MBA Offers CFPB Recommendations on Proposed HMDA Rule Amendments

The Mortgage Bankers Association, in a letter to the Consumer Financial Protection Bureau, offered recommendations regarding proposed amendments to the Home Mortgage Disclosure Act.

The proposed amendment includes a two-year temporary increase in transactional coverage thresholds for open-end lines of credit to HMDA (Regulation C).

“While we support the proposed increase in the reporting threshold for open-end lines, we believe additional efforts are needed,” wrote MBA Senior Vice President of Residential Policy and Member Engagement Pete Mills.

These efforts include:

–Temporarily suspending mandatory reporting for all open-end lines;

–Increasing the threshold for closed-end multifamily loans to 100 loans; and

–Implementing a one-year delay in mandatory collection and reporting of “new data points”–those that are required for loans acted on in 2018.

In its October 1, 2015 rule amending Regulation C, the CFPB requires greatly expanded data on mortgages which, for the first time, includes open-end lines. Prior to that, reporting on open-end lines was optional. The rule does not, however, require such reporting from institutions that originated less than 100 open-end lines in each of the two proceeding reporting years.

The new CFPB proposal would increase the threshold to 500 or more open-end lines for two years (2018-19). During that time, the Bureau will reconsider the issue and avoid requiring institutions originating less than 500 loans to collect and report data, which MBA supports.

“Requiring reporting of open-end lines comes in the midst of what is the greatest expansion of HMDA data collection ever,” MBA said. “This expansion includes doubling the data points required to be collected and revision of most of those that are currently required. These changes alone are resulting in very considerable costs. Reporting open-end lines, which for most companies are a separate line of business, requires separate training and systems changes and therefore entails substantially greater costs.”

Instead, MBA recommended temporarily suspending the open-end line reporting requirement entirely. “MBA is supportive of holistic reforms that are not based on an institution’s size, charter, or business model,” the letter said. “Accordingly, we would encourage temporary suspension of the open-end line reporting requirement entirely for now as other requirements are implemented. Lenders that choose to do so may report open-end lines voluntarily, as they may now.

Second, MBA recommended the Bureau also consider increasing the threshold for reporting closed-end multifamily mortgage loans. Specifically, it recommends increasing the HMDA reporting threshold for closed-end multifamily mortgage loans from 25 originations in either of the preceding two calendar years to 100 originations.

“We believe that the higher threshold for multifamily mortgage originations, which are generally business-to-business rather than consumer transactions, would maintain a more appropriate balance between the regulatory burdens and the potential public policy benefits of HMDA reporting,” MBA said. “As the Bureau observed, the burden of the one-time costs of implementing the new HMDA reporting requirements can be substantial, and the impact of that cost can be particularly substantial in the case of smaller-volume multifamily lenders. In addition, HMDA reporting of multifamily loans in particular creates the potential for privacy risk for both borrowers and lenders because, depending on the data points the Bureau elects to make public, third parties may be able to identify individual multifamily properties from HMDA data.”

These factors, MBA said, create an unintended incentive for smaller-volume multifamily lenders to cap lending at less than 25 originations to avoid the reporting burdens and privacy risks triggered by HMDA reporting, which could create an unwarranted impediment to the availability of capital to support rental housing.

Third, MBA said new data collection requirements should be delayed by one year. “Although we appreciate the CFPB’s work to facilitate implementation, the CFPB’s regulatory process and technological framework for this rule are still incomplete,” MBA said.