News from Washington: Regulatory Updates
The Consumer Financial Protection Bureau (CFPB) proposes policy guidance regarding public disclosure of loan-level Home Mortgage Disclosure Act (HMDA) data. 
On September 20, 2017, the CFPB proposed policy guidance that describes modifications that the CFPB plans to apply to the loan-level HMDA data that financial institutions will report pursuant to Regulation C beginning on January 1, 2018, before the data are disclosed to the public.
The Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank Act) amended HMDA to require collection and reporting of new data points and authorized the CFPB to require additional information from covered institutions. In October 2015, the CFPB issued a final rule amending Regulation C that included new and modified data fields.
Federal and state agencies use HMDA data to support a variety of activities. For example, some supervisory agencies use HMDA data in conducting Community Reinvestment Act (CRA) evaluations and fair lending examinations. Moreover, HMDA data disclosure provides the public with information on the home mortgage lending activities of particular reporting entities and on the activity in their communities. This information is used by local, state, and federal officials to evaluate housing trends and issues and by community organizations to monitor institution lending patterns.
The CFPB has interpreted HMDA to require that public HMDA data be modified, as is currently also the case, when the release of the unmodified data creates risks to applicant and borrower privacy interests that are not justified by the benefits of such release to the public in light of HMDA’s statutory purposes. Specifically, the CFPB has interpreted HMDA to require the application of a balancing test to determine whether and how HMDA data should be modified prior to disclosure to the public.
After the application of its balancing test, the CFPB indicates, in its proposed policy guidance, that in connection with HMDA data that will be publicly disclosed beginning in 2019, it plans to: publicly disclose certain data fields in their entirety, modify certain data fields for public disclosure by reducing the precision of the values reported, and exclude certain data fields from public disclosure. The CFPB has reported that the proposed guidance will be nonbinding in part to preserve flexibility to revise the modifications to be applied to the public loan-level HMDA data to maintain a proper balancing of the privacy risks and the benefits of disclosure.
The 60-day public comment period for the proposed guidance ended on November 24, 2017. The proposed guidance is available at http://files.consumerfinance.gov/f/documents/201709_cfpb_hmda-disclosure-policy-guidance.pdf. 
The Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency propose to amend their CRA regulations to conform to the CFPB’s HMDA amendments.
On September 13, 2017, the three agencies issued a joint notice of proposed rulemaking to amend their respective CRA regulations to revise the CRA consumer loan and home mortgage loan definitions and the CRA public file content requirements, to maintain consistency with corresponding CFPB amendments to Regulation C that are effective on January 1, 2018. In addition, the proposal contains technical corrections and would remove obsolete references to the Neighborhood Stabilization Program.
The proposed amendments to the CRA regulations would become effective on January 1, 2018. The 30-day public comment period closed on October 20, 2017. The proposal is available at https://www.federalreserve.gov/newsevents/pressreleases/files/bcreg20170913a1.pdf.
The CFPB temporarily changes the HMDA collection and reporting threshold for open-end lines of credit.
On September 13, 2017, the CFPB issued a final rule amending its October 2015 updates to Regulation C by increasing the HMDA threshold for collecting and reporting data about certain dwelling-secured open-end lines of credit — to include home equity lines of credit — for a period of two years (calendar years 2018 and 2019). As a result, financial institutions originating fewer than 500 open-end lines of credit in either of the preceding two years would not be required to begin collecting such data until January 1, 2020.
The CFPB did not make the threshold increase for open-end lines of credit permanent at this time. Absent further action, effective January 1, 2020, the open-end threshold will be restored to the 100 open-end lines of credit threshold established by the October 2015 updates to Regulation C, and creditors originating between 100 and 499 open-end lines of credit will need to begin collecting and reporting HMDA data on open-end lines of credit.
The September 2017 final rule also contains a number of clarifications, technical corrections, and minor changes to Regulation C.
The changes will be effective on January 1, 2018. The final rule is available at: https://www.gpo.gov/fdsys/pkg/FR-2017-09-13/pdf/2017-18284.pdf.
The CFPB announces its annual adjustments to various Regulation Z thresholds.
On August 30, 2017, the CFPB announced the annual Regulation Z dollar threshold adjustments for certain credit transactions, based on the annual percentage change reflected in the Consumer Price Index in effect on June 1, 2017. Specifically, the final rule published in the Federal Register amended the official interpretations for Regulation Z and adjusted:
- The minimum interest charge disclosure thresholds and the safe harbor penalty fee thresholds under the Credit Card Accountability Responsibility and Disclosure Act
- The minimum interest charge disclosure thresholds for §§1026.6(b)(2)(iii) and 1026.60(b)(3) will remain unchanged at $1.00 for calendar year 2018.
- The safe harbor penalty fee thresholds remain unchanged at $27 for §1026.52(b)(1)(ii)(A) (comment 52(b)(1)(ii)-2) (first violation safe harbor penalty fee) and $38 for §1026.52(b)(1)(ii)(B) (comment 52(b)(1)(ii)-2) (subsequent violation safe harbor penalty fee) for calendar year 2018.
- The high-cost mortgage thresholds under the Home Ownership and Equity Protection Act
- The points and fees total loan amount threshold trigger under § 1026.32(a)(1)(ii)(A) (comment 32(a)(1)(ii)-1) for calendar year 2018 is $21,032.
- The adjusted points and fees dollar trigger under §1026.32(a)(1)(ii)(B) (comment 32(a)(1)(ii)-3) for calendar year 2018 is $1,052.
- The ability to repay and qualified mortgage thresholds under the Dodd–Frank Act
- A covered transaction is not a qualified mortgage under §1026.43(e)(3) (comment 43(e)(3)(ii)-1) in calendar year 2018 if the transaction’s total points and fees exceed: 3 percent of the total loan amount for a loan amount greater than or equal to $105,158; $3,155 for a loan amount greater than or equal to $63,095 but less than $105,158; 5 percent of the total loan amount for loans greater than or equal to $21,032 but less than $63,095; $1,052 for a loan amount greater than or equal to $13,145 but less than $21,032; or 8 percent of the total loan amount for loans less than $13,145.
The changes will be effective on January 1, 2018. The final rule is available at https://www.gpo.gov/fdsys/pkg/FR-2017-08-30/pdf/2017-18003.pdf.
The Federal Financial Institutions Examination Council (FFIEC) members issue new HMDA examiner transaction testing guidelines.
The recently issued FFIEC HMDA Examiner Transaction Testing Guidelines include sampling, verification, and resubmission procedures for use in connection with HMDA data collected beginning on January 1, 2018, pursuant to the CFPB’s amendments to Regulation C. The guidelines describe the process of validating the accuracy of such HMDA data and the circumstances in which examiners may direct institutions to correct and resubmit data.
As the CFPB explained in a related blog post on August 22, 2017, the guidelines:
- Eliminate the “file” error resubmission threshold under which a financial institution would be directed to correct and resubmit its entire HMDA Loan Application Register (HMDA LAR) if the total number of sample files with one or more errors equaled or exceeded a certain threshold,
- Establish, for the purpose of counting errors toward the data “field” error resubmission threshold, allowable tolerances for certain data fields, and
- Lower the field error resubmission threshold to 10 percent for financial institutions with HMDA LAR counts of 100 or less.
The Federal Reserve’s CA letter and the guidelines are available at https://www.federalreserve.gov/supervisionreg/caletters/caltr1702.htm. The CFPB’s blog post is available at https://www.consumerfinance.gov/about-us/blog/heres-what-you-need-know-about-new-ffiec-hmda-examiner-transaction-testing-guidelines/.