sacramento, CA, Dallas, TX, or Buffalo, NY

This position requires individuals to be able to perform one or multiple of the following functions:  credit analysis, loan processing, and mortgage underwriting. Loan specialist will be located in one of our 3 processing centers in Sacramento, CA, Dallas, TX, or Buffalo, NY.  Specific type of work will be based upon the individual qualifications of each person but basic functions include:

  • Evaluating Financial Information
  • Determining Credit worthiness and repayment ability of individuals and businesses using income related tax documents such as tax returns, W-2, paystubs, consumer credit reports, etc.
  • Making loan recommendations and decisions
  • Evaluation of overall financial condition

Qualifications

Due to the broad array of required loan tasks we are looking for individuals with a range of qualifications.  The position calls for 4 types of skill sets which are credit analysts, loan officers, mortgage underwriters, and recent college graduates with a minimum of a Bachelor’s degree in finance, statistics, business administration or a related business field.  In addition to the above qualifications any applicant with fluency in a foreign language is encouraged to highlight their language and level of proficiency on their application.

Expectations

All loan specialists will become temporary SBA employees and as such will be required to meet the following requirements:

  • Be a U.S. Citizen
  • Pass a credit and background check
  • Able to work between 40 to 84 hours a week based upon case load

Compensation

The SBA will cover all travel and per diem based on the government rate for every individual.  Compensation will be based on each individual’s qualifications, skillsets, responsibility, hours, and location.  Compensation will range from $16.77 to $39.96 per hour.  Overtime pay is authorized and will range from $25.16 to $41.97).

If you are interested in this position, please send your resume to PDCHR@SBA.gov ; questions should be directed to Human Resources at 817-868-2300. SBA is an Equal Opportunity Employer.

Lawyers, Paralegals and Legal Assistants

Locations: Sacramento, CA, Dallas, TX, or Buffalo, NY

These positions require individuals to be able to perform one or more of the following functions, including but not limited to: speak with borrowers and prepare associated legal documents, review closing documents, and validate deeds and collateral.  While a background in these areas is useful, training on all required tasks will be provided by SBA Staff. Personnel will be located in one of our 3 processing centers in Sacramento, CA, Dallas, TX, or Buffalo, NY.

Qualifications

Due to the broad array of required legal tasks we are looking for individuals with a range of qualifications.  The positions call for skill sets with a background in law, so attorneys and paralegals and legal assistants are encouraged to apply.  In addition to the above qualifications any applicant with fluency in a foreign language is encouraged to highlight their language and level of proficiency on their application.

Expectations

All legal specialists will become temporary SBA employees and as such will be required to meet the following requirements:

  • Be a U.S. Citizen
  • Pass a credit and background check
  • Able to work between 40 to 84 hours a week based upon case load

Compensation

The SBA will cover all travel and per diem based on the government rate for every individual.  Compensation will be based on each individual’s qualifications, skillsets, responsibility, hours, and location.  Compensation for attorneys and paralegals will range from $25.41 to $39.96 per hour.  Overtime ($38.12 to $41.97) will be paid for hours over 40 weekly.  Compensation for legal assistants will range from $16.77 to $27.01 per hour.  Overtime ($25.16 to $40.52) will be paid for hours over 40 weekly.

If you are interested in an individual position as a lawyer, paralegal or legal assistant, please send your resume to PDCHR@SBA.gov or call 817-868-2300 and ask for Human Resources. SBA is an Equal Opportunity Employer.

ABA Pledges Support in Wake of Hurricane Irma

September 12, 2017
As Hurricane Irma tore through Florida this weekend and continues to make its way through the Southeast, ABA President and CEO Rob Nichols yesterday pledged the association’s continued support to banks affected by the severe storms, flooding and high winds.

“Our hearts go out to all of those affected by Hurricane Irma. As the first damage assessments start to come in, it is clear that this storm delivered a serious blow to Florida, and remains a threat to other states,” Nichols said. “ABA is closely coordinating with state bankers associations in the affected areas, as well as local, state and federal officials to ensure our customers and communities have access to the banking system. ABA will continue to support the relief effort in any way we can, and we are pleased but not surprised to see so many banks already stepping up to help.”

