Home Mortgage Disclosure (Regulation C) Temporary Increase in Institutional and Transactional Coverage Thresholds for Open-End Lines of Credit, 33455-33465 [2017-15220]

Agencies

• BUREAU OF CONSUMER FINANCIAL PROTECTION

[Federal Register Volume 82, Number 138 (Thursday, July 20, 2017)]
[Proposed Rules]
[Pages 33455-33465]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-15220]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 82, No. 138 / Thursday, July 20, 2017 / 
Proposed Rules

[[Page 33455]]



BUREAU OF CONSUMER FINANCIAL PROTECTION

12 CFR Part 1003

[Docket No. CFPB-2017-0021]
RIN 3170-AA76


Home Mortgage Disclosure (Regulation C) Temporary Increase in 
Institutional and Transactional Coverage Thresholds for Open-End Lines 
of Credit

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Proposed rule with request for public comment.

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SUMMARY: The Bureau of Consumer Financial Protection (Bureau or CFPB) 
proposes amendments to Regulation C that would, for a period of two 
years, increase the threshold for collecting and reporting data with 
respect to open-end lines of credit so that financial institutions 
originating fewer than 500 open-end lines of credit in either of the 
preceding two years would not be required to begin collecting such data 
until January 1, 2020.

DATES: Comments must be received on or before July 31, 2017.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2017-
0021 or RIN 3170-AA76, by any of the following methods:
     Email: FederalRegisterComments@cfpb.gov. Include Docket 
No. CFPB-2017-0021 or RIN 3170-AA76 in the subject line of the email.
     Electronic: https://www.regulations.gov. Follow the 
instructions for submitting comments.
     Mail: Monica Jackson, Office of the Executive Secretary, 
Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC 
20552.
     Hand Delivery/Courier: Monica Jackson, Office of the 
Executive Secretary, Consumer Financial Protection Bureau, 1275 First 
Street NE., Washington, DC 20002.
    Instructions: All submissions should include the agency name and 
docket number or Regulatory Information Number (RIN) for this 
rulemaking. Because paper mail in the Washington, DC area and at the 
Bureau is subject to delay, commenters are encouraged to submit 
comments electronically. In general, all comments received will be 
posted without change to https://www.regulations.gov. In addition, 
comments will be available for public inspection and copying at 1275 
First Street NE., Washington, DC 20002, on official business days 
between the hours of 10 a.m. and 5:30 p.m. Eastern Time. You can make 
an appointment to inspect the documents by telephoning 202-435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Sensitive personal information, such as account numbers or Social 
Security numbers, should not be included. Comments will not be edited 
to remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Alexandra W. Reimelt, Counsel, Office 
of Regulations, Consumer Financial Protection Bureau, at 202-435-7700 
or cfpb_reginquiries@cfpb.gov.

SUPPLEMENTARY INFORMATION: 

I. Summary of the Proposed Rule

    Regulation C implements the Home Mortgage Disclosure Act (HMDA). 
For over four decades, HMDA has provided the public and public 
officials with information about mortgage lending activity within 
communities by requiring financial institutions to collect, report, and 
disclose certain data about their mortgage activities. The Dodd-Frank 
Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) amended 
HMDA and, among other things, expanded the scope of information that 
must be collected, reported, and disclosed under HMDA and transferred 
rule writing authority from the Board of Governors of the Federal 
Reserve System (Board) to the Bureau.\1\
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    \1\ Dodd-Frank Wall Street Reform and Consumer Protection Act, 
Public Law 111-203, section 1094, 124 Stat. 1376, 2097-101 (2010).
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    In October 2015, the Bureau published a final rule implementing the 
Dodd-Frank Act amendments to HMDA (2015 HMDA Final Rule).\2\ In that 
rule, the Bureau adopted significant changes to Regulation C, most of 
which will be effective on January 1, 2018. Among other changes, the 
2015 HMDA Final Rule required collection and reporting of data with 
regard to open-end, dwelling-secured lines of credit.\3\ However, the 
2015 HMDA Final Rule contained an exclusion with respect to an open-end 
line of credit if a financial institution originated fewer than 100 
such lines of credit in each of the two preceding calendar years (open-
end transactional coverage threshold).\4\ The 2015 HMDA Final Rule 
contained parallel provisions as part of the definition of ``financial 
institution,'' which limit Regulation C's institutional coverage to 
include only institutions that, in addition to meeting the other 
applicable coverage criteria, originated at least 25 closed-end 
mortgage loans or 100 open-end lines of credit in each of the two 
preceding calendar years (institutional coverage threshold).\5\
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    \2\ Home Mortgage Disclosure (Regulation C); Final Rule, 80 FR 
66128 (Oct. 28, 2015). In this notice, citations to Regulation C as 
amended by the 2015 HMDA Final Rule are to the applicable sections 
of title 12 of the Code of Federal Regulations as they will read 
following their effective date. See generally 12 CFR 1003.
    \3\ 12 CFR 1003.2(e). Prior to this amendment, reporting with 
respect to open-end lines of credit was voluntary. See infra note 
10.
    \4\ 12 CFR 1003.3(c)(12). As adopted by the 2015 HMDA Final 
Rule, this provision states the test as ``fewer than 100 open-end 
lines of credit in each of the two preceding calendar years,'' but 
this was a drafting error; the intent was to require that a 
financial institution have exceeded the threshold in both of the 
preceding calendar years to be subject to open-end line of credit 
reporting, thus the exclusion should require that a financial 
institution originate fewer than 100 such lines of credit in either 
of the two preceding calendar years. As discussed below, the Bureau 
has since proposed to correct this error. See 82 FR 19142, 19148-49 
(Apr. 25, 2017).
    \5\ 12 CFR 1003.2(g)(1)(v) and (g)(2)(ii).
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    The Bureau has heard concerns that, in setting the open-end 
transactional coverage threshold at 100 transactions, the Bureau set it 
too low. The Bureau is now proposing to increase that threshold to 500 
or more open-end lines of credit for two years (calendar years 2018 and 
2019). During that period, the Bureau will reconsider the open-end 
transactional coverage threshold: This temporary increase would allow 
the Bureau to do so without requiring financial institutions 
originating fewer than 500 open-end lines of credit per year to collect 
and report data with respect to open-end lending in the meanwhile.

[[Page 33456]]

    This proposal seeks comment on whether the Bureau should 
temporarily increase the threshold in this manner.

