In April 2020, the Consumer Financial Protection Bureau (CFPB) issued a final rule increasing the Home Mortgage Disclosure Act (HMDA) reporting threshold for closed-end mortgage loans from 25 covered loans originated in each of the prior two years to 100 covered loans originated in each of the prior two years.
After the adoption of the 2020 rule, the National Community Reinvestment Coalition (NCRC), Montana Fair Housing, Texas Low Income Housing Information Service, Empire Justice Center, the Association for Neighborhood & Housing Development and the City of Toledo, Ohio, filed a lawsuit challenging the changes to the closed-end loan and open-end line of credit reporting thresholds.
A federal judge in the D.C. district court has ruled in favor of a coalition of community housing groups against the CFPB, vacating part of a Trump-era rule that changed the reporting obligations of certain mortgage lenders.
The judge found the CFPB, under Trump appointee Kathy Kraninger, acted in an “arbitrary and capricious” manner by exempting mortgage lenders from reporting obligations under HMDA which is designed to help uphold fair lending and fair housing laws.
“Public data on home mortgage lending is crucial to combatting modern-day redlining and other forms of illegal discrimination that contribute to the savage inequalities plaguing our country,” said Jesse Van Tol, president and CEO of NCRC.
The court did partially rule in favor of CFPB by maintaining portions of the 2020 rule related to open-end lines of credit, but the portion specifically related to closed-end mortgage loans was vacated.
“Where a statute is designed to provide transparency in business practices to enable enforcement of laws designed to bar discriminatory and risky lending practices, and where Congress has so recently carefully crafted a framework to maximize the universe of lending institutions required to report some data, while minimizing the extent of the burden of reporting on those institutions most likely to feel the brunt of it, CFPB’s decision to essentially undo Congress’ carefully selected balance with blanket exceptions for this share of the lending market without explanation is arbitrary and capricious,” the opinion reads in part.
The CFPB has not issued a public statement regarding whether it plans to appeal the ruling. If the CFPB does not appeal the ruling, then the CFPB will need to determine how to re-implement the 25 closed-end loan threshold.