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CFPB delivers 2020 fair lending report to Congress
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.
CFPB rolls back last year’s Covid-19 flexibilities
On March 31, the CFPB rescinded, effective April 1, the following policy statements, which provided temporary regulatory flexibility measures to help financial institutions work with consumers affected by the Covid-19 pandemic:
- A March 26, 2020, statement addressing the Bureau’s commitment to taking into account staffing and related resource challenges facing financial institutions related to supervision and enforcement activities.
- A March 26, 2020, statement postponing quarterly HMDA reporting requirements. (Covered by InfoBytes here.)
- A March 26, 2020, statement postponing annual data submission requirements related to credit card and prepaid accounts required under TILA, Regulation Z and Regulation E. (Covered by InfoBytes here.)
- An April 1, 2020, statement on credit reporting agencies and furnishers’ credit reporting obligations under the Fair Credit Reporting Act and Regulation V during the Covid-19 pandemic. The Bureau notes that the rescission “leaves intact the section entitled “Furnishing Consumer Information Impacted by COVID-19” which articulates the CFPB’s support for furnishers’ voluntary efforts to provide payment relief and that the CFPB does not intend to cite in examinations or take enforcement actions against those who furnish information to consumer reporting agencies that accurately reflect the payment relief measures they are employing.” (Covered by InfoBytes here.)
- An April 27, 2020, statement affirming that the Bureau would not take supervisory or enforcement action against land developers subject to the Interstate Land Sales Full Disclosure Act and Regulation J for delays in filing financial statements and annual reports of activity. (Covered by InfoBytes here.)
- A May 13, 2020, statement providing supervision and enforcement flexibility for creditors to resolve billing errors during the pandemic. (Covered by InfoBytes here.)
- A June 3, 2020, statement providing temporary flexibility for credit card issuers regarding electronic provision of certain disclosures during the Covid-19 pandemic in accordance with the E-Sign Act and Regulation Z. (Covered by InfoBytes here.)
The rescission also withdraws the Bureau as a signatory to the April 7, 2020, Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (covered by InfoBytes here), and the April 14, 2020, Interagency Statement on Appraisals and Evaluations for Real Estate Related Financial Transactions Affected by the Coronavirus (covered by InfoBytes here).
Additionally, the Bureau issued Bulletin 2021-01 announcing changes to how it communicates supervisory expectations to institutions. Bulletin 2021-01 replaces Bulletin 2018-01 (covered by InfoBytes here), which previously created two categories of findings conveying supervisory expectations: Matters Requiring Attention (MRAs) and Supervisory Recommendations (SRs). Under the revised Bulletin, the Bureau notes that examiners “will continue to rely on [MRAs] to convey supervisory expectations” but will no longer issue formal written SRs, as the agency believes that MRAs will more effectively convey its supervisory expectations. The Bulletin further states that “Bureau examiners may issue MRAs with or without a related supervisory finding that a supervised entity has violated a Federal consumer financial law.”
FFIEC releases 2020 HMDA data
On March 31, the CFPB announced the release of the 2020 HMDA loan application register (LAR) data. The LAR data, available on the Federal Financial Institutions Examination Council’s HMDA Platform, contains modified loan-level information on approximately 4,400 HMDA filers. The Bureau also announced plans to produce the 2020 HMDA data “in other forms to provide users insights into the data, including a nationwide loan-level dataset,” which “will provide all publicly available data from all HMDA reporters, aggregate and disclosure reports with summary information by geography and lender,” and allow users to create custom datasets and reports. The Bureau also stated that it will publish a Data Point article highlighting key trends in the annual data.
FFIEC releases 2021 HMDA reporting guide
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.
House discusses lending discrimination, proposed fair lending legislation
On February 24, the House Financial Services Committee’s Subcommittee on Oversight and Investigations held a hearing entitled “How Invidious Discrimination Works and Hurts: An Examination of Lending Discrimination and Its Long-term Economic Impacts on Borrowers of Color.” The subcommittee’s memorandum regarding the hearing discussed the importance of exploring “available tools and potential legislative solutions to detect hidden discrimination and deter discrimination in lending and housing,” and addressed topics such as modern-day redlining, racial wealth gaps, and matched-pair testing (a method for detecting impermissible differences in treatment based on protected classes).
