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  • CFPB adjusts annual dollar amount thresholds under TILA, HMDA regulations

    Federal Issues

    On December 21, the CFPB released a final rule revising the dollar amounts for provisions implementing TILA and its amendments that impact loans under the Home Ownership and Equity Protection Act of 1994 (HOEPA) and qualified mortgages (QM). The Bureau is required to make annual adjustments to dollar amounts in certain provisions in Regulation Z, and has based the adjustments on the annual percentage change reflected in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) in effect on June 1, 2022. The following thresholds are effective January 1, 2023:

    • For open-end consumer credit plans under TILA, the threshold for disclosing an interest charge will remain unchanged at $1.00;
    • For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages will be $24,866, and the adjusted points-and-fees dollar trigger for high-cost mortgages will be $1,243;
    • For qualified mortgages under the General QM loan definition, the thresholds for the spread between the annual percentage rate and the average prime offer rate will be: “2.25 or more percentage points for a first-lien covered transaction with a loan amount greater than or equal to $124,331; 3.5 or more percentage points for a first-lien covered transaction with a loan amount greater than or equal to $74,599 but less than $124,331; 6.5 or more percentage points for a first-lien covered transaction with a loan amount less than $74,599; 6.5 or more percentage points for a first-lien covered transaction secured by a manufactured home with a loan amount less than $124,331; 3.5 or more percentage points for a subordinate-lien covered transaction with a loan amount greater than or equal to $74,599; or 6.5 or more percentage points for a subordinate-lien covered transaction with a loan amount less than $74,599”; and
    • For all QM categories, the adjusted thresholds for total points and fees will be “3 percent of the total loan amount for a loan greater than or equal to $124,331; $3,730 for a loan amount greater than or equal to $74,599 but less than $124,331; 5 percent of the total loan amount for a loan greater than or equal to $24,866 but less than $74,599; $1,243 for a loan amount greater than or equal to $15,541 but less than $24,866; and 8 percent of the total loan amount for a loan amount less than $15,541.”

    With respect to credit card annual adjustments, the Bureau noted that its 2023 annual adjustment analysis on the CPI-W in effect on June 1, did not result in an increase to the current minimum interest charge threshold (which requires “creditors to disclose any minimum interest charge exceeding $1.00 that could be imposed during a billing cycle”).

    The Bureau also issued a final rule adjusting the asset-size threshold under HMDA (Regulation C). Under HMDA, institutions with assets below certain dollar thresholds are exempt from collection and reporting requirements. The final rule increases the asset-size exemption threshold for banks, savings associations, and credit unions from $50 million to $54 million, thereby exempting institutions with assets of $54 million or less as of December 31, 2022, from collecting HMDA data in 2023.

    Federal Issues Agency Rule-Making & Guidance CFPB TILA Regulation Z HOEPA Qualified Mortgage Mortgages Consumer Finance CARD Act HMDA Regulation C

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  • CFPB issues HMDA technical amendment

    Agency Rule-Making & Guidance

    On December 12, the CFPB issued a technical amendment to the HMDA Rule to reflect the closed-end mortgage loan reporting threshold of 25 mortgage loans in each of the two preceding calendar years. As previously covered by InfoBytes, in September, the U.S. District Court for the District of Columbia granted partial summary judgment to a group of consumer fair housing associations (collectively, “plaintiffs”) that challenged changes made in 2020 that permanently raised coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under HMDA. The 2020 Rule, which amended Regulation C, permanently increased the reporting threshold from the origination of at least 25 closed-end mortgage loans in each of the two preceding calendar years to 100, and permanently increased the threshold for collecting and reporting data about open-end lines of credit from the origination of 100 lines of credit in each of the two preceding calendar years to 200 (covered by InfoBytes here). The plaintiffs sued the CFPB in 2020, arguing, among other things, that the final rule “exempts about 40 percent of depository institutions that were previously required to report” and undermines HMDA’s purpose by allowing potential violations of fair lending laws to go undetected. (Covered by InfoBytes here.) As a result of the September 23 order, the threshold for reporting data about closed-end mortgage loans is 25, the threshold established by the 2015 HMDA Rule.

