January 29, 2021

RECORDED WEBINAR – Home Mortgage Disclosure Act: What You Need to Know

Download our recorded webinar presented by Brad R. Stumpe, CPA, CRCM of the Anders Banking and Financial Institutions group as he takes a deep dive into new HMDA updates and how they will affect reporting for banks, credit unions and other financial institutions. The presentation covers key insights around the HMDA, including:

– Updates to the rules and regulations of reporting – where do you fit in?

– The types of loans to report

– A walkthrough of the report details

Download the webinar below.

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January 29, 2021

Anders Named a 2021 Top Workplace in the U.S.

Anders CPAs + Advisors has earned the 2021 Top Workplaces USA award, issued by Energage. This is the inaugural year for Top Workplaces USA, built on the program’s 14-year history surveying more than 20 million employees across 54 markets for the regional Top Workplaces awards.

On a local level, Anders has been named to the St. Louis Post-Dispatch’s list of Top Workplaces several times and we are honored to be recognized as a Top Workplace nationally.

Top Workplaces USA offers national recognition for large organizations, those with more than 150 employees, and those that may have operations in multiple markets. Several thousand organizations from across the country were invited, and more than 1,100 participated in the Top Workplaces USA survey. Winners of the Top Workplaces USA list are chosen based solely on employee feedback gathered through an employee engagement survey, issued by Energage. Results are calculated by comparing the survey’s research-based statements, including 15 Culture Drivers that are proven to predict high performance against industry benchmarks.

“During this very challenging time, Top Workplaces has proven to be a beacon of light for organizations, as well as a sign of resiliency and strong business performance,” said Eric Rubino, Energage CEO. “When you give your employees a voice, you come together to navigate challenges and shape your path forward. Top Workplaces draw on real-time insights into what works best for their organization, so they can make informed decisions that have a positive impact on their people and their business.”

Learn more about Energage or the Top Workplaces program.

Interested in working for a Top Workplace? Check out the current openings at Anders.

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Event Date: February 18, 2021

Microsoft Teams Customer Immersion Workshop for Associations

Did you know that Not-For-Profit organizations are eligible for a free Microsoft Office 365 license? Additionally, as a result of the newest CARES Act funding and Paycheck Protection Program (PPP), associations are eligible to use up to 40% of funding on cloud technology or cloud services. 

Join us on February 18 from 11am-1pm for our Microsoft Teams Customer Immersion Experience (CIE) where we will walk you through a day in the life of using Microsoft Teams effectively in your organization and with your membership. This experience will answer your questions about the platform and focus on:

  • Features to keep you connected with your association group – Email, Calendars, Chat, File Sharing, and More 
  • Creating Team Channels and send notification to your association members 
  • How to conduct Calls and Meetings within your organization – Video Conferencing and Calendar 
  • Tips and Tricks to create a smooth Microsoft Teams experience while working remotely 

You will also get to experience how to make or receive calls using Microsoft Teams Calling. A trained facilitator who will help you discover the right solutions that will work for your environment, and show how these technologies will be able to help you embrace productivity with your team and your membership.

Register for the Microsoft Teams CIE below:

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January 28, 2021

RECORDED WEBINAR – Employee Retention Tax Credit and the PPP

The newly expanded Employee Retention Tax Credit (ERTC) and second draw of the Paycheck Protection Program (PPP) has business owners asking important questions, such as:

  • Am I eligible for the ERTC?
  • How much can I claim for the ERTC and how?
  • Can I claim the ERTC if I have a PPP loan?
  • How can I maximize PPP loan forgiveness and ERTC eligibility?

Paul Rhea, Rebekah Tucker and Dan Schindler of the Anders CARES Act Team answer these questions and more in a presentation for the National Federation of Independent Business (NFIB).

Download the recorded webinar on NFIB’s website.

Visit our COVID-19 Resource Center for more resources. To discuss your situation and recovery options, contact an Anders advisor below.

