CSBS Issue Briefings - August 2020

Home Mortgage Disclosure Act

CSBS Official Public Position

While state regulators support the statutory intention of HMDA, CSBS believes the relationship lending model of community banks should not be subjected to the same scrutiny as large, global institutions that deploy standardized model-based lending programs.

Summary

In October 2015, the Consumer Financial Protection Bureau (CFPB) finalized amendments to HMDA (Regulation C). The updated rule required financial institutions to report 25 new data points identified in the Dodd-Frank Act, as well as other data points that the CFPB believes may be necessary. The rule also sought to provide limited relief to the smallest depository HMDA reporters by increasing the threshold for reporting from one covered loan to 25 covered loans. In May 24, 2018, the president signed into law the Economic Growth, Regulatory Relief and Consumer Protection Act, sometimes known as S. 2155. Section 104 of the Act requires the CFPB to adjust the transactional threshold in Regulation C, allowing institutions to only report certain new HMDA data points (added by DFA and the 2015 Rule) if they originated more than 500 closed-end mortgage loans in each of the two preceding calendar years. In August 2018, the CFPB issued an interpretive and procedural rule to implement and clarify the partial exemptions that will apply if the bank or credit union originated fewer than 500 closed-end mortgage loans in each of the preceding two calendar years (and have a satisfactory CRA rating). The rule clarified 26 data points are covered by the partial exemption, and 22 data points still must be reported by institutions or credit unions that qualify for the partial exemption. A total of 2,251 reporters made use of the EGRRCPA’s partial exemptions for at least one of the 26 data points eligible for the exemptions. The 2018 HMDA data became available in August of 2019 and (released in 2019) contains a variety of information reported for the first time. With the release of the 2018 data, the FFIEC urged users of the data to be cautious when exploring whether new data points indicate discrimination. In a press release announcing availability of 2018 data on mortgage lending: “HMDA data alone cannot be used to determine whether a lender is complying with fair lending laws. The data do not include some legitimate credit risk considerations for loan approval and loan pricing decisions. Therefore, when regulators conduct fair lending examinations, they analyze additional information before reaching a determination about an institutions compliance with fair lending laws.” In 2019, the CFPB issued only one action related to fair lending, fining Freedom Mortgage $1.75 million for alleged violations of HMDA. In April 2020, the CFPB finalized a rule further increasing the reporting threshold for closed-end mortgages from 25 to 100 loans for both depository and non-depository lenders. The permanent threshold for reporting open-end lines of credit will increase from 100 to 200 on Jan. 1, 2022, when the current temporary threshold of 500 (from S. 2155) expires.

Why it Matters to State Regulators

FOR STATE REGULATOR USE ONLY