Business groups urge court to "bring sunlight back into mortgage lending data"
US trade groups have taken the Consumer Financial Protection Bureau (CFPB) to court for acting unlawfully in issuing an anti-transparency rule for mortgage lenders.
Chief district judge Beryl Howell ruled that the CFPB overstepped its authority when it issued the Home Mortgage Disclosure Act (HMDA) in 2020, exempting 5% of all mortgage lenders from reporting critical data under the designed to prevent potential discrimination and redlining in banking services.
Howell said this aspect of the 2020 rule was “arbitrary and capricious,” as the agency overstated the benefits and costs of increasing closed-end loans, such as 20- and 30-year fixed-rate mortgages. The CFPB also failed to adequately explain what the court referred to as a “decision to essentially undo Congress’s carefully selected balance.”
The National Community Reinvestment Coalition (NCRC) and its co-plaintiffs – Montana Fair Housing (MFH), Texas Low Income Housing Information Service (TxLIHIS), Empire Justice Center (EJC), and the Association for Neighborhood & Housing Development (ANHD) – asked the Texas federal court to restore the mortgage lending transparency obligations.
“This ruling partially overturns a Trump-era rule that blocked a significant portion of the mortgage industry from reporting information about who they were approving and denying for loans,” NCRC president and CEO Jesse Van Tol said. “Public data on home mortgage lending is crucial to combating modern-day redlining and other forms of illegal discrimination that contribute to the savage inequalities plaguing our country. By recognizing that the prior administration had been arbitrary and capricious and bringing sunlight back into mortgage lending data, the court helps to vindicate the federal government’s longstanding efforts to deliver equality of opportunity.”
Adam Pulver, the lead attorney on the case, said: “Congress has recognized that the burden of HMDA disclosure requirements is outweighed by the benefits that result from transparency as to lending activity. It was clear to us and the court that CFPB ignored those benefits, and Congress’s wishes, to increase the threshold for no other reason than to increase lender profit. We look forward to CFPB’s prompt implementation of the decision.”
“Nearly 50 years since HMDA and the anti-redlining Community Reinvestment Act (CRA) were passed and communities and neighborhoods of color continue to face a widening racial wealth gap and modern-day redlining,” said ANHD executive director Barika Williams. “The Trump administration’s unlawful decision to raise reporting thresholds to shield lenders from scrutiny weakened HMDA and undermined efforts to identify disparities in lending. We are pleased that the court set aside that decision as to closed-end loans and restored access to this important data. Comprehensive local data, disaggregated by race, is critical for ANHD’s work identifying and documenting ongoing disparities and advocating for race-conscious policies marginalized communities need to combat redlining, speculation, and displacement.”
“The HMDA data – as intended – shines a light on disparities in lending to Black, Latinx, Asian and white borrowers, and the disparities between Black and Brown and white neighborhoods,” said Ruhi Maker Esq., senior attorney at Empire Justice Center, which has been analyzing HMDA data for 30 years and is the host of the Rochester, NY CRA coalition. “The data is the backbone of our advocacy work with and around fair lending and fair housing work. We use it to work with banks to craft lending solutions and as a basis for our comments to federal regulators. We are thrilled that this data will continue to be collected; continuity is critical to our ability to identify and analyze long-term trends.”