II. Background

A. Collecting and Reporting Data Concerning Open-End Lines of Credit 
Under the 2015 HMDA Final Rule

    HMDA and its implementing regulation, Regulation C, require certain 
banks, savings associations, credit unions, and for-profit 
nondepository institutions to collect, report, and disclose data about 
originations and purchases of mortgage loans, as well as mortgage loan 
applications that do not result in originations (for example, 
applications that are denied or withdrawn). In 2010, Congress enacted 
the Dodd-Frank Act, which amended HMDA and also transferred HMDA 
rulemaking authority and other functions from the Board to the 
Bureau.\6\ Among other changes, the Dodd-Frank Act expanded the scope 
of information relating to mortgage applications and loans that must be 
collected, reported, and disclosed under HMDA. The Dodd-Frank Act also 
provides the Bureau with the authority to require ``such other 
information as the Bureau may require.'' \7\
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    \6\ Public Law 111-203, 124 Stat. 1376, 1980, 2035-38, 2097-101 
(2010).
    \7\ Id.
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    In October 2015, the Bureau issued the 2015 HMDA Final Rule, which 
implemented the Dodd-Frank Act amendments to HMDA.\8\ That final rule 
modified the types of institutions and transactions subject to 
Regulation C, the types of data that institutions are required to 
collect, and the processes for reporting and disclosing the required 
data.
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    \8\ 2015 HMDA Final Rule, 80 FR 66128 (Oct. 28, 2015).
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    Home-equity lines of credit were uncommon in the 1970s and early 
1980s when Regulation C was first implemented. In 1988, the Board 
amended Regulation C to permit, but not require, financial institutions 
to report home-equity lines of credit that were for the purpose of home 
improvement or home purchase.\9\ In practice, few financial 
institutions elected to do so and the Bureau estimated that only about 
1 percent of open-end lines of credit secured by dwellings were 
reported under HMDA.\10\
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    \9\ 53 FR 31683, 31685 (Aug. 19, 1988). Under this provision, 
data with respect to ``home equity lines of credit made in whole or 
in part for home purchase or home improvement'' is ``optional data'' 
which a financial institution may report. 12 CFR 1003.4(c)(3). A 
``home-equity line of credit'' is defined in current Regulation C as 
an ``open-end credit plan secured by a dwelling as defined in 
Regulation Z (Truth in Lending), 12 CFR part 1026.'' 12 CFR 1003.2. 
The definition of ``open-end line of credit'' in the 2015 HMDA Final 
Rule, effective January 1, 2018, paralleled this definition, but 
applies without regard to whether the credit is consumer credit, as 
defined in 12 CFR 1026.2(a)(12), is extended by a creditor, as 
defined in 12 CFR 1026.2(a)(17), or is extended to a consumer, as 
defined in 12 CFR 1026.2(a)(11).
    \10\ 2015 HMDA Final Rule, supra note 8, at 66282.
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    In 2000, in response to the increasing importance of open-end 
lending in the housing market, the Board proposed to revise Regulation 
C to require mandatory reporting of all home-equity lines of 
credit.\11\ However, the Board's 2002 final rule left open-end 
reporting voluntary, as the Board determined at that time that the 
benefits of mandatory reporting relative to other then-proposed changes 
(such as collecting information about higher-priced loans) did not 
justify the increased burden.\12\
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    \11\ 65 FR 78656, 78659-60 (Dec. 15, 2000).
    \12\ 67 FR 7222, 7225 (Feb. 15, 2002).
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    As discussed in the 2015 HMDA Final Rule, open-end mortgage lending 
continued to increase in the years following the Board's 2002 final 
rule, particularly in areas with high home-price appreciation. Further, 
research indicates that speculative real estate investors used open-
end, home-secured lines of credit to purchase non-owner occupied 
properties, which correlated with higher first-mortgage defaults and 
home-price depression during the financial crisis.\13\ Furthermore, in 
the years leading up to the crisis such home-equity lines of credit 
often were made and fully drawn more or less simultaneously with first-
lien home purchase loans, essentially creating high loan-to-value home 
purchase transactions that were not visible in the HMDA dataset.\14\ 
Thus, as the Bureau noted in the 2015 HMDA Final Rule, overleverage due 
to open-end mortgage lending and defaults on dwelling-secured open-end 
lines of credit contributed to the foreclosure crises that many 
communities experienced in the late 2000s.\15\
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    \13\ 2015 HMDA Final Rule, supra note 8, at 66160.
    \14\ Id.
    \15\ Id.
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    More generally, as the 2015 HMDA Final Rule also noted, dwelling-
secured open-end lines of credit liquefy equity that borrowers have 
built up in their homes, which often are their most important assets, 
and increase their risk of losing their homes to foreclosure when 
property values decline.\16\ At the same time, home-equity lines of 
credit have become increasingly important to the housing market, and 
including data on such lines within the HMDA dataset would help to 
understand how financial institutions are meeting the housing needs of 
communities.\17\ For these and other reasons articulated in the 2015 
HMDA Final Rule,\18\ the Bureau determined that it is important to 
improve visibility into this key segment of the mortgage market by 
requiring reporting of open-end lines of credit.\19\ As noted in the 
2015 HMDA Final Rule, the Bureau believes that including dwelling-
secured lines of credit within the scope of Regulation C is a 
reasonable interpretation of HMDA section 303(2), which defines 
``mortgage loan'' as a loan secured by residential real property or a 
home improvement loan. In the 2015 HMDA Final Rule, the Bureau 
interpreted ``mortgage loan'' to include dwelling-secured lines of 
credit, as they are secured by residential real property and they may 
be used for home improvement purposes.\20\ As further noted in the 2015 
HMDA Final Rule, pursuant to section 305(a) of HMDA, the Bureau 
believes that requiring reporting of all dwelling-secured, consumer 
purpose open-end lines of credit is necessary and proper to effectuate 
the purposes of HMDA and prevent evasions thereof.\21\
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    \16\ Id.
    \17\ 2015 HMDA Final Rule, supra note 8, at 66157.
    \18\ See id. at 66149, 66160-61.
    \19\ Id. at 66149.
    \20\ Id. at 66160.
    \21\ Id.
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    To effectuate this decision, the 2015 HMDA Final Rule defined two 
new terms: ``covered loan,'' which is defined to mean ``a closed-end 
mortgage loan or an open-end line of credit that is not an excluded 
transaction,'' \22\ and ``open-end line of credit,'' which is defined 
to mean an extension of credit that is secured by a lien on a 
``dwelling'' (as that term is defined in the rule) and that is an open-
end credit plan as defined in Regulation Z (without regard to certain 
limitations relevant for Regulation Z, but not Regulation C, 
purposes).\23\
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    \22\ 12 CFR 1003.2(e).
    \23\ Id. at Sec.  1003.2(o).
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    In expanding coverage to include open-end lines of credit, the 
Bureau recognized that doing so would impose one-time and ongoing 
operational costs on reporting institutions; that the one-time costs of 
modifying processes and systems and training staff to begin open-end 
line of credit reporting likely would impose significant costs on some 
institutions; and that institutions' ongoing reporting costs would 
increase as a function of their open-end lending volume.\24\
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    \24\ 2015 HMDA Final Rule, supra note 8, at 66161. The 
definition of ``open-end line of credit'' replaced the definition of 
a ``home-equity line of credit. See supra note 9.

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[[Page 33457]]

    The Bureau sought to avoid imposing these costs on small 
institutions with limited open-end lending, where the benefits of 
reporting the data do not justify the costs of reporting.\25\ In 
seeking to draw such a line, the Bureau acknowledged that it was 
handicapped by the lack of available data concerning open-end 
lending.\26\ This created challenges both in estimating the 
distribution of open-end origination volume across financial 
institutions and estimating the one-time and ongoing costs that would 
be incurred by institutions of various sizes in collecting and 
reporting data on open-end lending.
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    \25\ 2015 HMDA Final Rule, supra note 8, at 66149.
    \26\ Id.
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    With respect to open-end origination volume, the Bureau used 
multiple data sources, including credit union Call Reports, Call 
Reports for banks and thrifts, and data from the Bureau's Consumer 
Credit Panel to develop estimates for different potential 
thresholds.\27\ The Bureau assumed that all of the depository 
institutions that were exempted from HMDA reporting under Regulation C 
because of their location or asset size would continue to be 
exempt.\28\ With respect to the remaining depositories, the Bureau 
developed the following estimates: \29\
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    \27\ Id. at 66261, 66275 n.477. As the Bureau explained, credit 
union Call Reports provide the number of originations of open-end 
lines of credit secured by real estate but exclude lines of credit 
with first-lien status and may include business loans that are 
excluded from reporting under the 2015 HMDA Final Rule. Id. at 66281 
n.489.
    \28\ Id. at 66281 n.489. The Bureau limited its estimate to 
depositories because it believes that most nondepositories do not 
originate open-end lines of credit. Id. at 66281.
    \29\ The first row in the chart, labeled ``Proposed'' assumed 
that financial institutions would be required to report on their 
open-end lines of credit regardless of the number originated so long 
as the institution originated at least 25 closed-end mortgages 
during each of the prior two calendar years. This row reflects the 
impact of the rule that the Bureau had proposed. The remaining rows 
assume that reporting of open-end lines of credit would be required 
without regard to the number of closed-end loans originated but only 
if the financial institution originated the number of open-end lines 
of credit shown in the various rows. Id. at 66281.
[GRAPHIC] [TIFF OMITTED] TP20JY17.001

