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New HMDA Rule Would Apply to Reverse Mortgages, Delay Sought

The reverse mortgage industry’s top trade group confirmed that a proposed rule regarding the Home Mortgage Disclosure Act would indeed apply to Home Equity Conversion Mortgages — and asked the agency in charge of administering the rule for a delay.

The Consumer Financial Protection Bureau proposed an update to HMDA reporting regulations at the end of last month, which would ease the burden on smaller lenders that originate “open-end lines of credit.”

Back in 2015, the CFPB rolled out a final HMDA rule that would require a wide variety of lenders to submit detailed borrower information. Institutions that originated fewer than 100 of these “open-end” credit lines in the preceding two years, however, would not be subject to the standard.

Under an updated rule proposed in July, the threshold would be raised to 500, thus exempting many more small lenders — including both banks and non-bank institutions — from the requirement.

While there was initially some confusion over whether this provision would indeed affect the HECM space, the National Reverse Mortgage Lenders Association clarified the issue in a July 31 letter to the CFPB.

“It is our understanding that…the 2017 HMDA Proposal would include reverse mortgages structured as open-end lines of credit,” NRMLA vice president Steve Irwin wrote.

But Irwin called on the CFPB to suspend the intended rollout date of the entire HMDA proposal, scheduled to go into effect on New Year’s Day 2018. The regulations would require lenders to submit a burdensome amount of data, potentially expose borrowers to breaches of their personal information, and force reverse mortgage lenders to invest in specialized software to collect and report the information.

“We note that there are very few reverse mortgage vendors, which makes it more difficult to find and implement alternatives in implementing the revised HDMA requirements,” Irwin said, adding that NRMLA members have reported that the rules would “significantly” increase costs for originators.

Irwin and NRMLA also cited Executive Order 13772, President Trump’s February action that laid out certain “core principles” of financial regulation — including an edict that all oversight be “efficient, effective, and appropriately tailored.”

“In any event the bureau should confer with the Treasury Department to further review the revised final and proposed HMDA rules to assure it meets Executive Order 13772.”

Written by Alex Spanko