Sudden HMDA rule changes require reasonable transition period

December 19, 2022

Credit unions and other financial institutions need a reasonable transition period to comply with sudden changes in the 2020 Home Mortgage Disclosure Act (HMDA) final rule, CUNA and other trades wrote to Federal Financial Institution Examination Council member agencies. CUNA’s Compliance team brought attention to a decision from the U.S. District Court for the District of Columbia—National Community Reinvestment Coalition v. Consumer Financial Protection Bureau—vacates portions of the 2020 HMDA final rule.

Specifically, the September decision vacates part of the HMDA rule that increases the loan volume reporting thresholds for closed-end mortgage loans from 25 to 100 in each of the two preceding calendar years. CUNA’s Compliance team identified that this is a significant operational challenge for smaller credit unions affected by the change.

“The effect of the court’s ruling, therefore, is to abruptly and without notice eliminate final regulations that for three years had expanded the number of small-volume lenders that were exempt from HMDA reporting requirements,” the letter reads. “The impact of this decision is severe. Hundreds of community banks and credit unions that relied on the exemption will now be required to collect and report 22 HMDA data points, presumably beginning on January 1, 2023.”

The letter notes small volume lenders report they cannot accomplish the required tasks in the final two weeks of the year, and that “pipeline” issues involving 2022 applications that do not receive final action until 2023 are concerning.

The organizations note a Dec. 6 CFPB blog post addressing some challenges is helpful, but more is needed from the CFPB and all FFIEC agencies. recognizes time is needed to come into compliance states the bureau does not tend to initiative enforcement or citations for HMDA violations for failures to report closed-end mortgage loan data collected in 2022, 2021, or 2020.

“We urge the FFIEC to issue a formal statement published in the Federal Register, explicitly stating that, with respect to lenders affected by the court’s ruling, calendar year 2023 will be a supervisory transition period during which the agencies will expect ‘good faith’ efforts to comply with the pre-2020 HMDA rule, and that the agencies will not cite HMDA violations or initiate enforcement actions against lenders that act in good faith to develop and implement reporting programs,” the letter reads.

“This approach would give lenders needed assurances regarding legal and examination risk and provide time for lenders to install or refine HMDA systems and achieve compliance,” it adds.