HMDA reporting requirement extends to more banks

The Office of the Comptroller of the Currency informed banks, which it oversees, that changes have been made to Home Mortgage Disclosure Act reporting requirements.

Going forward, the loan volume reporting threshold is set at 25 closed-end mortgage loans originated in each of the two preceding calendar years, according to a bulletin published on the agency's website in early February. The changes were first announced by the Consumer Financial Protection Bureau in mid-December.

This marks a sharp change from the 100-loan threshold set previously by a contested 2020 HMDA rule. Going forward, more depository institutions will have to file HMDA data. 

The Home Mortgage Disclosure Act requires lenders to report mortgage application and origination activity on an annual basis and is one of the main tools used by regulators to uncover Fair Housing Act lending violations.

The modifications to the rule, which were made following a court decision last year, revert the reporting requirements to the original 2015 CFPB regulation that established loan volume thresholds. It has been changed at least four times since 2015, with the frequent alterations prompted by banks arguing that the provisions set forth by the government watchdog have been financially "burdensome." 

Critics against the 2020 version of the rule, which raised the reporting obligation for banks, argued that it created an exception to HMDA's collection and reporting requirements for a class of up to 40% otherwise covered financial institutions, resulting in a loss of data.

The lawsuit that upended the 2020 regulation was lodged by the National Community Reinvestment Coalition, several fair-housing organizations, and the City of Toledo.

The coalition challenged the CFPB's 2020 rule as being arbitrary and capricious, contrary to the law, and exceeding the CFPB's statutory authority under the Administrative Procedure Act. Specifically, the lawsuit argued that data the CFPB relied on to justify the change to its reporting threshold was faulty. 

In mid-2022, a federal judge partially sided with the plaintiffs and stated that the CFPB acted unlawfully in issuing a 2020 rule exempting many mortgage lenders from reporting HMDA data.

Following the decision, the NCRC issued a statement that "public data on home mortgage lending is crucial to combating modern-day redlining and other forms of illegal discrimination."

"This ruling partially overturns a Trump-era rule that blocked a significant portion of the mortgage industry from reporting information about who they were approving and denying for loans," said Jesse Van Tol, president of NCRC, in a written statement. "By recognizing that the prior administration had been arbitrary and capricious, and bringing sunlight back into mortgage lending data, the court helps to vindicate the federal government's longstanding efforts to deliver equality of opportunity."

In announcing the reversal, the OCC said it doesn't intend to assess penalties for failures to report closed-end mortgage loan data on reportable transactions conducted from 2020 to 2022 for affected banks that meet Regulation C requirements.

The OCC in its bulletin also added that examinations conducted in affected banks regarding HMDA reportable transactions from 2022, 2021, or 2020 "will be diagnostic to help banks identify compliance weaknesses" and that collection and submission of 2023 HMDA data "will provide affected banks with an opportunity to identify gaps in and make improvements to their HMDA compliance management systems."