WASHINGTON (Legal Newsline) – A District of Columbia federal judge now has arguments from both sides in the dispute over whether a new rule changing how mortgage data is collected is “arbitrary and capricious.”
The Consumer Financial Protection Bureau on April 2 defended its Home Mortgage Disclosure rule, published last May. 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, but it will interfere with the ability to make sure lenders are meeting the housing needs of their communities, says a coalition of plaintiffs led by the National Community Reinvestment Coalition.
The plaintiffs moved for summary judgment in December. The CFPB responded to that motion and filed one of its own on April 2.
“With respect to the closed-end loan threshold, the Bureau estimated that by increasing the reporting threshold to 100, the annual savings in ongoing costs for newly excluded financial institutions that were not eligible for a partial exemption under the (Economic Growth, Regulatory Relief and Consumer Protection Act of 2018) would be approximately $4,500 for a representative low-complexity institution and approximately $44,700 for a representative moderately complex institution,” the CFPB argues.
“For newly excluded institutions that were eligible for a partial exemption under the EGRRCPA, the Bureau estimated that a representative low-complexity institution would save approximately $2,200 annually and a representative moderately complex institution would save $32,800 annually.
“Looking at aggregate cost savings across the market, the Bureau estimated that newly excluded institutions would save in total $6.4 million annually under the 100 closed-end threshold.”
About 1,700 financial institutions would not have to file reports with the new closed-end threshold, the CFPB says. Many of those were experiencing significant burdens to fulfill the previous 25 threshold.
Similar concerns went into changing the open-end reporting threshold to 200.
“In short, nothing in the EGRRCPA suggests that Congress intended to preclude raising HMDA’s reporting thresholds should the Bureau determine, through the exercise of its pre-existing authorities, that doing so was warranted,” the CFPB argues.
“The Bureau determined, based on information it had gathered since 2015, including after the passage of the EGRRCPA, and following its consideration and balancing of benefits and costs to both consumers and covered persons, that excepting additional loans made by the smallest loan volume reporting institutions was appropriate under HMDA.”
The plaintiff coalition said 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.”