Identifying Your Loans Under the New HMDA Rules

The Universal Loan Identifier

You don’t nearly triple the amount of reportable data by keeping things simple. The new HMDA rules expand on nearly everything that needs to be reported on the LAR, including how loans are identified for reporting purposes. The current rules require an “identifying number for the loan or loan application” and each institution “must ensure that each identifying number is unique within the institution.” (12 CFR 1003.4(a)(1) and Comment 4). The new rules though require a “universal loan identifier (ULI),” which has its own specific requirements now.

There are now 3 parts to a ULI:

  1. A Legal Entity Identifier (LEI);
  2. A 23 character identifier that’s “unique within the financial institution;” and
  3. A 2 character check digit.

The first part is likely to be the most confusing and newest, so let’s break it down.

The Legal Entity Identifier

History and Regulation

The LEI is a unique identifier for financial institutions internationally, like an international social security number for banks. It was first introduced around the beginning of 2013 as part of an international effort with the G20 nations as a reaction to the financial crisis. It established the LEI Regulatory Oversight Committee (ROC), which helped establish the Global LEI Foundation (GLEIF), whose goal was to help oversee the issuing of LEIs. The GLEIF accredit Local Operating Units (LOUs), which are the organizations that are authorized to issue LEIs. But before GLEIF was established, the ROC was endorsing organizations who were also issuing LEIs, and these are called “LEI ROC-Endorsed pre-LOU.” These organizations can be international or national; in fact, at the moment there does not appear to be any organization issuing LEIs that is based in the United States. They also have multiple purposes and functions; for example, the London Stock Exchange is a pre-LOU LEI issuer.

That history is to put into context the following regulatory language: Section 1003.4(a)(1)(i)(A)(1) and (2) requires the LEI be issued by “ a utility endorsed by the LEI Regulatory Oversight Committee” or “a utility endorsed or otherwise governed by the Global LEI Foundation (GLEIF) (or any successor of the GLEIF) after the GLEIF assumes operational governance of the global LEI system.” Or, in other words, a “LEI ROC-Endorsed pre-LOU” or a LOU.

There are about 30 total pre-LOUs and LOUs, and the list can be found here: https://www.gleif.org/en/about-lei/how-to-get-an-lei-find-lei-issuing-organizations. As of October 2015, if an institution wishes to issue LEIs, they must be a GLEIF-accredited LOU.

Getting a LEI

Financial institutions need to register to receive an LEI. There is a lot of discretion on which pre-LOU or LOU to register with, though when selecting where to register to receive an LEI, take into account such things as language, currency, and time zones. Each LEI charges its own fees, usually a larger initial fee (about $200 at the moment) and annual re-registration fees (about $100).

After selecting an organization and applying, the LOU needs to collect a “minimum set of reference data,” such as the official name of the entity, headquarters address, and the address of legal formation to name a few. The LOU is required to check each entry against reliable sources such as official public records to verify the provided information.

The wait time can vary depending on the LOU.

I reached out to the GLEIF to ask about LEI issuers in the US, and the three biggest LEI issuers in the US are:

  1. Business Entity Data B.V. (https://www.gmeiutility.org/) (Netherlands)
  2. London Stock Exchange (http://www.lseg.com/LEI) (U.K.)
  3. WM Datenservice (https://www.wm-leiportal.org/) (Germany)

The LEIs and associated data submitted to the LOU about the institution are public record, and made available to regulations and the public continuously and for free.

Portability of LEIs

The good news is that LEIs can be transferred or “ported” from one LOU to another. Like keeping your cell phone number when switching carriers, once an organization is given an LEI, it will not change depending on which LOU is maintaining it. This means you won’t be stuck with your original LEI issuing LOU. So you can register now with the London Stock Exchange, and later transfer it to a more local LOU if a new one is established.

The upcoming changes to HMDA will take some time to really understand and get used to, but one big step is understanding and preparing for the new LEI requirement. Getting the issue of obtaining an LEI down is likely something that is better handled sooner rather than later though, as applications are sure to spike soon. Best of luck!

Bryan T. Noonan, Esq.
Regulatory Compliance Consultant
SPILLANE CONSULTING ASSOCIATES, INC.
501 John Mahar Highway, Suite 101
Braintree, MA  02184
781-356-2772
781-356-2837 (fax)
www.scapartnering.com

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