The U.S. House of Representatives voted for a bill that exempts certain depository institutions from complying with requirements under the Home Mortgage Disclosure Act (HMDA).
If enacted, credit unions and other lenders with less origination volume as set forth in the bill will not be legally compelled to report and maintain loan information records under HMDA.
The Home Mortgage Disclosure Adjustment Act received 243 – 184 votes last 18 January and is now referred to the U.S. Senate for deliberation.
What’s HMDA About?
The bill pending before the U.S. Senates eases the HMDA’s requirements for lenders to disclose and maintain information about mortgage applications they received, originated and purchased from other lenders.
Enacted in 1975, HMDA by virtue of the Dodd-Frank Act was expanded to include additional mortgage data on underwriting and pricing. The Consumer Financial Protection Bureau pursuant to the Dodd-Frank Act issued a rule (Regulation C) requiring lenders to comply with the additional information effective January 1, 2018.
Data collected under HMDA will help determine which housing markets are served and which homeownership needs are met. From there, the government can come up with relevant policies and
regulations, according to CFPB.
HMDA, as expanded, is not without criticism as some lenders found it burdensome especially the penalties and resubmission of erroneous data. CFPB has recently ruled that it will not assess penalties for any errors in HMDA data collected in 2018 and reported in 2019, nor will it require lenders to resubmit HMDA data unless found with material errors.
CFPB notes that 16.3 million data were collected last year from 6.8K lenders in 2016.
These pieces of data disclosed under HMDA fall under three categories:
- Basic information about the loan: loan identification number, application date, type of loan, purpose for the loan, whether the loan application was that for pre-approval, the type and occupancy status of the property, the type of entity who purchased the loan (if originated and sold in the same year), etc.
- Personal information on the borrower and co-borrower: race, ethnicity, gender, and income.
- Address of the property, including its MSA (metropolitan statistical area) or metropolitan division, state and county, and census tract.
What’s the House Bill About?
While not all lenders are required to report data under HMDA, the relevant house bill primarily sponsored by Rep. Blaine Luetkemeyer (R-MO-3) seeks to exempt certain lenders from the disclosure and maintenance of relevant loan application records.
The depository institutions exempted under the bill are those who originated:
- less than 500 closed-end mortgages loans in each of the two preceding calendar years.
- less than 500 open-end lines of credit in each of the two preceding calendar years.
Credit unions who earlier criticized CFPB over its HMDA requirements welcome the bill, according to Housingwire. Both the Credit Union National Association and the National Association of Federally-Insured Credit Unions hailed the move as a relief from their regulatory burden and a decrease of compliance costs.
Justin McHood is a managing partner at Suited Connector and has been recognized by national media outlets as a financial expert for more than a decade.