The CFPB issued a final rule changing Regulation C, which implements the Home Mortgage Disclosure Act (HMDA) today. This is significant because HMDA requires certain institutions to collect, report, and disclose information about their mortgage lending activity. The CFPB and other banking regulators will use the reported data to determine whether financial institutions are serving the housing needs of their communities, and to identify potentially discriminatory lending patterns so that the CFPB can enforce anti-discrimination laws. The data will also be used by the government to determine where it should distribute public-sector investment. This final rule changes the:
- Types of institutions that are subject to Regulation C;
- Types of transactions that are subject to Regulation C;
- Specific information that covered institutions are required to collect, record, and report; and
- Processes for reporting and disclosing data.
Changes in Institutional Coverage
Beginning in 2017, the HMDA rule is expected to narrow the scope of depository institutions subject to Regulation C. A bank, savings association, or credit union will not be subject to Regulation C in 2017 unless it meets the asset-size, location, federally related, and loan activity tests under current Regulation C. It must also originate at least 25 home purchase loans, including refinancing of home purchase loans, (as those terms are defined in current Regulation C) in both 2015 and 2016. Effective January 1, 2018, the HMDA rule adopts a uniform loan-volume threshold for all institutions that originated at least 25 covered closed-end mortgage loans in each of the two preceding calendar years or at least 100 covered open-end lines of credit in each of the two preceding calendar years, and it meets other applicable coverage requirements. A bank, savings association, or credit union will be subject to Regulation C if it originated at least 25 covered closed-end mortgage loans or at least 100 covered open-end lines of credit in each of the two preceding calendar years, and it meets current Regulation C’s asset-size, location, federally related, and loan activity tests. A for-profit lending institution other than a bank, savings association, or credit union will be subject to Regulation C if it originated at least 25 covered closed-end mortgage loans or at least 100 covered open-end lines of credit in each of the two preceding calendar years, and it satisfies the existing location test.
Changes in Transactional Coverage
Beginning on January 1, 2018, covered loans under the HMDA rule generally will include closed-end mortgage loans and open-end lines of credit secured by a dwelling. However, the HMDA rule only requires covered institutions that originated at least 100 covered open-end lines of credit in each of the two preceding calendar years to collect, record, and report information about open-end lines of credit. Dwelling-secured business-purpose loans and lines of credit will be covered only if they are home purchase loans, home improvement loans, or refinancing. Agricultural-purpose transactions or other specifically excluded transactions, even if they are dwelling-secured, will not be considered a “covered loan.” Home improvement loans will only be covered if they are secured by a dwelling.
Data Submission Process
The Bureau is developing a new web-based submission tool for reporting HMDA data. Institutions will be required to report using the web-based submission tool beginning in 2018. Appendix A of the HMDA rule is amended, effective January 1, 2018, to require institutions to electronically submit certain information and includes new transition requirements for data collected in 2017 and reported in 2018.
Specific Information Required to be Reported
For HMDA data collected on or after January 1, 2018, institutions will report additional information about the origination of, purchase of, and application for covered loans. The HMDA rule adds the data points specifically identified in the Dodd-Frank Act, as well as data points that the Bureau determined, will assist in carrying out HMDA’s purposes. Check back for more information regarding the additional data points that will be required to be reported under the HMDA rule.
To review the new HMDA rule and the CFPB’s regulatory implementation materials, click here.