Smaller institutions may receive some mortgage data reporting relief from a proposal by the Consumer Financial Protection Bureau to raise a reporting threshold for the Home Mortgage Disclosure Act.
Under HMDA rules scheduled to take effect in January 2018, financial institutions are generally required to report home-equity lines of credit if they made at least 100 such loans in each of the last two years. The new proposal would increase that threshold to 500 loans through calendar years 2018 and 2019 so the bureau can consider whether to make a permanent adjustment.
The CFPB updated HMDA regulation in 2015 to increase the quality and type of data reported by financial institutions. Most of the updated requirements take effect in January 2018. One of the significant changes is a requirement for some lenders to collect, report and disclose data on certain dwelling-secured open-end lines of credit, including home-equity lines of credit.
Initially, the CFPB offered an exemption from that new requirement to small-volume lenders who made fewer than 100 such loans in each of the previous two years. Based on feedback from community banks and credit unions, the bureau realized that the challenges and costs of reporting open-end lending are greater than originally estimated when it adopted the 100-loan threshold.
“Home-equity lines of credit worsened the foreclosure crisis that swept the country in 2008 and 2009,” said CFPB Director Richard Cordray. “We need to keep track of the responsible use of these loans for consumers, but after hearing from community banks and credit unions we want to reconsider whether that goal can be achieved with a higher reporting threshold.”
The bureau estimated the increased threshold would still capture about 75 percent of the home-equity lending market, compared to 88 percent under the 100-loan limit.
The temporary increase is regarded as a positive – if insufficient – step in the right direction by some industry players, including the Independent Community Bankers of America.
“While ICBA is encouraged by any threshold increase, we believe that in order to provide a consistent and stable regulatory environment that encourages community banks to invest in the future of their local economies, that a permanent increase is necessary sooner, not later,” said President Cam Fine.
ICBA favors raising the reporting threshold to 1,000 in each of the previous two years for first lien, closed-end loans and to 2,000 for HELOCs.