    Agency Rule-Making & Guidance Federal Issues CFPB HMDA Mortgages Regulation C Fair Lending Consumer Finance

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  • District Court criticizes CFPB’s cost-benefit analysis in HMDA change

    Courts

    On September 23, the U.S. District Court for the District of Columbia granted partial summary judgment to a group of consumer fair housing associations (collectively, “plaintiffs”) that challenged changes made in 2020 that permanently raised coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under HMDA. As previously covered by InfoBytes, the 2020 Rule, which amended Regulation C, permanently increased the reporting threshold from the origination of at least 25 closed-end mortgage loans in each of the two preceding calendar years to 100, and permanently increased the threshold for collecting and reporting data about open-end lines of credit from the origination of 100 lines of credit in each of the two preceding calendar years to 200. The plaintiffs sued the CFPB in 2020, arguing, among other things, that the final rule “exempts about 40 percent of depository institutions that were previously required to report” and undermines HMDA’s purpose by allowing potential violations of fair lending laws to go undetected. (Covered by InfoBytes here.) The plaintiffs also claimed that the agency’s cost-benefit analysis underlying the 2020 Rule was “flawed because the Bureau exaggerated the ‘benefits’ of increasing the loan-volume reporting thresholds by failing to adequately account for comments suggesting that the savings would be much smaller than estimated, and by relying on overinflated estimates of cost savings to newly-exempted lending institutions with smaller loan volumes.” The plaintiffs asked that the 2020 Rule be vacated and set aside on the grounds that the Bureau acted outside of its statutory authority in issuing the 2020 Rule and violated the Administrative Procedure Act. The Bureau countered that issuing the 2020 Rule was within its scope of authority because HMDA’s text “does not unambiguously foreclose” the agency’s interpretation of the statute.

    The court first determined that promulgation of the 2020 Rule did not exceed the Bureau’s statutory authority because “HMDA grants broad discretion ‘in the judgment of the’ agency to create ‘exceptions’ to the statutory reporting requirements…” “[E]ven a regulation relieving roughly forty percent of institutions from data collection and reporting requirements is an exception to the ‘rule’ of disclosure, which continues to apply to the majority of institutions,” the court wrote, adding that the 2020 Rule preserves the reporting requirements, “as compared to the 2015 Rule, for most institutions, the vast majority of loans, and the vast majority of communities.”

    However, the court agreed with the plaintiffs that the cost-benefit analysis for the 2020 Rule’s increased reporting threshold for closed-end mortgage loans was arbitrary and capricious. The court expressed criticism of the cost-benefit analysis used by the Bureau to justify setting the minimum number of closed-end loans in each of the two preceding calendar years at 100, and found that the Bureau failed to adequately explain or support its rationales for revising and adopting the closed-end reporting thresholds under the 2020 Rule. The Bureau “conceded the new rule would cause identifiable harms to the public, but effectively threw up its proverbial hands, citing an inability to incorporate these harms into its analysis as quantifiable ‘costs,’ and moved on to the next topic of discussion,” the court said.

    The Bureau “exaggerated the savings to ‘covered persons’ under the new rule, and did not engage appropriately with the nonquantifiable ‘harms’ of the 2020 Rule, and the disparate impact of those harms on the traditionally underserved populations HMDA is intended to protect, even as it conceded the revised threshold would certainly result in some harm to consumers,” the court said, questioning the Bureau’s analysis of disparate impacts on rural and low-to-moderate-income communities. The court determined that the plaintiffs identified several flaws in the Bureau’s cost-benefit analysis supporting the increased closed-end mortgage loan threshold, thus rendering this aspect of the 2020 Rule “arbitrary, capricious and requiring vacatur.” The court asked the Bureau for a “more reasoned explanation as to whether and how the cost-benefit analysis accounted for the ongoing need to collect data on home mortgages pursuant to other statutory requirements and underwriting purposes, and why, when a lender must collect and report multiple data points for each mortgage and loan application, the marginal cost of collecting the additional, HMDA-specific data points is so significant that the increased reporting threshold of the 2020 Rule renders unique cost savings.”

    Courts HMDA Mortgages CFPB Fair Lending Administrative Procedure Act Regulation C

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  • CFPB releases annual HMDA and TILA adjustments

    Federal Issues

    On December 23, the CFPB announced final rules adjusting the asset-size thresholds under HMDA (Regulation C) and TILA (Regulation Z). Both rules took effect January 1, 2022. Under HMDA, institutions with assets below certain dollar thresholds are exempt from the collection and reporting requirements. The final rule increases the asset-size exemption threshold for banks, savings associations, and credit unions from $48 million to $50 million, thereby exempting institutions with assets of $50 million or less as of December 31, 2021, from collecting and reporting HMDA data in 2022. TILA, likewise, exempts certain entities from the requirement to establish escrow accounts when originating higher-priced mortgage loans (HPMLs), including entities with assets below the asset-size threshold established by the CFPB. The final rule increases this asset-size exemption threshold from $2.230 billion to $2.336 billion, thereby exempting creditors with assets of $2.336 billion or less as of December 31, 2021, from the requirement to establish escrow accounts for HPMLs in 2022.

