The CFPB recently issued both a proposed Home Mortgage Disclosure Act (HMDA) rule and an advance notice of proposed HMDA rulemaking. The CFPB also issued a summary that mainly focuses on the proposed rule, as well as an unofficial redline of how the proposed rule would amend the HMDA rule, known as Regulation C. The proposal states that comments on the proposed rule and advance notice of proposed rulemaking will be due 30 days and 60 days, respectively, after the items are published in the Federal Register. (Note: The Federal Register version of the proposed rule, which was published on May 13, 2019, indicates that comments are due by July 12, 2019, which is a 60 day comment period. The advance notice of proposed rulemaking appears in the May 8, 2019 Federal Register and comments are due by July 8, 2019.)
The proposed rule includes proposals addressing three main aspects of the HMDA rule:
- A proposal to increase the volume threshold that triggers reporting of closed-end mortgage loans from at least 25 originated loans in each of the prior two calendar years to at least 50 originated loans in each of the prior two calendar years. The CPFB also solicits comments on an alternative threshold of 100 originated loans in each of the prior two calendar years. Before the main implementation of the HMDA rule amendments issued in October 2015, the threshold for reporting closed-end loans applicable to non-depository lenders was 100 originated loans in the prior calendar year.
- A proposal to continue until January 1, 2022 the temporary volume threshold that triggers reporting of open-end lines of credit of at least 500 originated lines of credit in each of the prior two calendar years, and then implement a permanent threshold of 200 originated lines of credit in each of the prior two calendar years. As previously reported, while the HMDA rule amendments adopted in October 2015 established a threshold of 100 originated lines of credit in each of the prior two calendar years, in 2017 the CFPB temporarily increased the threshold to the 500 originated lines of credit level until January 1, 2020.
- A proposal to incorporate into Regulation C the interpretation and procedures previously issued by the CFPB to implement the partial exemption from HMDA reporting for smaller volume bank and credit union lenders adopted in the Economic Recovery, Regulatory Relief, and Consumer Protection Act.
Advance Notice of Proposed Rulemaking
The HMDA amendments adopted by the CFPB in October of 2015 revised certain pre-existing data points, added data points set forth in Dodd-Frank, and included additional data points based on authority in Dodd-Frank for the CFPB to mandate reporting of such other information as it may require. The discretionary data points added by the CFPB are:
- Reasons for denial (previously optional).
- Total origination charges.
- Total discount points.
- Amount of lender credits.
- Interest rate at closing or account opening.
- Debt-to-income ratio.
- Combined loan-to-value ratio.
- For transactions involving a manufactured home, whether the loan is or would have been secured by the home and land, or only the home.
- For transactions involving a manufactured home, whether the consumer owns or would have owned the land, or leases or would have leased the land.
- When an automated underwriting system is used to evaluate an application, the name of the system and the result generated by the system.
- Whether the loan is a reverse mortgage loan.
- Whether the loan is an open-end line of credit.
- Whether the loan is primarily for a business or commercial purpose.
- The total number of individual dwelling units in the security property. (The CFPB describes this item as a data point that was revised, but it is a new data point.)
- For a multifamily dwelling, the number of units that are income-restricted under federal, state or local affordable housing programs.
For certain data points, the October 2015 amendments provide for the completion of free-form text fields under certain conditions. The amendments also significantly revised the race and ethnicity data points by allowing applicants to:
- Indicate certain specified subcategories (e.g. Mexican, Puerto Rican or Cuban) in addition to indicating the main Hispanic or Latino category, and/or indicate a non-specified Hispanic or Latino subcategory in a free form text field.
- For individuals indicating they are American Indian or Alaskan Native, enter a specific tribe in a free form text field.
- For the Asian and the Native Hawaiian or Other Pacific Islander race categories, indicate certain specified subcategories of those races and/or indicate a non-specified race subcategory in a free form text field.
The October 2015 amendments also expanded the scope of reportable loans by requiring the reporting of dwelling-secured business or commercial purpose loans that meet the definition of a home purchase, refinancing or home improvement transaction.
The CFPB is seeking comment on whether to make changes to the revised or new data points, and the coverage of business or commercial-purpose loans that are made to a non-natural person and secured by a multi-family dwelling. The CFPB encourages commenters to be specific and, when possible, include relevant empirical evidence.
With regard to data points, the CFPB specifically asks for comments on four topics:
- Identify any new data point or any data point revised to require additional information for which the cost of collecting and reporting the information does not justify the benefit that the information collected and reported provides in furthering the purposes of HMDA.
- For each free-form text field required by the 2015 HMDA rule amendments:
- What are the costs of providing information through the free-form text field?
- What are the benefits of providing information through the free-form text field?
- Are there alternatives that are better than providing information through the free-form text field?
- Are there other considerations the Bureau should take into account in deciding whether to propose to eliminate or revise any new data point or revised data point from the 2015 HMDA rule amendments?
- Are there new or revised data points under the 2015 HMDA rule amendments for which more explanation is needed to clarify the collection and reporting requirements?
- If so, please identify any data point for which additional clarity could reduce the costs associated with collecting and reporting the data and improve the value of the data in furthering the purposes of HMDA.
With regard to loans that are made to a non-natural person and secured by a multifamily dwelling, the CFPB seeks information that might assist it in deciding whether to propose to exclude such transactions from HMDA’s requirements, including information about the following:
- The value that the required HMDA data on such transactions provides in serving HMDA’s purposes.
- Other benefits associated with reporting such transactions.
- The burden imposed by the requirement to report data on such transactions.