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Recent Court Action Overturns Closed-End Loan HMDA Reporting Threshold for Exempt Institutions

Submitted by Heather A. MacKinnon, Wisconsin Bankers Association, Vice President - Legal

In National Community Reinvestment Coalition v. Consumer Financial Protection Bureau (CFPB), a D.C. District Court has invalidated the legal exemption threshold for reporting closed-end loan data for HMDA purposes. The ruling lowers the HMDA reporting threshold for closed-end mortgage loans. 

CFPB has the authority to establish thresholds for reporting closed-end mortgage loan and open-end lines of credit HMDA data. In 2015, CFPB overhauled the existing HMDA data collection and reporting requirements. Upon determining that the existing rules for closed-end mortgage loans presented an administrative burden on lending institutions, CFPB promulgated a rule to exempt from the disclosure requirements those lending institutions issuing fewer than 25 closed-end mortgage loans. HMDA reporting thresholds were revised again in 2017 and in 2020. 

In its 2020 rule, CFPB attempted to address “considerable burdens associated with reporting” HMDA data and set the threshold for exemption at 100 closed-end mortgage loans in each of the two preceding calendar years. The 2020 rule also set an exemption threshold for open-end lines of credit; which starting in 2022, is 200 open-end lines of credit in each of the two preceding calendar years.  

The plaintiffs in the case challenged CFPB’s 2020 rule claiming the agency (a) exceeded its statutory authority under HMDA when it set the closed-end reporting exemption threshold, and (b) was incorrect with its costs-benefit analysis under the belief CFPB exaggerated the “benefits” of increasing the loan-volume reporting thresholds and had miscalculated the “costs” of the 2015 rule. 

The court concluded the plaintiffs accurately identified flaws in CFPB’s 2020 rule’s costs-benefit analysis the agency used to support the increase in closed-end mortgage loan thresholds. The court also found CFPB failed to respond appropriately to the comments questioning the magnitude of the estimated savings. 

As a result, the court invalidated the exemption threshold for closed-end loans. The court vacated and remanded the closed-end mortgage loan reporting threshold to CFPB. The exemption threshold for open-end lines of credit remains untouched at 200 open-end lines of credit originated in each of the prior two years. 

The effect of the court’s findings rolls the exemption threshold for closed-end loans down from 100 to the 2015 level of 25 closed-end mortgage loans. FIPCO and WBA strongly recommend that financial institutions that expect to exceed the closed-end mortgage loan threshold of 25 closed-end mortgage loans in each of the two preceding calendar years begin HMDA reporting preparations now. FIPCO and WBA expect reporting obligations to resume for 2023 at the lower threshold. FIPCO and WBA believe CFPB is to issue instructions regarding how to comply with HMDA requirements for those affected by the ruling and FIPCO will be sure the information is shared with users when released.

The court ruling may be viewed at: https://www.citizen.org/wp-content/uploads/NCRC-v-CFPB-decision.pdf