WASHINGTON (Legal Newsline) – Affordable housing groups are asking a federal judge to grant them victory over a federal agency over a rule published in May that changes certain business practices.
The plaintiffs, led by the National Community Reinvestment Coalition, filed their motion for summary judgment on Dec. 11 in D.C. federal court, calling the new rule “an arbitrary and capricious application of” the Consumer Financial Protection Bureau’s authority.
The coalition takes issue with the CFPB’s Home Mortgage Disclosure (Regulation C) that was published May 12. It raises the loan-volume thresholds at which financial institutions are required to report data about closed-end mortgage loans and open-end lines of credit.
It raises those thresholds from a rule published five years ago.
“As a result, thousands of lending institutions will become exempt from reporting (Home Mortgage Disclosure Act) data, undermining the effectiveness of HDMA in achieving its statutory purposes,” the lawsuit says.
The main purpose of HDMA is making that data available to make sure lenders are meeting the housing needs of their communities, the lawsuit says.
The coalition says in its motion that the CFPB relied on erroneous data when pushing the new rule through while overstating its benefits. It also allegedly failed to consider the harms to consumers and acted beyond its authority.
“The agency acknowledged that 13% of multifamily loan applications and originations by depository and non-depository institutions would no longer be reported under the increased threshold,” the motion says.
“The agency’s only discussion of it, however, was to say that ‘the limited decreases in the amount of data are justified by the benefits of relieving smaller-volume institutions of the burdens of HMDA reporting,’ and that a ‘significant number’ of loans would still remain covered.
“Yet a 13% loss of data is not a ‘limited decrease,’ but a substantial loss. Such a cursory dismissal of the disproportionate impact on multifamily housing is insufficient in light of the detailed concerns raised by commenters.”