    The Bureau noted that expansions or contractions in the number of 
financial institutions, or changes in product offerings and demands 
during implementation could alter the estimated impacts.\30\
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    \30\ Id. at 66275 n.477.
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    To estimate the one-time and ongoing costs of collecting and 
reporting data under HMDA, the Bureau identified seven ``dimensions'' 
of compliance operations and used those to define three broadly 
representative financial institutions according to the overall level of 
complexity of their compliance operations: ``tier 1'' (high-
complexity); ``tier 2'' (moderate-complexity); and ``tier 3'' (low-
complexity).\31\ In estimating costs specific to collecting and 
reporting data for open-end lines of credit, the Bureau assumed that 
tier 1 institutions originate more than 7,000 such lines of credit, 
that tier 2 institutions originate between 200 and 7,000 such lines of 
credit, and that tier 3 institutions originate fewer than 200 such 
lines of credit.\32\ The Bureau then sought to estimate one-time and 
ongoing costs for the average-size institution in each tier.\33\
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    \31\ Id. at 66261. The seven factors were: The reporting system 
used; the degree of system integration; the degree of system 
automation; the compliance program; and the tools for geocoding, 
performing completeness checks, and editing. Id. at 66269.
    \32\ Id. at 66285.
    \33\ For purposes of calculating aggregate costs, the Bureau 
assumed that the average tier 1 institution received 30,000 
applications for open-end lines of credit; the average tier 2 
institution received 1,000 such applications; and the average tier 3 
institution received 150 such applications. Id. at 66286.
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    With respect to one-time costs, the Bureau recognized that the one-
time cost of reporting open-end lines of credit could be substantial 
because most financial institutions do not currently report open-end 
lines of credit and thus would have to develop completely new reporting 
infrastructures to begin reporting these data. As a result, there would 
be one-time costs to create processes and systems for open-end lines of 
credit in addition to the one-time costs to modify processes and 
systems for other mortgage products.\34\ However, for tier 3, low-
complexity institutions, the Bureau stated that it believed that the 
additional one-time costs of open-end reporting would be relatively low 
because the Bureau believed that these institutions are less reliant on 
information technology systems for HMDA reporting and that they may 
process open-end lines of credit on the same system and in the same 
business unit as closed-end mortgage loans, so that their one-time 
costs would be derived mostly from new training and procedures adopted 
for the overall changes in the final rule.\35\
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    \34\ Id. at 66264; see also id. at 66284-85.
    \35\ Id. at 66265; see also id. at 66284.
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    With respect to ongoing costs, the Bureau acknowledged that costs 
for open-end reporting vary by institutions due to many factors, such 
as size, operational structure, and product complexity, and that this 
variance exists on a continuum that was impossible to fully 
represent.\36\ At the same time, the Bureau stated it believed that the 
HMDA reporting process and ongoing operational cost structure for open-
end reporters would be fundamentally similar to closed-end 
reporting.\37\ Thus, using the ongoing cost estimates

[[Page 33458]]

developed for closed-end reporting, the Bureau estimated that for the 
average tier 1 institutions the ongoing operational costs would be 
$273,000 per year; for the average tier 2 institution $43,400 per year; 
and for the average tier 3 institution $8,600 per year.\38\ These 
translated into average costs per HMDA record of $9, $43, and $57 
respectively.\39\ Importantly, the Bureau acknowledged that, precisely 
because no good source of publicly available data exists concerning 
dwelling-secured open-end lines of credit, it was difficult to predict 
the accuracy of the Bureau's cost estimates, but also stated its belief 
that they were reasonably reliable.\40\
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    \36\ Id. at 66285.
    \37\ Id.
    \38\ Id. at 66286.
    \39\ Id.
    \40\ Id. at 66162.
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    Drawing on all of these estimates, the Bureau decided to establish 
an open-end transactional coverage threshold that would require 
institutions that originate 100 or more open-end lines of credit to 
collect and report data. The Bureau estimated that this threshold would 
avoid imposing the burden of establishing open-end reporting on 
approximately 3,000 predominantly smaller-sized institutions with low 
open-end lending \41\ and would require reporting by only 749 financial 
institutions, all but 24 of which would also report data on their 
closed-end mortgage lending.\42\ The Bureau explained that it believed 
this threshold appropriately balanced the benefits and burdens of 
covering institutions based on their open-end mortgage lending.\43\
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    \41\ Id. The estimate of the number of institutions that would 
be excluded by the transaction coverage threshold was relative to 
the number that would have been covered under the Bureau's proposal 
that led to the 2015 HMDA Final Rule. Under that proposal, a 
financial institution would have been required to report its open-
end lines of credit if it had originated at least 25 closed-end 
mortgage loans in each of the preceding two years without regard to 
how many open-end lines of credit the institution originated. See 79 
FR 51731 (Aug. 29, 2014).
    \42\ Id. at 66281.
    \43\ Id. at 66162.
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    To effectuate this decision, the 2015 HMDA Final Rule amended 
Regulation C to define two discrete thresholds that were intended to 
work in tandem. First, the rule established an institutional coverage 
threshold that limits the definition of ``depository financial 
institution'' and ``nondepository financial institution'' to include 
only those institutions that either originated at least 25 covered 
closed-end mortgages in each of the preceding years or that originated 
at least covered 100 open-end lines of credit in each of the two 
preceding years.\44\ Second, the rule separately established a 
transactional coverage threshold for open-end lines of credit by 
providing that an open-end line of credit is an excluded transaction if 
the financial institution originated fewer than 100 open-end lines of 
credit in each of the two preceding calendar years.\45\
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    \44\ 12 CFR 1003.2(g)(1)(v) and (g)(2)(ii). The final rule 
excluded certain transactions from the definition of covered loans 
and those excluded transactions do not count towards the 
institutional transaction threshold.
    \45\ 12 CFR 1003.3(c)(12). As noted above and discussed again 
below, the exclusion as adopted in the 2015 HMDA Final Rule was 
intended to apply if the financial institution originated fewer than 
100 open-end lines of credit in either of the two preceding calendar 
years; the current text of the rule was a drafting error that the 
Bureau has now proposed to correct. The final rule created a 
separate transactional coverage threshold for closed-end mortgages, 
treating those as excluded transactions if an institution originated 
fewer than 25 closed-end mortgage loans in each of the two preceding 
calendar years. Id. at Sec.  1003.3(c)(11). The Bureau has proposed 
to change the ``each'' in this text to ``either'' as well. See infra 
note 46, at 19148.
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B. Proposed Technical Corrections and Clarifying Amendments to the 2015 
HMDA Final Rule

    On April 13, 2017, the Bureau issued a Notice of Proposed 
Rulemaking (2017 HMDA Proposal) containing a set of proposed technical 
corrections and clarifying amendments to the Regulation C as amended by 
the 2015 HMDA Final Rule.\46\ Among the corrections included in that 
proposal is an amendment to the open-end transactional coverage 
threshold. Under the 2017 HMDA Proposal, an open-end line of credit 
would be an excluded transaction if the institution originated fewer 
than 100 open-end lines of credit in either of the two preceding 
calendar years.\47\ This would change the provision as adopted by the 
2015 HMDA Final Rule to correct a drafting error.
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    \46\ 82 FR 19142 (Apr. 25, 2017).
    \47\ Id. at 19168.
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    The 2017 HMDA Proposal noted that, under the institutional coverage 
threshold in the 2015 HMDA Final Rule, the definition of financial 
institution included only institutions that originate either 25 or more 
closed-end mortgage loans or 100 or more open-end lines of credit in 
each of the two preceding calendar years. That threshold and the 
transaction coverage threshold were intended to be complementary 
exclusions.\48\ But, if the transactional coverage threshold is to 
mirror the loan volume threshold for financial institutions, as the 
2017 HMDA Proposal noted, the transactional coverage threshold should 
provide that an open-end line of credit is an excluded transaction if a 
financial institution originated fewer than 100 open-end lines of 
credit in either, rather than each, of the two preceding calendar 
years.\49\ The use of the word ``each'' in the financial transaction 
threshold in the 2015 HMDA Final Rule thus was a drafting error.\50\
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    \48\ Id. at 19149.
    \49\ Id.
    \50\ Id. at 19148. The proposal similarly would change the 
transactional coverage threshold for closed-end mortgage loans. Id.
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    The 2017 HMDA Proposal sought comment on this and other proposed 
changes. The comment period closed on May 25, 2017. The Bureau is in 
the process of reviewing the comments and preparing a final rule, which 
the Bureau expects to issue on or before the date on which this 
proposal would be finalized. Accordingly, this proposal reflects the 
amended language of the 2017 HMDA Proposal.\51\ Further, if this 
proposal is finalized, the Bureau would adopt final language that 
reflects not only this proposal but also the final changes that would 
be adopted pursuant to the 2017 HMDA Proposal's final rule.
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    \51\ The 2017 HMDA Proposal also added a new category of 
excluded transaction that would not count towards the institutional 
transaction threshold, and amended Sec.  1003.2(g)(1)(v) and 
(g)(2)(ii) accordingly. Those amendments are not reflected in this 
proposal but are still under consideration by the Bureau.
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C. Questions Regarding the Open-End Transactional Coverage Threshold

    Since the Bureau issued the 2015 HMDA Final Rule, many industry 
stakeholders have expressed concerns over the levels for the 
transactional coverage thresholds. The Bureau has sought to listen to 
and understand the basis for these concerns. In the 2015 HMDA Final 
Rule, the Bureau modified Regulation C's institutional and 
transactional coverage to better achieve HMDA's purposes in light of 
current market conditions and to reduce unnecessary burden on financial 
institutions. The Bureau adopted uniform loan volume thresholds for 
depository and nondepository institutions. The loan volume thresholds 
require an institution that originated at least 25 closed-end mortgage 
loans or at least 100 open-end lines of credit in each of the two 
preceding calendar years to report HMDA data, provided that the 
institution meets all of the other criteria for institutional coverage.
    As discussed above, the Bureau did not have robust data for making 
the estimates that went into establishing the open-end coverage 
threshold. The Bureau now has some reason to question whether it struck 
the appropriate balance in establishing a threshold of 100 open-end 
lines of credit.

