Court tosses Trump-era HMDA reporting change

Ruled in favor of community housing groups over CFPB

A federal judge has ruled in favor of a coalition of community housing groups against the Consumer Financial Protection Bureau (CFPB), vacating part of a Trump-era rule that impacted the reporting obligations of certain mortgage lenders.

The D.C. District Court found that the CFPB, under Trump appointee Kathy Kraninger, acted in an “arbitrary and capricious” manner by exempting mortgage lenders from reporting obligations under the Home Mortgage Disclosure Act (HMDA) designed to help combat fair lending and fair housing violations, including redlining. While the rule was not entirely thrown out, the coalition of community groups characterized the decision as a “vindication.”

“This ruling partially overturns a Trump-era rule that blocked a significant portion of the mortgage industry from reporting information about who they were approving and denying for loans,” said Jesse Van Tol, president and CEO of the National Community Reinvestment Coalition (NCRC), which filed the suit. “Public data on home mortgage lending is crucial to combatting modern-day redlining and other forms of illegal discrimination that contribute to the savage inequalities plaguing our country.”

The court did partially rule in favor of CFPB by maintaining portions of the 2020 rule related directly to open-end lines of credit, but the portion specifically related to closed-end mortgage loans was vacated.

“By recognizing that the prior administration had been arbitrary and capricious, and bringing sunlight back into mortgage lending data, the court helps to vindicate the federal government’s longstanding efforts to deliver equality of opportunity,” Van Tol said of the decision.

In a court filing made in June 2021, attorneys for the CFPB had argued that the plaintiffs had not sufficiently established that provisions of the rule were “unreasonable,” and that the rule was a “lawful exercise” of the Bureau’s authority.

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While the presiding judge did not challenge CFPB’s authority to implement policy, the opinion did find that the Bureau’s justifications for excluding a large share of institutions from reporting requirements under HMDA were “on shaky ground.”

“Where a statute is designed to provide transparency in business practices to enable enforcement of laws designed to bar discriminatory and risky lending practices, and where Congress has so recently carefully crafted a framework to maximize the universe of lending institutions required to report some data, while minimizing the extent of the burden of reporting on those institutions most likely to feel the brunt of it, CFPB’s decision to essentially undo Congress’s carefully selected balance with blanket exceptions for this share of the lending market without explanation is arbitrary and capricious,” the opinion reads in part.

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