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January 26, 2021

5 Ways to Kickstart Your Cybersecurity Efforts

Keeping your company protected from cyberthreats is important, but it’s hard to know where to get started. A personalized, comprehensive cybersecurity plan is recommended to stay ahead of cyberthreats, but there are several tactics and baby steps businesses can take to start building a defense. Below we dive into five low-cost and easy ways to improve your cybersecurity posture that can help you get started and prepare you for developing a robust cybersecurity strategy.

1. Implement Cisco OpenDNS Resolver

Avoid exposing your network to harmful sites and phishing strategies by implementing Cisco OpenDNS resolver. Organizations can use Cisco’s platform to prevent employees from accessing known malicious websites, block phishing sites and prevent virus and malware infections by using Cisco OpenDNS for DNS resolution.

2. Require Multi-Factor Authentication (MFA)

MFA is a method for authentication that requires the user to provide two or more verification factors to gain access to a resource such as an application, online account or a VPN. MFA asks users to provide a password and another verification method, such as on a smart phone or using facial recognition. Office 365 users can easily implement this type of authentication for an added layer of security. Organizations should implement MFA to reduce the probability of an unauthorized login by 99%.

3. Complete a Dark Web Scan for Employees’ Authentication Information

The dark web is the hidden portion of internet sites only accessible by a specialized web browser. The dark web is used for keeping internet activity anonymous and private, which can aid in both legal and illegal applications. Ask your technology service provider for a dark web scan to see if any personal or business information is present on the dark web. Organizations would benefit from this report by learning how many network accounts are present on the dark web because those accounts could be used to provide a hacker a very quick and easy method to login to a network. Don’t have this service with your technology provider? Contact Anders Technology for a free dark web san.

4. Install an Antivirus

Free antivirus software is easy to find, but not comprehensive or secure enough for business use. Very popular free antivirus vendors have admitted to providing harvested user data to third parties. It’s always a better choice to implement a reputable, robust antivirus software that can more adequately perform security operations like anti-phishing, firewall, tune-up, VPN and web protection. The small fee you’ll pay is a valuable investment in your cybersecurity protection.

5. Complete Software Updates Regularly

Regularly updating your software and patches protects against vulnerabilities and exposed data. Make sure you’re performing consistent updates on Windows, Adobe and all other platforms used. If a vulnerability is made public in a major platform that has been eliminated with a patch, regular updates will ensure this patch is deployed and your data is safe.

These tactics are great ways to get started securing your network, but will only protect against the tip of the iceberg of cybersecurity attacks. Whether you’re looking for supplemental cybersecurity expertise to add to your team, or technology advisors to take care of it all for you, Anders Technology can help you implement cybersecurity best practices to protect you and your organization from evolving threats. Contact an Anders advisor to see how we can help you mitigate security risk and defend against a costly cyberattack.

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January 22, 2021

Choosing the Right CPA Firm to Audit Your Employee Benefit Plan

Companies that provide employee benefit plans (EBPs) may be familiar with the auditing process required by the Department of Labor. Generally, employee benefit plans with 100 or more participants are required to have an independent audit as part of their obligation to file the annual report Form 5500. An annual audit may be an unavoidable cost of doing business, but it does not need to be a cumbersome process.

You Need an Employee Benefit Plan Audit, Now What?

One of the most important duties of a plan sponsor is to hire a qualified certified public accountant. Hiring a qualified auditor helps to protect the assets and financial integrity of the plan and ensures that plan sponsors and various service providers fulfill their fiduciary responsibilities to the plan and plan participants. A qualified auditor also helps keep the plan in compliance with a variety of regulations, which can save the company from penalties being assessed by the Department of Labor (DOL) or possible lawsuits by plan participants.

Finding the Right Auditor

Even though a plan undergoes an audit, the audit may be deficient due to the selection of an inexperienced auditor. It is important to work with an auditing firm that has depth of experience conducting plan audits. The more technical training and experience an auditor has with employee benefit plan audits, the more familiar they are with compliance requirements, plan operations, and specialized auditing standards. Be sure to inquire about the type and amount of benefit plan audit training members of their team receive annually.

To ensure you have an experienced auditor, you may want to discuss their work with other employee benefit plan clients to ensure they are well versed in your plan type. You may also inquire if the auditor is a member of the AICPA’s Employee Benefit Audit Quality Center, which is a national network of CPA firms that demonstrate commitment to employee benefit plan audit quality.

