All posts by synergy

The Latest Developments at the CFPB

June 13, 2018 synergy Leave a comment

The acting director of the Consumer Financial Protection Bureau (CFPB) often says that the only reason he hasn’t burned the agency down is because it’s illegal.

Mick Mulvaney, the staunchly conservative White House budget director, has taken extensive steps to restrain and reform the CFPB while insisting he would do just enough to meet its legally mandated actions. He has worked to undo years of the bureau’s most controversial rules while laying the groundwork for a massive reduction in the CFPB’s reach and authority, including calling on Congress to strip its powers.

Just this week, Mulvaney dismissed the members of three CFPB advisory boards, including a consumer advocate panel he’s legally required to meet with twice each year.

Here are five ways that Mulvaney, who fought against the CFPB’s creation as a member of the House, has transformed it from within during his six months atop the agency.

Structural changes and political hires

Mulvaney has used his vast power and independence to sway the CFPB by pairing career bureau staffers hired for policy chops with highly paid political appointees. He’s also rearranged the bureau’s structure, making a broad array of powers subject to his appointees’ control.

Mulvaney’s top aides have overseen efforts to slim down the bureau and make it more responsive to the financial services industry.

The acting director brought on Brian Johnson and Kirsten Sutton Mork in senior roles, giving them oversight of most day-to-day bureau functions. The former aides to Rep. Jeb Hensarling (R-Texas), the House Financial Services Committee chairman, were key to his legislative and investigative efforts to tame the CFPB.

Hensarling led the House GOP’s push to repeal most of the CFPB’s powers and launched probes of the bureau’s regulatory actions through his subpoena power.

Mulvaney, a former Financial Services panel member, said the arrangement mirrored other federal agencies and balanced out a staff composed mainly of Democratic Sen. Elizabeth Warren’s (Mass.) acolytes.

Mulvaney also stoked rage among the CFPB’s progressive supporters and some small financial institutions when he dismissed this week the members of three key advisory groups.

CFPB officials downplayed the furor among consumer advocacy groups and insisted that board members only cared about “their taxpayer funded junkets to Washington, D.C., and being wined and dined by the Bureau.”

Board members called the claim outrageous and some offered to cover their own expenses.

“We give two days of our time working, sitting at our table from morning until night, digging into these weighty issues,” Josh Zinner, the CEO of the Interfaith Center on Corporate Responsibility, said Wednesday. “They have no actual rationale for dismissing these boards, and now they’re just resorting to name calling. It’s absurd.”

Retreat on payday lending crackdown

Mulvaney has reversed the CFPB’s wide crackdown on short-term, high-interest loans.

The acting director opposes the bureau’s October 2017 rule targeting “payday” loans and sought to delay it through several means. He delayed the compliance date for the first portion of the rule in January, and started the lengthy regulatory process to rewrite it.

The CFPB filed a joint motion with a group of payday lenders suing against the rule, asking the court to delay its effective date until their case is completed.

Mulvaney has also dropped several cases against payday lenders but insists the bureau is pursuing several others under its legal mandate to enforce fair lending laws.

But his step back from the CFPB’s efforts to tackle payday lending has enraged the bureau’s liberal allies and its former director, Richard Cordray, who issued the payday rule shortly before stepping down to run for Ohio governor.

Call for complaints about CFPB’s own actions

The CFPB has issued several formal requests for complaints on almost every aspect of its own regulatory and enforcement actions.

Banks, lenders and financial services firms have griped for years about the bureau’s aggressive oversight. But the official call for complaints will give the CFPB a wealth of documented rationale meant to justify major reversals in bureau policy.

The requests target the ways the CFPB crafts regulations, begins investigations, issues subpoenas and penalizes firms it believes have violated laws.

“Regulation by enforcement is done,” Mulvaney said in April. “Financial services providers should be allowed to know what the law is before being accused of breaking it.”

Cost-cutting measures

The 2010 Dodd-Frank Act empowers the CFPB director to request from the Federal Reserve as much money as they deem necessary each fiscal quarter, and the Fed is obligated to provide the funding.

Mulvaney requested $0 during his first fiscal quarter in charge of the bureau, saying he’d instead use the CFPB’s $177 million emergency reserve account with the Fed’s New York branch.

The fiscal hawk former congressman is mulling ways to slash the CFPB’s expenses, including personnel changes or relocations. He’s also floated reducing the amount of outside scholarship conducted by CFPB employees the bureau sponsors.

Rebranding push

Mulvaney has tried to drag the CFPB as far as possible from its roots as Warren’s brainchild. He’s insisted the agency should be called by its formal legal name, the Bureau of Consumer Financial Protection, despite the frequent use of shorter names by other federal entities.

The acting director has said he wants to bring the CFPB in line with noncontroversial regulators, such as the Federal Deposit Insurance Corporation.

“I don’t want us to be Elizabeth Warren’s baby, because as long as you’re associated with one person, be it me or her, you’re never going to be taken as seriously as a bureaucracy, as an oversight regulator as you probably should,” Mulvaney said in April.

The bureau has also adopted a less flashy, more traditional logo, though its website still sports Cordray-era neon green.

Source: http://thehill.com/regulation/finance/391443-five-ways-mulvaney-is-cracking-down-on-his-own-agency?amp

Mortgage Banking

Loan Officer Back to Basics Refresher

June 13, 2018 synergy Leave a comment

Low numbers of homes for sale have made the current housing market very competitive. For prospective buyers, this has meant it is more important than ever to be in the strongest position possible when making an offer.

Unfortunately, the market isn’t always the only barrier to home ownership. Nearly one in 10 borrowers gets denied for a mortgage, according to recent analysis by LendingTree. We pinpointed the biggest reasons mortgage applications were denied.

Here are five things that can torpedo your mortgage application.

1. Your past credit history

A poor credit history is the overarching reason that can lead to your mortgage loan being denied. In our study, one in four denied borrowers (26%) were turned down because of their credit history. The good news is that you are continually updating your credit history and can take steps to improve it if there are disadvantageous items.

Review your credit report on Annualcreditreport.com or through a monitoring service like My LendingTree to ensure it is accurate. Work to address any adverse records before applying for the loan.

2. Cutting it too close on debt-to-income

A lot of the trouble from the financial crisis was because borrowers were put into homes they could not pay for on a sustainable basis. As a result, mortgages since then have adhered very strictly to income requirements. Stretching to buy your dream home is not advisable. Lenders are unlikely to approve borrowers whose debt-to-income ratios exceed 36%. DTI is your total monthly debt obligations divided by your gross monthly income. It was the cause of 26% of mortgage denials in our study.

3. Taking out new credit before closing

Most borrowers know to avoid applying for new accounts in the run-up to their mortgage application. That advice still applies once you are approved and are on the way to closing on a home. The length of time between initial application and closing is about 45 to 60 days. Lenders will check your credit again just prior to closing, and material changes could affect the cost of the loan or even lead to an approval being reversed. Avoid new applications for other credit during this time.

4. The property is not worth the price

The lending decision evaluates two things: the borrower and the property, which is the collateral the lender will receive in the event the borrower defaults. In our analysis, collateral was the third-leading cause of mortgage denials, indicating the home was not worth enough to justify the financing requested. Make sure you have a look at the property and have a trusted home inspector look it over, too.

5. Sloppiness and lack of documentation

The days of loans with little to no documentation are long gone. Make sure everything in your application, from your tax records to your employment history, is accurate and you have documentation. Be proactive and gather all the typical documentation you’ll need before you apply, so you aren’t denied a loan or delayed in closing.