[[Page 33459]]

    In striking that balance, the Bureau estimated, based upon 2013 
data, that under that threshold 749 depository institutions would be 
required to report their open-end lines of credit. Since 2013, the 
number of dwelling-secured open-end lines of credit originated has 
increased by 36 percent and continues to grow.\52\ To the extent that 
institutions that are originating fewer than 100 open-end lines of 
credit share in that growth, the number of institutions at the margin 
that will be required to report under the 2015 HMDA Final Rule open-end 
transaction coverage threshold necessarily will increase.
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    \52\ Experian-Oliver Wyman Market Intelligence Reports show that 
in 2013 there were 1.14 million home-equity lines of credit 
originated. In 2016 that number grew to 1.55 million.
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    The data available to the Bureau with respect to open-end line of 
credit institutions by banks and thrifts is not sufficiently robust to 
allow the Bureau to estimate with any precision the number of such 
institutions that have crossed over the open-end transactional 
threshold in the 2015 HMDA Final Rule. However, there is reliable data 
with respect to credit unions which are required to report open-end 
originations in their Call Reports. The Bureau's review of credit union 
Call Report data indicates that the number of credit unions that 
originated 100 or more open-end lines of credit in 2015 was up 31 
percent over 2013.\53\ If there were a comparable increase among banks 
and thrifts, that would imply that the total number of open-end 
reporters under the transactional coverage threshold would be 980, as 
compared to the estimate of 749 in the 2015 HMDA Final Rule.\54\ Of 
course, if volumes have increased at these institutions, the breadth 
and importance of the credit they extend may also have increased and 
therefore the benefits from collecting and reporting those data may 
have as well.
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    \53\ The 2015 HMDA Final Rule contained aggregated estimates for 
credit unions, banks, and thrifts. In developing those estimates, 
the Bureau had constructed separate estimates for credit unions 
using the credit union Call Report data. Specifically, the Bureau 
estimated that in 2013 there were 534 credit unions that originated 
100 or more open-end lines of credit. Based on 2015 credit union 
Call Report data, that number is now 699.
    \54\ The estimates contained in the 2015 HMDA Final Rule and 
those stated in text are based on origination volumes for a single-
year. The two-year lookback period intended in the 2015 HMDA Final 
Rule and contained in the 2017 HMDA Proposal and in this proposal as 
well--that is, the exclusion for institutions that fell below the 
transactional coverage threshold in either of the two preceding 
years--would likely reduce the number of reporters below those 
stated in text at least during the first year after the rule takes 
effect. On the other hand, the fact that the estimates are based 
upon credit union Call Report data which, as noted in the 2015 HMDA 
Final Rule, exclude open-end lines of credit originated in a first 
position may mean that the estimates understate the number of 
reporters.
---------------------------------------------------------------------------

    Additionally, information received by the Bureau since issuing the 
2015 HMDA Final Rule has caused the Bureau to question its assumption, 
as set forth above, that low-complexity (tier 3) institutions process 
their home-equity lines of credit on the same data platforms as their 
closed-end mortgages, which in turn drove the Bureau's corresponding 
assumptions that the one-time costs for these institutions would be 
minimal. The Bureau has heard anecdotal evidence suggesting that one-
time costs could be as high as $100,000 for tier 3 institutions. The 
Bureau likewise has heard anecdotal evidence suggesting that the 
ongoing costs for these institutions--which the Bureau estimated would 
be under $10,000 per year and add under $60 per line of credit--could 
be at least three times higher.
    These reports, coupled with the additional evidence discussed above 
with respect to the number of institutions that would be covered by the 
open-end transactional coverage test contained in the 2015 HMDA Final 
Rule, have led the Bureau to believe that it is appropriate to seek 
comment to determine whether an adjustment in the threshold is 
appropriate. Although this could be accomplished by delaying the 
effective date for the reporting requirement for open-end lines of 
credit in toto, for the reasons set forth above and those articulated 
in the 2015 HMDA Final Rule, the Bureau continues to believe that it is 
vitally important to begin to collect data on the burgeoning market for 
home-equity lines of credit. Accordingly, in light of the 
considerations set forth above, the Bureau is proposing to increase 
temporarily the open-end transactional coverage threshold--and to make 
a parallel change in the institutional coverage threshold--so that 
institutions originating fewer than 500 open-end lines of credit in 
either of the two preceding calendar years will not be required to 
commence collecting or reporting data on their open-end lines of credit 
until the Bureau has the opportunity to reassess whether to adjust the 
threshold.
    In developing a proposed temporary adjustment of the threshold, the 
Bureau has examined the coverage estimates contained in the 2015 HMDA 
Final Rule, as well as the Bureau's analysis of more recent credit 
union Call Report data.
    As shown above in Table 8 from the 2015 HMDA Final Rule, the Bureau 
had estimated, using 2013 data, that a 500 line-of-credit threshold 
would have reduced the number of reporting institutions from 749 to 
231, a 69 percent reduction, while reducing the share of lines of 
credit reported from 88 percent to 76 percent, a fourteen percent 
reduction.\55\ Of the 231 depositories that the Bureau estimated were 
originating 500 or more open-end lines of credit, 175 were credit 
unions. The Bureau's review of credit union Call Report data from 2015 
suggests that the number of credit unions originating 500 or fewer 
lines of credit has increased, but at a slightly slower pace than the 
increase in credit unions originating between 100 and 499 open-end 
lines of credit.\56\ Assuming comparable trends among banks and 
thrifts, the Bureau now estimates that in 2015, 289 depository 
institutions originated 500 or more open-end lines of credit, as 
compared to an estimated 980 such institutions that originated at least 
100 such lines. On average, the institutions that would be excluded by 
increasing the threshold to 500 originated fewer than 250 open-end 
lines of credit per year.\57\ At the same time, the Bureau estimates 
that under a 500 loan open-end transactional coverage threshold, 
roughly three-quarters of the loan application volume in the open-end 
market would be reported.\58\
---------------------------------------------------------------------------

    \55\ 2015 HMDA Final Rule, supra note 8, at 66281. Note that the 
estimates contained in the 2015 HMDA Final Rule were based on 
origination volumes in a single year (2013), and did not reflect the 
intended two-year lookback period for determining whether reporting 
would be required.
    \56\ According to the Bureau's analysis of credit union Call 
Report data, in 2015 there were 219 credit unions that reported 
originating 500 or more open-end lines of credit.
    \57\ This estimate is based on an analysis of the credit union 
Call Report data for 2015. The Bureau also has reviewed 2013 and 
2014 credit union Call Report data which likewise shows an average 
at or below 250 for credit unions originating between 100 and 500 
open-end lines of credit.
    \58\ The 2015 HMDA Final Rule estimated that an open-end 
transactional coverage threshold of 500 would cover 76 percent of 
the market. The credit union Call Report data suggests that the 
share of the credit union market covered by credit unions 
originating at least 500 open-end lines increased by 6 percent in 
2015 relative to 2013. However, we conservatively rely on the 
estimate contained in the 2015 HMDA Final Rule.
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    The Bureau has considered, as an alternative, increasing the open-
end transactional coverage threshold to 1,000. The Bureau estimates 
that there are approximately 110 depository institutions that 
originated between 500 and 1,000 open-end lines of credit in 2015.\59\ 
Increasing the open-end

[[Page 33460]]

transactional coverage threshold to 1,000 and applying that test to 
institutions that originated at least 1,000 open-end lines of credit in 
each of the prior two years (i.e., in 2014 and 2015) would have 
relieved approximately 90 depository institutions of the obligation to 
report on their open-end lines of credit in 2016 relative to a 500 
threshold. In 2016, those institutions originated, on average, close to 
1,000 open-end lines of credit per year.\60\ Furthermore, a 1,000 loan 
open-end transactional coverage threshold would reduce coverage of the 
open-end line of credit market to approximately 68 percent and would 
reduce coverage of the credit union open-end line of credit marketplace 
to just 49 percent.\61\
---------------------------------------------------------------------------

