Loan Data Collection

Position

  • New and proposed CFPB loan reporting requirements divert critical community bank resources which would otherwise be used to serve American consumers.
  • ICBA supports the repeal of the Dodd-Frank Act amendments to the Home Mortgage Disclosure Act (HMDA).
  • ICBA supports significantly expanding the exemption for reporting under HMDA by increasing the reporting thresholds under the revised Regulation C.
  • ICBA supports the repeal of Dodd-Frank Section 1071 which requires the CFPB to implement HMDA-like data collection and reporting requirements for small business lending.
  • If legislative repeal of Section 1071 proves infeasible, ICBA urges the CFPB to use its authority under Dodd-Frank to exempt banks with less than $10 billion in assets from data reporting and to limit any regulation to data points required by statute.
  • ICBA urges the CFPB to prioritize protecting customer privacy as it considers new data reporting requirements.

Background

The CFPB is advancing various initiatives which will require community banks to report an unprecedented amount of data regarding their lending. The recently revised Regulation C and an expected rule implementing Dodd-Frank Section 1071 will create additional loan data collection and reporting requirements for community banks. The benefits of these new requirements are unclear and likely will not outweigh the substantial increase in compliance costs and burden for community banks.

Repeal Additional HMDA Reporting Requirements. The Dodd-Frank Act amendments to HMDA added a number of data points and provided the CFPB wide discretion to impose additional requirements. The resulting HMDA rule increases the number of required data fields from 23 to 48. To comply with these new requirements, community banks will be forced to overhaul their systems and retrain staff at significant cost. Yet the data will likely provide little incremental benefit or insight over what is currently reported. Collection of the new data points begins on January 1, 2018, and reporting of that data begins in 2019.

Higher HMDA Reporting Threshold Needed. Under current law, institutions with assets of less than $44 million (adjusted annually) and institutions with no offices in metropolitan statistical areas are exempt from reporting under HMDA. The new rule creates an additional exemption for small volume mortgage lenders that originate fewer than 25 closed-end mortgages and fewer than 100 open-end lines of credit in each of the two preceding years. The small volume lender exemption will cover about 1,400 institutions, according to CFPB estimates, and a maximum of approximately 34,000 loans. This represents an infinitesimal fraction of the nearly 10 million annual mortgage applications reported through HMDA last year.

ICBA recommends the loan volume threshold for HMDA reporting be increased to 1,000 closed-end mortgages and 2,000 open-end lines of credit. ICBA believes this increase would provide relief for many more small lenders without significantly impacting the mortgage data available to the CFPB or impairing the purpose of the HMDA statute.

Repeal or Exempt Community Banks from Small Business Lending Requirements. Dodd-Frank Section 1071 requires the CFPB to implement rules for the collection and reporting of data on financial institutions’ small business lending under the Equal Credit Opportunity Act. Section 1071 requires the collection and reporting of 12 pieces of data in connection with credit applications made by women- or minority-owned businesses of any size as well as all small businesses regardless of ownership, including the race, sex, and ethnicity of the principal owners of the business. Section 1071 also gives the CFPB discretion to require the reporting of any additional information that would assist the Bureau in fulfilling the purposes of the statute. This data collection will impose significant new burdens on community banks at a time when they are absorbing numerous other regulatory requirements.

Protect Privacy. The breadth of the data to be required to be collected and potentially published under the CFPB’s initiatives may make it possible to identify a borrower. Consequently, private and potentially embarrassing financial data about applicants could be revealed. This is especially true in rural and underserved areas where the small number of loans and households make it easier to identify individual borrowers. Special consideration should be given to lenders that serve such areas.

Staff Contact:<em<> Joe Gormley </em<>