MBA, Trade Groups Ask CFPB for Multifamily Exemption to HMDA Reporting

The Mortgage Bankers Association and other industry trade groups urged the Consumer Financial Protection Bureau to narrow its definition of financial institutions subject to the Home Mortgage Disclosure Act reporting by exempting transactions secured by multifamily properties.

The letter also asks the Bureau to increase the current transaction coverage test threshold for closed-end loans from 25 to 500.

“Our members experience the unwarranted regulatory burdens and privacy issues from the unnecessary application of HMDA reporting requirements to business-purpose loans secured by multifamily properties,” the letter said. “We believe that HMDA reporting on business-to-business loans secured by multifamily properties is not necessary to fulfill the statutory purposes of HMDA and that the burden of collecting and reporting that information therefore far outweighs the benefits of doing so.”

The letter comes in response to a Bureau Request for Information on changes it could make to Regulation C, implementing the Home Mortgage Disclosure Act, as an Inherited Regulation. The Bureau assumed regulatory authority of HMDA in 2015.MBA and the trade groups–the Commercial Real Estate Finance Council, National Apartment Association and National Multifamily Housing Council–said business-to-business transactions to finance multifamily properties involve businesses, e.g., corporations, limited liability companies or partnerships, and not natural persons as in single-family residential transactions.

“In this regard, we note that the Bureau’s own explanation of why it elected to require HMDA reporting on multifamily loans provides no link to the congressional findings underlying HMDA, to the statutory purposes of HMDA, or to any of the Bureau’s authority,” the letter said. “This strongly suggests regulatory coloring outside the lines of what HMDA was intended to cover.”

Moreover, the letter noted, that coloring outside the lines imposes considerable cost.

“Multifamily lenders typically cannot readily standardize data collection around multifamily lending transactions to fit into a reporting regime designed with single-family lending in mind,” it said. “For example, because many business-to-business multifamily lenders originate loans with multiple risk profiles for multiple investors, they may have a business need to document and underwrite different sets of loans differently. As a result, lenders may find that they have to develop separate HMDA processes for type of loan originated, for each investor, which results in a complex and cumbersome process. And, for smaller loan-volume multifamily lenders, this considerable burden creates a disincentive to originate more than 25 loans in a year, which could reduce the availability of capital to finance rental housing in some areas.”

The letter also supports increasing the transaction coverage test threshold from 25 to 500 loans in each of the two preceding calendar years, noting that recently passed legislation–S. 2155, the Economic Growth, Regulatory Relief and Consumer Protection Act–provides for such a threshold.