Tendayi Kapfidze is LendingTree’s chief economist. He oversees the online lending exchange’s analysis of the U.S. economy with a focus on housing and mortgage market trends.

Source:https://www.cbsnews.com/news/5-things-that-can-torpedo-your-mortgage-application/

Commercial Banking

Risks and Compliance in Commercial Banking Today

June 13, 2018 synergy Leave a comment

In today’s news cycle, it seems barely a week goes by before another headline flitters across a social news feed about a data breach at some major U.S. or foreign company. Hackers and scams seem to abound across the marketplace, regardless of industry or any defining factor.

Cybersecurity itself has become an increasingly important issue for bank boards—84 percent of directors and executives responding to Bank Director’s 2018 Risk Survey earlier this year cited cybersecurity as one of the top categories of risk they worry about most. Facing the industry’s cyber threats has become a principal focus for many audit and risk committees as well, along with their oversight of other external and internal threats.

Technology’s influence in banking has forced institutions to come to terms with both the inevitability of not just integrating technology somewhere within the bank’s operation, but the risk that’s involved with that enhancement. Add to that the percolating influence of blockchain and cryptocurrency and the impending implementation of the new current expected credit loss (CECL) standards issued by the Financial Accounting Standards Board, and bank boards—especially the audit and risk committees within those boards—have been thrust into uncharted waters in many ways and have few points of reference on which to guide them, other than what might be general provisions in their charters.

And lest we forget, audit and risk committees still face conventional yet equally important duties related to identifying and hiring the independent auditor, oversight of the internal and external audit function, and managing interest rate risk and credit risk for the bank—all still top priorities for individual banks and their regulators.

The industry is also in a welcome period of transition as the economy has regained its health, which has influenced interest rates and driven competition to new heights, and the current administration is bent on rolling back regulations imposed in the wake of the 2008 crisis that have affected institutions of all sizes.

These topics and more will be addressed at Bank Director’s 2018 Audit & Risk Committees Conference, held June 12-13 at Swissôtel in Chicago, covering everything from politics and the economy to stress testing, CECL and fintech partnerships.

Among the headlining moments of the conference will be a moderated discussion with Thomas Curry, a former director of the Federal Deposit Insurance Corp. who later became the 30th Comptroller of the Currency, serving a 5-year term under President Barack Obama and, briefly, President Donald Trump.

Curry was at the helm of the OCC during a key time in the post-crisis recovery. Among the topics to come up in the discussion with Bank Director Editor in Chief Jack Milligan are Curry’s views on the risks facing the banking system and his advice for CEOs, boards and committees, and his thoughts about more contemporary influences, including the recently passed regulatory reform package and the shifting regulatory landscape.

Source: https://www.bankdirector.com/index.php/issues/risk/good-and-bad-facing-audit-and-risk-committees-today/

Commercial Banking

Commercial Banks and Their Share of the Mortgage Industry

June 13, 2018 synergy Leave a comment

The five largest U.S. banks originated residential mortgages worth less than $87 billion in Q1 2018. This marks a sharp reduction from the figure of $110 billion in the previous quarter, and is also well below the $96 billion in mortgages originated a year ago. In fact, this was one of the worst quarters on record for these banks in the last twenty years. The only instance where these banks fared worse was in Q1 2014, when the end of the mortgage refinancing wave resulted in total originations dropping to $75 billion.

The sharp decline is primarily because of the reduction in overall activity levels across the mortgage industry from an increase in interest rates – something that can be attributed to the Fed’s ongoing rate hike process. While total mortgage originations for the industry also fell to $346 billion from $361 billion a year ago, a sharper decline in origination activity for the largest banks led their market share lower to 25% from 27% in Q1 2017.

We capture the impact of changes in mortgage banking performance on the share price of the banks with the largest mortgage operations in the U.S. – Wells Fargo, U.S. Bancorp, JPMorgan Chase and Bank of America – in a series of interactive dashboards. Total U.S. Originations includes fresh mortgages as well as mortgage refinances as compiled by the Mortgage Bankers Association

The mortgage industry in the U.S. witnessed a sharp reduction in origination volumes since Q4 2016, as a series of interest rate hikes by the Fed weighed on mortgage refinancing activity even as an increase in mortgage rates hurt the number of fresh mortgage applications. This led to total mortgage originations falling from $561 billion in Q3 2016 to just $346 billion in Q1 2018. There was a notable uptick in mortgage activity over Q2-Q3 2017, though, as a small reduction in long-term mortgage rates helped boost demand over this period.

Wells Fargo Maintains Its Lead

Wells Fargo has remained the largest mortgage originator in the country since before the economic downturn. While the bank was always focused on the mortgage business, it tightened its grip in the industry after the recession thanks to its acquisition of Wachovia – originating one in every four mortgages in the country in early 2010. Although weak conditions in the mortgage space dragged down Wells Fargo’s market share to a low of 11% in Q4 2015, the bank’s market share has largely remained around 12.5% over recent quarters.

That said, the combined market share of these five banks has fallen drastically from over 50% in 2011 to around 25% now. This was primarily due to a sizable reduction in mortgage operations by Bank of America and Citigroup to curtail losses they incurred in the wake of the recession. In fact, Bank of America’s mortgage banking division has shrunk to an insignificant part of its business model – leading to a decision by its management to no longer report mortgage banking revenues separately starting in Q1 2018.

s://www.forbes.com/sites/greatspeculations/2018/06/07/largest-u-s-commercial-banks-continue-to-lose-market-share-in-the-mortgage-industry/#72ac9d1d9e86

Commercial Banking

Regulation Compliance Bruden Now Quantified

June 13, 2018 synergy Leave a comment

How much does your bank spend on regulatory compliance?

A recent Fed district bank study found that community bank compliance costs averaged 7.2% of non-interest expense. While significant by itself, that average hides a trend with significant implications—but let’s not get ahead of the story.

When S. 2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act was signed into law, the industry breathed a big sigh of relief. But getting rid of some of the Dodd-Frank Act rules, or easing them, won’t solve the totality of the regulatory burden banks face—not by a long shot. There was plenty to do before Dodd-Frank came about, and most previous relief laws merely nibbled around the edges of compliance duties.

Compliance isn’t fading away

In fact, it has been pointed out by some in the compliance fraternity that, in the wake of S. 2155, banks initially will face additional costs in unwinding systems and procedures built at a significant cost to handle the rules that have been eliminated or amended.

Indeed, in an analysis of S. 2155 on BankingExchange.com by Zach Fox of S&P Global Market Intelligence, “Still engulfed by regs,” the writer states:

“For smaller banks, the relief appears more modest. Some of the law’s provisions meant to ease regulatory burden will have little impact for a simple reason: Small banks were already exempt. Provisions, such as qualified mortgage status for loans held in portfolio, higher leverage at bank holding companies, a lengthier exam cycle, and a shorter call report, were already available to banks with less than $1 billion of assets.”

The hopes for further relief through Senate consideration of other financial legislation sent over by the House remain just that—hopes. Political promises from Senate leadership to House Financial Services Commission Chairman Jeb Hensarling have been made in a midterm election year that may exert unusual gravitational pull on legislation.

Burden’s costs and implications

And that makes the findings of a Federal Reserve Bank of St. Louis study about community banks’ regulatory costs especially interesting.

For those who predict that compliance costs will continue to encourage consolidation at the small end of the industry spectrum, the study provides more evidence.

