Bill to exempt small lenders from Regulation C passes House Committee

Written By: Joel Palmer, Op-Ed Writer

Four months after it was introduced, legislation that would amend the Home Mortgage Disclosure Act (HMDA) passed out of the House Financial Services Committee.

H.R. 2954, known as the Home Mortgage Disclosure Adjustment Act, was passed by the committee 36-24. The bill was introduced in June by Rep. Tom Emmer (R-MN).

The bill aims to exempt small banks and credit unions from being forced to comply with the Consumer Financial Protection Bureau’s (CFPB) revised Regulation C rule under the HMDA. 

The new Regulation C, part of Dodd-Frank, requires banks and credit unions to collect dozens of new data points on loan applications and report the data to CFPB. It goes into effect January 1, 2018.

H.R. 2954 exempts banks and credit unions “who had nothing to do with the 2008 collapse” from the “excessive and unnecessary regulations” of Regulation C if they are:

•    Lenders that have originated 1,000 or fewer closed-end mortgages (typical mortgage for a purchase or refinance of a home) in each of the two preceding calendar years; or are

•    Lenders that have originated 2,000 or fewer open-end lines of credit (such as a typical home equity loan) in each of the two preceding calendar years will be exempt from reporting on such loans.

“There is a time and a place for regulation, but imposing new and unnecessary mandates and reporting requirements on our community financial institutions is most certainly a step too far,” said Emmer. “Not only are our small banks and credit unions being forced to close up shop, these stifling regulations are making it harder for entrepreneurs and American families to get the mortgages, car loans and the business financing they need.”

Emmer’s bill is similar to legislation introduced the same month in the Senate by Sen. Mike Rounds (R-SD) and Sen. Heidi Heitkamp (D-ND). The main difference in their bill is that the exemption would cover institutions with 500 or less mortgages or credit lines in the previous two years.

Industry groups including the American Bankers Association, the Independent Community Bankers of America, and the National Association of Federally-Insured Credit Unions have supported H.R. 2954.

“The pending HMDA changes were imposed after the financial crisis. Although well-intentioned, the new reporting requirements were overly broad in their coverage and have the potential to add significant cost and regulatory burden, as well as privacy concerns for customers, to small institutions which have an excellent track record of fairly and honestly serving their customers’ needs,” wrote James Ballentine, executive vice president of the ABA, in a letter of support.

There is also strong opposition from a number of national and state advocacy groups, which collectively submitted a letter to Congress when H.R. 2954 was introduced. 

“This bill would undermine efforts to ensure that the nation’s mortgage lenders are serving all segments of the market fairly by exempting nearly all lenders from the updated reporting required by the Dodd- Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). Public officials use this information in distributing public-sector investments so as to attract private investment to areas where it is needed, and to identify possible discriminatory lending patterns.”

Among the group’s arguments is that, about 22 percent of the depository institutions that currently report on their closed-end mortgages would be exempt under H.R. 2954.

About the Author

As an NAMU® Opinion Editorial Contributor, Joel Palmer is a freelance writer who spent 10 years as a business and financial reporter and another 10 years in marketing for the insurance and financial services industries. He regularly writes about the mortgage industry, as well as residential and commercial real estate, investments, and retirement income planning. He has also ghostwritten books on starting a business, marketing, and retirement income planning.

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