HOME MORTGAGE DISCLOSURE ACT REFORM
- Recent revisions to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA), will greatly increase the reporting burden for many community banks.
- ICBA strongly supports expanding the exemption for reporting under HMDA by increasing the 25 first-lien mortgage threshold in the revised Regulation C.
- ICBA opposes the expansion of HMDA reporting requirements beyond what is required by statute. In particular, the collection and reporting of data on home equity lines of credit (HELOC) and reverse mortgage loans is costly and burdensome and will not add greater clarity to currently required data.
- ICBA urges the CFPB to carefully consider consumer privacy as it contemplates the public release of additional data collected under the revised Regulation C.
- Given the increased reporting requirements, ICBA strongly supports greater tolerances for HMDA reporting errors to help community banks with the growing compliance burden.
- CFPB should closely monitor the marketplace to ensure that implementation issues are resolved and that vendors provide needed software and systems updates needed to comply with HMDA in a timely manner.
The Dodd-Frank Act transferred rulemaking authority for HMDA to the CFPB, effective July 2011. It also amended HMDA to add new data points and authorized the Bureau to require additional information from covered institutions.
Additional Reporting Requirements. The Bureau’s new HMDA Rule, issued on October 15, 2015, will increase the number of unique data fields that are required to be reported on mortgage loan applications from 23 to 48. Of the 25 new fields, approximately half were added at the CFPB’s discretion. These include data on most reverse mortgages and home equity lines of credit (HELOCs). Community banks will be required to overhaul their systems and train staff at great cost to make these changes yet the data will likely provide little additional benefit or insight from what is currently required to be reported. Collection of the new data points begins on January 1, 2018, with reporting of that data beginning in 2019.
Higher Reporting Threshold Needed. Certain institutions do not report under HMDA. Institutions with assets of less than $44 million (adjusted annually) and institutions with no offices in metropolitan statistical areas are exempt. In addition, the new rule creates an exemption for small volume mortgage lenders. Institutions that originate fewer than 25 closed-end mortgages and fewer than 100 open-end lines of credit in each of the two preceding years are exempt from HMDA reporting. The small volume lender exemption will cover about 1,400 institutions, according to CFPB estimates, and a maximum of approximately 34,000 loans, though the actual number of HMDA-exempt loans is certainly far smaller. This represents an infinitesimal fraction of the nearly 10 million annual mortgage applications reported through HMDA last year.
To help alleviate the adverse impact of the new rule, ICBA strongly supports increasing the loan volume threshold for HMDA reporting. ICBA believes that there is an opportunity to provide relief for many more small lenders without materially impacting the mortgage data available to the CFPB or impairing the purpose of the HMDA statute.
Error Tolerances. CFPB is in the process of reviewing error tolerances for HMDA reporting. Time and resources spent on reviewing HMDA data for submission will increase exponentially due to additional data fields. ICBA strongly urges the Bureau to increase tolerances for reporting errors in order to minimize regulatory burden for community banks.
Consumer Privacy. ICBA urges the CFPB to carefully examine potential privacy concerns with the public disclosure of the new data fields required by HMDA. Given the breadth of the data to be required, it may be possible to identify a particular borrower. As a consequence, private and potentially embarrassing financial data about applicants could be revealed. In addition, special consideration about privacy should be given to community banks that serve customers in rural and underserved areas where the small number of loans and households make it even easier to identify individual borrowers.
Implementation. CFPB should work with market participants before and after the rule’s effective date to ensure that implementation issues are addressed promptly. In addition, community banks and other lenders experienced major issues implementing both the January 2014 mortgage rules and the TILA RESPA Integrated Disclosure (TRID) rule due to many vendors’ inability to roll out software upgrades in a timely manner. CFPB must monitor vendors closely as banks and others prepare to implement HMDA to ensure that the marketplace is not disrupted.
Staff Contact: Joe Gormley