Indeed, the study reports that 85% of bankers in the most-recent sampling in its database indicated that regulatory costs were important in considering acquisition offers.

The project makes it clear that regulatory burden hits smaller community banks harder than larger community banks, and that the impetus to merge for compliance efficiency will not go away, even though the recent regulatory reforms may help some institutions.

Major findings

The Fed study, entitled Compliance Costs, Economies Of Scale, And Compliance Performance, was published in April. The project was based on survey data compiled from among nearly 1,100 community banks by the Conference of State Bank Supervisors in 2015, 2016, and 2017. (All institutions in the sample were under $10 billion in assets.) Interestingly, the researchers also referenced multiple studies of banking compliance costs that have been performed in recent years by agencies, academics, and associations to give a full picture around their own findings and arguments.

The survey looked at regulatory costs in multiple ways and at multiple levels. Among the findings:

• Economies of scale exist in compliance.

Many forms of compliance have incremental costs—suspicious activity reporting, mortgage transactions, etc., cost more with increasing volume—but the ongoing fundamental systems costs and the costs of keeping current apply to all institutions.

“Banks with assets of less than $100 million reported compliance costs that averaged almost 10% of non-interest expense,” the study reports, “while the largest banks in the study reported compliance costs that averaged 5%. In other words, the compliance cost burden for the smallest community banks is double that of the largest community banks.” [Emphasis added.] The largest banks referred to were those with between $1 billion and $10 billion in assets.

• Bank Secrecy Act compliance costs lead the way among expenses tied to specific regulations.

In the 2017 survey results, based on 2016 numbers, BSA expenses dwarfed all other compliance costs, with the exception of those related to RESPA, TILA, and Regulation Z. This is interesting because Comptroller of the Currency Joseph Otting, a former banker, identified BSA costs early on as a priority. While banking agencies can’t directly change the rules, Otting has spearheaded efforts to discuss these issues with the agency that does, the Financial Crimes Enforcement Network, or FinCEN.

As the exhibit below indicates, mortgage-related rules would supplant BSA as the leading categories if the RESPA, TILA, and Regulation Z, Qualified Mortgage, and Ability to Repay rule bar were combined into one, totaling almost 36%.

Source: Compliance Costs, Economies Of Scale, And Compliance Performance

• Personnel expenses account for the majority of community bank compliance costs.

The study found that this was followed, in order, by data processing, accounting, consulting, and legal expenses. The report states that personnel costs—coming to 5.1% of average non-interest expense—represent almost seven times more than the other four categories combined.

Source: Compliance Costs, Economies Of Scale, And Compliance Performance

“Compliance expenses for personnel appear to be more subjective than expenses in the other categories,” the report says. “For example, it may be difficult to estimate just how much time a loan officer spends filling out compliance forms versus drumming up new business. Respondents may account differently for the time and attention devoted to compliance by chief executive officers or boards of directors.”

• Compliance spending and compliance ratings bear little relationship to each other.

For this analysis, the researchers looked at both compliance ratings and the M—for management—component of the CAMELS ratings, which includes consideration of the management and board oversight of the compliance function.

Source: Compliance Costs, Economies Of Scale, And Compliance Performance

The analysis found that “within a given size category, compliance expenses as percentages of non-interest expense do not appear to vary systematically for banks with different performance ratings. For banks with assets of less than $100 million, for example, relative compliance expenses at the highest-rated banks were lower than for other banks, while for banks with assets between $500 million and $1 billion, relative compliance expenses were higher for the highest-rated banks than for other banks. This suggests that compliance performance is based on factors other than what is spent on it.”

Source: http://m.bankingexchange.com/news-feed/item/7605-reg-burden-hits-small-hardest?Itemid=638

Bonus

Top Napa Valley Wineries to Visit

June 13, 2018 synergy Leave a comment

Alpha Omega

This family-owned winery on the main tourist route along Highway 29 has made its name with high-end single-vineyard Cabernets from famous vineyards like Beckstoffer To Kalon and Beckstoffer Dr. Crane. The rustic-chic, barn-like tasting room offers current releases for $50 and a tour and tasting for $65; there are also private tastings by appointment. Arrive in nice weather and sip on the panoramic terrace.

Beaulieu Vineyard

One of the oldest producers in the valley, BV offers tours of the original winery building, which dates back to 1885. These are followed by barrel samples of Cabernet and a stop in the new Heritage Room, which chronicles the history of wine in Napa.

Beringer

One of the top large wineries in the world, Beringer has long done an exceptional job of producing a substantial volume of reliably high-quality wine, from the entry level bottlings to the often extraordinary Private Reserves. Its impressive, 1884 fieldstone Rhine House, housing the tasting room, is a Napa Valley landmark. There are various tasting and tour options; try the $55 Taste of Beringer Tour, which includes a barrel sampling in the old, hand-dug caves and a guided, sit-down tasting.

Black Stallion

Visitors can assess leaf shape and cluster size and otherwise analyze 17 grape varieties in the demonstration vineyard here. Drop by for a walk-in tasting room ($20-$50 depending on the flight).

Buehler Vineyards

The nicely understated Cabs at this family-owned vineyard are some of the valley’s best values. Plus, private tours and tastings are hosted by the Buehler family.

Cade Estate

The views of the valley floor are glorious from this super-sustainable, LEED Gold–certified winery, located on Howell Mountain. Guests can taste Cade’s superb Sauvignon Blanc in its chic outdoor living room.

Cakebread

Cakebread, a familiar sight on Highway 29 in Rutherford, was one of the moving forces behind Napa’s revival in the 1970s, and scored a runaway success with its luscious style of Chardonnay, plus full-flavored reds. Cakebread (it’s the family name, by the way, not a wine descriptor) is serious about its guest experience, and offers a range of tastings, tours, educational experiences and food pairings.

Brasswood

This sleek winery in St. Helena is a destination in itself, with the Brasswood Bar + Kitchen serving “Wine country comfort food” Wednesdays through Sundays, the Rosgal Gallery (call ahead), and of course the tasting room itself, plus the clubby Winemaker’s Den private room, available by appointment.

Caymus

Caymus’ velvety, full-throttle Special Selection Cabernet Sauvignon was among Napa’s first “cult Cabernets” back in the 1970s, and it’s still going strong under the third generation of the Wagner family to run the operation. Visitors to their beautiful old fieldstone winery, tucked away off Conn Creek Rd. pay a $50 per person tasting fee to sample five wines produced by the Wagner family (who also make Conundrum, and Mer Soleil among other labels).

Chappellet

This is the oldest winery on Pritchard Hill, a stunning, high-elevation area known for producing some of Napa’s best Cabs. Chappellet’s extensive 90-minute Vineyard Tour and Tasting includes a walk through the organic vineyards and a seated tasting of new releases.

Chateau Montelena

This winery is famous as a location in the movie Bottle Shock, a fictionalized account of the famous 1976 Judgement of Paris tasting, when Montelena’s Chardonnay upset a roster of great French wines. The Chardonnay is still very worthy, but most visitors will arrive at Montelena’s gorgeously sited, 19th century stone château thirsty for the famous Cabernets and Zinfandels. There are numerous tasting and tour experiences on tap, from the $30 current release tasting (reserve ahead) on up.

