Politics & MoneyMortgage

CFPB proposes HMDA changes for community banks and credit unions

Seeks comments on the 100-loan threshold

The Consumer Financial Protection Bureau released a proposed rule on Friday to reassess a section included in the Home Mortgage Disclosure Act (HMDA) that pertains to community banks and credit unions. As it stands, the rule is set to take effect in January 2018.

The CFPB stated that it’s looking into the reporting requirements for banks and credit unions that issue home-equity lines of credit.

Under the rule, financial institutions are generally required to report home-equity lines of credit if they made 100 such loans in each of the last two years.

But this could change depending on the feedback the bureau gets from the proposed rule.

The new proposal would increase that threshold to 500 loans through calendar years 2018 and 2019 so that the CFPB can consider whether to make a permanent adjustment.

The CFPB estimates that the temporary 500-loan threshold would still capture about three-quarters of the home-equity lending market, down from about 88% at the 100-loan threshold.

As a result, the CFPB is seeking comment on whether to postpone collection of this information for smaller-volume institutions so that it can study whether the threshold should be adjusted permanently.

The Home Mortgage Disclosure Act, which was enacted in 1975, requires most lenders to report information about the home loans that they originate or purchase, as well as applications received.

The CFPB explained that banking regulators and the public can use this data to monitor whether financial institutions are serving the housing needs of their communities, to assist in distributing public-sector investment in order to attract private investment to areas where it is needed, and to identify possible discriminatory lending patterns.

The bureau first released updates to HMDA in October 2015 to improve the quality and type of data reported by financial institutions, the CFPB claims.

From there, the CFPB gave the industry about three years to become compliant, with most of the updated requirements taking effect in January 2018.

“Home-equity lines of credit worsened the foreclosure crisis that swept the country in 2008 and 2009,” said CFPB Director Richard Cordray. “We need to keep track of the responsible use of these loans for consumers, but after hearing from community banks and credit unions we want to reconsider whether that goal can be achieved with a higher reporting threshold.”

Back in April, the CFPB issued a separate a much-asked-for proposal on the HMDA rule to clarify the 2015 updates to the rule, in order to help ensure industry compliance, according to the national regulator. To read about the proposed changes, click here.

And ever since the bureau issued the new HMDA final rule, the industry has been on high alert to come into compliance, even going so far as to say that HMDA is replacing TRID (the TILA-RESPA Integrated Disclosure rule) as the most dreaded mortgage acronym.


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