For these reasons, the selection of an experienced and reliable auditor is very important. Anders can help you and your plan administrators comply with key ERISA, DOL and IRS requirements. Our audit experience includes single and multi-employer defined benefit, profit sharing, 401(k), ESOP, and health and welfare benefit plans, as well as public employee retirement systems. Contact an Anders advisor below to learn more.

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January 22, 2021

Luke Luckett, Justin Marty, Lesley Sanchez and Dan Schindler Named Principals at Anders

Lucas A. Luckett, CPA/PFS, CEPA, Justin P. Marty, CPA, Lesley M. Sanchez, CPA and Daniel K. Schindler, CPA have been promoted to principals at Anders, effective January 1, 2021.

About Luke Luckett

Luke Luckett is one of the youngest Certified Exit Planning Advisor (CEPA) in the U.S., and one of only 500 people in the entire country. As a Certified Public Accountant (CPA) and Personal Financial Specialist (PFS) on the Anders Family Wealth and Estate Planning team, Luke enjoys helping clients plan for life after transitioning their business by maximizing the value of their company and creating personal financial goals. He also brings a wide variety of tax and family wealth experience to his clients, specializing in individual and trust tax planning, estate planning, business transition planning, executive cashflow planning and stock option planning.

Luke holds a B.S.B.A. in Accounting and Finance from Southeast Missouri State University. He has received many accolades in his career, including being named a 30 Under 30 by the St. Louis Business Journal, received the Spirit of Rainmaker as a graduate of the Rainmaker Academy, named a MOCPA Outstanding Young Professional and a graduate of the AICPA Leadership Academy. Luke is the past Chair of the St. Louis Chapter of the Missouri Society of Certified Public Accountants (MOCPA).  He is also an active member of the Estate Planning Council of St. Louis and Southeast Missouri State University Alumni Association.

Learn more about Luke Luckett.

About Justin Marty

Justin started at Anders as an intern and worked his way up through the ranks to become a principal in Tax. He works closely with not-for-profit organizations, including labor unions, and prepares most of the request Form 990s at Anders, with specific experience in labor, welfare, pension, vacation and other funds. He also works with manufacturers, distributors, real estate companies, and specializes in preparing taxes for S corporations and partnerships.

Justin is a Certified Public Accountant and holds a Masters in Accounting and Bachelors in Accounting from University of Missouri – St. Louis. He is also a member of the Missouri Society of Certified Public Accountants and American Institute of Certified Public Accountants.

Learn more about Justin Marty.

About Lesley Sanchez

Lesley works with privately held companies primarily in banking, manufacturing, hospitality and construction. Lesley provides various consulting services for her clients including internal control and accounting process improvements, financial statement due diligence and quality of earnings analysis. She also has experience assisting clients through complex financial reporting issues such as revenue recognition, business acquisitions and equity compensation. Lesley also concentrates on conducting employee benefit plan audits for defined contribution plans and ESOPs.

Lesley is a Certified Public Accountant and holds a Masters degree in Accounting from St. Louis University and a B.S. in Agriculture and Consumer Economics with a specialization in Accounting from University of Illinois. She is a member of the American Institute of Certified Public Accountants, Missouri Society of Certified Public Accountants and has participated in the firm’s leadership program, Rainmaker Academy.

Learn more about Lesley Sanchez.

About Dan Schindler

Dan has successfully combined his love for all things food, spirits, sports and helping people succeed into his career. While he leads operations of the Anders Sports, Arts & Entertainment Group and represents professional athletes, agents and advisors; he also provides savvy advice on operational efficiencies and cash flow analysis to a growing number of restaurants, food and beverage companies and craft brewery owners. Dan is a member of the firm’s CARES Act Research and Response Team and advises clients around the latest legislation on COVID-19 relief, including the Paycheck Protection Program. Spending time to understand each client and their specific needs, and then navigating them through difficult tax and business situations, is what he enjoys most.

