CFPB finalizes HMDA rule that gives reg relief to banks

The Consumer Financial Protection Bureau issued a final rule that reduces the number of financial institutions reporting Home Mortgage Disclosure Act data that can be used to root out discrimination in home lending.

The amendment to Regulation C, released on Thursday and effective July 1, will increase the permanent loan-volume coverage threshold for collecting and reporting data on closed-end mortgages from 25 to 100.

The CFPB first proposed the current HMDA changes in May 2019. The move is part of CFPB Director Kathy Kraninger's efforts to provide regulatory relief to small lenders by significantly raising loan thresholds for collecting and reporting HMDA data.

The final rule also increases the permanent threshold for open-end lines of credit from 100 to 200.

Financial institutions currently have a reprieve from HMDA reporting after the CFPB extended a temporary threshold that required institutions with 500 open-end lines of credit to report. The permanent threshold goes into effect Jan. 1, 2022, when the temporary, two-year threshold expires, the CFPB said.

The agency sought to tie the regulatory relief to the coronavirus pandemic. In its press release, the CFPB said it recognizes “the operational challenges” confronting institutions due to COVID-19.

“The Bureau anticipates that this final rule, once effective, will reduce regulatory burden on smaller institutions to help those institutions to focus on responding to consumers in need now and in the longer term,” the CFPB said in the release.

Congress enacted HMDA in 1975 to collect data that can be used to identify institutions that engage in discrimination in mortgage lending, typically by raising costs for certain borrowers. The CFPB and other prudential regulators use the data to examine and identify fair-lending violations.

The 2018 regulatory relief law had already exempted an estimated 85% of all banks from reporting expanded HMDA data points, including an exemption from disclosing all points and fees when a bank originates a home loan.