To help banks and state bankers associations, ABA has made resources available to help with incident response and crisis communications, including individual playbooks for each state and information from the Financial Services Information Sharing and Analysis Center. ABA urges all banks to join the FS-ISAC to receive members-only communications relating to disaster response and preparedness. ABA also provides a free members-only Crisis Communications Toolkit, which includes talking points, FAQs for frontline staff, communications to customers, consumer tips and sample news releases and social media posts for a disaster response situation. View ABA’s incident response resources. Access the Crisis Communications Toolkit.

Strategic Compensation

“Strategic Compensation”

By Matt Brei, President and Kristen Kostner, Senior Consultant, Blanchard Consulting Group – IBA Associate Member

Our firm has been providing compensation consulting services exclusively to community and regional banks for the last seven years, and we can confidently say that one of the first things we talk about with most new clients is the strategic use of compensation. Human capital is likely the most expensive resource a bank has, and we all know our people are important in a customer facing business, so why not be strategic with it? Almost every business has a written strategic plan that states profitability goals, growth goals, three-year plans, etc. Frequently, the board and executive management spend multiple days working on such a plan. However, when it comes to compensation, less than half of banks (47% of the 201 banks surveyed in our 2016 Compensation Trends Survey) have a written compensation philosophy.

Banks are for profit businesses, so it certainly seems to make sense that their compensation programs should be in-line with the strategic goals of the organization. All employees are not the same and do not provide the same value to the bank. As such, they should not all be paid at the median of the market, always receive the same annual 3% salary increase, and receive the same bonus or incentive as their peers. Unless, of course, the strategic plan says you want to be average and you want all your people to be average as well!  We are confident that we never seen a strategic plan with those goals in it.

The Compensation Philosophy

Most organizations start the strategic compensation discussion with the development of a compensation philosophy. This document, often only a page or two, primarily identifies a few key items. 1) What are we trying to accomplish with our compensation programs, 2) What compensation programs do we have available to our employees, 3) Who qualifies for these programs and why, and 4) Where do we want to position ourselves versus market? The compensation philosophy statement should be a living document that is reviewed annually and is adjusted as necessary to support business strategy changes.

Strategic Salary Planning

Banks that are strategic with compensation will frequently have a clearly defined salary grade structure, accurate and up-to-date job descriptions, utilize external market data for position benchmarking, and a salary increase matrix for annual salary adjustments. The salary structure will have enough grades to encompass all levels of positions, and will often be used as a motivational tool to show top performers how they can progress within their current range, and where promotions could place them in the future for career growth and development. The salary structure should be tested against both internal and external bench marking to ensure it’s competitive. The entire structure should also be reviewed annually and adjusted for cost of labor and market trend increases. Ultimately, salary structures do not have to be overly complex to be effective.

Additionally, the annual salary increase process should be strategic, based on the performance of the individual, internal equity with others in the same position, his or her current positioning in their salary grade, and fit within the overall budget of the organization. Many banks utilize a salary increase matrix to assist managers in determining annual raises. The matrix generally focuses on providing the largest increases to employees who are exceeding job expectations and are positioned low in their salary grade. Employees who are simply meeting expectations and are high in their salary grade will often have very minimal increases, and employees who are not performing will generally receive no increase. Those above the maximum of their salary grade typically receive their increase in the form of a one-time lump sum payment.  These matrices help managers be strategic with their salary increase budgets and put the dollars in the right place.  The days of giving everyone the same percent of salary raise are gone.

