Executive Letter: Agency Guidance Regarding Lower Closed-End Mortgage Loan HMDA Reporting Threshold

By Rose Oswald Poels

New guidance has been issued from both the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC) regarding the recently lowered reporting threshold for closed-end mortgage loans under the Home Mortgage Disclosure Act (HMDA), Regulation C. The reduction of the reporting threshold was swiftly imposed, and I believe the new agency guidance will be helpful for members impacted by the change.

As previously reported in my November 1 and December 29 Executive Letters, the Bureau of Consumer Financial Protection (CFPB) lowered the reporting threshold due to an action by the United States District Court for the District of Columbia, which vacated a 2020 HMDA-related rule that had increased the loan volume reporting threshold for closed-end mortgage loans. As a result of the court’s order, the threshold for reporting data about closed-end mortgage loans was lowered to 25 — a threshold established by a 2015 HMDA-related rule. A technical amendment was made to the Code of Federal Regulations to reflect the lower reporting threshold near the end of 2022.

Just this past week, both OCC and FDIC issued guidance regarding the lower reporting threshold. I have outlined each agency’s guidance below.

OCC
In its release (Bulletin 2023-5), OCC stated that banks that originated at least 25 closed-end mortgage loans in each of the two preceding calendar years, but fewer than 100 closed-end mortgage loans in either or both of the two preceding calendar years, may need to make adjustments to policies and procedures to comply with reporting obligations.

OCC stated it recognizes the changes may require time to implement. OCC also stated that it does not intend to assess penalties for failures to report closed-end mortgage loan data on reportable transactions conducted in 2022, 2021, or 2020 for banks affected by the change that meet Regulation C’s other coverage requirements. OCC examinations conducted in affected banks regarding HMDA reportable transactions from 2022, 2021, or 2020 will be diagnostic to help banks identify compliance weaknesses. OCC stated that the collection and submission of 2023 HMDA data will provide affected banks with an opportunity to identify gaps in and make improvements to their HMDA compliance management systems.

FDIC
In its release (Financial Institutions Letter 06-2023), FDIC outlined its supervisory approach to the HMDA reporting changes to closed-end mortgage loans. FDIC also stated recognition that banks affected by the threshold change need time to implement or adjust policies, procedures, systems, and operations to come into compliance with reporting obligations. Accordingly, for closed-end mortgage loan data, FDIC plans to implement a supervisory approach consistent with CFPB’s approach.

As such, for FDIC-supervised banks that (1) are subject to Regulation C’s other coverage requirements, and (2) originated at least 25 closed-end mortgage loans in each of the two preceding calendar years, but fewer than 100 closed-end mortgage loans in either of the two preceding calendar years, FDIC does not intend to initiate enforcement actions or cite HMDA violations for failures to report closed-end mortgage loan data for 2022, 2021, or 2020. Any FDIC-supervised bank may elect to report data voluntarily for those years; however, FDIC stated it does not expect those banks to collect and report data retroactively for closed-end mortgage loans covered by the court’s order vacating CFPB’s 2020 HMDA-related rule.

FDIC has clarified that banks affected by the court’s order, and that meet the reporting threshold of 25 closed-end mortgage loans in each of the two proceeding calendar years as of 2023, should start collecting data in 2023 and reporting data in 2024.

As is always the case, when working with your regulatory agencies, I recommend frank conversations with your examiner in charge (EIC) regarding agency expectations and findings. While being respectful, members should not be shy about questioning the EIC about examiners’ rationale or interpretations and to ask for regulatory citations for the bank to then separately, further research and confirm whether examiner instruction or finding is correct.

If you have questions regarding the recently issued guidance, about HMDA reporting requirements, or other compliance-related questions, be sure to reach out to the WBA Legal team.