    Federal Issues CFPB HMDA TILA Consumer Finance Regulation C Regulation X Mortgages

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  • CFPB delivers 2020 fair lending report to Congress

    Federal Issues

    On April 14, the CFPB issued its annual fair lending report to Congress, which outlines the Bureau’s efforts in 2020 to fulfill its fair lending mandate, while protecting consumers against the resulting economic consequences of the Covid-19 pandemic. According to the report, the Bureau continued to focus on promoting fair, equitable, and nondiscriminatory access to credit, highlighting several fair lending priorities that continued from years past such as mortgage origination, small business lending, and student loan origination. The report also discusses new policy areas and programs for fair lending examinations or investigations, including (i) the Fair Lending Help Desks; (ii) amendments concerning Regulation C, which will increase the permanent threshold for collecting, recording, and reporting data about open-end lines of credit from 100 to 200; and (iii) two HMDA data point articles. Additionally, the report discusses the Bureau’s efforts in expanding access to credit for underserved or underbanked populations, including: (i) hosting the first “Tech Sprint” (covered by InfoBytes here) to encourage regulatory innovation and stakeholder collaboration; (ii) continuing to examine and investigate institutions for compliance with HMDA and ECOA; (iii) engaging with stakeholders to discuss fair lending compliance, issues related to credit access, and policy decisions; and (iv) issuing Supervisory Recommendations relating to weak or nonexistent fair lending policies and procedures, risk assessments, and fair lending training. The report also provides information related to regulation, supervision, enforcement, and education efforts.

    Federal Issues Agency Rule-Making & Guidance Fair Lending CFPB Mortgages HMDA ECOA Regulation C Consumer Finance Covid-19 Mortgage Origination

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  • FFIEC releases 2021 HMDA reporting guide

    Agency Rule-Making & Guidance

    On March 30, the FDIC issued FIL-21-2021 announcing the Federal Financial Institutions Examinations Council’s issuance of the 2021 edition of the “Guide to HMDA Reporting: Getting It Right!” The guide applies to HMDA data collected in 2021 that will be reported to supervisory agencies by March 1, 2022, and includes (i) a summary of responsibilities and requirements; (ii) directions for assembling the necessary tools; and (iii) instructions for reporting HMDA data. According to the announcement, the 2021 edition provides information to assist with HMDA compliance in the event of a merger or acquisition, as well as updates to the appendices that reflect amendments to Regulation C made by a CFPB final rule published last year (covered by InfoBytes here). The final rule increased the permanent threshold from 25 to 100 loans starting July 1, 2020, for both depository and nondepository institutions, and also increased the permanent threshold for collecting and reporting data about open-end lines of credit from 100 to 200. The latter change, however, will not take effect until January 1, 2022, when the current temporary threshold of 500 open-end lines of credit expires.

    Agency Rule-Making & Guidance FDIC FFIEC HMDA CFPB Regulation C Mortgages Bank Regulatory

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  • CFPB releases annual HMDA and TILA adjustments

    Federal Issues

    On December 22, the CFPB announced final rules adjusting the asset-size thresholds under HMDA (Regulation C) and TILA (Regulation Z). Both rules took effect January 1.

    Under HMDA, institutions with assets below certain dollar thresholds are exempt from the collection and reporting requirements. The final rule increases the asset-size exemption threshold for banks, savings associations, and credit unions from $47 million to $48 million, thereby exempting institutions with assets of $48 million or less as of December 31, from collecting and reporting HMDA data in 2021.

    TILA exempts certain entities from the requirement to establish escrow accounts when originating higher-priced mortgage loans (HPMLs), including entities with assets below the asset-size threshold established by the CFPB. The final rule increases this asset-size exemption threshold from $2.202 billion to $2.230 billion, thereby exempting creditors with assets of $2.230 billion or less as of December 31, from the requirement to establish escrow accounts for HPMLs in 2021.

    Federal Issues CFPB HMDA TILA Regulation C Regulation Z

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  • CFPB settles with bank for HMDA filing errors

    Federal Issues

    On October 27, the CFPB announced a settlement with a national bank, resolving allegations that the bank reported inaccurate HMDA data for 2016 and 2017 mortgage transactions. According to the consent order, the bank allegedly violated HMDA, Regulation C, and the Consumer Financial Protection Act by failing to report accurate data among the 7,000 mortgage applications reported in 2016 and 2017. Specifically, the Bureau alleged that the submissions contained “significant errors,” with an internal audit of the 2016 filing identifying a 40 percent error rate and the Bureau’s review of the 2017 filing identifying a 16 percent error rate. The Bureau asserted that the 2016 errors were caused by “a lack of appropriate staff, insufficient staff training, and ineffective quality control,” while the 2017 errors were “directly related to weaknesses in [the bank]’s compliance-management system (CMS).” In 2013, the bank entered into a consent order with the Bureau for similar issues; thus, the Bureau concluded the 2016 and 2017 errors were “intentional and not bona fide” as the bank allegedly failed to maintain a “CMS with procedures reasonably adapted to avoid” the errors since the previous order.

