CFPB Issues Final HMDA Rule Offering Relief to Smaller Institutions and Credit Unions

Bradley Arant Boult Cummings LLP

The Consumer Financial Protection Bureau (CFPB) issued its long-awaited final rule amending the Home Mortgage Disclosure Act (HMDA) on Thursday, October 10. These changes promise to bring some measure of relief to smaller financial institutions and credit unions. Prior to this new rule, the CFPB did not require the collection and reporting of HMDA data for institutions originating less than 500 open-ended lines of credit until January 1, 2020. The new rule provides that this temporary collection and reporting threshold will be extended to January 1, 2022.

This rule follows a May 2019 advance notice of proposed rulemaking (ANPR) in which the CFPB would, along with extending the temporary reporting threshold for open-ended loans, temporarily raise the collection and reporting threshold for closed-end mortgage loans from 25 to 50 to 100 loans for 2018 and 2019. The ANPR would then ultimately lower the threshold to 200 open-end loans after January 1, 2022. While the final rule does not include the ANPR’s provisions related to closed-end loan collection and reporting requirements, it signals the CFPB’s intent to issue a separate rule addressing this issue.

Finally, the new rule implements certain exemptions for smaller financial institutions that were issued in 2018 pursuant to the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA). For instance, the rule specifies that some smaller insured depository institutions and credit unions have the option of reporting exempt data so long as all data fields within an exempt data point are reported. This clarification is designed to assist smaller institutions that may find it less burdensome to report all data points rather than institute policies and procedures to separate exempt and non-exempt data points before reporting.

To be sure, collection and reporting requirements under HMDA have increased both the costs and risks associated with consumer and some commercial lending. According to an October 15, 2019 joint comment to the CFPB by, among others, the American Bankers Association and the Mortgage Bankers associations, since 2008 the cost of originating mortgage loans for mid-sized banks has approximately doubled from approximately $4,800 to $9,000. Likewise, most institutions responding to the ABA’s annual Real Estate Lending Survey have reported higher compliance costs as a result of increased regulations. In a May 2019 statement, CFPB Director Kathleen Kraninger suggested that she was attuned to some of these concerns, stating that the proposed changes to HMDA collection and reporting requirements were designed to “provide much needed relief to smaller community banks and credit unions while still providing federal regulators and other stakeholders with the information [the CFPB] need[s] under the Home Mortgage Disclosure Act.”

We anticipate additional changes to Regulation C that will provide relief to small to medium-sized institutions. Nevertheless, HMDA’s collection and reporting requirements will continue to be a source of significant regulatory, litigation, and reputational risk. As such, all covered institutions should have in place easy-to-use policies and procedures, as well as training programs designed to guarantee accurate collection, reporting, and analysis of HMDA data.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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