Home Mortgage Disclosure Act (HMDA)

Yesterday, the CFPB issued two HMDA-related items – a final rule amending federal Regulation B’s information collection provisions and a proposed policy document addressing which HMDA data fields the Bureau intends to make public beginning in 2019.

The Regulation B amendment is intended to facilitate compliance with the new version of Regulation C going into effect on January 1, 2018.   The final rule provides creditors with flexibility in complying with Regulation B’s information collection requirements and restrictions for certain dwelling-secured loans. This will allow lenders to use uniform information-gathering practices and consistent forms without running afoul with Regulation B, even when their loan volume or other circumstances exempts them from data collection and reporting under Regulation C.  The final rule can be found here.

The policy guidance document sets out how the CFPB proposes to balance the competing goals of making HMDA data available to the public while also protecting loan applicant privacy. The Bureau believes that public disclosure of HMDA data is critical to advancing HMDA’s goals, including the identification of possible lending discrimination.  On the other hand, there is a risk that the expanded list of HMDA fields that will be collected next year under amended Regulation C could reveal loan applicants’ identities and other personal information.  The CFPB therefore proposes to exclude certain fields from public disclosure and to modify certain others so they are less specific.  The proposed guidance can be found here. The Bureau will accept comments on the proposal for 60 following its publication in the Federal Register.

The Consumer Financial Protection Bureau issued a proposed rule that would raise the threshold temporarily for institutions that will be required to collect and report data on home equity lines of credit (HELOCs).

Financial institutions that must collect and report data under the Home Mortgage Disclosure Act (HMDA) will start to feel the brunt of the CFPB’s HMDA overhaul relatively soon. Beginning January 1, 2018, new thresholds for determining which institutions must collect and report HMDA data (including the extensive set of new data elements) are set to become effective. As it stands, those institutions will include those that, in addition to other criteria, originated at least 25 closed-end mortgage loans or 100 open-end lines of credit in each of the two preceding calendar years. Accordingly, in connection with HELOCs, if the institution did not originate 100 open-end lines of credit in both of those past two years, the Bureau will not require the institution to collect and report data on those loans.

As indicated in the Bureau’s recent proposed rule, it has learned that the 100-HELOC threshold may be too low, and may impose significant costs on relatively small HELOC lenders. The Bureau indicated that the number of open-end loan originations is continuing to rise, so the threshold may capture more institutions than previously estimated. Further, while the Bureau previously thought that the start-up costs of implementing new technology for capturing and reporting data on HELOCs are sometimes not quite as overwhelming for small institutions (since they may not be as burdened by legacy systems), the Bureau now believes it may have underestimated those costs. HMDA reporting on HELOCs has historically been voluntary – many lenders originate those loans through separate business units using separate systems, and have not needed to consolidate those processes or otherwise collect that data until now. Accordingly, the Bureau is proposing to relieve those institutions that originate fewer than 500 open-end lines of credit in either of the preceding two years from having to collect and report data on those loans.

This higher threshold applies both to whether an institution is a reporting “financial institution,” and with regard to the types of transactions a reporting “financial institution” must report.

The proposed rule would raise the HELOC threshold to 500 open-end lines of credit just for two years, until January 1, 2020, at which time the threshold will revert back to 100 such loans. The agency will use that time to reassess whether it should adjust the threshold permanently.

Comments on the proposed rule are due in just two weeks (by July 31, 2017) – arguably indicating that the Bureau does not expect much opposition to this proposal. The Bureau reportedly hopes to finalize this rule along with the technical corrections it proposed in April 2017.

On Friday, January 13, the Department of Justice (“DOJ”) filed a lawsuit against a Minnesota bank in which it alleged that the bank violated the Fair Housing Act and the Equal Credit Opportunity Act by unlawfully redlining in the Minneapolis-St. Paul-Bloomington metropolitan statistical area (“Minneapolis MSA”).  The complaint, filed in the U.S. District Court for the District of Minnesota, claims that from 2010 to at least 2015, the bank purposely avoided serving the credit needs of residents in majority-minority neighborhoods while meeting the credit needs of residents in majority-white neighborhoods.  The DOJ is seeking damages for aggrieved persons, civil money penalties, and injunctive relief. The bank has chosen to litigate, rather than settle, as it believes the DOJ’s claim is baseless. Continue Reading Redlining Revelations: DOJ Lawsuit Alleges Discriminatory Practices by Bank

Today, the Consumer Financial Protection Bureau (CFPB) announced that it is sending warning letters to 44 mortgage lenders and mortgage brokers, stating that the CFPB staff has information that the companies may not be complying with their obligations to report data under the Home Mortgage Disclosure Act (HMDA).

The CFPB states in its press release that it “identified the 44 companies by reviewing available bank and nonbank mortgage data,” but it does not provide further details about how the companies were identified.

The warning letters note that failure to comply with HMDA reporting requirements “could result in the imposition of the full range of available remedies, including injunctive relief and civil money penalties.”

The letters are a reminder to all institutions to ensure that they are compliant with HMDA.  Several years ago, the CFPB issued consent orders against two institutions for inaccurate HMDA reporting, requiring them to correct and resubmit certain data and to implement effective HMDA compliance management systems.  The letters described above may signal that the CFPB plans to step up its HMDA enforcement again.