Dan is a Certified Public Accountant and holds Masters and Bachelors degrees in Accountancy from University of Missouri – Columbia. A natural business developer, he received the Master Rainmaker award as a graduate of the Rainmaker Academy. Dan serves as the Chair of the Leading Edge Alliance’s Young Professionals Steering Committee and is a member of the American Institute of Public Accountants and Missouri Society of Certified Public Accountants. A very active member of the community, Dan is the President of the Schindler Family Foundation, on the boards of the Mizzou Tiger Club – St. Louis and the Young Friends of the Donald Danforth Plant Science Center. Dan also volunteers for Fair Saint Louis, is an ambassador for the Juvenile Diabetes Research Foundation and a member of the St. Louis Chapter Baseball Writers Association.

Learn more about Dan Schindler.

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January 19, 2021

Creative Technology Uses for PPP2 Funding – Cloud Computing Services

Now is a perfect time to review your technology plan and assess how cloud technology can help your business in 2021. One of the new benefits to the Paycheck Protection Program Second Draw (PPP2) program approved in December 2020 is it now includes additional ways to spend your funds and still achieve 100% forgiveness. 

Under the new guidance issued for the PPP2, you can spend up to 40% of your PPP2 funds on technology which qualifies as “cloud computing services” for your business. Technology expenses were not included in the first round of funding, so this category is new. To jumpstart your thinking, we have deciphered a few ways you can utilize the PPP2 funds towards leveraging technology to modernize your business. 

Here are three ideas we think business owners and leaders can leverage technology to better their business using PPP2 funds while still obtaining 100% forgiveness: 

1. Data Analytics

Modern businesses are recognizing the power of data to win in today’s competitive marketplace. Microsoft’s PowerBI tool is a cloud computing service that has emerged as a leader in helping companies embrace analytics across the organization through its ease of use and simple interface. PowerBI can help you get the insights you need to make confident decisions and drive efficiencies in your business. Specifically, PPP funds could be used to pay for PowerBI subscriptions and implementation services such as creating initial PowerBI reports, setting up a data management program, or training your employees via a ‘Dashboard in a Day’ training session.

2. Cloud Readiness Assessment

PPP2 funds could be used to perform the initial readiness assessment to develop a Cloud Roadmap for migrating files, applications, or servers to Microsoft 365 or Azure. Migrations to a public cloud, such as Microsoft, can help improve your business operations and result in up to 30-40% total cost of ownership (TCO) savings, creating an ongoing competitive advantage for your business.

3. Process Automation via Microsoft Power Automate

New low-code/no-code solutions available now help businesses automate manual processes specific to them. These solutions, powered by the Microsoft Power Platform, enable businesses to automate their processes faster and reduce the cost of doing business. Microsoft’s secure Power Platform empowers business users, not developers.

Technology can be used to speed up adoption of newer technology, automate manual processes, or to help employees work from anywhere. If you have been looking for the right opportunity for your business to fully embrace cloud computing services, PPP2 funds could make this the right time.  

Next Steps

Anders Technology has the training, experience, and expertise to help your business understand the options under the new PPP2 guidelines and how you can prioritize your 2021 goals and budget to utilize your spending to fit your needs. Contact an Anders advisor below to discuss your situation and recovery options. Visit our COVID-19 Resource Center for more resources as it relates to the recovery of your business.

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January 19, 2021

Using PPP2 Funds for Technology Modernization via the Cloud

Round two of the Paycheck Protection Program (PPP) is upon us and Anders has been closely analyzing the contents to help companies identify strategies for maximizing the impact of their PPP funds.

While the majority of your PPP funds still need to be spent on payroll (60%), one of the biggest changes in the new round of PPP is the ability to spend up to 40% of funds on other types of pandemic related expenses. Specifically, the “covered operations expenditures” category allows PPP funds to be used to pay for cloud services that run your business.

Investing in Technology

Many businesses struggled to embrace the sudden shift to remote work caused by the pandemic in Spring 2020. In many cases these companies were constrained by their historical lack of investment in technology. Suddenly companies who were still using dated, on-premise technology were at a significant disadvantage compared to their cloud-enabled competitors.

PPP2 creates an interesting opportunity for small to midsize companies to modernize their operations via the use of cloud technology. The government is encouraging companies to invest in cloud solutions to improve business continuity and become more efficient.

