The Consumer Financial Protection Bureau (CFPB) announced Friday afternoon a proposal on HMDA reporting requirements for banks and credit unions that issue home-equity lines of credit. Under rules that are scheduled to take effect in January 2018, financial institutions are generally required under the Home Mortgage Disclosure Act (HMDA) to report home-equity lines of credit if they made 100 such loans in each of the last two years. The new proposal would increase that threshold to 500 loans through calendar years 2018 and 2019 so that the Bureau can consider whether to make a permanent adjustment.

The Bureau said that it has heard increasing concerns from community banks and credit unions that the challenges and costs of reporting open-end lending may be greater than the Bureau had estimated when adopting the 100-loan threshold. The CFPB estimates that the temporary 500-loan threshold would still capture about three-quarters of the home-equity lending market, down from about 88 percent at the 100-loan threshold. Comments will be accepted through July 31, 2017.

Observation: The comment period will be shorter than 15 days from publication, even if this hits the Federal Register on Monday. That's a strong signal that this is a "done deal," and the comment period is a formality.

We've been hearing about this one for a while now. This sounds like a logical step in the right direction for small community banks and credit unions. I wonder if we'll see any proposals to increase the threshold for closed-end loans.

Probably not.

5000 or more would be nice

In regards to the adjustment to the threshold.. In one section it says "Although this could be accomplished by delaying the effective date for the reporting requirement for open-end lines of credit in toto, for the reasons set forth above and those articulated in the 2015 HMDA Final Rule, the Bureau continues to believe that it is vitally important to begin to collect data on the burgeoning market for home-equity lines of credit." Is that kind of hinting at they may not be considering delaying anything at all?

I think they are saying that they could accomplish their goal of conducting more research on the open-end reporting threshold by delaying the reporting requirement for all institutions, but that they would rather just increase the reporting threshold so that they still obtain data from larger reporters for open-end credit, since it is "vitally important."

The analysis section talks about why they are not increasing the open end threshold and provides numbers. Regarding the open end threshold, here is what I told my HMDA Academy folks just now:

"Well, the CFPB obviously was working on this because the proposal to increase the open end line of credit threshold to 500 from 100 was issued today (it still has to be published in the Federal Register). Comments are due by July 31, 2017.

This proposal applies to all open end lines including business purpose. Business purpose lines must be for a home purchase, home improvement or refinance. When counting consumer open end, you must consider all dwelling secured open end lines of credit to determine your volume.

The proposal can be accessed here:

http://files.consumerfinance.gov/f/documents/201707_cfpb_NPRM_HMDA-temporary-threshold-increases.pdf

The proposed increased threshold continues to be independent of the closed end theshold; an institution could be required to report closed end mortgage and not open end and vice versa. One is not considered in evaluating coverage of the other.

The CFPB did consider increasing the threshold to 1000 open end lines of credit but that was rejected in favor of 500. Page 17, 18 and 19 explain the analysis that was done to decide 500 was a good number. I recommend reading at least that section to understand the thought process.

If your institution feels this is still too low then review the proposal and comment. Too many institutions do not comment but then complain. If you comment, provide details such as asset size, increased expenses, etc. This information is definitely taken into consideration."

So, if you think a higher threshold is in order, comment and provide data. Don't sit quietly and then complain here!

Re the wording about gathering data is to say that the CFPB will use this two year "temporary higher threshold" to provide relief while they do further study to see if it should be warranted as a permanent threshold (or changed).

Is there any clarification as to whether the 500 includes just originated HELOCs or all applications?

The threshold is on originations, not applications.

::::doing the Happy Dance:::

Interesting that the way they propose to amend the regulation doesn't include a "sunset" or reverting back to the 100 loan threshold. So if they ultimately decide to leave the HELOC threshold at 500, they could just leave it alone. See below.

And that's what I fully expect will happen.