Clif Family Winery

The Clif family, of energy bar fame, makes excellent wine as well. Rent a road bike from the Velo Vino tasting room and do the 24-mile Cold Springs Loop, past Clif’s organic farm and vineyards, with espresso before and a wine tasting after. Clif Family Winery has also introduced a food truck, The Clif Family Bruschetteria, which is typically parked outside their tasting room. The truck serves numerous variations of bruschetta along with other Northern Italy–inspired fare. Much of the produce is sourced directly from the Clif Family Farm.

Cliff Lede

Each of Cliff Lede’s vineyard blocks is named for a rock song. Get a backstage pass for access to limited production wines, including “High Fidelity” and “Rock Block” offerings. The lounge also features rotating art exhibits. Prior reservation required.

Clos du Val

For many years this foundational Stags Leap District winery was known for an austere style favored by its fans, but at odds with many of its neighbors. But beginning with the superb 2012 vintage, the winery started to produce reds in a richer, more velvety style that, as the winery puts it, “embraces the Napa Valleyness” of the wines. You can taste the evolution at the lovely winery in a variety of settings—there are picnic tables, pre-reserved private cabanas, and a just-drop-in tasting room with current releases.

Corison

Make an appointment to taste through library samples of older vintages of winemaker Cathy Corison’s fantastic Cabernet Sauvignons. Tasting flights include our current release and selected library vintages, available exclusively at the winery.

Domaine Carneros

Founded by Champagne Taittinger in 1989, Domaine Carneros’s impressive, largely solar-powered château amid the rolling hills on Route 12 was modeled on Taittinger’s Château de la Marquetterie back in France. You must reserve ahead for even the basic tasting. But it is worth it, both for the educational experience (the $50 tour, offered three times a day, takes you from the vineyard to the cellar), and for the laid-back atmosphere—you can sip away at a table on the terrace with its sweeping vineyard views. Top-notch bubbly is the thing here, but the still wines are lovely as well.

Domaine Chandon

Chandon is one of the few wineries in Napa Valley with a food menu to complement its sparkling wine list. Purchase wine buy the flight, glass or bottle then settle into the festive patio or find a quiet spot in an Adirondack on the expansive lawn under the oak trees.

Duckhorn

Duckhorn, one of the pioneers of Napa’s modern era, first struck gold with Merlot, notably its famous luxury bottling from Three Palms Vineyard, which remains its flagship. The winery also has a following for palate-flattering Cabs and Sauvignon Blancs. Though the main portfolio tends toward the expensive, there are more affordable wines well worth enjoying under the Decoy and Canvasback labels. Reserve ahead and taste five current releases for $35, or opt for various limited bottle tastings.

Etude

Etude’s deck is idyllic, with bright white umbrellas and tastings of excellent Chardonnay and Pinot Noirs.

Failla

It’s a little strange that Failla even allows visitors, considering how sought-after its wines are. Ehren Jordan, one of Napa’s most lauded winemakers, often hangs out with guests in his courtyard. Taste single-vineyard Pinots (made with grapes from around the state) in the restored farmhouse or 15,000-square-foot cave.

Far Niente

At $75 per person, this tour and tasting may actually be one of the best bargains in the Valley. The fieldstone winery, an 1885 National Register landmark was lavishly restored by the Nickel family, who own the property, dug its famous wine caves and planted its lovely gardens. The tour takes it all in, but the wines themselves are the real draw.

Flora Springs

If you’ve driven up Highway 29 into St. Helena you’ve surely seen the Las Vegas-worthy, wavy façade (a cutaway soil profile?) of Flora Spring’s multi-venue tasting room, which is a lovely, drop-in tasting room inside (with some premium tastings requiring reservations.) But it’s also worth bushwhacking a bit off the main drag to the actual winery, a once-abandoned 19th-century stone structure that is also home to the family proprietors. You’ll need an appointment to access its slate of tours and experiences.

Frank Family Vineyards

Proprietor Rich Frank’s resume as one of Hollywood’s long-running inside players includes nearly a decade as president of Walt Disney Studios. His historic Calistoga winery has a notable history of its own—it is on the site of the old Kornell Champagne Cellars and the 19th-century Larkmead before that. The pretty frame house that serves as the tasting room offers a four-wine tasting, including one of the Cabernets that have quickly put Frank on the map; the $40 tasting includes its often-overlooked, but excellent artisan sparkling wine.

Grgich Hills Estate

Creamy, full-flavored Chardonnays were this Napa icon’s first signatures, and are still the standard-bearers—the basic $25 tasting flight is all Chardonnay—but visitors to this easy-going valley-floor winery (Hills is a partner’s name, not a geographical description) should be sure to get a taste of the lively Fumé Blanc, or the graceful, medium-rich Cab or Zinfandel to get the winery’s approach to making wines of finesse.

HdV

Winemaker Stéphane Vivier, a French expat, uses Burgundian winemaking techniques, like fermenting in enormous French foudres and meticulously sorting grapes after harvest, to make his fantastic Carneros Chardonnays.

Heitz Cellar

When your palate is tired out from tasting dozens of Cabernets, try this fantastic winery. It has Cab, too, but it is definitely the only winery in Napa making floral, strawberry-scented and light-bodied Grignolino, an obscure Italian variety.

Inglenook

The elegant, ivy-covered Inglenook Château is a Napa icon, dating back to the 1800s; it was purchased from the Niebaum family by Francis Ford Coppola in 1975. Small-group tours ($75/person) end with a seated tasting paired with artisanal cheeses. Afterward, stop by the perfectly curated shop for tabletop pieces from designers like William Yeoward and L’Objet pour Fortuny.

Long Meadow Ranch

All of the tastings here include samples of the estate’s wonderful olive oils, too. Reserve a spot for the Chef’s Table ($145), which occurs in a private room and is served with wine pairings. Dishes are tailored to the wines, from Sauvignon Blanc to Cabernet.

Long Meadow Ranch, 707-963-4555

Louis M. Martini

This over 80-year-old winery continues to make exceptional, value-driven Cabernet from both Sonoma and Napa for every vintage. Its tasting room offers a rotating selection of 10 wines.

Ma(i)sonry

20 small California wineries offer tastings at the Ma(i)sonry collective. Guests can taste from whichever wineries they choose in whichever setting they prefer, from a steampunk-art gallery to a contemporary sculpture garden to a blanket on the lawn.

Newton Vineyard

The vineyard tour of Newton’s sustainably farmed property on Spring Mountain is epically beautiful. Wander through classical English gardens, ride around in a six-wheeler, then look out over all of Napa from beside Pino Solo (a lone pine at the peak of the estate), while tasting Newton’s wines. At $100, it’s expensive but worth it.

Odette Estate

A high-style, new Stag’s Leap winery from the high-profile team (Gordon Getty, Gavin Newsom and Napa Valley veteran John Conover) behind PlumpJack and Cade, this is a gorgeous contemporary winery in a dramatic location under the Stags Leap Palisades. Make an appointment to taste the extraordinary, top-level Cabernet Sauvignon (though taking a bottle home will cost you in the triple digits).

Truchard

Truchard makes 15 small-batch bottlings of Cabernet, Pinot Noir and Chardonnay, several of which are available only in its tasting room. Tours here (sometimes led by a Truchard family member) take guests around the vineyards and wine caves, including samples of four wines along the way.

Whetstone

Whetstone’s tasting room is situated in a real live Napa Valley château built in 1885. Sit around a big stone fireplace and taste current-release Chardonnays and Syrah while snacking on rosemary almonds.

