Written By: Joel Palmer, Op-Ed Writer
The Consumer Financial Protection Bureau (CFPB) announced earlier this month that it is implementing the changes to the Home Mortgage Disclosure Act (HMDA) that were part of the recently passed Economic Growth, Economic Growth, Regulatory Relief, and Consumer Protection Act. The FDIC released a similar statement.
The law, also known as S. 2155 and signed by President Trump in May, provides an exemption for HMDA data collection to certain lenders.
According to the CFPB’s statement:
“The Act provides partial exemptions for some insured depository institutions and insured credit unions from certain HMDA requirements. The partial exemptions are generally available to insured depository institutions and insured credit unions:
• For closed-end mortgage loans if the institution originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years.
• For open-end lines of credit if the institution originated fewer than 500 open-end lines of credit in each of the two preceding calendar years.”
"For closed-end mortgage loans or open-end lines of credit subject to the partial exemptions, the Act states that the “requirements of [HMDA section 304(b)(5) and (6)]” shall not apply. Accordingly, for these transactions, those institutions are exempt from the collection, recording, and reporting requirements for some, but not all, of the data points specified in current Regulation C.”
The CFPB’s statement also included the following information:
• The new law does not affect the format of the Loan/Application Registers (LARs). All LARs will be submitted to the same HMDA Platform.
• It does not intend to require lenders to resubmit data for HMDA data collected in 2018 and reported in 2019, unless there are material errors.
• The bureau does not intend to assess penalties with respect to errors in data collected in 2018 and reported in 2019.
• CFPB expects to provide further guidance this summer on the applicability of the law to HMDA data collected in 2018.
S. 2155 rolled back many of the reporting requirements included in an October 2015 update to the HMDA. That 800-page set of rules increased mortgage lenders reporting requirements and were designed to provide regulators with more information on consumers’ access to mortgage loans. It also expanded the data related to mortgage applications and loans to be collected, reported and disclosed under HMDA.
Those new data points included age applicants, fees payable at origination, difference between the APR of the loan and benchmark rates, prepayment penalties, property values, loan terms, and credit scores of loan applicants.
Those rules had also eliminated the asset test for exemption of certain lenders. Prior to the passage of S. 2155, lenders that made the lending decision on at least 25 loans in a given year had to file.
While opponents of the HMDA provision in S. 2155 warned that less data could lead to mortgage finance discrimination, many in the industry pointed out that the legislation simply reformed the dramatic expansion of reporting mandates imposed by the 2015 rule change.
Applying the standards previously imposed by CFPB to minority and community financial institutions, it was argued, would discourage local lending and lead to more mortgage industry consolidation.
HMDA requires financial institutions to maintain, report, and publicly disclose loan-level information about mortgages. It was originally enacted by Congress in 1975 and is implemented by Regulation C. Congress amended HMDA with the 2010 Dodd-Frank Act, which transferred HMDA rule making authority to the CFPB.
According to data reported as of April 18, 2018, CFPB received 14.3 million HMDA records from 5,852 financial institutions for mortgages originated in 2017.
About the Author
As an NAMP® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.