    \59\ The estimates contained in the 2015 HMDA Final Rule were 
predicated on an estimate that in 2013 there were 93 credit unions 
that originated between 500 and 1,000 open-end lines of credit. The 
Bureau's analysis of 2015 credit union Call Report data shows that 
in 2015 there were 95 such credit unions. The Bureau thus assumes 
that the total number of depository institutions originating between 
500 and 1,000 open-end lines of credit held constant between 2013 
and 2015.
    \60\ According to the Bureau's calculations, of the credit 
unions originating between 500 and 1,000 open-end lines of credit in 
2015, fewer than 80 percent had done so in both 2014 and 2015. Those 
credit unions originated, on average, 959 and 1,032 open-end lines 
of credit in 2014 and 2015 respectively.
    \61\ The estimates in the 2015 HMDA Final Rule were predicated 
on an estimate that an open-end transactional coverage threshold of 
1,000 would reduce coverage of the credit union marketplace to 50 
percent. The Bureau's review of 2015 credit union Call Report data 
indicates that remains true.
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    Beyond that, the Bureau believes that institutions that have 
originated at least 500 dwelling-secured open-end lines of credit in 
each of the last two years--and that are averaging closer to 1,000 such 
lines--are, at a minimum, moderately-complex operations able to 
shoulder the costs of collecting and reporting data on their open-end 
lines of credit. For example, information supplied to the Bureau from 
the credit league of one State indicates that of the seven credit 
unions in that State that had originated more than 250 home-equity 
lines of credit in the first six months of 2016 (and thus were on track 
to originate 500 for the year), six had assets over $1 billion.
    For all these reasons, the Bureau is proposing to amend the open-
end transactional coverage threshold in Regulation C as adopted by the 
2015 HMDA Final Rule, effective January 1, 2018, to increase the 
threshold from 100 to 500 and is proposing to amend the threshold, 
effective January 1, 2020, to restore it to 100. The Bureau is 
proposing a parallel change in the institutional coverage threshold. 
The Bureau believes that this two-year period will give the Bureau 
sufficient time to assess whether the change being proposed should be 
made permanent or whether the threshold should be set at some lower 
level, and to finalize its determination in time to allow institutions 
who may be covered under the permanent threshold but not by the 
temporary threshold to complete their implementation process.
    The Bureau seeks comment on whether to increase temporarily the 
open-end transactional coverage threshold and, if so, whether to raise 
the threshold to 500 or to a larger or smaller number. The Bureau also 
seeks comment on whether, if it elects to increase the open-end 
transactional coverage threshold, it should do so for a period of two 
years or a longer or shorter period of time.
    The Bureau notes that it is not proposing to adjust the closed-end 
transactional coverage threshold. As explained above, in establishing 
that threshold the Bureau was able to base its determination on a 
robust dataset that enabled the Bureau to evaluate the implications of 
potential alternative thresholds. This was possible because, prior to 
January 1, 2017, under Regulation C depository institutions that 
originated even a single closed-end mortgage and met the location and 
asset coverage criteria generally were required to report on closed-end 
mortgage applications under HMDA.
    Relying on these data, the Bureau was able to evaluate the 
implications of alternative potential transactional coverage threshold 
for closed-end mortgage loans. The Bureau recognized that setting a 
threshold above 25 closed-end loans would not significantly impact the 
value of HMDA data at the national level. But the Bureau also 
recognized that public officials, community advocates, and researchers 
rely on HMDA data to analyze access to credit at the neighborhood level 
and to target programs to assist underserved communities and consumers 
and that, therefore, it was appropriate to consider local impacts in 
setting a transactional coverage threshold.\62\ For example, had the 
threshold for closed-end mortgage loans been set at 500 loans--the 
highest level the Bureau considered although well below thresholds 
urged by some industry stakeholders--more than 5,000 census tracts 
would have lost 20 percent or more of the then currently-reported HMDA 
data, of which one-third would have been tracts designated as low- to 
moderate-income (LMI).\63\ In contrast, the 25-loan transactional 
threshold established by the 2015 HMDA Final Rule resulted in only 46 
census tracts losing 20 percent or more of their data. Further, the 
closed-end transactional coverage threshold established by the 2015 
HMDA Final Rule also increased reporting by nondepository 
institutions--and thus increased visibility into their share of the 
market--by reducing their preexisting threshold from 100 to 25, thereby 
leveling the playing field.\64\
---------------------------------------------------------------------------

    \62\ 2015 HMDA Final Rule, supra note 8, at 66147.
    \63\ Id. at 66279.
    \64\ The current nondepository institution coverage test 
includes a loan-volume or asset test, where only nondepository 
institutions that originated at least 100 applicable loans in the 
preceding calendar year or had assets of more than $10 million on 
the preceding December 31 and meet the other applicable criteria are 
required to report HMDA data. See Section 1026.2 (definition of 
financial institution).
---------------------------------------------------------------------------

    Additionally, because many depository financial institutions 
originating even a small number of loans were at the time of the 2015 
HMDA Final Rule required to report under HMDA, in estimating the one-
time and incremental ongoing costs of implementing and complying with 
the final rule, the Bureau was able to draw upon actual experience of 
institutions of various sizes in collecting and reporting HMDA data.
    Despite the objections the Bureau has heard since issuing the 2015 
HMDA Final Rule to the transactional coverage threshold for closed-end 
mortgage loans, the Bureau does not have reason to believe that it 
underestimated the costs of implementation or overestimated the adverse 
consequences of establishing a higher threshold for analyses at the 
local level. The Bureau also continues to believe that there are 
significant benefits in obtaining increased visibility into the 
originations by nondepositories that originate fewer than 100 closed-
end mortgages. For these reasons, as well as those set forth in the 
2015 HMDA Final Rule, the Bureau does not believe it is necessary or 
appropriate to reconsider that threshold and therefore is not proposing 
to do so.
    The Bureau is not proposing in this notice to change the effective 
date for any other provision of the 2015 HMDA Final Rule or to make any 
other substantive changes to that rule.

III. Legal Authority

    The Bureau is issuing this proposal pursuant to its authority under 
the Dodd-Frank Act and HMDA. This proposed rule consists of amendments 
to the 2015 HMDA Final Rule.\65\ Section 1061 of the Dodd-Frank Act 
transferred to the Bureau the ``consumer financial protection 
functions'' previously vested in certain other Federal agencies, 
including the Board.\66\ The term ``consumer financial protection

[[Page 33461]]

function'' is defined to include ``all authority to prescribe rules or 
issue orders or guidelines pursuant to any Federal consumer financial 
law, including performing appropriate functions to promulgate and 
review such rules, orders, and guidelines.'' \67\ Section 1022(b)(1) of 
the Dodd-Frank Act authorizes the Bureau's Director to prescribe rules 
``as may be necessary or appropriate to enable the Bureau to administer 
and carry out the purposes and objectives of the Federal consumer 
financial laws, and to prevent evasions thereof.'' \68\ Both HMDA and 
title X of the Dodd-Frank Act are Federal consumer financial laws.\69\ 
Accordingly, the Bureau has authority to issue regulations to 
administer HMDA.
---------------------------------------------------------------------------

    \65\ 2015 HMDA Final Rule, supra note 8, at 66136-37.
    \66\ 12 U.S.C. 5581. Section 1094 of the Dodd-Frank Act also 
replaced the term ``Board'' with ``Bureau'' in most places in HMDA. 
12 U.S.C. 2803 et seq.
    \67\ 12 U.S.C. 5581(a)(1)(A).
    \68\ 12 U.S.C. 5512(b)(1).
    \69\ Dodd-Frank Act section 1002(14), 12 U.S.C. 5481(14) 
(defining ``Federal consumer financial law'' to include the 
``enumerated consumer laws'' and the provisions of title X of the 
Dodd-Frank Act); Dodd-Frank Act section 1002(12), 12 U.S.C. 5481(12) 
(defining ``enumerated consumer laws'' to include HMDA).
---------------------------------------------------------------------------

    HMDA section 305(a) broadly authorizes the Bureau to prescribe such 
regulations as may be necessary to carry out HMDA's purposes.\70\ These 
regulations may include ``classifications, differentiations, or other 
provisions, and may provide for such adjustments and exceptions for any 
class of transactions, as in the judgment of the Bureau are necessary 
and proper to effectuate the purposes of [HMDA], and prevent 
circumvention or evasion thereof, or to facilitate compliance 
therewith.'' \71\
---------------------------------------------------------------------------

