ComplianceJuly 20, 2018

Limits on the availability of the new partial HMDA reporting exemption

On May 24, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act was signed into law (Pub. L. No. 115-174, the “Act”). The Act is intended to provide regulatory relief to banks, particularly regional and community banks. A major provision of the Act involves amendments to the Home Mortgage Disclosure Act (“HMDA”) designed to reduce the burden on certain depository institutions from having to report certain HMDA data requirements that became effective on January 1, 2018.  We have heard from some depository institutions and other reporters that they believe the HMDA amendments made by the Act fully exempt them from their reporting obligations altogether, which is not the case.

On July 5, 2018, the FRB, OCC, FDIC, NCUA, and BCFP each issued similar statements about the Act’s relief from various HMDA data elements (the “Regulatory Relief Statements”).[1] Importantly, aspects of these statements indicate there are limits on the availability and scope of the new HMDA changes.  Among other things, the statements make it clear that the regulatory relief provided by the HMDA changes is a partial reporting exemption, limited to certain data points.

The new HMDA amendments made by Section 104 of the Act essentially provide that certain HMDA data points that became effective in 2018 do not apply to an insured depository institution or an insured credit union: (1) for closed-end mortgage loans if the institution originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years, and (2) for open-end lines of credit if the institution originated fewer than 500 open-end lines of credit in each of the two preceding calendar years, but only if the depository institution (if applicable) has not “…received a rating of ‘needs to improve record of meeting community credit needs’ during each of its two most recent examinations or a rating of ‘substantial noncompliance in meeting community credit needs’ on its most recent examination under Section 807(b)(2) of the Community Reinvestment Act…” Note that the partial HMDA reporting exemption is not available to non-depository institutions such as certain non-depository mortgage lenders.

Here are some important considerations regarding the limited benefit of the new partial HMDA reporting exemption:

1.       The Act only eliminated the requirement to report the HMDA data elements added to Regulation C by the BCFP pursuant to amendments to HMDA made in Dodd-Frank that became effective beginning January 1, 2018. An institution that qualifies for the partial exemption must still report all the other HMDA data elements in effect for the 2018 reporting year.[2]

2.       Loan/Application Register (“LAR”) submissions must still be formatted in accordance with the 2018 Filing Instructions Guide for HMDA Data Collected.

3.       More important details and guidance relating to the partial HMDA data exemption are yet to come from regulators concerning actual implementation, including the CRA rating provision, technical reporting requirements, and the precise fields that are affected by the Act’s changes to HMDA.

4.       All depository institutions should note that examiners, as part of fair lending examinations, often ask for additional lending data, including many of the fields that certain institutions may no longer have to report under the partial exemption.  Consequently, it may be beneficial to have an internal process for capturing and retaining all the new required HMDA fields at the time loans are originated.  Further, much of that data is essential in conducting self-assessments.

The bottom line is that the Act only provides limited regulatory relief and does not relieve an institution that qualifies for the partial exemption from a number of important, ongoing HMDA-related data collection requirements and considerations.

Note: This statement is not intended to be legal, accounting, tax or other professional advice, and Wolters Kluwer encourages readers to review official materials and seek advice of counsel.