Wednesday, April 12, 2017

Legal Entity Identifiers and HMDA 2018: Questions and Answers

Jonathan Foxx
Managing Director

The Legal Entity Identifier (“LEI”) is a unique 20-character code that identifies distinct legal entities which engage in financial transactions. The LEI is a global standard, designed to be non-proprietary data that is freely accessible to all. Many financial institutions have not obtained a Legal Entity Identifier (LEI).

A financial institution must provide with the following information in its HMDA submission on or after January 1, 2018:

 i.  Its name;
ii.  The calendar year the data submission covers pursuant to paragraph (a)(1)(i) of this section or calendar quarter and year the data submission covers pursuant to paragraph (a)(1)(ii) of this section;
iii. The name and contact information of a person who may be contacted with questions about the institution's submission;
iv.  Its appropriate Federal agency;
v.  The total number of entries contained in the submission;
vi.  Its Federal Taxpayer Identification number; and
vii. Its Legal Entity Identifier (LEI) as described in § 1003.4(a)(1)(i)(A)

[Emphasis added. See 5(a)(3)(vii)—Legal Entity Identifier (LEI)]

For purposes of the submission requirement, “appropriate Federal agency” means the appropriate agency for the financial institution as determined pursuant to § 304(h)(2) of the Home Mortgage Disclosure Act [12 U.S.C. 2803(h)(2)] or a financial institution subject to the Consumer Financial Protection Bureau's (“Bureau”) supervisory authority under § 1025(a) of the Consumer Financial Protection Act of 2010 [12 U.S.C. 5515(a)].

If your financial institution needs an LEI, the GMEI Utility is endorsed by the Global LEI Foundation and also has a search function. There are some frequently asked questions on their website and we provide below a few highlights derived from that resource.
-     Who can register the financial institution? You must currently be an employee of the financial institution you are registering and also authorized by the financial institution to register for an LEI. Alternatively, financial institutions may use a third party through an assisted registration process. The person registering the financial institution will need a user account, which may be created here.
-     What information is needed to register? The basic information listed in the ISO 17422, such as the financial institution’s legal name, registered address, headquarters address, legal form, and so forth.
-    What is the cost? The GMEI Utility charges $200 for each registration request plus a $19 surcharge. To maintain and keep the LEI registration active, the fee for each registration is $100 plus a $19 surcharge. For more information, visit the FAQs specific to payment.
Once payment is processed, the GMEI will validate the financial institution using public sources. Once this process is complete, it takes about three business days for an LEI to be issued in the GMEI database. Overall, the GMEI Utility’s FAQs state that most requests are “cleared” within three to five business days.

It is advisable to review the CFPB’s HMDA implementation webpage for more information.

Frequently Asked Questions

Q: Why do we need an LEI?

A: The Bureau has taken the position that an LEI could improve the ability to identify a financial institution reporting data and correlate it to its corporate configuration. In addition, the Bureau has stated that “facilitating identification of a financial institution's corporate family could help data users identify possible discriminatory lending patterns and assist in identifying market activity and risks by related companies.” By facilitating identification, this requirement apparently is also meant to help data users identify whether financial institutions are serving the housing needs of their communities. [§ 1003.5(a)(3)]

Q: Should we be getting our LEI as soon as possible? Can we get an LEI before we have to start using it, or do we have to use it as soon as we obtain it?

A: We recommend that you obtain your LEI by the first or second quarter of 2017. There is no reason to delay. We don’t anticipate the price to change. However, you must have an LEI for all loans submitted for HMDA on or after January 1, 2018.

Q: Do you anticipate the Uniform Loan Identifier ("ULI") to be calculated by Loan Origination Systems?

A: We do anticipate that many LOSs will offer to provide this number. However, it is very possible that they may leave this to the vendor collecting your HMDA data. Some concern has been raised about commercial or consumer systems needing such a programming solution. It is our understanding that the Bureau is evaluating this requirement with respect to a compliance effective date for calculating and verifying the ULI and ensuring it has not been previously used.