Whitehall Lane

The Leonardini family’s high-quality winery has remained surprisingly under many wine lovers’ radar. But those who linger awhile at the tasting room off Highway 29 south of St. Helena can taste their portfolio of wines—notably the Cabernets and Merlots—offered at realistic prices. A drop in tasting of four wines is just $25, but those with more time should consult the website for a roster of options, including tastings outdoors in the vineyards.

Source: https://www.foodandwine.com/slideshows/best-napa-valley-wineries-visit#1

Mortgage Banking

Secrets of Quicken Mortgage Loans Success

June 13, 2018 synergy Leave a comment

Quicken Loans recently overtook embattled Wells Fargo to become the leading direct-to-consumer mortgage lender in the nation.

It is the first time a Detroit-based firm has ever held that title.

Yet being No. 1 in mortgages is a lot different than being tops in other industries, such as automotive. In the highly fragmented mortgage sector, where prospective borrowers can visit some 30,000 bank branches and credit unions across the country for a home loan, Quicken commands a market share of just 5.4 percent.

“Every time we start to get a big head, I remind our people, ‘You know that 19 out of 20 people who wake up this morning and get a home loan aren’t coming here?’ ” Dan Gilbert, 56, Quicken’s founder and chairman, said in a one-on-one interview in the firm’s bright downtown headquarters with windows facing the Renaissance Center and the Detroit River. “We’ve got a long ways to go.”

Gilbert said he thinks Quicken can grow to 10 percent of the market — perhaps even 20 percent or more. The key, he said, is to keep improving Quicken’s edge in technology and customer service.

“That’ll take time,” Gilbert said from his 10th floor office in One Campus Martius, previously known as the Compuware building, in Detroit. “But we have the platform and infrastructure in place to do that. We really think we do.”

Such a feat is rare and hard to achieve. Few lenders ever capture more than 10 percent of the retail mortgage market, a category that excludes loans made through brokers, according to Guy Cecala, CEO and publisher of Inside Mortgage Finance, which produces closely followed lender rankings.

Wells Fargo, in fact, still holds the top ranking for mortgage originations in a broader category that includes loans from brokers and those bought from other lenders.

“It is a lot more of a challenge if you are an online or direct-to-consumer lender like Quicken,” Cecala said. “They are going to need to keep up the advertising, they are going to need to be a lender of choice.”

Major employers are important in any city. However, Quicken’s success has had an outsize impact on Detroit, which is recovering from decades of disinvestment and a 2013-14 municipal bankruptcy.

If Gilbert’s mortgage machine ever sputters out, so could the city’s rebound.

Quicken says it employs nearly 13,000 people in Detroit, making it one of the city’s largest employers. The mortgage firm accounts for close to three-quarters of the total head count in Detroit for all businesses within Gilbert’s family of companies.

Those businesses number more than 100 and range from real estate firm Bedrock to StockX, an online stock market for sneakers, sports apparel and other goods. Gilbert’s real estate holdings include more than 100 buildings and new development projects in and around downtown.

Quicken, though, “is still the absolute flagship, most important business — most people, most revenue, most profit,” Gilbert said.

Don’t say ‘nonbank’

Many in the financial industry now classify Quicken as a so-called “nonbank.” That distinguishes the firm from traditional banks that take deposits, offer checking accounts and have ATM machines.

Gilbert absolutely hates the term.

He feels that “nonbank” gives the wrong impression of Quicken’s business model — and the quality of the $20.4 billion in residential mortgages it originated in the first quarter — as being riskier. Mostly, he thinks it strange to define Quicken by something it is not.

“You know, I’m a non-zebra talking right now — it’s just the weirdest thing,” Gilbert said. “In what other category in the world is someone a non-something? It’s an irrelevant term for both bank and nonbank as it refers to mortgages.”

Quicken is the first nonbank to become the top retail mortgage lender since the 2008 financial crisis.

Gilbert says Quicken has achieved its success through an obsessive focus on customer service, a company culture centered on constant improvement, and the innovative online selling and processing of “very vanilla” mortgages — none of the free-wheeling loan products that led to last decade’s market meltdown.

About 95 percent of all Quicken’s mortgages have explicit government backing through Fannie Mae, Freddie Mac, Ginnie Mae or the Federal Housing Administration, which generally insure loans against homeowner defaults.

Most of Quicken’s other loans are so-called jumbo mortgages, Gilbert said, which are those above $453,100 in value (or $679,650 in higher-cost regions) and therefore aren’t eligible for government backing.

Defending the title

How long Quicken can stay No. 1 could depend on its adjustment to the mortgage industry’s shift away from mortgage refinancings. The number of refinancings has been plummeting nationwide as interest rates inch up.

The shift also has resulted in lower mortgage origination volume across the industry.

The Mortgage Bankers Association forecast that refinancings will fall another 30 percent this year, following a 33 percent year-over-year drop in 2017. The rate on a 30-year, fixed-rate mortgage was 4.56 percent Thursday, up from 3.94 percent a year ago, according to Freddie Mac.

Quicken’s strong first-quarter results, achieved in a purchase-oriented mortgage market, suggest that it is making the transition.

“They managed to thrive in a home purchase market, which would suggest (the refinancings fade) is not an issue,” Cecala said. “But it will be easier to tell after 2018 is in the record book.”

Quicken also has gotten more involved in the business of servicing mortgages, which generates revenue for the firm. Servicing involves collecting payments from homeowners on behalf of the owners or investors in the mortgage.

“They are the seventh largest servicer in the country now and that is phenomenal given that they really weren’t servicing loans six years ago,” Cecala said.

Gilbert said Quicken has no plans to loosen its lending standards to compensate for lost refinancing business.

“We won’t,” he said. “Our reputation is not worth any short-term money that you might make from that.”

No subprime

Gilbert has long insisted that Quicken did not partake in the subprime mortgage boom that culminated in last decade’s market crash. He points to the company’s survival through that era when numerous lenders, such as No. 1-ranked Countrywide Financial, disappeared.

“That’s why we’re alive,” he said.

He recalled the significant industry pressure at the time to extend loans to unqualified borrowers.

“I remember our guys bringing us stuff, our guys being our bankers, saying, ‘Hey look, Countrywide is offering 100% loan-to-value loans for 580 (credit) score borrowers with no income verification. I said, ‘We’re not doing these loans,’ ” Gilbert said.

“You have to look at it through the eyes of ‘would you loan your money.’ That’s how I ask people to look at it,” he added. “Because even if you could make some money in the short term and sell (the mortgage) off, we still have reps and warranties that we make, by the way, to whoever we sell to. And secondly, it’s not the right thing for the customer.”

More recently, Quicken has been battling the U.S. Department of Justice in federal court in a False Claims Act case alleging that, from 2007 through 2011, the firm fraudulently approved borrowers for Federal Housing Administration-backed mortgages.

Gilbert has strongly denied the allegations and, unlike other lenders, has refused to settle the case with a big payout to the government. A trial on the merits of the government’s claims isn’t expected to start until mid-2019 at the earliest.

Quicken continues to participate in the FHA mortgage program. Other lenders have scaled back or stopped doing FHA loans in recent years.

“The problem in this country is, if you’re going to treat the bad guys the same as the good guys, you’re not going to have a lot of good guys left,” Gilbert said earlier this year.

Rock to Rocket

Gilbert started Quicken Loans, then known as Rock Mortgage, in 1985 with his brother and a friend. Back then, business involved “bringing doughnuts into real estate offices and hoping they give you a referral,” he said.

Quicken became one of the first online mortgage lenders in the late 1990s and started shuttering its brick-and-mortar branches.

