The change brings mortgage data reporting back into line with Congress's intent, starting in 2023.
In a victory for consumers and strong fair lending monitoring, the Consumer Financial Protection Bureau (CFPB) will enforce more robust reporting requirements under the Home Mortgage Disclosure Act (HMDA) beginning in 2023. On December 6, 2022, the CFPB published a blog informing mortgage lenders that it will apply HMDA reporting requirements for mortgage lenders who make more than 25 closed-end mortgage loans a year. Closed-end mortgages, such as 20 and 30-year fixed rate mortgage loans, make up the vast majority or more than 90% of the mortgage market.
Yesterday’s announcement comes in the wake of a September 23, 2022, federal district court decision vacating a Trump-era 2020 HMDA rule which improperly raised the threshold for reporting closed-end mortgage loans from 25 to 100 loans annually. The 2020 HMDA rule resulted in 35% of mortgage lenders not being required to report their data, including approval and denials by demographic group. Under the previous HMDA rule issued in 2015, the CFPB had set a lower reporting threshold of 25 closed-end loans per year which was consistent with Congress’s purpose in enacting HMDA to provide effective fair lending monitoring and enforcement.
The National Community Reinvestment Coalition (NCRC) led a challenge to the Trump-era rule, filing suit in the summer of 2020 together with co-plaintiffs Montana Fair Housing, Texas Low Income Housing Information Service, Empire Justice Center, the Association for Neighborhood and Housing Development, and the City of Toledo, Ohio. In our complaint, we challenged the CFPB’s 2020 Rule, arguing that it was arbitrary and capricious and therefore, violated the Administrative Procedure Act (APA) when the CFPB changed the threshold number of closed-end mortgage loans from 25 to 100 annually without providing a sound reason for this change.
In her decision ruling in favor of NCRC and its co-plaintiffs, Chief US District Judge Beryl A. Howell found that the CFPB acted arbitrarily and capriciously in violation of the APA in raising the closed-end thresholds in the 2020 HMDA Rule. The court held the CFPB had overstated the costs to lenders associated with HMDA reporting requirements for closed-end loans and failed to adequately explain why the agency made a “decision to essentially undo Congress’s carefully selected balance” of requiring robust and effective reporting mortgage lending data.
The CFPB’s December 6 blog post makes good on Judge Howell’s order: As a result of the CFPB’s announcement, there will be more data available about mortgage lending patterns, particularly in rural and Native American areas. HMDA data is critical to understanding the mortgage lending arena and exposing lending discrimination as it reveals to whom and where lenders are approving or denying loans and includes penalties for mortgage lenders who do not report.
The CFPB should be applauded for moving quickly to provide clear guidance to mortgage lenders who were previously excluded from reporting under the 2020 HMDA Rule. In a few weeks these lenders must take steps to ensure they will be able to comply with the reinstated threshold in 2023.
Plaintiffs were represented by Public Citizen in this case.
Brad Blower is NCRC’s General Counsel.
Anneliese Lederer is Director of Fair Lending and Consumer Protection.
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