Residential: CFPB’s proposed HMDA reform will provide relief to smaller lenders

In a wave of announcements earlier this month, the Consumer Financial Protection Bureau (CFPB) outlined its plan to tackle Home Mortgage Disclosure Act (HMDA) reform. “This issue has been on the CFPB’s radar for quite some time,” said Tom Cronin, Managing Director at The Collingwood Group. “The industry has been waiting since last year’s regulatory relief legislation for the details on how new exemptions will be implemented. Expanding exemption thresholds as the CFPB has proposed will provide meaningful relief to smaller lenders, community banks and credit unions.”

A Notice of Proposed Rulemaking and an Advance Notice of Proposed Rulemaking laid out options for amending existing HMDA requirements and open the door to revisiting over half the data fields.

The proposed rulemaking implements mandates from the Economic Growth, Regulatory Relief and Consumer Protection Act of 2018 to expand exemptions from HMDA reporting requirements. The CFPB has proposed raising the threshold for collecting and reporting HMDA data, from 25 closed-end mortgage loans to either 50 or 100, to provide exemptions to more small lenders. The CFPB has also proposed extending the temporary threshold of 500 for open-end lines of credit for another two years.

The Advance Notice of Proposed Rulemaking goes even further, soliciting comment on the costs and benefits of the expanded HMDA dataset that went into effect in 2015. This proposed rulemaking could lead to a significant reduction in the number of HMDA data fields that lenders are responsible for collecting and reporting. “We’ve seen HMDA grow from nine data fields to close to 50 data fields since the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act,” said Cronin. “While 23 of the fields are statutorily mandated, the other 25 new fields added by CFPB regulation in 2015 could be amended without legislative action.”

On the same day the CFPB announced the proposed rulemakings, it shared plans to retire its HMDA Explorer tool, found on its website, and the Public Data Platform API behind it. The Federal Financial Institutions Examinations Council (FFIEC) will make 2018 HMDA available on its website, and loan level data from 2007 to 2017 will remain available on the CFPB’s website.

“The CFPB’s announcements have garnered mixed reactions,” said Cronin. The industry has advocated for an easing of the rapid expansion of HMDA collection and reporting requirements under the previous administration. Industry groups such as the National Association of Federally Insured Credit Unions (NAFCU) have applauded the proposed rulemakings saying, “NAFCU thanks the Bureau for listening to our concerns in implementing modest changes to allow more credit unions to focus on lending to those in need instead of being bogged down in red tape.”

Other industry groups and members of Congress have urged the CFPB to conduct HMDA reform more cautiously. The National Community Reinvestment Coalition (NCRC) expressed concern about the sunset of the HMDA query tool and asked the CFPB to maintain “easy access to HMDA data.”

Sen. Sherrod Brown, D-Ohio, Senate Banking Committee ranking member, issued a statement in response to the CFPB’s announcements. Brown said, “Reducing HMDA reporting will make it easier for lenders to discriminate against people of color, and it will reduce access to credit in small towns and rural areas.” He also asked the CFPB to reverse its decision to retire HMDA Explorer, which he said has “made it easier for local organizations without sophisticated data analytics tools to assess access to mortgage credit in their communities.”

“The increases to the coverage thresholds, whether 50 or 100, will provide immediate relief to smaller lenders,” said Cronin. “However, the Advanced Notice of Proposed Rulemaking on the costs and benefits of the 2015 expanded HMDA dataset could result in far more wide-reaching relief for all mortgage lenders.”

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