More recently, through its new Rocket Mortgage mobile and online brand, the firm has shortened the time to closing a mortgage to as few as 16 days for a purchase and eight days for refinancing.

Quicken has won eight consecutive annual J.D. Power awards for client service in mortgage origination and four for mortgage servicing.

Out of suburbia

The start of Detroit’s rebound can be traced to Gilbert’s decision a decade ago to move Quicken’s headquarters from the suburbs and into downtown, bringing thousands of young employees.

Gilbert said he doesn’t consider the Detroit move as any sort of charitable act. Had Quicken stuck to the suburbs, today its workforce might be inconveniently spread across multiple buildings, separated 5 or 6 miles apart.

“There is no way we would be the company we are today spread out in the suburbs,” he said. “It’s been very profitable for us to be a business in the city.”

How it works

Unlike traditional banks, Quicken can’t rely on a base of customer deposits to make mortgages. Instead, it can either borrow the money for the loans from banks, tap lines of credit or use its own cash, Gilbert said.

“We carry quite a bit on our balance sheet,” he said.

Quicken runs the majority of the mortgages through the underwriting systems for the government-backed entities such as Fannie Mae. It then pools the mortgages and bundles them into securities, which Quicken goes on to sell into the secondary market.

It is common for all mortgage lenders — banks and nonbanks — to process and sell their mortgages that way.

Some market observers have raised concerns about the possible risks and dangers of nonbank mortgage lenders, contending that such firms are vulnerable to sudden dry-ups in their short-term credit lines.

Gilbert insists that Quicken is well-capitalized and less risky than many banks.

“We have more assets than 94 percent of FDIC-insured banks,” he said.

Moody’s Investors Services upgraded Quicken’s bond rating by a step in December, saying that “while profitability has declined from the exceptional levels of 2015 and 2016, we expect the company to continue to generate very strong profitability over the next several years.”

Gilbert also disputes claims that nonbanks are under-regulated. He says Quicken is actually more closely regulated than many traditional banks because it is overseen by regulators in all the 50 states where it makes mortgages, plus by government agencies including the Consumer Financial Protection Bureau and the government-backed mortgage entities.

Cecala of Inside Mortgage Finance said that few in the industry are worried about Quicken.

“Despite those general concerns about nonbanks, most people don’t have the concern about Quicken, just by their sheer size,” he said. “They are the largest nonbank by far, and even though they are privately held, everyone knows that they certainly have the wherewithal to make good on anything they need to.”

Source: https://www.freep.com/story/money/2018/05/31/quicken-loans-mortgage-dan-gilbert/647865002/

Mortgage Banking

Have Housing Prices Peaked ? Here is the Latest

June 13, 2018 synergy Leave a comment

The early stages of a housing bubble are fun for pretty much everyone. Homeowners see their equity start to rise and feel smart for having bought; home seekers have to pay up, but not too much, and fully expect their new home to keep appreciating. People with modest incomes feel a bit of pinch but can still afford to stick around.

But later on, the bad starts to outweigh the good. Existing homeowners still enjoy the ride, but would-be buyers find themselves priced out of their top-choice neighborhoods. And residents who aren’t tech millionaires find that they can no longer afford to live where they work. Consider the plight of a teacher or cop pretty much anywhere in California these days:

Drew Barclay has a master’s degree in education and three years of experience as an English teacher, but, like most new teachers in Davis, he can’t afford to live there.

Instead, Barclay, 31, shares a rental in Sacramento that costs him $950 a month – about 40 percent of the $2,550 he brings home each month after taxes.

He is so certain that he won’t be able to qualify for a loan for a home in Davis on his $47,000 annual salary that he hasn’t bothered to house hunt. The median price for a house in the city in March was $682,500, according to tracking firm CoreLogic. Renting also is prohibitive, with the average rent in Davis about $2,500 a month, according to Zillow, a real estate website.

Davis Joint Unified officials hope to get a little help from state legislators. Last week, the state Senate voted 24-8 to waive the annual school district parcel tax of $620 for teachers and other employees of the Yolo County school district.

Davis school board member Alan Fernandes said that about two-thirds of the district’s teachers live outside Davis where housing is less expensive. He said the bill would encourage more of the district’s teachers to live in the community they serve.

Davis Joint Unified regularly passes parcel taxes to keep class sizes down and to support classroom programs. In 2016, 71 percent of Davis voters approved Measure H, a yearly tax of $620 on each parcel of taxable real property in the district for eight years. The measure raises $9.5 million a year to support math, reading and science programs and reduced class sizes for elementary grades.

But the roughly $50 a month exemption isn’t likely to help Davis Joint Unified teachers enough to make buying a house affordable. The teachers are some of the lowest-paid educators in the region, with some of the highest health care costs.

Barclay said he knows teachers 10 or 15 years older than he is who are renting rooms in other educators’ homes to get by. He said some teachers have weekend jobs to make enough money to pay their bills.

“Because I’m fairly certain I can’t put down permanent roots here, I don’t see this position as a permanent one,” Barclay said of his job as an English teacher at Davis Senior High School.

California school districts have responded by offering signing bonuses, housing stipends, computers and free tuition to educators who sign up with their districts.

Source: https://seekingalpha.com/article/4178036-housing-bubble-pathologies-start-bite-yet-another-sign-cycle-peaked

Mortgage Banking

AML / BSA for Mortgage Lenders – Are You Compliant ?

June 13, 2018 synergy Leave a comment

BLOG VIEW: The U.S. Department of the Treasury, through the Financial Crimes Enforcement Network (FinCEN), issued a final rule in February 2012 requiring nonbank residential mortgage lenders and originators to establish anti-money laundering (AML) programs and to report suspicious activities under the Bank Secrecy Act (BSA). The BSA is designed to alert law enforcement of criminal and terrorist activity. The BSA requires U.S. financial institutions (including non-bank residential mortgage lenders/brokers) to assist U.S. government agencies in detecting and preventing money laundering.

Despite the issuance of this final rule more than six years ago, many nonbank mortgage lenders/brokers are not complying with the requirements of the BSA and, as a result, regulators are beginning to take note in their examinations.

A compliant AML program for a residential mortgage lender/broker includes: 1) designating a competent individual to serve as the company’s BSA/AML compliance officer; 2) conducting an AML Risk Assessment; 3) drafting and implementing written internal policies and procedures; 4) establishing an ongoing training program; and 5) conducting an independent audit of the company’s AML program every 12 to 18 months. An AML program must also include the maintenance of a “red flags” program and a customer identification program, the filing of suspicious activity reports (SARs), when required, and compliance with Section 314 of the U.S. Patriot Act and Office of Foreign Assets Control (OFAC) regulations.

Most mortgage companies have designated a BSA/AML compliance officer and have an AML policy and procedure in place; however, many mortgage companies do not comply with one or more of the other AML requirements.

For example, more often than not, mortgage companies are not conducting an AML risk assessment. This needs to be completed at least every 12 to 18 months, and lenders should be modifying identified activities based on the company’s operations and growth. The risk assessment should consider the current and future state of items such as the company’s size, products, customer base and geographic area of operation. The Conference for State Bank Supervisors (CSBS) has issued a tool to assist mortgage companies in completing such risk assessments. This tool can be found at https://www.csbs.org/bsa-aml-self-assessment-tool.

Another BSA requirement that is frequently lacking or unfulfilled is ongoing training. Mortgage companies must train their personnel at least annually in all applicable aspects of AML regulations. A best practice for lenders is to provide AML training to all new employees within 30 days of hire.

