CUNA urges CFPB to use all authority to exempt CUs from HMDA provisions

October 29, 2014

WASHINGTON (10/30/14)--Changes by the Consumer Financial Protection Bureau to Home Mortgage Disclosure Act (HMDA) rules would be yet another layer of expense and burden on credit unions already struggling to meet a suffocating overall compliance burden, the Credit Union National Association warns in its most recent comment letter.

CUNA urges the CFPB to use a surgeon's precision in meeting Dodd-Frank Act requirements to change HMDA--and go no further than the act mandates. CUNA also charged the CFPB with doing all it can to exempt credit unions from as many provisions of the proposal as is permissible.

The CFPB unveiled HMDA revisions in July--changes it said are intended to improve the information reported about the residential mortgage market under HMDA.

The proposal also is meant to simplify the reporting process for credit unions and other financial institutions. However, by the CFPB's own estimates, the changes would represent a compliance burden of 4.7 million hours annually for all regulated entities required to report under HMDA.

CUNA strongly urges the bureau to increase a proposed threshold that would exempt a depository institution from reporting HMDA data if it originates fewer than 25 closed-end mortgage loans in the year--which would include closed-end, reverse mortgages.

"As a practical matter, very few credit unions involved in mortgage lending originate less than 25 covered loans, so the relief contemplated by the proposal would likely be very small, if at all," CUNA writes.

CUNA urges the bureau to increase the exemption threshold to 500 loans to more appropriately exempt smaller financial institutions that have no track record of discriminatory lending--or redlining--or fair-lending violations.

In its letter, CUNA also advocates that the CFPB drop its plan to require mandatory reporting of home equity lines of credit (HELOCs)--calling that provision "a chief concern."

CUNA explains that HELOCs often are administered in consumer lending functions of a credit union, rather than in mortgage functions. This means HELOCs are maintained on entirely separate computer operating systems and platforms than their first mortgage counterparts, making it extremely difficulties and significantly expensive to compile and aggregate the required HMDA data points for HELOCs if the bureau's rule is finalized as currently proposed.

CUNA further urges adoption of a sufficient implementation time. 

"The data collection requirements outlined within the bureau's proposal are, at best, overwhelming for a vast majority of HMDA-reporting credit unions," CUNA writes and continues:

"As previously discussed in this letter, systems will need to be reprogrammed, staff will need to be trained and retrained, existing application forms will need to be amended, and over thirty-seven new data elements will also need to be developed, programmed, implemented and staff will also need to be trained according to the policies and procedures surrounding each of these additional data point disclosures, which will also have to be developed."

Another key area of concern, CUNA notes, is that the bureau does not state within the proposal what, if any, of the new data collection points would or would not be made available to the public, but indicates that the agency is reviewing the matter.

Much of the HMDA data, such as credit scores and property addresses, raise significant privacy issues because if made publicly available  it could conceivably allow a person to piece together the financial picture of a borrower, their place of residence, their income and their livelihood, thereby significantly intruding on credit union members' privacy.

CUNA urges the CFPB not to proceed until this issue is resolved and then to provide  an additional comment period for credit unions and other stakeholders to weigh in on the specifics of the privacy plan.

Additionally, the Government Accountability Office (GAO) recently released a report indicating concerns regarding the privacy and security procedures for data collection by the CFPB, and making numerous recommendations to improve the protection and security of consumer financial data.

CUNA feels that until all of these recommendations are acted upon, expanding the data provided to the agency would place credit union members at greater risk of financial harm, exposing credit unions and their members to possible misuse of their sensitive and personal financial information, including fraud and identity theft.