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On November 10, the CFPB updated its FAQs on the Home Mortgage Disclosure Act (HMDA) reporting requirements to clarify institutional and transactional coverage. The updated FAQs, among other things, highlighted that the final rule, issued in April 2020, established the closed-end mortgage loan threshold to be 100 in each of the two preceding calendar years, effective July 2020, and the open-end line of credit threshold at 200 in each of the two preceding calendar years, effective January 1, 2022, upon the expiration of the temporary threshold of 500 open-end lines of credit. (Covered by InfoBytes here). Additionally, the FAQs presented circumstance-based questions and answers applying the threshold rules to scenarios with varying originations of closed-end mortgage loans and open-end lines of credit and addressed voluntary reporting.
On November 12, the CFPB sent a reminder to institutions that the threshold for reporting HMDA data for open-end lines of credit will adjust to 200 open-end lines of credit in each of the two preceding calendar years effective January 1, 2022. According to the reminder, starting January 1, 2022, an institution that meets the new threshold and all other Regulation C institutional coverage criteria, must collect, record, and report data about its open-end lines of credit.
On November 1, the National Community Reinvestment Coalition (NCRC) announced it had filed fair housing complaints with HUD against two mortgage lenders for allegedly engaging in discriminatory behavior against prospective Black clients. The first complaint is based on a matched-pair test conducted in the Seattle/Tacoma, Washington area, which allegedly demonstrated that lending specialists provided different lending product information to prospective borrowers based on race. NCRC also alleged that the lender’s HMDA data showed lending behaviors consistent with discriminatory practices. NCRC also conducted matched-pair testing on a second lender’s practices in the Charlotte, North Carolina area. According to the complaint, the lender also allegedly provided different information and more favorable services to White testers. An examination of the lender’s HMDA data similarly showed alleged discriminatory lending patterns.
On October 20, the CFPB released three updates regarding the Filing Instructions Guide for HMDA data collected in 2022 that must be reported in 2023. As previously covered by InfoBytes, the CFPB released the Filing Instructions Guide for HMDA, which states that there are no significant changes to the submission process and that the required data fields to be collected and reported have not changed. Instructions for quarterly reporting can be found in the Supplemental Quarterly Reporting Guide.
On October 25, the CFPB reminded that, "[f]or data collected beginning January 1, 2022, financial institutions should use census tract information provided in the 2020 Census." In addition, the FFIEC’s Geocoder will utilize census tract information from the 2020 Census beginning January 1, 2022.
On September 9, the CFPB released the Filing Instructions Guide for HMDA data collected in 2022 that must be reported in 2023. The guide states that there are no significant changes to the submission process and that the required data fields to be collected and reported have not changed. Instructions for quarterly reporting can be found in the Supplemental Quarterly Reporting Guide, which was issued the same day. According to the most recent HMDA reporting guide by the FFIEC, the next HMDA report is due for entities on March 1, 2022.
On August 19, the CFPB released a Data Point report titled, 2020 Mortgage Market Activity and Trends, which finds that the total number of closed-end originations, as well as applications, increased substantially between 2019 and 2020. The 2020 HMDA data encompasses the third year of data that incorporates amendments to HMDA by Dodd-Frank. The changes include new data points, revisions to some existing data points, and authorizing the CFPB to require new data points. As covered by a Buckley Special Alert, the CFPB issued a final rule that implemented significant changes that reflected the needs of homeowners and the evolution in the mortgage market.
According to the report, trends in mortgage applications and originations found in the 2020 HMDA data point include:
- 4,472 financial institutions reported at least one closed-end record in 2020, which is a decrease from 5,505 in 2019;
- “The number of home-purchase loans secured by site-built, one-to-four-family properties increased by about 387,000, whereas the number of refinance loans increased by 149.1 percent from 3.4 million in 2019 to 8.4 million in 2020”;
- In 2020, the number of open-end line-of-credit originations, besides reverse mortgages, fell by 16.6 percent to 869,000, from 1.04 million in 2019;
- “The share of loans secured by closed-end home-purchase loans for site-built, one-to-four-family, first lien, principal-residence properties for Black borrowers increased in 2020 and the share of refinance loans for Asian borrowers increased in 2020”; and
- In 2020, the refinance boom largely continued the trends since the second quarter of 2019.
According to CFPB Acting Director Dave Uejio, “initial observations about the nation’s mortgage market in 2020 are welcome news, with improvements in the overall volume of home-purchase and refinance loans compared to 2019.” He also noted that “Black and Hispanic borrowers continued to have fewer loans, [are] more likely to be denied than non-Hispanic White and Asian borrowers, and pay higher median interest rates and total loan costs. It is clear from that data that our economic recovery from the COVID-19 pandemic won’t be robust if it remains uneven for mortgage borrowers of color.”
