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CFPB proposes amendment to Reg. C

Two things have just come up on our radar screen, both of which are important to member banks.

The first involves a proposed amendment to Reg. C by the Consumer Financial Protection Bureau (CFPB) and the changes are both massive and significant. In a nutshell, the number of fields for the HMDA-LAR would essentially be doubled and would now include:

  • all loans secured by a lien on a dwelling, including commercial loans which have relied on the value of a dwelling that makes up any part of the collateral for the loans; and
  • all "cash-out equity" loans not currently reportable.

 These new rules will apply to any lender that has its main location or a branch in an MSA, has assets above $43 Million and, in the preceding calendar year, originated at least 25 covered loans, but excluding open-end lines of credit.

"The HMDA burden on member banks will get much, much bigger if this proposal is adopted," said OBA's General Counsel Mary Beth Guard. "I urge bankers to file comment letters immediately and urge the CFPB to:

  • Increase the asset size threshold ($43 Million); or
     
  • The threshold number of "covered loans"(25 under the proposal) or both;
     
  • Make sure you tell them the extent to which your bank has ever had a request from a member of the general public for the bank's HMDA data. For most banks, the answer will be a very loud and resounding "NO!" (Our guess is that will come as a complete surprise to the Bureau.)
     
  • It might be helpful (if it's at all possible) to run a quick calculation of how many loans currently on your books on which you would have to report under this proposed rule because of the expanded reporting criteria (any and all loans secured in any manner by residential real estate).
     
  • Have your staff develop an estimate of how long it takes to do everything you need to do for HMDA right now. Then do the math to factor in the substantially larger number of affected applications and a doubling in size of the number of data fields to be completed on the LAR.
    • For example, if you now have to report on 150 loans and under this proposed expansion scope you would have to report on 300 loans, Mary Beth suggests that you develop an estimate for the additional employee costs your bank would incur as a result of doubling both the number of loans and the new field requirements if the proposal is adopted as written.

"Finally, compare that (number) with your bottom line . . . (to give) the numbers . . . some context, in terms of what this means to your institution," Mary Beth said. "That is the type of comment letter that should make a difference.

"Yes, it's the eleventh hour for getting (a comment letter) . . . done, but filing a comment letter on this represents time well spent," she said.

The comment deadline is a week from yesterday, October 29, 2014.

You can read the proposal AND submit your comment online by clicking here.

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