Final HMDA Rule Provides Relief for Community Banks

Thoughtware Article Published: Apr 22, 2020
Change on top of a calculator and a magnifying glass

On April 16, 2020, the Consumer Financial Protection Bureau (CFPB) issued a final rule raising the loan-volume coverage thresholds for financial institutions reporting data under the Home Mortgage Reporting Act (HMDA). The rule will help reduce regulatory burden on smaller institutions. 

The 2020 HMDA final rule includes changes with two different effective dates: 

  • Effective July 1, 2020, the final rule quadruples the threshold by permanently raising the closed-end coverage threshold from 25 to 100 closed-end mortgage loans in each of the two preceding calendar years.
  • Effective January 1, 2022, when the temporary threshold of 500 open-end lines of credit expires, the final rule doubles the permanent open-end threshold from 100 to 200 open-end lines of credit in each of the two preceding calendar years. 

The CFPB provided guidance on how the midyear implementation affects a newly excluded institution’s data collection, recording and reporting obligations under HMDA.

  • Collection of HMDA data – Newly excluded institutions may discontinue the collection of data for HMDA purposes beginning on July 1, 2020. 

Reminder: Under the Equal Credit Opportunity Act and Regulation B, there’s a separate data collection requirement for mortgage loans for the purchase or refinancing of the consumer’s principal residence. This will be a big change for some institutions, so it’s important to prepare and train your lending staff now. 

  • Recording of HMDA data – Newly excluded institutions must still record closed-end mortgage loan data for the first quarter of 2020 on their loan application registers within 30 days after the end of the first quarter. Newly excluded institutions won’t be required to record second-quarter data because the recording deadline is after July 1, 2020.
  • Reporting of HMDA data – Newly excluded institutions aren’t required to report any HMDA data for 2020, including the data that was collected and recorded for the first quarter. Newly excluded institutions may opt to report data for 2020, but to do so, they must report data for the entire year.

Read the CFPB’s final rule on HMDA reporting for closed-end mortgage and open-end lines of credit. As with most topics related to COVID-19, changes are being made rapidly. Please note that this information is current as of the date of publication. For more information, reach out to your BKD Trusted Advisor or use the Contact Us form below. 

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