This is the third in our article series on mandatory mortgage activity disclosures required by the California Bureau of Real Estate (CalBRE) and the Nationwide Mortgage Licensing System (NMLS). This article discusses the residential mortgage loan report (RE 857) required of CalBRE-licensed brokers who make mortgages as direct lenders.
Mortgage activity reporting
California Bureau of Real Estate (CalBRE) licensees are required to submit periodic reports about their consumer mortgage activity and financial condition to both the CalBRE and the Nationwide Mortgage Licensing System (NMLS). [Calif. Business and Professions Codes §§10166.07-08; 12 United States Code §5104(e)]
CalBRE licensee mortgage activity reports include:
- the mortgage loan activity notification (CalBRE Form RE 866), filed with the CalBRE [Bus & P C §10166.02];
- the business activity report, filed with the CalBRE [Bus & PC §10166.07];
- the residential mortgage loan report (CalBRE Form RE 857), filed with the CalBRE [Calif. Health and Safety Code §§35815-35816]; and
- the mortgage call report, filed with the NMLS. [12 USC §5104(e)]
CalBRE licensees file the mortgage loan activity notification form (CalBRE Form RE 866) to notify CalBRE when they commence making, arranging or servicing consumer mortgages.
CalBRE brokers file the business activity report annually to notify CalBRE of all their different types of mortgage activities, both consumer and commercial.
CalBRE brokers who are mortgage loan originators (MLOs) file the mortgage call report to notify the NMLS of their quarterly consumer mortgage activities.
Editor’s note — A consumer mortgage is a debt:
- incurred primarily for personal, family or household purposes; and
- secured by a parcel of real estate containing one-to-four residential units, whether or not the owner occupies the property.
MLOs deal in consumer mortgages. [Bus & P C §10131.1(b)]
In contrast, a business mortgage is a debt:
- incurred for a non-consumer purpose and secured by any type of real estate; or
- incurred for a consumer purpose and secured by other than a one-to-four unit residential property. [12 United States Code §1701j-3(e)]
Business mortgages, also known as commercial mortgages, are the purview of mortgage loan brokers (MLBs).
The residential mortgage loan report
The residential mortgage loan report (CalBRE Form RE 857) is a report filed by mortgage brokers who act as direct lenders. This report is not filed by CalBRE-licensed brokers who only arrange residential mortgages funded – made – by others.
Brokers acting as direct lenders use this filing to report their annual residential mortgage activity to the CalBRE. Data on both applications and closed residential mortgages are reported.
A residential mortgage for this report includes both consumer mortgages and commercial mortgages secured by one-to-four unit residential property which fund either the purchase or improvement of the secured property. This includes cash-out refinancing which funds some improvement to the property. [21 Code of California Regulations §7117(d), 7118(b)-(c)]
A residential mortgage does not include:
- a mortgage secured by unimproved land;
- a rate and term refinance by modification;
- a mortgage or cash-out refinance which funds a purpose other than the purchase or improvement of the secured one-to-four unit residential property, such as a vacation, education or business/investment/agriculture activity;
- a mortgage applied for outside of California;
- a mortgage made in California, but secured by property outside of California [21 CCR §7118(c)]; or
- a mortgage made by the lender when a real estate broker arranges the mortgage acting as an MLO or an MLB. [21 CCR §7121(b)]
Direct lenders are to report
Residential mortgage activities of direct lenders exempt from the federal Home Mortgage Disclosure Act (HMDA) reporting are monitored by the California State Transportation Agency and the California Business, Consumer Services and Housing Agency (BCSH).
The purpose of the oversight is to determine whether direct lenders of residential mortgages are fulfilling their obligation to provide lending to all qualified applicants in their respective communities. Like HMDA, the report data is reviewed to identify potentially discriminatory lending patterns based on the demographics of a community. [Health & S C §35816]
To comply with state reporting, lenders exempt from federal HMDA rules file a residential mortgage loan report with the state agency governing their licensure:
- real estate brokers making mortgages secured by one-to-four residential units as direct lenders report to the CalBRE;
- broker-dealers, credit unions, industrial loan companies, finance lenders and residential mortgage lenders report to the California Department of Business Oversight (DBO);
- mortgage insurers report to the Department of Insurance; and
- all other mortgage lenders report to the BCSH. [21 CCR §7117(b)]
The residential mortgage loan report CalBRE-licensed direct lenders file with CalBRE is the California equivalent of the federal HMDA disclosure required of larger, federally regulated direct lenders.
