The CFPB just released a 275-page proposed rule with a request for public comment. It offers two alternatives to amend Regulation C to increase the threshold for reporting data about closed-end mortgage loans so that institutions originating fewer than either 50 closed-end mortgage loans, or alternatively 100 closed-end mortgage loans, in either of the two preceding calendar years would be exempt from HMDA filing.
First, let’s look at the purpose of the HMDA data. The intent is not to make lenders miserable with one more report they are required to file. That is the stated concern of the bureau as they believe it will create too much of a “compliance burden” on smaller institutions. To be honest, if you’re in banking, filing reports should be like breathing as everyone wants one and that is part of the business.
HMDA Data’s Primary Purpose:
- Detection of discriminatory patterns by individual lenders or lenders as a whole in an area.
- Used by Public officials, community advocates, and researchers to analyze access to credit at the neighborhood level and to target programs to assist underserved communities and consumers.
- Data for grants to determine where revitalization dollars are needed most.
Side One – Keep the Threshold Lower:
If you increase the number of loans to become exempt from HMDA filing, you decrease the data available in that area. The reality is that many small community banks and credit unions are the primary lenders in some areas and the loss of this data would impact the usefulness of the data.
Side Two – Increase the Threshold:
If you don’t increase the number of loans to become exempt from HMDA filing, then small institutions will consider filing a HMDA report too burdensome based on the amount of business that they do and will no longer offer those loans. This theoretically limits access to credit in the communities served by those institutions.
This conundrum means that the bureau must find the right balance between data and burden. So, they are asking for your opinion.
Currently Reporting HMDA Data
- 4,263 are Depository Institutions (banks and credit unions)
- 697 are Non-Depository Institutions (like mortgage bankers)
- For a total of 4960 currently reporting
- 3300 Insured Depository Institutions are presently, partially exempt
The Future of HMDA Reporting?
- Should the exemption be 50 or 100 closed loans?
- At 50 the 4263 number from above drops to 3518. At this level, the CFPB calculates that 83% of the data would continue to be reported. Yet, keep in mind, that 3300 are currently exempt so that would bring the total exempt to 4045 institutions (3300 + 745 (which is the difference between 4263 and 3518)).
- At a 100-loan exemption, the question should be asked, “is it worth collecting HMDA data?” as the numbers dramatically change again. I’m not smart enough to be a statistician, but I’m pretty sure that this would skew the numbers in some parts of the country.
The Answer? I would love to hear the opinions of both the lenders and consumer advocates, so please comment below!