New HMDA Regs Require Banks to Collect Lots of Data...That They Already Have
The Home Mortgage Disclosure Act of 1975 is a key piece of fair lending legislation. It requires mortgage lenders to report data on loan applications and loans funded that enables both government and private groups to monitor lending patterns for violations of the Fair Housing Act and Equal Credit Opportunity Act (as well as state fair lending laws). In 2015 the CFPB adopted a new HMDA rule that would expand the number of data fields collected by some 25 fields, effective Jan. 1, 2018. This is being decried as an unreasonable burden on small institutions and a bipartisan collection of Senators on the Senate Banking Committee have proposed a bill that would exempt financial institutions that made less than 500 open-end loans or 500 close-end loans in each of the previous two years from the new HMDA reporting requirements.
There's no question that the new HMDA requirements add something to financial institutions regulatory burden. But a look at what these requirements are shows that the burden is really de minimis. It's not going to make-or-break a small financial institution. Below is a list of all 25 new data fields. As you will see, after each one I have indicated whether it is data that is already required for the TILA-RESPA Integrated Disclosure (TRID) or would normally be in a loan underwriting file. If it is in either, then it is simply a matter of having adequate software to plug that data into HMDA reporting. Asking a bank to have integrated mortgage underwriting and reporting software doesn't seem like an unreasonable request, but none of this is stuff that should take very long to do even by hand-entry of data (something I've done plenty of). I've dotted all my i's and crossed my t's here, but the bottom line is this. Almost every piece of information required under the new HMDA rule is already being collected by the lender for either its own underwriting purposes or for compliance with other regulatory requirements. In other words, this just ain't a big deal. My guess would be that the total additional compliance costs is a few thousand dollars per year for this.
The CFPB itself estimates (see p. 66308) per the Paperwork Reduction Act requirement that for truly small banks total HMDA compliance costs (which includes existing costs) will be between 143 and 173 hours of time annually. Even at $100/hr (which is far more than a compliance staffer at a small bank makes), this would total, at most, $17,300 annually. Around half the fields are new, so we're looking at around $8,650 annually in additional costs for small banks as the high-end estimate. So this leave me wondering why the pushback against the new HMDA rule.
Am I missing something here? This just doesn't seem to be a game changer for small financial institutions, and it will cause some serious damage to HMDA data in some communities and even some entire states in which large financial institutions don't have much of a presence.
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