As we previously reported, in October 2015, the CFPB adopted significant revisions to Regulation C, the Home Mortgage Disclosure Act (HMDA) rule, most of which become effective January 1, 2018. As a result of the revisions, the reporting of home equity lines of credit (HELOCs) under HMDA, which is currently voluntary, will become mandatory for both depository institutions and non-depository institutions that originated at least 100 HELOCs in each of the two preceding calendar years.
On July 14, 2017, the CFPB proposed to temporarily increase the reporting threshold to the origination of 500 HELOCs in each of the two preceding calendar years. On August 24, 2017, the CFPB finalized a rule to increase the threshold for collecting and reporting data about HELOCs (the “Rule”). Under the Rule, financial institutions originating 100 or more HELOCs but fewer than 500 in 2018 or 2019 would not be required to begin collecting and reporting HELOC data until January 1, 2020. This temporary increase was adopted amid concerns from community banks and credit unions about the challenges and costs of reporting open-end lending. The CFPB will assess whether another rulemaking is required to address the appropriate permanent threshold for smaller-volume lenders. Accordingly, the reporting threshold commencing in 2020 may still be revised.
The Rule also finalizes certain substantive changes and technical corrections to the 2015 HMDA Final Rule that were proposed in April 2017. First, the Rule establishes transition rules that permit financial institutions, under certain conditions, to report “not applicable” for two data points – loan purpose and the unique identifier for the loan originator (the NMLSR ID). Second, the Rule amends the 2015 HMDA Final Rule to clarify certain key terms, such as multifamily dwelling, temporary financing, and automated underwriting system, and to create a new reporting exception for certain transactions associated with New York State consolidation, extension, and modification agreements. These changes, which we discussed in detail when they were initially proposed in April, were largely adopted as proposed because according to the CFPB, the “comments [received] did not raise points relevant to the Bureau’s decisions raised in its proposals.” Third, the Rule provides that a census tract reporting error will be considered a bona fide error and not a violation of HMDA or Regulation C if a financial institution obtains an incorrect census tract number from the CFPB’s soon-to-be-online geocoding tool, as long as the financial institution entered an accurate property address into the tool and the tool returned a census tract for the address entered.
Concurrent with the issuance of the Rule, the CFPB released an executive summary of the final rule, updates to technical filing instructions, and other implementation materials. Note that the changes include revisions to the Filing Instructions Guide for data collected in 2017 that must be reported in 2018.
With few exceptions, most of the amendments included in the 2015 HMDA Final Rule will take effect on January 1, 2018. Interested parties should assess if programming and operational changes made necessary by the Rule can be appropriately completed by January 1, 2018.