32 THE NAFCU JOURNAL March–April 2023 Over the last few waning months of 2022, several changes were made to the thresholds for determining applicability under the Home Mortgage Disclosure Act (HMDA). The “activity” threshold for closed-end mortgages was changed in late September 2022 after the United States District Court of the District of Columbia issued an opinion vacating the Consumer Financial Protection Bureau’s (CFPB) 2020 final rule which had raised the reporting threshold from 25 closed-end mortgages to 100. The ruling nullified the 100 closed-end mortgage loans threshold and reestablished the threshold back to the 25 closed-end mortgage loans threshold, which was originally from 2015. The court held the CFPB’s 2020 closedend mortgage loan threshold was “arbitrary and capricious.” Generally, a court finds an agency’s action arbitrary and capricious “when it ‘entirely fail[s] to consider an important aspect of the problem,’ offers an explanation for its decision that ‘runs counter to the evidence before the agency,’ or ‘is so implausible that it could not be ascribed to a difference in view or the product of the agency expertise.’” The court spared the 200-loan volume threshold COMPLIANCE CENTRAL HOW IMPORTANT CHANGES TO HMDA IMPACT REPORTING By Justin White, NAFCU Regulatory Compliance Counsel for open-end lines of credit, maintaining the plaintiffs did not meet their burden in proving the bureau was “arbitrary and capricious” in their actions. With regards to the closed-end threshold, the court held the benefits of the 2020 rule were “inflated and the costs not adequately addressed.” This court ruling vacates the 2020 rule and reverts to the lower threshold for closed-end mortgage loans. Moving forward, credit unions will now determine if they are subject to HMDA’s data collection and reporting requirements for closed-end mortgages by reviewing whether they made 25 or more closedend mortgages in each of the preceding two calendar years. This decrease in the threshold means that more credit unions are now under reporting obligations to file HMDA data in March following this court decision. Notably, CFPB failed to appeal the district court decision and published a blog post that essentially accepted the outcome of the case, indicating that vacation of the 2020 rule is here to stay. In addition, the blog addressed how the change to the closedend mortgage threshold may impact its enforcement and supervision priorities. The CFPB acknowledged changes to internal procedures and processes to stay or become compliant will take time and enforcement action against these federal credit unions that meet these “limited circumstances” are not a priority. The combination of the decision to not appeal and the CFPB’s recent statement regarding the supervision of and enforcement against financial institutions that are not yet compliant with the new threshold suggests the current CFPB leadership might be amenable to the court decision. The second change occurred in late December when the CFPB made changes to the asset-size exemption threshold for credit unions following the promulgation of a final rule on the issue. The CFPB adjusted the threshold from $50 million to $54 million, exempting credit unions with assets of $54 million or less from collecting data in this calendar year (2023). This change may pose unique challenges “The CFPB highlights several other merger circumstances where data collection may be required for surviving or newly formed credit unions. This is where it can get tricky.”
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