Additionally, the BSA/AML compliance officer must receive periodic training that is relevant and appropriate given changes to regulatory requirements, as well as the activities and overall AML risk profile of the company. All AML training needs to be adequately tailored to a company’s operations. For example, mortgage companies should specifically train their personnel on the types of suspicious activity and “red flags” they are likely to come across, such as mortgage fraud related items.

Finally, mortgage companies must document their training programs by maintaining training and testing materials, the dates of training sessions and attendance records. Lenders that are not conducting this annual training should immediately do so, and there are a host of vendors that can assist in providing AML training and tracking tools at a fairly reasonable cost.

Another aspect lenders seem to be overlooking is independent testing/audits. Although the specific nature of the testing will be somewhat dependent on the company’s size and risk profile, the AML audit can be performed by an independent third party or an employee of the company, provided the employee has no role whatsoever in the AML functions being tested (including reporting to the BSA/AML officer), and possesses enough knowledge of BSA regulations to be qualified to perform the audit.

By far, the area of most noncompliance by mortgage companies pertaining to AML requirements is with regard to the filing of SARs. FinCEN highlights the importance of SAR filing by mortgage companies indicating that mortgage companies are the, “primary providers of mortgage finance … and are in a unique position to assess and identify money laundering risks and fraud.”

The BSA lists several situations where a mortgage company must file a SAR. A SAR requires basic company information, information about the individuals involved and information about the suspicious activity or transaction. FinCEN requires all filings to be submitted electronically through its website.

Many mortgage companies take the view that transactions are only reportable only if they involve currency. Not only is this view incorrect, it’s also quite risky. While many of the requirements for the filing of a SAR involve currency, there is also a requirement for a transaction to be reported if a mortgage company knows, suspects or has reason to suspect that a transaction involves the use of the loan or company to facilitate criminal activity.

Given this, mortgage companies must file a SAR every time they suspect fraud – whether it is income, employment, occupancy or some other type of fraud. If a mortgage company has not filed any SARs, or only a few, in the past six years, it could be a sign that the company does not have a compliant AML program or a weak one for that matter.

As such, it is not uncommon for an examiner to ask to review any adverse action notices for the past several years or to speak with the underwriting department to discuss whether they have denied any transactions for suspected or known fraud. In most instances, such fraudulent or suspicious situations are reported to an employee’s manager and not the BSA/AML compliance officer.

It is not surprising that these companies are often the ones that either do not conduct AML training or do not customize their AML training to specifically discuss mortgage fraud, rather than just situations involving large money laundering schemes and currency. Furthermore, it is a best practice for the BSA/AML compliance officer to review all QC reports in an effort to identify any activity that could require the filing of a SAR.

There are many mortgage companies with strong AML programs in place. These companies expend the resources, time and money to ensure they comply with all the BSA requirements. Given the substantial civil and criminal penalties set forth in the statute and the significant increase in state examination questions related to AML items, it is recommended that lenders take a long, hard look at their AML programs and ensure all requirements are properly satisfied.

Michael Barone is executive director of compliance for MQMR, where he oversees all compliance and regulatory guidance with clients and prospective clients.
Source: https://mortgageorb.com/despite-regulatory-clarity-aml-errors-persist-in-mortgage-lending

Compliance Updates, Regulatory Updates

HMDA Reporting – Getting It Right

May 17, 2018 synergy Leave a comment

A Guide to HMDA Reporting: Getting It Right! will assist you in complying with the Home Mortgage Disclosure Act (HMDA) as implemented by the Consumer Financial Protection Bureau’s Regulation C, 12 CFR Part 1003 (Regulation C). The purpose of this Guide is to provide an easy-to-use summary of certain key requirements. This Guide does not provide detailed information about the HMDA submission process, or file, data, and edit specifications. Information about those topics may be found on the FFIEC’s Resources for HMDA Filers website, available at www.consumerfinance.gov/data-research/hmda/for-filers and www.ffiec.gov/hmda/. The Foreword and Summary of Requirements sections of the Guide were developed by the Federal Financial Institutions Examination Council (FFIEC) — the Board of Governors of the Federal Reserve System (Board), the CFPB the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), the Office of the Comptroller of the Currency (OCC), and the State Liaison Committee (SLC) — and the U.S. Department of Housing and Urban Development (HUD). The appendices include, in addition to Regulation C and its Official Interpretations, certain HMDA compliance materials developed and issued exclusively by the CFPB and not by the FFIEC or its other member agencies. Financial institutions may wish to consult and rely upon additional compliance resources that their Federal supervisory agencies may offer. Contact information for each agency is available in Appendix H. This edition of the Guide incorporates the amendments made to HMDA in the DoddFrank Act. 1 The Dodd-Frank Act amended HMDA, transferring rulewriting authority to the Bureau and expanding the scope of information that must be collected, reported, and disclosed under HMDA, among other changes. In October 2015, the Bureau issued the 2015 HMDA Final Rule implementing the Dodd-Frank Act amendments to

Regulation C. 2 On August 24, 2017, the Bureau issued a final rule further amending Regulation C to make technical corrections and to clarify and amend certain requirements adopted by the 2015 HMDA Final Rule.3 The 2015 HMDA Final Rule modified the types of institutions and transactions subject to Regulation C, the types of data that institutions are required to collect, and the processes for reporting and disclosing the required data.4 The Summary of Requirements reviews HMDA’s purposes and data collection, reporting, and disclosure requirements. It provides a high level summary of:  The institutions covered by Regulation C.  The transactions covered by Regulation C.  The information that covered institutions are required to collect, record, and report.  The requirements for reporting and disclosing data. This Guide is not a substitute for HMDA or Regulation C. Regulation C and its official interpretations (also known as the commentary) are the definitive sources of information regarding their requirements. Regulation C is available in Appendix F and G of this Guide and at www.consumerfinance.gov/regulatory-implementation/hmda/.

Additionally, this Guide is not a substitute for the requirements for filing the reportable data. The Filing Instructions Guide is the definitive source for information regarding the filing requirements and is available at www.consumerfinance.gov/dataresearch/hmda/for-filers.

Feedback The FFIEC welcomes suggestions for changes or additions that might make this Guide more helpful.

Write to: FFIEC, 3501 Fairfax Drive Room B-7081a Arlington, VA 22226

Send an e-mail to: GettingItRightGuide@cfpb.gov

If, after reviewing the resources in this Guide, you have a question regarding a specific provision of the regulation, or have questions about how to file HMDA data, please email HMDAHELP@cfpb.gov with your specific question, identifying the filing year you are referencing, and, when applicable, the section(s) of the regulation related to your question. You can also submit the inquiry online using the form available at hmdahelp.consumerfinance.gov. The information you provide will permit the Consumer Financial Protection Bureau to process your request or inquiry. You may also contact your appropriate Federal HMDA reporting agency (see Appendix H to this Guide.)

Generally, this Guide will point you to the relevant resources that discuss:

The institutions covered by Regulation C.

The transactions covered by Regulation C.

The information that covered institutions are required to collect, record, and report.

The requirements for reporting and disclosing data. The material can be found after the introduction in the referenced appendix section.