On June 17, the Federal Financial Institutions Examinations Council (FFIEC) released the 2020 Home Mortgage Disclosure Act (HMDA) data on mortgage lending transactions at 4,475 covered institutions. Available data products include: (i) the HMDA Dynamic National Loan-Level Dataset, which is updated on a weekly basis to reflect late submissions and resubmissions; (ii) the Snapshot National Loan-Level Dataset, which contains the national HMDA datasets as of a fixed date, in the case of 2020 data, May 1, 2021; (iii) the Aggregate and Disclosure Reports, which provides summaries on individual institutions and geographies; (vi) the HMDA Data Browser where users can customize tables and download datasets for further analysis; and (v) the modified Loan/Application Registers for filers of 2020 HMDA data.
The data currently includes “a total of 48 data points providing information about the applicants, the property securing the loan or proposed to secure the loan in the case of non-originated applications, the transaction, and identifiers.” The 2020 data includes information on 22.7 million home loan applications, 14.5 million of which resulted in loan originations, and 2.8 million purchased loans. Among the observations from the data relative to the prior year: (i) the number of reporting institutions decreased by roughly 19 percent; (ii) closed-end loan applications increased by roughly 63 percent, while open-end line of credit applications decreased by 19 percent; (iii) the total number of originated closed-end loans increased by roughly 67 percent; (iv) refinance originations for 1-4 family properties increased by 150 percent; (v) home purchase lending increased by almost 7 percent; and (vi) non-depository, independent mortgage companies accounted for approximately 60 percent of first-lien owner-occupied home purchase loans (up from approximately 56 percent in 2019).
On June 14, the CFPB released a report analyzing differences in certain loan and borrower characteristics and general lending patterns for lenders below and above the 100-loan closed-end threshold set by the 2020 HMDA final rule. As previously covered by InfoBytes, last year the Bureau issued a final rule permanently raising coverage thresholds for collecting and reporting data about closed-end mortgage loans under HMDA from 25 to 100 loans.
While the Bureau notes that the “analysis is necessarily limited and preliminary,” the report’s findings, which analyzed publicly available HMDA data from 2019 for which the 25-loan threshold still applied, show, among other things, that (i) lenders that are exempt under the 2020 final rule (those whose origination volume exceeds the 25-loan threshold but falls below the 100-loan threshold) “do not appear to be more likely to lend to Black and non-White Hispanic borrowers than larger volume lenders”; (ii) these lenders may be more likely to lend to non-natural person borrowers such as trusts, partnerships, and corporations; (iii) a higher percentage of these loans are secured by properties in low-to-moderate income (LMI) census tracts, properties in rural areas, second liens, and investment properties; (iv) these lenders tend to make more loans to borrowers who appear to have higher income levels than large lenders’ borrowers; and (v) a slightly higher percentage of loans made by these lenders are secured by manufactured homes than by lenders with origination volumes over 300. According to the Bureau’s blog post, the “findings are consistent with a possible explanation that lenders below the 2020 rule’s 100-loan closed-end threshold are making more loans to investors buying up property in [LMI] census tracts for rental or resale.”
Last month, the Government Accountability Office delivered a report at the request of Senators Elizabeth Warren (D-MA) and Sherrod Brown (D-OH) on the CFPB’s oversight and enforcement of fair lending laws after the agency’s 2018 reorganization which moved the Office of Fair Lending and Equal Opportunity from the Supervision, Enforcement, and Fair Lending Division to the Office of the Director and shifted certain responsibilities. GAO’s investigation focused on how the Bureau (i) “managed the reorganization of its fair lending activities”; (ii) “monitored and reported on its fair lending performance”; and (iii) used new HMDA data reported by some lenders since 2018 in its fair lending activities. The investigation team examined documents related to the Bureau’s fair lending activities, including strategic and performance reports and policies and procedures, and interviewed Bureau staff. GAO concluded that the Bureau “did not substantially incorporate key practices for agency reform efforts GAO identified in prior work” during the reorganization, and identified challenges related to the reorganization such as “loss of fair lending expertise and specialized data analysts,” which “may have contributed to a decline in enforcement activity in 2018.” The report also pointed out that the Bureau’s decision to stop reporting fair lending supervision and enforcement performance goals and measures has reduced transparency. However, the report noted that the Bureau has incorporated loan-level HMDA data to support its fair lending activities and that the new data points have improved the agency’s ability to compare how different institutions price loans, helping staff identify potentially discriminatory lending practices.
GAO’s report recommended that the Bureau: (i) collect and analyze information on the outcomes of its fair lending reorganization and use that assessment to address any related challenges or unintended consequences; and (ii) “develop and implement performance goals and measures specific to its efforts to supervise and enforce fair lending laws.” The Bureau agreed with both recommendations and affirmed its commitment to implementing them.
