Compliance Blog

The regulators have been busy furiously drafting new guidance and relief as fast as they can to support financial institutions during these times. Since it wasn’t COVID-19-related, one rule you might have missed is the HMDA final rule (yes, another HMDA final rule) issued on April 16. I don’t know about you but it seems to me that the first iteration of anything is usually the best and anything that came after is just trying to live up to the hype (I mean, did anyone actually make it all the way through Tokyo Drift?). The CFPB seems to have the mindset of a filmmaker when it comes to HMDA as it seems they just cannot help but keep trying to make new rules that are better. At least this one comes with a little bit of relief for credit unions.

Cast: the final rule applies to all covered financial institutions.

Release date: closed-end rule changes become effective on July 1, 2020; open-end rule changes become effective on January 1, 2022.

Plot Synopsis:

The Closed-End Mortgage Threshold

As it currently stands, credit unions that are otherwise covered by HMDA are required to record and report HMDA data for closed-end mortgages if they originated 25 or more closed-end mortgages in each of the two preceding calendar years. The CFPB’s new final rule raises that threshold to 100 or more closed-end mortgages in each of the two preceding calendar years.

For 2020 reporting, beginning on July 1, credit unions will only need to record and report HMDA data for closed-end mortgages if they originated 100 or more in each calendar year for 2018 and 2019. The change does not have any practical impact on credit unions that originated fewer than 25 closed-end mortgages in either 2018 or 2019, as they’ll continue to be exempt from the data recording and reporting requirements for closed-end mortgages (but may still be subject to reporting requirements for open-end credit). Similarly, credit unions that originated 100 or more closed-end mortgages in each respective calendar year for 2018 and 2019 will continue to be required to record and report data.

Starring Role: Newly Excluded Institutions

The change to the threshold will have the largest impact on what the CFPB refers to as “newly excluded institutions” – those credit unions that originated least 25, but fewer than 100, closed-end mortgages in each calendar year of 2018 and 2019. Those credit unions were required to comply with the data collection and reporting requirements of HMDA for the first half of 2020, but will become excluded on July 1, 2020, when the new rule takes effect.

So, what does this rule change mean for these “newly excluded” credit unions? They were required to collect HMDA data in Q1 and Q2 of 2020 – should they just throw that data away?

According to the preamble, “newly excluded” credit unions are required to collect and record HMDA data for Q1 of 2020. The rule also requires these credit unions to collect HMDA data for Q2 of 2020 but they are not required to record that data for Q2 because the deadline for recording Q2 data – 30 days after the end of the quarter – falls after July 1, 2020. For these credit unions, no HMDA data needs to be collected or recorded starting on July 1.

As for reporting the annual 2020 HMDA data, these “newly excluded” credit unions will not be required to report their 2020 HMDA data in March 2021.

This chart summarizes a credit union’s potential quarterly and annual data collecting and recording requirements for 2020 under the new rule:

Voluntary Reporting for Closed-End Mortgages

Finally, the bureau has noted that some credit unions may continue recording data after July 1, 2020, to comply with other laws – such as Regulation B of the Equal Credit Opportunity Act – or for other reasons. Those credit unions could voluntarily choose to record and report HMDA data, if desired, but such actions are not required by Regulation C. If exempted credit unions choose to voluntarily report HMDA data, then they will need to provide a full data set – recording and reporting all HMDA data for the entire 2020 calendar year.

The HELOC Threshold

Under the current rule, credit unions that originate 500 or more HELOCs in each of the preceding two years are required to record and report data for HELOCs. The CFPB’s new final rule lowers that threshold to 200, beginning January 1, 2022. Starting in 2022, credit unions will need to record and report HMDA data for HELOCs if they originated 200 or more HELOCs in each of the preceding two years (2020 and 2021).

This will create what could be dubbed “newly included” credit unions – those credit unions that originate more than 200, but less than 500, HELOCs each year. Such credit unions have been exempt from the data recording and reporting requirements for HELOCs under Regulation C for the past few years, but will need to begin complying with those requirements on January 1, 2022.