Article by: Ben Giumarra, Spillane Consulting Associates, Inc.
|Special two-part series this week! First a quick note on HMDA and corrected disclosures. Second, some takeaways from a recent Federal Reserve publication on finance charges.
Part 1: HMDA with TRID Changes
One consideration with the new HMDA rules will be going back and updating the LAR when corrected disclosures are provided. This is a bigger issue than years before for two reasons: (1) There is more data to report (and thus more chance to go back and fix), and (2) many fields are based on the TRID disclosures which require corrected disclosures frequently.
The following items must be reported “as disclosed” on the Closing Disclosure.
So what happens when a Closing Disclosure is revised? What happens when it’s revised post-closing?
–> Report the data as disclosed on the most recent Closing Disclosure. This is true even where the CD is revised (often along with a refund) post-closing.
–> Do not update the LAR if the updated Closing Disclosure is provided in a different reporting period. So, for example, for annual HMDA reporters, if data is reported in 2019 and later changes with a revised CD in 2020, then the 2019 data is still used.
*APR is a recent addition to this list. The April 2017 HMDA rule proposed modest changes to the original HMDA rule. This rule is still proposed but likely to take effect. One change is to add APR to this list of items that are reported “as disclosed.”
Part 2: Federal Reserve & Finance Charges
The Federal Reserve’s always-helpful Compliance Outlook newsletter is out for the first quarter. Read it here. It has an interesting article on “Understanding Finance Charges for Closed-End Credit” that I was excited to read – hoping it was going to settle a few debates about what’s included in the Finance Charge and what’s not.
Let’s break it down.
First of all, this is a GREAT article for anyone looking for an overall rundown of what’s included in the APR generally. Of course, this is one of the few regulatory topics that has basically been the same for decades, so for anyone with less time or more experience, here are some takeaways:
#1) Finance Charge Problems are Common
The article confirms that federal regulators still “frequently cite” institutions for finance charge disclosure violations.
#2) 3rd Party Charge Confusion
The article states “A creditor may mistakenly believe that if it does not retain a charge collected on behalf of a third party, it is not a finance charge.” This isn’t anything new – but it is something we see happen frequently, so I think it’s good to clarify. The fact that they addressed this means the federal regulators are seeing it too. But despite rumors that appear to be spreading – there’s no magic rule that says 3rd party fees are excluded from the APR. Some third party fees are excluded, but many others are not.
#3) Otherwise – Disappointing
While this article is a great summary from the Fed, unfortunately I think it’s a bit of a disappointment because it avoids providing any fresh interpretations on ambiguous items — it doesn’t for example, attack the issue of whether lump sum attorney fees will be included in the APR or not (it only recites the regulatory language that we already had, and that obviously isn’t clear enough).
In Other News
On My Mind …
Cool story out of college football, have you heard of Damion Jackson? He’s earned a spot on the roster of the highly competitive Nebraska team despite never having played football before. Of course everyone told him he didn’t have a chance. But everyone also told him he didn’t have a chance at becoming a Navy SEAL either. Maybe it was because he didn’t know how to swim or use a firearm when he joined the Navy at 18 years old. One year later he was added to the SEAL team, the youngest member of his entire class. When he was originally accepted into SEAL training, everyone asked: “Did he grow up shooting? … Was he on the swim team?” Nope.
His secret? “I’m the kind of guy that gets a wild idea and then I kind of go for it … I put 100 percent of my energy into it.”
“I would say I have an usual level of excitement for the unexpected. I’m very intellectually stimulated by the hard things and managing in uncertainty. I’m calm and happy in that state, instead of being unsettled. I have a real belief that the only way to succeed today is understanding that uncertainty IS the job – it’s not about the light at the end of the tunnel.”
-Katie Beauchamp (CEO of Birchbox, on what everyday thing she does better than anyone else)
Thank you to Ben Giumarra, Spillane Consulting Associates, Inc., a member of our Education Committee, who with the support of other experts at SCA have put together this newsletter.