CFPB Issues Final Rule Amending HMDA
The Consumer Financial Protection Bureau (“CFPB”) recently issued a final rule which amends Regulation C, 12 CFR part 1003, to implement certain proposals from its May 2019 Notice of Proposed Rulemaking under the Home Mortgage Disclosure Act (“HMDA”). Most notably, the final rule extends for two years a temporary adjustment to Regulations C’s institutional and transactional coverage threshold for open-end lines of credit. Also, the rule provides further clarification of partial exemptions from certain HMDA requirements created by the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”). With limited exceptions, the final rule is effective January 1, 2020.
History
In October 2015, the CFPB issued the 2015 HMDA Rule which implemented the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) amendments to HMDA. It generally required financial institutions that originate at least 100 open-end lines of credit in each of the two preceding years to report data about their open-end lines of credit and applications. Additionally, it added requirements for new data points, and revised certain existing data points.
In 2017, the CFPB issued a rule (2017 HMDA Rule) which temporarily increased the open-end coverage threshold to 500 for two years, so that only financial institutions that originated at least 500 open-end lines of credit in each of the two preceding years are subject to HMDA’s requirements for their open-end lines of credit for 2018 and 2019.
The EGRRCPA, which became law in May 2018, included a partial exemption from HMDA’s requirements for insured depository institutions and insured credit unions that originated less than 500 open-end lines of credit in each of the two preceding years. However, all insured depository institutions and insured credit unions that are granted a partial exemption for open-end lines of credit by the EGRRCPA are fully excluded from HMDA’s requirements for their open-end lines of credit by the 2017 HMDA Rule in calendar years 2018 and 2019.
In August 2018, the CFPB issued an interpretive and procedural rule to clarify questions about the new partial exemptions and how they effected 2018 reporting of data. In part, the rule clarified that only loans and lines of credit that are otherwise HMDA reportable count toward the thresholds for partial exemptions and that insured depository institutions and insured credit unions covered by a partial exemption have the option of reporting exempt data fields. However, if a data point covered by the partial exemption includes multiple data points, all of the data fields must be reported if at least one of the data fields are reported. Some of the exempt data points that have multiple data fields include property address, credit score, reason for denial, and total loan costs. The CFPB indicated that it intended to, at a later date, initiate a notice and comment rulemaking to incorporate the interpretations and procedures into Regulation C, and further implement EGRRCPA. In May 2019, a Notice of Proposed Rulemaking was issued with a request for public comment.
Final Rule
After receiving over 300 comments from lenders, industry trade associations, consumer groups, and others, the CFPB issued a final HMDA rule which extends to January 1, 2022 the current temporary threshold of 500 open-end lines of credit for open-end institutional and transactional coverage which was set to expire on January 1, 2020.
The CFPB states that by extending the current temporary increase in the open-end coverage threshold for an additional two years, it allows them time to consider fully the appropriate level for the permanent open-end coverage threshold for data collected beginning January 1, 2022. The CFPB will be reviewing additional comments relating to this particular aspect of the proposal, with the intent of issuing a permanent threshold rule in 2020. If the CFPB does not act to make further changes, according to the 2015 HMDA Rule and the 2017 HMDA Rule, the open-end coverage threshold will adjust to 100.
Additionally, the final rule incorporates into Regulation C the interpretations and procedures from the August 2018 rule, and provides clarification regarding certain interpretive issues such as when a partial exemption applies to a transaction after a merger or acquisition.
