HMDA and Action Taken By Natalie Straus, Director-Financial Services, Forvis Mazars Despite uncertainty involving the future of the Consumer Financial Protection Bureau (CFPB), recent regulatory agency findings highlight the continued significance of the Home Mortgage Disclosure Act and Regulation C (HMDA). Covered institutions are required to collect and report specific information about certain mortgage lending activity to the federal government on an annual basis. HMDA data is used to accomplish the following goals: 1. To help determine whether financial institutions are serving the housing needs of their communities; 2. To assist public officials in distributing public-sector investment to attract private investment to areas where it is needed; and 3. To assist in identifying possible discriminatory lending patterns and enforcing anti-discrimination statutes.1 In the 2025 Consumer Compliance Supervisory Highlights, the FDIC identified HMDA as the fifth-most cited violation. HMDA violations constituted 65 of the 1,275 total violations cited by the agency in 2024.2 In addition, in the Consumer Compliance Outlook: First Issue 2025, the Federal Reserve indicated HMDA violations constituted 253, or 38.2%, of the 662 total violations identified during exams in 2024.3 Both agencies identified “action taken required under § 1003.4(a)(8)” as a source of violations. Action Taken “Action taken” has long presented reporting difficulties to reportable institutions. Confusion often arises from nuances associated with “approved but not accepted” applications, “withdrawn” applications, applications that are “closed for incompleteness” and “counteroffers.” Approved but Not Accepted An institution must carefully consider the “conditional approvals” guidance when it issues an approval that is subject to the applicant meeting certain conditions, as these do not always constitute an “approved but not accepted” application. HMDA makes a distinction between approvals conditioned solely on “customary commitment or closing conditions” and those that are conditioned on any “underwriting or creditworthiness conditions.” The appropriateness of coding an application “approved but not accepted” when conditions are not met depends on the category of outstanding conditions. “Customary commitment or closing conditions” include conditions such as “clear-title requirement, an acceptable property survey, acceptable title insurance binder, clear termite inspection, a subordination agreement from another lienholder, and, where the applicant plans to use the proceeds from the sale of one home to purchase another, a settlement statement showing adequate proceeds from the sale.”4 “Underwriting or creditworthiness conditions” include conditions “that constitute a counter-offer, such as a demand for a higher down payment; satisfactory debt-to-income or loan-to-value ratios, a determination of need for private mortgage insurance, or a satisfactory appraisal requirement; or verification or confirmation, in whatever form the institution requires, that the applicant meets underwriting conditions concerning applicant creditworthiness, including documentation or verification of income or assets.”5 An institution should report “approved but not accepted” when an approval is conditioned on “customary commitment or closing conditions,” and the conditions are met but credit is not ultimately extended, or when the conditions are not met and the loan is not originated as a result. For example, an application would be coded “approved but not accepted” when the approval is subject to a clear termite inspection and a clear inspection is obtained, but the applicant changes their mind and decides not to purchase the property. In addition, an application would be coded “approved but not accepted” when the approval was subject to clear title requirements, when the title report shows potential issues and the institution is consequently unable to originate the loan. An institution should not report “approved but not accepted” when an approval is subject to “underwriting or creditworthiness conditions” and the Colorado Banker 16
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