On April 29, the CFPB released its fourth annual report to Congress on fair lending activities. The report recaps the CFPB’s 2015 supervisory and enforcement efforts around fair lending and identifies ongoing priorities in the areas of: (i) mortgage lending, noting a continuing focus on HMDA data integrity and fair lending risks related to redlining, underwriting, and pricing; (ii) indirect auto lending, noting targeted ECOA reviews in examinations; (iii) credit cards, focusing “on the quality of fair lending compliance management systems and on fair lending risks in underwriting, line assignment, and servicing”; and (iv) other product areas including small-business lending, focusing on risks in underwriting, pricing, and redlining, and offering that “current and future small business lending supervisory activity will help expand and enhance the Bureau’s knowledge in this area, including the credit process; existing data collection processes; and the nature, extent, and management of fair lending risk.” The report highlights that “supervisory work on mortgage servicing has included use of the ECOA Baseline Review Modules … to identify potential fair lending risk in mortgage servicing and inform [its] prioritization of mortgage servicers.” In addition to recaps of its 2015 rulemaking, published guidance and efforts at interagency cooperation (including its MOU and sharing of customer complaints with HUD), the report also indicates that the CFPB had a number of authorized enforcement actions in settlement negotiations or pending investigations at year end in areas including mortgage lending, indirect auto lending, and credit cards.
On July 13, the CFPB announced that the FFIEC and HUD had published new resources for financial institutions required to file data pursuant to the Home Mortgage Disclosure Act (HMDA) and Regulation C, as amended by the CFPB’s October 2015 final rule, which revised and expanded the scope of HMDA reporting requirements. Accordingly, the CFPB updated its “Resources for HMDA filers” page to include the following new FFIEC and HUD resources: (i) a Technology Preview, which provides an initial summary for how HMDA filers will interact with the HMDA Platform, a web-based data submission and edit-check system that filers will use to submit HMDA data collected in or after 2017; (ii) Filing Instructions Guide (FIG) for HMDA data collected in 2017, which outlines changes to the submission process for data collected in 2017, 2017 file specifications, and 2017 edit specifications; and (iii) FIG for HMDA data collected in 2018. The 2018 FIG includes field definitions for the many additional or modified data points required for data collected in 2018 and 2018 file format and edit specifications. The technical specifications in the FIG will allow lenders and vendors of HMDA data-preparation software to begin making the systems changes needed to collect data in 2018 for submission in 2019. The CFPB’s HMDA resource page also includes FFIEC HMDA FAQs and reminds financial institutions to visit the FFIEC website for resources to submit data collected in or before 2016.
On January 7, the CFPB announced that it will request public feedback on the resubmission of mortgage lending data reported under HMDA. Upon publication in the Federal Register, the Request for Information Regarding Home Mortgage Disclosure Act Resubmission Guidelines (Request for Information) will be open for 60 days. The Bureau’s Request for Information follows the agency’s October release of a final rule amending Regulation C to expand the reporting requirements of the HMDA regulation. Among other things, the amended rule increases the number of data points collected from financial institutions that must be reported to federal regulators beginning March 1, 2019, thus potentially necessitating revisions to the resubmission guidelines, which are the guidelines that describe when supervised institutions will be expected to correct and resubmit data. In response to questions regarding whether the CFPB will adjust mortgage lending data resubmission guidelines to reflect the new data requirements under the amended rule, the Request for Information seeks public comment regarding (among other things): (i) the CFPB’s use of resubmission error thresholds and how they should be calculated; (ii) whether error thresholds should vary depending upon an institution’s LAR entry size; and (iii) whether systemic and non-systemic errors should be treated differently, and, if so, how they should be distinguished from one another.
On December 1, the CFPB released a group of resources designed to help financial institutions understand their obligations under HMDA and Regulation C, as amended by the Bureau’s October 15 final rule. The resources include a brief 5-page executive summary of the recent changes, the HMDA Small Entity Compliance Guide, two reference tools that show when data must be collected, recorded, and reported and when data can be reported as “not applicable,” and HMDA institutional coverage charts for both 2017 and 2018.
The most substantial of these resources is the HMDA Small Entity Compliance Guide that the Bureau describes as, “a plain-language guide to the new rule which makes the content more accessible for industry constituents, especially smaller businesses with limited legal and compliance staff.” The guide is 109 pages and covers key changes and effective dates, institutions and transactions that are covered under the new rule, the data points that must be reported and how they should be recorded and reported, as well as small sections on practical implementation and how mergers and acquisitions affect the applicability of the new rule. The guide also provides an e-mail address and phone number for anyone who has reviewed all of the available materials and still has a specific regulatory interpretation question.
On October 15, the Consumer Financial Protection Bureau (the CFPB or Bureau) issued a final rule that will expand the scope of the Home Mortgage Disclosure Act (HMDA) data reporting requirements while seeking to streamline certain existing requirements. Although some of the new data points the Bureau is requiring are expressly mandated by the Dodd-Frank Act, the Bureau is also requiring a significant number of new data points based on discretionary rulemaking authority granted by the Act.
While we describe the amended rule below in greater detail, highlights include:
- Expanded data-collection under the revised rule will begin on January 1, 2018, and reporting will begin in 2019. The Bureau would have been allowed under Dodd-Frank to require data-collection beginning in 2017 (at least nine months after issuance of the rule) but responded to industry requests for more time to convert systems to meet the extensive new data-collection requirements of the amended rule.
- The amended rule substantially expands the number of data points collected from financial institutions, including requiring reporting of rate spreads on most originated loans and lines of credit, not just higher-cost closed-end loans. However, the Bureau still has not decided the extent to which this information, which includes sensitive personal data such as credit scores, will be publicly available. It will solicit additional public input on privacy concerns before it determines how much of the information will be disclosed.
- The amended rule will require financial institutions to report home equity lines of credit (HELOCs) and reverse mortgages. However, in response to widespread criticism by industry commenters, the CFPB did not adopt its proposal to require reporting of all commercial-purpose loans secured by a dwelling.
- The amended rule does not make significant substantive changes to the definition of an “application” or to the “broker rule,” but it does reorganize and clarify existing Commentary provisions on those issues.
- The amended rule requires both depository and nondepository institutions that originated at least 25 closed-end mortgage loans or at least 100 open-end lines of credit in each of the two preceding calendar years to report HMDA data, so long as the institution meets all of the other tests for coverage of that type of institution.