    The consent order requires the bank to, among other things, pay a $200,000 civil money penalty and develop a HMDA compliance-management system that includes policies, procedures, and an internal audit program that regularly tests the HMDA data integrity.

    Federal Issues CFPB Regulation C CFPA HMDA Enforcement Mortgages

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  • CFPB raises HMDA reporting thresholds

    Agency Rule-Making & Guidance

    On April 16, the CFPB issued a final rule permanently raising coverage thresholds for collecting and reporting data about closed-end mortgage loans and open-end lines of credit under HMDA. As previously covered by InfoBytes, these changes were first proposed by the Bureau last May. The final rule, which amends Regulation C, increases the permanent threshold from 25 to 100 loans starting July 1, 2020 and is applicable to both depository and nondepository institutions. The Bureau states in an executive summary that newly excluded institutions can stop collecting HMDA data on their closed-end mortgage loans beginning July 1, 2020; however, these institutions may still be obligated to collect home loan activity information required by other regulations. Under the final rule, newly excluded institutions are still required to record closed-end data for the first quarter of 2020; however because these institutions would not otherwise report the data until early 2021, the final rule relieves newly excluded institutions of the March 1, 2021 reporting obligation on data collected in 2020 (including closed-end mortgage loan data collected in 2020 prior to July 1, 2020). The Bureau notes that newly excluded institutions “may voluntarily report HMDA data on closed-end mortgage loans in 2021 as long as the institution reports data for the full calendar year 2020.”

    The final rule also increases the permanent threshold for collecting and reporting data about open-end lines of credit from 100 to 200, however this change will not take effect until January 1, 2022, when the current temporary threshold of 500 open-end lines of credit expires (covered by InfoBytes here). Beginning in 2022, both depository and nondepository institutions that meet this threshold must report data on open-end lines of credit by March 1 of the following calendar year.

    Additional resources, including a timeline of key dates and institutional/transactional coverage charts are available here. “The Bureau recognizes the operational challenges confronted by institutions due to the current COVID-19 pandemic,” the CFPB states in its press release. “The Bureau anticipates that this final rule, once effective, will reduce regulatory burden on smaller institutions to help those institutions to focus on responding to consumers in need now and in the longer term.”

    Agency Rule-Making & Guidance CFPB HMDA Regulation C Covid-19 Mortgages

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  • CFPB releases HMDA FAQs

    Agency Rule-Making & Guidance

    On March 6, the CFPB released seven updated FAQs to assist reporting institutions in complying with HMDA and Regulation C. As previously covered by InfoBytes, the Federal Financial Institutions Examinations Council’s issued the 2020 edition of the “Guide to HMDA Reporting: Getting It Right!” in February. The FAQs offer guidance for reporting the following data points: (i) universal loan identifier (ULI); (ii) legal entity identifier (LEI); (iii) ethnicity, race, and sex; (iv) discount points; and (v) construction and construction/permanent transactions. Highlights are listed below:

    • Regulation C does not “require a financial institution to provide the ULI on loan documents.” It requires a financial institution to “collect, record, and report a ULI for applications for covered loans that is receives, covered loans that it originates, and covered loans that it purchases for each calendar year.”
    • “For applications taken by telephone…a person collecting the race or ethnicity information [is required] to orally state the information in the collection form unless the information pertains uniquely to applications taken in writing, for example, the italicized language in the sample data collection form.”
    • “[A] financial institution should not correct the race or ethnicity as reported by the applicant, even if the applicant has entered clearly incorrect or inappropriate information.”
    • “Where a natural person applicant does not provide ethnicity, race, or sex information for a mail, internet, or telephone application, and a financial institution does not have an opportunity to collect this information during an in person meeting during the application process, the financial institution may report either that the information was not collected on the basis of visual observation or surname (code 2) or that the requirement to report this data field is not applicable (code 3).”
    • “For construction and permanent loans where the construction loan is a separate transaction, the financial institution reports only the loan term of the permanent loan. Because the separate construction loan is designed to be replaced by permanent financing, it is excluded as temporary financing.”

    Agency Rule-Making & Guidance CFPB Enforcement HMDA Consumer Finance Regulation C

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