2019 Journal of Community Bank Case Studies

2019 COMMUNITY BANK CASE STUDY COMPETITION

Braden states that in the extra time it takes to close a loan, rates and terms can change, and sometimes not in the customers’ favor. “Two to four days may not seem like a lot, but when you’re trying to buy a house or trying to sell a house, it can definitely make an impact,” (Braden). Whether they had to spend more on interest or were required to refinance or find other living arrangements during the closing process, customers were directly impacted by this rule. Kentucky Bank had direct costs as well. According to bank management, TRID required software upgrades, procedural changes and personnel training (CSBS Regulatory Burden Questions). The Home Mortgage Disclosure Act has been enacted into law since 1975. It is not a new regulation, but changes in the Act since the financial crisis have been extremely burdensome on lenders and their institutions. HMDA is part of the Federal Reserve’s Regulation C. A June 2011 mandate put HMDA

under the control of the Consumer Financial Protection Bureau (like TRID) and also required the reporting of all public loan data. At its heart, this Act requires tracking of the demographics of loan customers (CFPB, TILA-RESPA Integrated Disclosure Rule Implementation). According to the FFIEC, HMDA helps determine whether financial institutions are affectively meeting housing needs of those in their areas of service, alerts public officials where investments are most needed in communities and identifies discriminatory lending practices (Background and Purpose). Garnering the data for HMDA requires banks to collect an abundance of information from customers when applying for loans. Changes in 2015 (clarified in 2017) to HMDA expanded the information fields required when creating mortgages. Kentucky Bank states that the post- recession HMDA changes altered requirements from around 30 fields to over 100 fields (CSBS Regulatory Burden Questions). Just as the increase in required disclosures from TRID created unintended issues, a longer application process led to more costs for both the borrower and the lender. “If you have ever wondered why your bank is asking questions that do not seem to bear on the loan itself, there is a good chance it is HMDA related” (Braden). Field information covers everything from the age of the borrower and credit score to the customer’s entire loan spread (Mortgage Bankers Association). Just as there were more resources and software required for TRID, the same was true in implementing the Home Mortgage Disclosure Act changes.

Just as the increase in required disclosures from TRID created unintended issues, a longer application process led to more costs for both the borrower and the lender.

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