On June 11, the Office of Information and Regulatory Affairs released the CFPB’s spring 2021 rulemaking agenda. According to a Bureau announcement, the information released represents regulatory matters the Bureau is “currently pursuing under interim leadership pending the appointment and confirmation of a permanent Director.” Any changes made by the new permanent director will be reflected in the fall 2021 rulemaking agenda. Additionally, the Bureau indicates that it plans to continue to focus resources on actions addressing the adverse impacts to consumers due to the ongoing Covid-19 pandemic, and highlighted an interim final rule issued in April that addresses certain debt collector conduct associated with the CDC’s temporary eviction moratorium order (covered by InfoBytes here). The Bureau will also continue to take concrete steps toward furthering the agency’s “commitment to promoting racial and economic equity.”
Key rulemaking initiatives include:
- Small Business Rulemaking. Last September, the Bureau released a Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) outline of proposals under consideration, convened an SBREFA panel last October, and released the panel’s final report last December (covered by InfoBytes here and here). The Bureau reports that it anticipates releasing a notice of proposed rulemaking (NPRM) for the Section 1071 regulations this September to “facilitate enforcement of fair lending laws as well as enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women-owned, minority-owned, and small businesses.”
- Consumer Access to Financial Records. The Bureau notes that it is considering rulemaking to implement section 1033 of Dodd-Frank in order to address the availability of electronic consumer financial account data. The Bureau is currently reviewing comments received in response to an Advance Notice of Proposed Rulemaking (ANPR) issued last fall regarding consumer data access (covered by InfoBytes here).
- Property Assessed Clean Energy (PACE) Financing. As previously covered by InfoBytes, the Bureau published an ANPR in March 2019 seeking feedback on the unique features of PACE financing and the general implications of regulating PACE financing under TILA. The Bureau notes that it continues “to engage with stakeholders and collect information for the rulemaking, including by pursuing quantitative data on the effect of PACE on consumers’ financial outcomes.”
- Automated Valuation Models (AVM). Interagency rulemaking is currently being pursued by the Bureau, Federal Reserve Board, OCC, FDIC, NCUA, and FHFA to develop regulations for AVM quality control standards as required by Dodd-Frank amendments to FIRREA. The standards are designed to, among other things, “ensure a high level of confidence in the estimates produced by the valuation models, protect against the manipulation of data, [ ] avoid conflicts of interest, require random sample testing and reviews,” and account for any other appropriate factors. An NPRM is anticipated for December.
- Amendments to Regulation Z to Facilitate LIBOR Transition. As previously covered by InfoBytes, the Bureau issued an NPRM in June 2020 to amend Regulation Z to address the sunset of LIBOR, and to facilitate creditors’ transition away from using LIBOR as an index for variable-rate consumer products. A final rule is expected in January 2022.
- Reviewing Existing Regulations. The Bureau notes in its announcement that while it will conduct an assessment of a rule implementing HMDA (most of which took effect January 2018), it will no longer pursue two HMDA proposed rulemakings previously listed in earlier agendas related to the reporting of HMDA data points and public disclosure of HMDA data. Additionally, the Bureau states that it finished a review of Regulation Z rules implementing the Credit Card Accountability Responsibility and Disclosure Act of 2009 and plans to publish any resulting changes in the fall 2021 agenda.
The Bureau’s announcement also highlights several completed rulemaking items, including (i) a final rule that formally extended the mandatory compliance date of the General Qualified Mortgage final rule to October 1, 2022 (covered by InfoBytes here); (ii) proposed amendments to the mortgage servicing early intervention and loss mitigation-related provisions under RESPA/Regulation X (covered by a Buckley Special Alert) (the Bureau anticipates issuing a final rule before June 30, when the federal foreclosure moratoria are set to expire); and (iii) a proposed rule (covered by InfoBytes here), which would extend the effective date of two final debt collection rules to allow affected parties additional time to comply due to the ongoing Covid-19 pandemic (the Bureau plans to issue a final rule in June on whether, and for how long, it will extend the effective date once it reviews comments).
On May 27, the CFPB released a report providing insights into manufactured housing financing, which is a source of lending for millions of manufactured housing homeowners. The report utilizes new information about manufactured housing that was added in 2018 to the list of HMDA data. The report also examines the differences between mortgage loans for site-built homes, mortgage loans for manufactured homes, and chattel loans for manufactured homes. The report found, among other things: (i) about 42 percent of manufactured home purchase loans are “chattel” loans, which are secured by the home but not the land; (ii) about 70 percent of the time, homeowners seeking a loan on a site-built home are approved, but about 30 percent of manufactured home loan applications are approved; (iii) the top five lenders account for over 40 percent of manufactured housing purchase loans and nearly 75 percent of chattel lending; and (iv) Hispanic, Black and African American, American Indian and Alaska Native, and elderly borrowers “are more likely than other consumers to take out chattel loans, even after controlling for land ownership.” The report also pointed out that “compared to mortgages for site-built homes, manufactured homes mortgages tend to have smaller loan amounts, higher interest rates, fewer refinances, and less of a secondary market, patterns that are even more acute for chattel loans.”