The Home Mortgage Disclosure Act (HMDA) has provided invaluable information on credit flows in US communities since 1975, and a proposed rulemaking issued by the Consumer Financial Protection Bureau (CFPB) would unnecessarily reduce the scope of its coverage and is ill-advised and should not be adopted.

The proposed rule would reduce the scope of HMDA reporting by raising the threshold for lenders from 25 closed end loans to 50 closed end loans.  The rulemaking also asked for comments about expanding the threshold further, to 100 or 250 loans.

CFA’s Director of Housing Policy Barry Zigas submitted comments on the rule on June 12, stating in part that:

• “It is premature to make these changes given that the data from 2018, the first year of reporting the expanded data set, has yet to be publicly released.
• The alleged costs of compliance cited as a key reason for the changes are modest and do not justify the data set’s diminution.
• The changes will leave important and large gaps in HMDA’s coverage, especially in rural areas, leaving regulators, community organizations, state and local governments and researchers with incomplete information on which to make important decisions. It also will leave the lending practices of smaller institutions largely unmonitored, further exacerbating researchers’ and others’ ability to understand the flow of credit.”

Zigas noted in CFA’s comment that lenders already collect all of the data required by HMDA reporting; that they have had nearly a decade to plan for reporting of new data fields mandated by the Dodd-Frank Act in 2010; and that the costs cited in the rule – an average of around $2000 per affected institution – do not justify the reduction in available information about credit flows that would result.

The comment letter also notes that when the Bureau issued the final rule that currently governs reporting requirements, “The Bureau concluded that, if it were to set the closed-end coverage threshold higher than 25, the resulting loss of data at the local level would substantially impede the public’s and public officials’ ability to understand access to credit in their communities.”

Zigas also noted that minority communities were hardest hit by the predatory and unsustainable mortgage practices that led up to the Great Recession, and that the new data fields were meant in large part to provide regulators and others information that could have signaled the pending crisis much earlier.  He concluded that “Had the new HMDA data fields been available in 2000, regulators, researchers and advocates would have seen the patterns of discriminatory and predatory behavior as they were building during the next five years and could have taken earlier steps to shut it down.  Having learned this lesson in the very hardest way, the Bureau should resist industry complaints and hold firm in the thresholds it adopted in the current rule.”