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Court Ruling on HMDA Public Reporting Requirement

November 16, 2022

Contributors: Beth A. Behrend, CCBCO, CBAP

A coalition of community housing groups, including the National Community Reinvestment Coalition (NCRC), Montana Fair Housing (MFH), Texas Low Income Housing Information Service (TxLIHIS), Empire Justice Center (EJC), and the Association for Neighborhood & Housing Development (ANHD) sued the Consumer Financial Protection Bureau (CFPB) over its 2020 Home Mortgage Disclosure Act (HMDA), arguing it unlawfully issued an anti-transparency rule for mortgage lenders. They asked the court to vacate that rule and restore previously required mortgage transparency reporting obligations.

In September, Chief U.S. District Judge Beryl A. Howell ruled the CFPB acted outside its authority in 2020 when it exempted hundreds of mortgage lenders from publicly reporting data designed to prevent potential discrimination, inequality, and redlining in access to banking services. The change raised the reporting requirement to 100 closed-end home loans originated per calendar year, up from 25. The impact: it lowered the percentage of lenders required to report home loan applicant data from 43% to 27%; the percentage required to report data on home equity lines of credit decreased as well, from 15% to 9%.

Further, the judge noted the CFPB’s actions were “arbitrary and capricious” and in violation of the Administrative Procedure Act, which requires federal agencies to engage in reasoned decision-making and to provide a reasonable explanation for changing rules. For instance, the court determined the CFPB overstated how much lenders would save under the revised reporting requirement and did not adequately consider the negative impact the loss of the data would have on ensuring equitable services for people in rural and low-income communities.

However, the court partially ruled in favor of CFPB by maintaining portions of HMDA. Specifically, the judge did not make a change to the reporting threshold for open-end loans, or home equity lines of credit, which was increased under the 2020 rule to 200 per calendar year, up from 100.

Partner with your Rehmann advisor to stay up to date on regulatory requirements – and any pending or settled legal challenges – to ensure your financial institution remains compliant.