CFPB proposal raises home equity threshold for small FIs

A new proposal by the Consumer Financial Protection Bureau would increase reporting requirements for banks and credit unions on home equity lines of credit to 500 loans through calendar years 2018 and 2019 so that the bureau can consider whether to make a permanent adjustment.

Under the Home Mortgage Disclosure Act (HMDA), financial institutions are generally required to report home-equity lines of credit if they made 100 such loans in each of the last two years.

“Home equity lines of credit worsened the foreclosure crisis that swept the country in 2008 and 2009,” said CFPB Director Richard Cordray. “We need to keep track of the responsible use of these loans for consumers, but after hearing from community banks and credit unions we want to reconsider whether that goal can be achieved with a higher reporting threshold.”

According to an article in CU Today, “As directed by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB updated the Home Mortgage Disclosure Act regulation in 2015 to improve the quality and type of data reported by financial institutions. Most of the updated requirements take effect in January 2018, and the industry is working to bring operations into compliance.”

One of the significant changes that will take effect in 2018 is a requirement for some lenders to collect, report, and disclose data on certain dwelling-secured open-end lines of credit, including home-equity lines of credit.

The CFPB said it is seeking comment on whether to postpone collection of this information for smaller-volume institutions to examine whether the threshold should be adjusted permanently. The CFPB estimates 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.