    \70\ 12 U.S.C. 2804(a).
    \71\ Id.
---------------------------------------------------------------------------

    A number of HMDA provisions specify that covered institutions must 
compile and make their HMDA data publicly available ``in accordance 
with regulations of the Bureau'' and ``in such formats as the Bureau 
may require.'' \72\ HMDA section 304(j)(7) also directs the Bureau to 
make every effort in prescribing regulations under that subsection to 
minimize the costs incurred by a depository institution in complying 
with such regulations.\73\ HMDA also authorizes the Bureau to issue 
regulations relating to the timing of HMDA disclosures.\74\
---------------------------------------------------------------------------

    \72\ See, e.g., HMDA section 304(a)(1), (j)(2)(A), (j)(3), 
(m)(2), 12 U.S.C. 2803(a)(1), (j)(2)(A), (j)(3), (m)(2); see also 
HMDA section 304(b)(6)(I), 12 U.S.C. 2803(b)(6)(I) (requiring 
covered institutions to use ``such form as the Bureau may 
prescribe'' in reporting credit scores of mortgage applicants and 
mortgagors). HMDA section 304(k)(1) also requires depository 
institutions covered by HMDA to make disclosure statements available 
``[i]n accordance with procedures established by the Bureau pursuant 
to this section.'' 12 U.S.C. 2803(k)(1).
    \73\ 12 U.S.C. 2803(j)(7).
    \74\ HMDA section 304(l)(2)(A), 12 U.S.C. 2803(l)(2)(A) (setting 
maximum disclosure periods except as provided under other HMDA 
subsections and regulations prescribed by the Bureau); HMDA section 
304(n), 12 U.S.C. 2803(n).
---------------------------------------------------------------------------

    In preparing this proposed rule, the Bureau has considered the 
changes below in light of its legal authority under HMDA and the Dodd-
Frank Act. The Bureau has determined that each of the changes addressed 
below is consistent with the purposes of HMDA and is authorized by one 
or more of the sources of statutory authority identified in this part.

IV. Section-by-Section Analysis

Section 1003.2 Definitions

2(g) Financial Institution
2(g)(1) Depository Financial Institution
2(g)(1)(v)
2(g)(1)(v)(B)
    Regulation C as amended by the 2015 HMDA Final Rule defines 
``depository financial institution'' as a bank, savings association or 
credit union that meets certain criteria. One of those criteria is that 
the institution either (A) originated at least 25 closed-end mortgages 
loans in each of the two preceding calendar years; or (B) originated at 
least 100 open-end lines of credit in each of the two preceding 
calendar years. For depositories that do not meet the closed-end 
mortgage loan component of this test, their status as a depository 
financial institution under Regulation C turns, in part, on their 
volume of open-end line of credit originations. Because, as discussed 
above in section II, the Bureau is proposing to increase temporarily 
the open-end transactional coverage threshold from 100 to 500, the 
Bureau is proposing to make a parallel, temporary change in the 
institutional coverage threshold included in Sec.  1003.2(g) as well. 
Under this proposed amendment, effective January 1, 2018, a depository 
institution that did not originate at least 25 closed-end mortgage 
loans in each of the two preceding years would not be deemed to be a 
depository financial institution under Regulation C unless it 
originated 500 or more open-end lines of credit in each of the two 
preceding years and met the other applicable criteria included in Sec.  
1003.2(g)(i).
    In accordance with the proposal with respect to the open-end 
transactional coverage threshold, the Bureau is proposing conforming 
amendments to the definition of depository financial institution 
effective January 1, 2020, to revert to the definition established by 
the 2015 HMDA Final Rule, i.e., to set the open-end institutional 
coverage threshold at 100 lines of credit.
    As a result, under this proposal, for calendar years 2018 and 2019, 
financial institutions that do not meet the closed-end mortgage loan 
component of the test and that originate between 100 and 499 open-end 
lines of credit would not meet the definition of ``depository financial 
institution.'' Absent further amendments by the Bureau, beginning in 
calendar year 2020, such depositories would meet the definition of 
``depository financial institution.''
    The Bureau solicits comment on this proposal.
2(g)(2) Nondepository Financial Institution
2(g)(2)(ii)
2(g)(2)(ii)(B)
    Under the 2015 HMDA Final Rule a ``nondepository financial 
institution'' is defined as a for-profit mortgage lending institution 
other than a bank, savings association, or credit union that meets 
certain criteria. One of those criteria is an institutional coverage 
threshold that is identical to the threshold for depository 
institutions discussed above. For the reasons discussed above in 
section II and the section-by-section analysis of Sec.  
1003.2(g)(1)(v)(B), the Bureau is proposing conforming amendments to 
Sec.  1003.2(g)(ii)(B), which includes the open-end loan volume 
threshold for coverage of nondepository financial institution. Under 
this proposal, for calendar years 2018 and 2019, the open-end loan 
volume threshold for institutional coverage of nondepository 
institutions would be raised from 100 to 500. Absent further amendments 
by the Bureau, beginning in calendar year 2020, such nondepository 
institutions would meet the definition of ``nondepository financial 
institution.''
    Comments 2(g)-3 and 2(g)-5 each assumed that the open-end 
institutional threshold was 100. The proposal would amend these 
comments effective January 1, 2018, to reflect the temporary higher 
threshold proposed herein and further amends the comment effective 
January 1, 2020, to restore the original threshold.

Section 1003.3 Exempt Institutions and Excluded Transactions

3(c) Excluded transactions
3(c)(12)
    Under Regulation C as amended by the 2015 HMDA Final Rule, an open-
end line of credit is an ``excluded

[[Page 33462]]

transaction'' and thus not subject to the collection, reporting, and 
disclosure requirements of Regulation C, if the financial institution 
originated fewer than 100 open-end lines of credit in each of the two 
preceding calendar years. As discussed above in section II, the Bureau 
has previously proposed to amend this provision to substitute the word 
``either'' for ``each,'' and the Bureau reflects the language of the 
2017 HMDA Proposal here. Additionally, for the reasons previously 
discussed, the Bureau is proposing, effective January 1, 2018, to 
increase the open-end transactional coverage threshold from 100 to 500 
lines of credit. The Bureau is further proposing, effective January 1, 
2020, to restore the open-end transactional coverage threshold to the 
level adopted by the 2015 HMDA Final Rule, i.e., 100 lines of credit.
    Under this proposal, for calendar years 2018 and 2019, a financial 
institution that originates between 100 and 499 open-end lines of 
credit in either of the two preceding calendar years would not be 
required to collect, report, and disclose data on open-end lines of 
credit. Absent further amendments by the Bureau, beginning in calendar 
year 2020, such a financial institution would be required to do so.
    The Bureau previously proposed to clarify that financial 
institutions may voluntarily report open-end lines of credit or closed-
end mortgage loans even if the institution may exclude those loans 
pursuant to the transactional thresholds included in Sec.  
1003.3(c)(11) or (12) under the 2015 HMDA Final Rule.\75\ This proposal 
reflects this amended language of the 2017 HMDA Proposal and amends 
that language to reflect the temporary higher threshold proposed herein 
effective January 1, 2018 and further amends the comment effective 
January 1, 2020 to restore the original threshold. As noted above, the 
Bureau is in the process of reviewing the comments on the 2017 HMDA 
Proposal and preparing a final rule, which the Bureau expects to issue 
on or before the date on which this proposal would be finalized.
---------------------------------------------------------------------------

    \75\ 82 FR 19142, 19165 (April 25, 2017).
---------------------------------------------------------------------------

    Comment 2(c)(12)-1 assumed that the open-end transactional 
threshold was 100. The proposal would amend this comment effective 
January 1, 2018, to reflect the temporary higher threshold proposed 
herein and further amends the comment effective January 1, 2020, to 
restore the original threshold.

