Back to 25: HMDA Threshold Changing Again?

If you find yourself confused about the often-changing HMDA thresholds, when to collect, and when to report you’re not alone. Between the 2015 thresholds, the temporary threshold increases, and the 2020 thresholds it’s a lot to follow. Recently a federal court stepped in and confused things even more by ruling that part of the 2020 changes were done without the proper authority, meaning that the Consumer Financial Protection Bureau (CFPB) will likely change the regulation again.

The regulation currently states the threshold for reporting covered loans is 100 for closed end and 200 for open end. Meaning that if an institution originated in each of the two previous years, 100 closed-end covered loans or 200 open-end covered loans, then the data associated with those loans is HMDA reportable. This is the current regulation and are the 2020 threshold changes that have been in place since mid-2020.

A federal court confused things last month by stating the threshold of 100 for reporting closed-end covered loans was chosen without properly documenting the justification for such a number, and as such the CFPB had no authority to make this change in 2020, so the threshold will revert back to the 2015 threshold of 25.

The 2015 rule set the threshold for reporting covered loans at 25 for closed end and 100 for open end. As you may remember, the open-end threshold was temporarily increased to 500, but after the 2020 rule, the thresholds were set at 100 for closed end and 200 for open end. The 2020 rule took effect mid-year such that institutions that were no longer going to be HMDA reporters due to the increased threshold for closed-end covered loans would stop collecting data on July 1, 2020.

So, where are we now? The recent changes come from a court ruling, so the CFPB has the right to appeal the court’s ruling to keep the threshold at 100 for closed-end covered loans, as is currently reflected in the regulation. However, the CFPB has been silent about their intentions going forward, and it is not widely thought that the CFPB will appeal this decision. The effects of that should be that the threshold for closed-end covered loans should revert back to 25. The court didn’t disturb the open-end thresholds, so those will remain at the 2020 levels and continue to be 200 going forward.

According to the CFPB’s data, this change should impact quite a few financial institutions, and many will be HMDA reporters once the threshold reverts to 25 that are not currently HMDA reporters with the threshold at 100. However, how and when the closed-end threshold will revert to 25 is not yet known. Initially, many believed the threshold of 25 would be re-implemented on January 1, 2023. But, here at the beginning of December, it’s still unclear what the timing will be. Financial institutions are required to follow the regulation until it changes, and despite actions by a court, the regulation hasn’t changed yet.  Only the CFPB has the authority to actually make changes to the published HMDA regulation.

For those institutions that had 25 or more covered transactions in each of the previous two years, start to think about how you will reimplement or implement a full HMDA program (policies, training, third parties, etc.), because we anticipate changes are coming, but for now we’re waiting on the CFPB to provide further details.

If you have questions about how these changes might impact you or your HMDA reporting, feel free to reach out to us on the Hotline and we’ll walk you through the best information currently available.