Meeting the threshold for reporting
CalBRE-licensed direct lenders who report under the federal HMDA are exempt from having to file this CalBRE report. [Health & S C §35816(b)]
Editor’s note — For non-bank, non-credit union lenders — which include CalBRE licensees funding mortgages as direct lenders — HMDA reporting is required when, in a calendar year:
- the lender is a for-profit entity;
- the lender originates at least $25 million in residential mortgages or their residential mortgage originations make up 10% or more of the total dollar amount of all mortgages they originate; and
- the lender had an office or branch in a metropolitan statistical area (MSA); AND
- had assets of $10 million or more, including the assets of a parent corporation; OR
- originated at least 100 residential mortgages. [12 Code of Federal Regulations §1003.2]
A CalBRE-licensed broker making mortgages as a direct lender who is exempt from HMDA reporting files the California residential mortgage loan report with the CalBRE if, during the calendar year:
- they make residential mortgages exceeding 10% of the total dollar amount of all mortgages they make [21 CCR §7121(a)];
- they make 12 or more residential mortgages during the calendar year with a total amount of $500,000; and
- they have assets no greater than $10 million. [CalBRE Form RE 857A]
Reporting forms and timeline
For CalBRE-licensed brokers who make mortgages as direct lenders, loan data is compiled and filed with CalBRE on the residential mortgage loan report (CalBRE Form RE 857). A separate residential mortgage loan report is completed for each MSA in which the broker has a branch. [21 CCR §7118(b)]
A CalBRE-licensed direct lender files a residential mortgage loan report, CalBRE Form 857, in duplicate every March 31. The report provides data on the prior calendar year’s mortgage activity. [21 CCR §7119(b)]
For instance, if the CalBRE-licensed direct lender falls under the reporting requirements during 2015, they are required to file the report on 2015 mortgage activity by March 31, 2016.
The CalBRE-licensed direct lender also makes the residential mortgage loan report available to the public for five years. This is accomplished by having the report available in every branch, and providing it upon request.
The five-year period commences from the filing due date. For example, a report due by March 31, 2015 needs to be available to the public until March 31, 2020. [21 CCR §7119(a)]
No fees are incurred for filing this report.
Data sorted by MSA
The CalBRE-licensed direct lender files a residential mortgage loan report for each metropolitan statistical area (MSA) in which they have a branch. MSAs are regions defined by the U.S. Office of Management and Budget (OMB) and used by government agencies for statistical purposes. MSAs represent regions of high population density.
MSAs are not defined strictly by county or city lines, but rather larger regions linked by common economic ties, e.g. Riverside-San Bernardino-Ontario.
Brokers can look up MSA codes and boundaries manually at http://www.census.gov/geo/maps-data/maps/statecbsa.html
In the top portion of the residential mortgage loan report, the CalBRE-licensed direct lender provides:
- their name;
- their CalBRE license number;
- their address and phone number;
- the enforcement agency (pre-filled with “Bureau of Real Estate”);
- the address of the enforcement agency (pre-filled with CalBRE’s address);
- the census map on which the MSA is based (pre-filled with 2010 data, the latest census data available);
- the year of the data being reported; and
- the MSA covered in the report.
Section 1 contains information about originations and applications, sorted by census tract. The census tract is also pulled by reviewing the census maps linked above. [21 CCR §7118(b)]
For each census tract within the MSA, the report provides:
- the total number of applications taken;
- the total number of mortgages made; and
- the total dollar amount of mortgages made, shown in terms of thousands;
for each of the following situations:
- the total of Federal Housing Administration (FHA)-insured mortgages, Farmers Home Administration (FmHA) mortgages and U.S. Department of Veterans Affairs (VA)-guaranteed mortgages used to purchase a property occupied by the borrower;
- conventional mortgages used to purchase a property occupied by the borrower;
- home improvement mortgages on one-to-four unit residential properties occupied by the borrower; and
- all home improvement loans on one-to-four unit residential properties not occupied by the borrower. [21 CCR §7118(b)(2)]
In Section 2, the broker provides the same totals for mortgages secured by one-to-four residential properties located outside of the MSA for their branch. The data is not broken down by census tracts for financed properties in MSAs other than where the broker has a branch. [21 CCR §7118(b)(1)(B)]