What’s Covered?

The PPP defines “covered operations expenditures” as follows:

payment for any business software or cloud computing service that facilitates business operations, product or service delivery, the processing, payment, or tracking of payroll expenses, human resources, sales and billing functions, or accounting or tracking of supplies, inventory, records and expenses;”

If we want to exercise this ‘cloud’ flexibility in the PPP loan, how do we interpret what qualifies as an expenditure?  The vast majority of cloud-based technology should qualify under the “cloud computing service that facilitates business operations” definition. Of course, be sure to discuss this with your PPP lender to confirm.

Many core ERP or CRM applications are cloud-based now and would qualify under the definition. Here are a few common solutions for small to midsize businesses that would almost certainly qualify:

  • Quickbooks Online or similar
  • ADP or similar
  • Bill.com or similar
  • Salesforce or similar
  • Netsuite or similar

The term “cloud” is imprecise and covers a lot of ground, which should create flexibility in how businesses are able to use their PPP funds. There are plenty of services, especially in the Microsoft family of services, to consider. Many common business solutions would also qualify as a ‘cloud computing service’, such as:

  • Email delivered via Microsoft 365,
  • Data Analytics powered by Microsoft PowerBI to provide insights into your business and start the automation journey for your small business,
  • Microsoft Azure for running server workloads outside the walls of your organization,
  • Microsoft Teams for calling, file collaboration and communications, and
  • Windows Virtual Desktops to power your Windows desktops from the cloud.

If any of these items have been on your radar to implement, now is the time to start planning because the timer starts for expenditures on the day you receive your PPP funds and you only have at most a 24 week window to spend the funds and achieve full loan forgiveness.

Understand Your Options

If your business has 500 or fewer employees and saw your gross revenues decrease by at least 25% in any quarter of 2020, then you should take a close look at the full requirements for both PPP2 and the Employee Retention Tax Credit (ERTC) to determine your eligibility.

Be careful with the expenditures you are looking to qualify to ensure you are following the ‘cloud computing service’ definition. For example, new laptops are likely not covered under the definition. Although laptops are valuable for accessing cloud-based applications, it is clear the intent is for business software and cloud functions.

PPP2 can be a lifeline for businesses hit hard by the pandemic. While the PPP2 rules are complex, the program can provide a significant opportunity to modernize your business to compete in the coming years.  Our advisors are closely following COVID-19 relief efforts and will continue to publish more insights to keep you informed. Visit our COVID-19 Resource Center or contact an advisor today to discuss your situation and recovery options.

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January 19, 2021

HMDA Data is Due March 1st for Banking Organizations – Are You Ready?

Organizations with loan compliance responsibilities probably came back to work to begin the new year fine tuning a game plan to submit a clean Home Mortgage Disclosure Act (HMDA) Loan Application Register (LAR) by March 1st. While our compliance professionals perform HMDA reviews and field HMDA questions throughout the year, each January comes with a renewed focus on what loans should be reported and how to ensure that each entry is consistent with information that can be found in the loan file. With this in mind, we’re diving into frequently asked questions around HMDA reporting to help make the process easier.

WHY IS HMDA SUCH A HUGE CHORE AT THE BEGINNING OF EACH YEAR?

Gathering data for HMDA can be cumbersome because an incredible amount of information must be reported to a high level of precision for each application. While the integrity of your HMDA data might not be top of mind throughout the year when other more pressing matters require your attention, integrating HMDA reporting into your everyday processes and scrubbing data throughout the year will result in fewer surprises to manage when the pressure is on to submit data by the March 1st deadline. Add to this the fact that Regulation C requires quarterly recording of HMDA data in a format that can be provided to examiners upon request and it just makes sense for HMDA to be a year-round effort rather than a February fire drill.

THE HMDA THRESHOLDS KEEP CHANGING, DO WE HAVE TO SUBMIT 2020 DATA?

The HMDA rules have been in a permanent state of flux with both permanent and temporary reporting thresholds on the move. The latest adjustment became effective July 1, 2020.

