UPDATE: The CFPB has released an interpretive and procedural rule outlining how the new HMDA Partial exemption applies to community banks and credit unions. Click here for more info.
After passing through Congress on Tuesday, President Trump today signed into law S.2155, known as the Economic Growth, Regulatory Relief, and Consumer Protection Act. This banking reform bill, introduced by Idaho Sen. Mike Crapo in November of 2017, does a number of things to undo the burdens placed on smaller financial institutions by the Dodd-Frank Act. One of those things relates to the new fields that were required under the Home Mortgage Disclosure Act (HMDA) beginning on January 1, 2018.
First and foremost, it is important to understand that this HMDA relief does not affect all HMDA reporters. Basically, large reporters will continue to report the January 1, 2018 HMDA fields without any relief. That said, some smaller reporters will get some relief as this new law provides for three main amendments to HMDA rules:
Closed-End Mortgage Loans
Open-End Lines of Credit
Required Compliance Based on CRA Ratings
HMDA Reporting for Closed-End Mortgage Loans
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The first relief coming from this new law relates to closed-end mortgage loans. Specifically, it appears that creditors who originate fewer than 500 closed-end mortgage loans in each of the 2 preceding calendar year will not be subject to the expanded HMDA fields required by the Dodd-Frank Act (paragraphs 5 & 6 of subsection b of 12 U.S.C. 2803). That said, it appears that the HMDA data fields that were required before the January 1, 2018 implementation date of the Dodd-Frank Act changes will apply.
From the law:
“(1) CLOSED-END MORTGAGE LOANS.—With respect to an insured depository institution or insured credit union, the requirements of paragraphs (5) and (6) of subsection (b) shall not apply with respect to closed-end mortgage loans if the insured depository institution or insured credit union originated fewer than 500 closed-end mortgage loans in each of the 2 preceding calendar years.”
HMDA Reporting for Open-End Lines of Credit
Similar to the relief for closed-end mortgage loans, there is additional relief for open-end lines of credit when a creditor originates fewer than 500 open-end lines of credit in each of the 2 preceding calendar years.
From the law:
“(2) OPEN-END LINES OF CREDIT.—With respect to an insured depository institution or insured credit union, the requirements of paragraphs (5) and (6) of subsection (b) shall not apply with respect to open-end lines of credit if the insured depository institution or insured credit union originated fewer than 500 open-end lines of credit in each of the 2 preceding calendar years.”
Required Compliance Based on CRA Ratings
One twist in the exceptions provided by the Economic Growth, Regulatory Relief, and Consumer Protection Act comes in part 3 to the exceptions in Section 104. This section states that if a depository institution has received a CRA rating of “needs to improve” during each of its 2 most recent examinations or a “substantial noncompliance” during its most recent examination, the depository institution must comply with the Dodd-Frank HMDA rules (paragraphs 5 & 6 of subsection b of 12 U.S.C. 2803).
From the law:
“(3) REQUIRED COMPLIANCE.—Notwithstanding paragraphs (1) and (2), an insured depository institution shall comply with paragraphs (5) and (6) of subsection (b) if the insured depository institution has received a rating of ‘needs to improve record of meeting community credit needs’ during each of its 2 most recent examinations or a rating of ‘substantial noncompliance in meeting community credit needs’ on its most recent examination under section 807(b)(2) of the Community Reinvestment Act of 1977 (12 U.S.C. 2906(b)(2)).”;
Required Actions By Financial Institutions
It is important to note that we are not attorneys and, therefore, cannot provide interpretations to this law. As is the case with most consumer protection laws, the Home Mortgage Disclosure Act is implemented by Regulation C, which the Consumer Financial Protection Bureau is responsible for. Therefore, financial institutions should look for future guidance from the CFPB as to how to proceed in regards to the changes in law affecting applicable HMDA reporters. In layman’s terms, small HMDA reporters need to wait for instructions from the CFPB on how to proceed. This means that, for now, all HMDA reporters will continue to do what they have been doing all year - at least until they are told differently by the CFPB or their primary regulator.
The HMDA amendments from the Economic Growth, Regulatory Relief, and Consumer Protection Act are found in section 104 here.