CFPB mulls hike of mortgage data rule reporting threshold

Proposal would temporarily affect “smaller” financial institutions

CFPB mulls hike of mortgage data rule reporting threshold
The Consumer Financial Protection Bureau has proposed changes to mortgage data rule reporting for banks and credit unions that issue home-equity lines of credit.

Such financial institutions are currently required to report home-equity lines of credit if they made 100 such loans in each of the last two years. The new proposal would see that threshold rise to 500 loans through calendar years 2018 and 2019, so that the bureau can consider whether to make a permanent adjustment.

“Home-equity lines of credit worsened the foreclosure crisis that swept the country in 2008 and 2009,” said CFPB Director Richard Cordray. “We need to keep track of the responsible use of these loans for consumers, but after hearing from community banks and credit unions we want to reconsider whether that goal can be achieved with a higher reporting threshold.”

The Home Mortgage Disclosure Act, originally enacted in 1975, requires most lenders to report information about the home loans that they originate or purchase, as well as applications received. Authorities “use this data to monitor whether financial institutions are serving the housing needs of their communities, to assist in distributing public-sector investment in order to attract private investment to areas where it is needed, and to identify possible discriminatory lending patterns.”

The CFPB updated rules in 2015 to “improve the quality” and type of data reported by financial institutions. “Collecting data on these products is important because of the risks they pose to consumers and to financial markets. Just like traditional mortgages, if a consumer defaults on these loans, they may lose their home,” the agency said. “Overleverage and defaults due to these products contributed to the foreclosure crises that many communities experienced in the late 2000s. However, this type of lending was not visible in the HMDA data or in any other publicly available data source collected at the time.”

The CFPB said the 2015 update was made in order to eliminate the “blind spot.” It soon hear “increasing” concerns from financial institutions that the challenges and costs of reporting open-end lending may be greater than it had estimated when adopting the 100-loan threshold.

According to its estimates, the temporary 500-loan threshold would still capture about 75% of the home-equity lending market, down from about 88% at the 100-loan threshold.

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