Keep in mind that there are separate thresholds for both closed-end credit and open-end credit, so you may have to report one but not the other, both, or neither. For 2020, the reporting thresholds are as follows:

  • Closed-End Loans – If your institution originated fewer than 100 reportable closed-end loans in either 2018 or 2019, then you do not have to report applications for closed-end loans with an action taken date in 2020. This threshold became effective July 1, 2020 and was an increase from 25 loans. If you would have been a reporter had the threshold remained at 25 but are not a reporter with the 100 loan threshold, then you still need to record data for the first quarter of 2020, but do NOT need to report that data. If you choose to voluntarily report 2020 data, then you must report for the entire year.
  • Open-End Loans – If your institution originated fewer than 500 reportable open-end loans in either 2018 or 2019, then you do not have to report applications for open-end loans with an action taken date in 2020. The temporary threshold of 500 reportable open-end loans expires at the end of 2021. For 2022 data (reported in 2023), the threshold will decrease to 200 reportable open-end loans in each of the two preceding calendar years.

If you are approaching either of these thresholds but do not exceed them, be sure to keep adequate documentation to support your exempt status should it be questioned.

WHAT KIND OF TOLERANCES ARE THERE FOR HMDA DATA?

Under the Truth in Lending Act, there are allowed tolerances for the annual percentage rate, finance charge and certain closing costs. Unfortunately, Regulation C does not include allowed tolerances for HMDA data except when calculating error rates for certain purposes. In these instances, a tolerance of three calendar days for application dates and action taken datesand a tolerance of $1,000 for loan amounts/amounts applied for and income. Errors that are within these tolerances are not included in the calculation to determine whether the examiners’ sample will be expanded, or resubmission will be required.

Many fields can accept very precise information. For example, the Debt-to-Income (DTI) ratio can be entered to 15 decimal places. If the file contains several documents with similar, but different, DTI ratios you need to determine which document was relied on to make the credit decision. No tolerance applies, so 43% is incorrect if the DTI ratio that was relied on was 42.95%.

WHAT ARE THE CONSEQUENCES IF OUR HMDA DATA ISN’T CORRECT?

While regulatory agencies have many tools at their disposal to encourage compliance with a wide variety of rules and regulations, the two most common that surface in discussions regarding HMDA are civil money penalties (CMP) and resubmission.

With the implementation of the new rules in 2018, punitive measures such as these have not been commonplace with examiners, allowing for a learning curve so long as a good faith effort to implement the new rules could be demonstrated. That being said, a $200,000 penalty was imposed in 2020 for inaccurate reporting on 2016 and 2017 LARs. Error rates for both years exceeded 30% and this same institution incurred a $34,000 penalty in 2013 for errors on its 2011 LAR.

Error rates that could trigger resubmission can be found in the HMDA Examination Procedures and are dependent on the number of entries on the LAR and calculated separately for each data field, such as loan purpose, action taken and income. A sample of the error rates that could result in resubmission are summarized below. When determining what is an internally acceptable error rate for your institution, these are a good place to start.

# of EntriesResubmission Threshold
101 – 1306.4%
131 – 1905.4%
191 – 100,0005.1%

Keep in mind that HMDA data is publicly available, so it’s accessed not only by various governmental entities, but also by the media, community groups, academicians, other financial institutions and anyone else who may be interested. Should any of these groups approach your institution with questions about your HMDA data do you want your response to be that the data is not accurate?

SHOULD WE REPORT THIS AS A DENIAL OR AS A WITHDRAWAL?

Unaccepted counteroffers can be a problem area for many institutions. One of the most common scenarios we see is an appraised value that does not support the original amount requested. The institution then counteroffers with a lower loan amount. If the applicant accepts and the loan is originated this is easy, the amount of the originated loan is reported, but what if the applicant does not accept the counteroffer? We often see this reported as a withdrawal; however, the Official Interpretations to Regulation C by the Consumer Financial Protection Bureau state that when “the applicant declines to proceed with the counteroffer or fails to respond, the institution reports the action taken as a denial on the original terms requested by the applicant.”

SHOULD WE REPORT ANY LOAN IF THE COLLATERAL IS A DWELLING?

