Magazine article American Banker

Prune HMDA Reporting Requirements for Small Banks

Magazine article American Banker

Prune HMDA Reporting Requirements for Small Banks

Article excerpt

Byline: Jack Hartings

Federal regulations now dictate virtually every step in the mortgage lending process -- even for the hometown community banks that work one-on-one with borrowers. These changes have made the mortgage business increasingly cumbersome and cost-prohibitive for smaller financial institutions.

Community banks are particularly concerned about the Consumer Financial Protection Bureau's proposal to expand the amount of borrower and loan data banks are required to report under the Home Mortgage Disclosure Act. Congress added to the already detailed HMDA data collection requirements by compelling regulators to collect additional borrower data. But the CFPB's proposed rulemaking goes above and beyond what lawmakers requested.

The CFPB's proposal would require financial institutions to report 37 new data fields for each borrower -- more than double the statutory requirement laid out by Congress. Furthermore, the bureau has said it views the implementation of the Dodd-Frank changes to HMDA as an opportunity to improve upon the data-collection process. But there must be a way to reap the benefits of additional reporting without imposing even greater costs on financial institutions -- especially local community banks, which bear a disproportionate burden of any regulation because of their smaller size. To help maintain the balance of private cost and public benefit, regulators should stick to the 17 new data fields laid out by lawmakers.

The CFPB must understand that the collective impact of its new mortgage regulations -- including six major final rules issued in January 2013 and new mortgage-disclosure requirements that take effect in August -- pose a tangible threat to the local communities that depend on mortgage credit from small banks. In the Independent Community Bankers of America's 2014 survey of more than 500 community bankers, roughly three-quarters said that new government regulations are keeping them from making more residential mortgage loans, even though they have the desire and capacity to lend more.

Moreover, revamping virtually all mortgage regulatory requirements within such a small window of time could drive many smaller lenders completely out of the market. Many community banks are already either inactive in the residential mortgage market or considering an exit from this business line. …

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