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

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Photo of Christopher K. Friedman Christopher K. Friedman

Chris Friedman is a regulatory compliance attorney and litigator who focuses on helping consumer finance companies and small business lenders, as well as banks, fintech companies, and other participants in the financial services industry, address the challenges of operating in a highly regulated…

Chris Friedman is a regulatory compliance attorney and litigator who focuses on helping consumer finance companies and small business lenders, as well as banks, fintech companies, and other participants in the financial services industry, address the challenges of operating in a highly regulated sector. Chris focuses on both small business lenders and alternative business finance products and has helped non-bank small business lenders, banks who make small business loans, commercial credit counselors, lead generators, and others in the industry. He helps clients launch new products, conduct due diligence, engage in compliance reviews, evaluate litigation risk, and solve some of the unique legal problems faced by companies who work with small businesses. In that vein, Chris has written extensively about the upcoming rulemaking related to Dodd-Frank 1071, which will require data collection and reporting by companies making loans to certain small businesses.

Photo of Benjamin William Perry Benjamin William Perry

Ben Perry’s practice spans the spectrum of legal services. On the litigation side, Ben represents clients at the trial and appellate level against a wide variety of claims in state and federal courts. His practice primarily concentrates on complex civil litigation, products liability…

Ben Perry’s practice spans the spectrum of legal services. On the litigation side, Ben represents clients at the trial and appellate level against a wide variety of claims in state and federal courts. His practice primarily concentrates on complex civil litigation, products liability defense, and representing financial institutions and mortgage companies in civil litigation. As part of the Banking and Financial Services Practice Group, he defends mortgage servicers, investors, and related entities against numerous state and federal law claims arising out of lending and loan servicing practices, including alleged violations of the Telephone Consumer Protection Act (TCPA) and various claims relating to the sale of bank-owned real estate. Ben also has substantial experience defending banks and investors in hundreds of cases related to homeowner’s association (HOA) superpriority liens, and he has represented a company’s founder and CEO facing claims brought by the SEC for alleged embezzlement of company funds.