CFPB posts rule explaining how HMDA exemptions will work

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The Consumer Financial Protection Bureau issued an interpretive rule Friday to clarify changes made to the Home Mortgage Disclosure Act that were mandated by President Trump's regulatory relief law.

The reg relief law, signed in May, exempts roughly 85% of banks and credit unions from reporting the expanded HMDA data points introduced for the 2018 reporting year. The mortgage industry lobbied heavily for the changes, particularly for an exemption from disclosures of all points and fees when a loan is originated.

After signaling in early July that it would release updated HMDA guidance this summer, the CFPB issued an "interpretive and procedural rule" on Aug. 31 and said it expects to initiate a notice-and-comment rulemaking "at a later date" to incorporate its interpretations into Regulation C, which implements HMDA.

The CFPB said it needed to clarify how banks and credit unions that receive the HMDA exemption through the Economic Growth Act should proceed with data collecting and reporting. It also clarified that the structure and requirements of the data to be reported is not being modified or reversed, only that some fields are exempted.

The CFPB's guidance provides additional details on the two ways depository mortgage lenders can qualify for the exemption. First, if a lender originates less than 500 closed-end and less than 500 home equity lines of credit in each of two consecutive years, it does not have to report the expanded HMDA data on any of its loans.

Alternatively, if a lender originates less than 500 closed-end loans per year, but more than 500 HELOCs, it only has to report the expanded data on its HELOCs, and vice versa.

In any case, depositories cannot receive the exemption if they have a negative Community Reinvestment Act examination history, ensuring that bad actors will have to report the full HMDA dataset.

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Dodd-Frank mandated 14 additional data fields for HMDA data collection, on top of the nine that already existed. The statute also gave the CFPB the discretion to add additional data fields, and former CFPB Director Richard Cordray used that authority to establish 25 additional data fields. Since then, acting CFPB Director Mick Mulvaney has emphasized easing HMDA compliance.

The CFPB clarified that banks and credit unions exempt from providing the expanded data points can still choose to report the information, but if they do, they have to submit all of the expanded data.

The guidance provides details on which of the data points in Reg C are covered by the partial exemptions. The CFPB also said that if a bank chooses not to report a universal loan identifier for loans covered by the partial exemption, then a nonuniversal loan identifier will be assigned to the loan transaction. Updated HMDA filing instructions that incorporate the clarifications were also provided in the new guidance.

The CFPB also noted that the threshold of 500 open-end lines of credit for the complete regulatory exclusion is temporary, and absent further action, the permanent threshold will be 100 open-end lines of credit beginning on Jan. 1, 2020.

The effective date of the interpretive rule was not nailed down, but the CFPB said that "there is good cause" to make the final rule effective on the date of publication in the Federal Register.

Regulators use HMDA data to enforce fair lending and anti-discrimination laws. Much of the data is also made public annually, where it's used in academic research and industry analyses.

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