After seeking industry comment back in July on a section included in the Home Mortgage Disclosure Act (HMDA), the Consumer Financial Protection Bureau decided to temporarily change reporting requirements for banks and credit unions that issue home-equity lines of credit.
The deadline to comply with HMDA is quickly approaching, with the rule set to take effect in January 2018.
Before this temporary adjustment, financial institutions were generally required to report home-equity lines of credit if they made 100 such loans in each of the last two years.
This new final rule increased the threshold to 500 loans through calendar years 2018 and 2019 in order to give the CFPB time to consider whether to make a permanent adjustment.
The final rule also contains a number of clarifications, technical corrections, and minor changes to the HMDA regulation.
"The Home Mortgage Disclosure Act is a vital source of information on the health and fairness of the mortgage market," said CFPB Director Richard Cordray. "Today’s amendments show that the Consumer Bureau is committed to ensuring that financial institutions are able to comply with the rule, and to promoting transparency across the largest consumer financial market in the world.”
Depending on how the next two years go, the CFPB will decide whether to initiate another rulemaking to address the appropriate level for the threshold for data collected beginning Jan. 1, 2020.
When the CFPB published the proposal, they estimated 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.
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.
But over the past two years, CFPB has announced some further updates as the industry has had time to digest the rule and ask questions.
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.
And now in this final rule, the CFPB delivered those answers. The clarifications announced include clarifying certain key terms, such as “temporary financing” and “automated underwriting system.”
The CFPB added that the changes finalized will also, for example, establish transition rules for reporting certain loans purchased by financial institutions. Another change will facilitate reporting the census tract of a property, using a geocoding tool that will be provided on the bureau’s website, the bureau added.
With the publishing of the amended final rule from the CFPB, the industry officially has less than half a year to make the adjustments and become compliant.