NEWS: On September 23, 2022, the U.S. District Court for the District of Columbia issued an opinion vacating a 2020 CFPB final rule under the Home Mortgage Disclosure Act (HMDA), related to the threshold for reporting data on closed-end mortgage loans. That decision means that the threshold for reporting data on closed-end mortgage loans is now 25 loans in each of the two preceding calendar years (the threshold established by a 2015 HMDA rule) rather than the 100 loan threshold set by the 2020 HMDA rule. This makes more credit unions responsible for collecting and reporting HMDA data.
In a blog post published today, the CFPB addressed concerns about enforcement actions related to this change, writing:
The CFPB recognizes that financial institutions affected by this change may need time to implement or adjust policies, procedures, systems, and operations to come into compliance with their reporting obligations. In these limited circumstances, in allocating the CFPB’s enforcement and supervisory resources, the CFPB does not view action regarding these institutions’ HMDA data as a priority. Thus, the CFPB does not intend to initiate enforcement actions or cite HMDA violations for failures to report closed-end mortgage loan data collected in 2022, 2021, or 2020 for institutions subject to the CFPB’s enforcement or supervisory jurisdiction that meet Regulation C’s other coverage requirements and originated at least 25 closed-end mortgage loans in each of the two preceding calendar years but fewer than 100 closed-end mortgage loans in either or both of the two preceding calendar years.
Case background
As explained in The League’s ii Release No. B017, HMDA requires certain financial institutions to collect, record, report, and disclose information about their mortgage lending activity. The CFPB’s Reg. C implements HMDA and sets out specific requirements. Reg. C applies to credit unions that meet certain tests. For example, the credit union is only covered if (among other things) it was of a certain asset size on the preceding Dec. 31; if it had an office in a metropolitan statistical area (MSA); and if it met “certain loan-volume thresholds” for closed-end mortgage loans or open-end lines of credit in each of the two preceding calendar years.
In April 2020, the CFPB issued a final rule increasing the HMDA reporting threshold for closed-end mortgage loans from 25 covered loans originated in each of the prior two years to 100 covered loans originated in each of the prior two years.
After the adoption of the 2020 rule, the National Community Reinvestment Coalition (NCRC) and other community housing groups filed a lawsuit challenging the changes to the closed-end loan and open-end line of credit reporting thresholds.
In September, a federal judge ruled against the CFPB, vacating part of the rule that changed the reporting obligations. The judge found the CFPB acted in an “arbitrary and capricious” manner by exempting mortgage lenders from reporting obligations under HMDA, which is designed to help uphold fair lending and fair housing laws.
The court did partially rule in favor of CFPB by maintaining portions of the 2020 rule related to open-end lines of credit, but the portion of the rule related to closed-end mortgage loans was vacated.
The opinion reads in part:
“Where a statute is designed to provide transparency in business practices to enable enforcement of laws designed to bar discriminatory and risky lending practices, and where Congress has so recently carefully crafted a framework to maximize the universe of lending institutions required to report some data, while minimizing the extent of the burden of reporting on those institutions most likely to feel the brunt of it, CFPB’s decision to essentially undo Congress’ carefully selected balance with blanket exceptions for this share of the lending market without explanation is arbitrary and capricious.”