V. Section 1022(b) of the Dodd-Frank Act

    In developing the proposed rule, the Bureau has considered the 
potential benefits, costs and impacts required by section 1022(b)(2) of 
the Dodd-Frank Act. Specifically, section 1022(b)(2) calls for the 
Bureau to consider the potential benefits and costs of a regulation to 
consumers and covered persons, including the potential reduction of 
consumer access to consumer financial products or services, the impact 
on depository institutions and credit unions with $10 billion or less 
in total assets as described in section 1026 of the Dodd-Frank Act, and 
the impact on consumers in rural areas. The Bureau has consulted with, 
or offered to consult with, the prudential regulators, the Department 
of the Treasury, the Securities and Exchange Commission, the Department 
of Housing and Urban Development, the Federal Housing Finance Agency, 
the Federal Trade Commission, the Department of Veterans Affairs, the 
Department of Agriculture, the Department of Justice, and the 
Department of the Treasury regarding consistency with any prudential, 
market, or systemic objectives administered by these agencies.
    The Bureau previously considered the costs, benefits, and impacts 
of the 2015 HMDA Final Rule's major provisions, including the 
institutional coverage threshold and the open-end transactional 
coverage threshold.\76\
---------------------------------------------------------------------------

    \76\ 2015 HMDA Final Rule, supra note 8, at 66282-66287.
---------------------------------------------------------------------------

    Compared to the baseline established by the 2015 HMDA Final Rule, 
the proposed temporary increase in the open-end transactional coverage 
threshold would generally benefit financial institutions that originate 
between 100 and 499 open-end lines of credit in either of the two 
preceding calendar years by, at a minimum, allowing them to delay 
incurring one-time costs and delay the start of ongoing compliance 
costs associated with collecting and reporting data on open-end lines 
of credit. Some institutions may incur costs because they have already 
planned to report open-end lines of credit and now will not be required 
to and will need to change their systems. The Bureau does not have a 
reliable basis to estimate those costs. However, as noted above, the 
Bureau previously proposed to clarify that financial institutions may 
voluntarily report open-end lines of credit or closed-end mortgage 
loans even if the institution may exclude those loans pursuant to the 
transactional thresholds included in Sec.  1003.3(c)(11) or (12) under 
the 2015 HMDA Final Rule. If the Bureau finalizes this clarification, a 
temporary increase in the open-end transactional coverage threshold 
will obviate the need for institutions that are prepared to report 
open-end lines of credit to change their system. However, to the extent 
institutions that already have incurred costs in preparing for 
compliance elect to take advantage of the two-year temporary increase 
in the open-end transactional coverage threshold, unless the Bureau 
elects during the two-year review period to make the increase 
permanent, these institutions would incur one-time expenses which, when 
added to expenses already incurred, may be greater than the one-time 
costs that would have been incurred had the institutions completed 
their compliance work by January 1, 2018. As noted above, the Bureau 
estimates that roughly 690 such institutions would be able to take 
advantage of the two-year temporary increase in the open-end 
transactional coverage threshold.
    The Bureau believes that temporarily increasing the open-end 
transactional coverage threshold for two years would reduce the 
benefits to consumers from the open-end reporting provisions of the 
2015 HMDA Final Rule as those benefits are described in the rule. 
However, the Bureau believes that such impact may be minimal because 
the temporary increase in the open-end transactional coverage threshold 
would still, in the aggregate, result in reporting on approximately 
three-quarters of all open-end lines of credit. However, the Bureau 
recognizes that there may be particular localities where the impact of 
the temporary increase in the open-end transactional coverage threshold 
would be more pronounced. The Bureau lacks data to be able to estimate 
the extent to which that may be true.
    To the extent there are benefits to covered persons resulting from 
the temporary increase in the open-end transactional coverage 
threshold, the Bureau believes those benefits would flow almost 
exclusively to insured depository institutions and credit unions with 
under $10 billion assets and to a large extent to depository 
institutions servicing consumers in rural communities. The Bureau does 
not believe that the proposed temporary increase in the open-end 
transactional coverage threshold would reduce consumer access to 
consumer financial products and services, and it may increase consumer 
access by decreasing the possibility that certain financial 
institutions increase their pricing as a result of the requirements of 
the 2015

[[Page 33463]]

HMDA Final Rule or seek to cap the number of open-end lines of credit 
they originate to stay under the open-end transactional coverage 
threshold.
    The Bureau requests comment on this discussion as well as 
submission of additional information that could inform the Bureau's 
consideration of the potential benefits, costs, and impacts of this 
proposed rule.

VI. Regulatory Flexibility Act

    The Regulatory Flexibility Act (RFA),\77\ as amended by the Small 
Business Regulatory Enforcement Fairness Act of 1996,\78\ requires each 
agency to consider the potential impact of its regulations on small 
entities, including small businesses, small governmental units, and 
small not-for-profit organizations.\79\ The RFA defines a ``small 
business'' as a business that meets the size standard developed by the 
Small Business Administration (SBA) pursuant to the Small Business 
Act.\80\
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    \77\ Public Law 96-354, 94 Stat. 1164 (1980).
    \78\ Public Law 104-21, section 241, 110 Stat. 847, 864-65 
(1996).
    \79\ 5 U.S.C. 601 through 612. The term `` `small organization' 
means any not-for-profit enterprise which is independently owned and 
operated and is not dominant in its field, unless an agency 
establishes [an alternative definition under notice and comment].'' 
5 U.S.C. 601(4). The term `` `small governmental jurisdiction' means 
governments of cities, counties, towns, townships, villages, school 
districts, or special districts, with a population of less than 
fifty thousand, unless an agency establishes [an alternative 
definition after notice and comment].'' 5 U.S.C. 601(5).
    \80\ 5 U.S.C. 601(3). The Bureau may establish an alternative 
definition after consulting with the SBA and providing an 
opportunity for public comment. Id.
---------------------------------------------------------------------------

    The RFA generally requires an agency to conduct an initial 
regulatory flexibility analysis (IRFA) and a final regulatory 
flexibility analysis (FRFA) of any rule subject to notice-and-comment 
rulemaking requirements, unless the agency certifies that the rule 
would not have a significant economic impact on a substantial number of 
small entities.\81\ The Bureau also is subject to certain additional 
procedures under the RFA involving the convening of a panel to consult 
with small entity representatives prior to proposing a rule for which 
an IRFA is required.\82\
---------------------------------------------------------------------------

    \81\ 5 U.S.C. 601 et seq.
    \82\ 5 U.S.C. 609.
---------------------------------------------------------------------------

    As discussed above, the Bureau believes that none of the proposed 
changes would create a significant impact on any covered persons, 
including small entities. Therefore, an IRFA is not required for this 
proposal.
    Accordingly, the undersigned certifies that this proposal, if 
adopted, would not have a significant economic impact on a substantial 
number of small entities. The Bureau requests comment on the analysis 
above and requests any relevant data.

VII. Paperwork Reduction Act

    Under the Paperwork Reduction Act of 1995 (PRA) (44 U.S.C. 3501 et 
seq.), Federal agencies are generally required to seek the Office of 
Management and Budget (OMB) approval for information collection 
requirements prior to implementation. The information collection 
requirements contained in Regulation C have been previously approved by 
OMB and assigned OMB control number 3170-0008. You may access this 
information collection on www.reginfo.gov by selecting ``Information 
Collection Review'' from the main menu, clicking on ``Search,'' and 
then entering the OMB control number. Under the PRA, the Bureau may not 
conduct or sponsor and, notwithstanding any other provision of law, a 
person is not required to respond to an information collection unless 
the information collection displays a valid control number assigned by 
OMB.
    The Bureau has determined that this proposed rule would not have 
any new or revised information collection requirements (recordkeeping, 
reporting, or disclosure requirements) on covered entities or members 
of the public that would constitute collections of information 
requiring OMB approval under the PRA. The Bureau welcomes comments on 
this determination or any other aspects of this proposal for purposes 
of the PRA. Comments should be submitted to the Bureau as instructed in 
the addresses part of this notice and to the attention of the Paperwork 
Reduction Act Officer. All comments will become a matter of public 
record.

List of Subjects in 12 CFR Part 1003

    Banks, Banking, Credit unions, Mortgages, National banks, Savings 
associations, Reporting and recordkeeping requirements.

Authority and Issuance

    For the reasons set forth above, the Bureau proposes to amend 
Regulation C, 12 CFR part 1003, as amended October 28, 2015, at 80 FR 
66128, and effective January 1, 2018, as set forth below:

PART 1003--HOME MORTGAGE DISCLOSURE (REGULATION C)

0
1. The authority citation for part 1003 continues to read as follows:

    Authority: 12 U.S.C. 2803, 2804, 2805, 5512, 5581.

    [The following amendments would be effective January 1, 2018, 
further amending the sections as amended October 28, 2015, at 80 FR 
66128.]

0
2. Amend Sec.  1003.2 by revising paragraphs (g)(1)(v)(B) and 
(g)(2)(ii)(B) to read as follows:


Sec.  1003.2  Definitions.