Institutional Coverage: Who Must Report? INSTITUTIONAL COVERAGE GENERALLY An institution is required to comply with Regulation C only if it is a “financial institution” as that term is defined in Regulation C. The definition of financial institution includes both depository financial institutions and nondepository financial institutions, as those terms are separately defined in Regulation C. 12 CFR 1003.2(g). An institution uses these two definitions, which are outlined below, as coverage tests to determine whether it is a financial institution that is required to comply with Regulation C. For the purposes of this Guide, the term “financial institution” refers to an institution that is either a depository financial institution or a nondepository financial institution that is subject to Regulation C.

INSTITUTIONAL COVERAGE TESTS DEPOSITORY FINANCIAL INSTITUTIONS A bank, savings association, or credit union is a depository financial institution and subject to Regulation C if it meets ALL of the following: 1. Asset-Size Threshold. On the preceding December 31, the bank, savings association, or credit union had assets in excess of the asset-size threshold published annually in the Federal Register, included in the official interpretations, 12 CFR Part 1003, Comment 2(g)-2, and posted on the Bureau’s website. 12 CFR 1003.2(g)(1)(i). The phrase “preceding December 31” refers to the December 31 immediately preceding the current calendar year. For example, in 2018, the preceding December 31 is December 31, 2017. Comment 2(g)-1. 2. Location Test. On the preceding December 31, the bank, savings association, or credit union had a home or branch office located in a metropolitan statistical area (MSA). 12 CFR 1003.2(g)(1)(ii). For purposes of this location test, a branch office for a bank, savings association, or credit union is an office: (a) of the bank, savings association, or credit union (b) that is considered a branch by the institution’s Federal or State supervisory agency. For purposes of Regulation C, an automated teller machine or other free-standing electronic terminal is not a branch office regardless of whether the supervisory agency would consider it a branch. 12 CFR 1003.2(c)(1). A branch office of a credit union is any office where member accounts are established or loans are made, whether or not an agency has approved the office as a branch. Comment 2(c)(1)-1. 3. Loan Activity Test. During the preceding calendar year, the bank, savings association, or credit union originated at least one home purchase loan or refinancing of a home purchase loan secured by a first lien on a one-to four-unit dwelling. 12 CFR 1003.2(g)(1)(iii). For more information on whether a loan is secured by a dwelling, is a home purchase loan, or is a refinancing, see 12 CFR 1003.2(f), (j), and (p) and associated commentary; and Sections 4.1.1.2 and 5.7 of the HMDA Small Entity Compliance Guide available in Appendix B of this Guide. 4. Federally Related Test. The bank, savings association, or credit union: a. Is federally insured; or b. Is federally regulated; or c. Originated at least one home purchase loan or refinancing of a home purchase loan that was secured by a first lien on a one- to-four-unit dwelling and also (i) was insured, guaranteed or supplemented by a Federal agency or (ii) was intended for sale to the Federal National Mortgage Association (Fannie Mae) or the Federal Home Loan Mortgage Corporation (Freddie Mac). 12 CFR 1003.2(g)(1)(iv). 5. Loan-Volume Threshold. The bank, savings association, or credit union meets or exceeds either the closed-end mortgage loan or the open-end line of credit loanvolume threshold in each of the two preceding calendar years. Effective January 1, 2018 and through December 31, 2019, a bank, savings association, or credit union that originated at least 25 closed-end mortgage loans in each of the two preceding calendar years, or originated at least 500 open-end lines of credit in each of the two preceding calendar years meets or exceeds the loan-volume threshold. When the bank, savings association, or credit union determines whether it meets these loan-volume thresholds, it does not count transactions excluded by 12 CFR 1003.3(c)(1) through (10) and (13). 12 CFR 1003.2(g)(1)(v). Closed-end mortgage loans, open-end lines of credit, and these excluded transactions are discussed below in TRANSACTIONAL COVERAGE: WHAT IS REPORTED?.

When determining if it meets the loan-volume thresholds, a bank, savings association, or credit union only counts closed-end mortgage loans and open-end lines of credit that it originated. Only one institution is deemed to have originated a specific closedend mortgage loan or open-end line of credit under Regulation C, even if two or more institutions are involved in the origination process. Only the institution that is deemed to have originated the transaction under Regulation C counts it for purposes of the Loan-Volume Threshold. Comment 2(g)-5; see also Comments 4(a)-2 through -4. These requirements are discussed below in TRANSACTIONS INVOLVING MULTIPLE ENTITIES. Regulation C also includes a separate test to ensure that financial institutions that meet only the closed-end mortgage loan threshold are not required to report their open-end lines of credit, and that financial institutions that meet only the open-end line of credit threshold are not required to report their closed-end mortgage loans. 12 CFR 1003.3(c)(11) and (12).6 For more information, see HMDA Small Entity Compliance Guide, Section 4.1.2 available in Appendix B of this Guide.

NONDEPOSITORY FINANCIAL INSTITUTIONS Under Regulation C, a for-profit mortgage-lending institution other than a bank, savings association, or credit union is a nondepository financial institution and subject to Regulation C if it meets BOTH of the following: 1. Location Test. The institution had a home or branch office in a metropolitan statistical area (MSA) on the preceding December 31. 12 CFR 1003.2(g)(2)(i). The phrase “preceding December 31” refers to the December 31 immediately preceding the current calendar year. For example, in 2018, the preceding December 31 is December 31, 2017. Comment 2(g)-1 For purposes of this location test, a branch office of a nondepository financial institution is any one of the institution’s offices at which the institution takes from the public applications for covered loans. A nondepository financial institution is also deemed to have a branch office in an MSA if, in the preceding calendar year, it received applications for, originated, or purchased five or more covered loans related to property located in that MSA, even if it does not have an office in that MSA. 12 CFR 1003.2(c)(2). Covered loans and applications for covered loans are discussed below in TRANSACTIONAL COVERAGE: WHAT IS REPORTED?. 2. Loan-Volume Threshold. The institution meets or exceeds either the closed-end mortgage loan-volume threshold or the open-end line of credit loan-volume threshold in each of the two preceding calendar years. Effective January 1, 2018 through December 31, 2019, an institution that originated at least 25 closed-end mortgage loans in each of the two preceding calendar years, or originated at least 500 open-end lines of credit in each of the two preceding calendar years meets or exceeds the loanvolume threshold.

When an institution determines whether it meets the loan-volume thresholds, it does not count transactions excluded by 12 CFR 1003.3(c)(1) through (10) and (13). 12 CFR 1003.2(g)(2)(ii). Closed-end mortgage loans, open-end lines of credit, and these excluded transactions are discussed below in TRANSACTIONAL COVERAGE: WHAT IS REPORTED?. When determining if it meets the loan-volume thresholds, an institution only counts closed-end mortgage loans and open-end lines of credit that it originated. Only one institution is deemed to have originated a specific closed-end mortgage loan or openend line of credit under Regulation C, even if two or more institutions are involved in the origination process. Only the institution that is deemed to have originated the transaction under Regulation C counts it for purposes of the loan volume threshold. Comment 2(g)-5; see also Comments 4(a)-2 through -4. These requirements are discussed below in TRANSACTIONS INVOLVING MULTIPLE ENTITIES. Regulation C also includes a separate test to ensure that financial institutions that meet only the 25 closed-end mortgage loan threshold are not required to report their open-end lines of credit, and that financial institutions that meet only the 500 open-end line of credit threshold are not required to report their closed-end mortgage loans. 12 CFR 1003.3(c)(11) and (12).7 For more information, see the HMDA Small Entity Compliance Guide, Section 4.1.2 available in Appendix B of this Guide.

Source: https://www.ffiec.gov/hmda/pdf/2018guide.pdf