CFPB proposes raising home equity loan reporting threshold

July 14, 2017 -- Credit unions and banks making 500 or fewer home equity loans annually would not be required to report the loans to the Consumer Financial Protection Bureau (CFPB) under a proposal issued Friday by the agency.

CFPB rules now in place (adopted in 2015) will require credit unions and banks making 100 or fewer home equity loans annually to start the reporting at the beginning of next year. Under the proposed rule on mortgage data rule reporting, the reporting threshold would rise to 500 for calendar years 2018-19; after that point, CFPD said it intends to consider whether to make the higher threshold permanent (or not).

CFPB said in a statement that it 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.

“We need to keep track of the responsible use of these loans for consumers,” said CFPB Director Richard Cordray in a statement. “But after hearing from community banks and credit unions we want to reconsider whether that goal can be achieved with a higher reporting threshold.” 

Cordray also pointed out that home-equity lines of credit worsened the foreclosure crisis that swept the country in 2008 and 2009. In its statement, CFPB asserted that overleverage and defaults due to home-equity credit lines contributed to the foreclosure crises in the late 2000s. “However, this type of lending was not visible in the HMDA data or in any other publicly available data source collected at the time,” CFPB stated.

To eliminate the “blind spot,” CFPB stated, the 2015 rule requires certain lenders to collect, report, and disclose information about their open-end lending as part of their HMDA data. The agency stated that it limited the reporting (which it allowed represents a new and, in some cases, significant compliance burden for smaller institutions) to those institutions making more than 100 home-equity loans annually.

“Through outreach, the Bureau 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 bureau stated. “Accordingly, the Bureau is seeking comment on whether to postpone collection of this information for smaller-volume institutions so that the Bureau can study whether the threshold should be adjusted permanently. The Bureau 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.  

LINK:
CFPB proposed rule temporarily raising the home equity loan reporting threshold for smaller institutions