The Consumer Financial Protection Bureau issued a final Home Mortgage Disclosure Act (“HMDA”) rule amending Regulation C to adjust institutional and transactional coverage thresholds for closed-end mortgage loans and open-end lines of credit. The final rule permanently raised the threshold to report closed-end mortgage loans from 25 to 100 originated loans in the previous two years and increased the permanent threshold to report dwelling-secured open-end lines of credit from 100 to 200 originated lines in each of the last two years.
The closed-end loan threshold is effective July 1, 2020, and the permanent open-end lines of credit threshold is effective January 1, 2022. A temporary threshold of 500 originated open-end lines of credit in each of the prior two years is in effect through 2021. In May 2019, the CFPB proposed to increase the closed-end loan threshold from 25 to 50 originated loans and the permanent open-end line of credit threshold from 100 to 200 lines in each of the preceding two years. The CFPB further proposed to extend the 500 originated lines temporary threshold through 2021. After the comment period expired, in October 2019, the CFPB issued a final rule extending the temporary 500 originated lines threshold for reporting open-end lines of credit through 2021.
The mid-year implementation of a higher reporting threshold for closed-end loans will have the impact of HMDA reporting institutions becoming non-reporting institutions as of July 1, 2020. For example, if an institution originated 25 or more closed-end loans in the last two years, then as of January 1, 2020, the institution would have to report HMDA data for 2020. If that same institution originated fewer than 100 closed-end loans as of July 2020 in the prior two years, it would be considered a “newly excluded institution” and not a HMDA reporting institution.
The CFPB has provided guidance to institutions on how the mid-year implementation impacts a newly excluded institution’s reporting obligations under HMDA:
- On July 1, 2020, newly excluded institutions may stop collecting data for HMDA purposes. However, under the Equal Credit Opportunity Act and Regulation B, separate data collection requirements remain for mortgage loans concerning a consumer’s principal residence.
- A newly excluded institution must record closed-end mortgage loan data for the first quarter of 2020 on its loan application registers within 30 days after the end of the first quarter. However, newly excluded institutions need not record second-quarter data.
- A newly excluded institution does not have to report any HMDA data for 2020 but may opt to report. However, should the institution choose to report, it must report for the entire year.
In announcing the final rule, the CFPB stated it anticipates it will reduce the regulatory burden on smaller institutions to focus on responding to consumers. We will continue to monitor and report on the CFPB’s HMDA rulemaking and guidelines.