Reg C Relief

by Mary Beth Guard, BOL Guru

For banks subject to HMDA, the recent decision of the Federal Reserve Board to postpone the effective date of Regulation C amendments from January 1, 2003 to January 1, 2004 comes as a major relief. As outlined in my previous article, the changes are substantial.

Don't shift your preparations totally to the back burner, however. The reason the deadline has been extended is because the FRB has become convinced that the steps necessary to ensure full compliance with the new rules, such as reprogramming data systems and retraining employees, will take a substantial amount of time. Begin now to outline the steps you need to take to be ready by the new deadline.

Plus, keep in mind that there are some changes that will still take effect beginning January 1, 2003.

Use of 2000 Census Data
Although the FRB extended the effective date of the original amendments, they have adopted an interim amendment to Appendix A, effective January 1, 2003, mandating the use of 2000 census data. The requirement to use 2000 census data rather than 1990 census data will become effective January 1, 2003, as previously scheduled.

Telephone applications
There are two different rules for collecting information on telephone applicants -- one which is effective for the period of January 1, 2003 - January 1, 2004, and another which will be in effect after that date.

For the period of January 1, 2003 through January 1, 2004, portions of the current Appendices A and B to Regulation C that set forth instructions for collecting monitoring information in telephone applications are being amended to require lenders to ask applicants their ethnicity, race, and sex in applications taken by telephone. For applications taken beginning January 1, 2003, lenders must ask telephone applicants for monitoring information under Appendix A, Paragraph V.D.2, and Appendix B, Paragraph I.B.4., as revised by the Board June 21, 2002.
--- For these applications, lenders must use the race or national origin categories in current Appendix A, Paragraph V.D.3., and in the sample data collection form in current Appendix B.
--- For applications taken on or after January 1, 2004, lenders are required to ask telephone applicants for monitoring information under Appendix A, Paragraph I.D.2., and Appendix B, Paragraph II.A., as revised by the amendments which will take effect in 2004, using the revised ethnicity and race and the sample data collection form.

Thresholds and Liens
Amendments adopted in June, 2002 by the FRB set the thresholds for determining the loans for which financial institutions must report loan pricing data. Under the amendments, institutions are to report the rate spread between the APR on a loan and the yield on comparable Treasury securities if the spread equals or exceeds 3 percentage points for first-lien loans, and 5 percentage points for subordinate-lien loans. Compliance with the amendments relating to the thresholds and lien status is mandatory on January 1, 2004.

Related links:
List of recent actions taken by the FRB with respect to Regulation C (with links)

The original version appeared in the May 2002 edition of the Oklahoma Bankers Association Compliance Informer.

First published on BankersOnline.com 9/30/02. Updated 10/1/02.