Monday, October 19, 2015

CFPB Adopts Final HMDA Rules: What You Need to Know

Last week, the CFPB issued its final rule modifying and significantly expanding the data collection reporting requirements under the Home Mortgage Disclosure Act (“HMDA”).  Adopted in 1975, HMDA requires certain lenders to report information about home loans for which they receive applications or which they originate or purchase.  The Dodd Frank Act directed the CFPB to expand the data reported under HMDA and provided the CFPB with rulemaking authority.  HMDA data is an integral focus for the Department of Justice and the CFPB in identifying red lining and other fair lending violations.  The new rule is lengthy (approximately 800 pages).  Here is a very cursory review:

  •  Data fields are significantly expanded.

The finalized rule significantly expands the data fields required by HMDA and exceed the data fields  required by the Dodd Frank Act.  The final rule includes twenty five new data fields, including: age, credit score, total loan costs or total points and fees, interest rates, loan term, mortgage loan originator identity and property value.  The rule additionally modifies several existing data fields. The new data collection rules take effect in 2018.

  • The scope of institutions covered decreases.

The final rules narrows the number of depository institutions subject to the reporting requirements. Beginning in 2018, institutions will only be required to report HMDA data if they 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 satisfy the location requirements (providing loans in identified metropolitan statistical areas (“MSA”)).  The CFPB estimates that the new threshold will reduce the number of banks and credit unions reporting by 22%.
  • Frequency of Reporting and Manner of Reporting.

Additionally, the final rule will require quarterly reporting beginning in 2020 for lenders reporting a combined total of 60,000 applications and covered loans in the preceding year.  The CFPB also announced that they are developing a new web-based submission tool for reporting HMDA data.

As these changes have been in the works for over a year, they should not catch anyone by surprise.  The good news is that the rule’s implementation will be gradual over the next few years.  However, banks and credit unions should immediately:

  • Identify their current data collection abilities;
  • Identify where they need to increase their data capture; and
  • Identify their affected lines of business.

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