Performance-Based Incentives

Once you have the salary component figured out, the next step is incentive-based pay. This can take the form of annual cash incentives and/or equity-based incentives. What type/s of incentive a bank utilizes will often vary depending on the company structure (public, private, etc.). Incentives may also vary depending on level of position. As an example, executives may be eligible for a cash and equity incentive plan, but staff may only be eligible for cash incentives. The key to using strategic compensation is to make sure your incentive plans are based on performance and are sufficiently motivating and rewarding key positions. The strategic goals of the organization should be incorporated into the incentive-based compensation plans. The concept is to clearly state what you want your employees to do and encourage and reward these behaviors through your incentive compensation programs. Getting everyone aligned and on the same page as to what the goals are is important for success. This takes time, communication, regular check-ins on performance, and “buy in” from the entire organization.

In today’s banking world, there is a lot of talk about incentive plans being “risky” and maybe even “evil” (example: Wells Fargo retail incentives). We strongly disagree with this sentiment. Banks are still in the business of being profitable and incentive plans have their place to help drive behaviors and reward performance. The key is to have a balanced approach between profitability goals, quality goals, and strategic goals. Some of the incentive plan “horror stories” actually prove that incentive plans work. They do drive behaviors and you simply need to be smart about what performance behaviors you are encouraging.

From our experience, the most successful banks (not unlike other industries) are those who are able to appropriately balance their profitability needs with good culture, good communication, and strategic compensation programs. Banks need to be financially successful to truly help the communities they serve. Ensuring that your compensation programs are strategically supporting the overall goals of your organization and are linked to the performance you need is essential. Make sure you are getting your “bang for the buck” with your compensation dollars being spent.

BANKERS IN THE NEWS

FOR IMMEDIATE RELEASE                                                                                                                           July 14, 2017

Idaho Bankers Association (208-342-8282)
Trent Wright, President and CEO

BANKERS IN THE NEWS

Boise Dan Heiner, SVP, Senior Credit Officer, Citizens Community Bank, Division of Glacier Bank in Boise was recently elected as the 2017/18 Chair of the Board of Directors for the Idaho Bankers Association at its Annual Business Meeting.  The meeting was held during the IBA Annual Convention. He succeeds J.V. (John) Evans, III, Executive Vice President/Regional Credit Officer, of D.L. Evans Bank.

Dan is responsible for direction and oversight of all commercial and consumer lending activities of the bank, including administration of credit policy, loan support functions, and monitoring of asset quality.

Prior to joining CCB Dan was employed by national, regional, and community banks working in several offices throughout south-eastern Idaho as a commercial and agricultural lender.  He has been in commercial banking for more than 40 years.

Dan’s various aspects of community involvement, include:
Board of Directors for the Idaho Bankers Association
Past President and current Director for the Idaho Community Bankers Association
Chairman of Chubbuck Development Authority
Past President of the Greater Pocatello Chamber of Commerce
Board Member of Bannock Development Corporation
Board Member of Eastern Idaho Development Corp
Rotary Club President

He has a Bachelor of Science degree from Idaho State University, and Graduated from Northwest AG Credit School, and the Pacific Coast Banking School- Graduate School of Banking.

Dan resides in Pocatello, Idaho with his wife, Laura. They have 4 children and 7 grandchildren, (soon to be 8).

Other Newly-Elected Officers and Directors of the IBA Board of Directors include:

Chair-Elect: Tracy Silver, Wealth Management Division Director, U.S. Bank
Treasurer: Ron Johnson, Executive Vice President & Chief Financial Officer, Bank of Commerce
Immediate Past Chair:  J.V. (John) Evans, III, Executive Vice President/Regional Credit Officer, D.L. Evans Bank

DIRECTORS:
Bruce Lowry, President & Chief Executive Officer, Ireland Bank
Don Melendez, Idaho Regional President, Wells Fargo
Jason Meyerhoeffer, CEO, First Federal Savings Bank
Justin Smith, Regional President, U.S. Bank
Lori Dizes, Senior Vice President, Region Manager, U.S. Bank
Robert Falco, Area President, Wells Fargo Bank
Toni Nielsen, Western Idaho Regional President, Zions Bank

The Idaho Bankers Association (IBA) is a statewide bankers’ trade association that represents all charter types and sizes of banks operating in Idaho.