It’s February, which means we look to nature’s weatherman to see if we should expect an early spring, we enhance our romance on St. Valentine’s Day, and we look at the end of the end of the monthly calendar to figure out if this is one of the 28-day years, or 29-day years. It’s also a fine time for new guidance from our friendly financial regulators, and they rarely disappoint.
In early February both the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) decided to stop letting the CFPB (Consumer Finance Protection Bureau) have all the fun regarding the late 2022 HMDA changes, and both agencies published their own guidance regarding these court-inspired HMDA changes.
As you may recall, in September 2022, a federal court caused a frenzy by stating the threshold of 100 for reporting closed-end covered loans was chosen without proper 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 previous threshold of 25. The court didn’t disturb the open-end thresholds, so those will remain at the current threshold of 200.
In December 2022, the CFPB posted on their website that they do not intend to initiate enforcement actions or cite HMDA violations for failures to report closed-end mortgage loan data collected in 2022, 2021, or 2020 for institutions that originated at least 25 closed-end mortgage loans in each of the two preceding calendar years but fewer than 100 closed-end mortgage loans in either or both of the two preceding calendar years. Although unaddressed in the CFPB’s post, it was presumed by many that the collection of data should begin on January 1, 2023, in anticipation of being reported in March 2024.
As previously stated, the OCC and FDIC have now published their own guidance about the HMDA changes, which are similar to what was stated by the CFPB.
First, the OCC stated they do not intend to assess penalties for failure to report loan data on reportable closed-end transactions conducted in 2022, 2021, or 2020 for those who originated at least 25 but fewer than 100 closed-end mortgage loans. OCC Exams should also help banks identify compliance weaknesses in this area. Further, the collection and submission of 2023 HMDA data will provide banks with an opportunity to identify problems and improve their HMDA data reporting. The OCC also acknowledged that the HMDA changes would take some time to implement.
Next, the FDIC stated that institutions affected by this change may need time to implement or adjust policies, procedures, and systems to comply with reporting obligations. Additionally, for closed-end mortgage data, the FDIC plans to implement a supervisory approach, similar to that of the CFPB. For those affected FDIC-supervised institutions, the FDIC does not intend to initiate enforcement actions or cite HMDA violations for failures to report closed-end mortgage loan data for 2022, 2021, or 2020 for those who originated at least 25 but fewer than 100 closed-end mortgage loans.
Further, while any FDIC-supervised institution may report data voluntarily for those years, the FDIC does not expect those institutions to collect and report data retroactively. Affected institutions should start collecting data in 2023 and reporting data in 2024.
Finally, we’d be remiss NOT to point out that the regulations do not reflect this change. Should you choose to look to the regulation, you’ll find that the regulation currently states the threshold for reporting covered loans is 100 for closed end. The regulator guidance discussed above makes it clear that banks should be following the 25 closed-end loan threshold, despite what the regulation states. There is currently no timeline to update the regulation, so it’s important to follow the guidance until such time that the regulation is updated. Regulations can be a confusing mess from time to time, the current HMDA situation is no exception. Feel free to reach out to us on the hotline with any HMDA questions you have about reporting thresholds, data points, deadlines or anything else.