HMDA Partial Exemptions
By: Greggory B. Oberg, Esq.
This article was first published in September of 2018, and has been updated and republished following the most recent HMDA Rulemaking.
Background
The regulatory reform bill signed into law in May 2018 created two new “partial exemptions” to HMDA reporting; one for open-end loans and one for closed-end loans.
Briefly, if you originated less than 500 covered closed-end loans in each of the past two years, you are “partially” exempt from what we’ve come to call the “2018 HMDA Rules.” Same goes for open-end loans.
The question we were left with in May was “which specific points are we exempt from, and how do we report now?” Well, the CFPB has finally spoken.
HMDA has changed (yet again)
Let’s just get right to it—the below chart was issued by the CFPB as part of an interpretive and procedural rule to “clarify changes made to HMDA by the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA”):
Wait, Weren't There 110 fields in HMDA?
A point of clarification is useful here. Under the 2018 HMDA rule as implemented on Jan. 1, 2018, HMDA included 48 DATA POINTS, which collectively total 110 DATA FIELDS. How is that possible? Peek back to the chart above, and take a look at the now (partially) exempted “Automated Underwriting System” Data Point: that POINT contains 12 FIELDS.
Moving forward, if you qualify for a partial exemption:
You Report 22 data points totaling 52 data fields (everyone reports these)
You may report (not required) 26 data points totaling 58 data fields
The distinction between “data points” and “data fields” is particularly salient post EGRRCPA, as the Interpretive rule states “institutions … have the option of reporting exempt data fields as long as they report all data fields within any exempt data point for which they report data[.]” (Aug 31, 2018 Interpretive Rule at 2.)
Returning to the AUS example, this means if you report one AUS, you must fully comply with AUS reporting rules, including alternative AUS used (if applicable) and AUS results.
Who Gets the Exemption?
When we first addressed this topic in 2018, the open-end "temporary" threshold was set to expire in 2020. As of the most recent Rulemaking, this exemption has been extended to 2022. In effect, the current partial exemption and open-end thresholds align to mean that you're reporting all or nothing on open-end loans. Unless and until these number diverge with respect to open-end loans, it will remain all or nothing.
You Can’t Have One Without the Other
Technically not true. The exemptions operate independently of each other, so you could have one set of reportable data on open-end loans, and an entirely different (larger) set of reportable data on closed-end loans. Things are going to be interesting for institutions that only get one exemption. Do you establish two parallel policies, or over-report on one type of loans?
The answer will clearly be institution specific, but if I had to give one-size-fits-all advice here, I’d say “don’t change anything until you have a good, long think about this.” Don’t underestimate the disruption to your origination team that would come from re-learning HMDA every year.
Picking and Choosing
My impression is the partial exemption will not be an “all or nothing” situation for most institutions. There are very valid reasons to continue reporting some of the exempt fields still. Some significant thought should go into whether, and to what extent, your institution will take advantage of the “partial exemption.”