On May 2, the Consumer Financial Protection Bureau (Bureau) issued a Notice of Proposed Rulemaking that would provide relief to smaller lenders from Home Mortgage Disclosure Act (HMDA) data reporting requirements and clarify partial exemptions from certain HMDA requirements that Congress added in the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA).
Coverage Threshold Adjustments
The proposed rule provides two alternatives that would permanently raise the closed-end coverage threshold to either 50 or 100 closed-end mortgage loans in each of the preceding two calendar years. The coverage threshold is currently set at 25.
The proposed rule also would extend the current temporary threshold of 500 open-end lines of credit coverage. Once the temporary extension expires, the proposed rule would set the open-end threshold permanently at 200 open-end lines of credit in each of the preceding two calendar years.
The Bureau is proposing the change to the closed-end coverage threshold and the temporary extension of the open-end coverage threshold to take effect on January 1, 2020, and the increase in the open-end coverage threshold to 200 open-end lines of credit to take effect on January 1, 2022.
Implementation of Partial Exemptions
The proposed rule also implements the partial exemptions from HMDA’s requirements the EGRRCPA recently added to HMDA. The August 2018 HMDA Rule clarified the following:
- Insured depository institutions and insured credit unions covered by a partial exemption have the option of reporting exempt data fields as long as they report all data fields within any exempt data point for which they report data
- Only loans and lines of credit that are otherwise HMDA-reportable count toward the thresholds for the partial exemptions
- Which of the data points in Regulation C are covered by the partial exemptions
- The exception to the partial exemptions for insured depository institutions with less than satisfactory examination histories under the Community Reinvestment Act of 1977
In addition, the 2018 HMDA Rule designated a nonuniversal loan identifier for partially exempt transactions for institutions that choose not to report a universal loan identifier. The proposed rule further implements the EGRRCPA by addressing additional interpretive issues relating to the partial exemptions the 2018 HMDA Rule didn’t specifically address, such as how to determine whether a partial exemption applies to a transaction after a merger or acquisition.
The Bureau is proposing that the amendments take effect on January 1, 2020. These amendments would be addressed by adding Section 1003.3(d) relating to the partial exemptions and making various amendments to the data compilation requirements in §1003.4.
If considered an HMDA-reportable institution with no partial exemption, lenders must collect and submit as many as 110 data fields for each HMDA-reportable application (versus 39 previously). Be aware that the new reporting requirements allow regulatory agencies to develop more sophisticated data screening and data mining that can be applied uniformly across all lenders subject to HMDA reporting requirements. This allows regulators to more effectively target institutions with potential elevated levels of fair lending risk.
Lenders must be diligent in evaluating their own fair lending risk. If internal monitoring detects any data anomalies, it’ll be especially important to document that they’re explainable by legitimate, nondiscriminatory factors. If they’re not explainable, appropriate remediation should be taken and documented.
Read about the Bureau’s proposed rules on HMDA reporting for closed-end mortgage and open-end lines of credit. For more information, reach out to your BKD trusted advisor or use the Contact Us form below.