CFPB Issues Final Rule Loosening HMDA Requirements

January 21, 2020 by Melissa C. Martorella, Esq.

Last May, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule package that included temporary thresholds for collecting and reporting data on open-end lines of credit under HMDA.

The rule also clarified partial exemptions for lenders from some HMDA requirements that were added by Congress into the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), which was signed into to law in May 2018.

In a press release announcing the final rule, the CFPB said the exemptions will last for another two years, holding the threshold at 500 open-end lines of credit. “For data collection years 2020 and 2021, financial institutions that originated fewer than 500 open-end lines of credit in either of the two preceding calendar years will not need to collect and report data with respect to open-end lines of credit.”

The rule is advantageous for smaller lenders, eliminating many from reporting requirements under HMDA. The rule also covers reverse-mortgage lenders and private lenders. The implementation of the rule will lessen burdens on smaller lenders and reduce compliance costs across the board.

“This final rule further effectuates the burden relief for smaller lenders provided by the EGRRCPA by addressing certain issues relating to the partial exemptions that the August 2018 rule did not address,” the Bureau stated in the press release.

The final rule comes at a time when the U.S. Supreme Court is set to hear a case challenging the constitutionality of the CFPB’s organizational structure. The decision could determine the fate of the agency that was formed under the Obama administration as part of the Wall Street Reform and Consumer Protection Act of 2010.

If the SCOTUS decides that the Bureau is unconstitutional, it could have ramifications throughout the industry by potentially unraveling all of the CFPB’s decisions over the past nine years.

The pending SCOTUS review may have played a role in why the CFPB decided to finalize its proposal. The rule proposal was made last May, and according to CFPB Director Kathleen L. Kraninger, is being finalized because it adds definitive clarity and is in the best interest of smaller financial organizations doing business in communities across America.

In the May announcement, Kraninger said the proposed changes would provide much needed relief to smaller community banks and credit unions while “still providing regulators and stakeholders with the information we need under the Home Mortgage Disclosure Act.”

In more proof that the rule issuance was fast tracked, it’s release comes five days before the original public commenting period deadline of October 15.

The final rule incorporates into Regulation C the two-year extension and implements further EGRRCPA partial exemptions.

The final rule extends to January 1, 2022, the current temporary threshold of 500 open-end lines of credit for open-end institutional and transactional coverage. The rule stated that the Bureau also intends to address in a separate final rule the changes it proposed to the permanent coverage thresholds for open-end lines of credit and closed-end mortgage loans.

According to the Bureau, this two-year extension will allow time to consider fully the appropriate level for the permanent open-end coverage threshold for data collected beginning January 1, 2022, after reviewing additional comments relating to that aspect of the proposal.

If you have questions about HMDA compliance or reporting, Geraci Law Firm is here to help. Our transactional team is filled with experts that can assist with determining whether HMDA reporting requirements apply to you. Please reach out to Melissa Martorella at 949-379-2265 for a consultation.

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