Michael Christians

Proposed HMDA Changes Overwhelm CUs

CFPB has proposed extensive new data reporting requirements.

September 22, 2015

Proposed changes to the Home Mortgage Disclosure Act (HMDA) had credit union compliance professionals shaking their heads Tuesday during the CUNA Regulatory Compliance School in Boston.

The Consumer Financial Protection Bureau's (CFPB) proposed changes will place a significant additional burden on affected financial institutions, increasing the number of data points collected on each affected loan from 14 to 44.

“Is anybody else freaked out about this?” Michael Christians, compliance attorney with PolicyWorks LLC, asked attendees of his aptly named breakout session, “HMDAghhhhh!!!!”

Enacted by Congress in 1975, one of HMDA’s goals is to eliminate discriminatory lending practices through public scrutiny of financial institution loan data.

The Dodd-Frank Act in 2010, passed in the wake of the financial crisis and recession, authorized CFPB to expand the scope of HMDA reporting requirements.

Congress included six specific data points to be collected, but also gave CFPB the authority to add reporting of “such other information that the bureau may require.”

And the CFPB took full advantage of that vague language, Christians said.

When the proposed HMDA changes were unveiled in July 2014, CFPB proposed an additional 24 data points to be reported by affected financial institutions.

The proposed rule would apply to applications, originations, and purchases of all loans secured by a dwelling. This means HMDA will now include reverse mortgages, home equity lines of credit, and business loans secured by a dwelling.

CFPB has delayed publishing the final rule, which had been expected in July.

Jennifer Stockett, CFPB’s senior advisor, financial institutions and business liaison, external affairs, told attendees Monday that the bureau’s final rule should come later this year and would likely have a long implementation period.

The delay means the new HMDA rules, because of statutory requirements, will not be effective any sooner than January 2017, Christians said.

“The long implementation period leads me to believe that we should have some concerns about what that final rule will look like,” he added.

Christians believes the proposed HMDA rule could face “significant” legal challenges, including:

Whether CFPB exceeded its statutory authority with the additional reporting requirements; and

Privacy concerns. Can CFPB justify that it needs all of the additional information? How will the agency ensure that the “pretty sensitive information” does not fall into the wrong hands?

Credit unions have many concerns with the HMDA proposed rule, Christians said. CUNA has been proactive on HMDA on behalf of credit unions.

In a letter sent to CFPB Director Richard Cordray in June, CUNA President/CEO Jim Nussle reiterated concerns about “particularly burdensome and prohibitive consequences on credit unions and their members.”

He urged the CFPB to require collection and reporting only on those data points required by the Dodd-Frank Wall Street Reform and Consumer Protection Act’s amendments to HMDA.