Today's Trends in Credit Regulation

CFPB Seeking Comments on Rule to Update HMDA Reporting Requirements
By Katie Hawkins

Only a month remains to comment on the Consumer Financial Protection Bureau's proposed rule that would update and simplify the reporting requirements for financial institutions under Regulation C, which implements the Home Mortgage Disclosure Act ("HMDA"). HMDA requires many lenders to report information about the home loans for which they receive applications or that they originate or purchase. The collected data is available for use by the public and regulators to monitor whether financial institutions are serving the housing needs of their communities.

The Bureau began its public rulemaking process to improve HMDA in February when it convened a panel of small businesses to provide feedback on the possible changes to the regulations. On July 24, 2014, the Bureau issued the proposed rule that is open for public comment through October 22, 2014. In announcing the proposed rule, CFPB Director Richard Cordray commented, "[i]t is critical that we shed more light on the mortgage market - the largest consumer market in the world" and noted that the proposed rule "would help us understand better how to protect consumers' access to mortgage credit while simplifying the reporting requirements for financial institutions."

In seeking to improve the quality of HMDA data, the Bureau proposes collection of specific new data points that could help identify discriminatory lending practices. The new data points include the property value, the term of the loan, the total points and fees, the duration of any teaser or introductory rates, and the applicant's or borrower's age and credit score. Some of the new data points were identified in the Dodd-Frank Act, in which Congress directed the Bureau to expand the HMDA dataset in order to better understand certain aspects of the mortgage market.

Towards the same goal of improving the quality of HMDA data, the proposed rule would require additional information on underwriting and pricing, such as debt-to-income ratios, interest rates, and total discount points charged. This information would be used to help regulators in determining how the Bureau's Ability-to-Repay rule is impacting the market. Additionally, the data would help the Bureau to monitor developments in specific markets, such as multi-family housing, affordable housing, and manufactured housing.

To simplify HMDA reporting requirements the proposed rule would standardize the reporting threshold by generally requiring that institutions report HMDA data if they make twenty five (25) or more closed-end loans or reverse mortgages in a year. This change would ease reporting requirements for small banks, but would not compromise the dataset because small bank lenders receive a low volume of applications and originate a low volume of loans. In addition, the proposed rule would eliminate reporting for certain home improvement loans. The proposed rule would also align HMDA reporting requirements with well-established industry data standards, which many financial institutions already use for their own processing, underwriting and pricing of loans, or to facilitate the sale of loans on the secondary market. The Bureau also seeks to improve the electronic reporting process, with the goals of a more efficient submission process, ease of data formatting requirements, and to help financial institutions prevent errors.

Finally, the proposed rule includes several changes aimed at clarifying and providing additional guidance on existing requirements under Regulation C that have been identified as confusing or unclear by financial institutions and other stakeholders. Examples of these clarifications include guidance on what types of residential structures are considered dwellings, the treatment of manufactured and module homes and multiple properties, coverage of pre-approval programs and temporary financing, how to report a transaction that involves multiple financial institutions, reporting the action taken on an application, and reporting the type of purchaser for a covered loan.

Katie Hawkins is an associate in the Maine office of Hudson Cook, LLP. Katie can be reached at 207-210-6836 or by email at

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