Digging Through the Data – Before and After HMDA Regulatory Relief
2018 was quite the year for HMDA. Imagine a regulatory rockslide, with change after change rolling down the hill.
2018 was quite the year for HMDA. Imagine a regulatory rockslide, with change after change rolling down the hill – some from new regulation and some from regulatory relief. After staying on steady regulatory ground with no adjustments to the HMDA rules for many years, the CFPB issued major changes, mostly effective January 1, 2018, which certainly caused a shift in gravity. These new rules changed the definitions for institutional coverage, modified the types of transactions reported and more than doubled the number of reportable data points under HMDA. The new rules also modified the instructions for collecting data on an applicant’s ethnicity, race and sex, and changed the terminology from “government monitoring information” to “demographic information collection.” We also saw changes to data submission methods and disclosure requirements. An amendment to the rules in 2017 also temporarily increased the threshold for reporting open-end lines of credit secured by a dwelling from 100 to 500 for 2018 and 2019. With so many rocks sliding down, it was tough to stay on top of the pile of regulatory change.
The first several months of 2018 were challenging for most of us. We were all busy digging our way through the data, applying the new rules to new applications and loan originations, and working to prepare 2017 data for submission via the new CFPB platform in March. On top of shoveling this load, many of us were also keeping our eyes and ears open for news about a bill named S.2155, aka the Economic Growth, Regulatory Relief and Consumer Protection Act (EGRRCPA) and its track through Congress. EGRRCPA promised regulatory relief and contained provisions that would make more welcomed changes to HMDA. On May 22, 2018, EGRRCPA passed the House, and on May 24, 2018, the president signed the Act into law. Relief had come at last! But how did this relief work? Many of the EGRRCPA provisions were effective immediately upon the president’s signing, but guidance outlining how to benefit from this relief did not exist. When it comes to compliance, knowing how to comply requires guidance, so we held on to our shovels until the regulators gave us direction.
That guidance did not come until August 31 in the form of the 2018 HMDA Interpretive and Procedural Rule, aka the partial exemption. This Rule provided us with the details of regulatory relief, which were quite a bit of data to dig through. The partial exemption eliminated collection and reporting requirements for over half of the new data points for financial institutions known as small filers, which originated fewer than 500 covered closed-end mortgage loans or 500 covered open-end lines of credit in each of the preceding two calendar years. Digging deeper, a small filer subject to CRA would lose the partial exemption – and the regulatory relief it provided – if it received a “needs to improve” rating in each of its two most recent CRA exams as of December 31 of the preceding calendar year or a “substantial noncompliance” rating in its most recent CRA exam.
The Rule stated that Section 104(a) of EGRRCPA took effect on May 24, when the Act became law – one of the first times a regulation was retroactively effective. So how did that work? Those eligible for the partial exemption had a few options:
- Ignore the Rule altogether and continue collecting and reporting through the end of 2018.
- Leave information collected through May 23 as is and start taking advantage of the partial exemption on May 24.
- Dig up all information collected from January 1 through May 24 (or through the date the institution had updated its LAR), sift through it by deleting all the information that would no longer be required to be reported, and continue reporting only the data required to be reported by the new Rule.
Has EGRRCPA truly brought the regulatory relief it promised or has the rock pile just become deeper and harder to dig through? We can certainly help you sort it all out, and you won’t even need to bring a shovel!