Sudden HMDA rule changes require reasonable transition period

Credit unions and other financial institutions need a reasonable transition period to comply with sudden changes in the 2020 Home Mortgage Disclosure Act (HMDA) final rule, CUNA and other trades wrote to Federal Financial Institution Examination Council member agencies. CUNA’s Compliance team brought attention to a decision from the U.S. District Court for the District of Columbia—National Community Reinvestment Coalition v. Consumer Financial Protection Bureau—vacates portions of the 2020 HMDA final rule.

Specifically, the September decision vacates part of the HMDA rule that increases the loan volume reporting thresholds for closed-end mortgage loans from 25 to 100 in each of the two preceding calendar years. CUNA’s Compliance team identified that this is a significant operational challenge for smaller credit unions affected by the change.

“The effect of the court’s ruling, therefore, is to abruptly and without notice eliminate final regulations that for three years had expanded the number of small-volume lenders that were exempt from HMDA reporting requirements,” the letter reads. “The impact of this decision is severe. Hundreds of community banks and credit unions that relied on the exemption will now be required to collect and report 22 HMDA data points, presumably beginning on January 1, 2023.”

The letter notes small volume lenders report they cannot accomplish the required tasks in the final two weeks of the year, and that “pipeline” issues involving 2022 applications that do not receive final action until 2023 are concerning.

 

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