* * * * *
    (g) * * *
    (1) * * *
    (v) * * *
    (B) In each of the two preceding calendar years, originated at 
least 500 open-end lines of credit that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10); and
    (2) * * *
    (ii) * * *
    (B) In each of the two preceding calendar years, originated at 
least 500 open-end lines of credit that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10).
* * * * *
0
3. Amend Sec.  1003.3 by revising paragraph (c)(12) to read as follows:


Sec.  1003.3  Exempt institutions and excluded transactions.

* * * * *
    (c) * * *
    (12) An open-end line of credit, if the financial institution 
originated fewer than 500 open-end lines of credit in either of the two 
preceding calendar years; or
0
4. In Supplement I to Part 1003:
0
a. Under Section 1003.2--Definitions, under 2(g) Financial Institution, 
paragraphs 3 and 5 are revised.
0
b. Under Section 1003.3--Exempt Institutions And Excluded Transactions, 
under 3(c) Excluded Transactions, in Paragraph 3(c)(12), paragraph 1 is 
revised and paragraph 2 is added.
    The revisions and addition read as follows:

Supplement I to Part 1003--Official Interpretations

* * * * *

Section 1003.2--Definitions

* * * * *
2(g) Financial Institution
* * * * *
    3. Merger or acquisition--coverage of surviving or newly formed 
institution. After a merger or acquisition, the surviving or newly 
formed institution is a financial institution under Sec.  1003.2(g) if 
it, considering the combined assets, location, and lending activity of 
the surviving or newly formed institution and the merged or acquired 
institutions or acquired branches, satisfies the criteria included in 
Sec.  1003.2(g). For example, A and B merge. The surviving

[[Page 33464]]

or newly formed institution meets the loan threshold described in Sec.  
1003.2(g)(1)(v)(B) if the surviving or newly formed institution, A, and 
B originated a combined total of at least 500 open-end lines of credit 
in each of the two preceding calendar years. Likewise, the surviving or 
newly formed institution meets the asset-size threshold in Sec.  
1003.2(g)(1)(i) if its assets and the combined assets of A and B on 
December 31 of the preceding calendar year exceeded the threshold 
described in Sec.  1003.2(g)(1)(i). Comment 2(g)-4 discusses a 
financial institution's responsibilities during the calendar year of a 
merger.
    * * *
    5. Originations. Whether an institution is a financial institution 
depends in part on whether the institution originated at least 25 
closed-end mortgage loans in each of the two preceding calendar years 
or at least 500 open-end lines of credit in each of the two preceding 
calendar years. Comments 4(a)-2 through -4 discuss whether activities 
with respect to a particular closed-end mortgage loan or open-end line 
of credit constitute an origination for purposes of Sec.  1003.2(g).
* * * * *

Section 1003.3--Exempt Institutions and Excluded Transactions

* * * * *
3(c) Excluded Transactions.
* * * * *
Paragraph 3(c)(12).
    1. General. Section 1003.3(c)(12) provides that an open-end line of 
credit is an excluded transaction if a financial institution originated 
fewer than 500 open-end lines of credit in either of the two preceding 
calendar years. For example, assume that a bank is a financial 
institution in 2019 under Sec.  1003.2(g) because it originated 50 
closed-end mortgage loans in 2017, 75 closed-end mortgage loans in 
2018, and met all of the other requirements under Sec.  1003.2(g)(1). 
Also assume that the bank originated 75 and 85 open-end lines of credit 
in 2017 and 2018, respectively. The closed-end mortgage loans that the 
bank originated, or for which it received applications, during 2019 are 
covered loans and must be reported, unless they otherwise are excluded 
transactions under Sec.  1003.3(c). However, the open-end lines of 
credit that the bank originated, or for which it received applications, 
during 2019 are excluded transactions under Sec.  1003.3(c)(12) and 
need not be reported. See comments 4(a)-2 through -4 for guidance about 
the activities that constitute an origination.
    2. Voluntary reporting. A financial institution voluntarily may 
report open-end lines of credit and applications for open-end lines of 
credit that are excluded transactions because the financial institution 
originated fewer than 500 open-end lines of credit in either of the two 
preceding calendar years.

[The following amendments would be effective January 1, 2020, further 
amending the sections as amended October 28, 2015, at 80 FR 66128.]
0
5. Amend Sec.  1003.2 by revising paragraphs (g)(1)(v)(B) and 
(g)(2)(ii)(B) to read as follows:


Sec.  1003.2   Definitions.

* * * * *
    (g) * * *
    (1) * * *
    (v) * * *
    (B) In each of the two preceding calendar years, originated at 
least 100 open-end lines of credit that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10); and
    (2) * * *
    (ii) * * *
    (B) In each of the two preceding calendar years, originated at 
least 100 open-end lines of credit that are not excluded from this part 
pursuant to Sec.  1003.3(c)(1) through (10).
* * * * *
0
6. Amend Sec.  1003.3 by revising paragraph (c)(12) to read as follows:


Sec.  1003.3  Exempt institutions and excluded transactions.

* * * * *
    (c) * * *
    (12) An open-end line of credit, if the financial institution 
originated fewer than 100 open-end lines of credit in either of the two 
preceding calendar years; or
0
7. In Supplement I to Part 1003:
0
a. Under Section 1003.2--Definitions, under 2(g) Financial Institution, 
paragraphs 3 and 5 are revised.
0
b. Under Section 1003.3--Exempt institutions and excluded transactions, 
under 3(c) Excluded transactions, in paragraph 3(c)(12), paragraph 1 is 
revised and paragraph 2 is added.
    The revisions and addition read as follows:

Supplement I to Part 1003--Official Interpretations

* * * * *

Section 1003.2--Definitions

* * * * *
2(g) Financial Institution
* * * * *
    3. Merger or acquisition--coverage of surviving or newly formed 
institution. After a merger or acquisition, the surviving or newly 
formed institution is a financial institution under Sec.  1003.2(g) if 
it, considering the combined assets, location, and lending activity of 
the surviving or newly formed institution and the merged or acquired 
institutions or acquired branches, satisfies the criteria included in 
Sec.  1003.2(g). For example, A and B merge. The surviving or newly 
formed institution meets the loan threshold described in Sec.  
1003.2(g)(1)(v)(B) if the surviving or newly formed institution, A, and 
B originated a combined total of at least 100 open-end lines of credit 
in each of the two preceding calendar years. Likewise, the surviving or 
newly formed institution meets the asset-size threshold in Sec.  
1003.2(g)(1)(i) if its assets and the combined assets of A and B on 
December 31 of the preceding calendar year exceeded the threshold 
described in Sec.  1003.2(g)(1)(i). Comment 2(g)-4 discusses a 
financial institution's responsibilities during the calendar year of a 
merger.
    * * *
    5. Originations. Whether an institution is a financial institution 
depends in part on whether the institution originated at least 25 
closed-end mortgage loans in each of the two preceding calendar years 
or at least 100 open-end lines of credit in each of the two preceding 
calendar years. Comments 4(a)-2 through -4 discuss whether activities 
with respect to a particular closed-end mortgage loan or open-end line 
of credit constitute an origination for purposes of Sec.  1003.2(g).
* * * * *

Section 1003.3--Exempt Institutions and Excluded Transactions

* * * * *
    3(c) Excluded transactions.
* * * * *
    Paragraph 3(c)(12).
    1. General. Section 1003.3(c)(12) provides that an open-end line of 
credit is an excluded transaction if a financial institution originated 
fewer than 100 open-end lines of credit in either of the two preceding 
calendar years. For example, assume that a bank is a financial 
institution in 2022 under Sec.  1003.2(g) because it originated 50 
closed-end mortgage loans in 2020, 75 closed-end mortgage loans in 
2021, and met all of the other requirements under Sec.  1003.2(g)(1). 
Also assume that the bank originated 75 and 85 open-end lines of credit 
in 2020 and 2021, respectively. The closed-end mortgage loans that the 
bank originated, or for

[[Page 33465]]

which it received applications, during 2022 are covered loans and must 
be reported, unless they otherwise are excluded transactions under 
Sec.  1003.3(c). However, the open-end lines of credit that the bank 
originated, or for which it received applications, during 2022 are 
excluded transactions under Sec.  1003.3(c)(12) and need not be 
reported. See comments 4(a)-2 through -4 for guidance about the 
activities that constitute an origination.
    2. Voluntary reporting. A financial institution voluntarily may 
report open-end lines of credit and applications for open-end lines of 
credit that are excluded transactions because the financial institution 
originated fewer than 100 open-end lines of credit in either of the two 
preceding calendar years.

    Dated: July 13, 2017.
Richard Cordray,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2017-15220 Filed 7-19-17; 8:45 am]
 BILLING CODE 4810-AM-P