Court overturns HMDA reporting threshold for small entities

A federal judge recently moved to vacate CFPB regulations that expanded the number of small-volume lenders deemed exempt from Home Mortgage Disclosure Act reporting requirements. In National Community Reinvestment Coalition v. Consumer Financial Protection Bureau, the D.C. District Court partly invalidated legal exemptions that allowed small mortgage lenders to avoid reporting closed-end loan data under HMDA.

HMDA rules provide that mortgage lenders must report HMDA data where their loan volume meet specific thresholds in the two preceding calendar years. Regulation C provides two thresholds, one for reporting closed-end mortgage loans and the other for reporting open-end lines of credit. The CFPB refers to the thresholds as “institutional and transactional coverage thresholds.” Lenders that do not meet either threshold in a given year are not required to collect and report any HMDA data.

In 2015, the CFPB set the closed-end threshold at 25 closed-end mortgage loans in each of the two preceding calendar years, and the open-end threshold at 100 open-end lines of credit in each of the two preceding calendar years. After multiple adjustments to these numerical thresholds, in 2020 the bureau acted to address “considerable burdens associated with reporting” this data by increasing the threshold of exempt institutions to 100 closed-end mortgage loans in each of the two preceding calendar years. The 2020 rule also set the permanent threshold for open-end lines of credit at 200 open-end lines in each of the two preceding calendar years, starting in calendar year 2022.

In its decision, the District Court invalidated the closed-end loan exemption expansions but let stand the threshold of 200 open-end lines of credit originated in each of the prior two years. The court vacated and remanded the closed-end mortgage loan reporting threshold to the CFPB. The CFPB is expected to issue instructions on how to comply with the HMDA requirements to institutions affected by the ruling in the coming days.