Subcommittee members also discussed recently introduced H.R. 166, the “Fair Lending for All Act,” which would, among other things: (i) direct the CFPB to establish an Office of Fair Lending Testing charged with testing creditors’ ECOA compliance, and permit the Bureau to refer ECOA violations to the attorney general for appropriate action; (ii) extend the protected classes under the law to sexual orientation, gender identity, and an applicant’s location based on zip code or census tract; (iii) establish criminal penalties under ECOA for knowing and willful violations of prohibited credit discrimination, including personal liability for executive officers and directors; (iv) require the Bureau to review loan applications for compliance with ECOA and other federal consumer laws; and (v) amend HMDA Section 304(b)(4) to add the new prohibited credit discrimination categories.
CFPB releases annual HMDA and TILA adjustments
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 $2.230 billion or less as of December 31, from the requirement to establish escrow accounts for HPMLs in 2021.
CFPB releases fall 2020 rulemaking agenda
On December 11, the CFPB released its fall 2020 rulemaking agenda. According to a Bureau announcement, the information details the regulatory matters that the Bureau “expect[s] to focus on” between November 2020 and November 2021. The announcement notes that the Bureau will also continue to monitor the need for further actions related to the ongoing Covid-19 emergency. In addition to the rulemaking activities already completed by the Bureau this fall, the agenda highlights other regulatory activities planned, including:
- Debt Collection. The Bureau notes that it expects to issue a final rule in December 2020 addressing, among other things, disclosures related to validation notices and time-barred debt (proposal covered by a Buckley Special Alert here).
- LIBOR Transition. The Bureau notes that it anticipates publishing the final rulemaking (proposal covered by InfoBytes here) on the LIBOR transition later than the original January 2021 target identified in the Unified Agenda, due to the November 30 announcement by UK regulatory authorities that they are considering extending the availability of US$ LIBOR for legacy loan contracts until June 2023, instead of the end of 2021.
- FIRREA. The Bureau notes that, together with the Federal Reserve Board, OCC, FDIC, NCUA, and FHFA, it will continue to develop a proposed rule to implement the automated valuation model (AVM) amendments made by the Dodd-Frank Act to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) concerning appraisals.
- Mortgage Servicing. The Bureau notes that it intends to issue an NPRM in spring 2021 to consider amendments to the Bureau’s mortgage servicing rules to address actions required of servicers working with borrowers affected by natural disasters or other emergencies. The Bureau notes that comments to the interim final rule issued in June 2020, amending aspects of the mortgage servicing rules to address the exigencies of Covid-19 (covered by InfoBytes here), suggest that the rules may need additional updates to address natural disasters or other emergencies.
- HMDA. The Bureau states that two rulemakings are planned, including (i) a proposed rule that follows up on a May 2019 advanced notice of proposed rulemaking, which sought information on the costs and benefits of reporting certain data points under HMDA and coverage of certain business or commercial purpose loans (covered by InfoBytes here); and (ii) a proposed rule addressing the public disclosure of HMDA data.
CFPB settles with bank for HMDA filing errors
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.
CFPB releases HMDA 2021 reference chart
On October 16, the CFPB published a new reference chart titled “Reportable HMDA Data: A Regulatory and Reporting Overview Reference Chart for Data Collected in 2021.” The chart is designed to be used as a reference tool for required data points to be collected, recorded, and reported under Regulation C, as amended by HMDA rules issued October 15, 2015, August 24, 2017, October 10, 2019, and April 16, 2020 (most recently covered by InfoBytes here). The Bureau noted that this chart does not provide HMDA loan/application register data fields or enumerations.
CFPB releases more 2019 HMDA data
On August 27, the CFPB issued a new analysis of the 2019 Home Mortgage Disclosure Act (HMDA) data on mortgage lending transactions, which follows an initial release from the CFPB and the Federal Financial Institutions Examinations Council (FFIEC) earlier in June (covered by InfoBytes here). The newly released report groups the new and revised HMDA data points into seven major categories: (i) open-end and reverse mortgage flags; (ii) expanded or revised demographic information; (iii) property type; (iv) loan purpose and characteristics; (v) applicant/borrower characteristics and property characteristics; (vi) pricing outcomes and components; and (vii) miscellaneous data points. The report breaks down the data points in each category by providing a definition and basic reporting requirements, as well as a statistical overview of the reported information.