John, unless I'm reading this entire incorrectly, it seems they are proposing to reset the threshold to 100 in 2020. From page 19 of the proposal:

For all these reasons, the Bureau is proposing to amend the open-end transactional
coverage threshold in Regulation C as adopted by the 2015 HMDA Final Rule, effective January
1, 2018, to increase the threshold from 100 to 500 and is proposing to amend the threshold,
effective January 1, 2020, to restore it to 100.

TMatt87, you are absolutely correct. I failed to "turn the page" after reading the first set of changes at the end (I always start reading these documents by searching for the phrase "List of Subjects," which takes me to the actual amendments), and didn't see the second set of changes, that "would be effective January 1, 2020," that would undo the increase and set the threshold back to 100. Of course, that means the Bureau could change even that "reset" until then, depending on what it learns as it studies the question further.

Two quick things.

1) Imo, there is a good chance that the 500 rule will stay. We will have a new business friendly CFPB director by late next year.

2) Does this mean that the privacy concerns people had (due to the reporting of a specific street address) will not be addressed by the CFPB?

Jake

This action doesn't foreclose the possibility that the Bureau might make other changes in the rule.

Thank you, John. Do have an opinion on the probability of additional relief?

Now that the threshold is being raised, I've pulled reports of our HELOCs and business lines that are secured by a dwelling for the purpose of home purchase, home improvement or refinance. Do I look at totals for 2015 and 2016? Or, pull year-to-date numbers for 2017 and try to predict if we will be under 500?

There's no question we will be reporting closed-end, so it would be great if we could wait on the open-end (we aren't reporting them today).

The Bureau will not be adjusting closed-end thresholds:

"The Bureau notes that it is not proposing to adjust the closed-end transactional coverage threshold. As explained above, in establishing that threshold the Bureau was able to base its determination on a robust dataset that enabled the Bureau to evaluate the implications of potential alternative thresholds..."

It's reasoning is explained in the last paragraph on page 19 through 21. Basically, if they increased the threshold it wouldn't affect much on a national level. However on a micro level;

"For example, had the threshold for closed-end mortgage loans been set at 500 loans– the highest level the Bureau considered although well below thresholds urged by some industry stakeholders – more than 5,000 census tracts would have lost 20 percent or more of the then currently-reported HMDA data, of which one-third would have been tracts designated as low- to moderate-income (LMI).63 In contrast, the 25-loan transactional threshold established by the 2015 HMDA Final Rule resulted in only 46 census tracts losing 20 percent or more of their data."

Congressional action for regulatory relief, including recently-introduced bills supported by ABA, ICBA, etc., could trump the CFPB's HMDA data collection rules or certain aspects of it including the exemption thresholds.

I think it rather amazing how hopeful bankers are that there will be significant regulatory relief from a group that hasn't been able to agree on much more than the time of sunrise over the Potomac.

I don't think anyone can predict what will happen. I think just the fact that there is discussion about relief for smaller institutions and certain actions have already been taken is a positive thing. For now, we are just going to plan as if there will be no other changes and see what happens. I definitely agree major change isn't likely coming soon, but who's to say what will happen with the CFPB?

Just reporting the news, John. I think those of us in the business for a long time have taken the mindset of "hope for the best, but prepare for the worst", and that's what we do at our shop. Everything has a way of coming back to equilibrium. The knee jerk reaction to the great recession and housing market collapse resulted in DF and an avalanche of rules and regulations, aided in great part by a consumer friendly and community advocate minded POTUS and same-party congress. The tide has shifted in DC, and now we're seeing an attempt to unwind or at least lessen the impact of regulation of industries beyond banking. But we'll see, and you're right, they can't agree on the color of the sky so to what extent any of this takes place is doubtful, and rightly so.

On a positive note, though, the regulators are making some strides at reducing bits and pieces of the burden. There are reduced-content Call Reports coming next year, and just a half-hour ago the FFIEC agencies announced a proposal to increase the threshold for requiring an appraisal on commercial real estate from $250K to $400K.