Keeping busy despite the pandemic, the Consumer Financial Protection Bureau (CFPB) has promulgated its final rule raising the loan-volume coverage thresholds for financial institutions reporting data under the Home Mortgage Disclosure Act (HMDA) and Regulation C.
What happened
Enacted in 1975, HMDA and its implementing regulation, Regulation C, require certain financial institutions to report data about mortgage loan applications and originations and their purchases. The data help determine whether financial institutions are serving the housing needs of their communities, assist public officials in distributing public-sector investment so as to attract private investment to areas where needed, and assist in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes.
As we previously reported, the CFPB proposed to raise the reporting thresholds back in May 2019. The CFPB’s final rule, amending Regulation C, increases the permanent threshold for collecting and reporting data about closed-end mortgage loans from 25 to 100 loans effective July 1, 2020. The final rule likewise amends (effective January 1, 2022) Regulation C to increase the permanent threshold for collecting and reporting data about open-end lines of credit from 100 to 200, when the current temporary threshold of 500 open-end lines of credit expires (the CFPB had temporarily extended the 500 open-end lines threshold in October 2019). Absent today’s final rule, the open-end threshold would have reverted to 100 open-end lines of credit upon the expiration of the temporary threshold.
So what does this mean for institutions that originated fewer than 100 closed-end mortgage loans in either of the two preceding calendar years? As a result of the final rule, these entities will not be subject to HMDA’s requirements to collect data on closed-end mortgage loans after July 1, 2020. For calendar year 2021, an institution will not be required to collect HMDA data for closed-end mortgage loans if it originated fewer than 100 closed-end mortgage loans during either 2019 or 2020. In calendar year 2020, an institution could have been subject to HMDA’s closed-end requirements as of January 1, 2020, because it originated at least 25 closed-end mortgage loans in 2018 and 2019 and meets all the other requirements under the rule, but under the final rule they will no longer be subject to HMDA’s closed-end requirements as of July 1, 2020 (a newly excluded institution), because it originated fewer than 100 closed-end mortgage loans during 2018 or 2019.
Some HMDA recording may still be required during this interim period. Newly excluded institutions must still record first-quarter 2020 closed-end data on a loan/application register by 30 calendar days after the end of that first quarter. They are not required to record closed-end data for the second quarter of 2020 because the deadline for recording that data is after July 1, 2020.
Because newly excluded institutions collecting HMDA data in 2020 would not otherwise report those data until early 2021, the final rule relieves newly excluded institutions of the obligation to report by March 1, 2021, data collected in 2020 on closed-end mortgage loans (including data collected in 2020 before July 1, 2020). Under the final rule, a newly excluded institution may voluntarily report HMDA data on closed-end mortgage loans in 2021 as long as the institution reports data for the full calendar year 2020.
The final HMDA rule may be found here.
Why it matters
The CFPB remains busy, and appears committed to completing rulemakings already in progress.
The final rule relieves the burdens on a number of financial institutions to collect and report these data. But these same lenders should examine other laws and regulations before doing so. For example, the Equal Credit Opportunity Act, as promulgated through Regulation B, includes an independent requirement to collect information regarding the applicant’s ethnicity, race, sex, marital status and age where the credit sought is primarily for the purchase or refinancing of a dwelling that is or will be the applicant’s principal residence and will secure the credit.
Manatt’s consumer financial services team advises mortgage lenders on compliance with fair lending laws and regulations. For additional assistance on these issues, contact Richard Gottlieb or any member of the team.