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HMDA Reporting Threshold Changes for 2020 and Beyond

On April 16, 2020, the CFPB released a final rule affecting the thresholds for HMDA reporting. To assist with understanding the transition, the Bureau has published new resources and updated some existing ones:

Now, that is a LOT of information above, so let’s see if we can’t distill it down:

  • Effective July 1, 2020, the number of closed-end loans which must be originated to be considered a covered “financial institution” is being increased from 25 to 100 for each of the two preceding years for both depository and non-depository institutions. The current 500 open-end figure is staying the same.
  • Effective January 1, 2022, the number of open-end loans which must be originated to be considered a “financial institution” is being decreased from 500 to 200 for each of the two preceding years for both depository and non-depository institutions.
  • The Executive Summary clarifies a couple items which could be confusing on the first read. If you are a HMDA reporter now, but would not be when the 100 closed-end threshold kicks in July 1, you must:
    • Continue collecting HMDA data for January 1 – June 30, 2020; and,
    • Record the collected HMDA data on a loan application register within 30 days of quarter-end but only for the first quarter, as the second quarter 30-day timing for recording falls after July 1.

So, you still must collect the first half of the year’s data and record the first quarter information on the LAR, but do you have to file come March 2021? The answer is no, reporting is optional.

You may be feeling like you have done all that work so you can report that data you have collected. But here is where the Regulators have thrown us a curve ball. If we want to report the information from the first half of 2020, WE HAVE TO COLLECT, RECORD AND REPORT FOR THE ENTIRE CALENDAR YEAR. So, your institution would have to keep collecting and reporting and verifying that data when it is not required. I don’t foresee a lot of optional reporting occurring.

Also, keep in mind this new rule does not absolve us of Regulation B collection responsibilities. We still have to collect information regarding the ethnicity, race, sex, marital status and age where the credit is primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence, where the extension of credit will be secured by the dwelling.

So, we would no longer be required to collect ethnicity/race/sex information for dwelling secured loans such as second homes and investment or free-and-clear properties. What happens if you continue to collect the demographic information when you are no longer a HMDA reporter? Regulation B permits data collection for up to five years when no longer a HMDA reporter (1002.5(a)(4)(iii)). The Bureau recognizes there may be a need for more time to update systems and forms and to retrain employees. Although Regulation B prohibits creditors from inquiring about the race, color, religion, national origin, or sex of a credit applicant except under certain circumstances, the Bureau notes that even after the effective date, applicable exceptions in Regulation B will permit institutions newly excluded to collect information in 2020 about the ethnicity, race, and sex of applicants for loans that would have been covered loans absent this final rule.

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