The answer to this question became more complicated when the current set of rules became effective with 2018 HMDA data. The first consideration is the closed-end and open-end thresholds discussed earlier in this article. If those thresholds have been exceeded, the next consideration is the type of loan, such as consumer, commercial, or agricultural. These rules apply equally to originated loans and to applications for these loans that do not result in origination, such as denials and withdrawals.

Consumer Loan Reporting

Consumer loans that are secured by a dwelling will be reported unless they meet one of the exclusions in the rule, the most common of these is temporary financing. A bright line loan term (six months, one year, etc.) does not exist, rather the Official Interpretation to Regulation C states that a loan is excluded as temporary financing if it “is designed to be replaced by separate permanent financing extended by any financial institution to the same borrower at a later time.” Construction loans, are the quintessential example of temporary financing that is not reported on the LAR.

Commercial Loan Reporting

Commercial loans that are secured by a dwelling must meet the definition of a home purchase, refinance, or home improvement loan under Regulation C. Only a portion of the loan proceeds need to be for one of these purposes for the loan to be included on the LAR. Home purchase loans are those that are to purchase a dwelling and that are secured by a dwelling. The dwelling that secures the loan does not have to be the dwelling that is being purchased. Home improvement loans are those that are to repair, rehabilitate, remodel, or improve a dwelling or the real property where a dwelling is located. Refinance loans are those that satisfy and replace and existing dwelling-secured loan by the same borrower. Finally, the temporary financing exclusion discussed above for consumer loans also applies to commercial loans.

Agricultural Loan Reporting

Agricultural loans are excluded from HMDA reporting if either the loan proceeds will be used primarily for agricultural purposes or if the loan is secured by a dwelling that is located on real property that is used primarily for agricultural purposes. Any reasonable standard may be used on a case-by-case basis to make this determination and Regulation C refers to Section 1026.3 of Regulation Z as a source for what constitutes an agricultural purpose.

Preapproval and Prequalification

Preapproval and prequalification requests are another common point of confusion. Refer to Regulation C and accompanying regulatory guidance to determine whether these types of requests should be reported. Regulation C, with some reference to Regulation B (Equal Credit Opportunity), is very specific about what constitutes a preapproval request, which may be reported, and a prequalification request, which is not reported. Do not rely on how your institution labels these requests. When determining HMDA-applicability, refer to Regulation C.

DO I NEED TO DETERMINE IF MY APPLICANT IS PUERTO RICAN OR CUBAN?

No, if the applicant does not provide this information you should not make this distinction based on visual observation or surname. The more detailed ethnicity and race categories such as Puerto Rican and Cuban were introduced with the rules that became effective with 2018 data and are known as disaggregated subcategories. When an applicant indicates an ethnicity of Hispanic or Latino or race of American Indian or Alaskan Native, Asian, or Native Hawaiian or Other Pacific Islander, then the applicant may further identify as one of several subcategories. If the applicant indicates a race of Black or African American or White, then there are no subcategories from which to choose. If the application was taken in person or via electronic media with a video component and the applicant declined to provide ethnicity, race, and sex information, then you must record this information on the basis of visual observation or surname. When doing so, select only from the aggregate categories of Hispanic or Latino or not Hispanic or Latino for ethnicity and American Indian or Alaskan Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White for race.

I CAN’T FIND ANY GUIDANCE THAT ADDRESSES THIS SITUATION, NOW WHAT?

Look for the most analogous situation in official guidance and apply the same concept to your circumstances. Both the CFPB and the FFIEC have dedicated HMDA pages on their websites. Once you reach a decision, apply it consistently across your LAR. The compliance specialists at Anders are also happy to help walk you through the scenario and reach a conclusion. Finally, this could also be a good time to consult with your primary regulator as they may have encountered a similar situation and already developed an opinion on the matter.

HMDA reporting is constantly evolving and compliance can be difficult to navigate. The Anders team of Banking and Financial Institutions compliance specialists closely follow changes to the HMDA rule and related guidance. If you have any questions or that unique situation that is slowing you down, we’re here to help. Contact Anders below to discuss your unique situation and reporting requirements.

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