Large banks could stand to get similar relief from mortgage data reporting requirements that Congress just gave community banks, but that relief may not be all it's cracked up to be.
On the one hand, acting Consumer Financial Protection Bureau Mick Mulvaney's comments that he wants to ease Home Mortgage Disclosure Act requirements imposed by his predecessor is welcome news. But on the other, more data helps lenders know how they stack up to the competition, and lenders may end up collecting the data anyway. The data also would have exposed lenders to far greater scrutiny of fair-lending violations.
"The problem without comparable data is a lender can't figure out how they compare to everybody else," said Leonard Ryan, president of QuestSoft Corp., a Laguna Hills, Calif., provider of mortgage software.
The regulatory relief bill that President Trump just signed gave 85% of all banks relief from expanded HMDA data fields mandated by the Dodd-Frank Act. Congress enacted HMDA in 1975 to root out discrimination in mortgage lending.
Dodd-Frank mandated 14 additional data fields for HMDA data collection, on top of the nine that already existed. The statute also gave the CFPB the discretion to add additional data fields, and former CFPB Director Richard Cordray used that authority to establish 25 additional data fields.
But Mulvaney turned heads earlier this month in a speech to the National Association of Realtors when he signaled he plans to use the same authority to rescind all 25 data fields. Such a move would extend regulatory relief to a wider array of lenders than in the reg relief legislation signed by Trump.
The Senate on Wednesday confirmed Brian Montgomery as Federal Housing Administration commissioner in a 74-23 vote.
Montgomery, who most recently served as vice chairman of the business advisory firm Collingwood Group, was previously FHA commissioner from 2005 to 2009.
However, Montgomery’s nomination was opposed by several Democrats, including Sens. Sherrod Brown of Ohio and Elizabeth Warren of Massachusetts, over concerns that he is too close to the mortgage industry. Despite his having already run the agency in the George W. Bush administration, Montgomery's nomination had languished since the fall.
His confirmation was lauded by industry groups, including the American Bankers Association and the Community Home Lenders Association.
“Montgomery’s previous experience as FHA commissioner in the Bush administration makes him exceptionally qualified for this role, and we’re pleased that he has chosen to return to public service and bring his knowledge and expertise back to HUD,” said ABA President and CEO Rob Nichols.
CHLA Executive Director Scott Olson urged Montgomery to preserve access to mortgage credit for low- and moderate-income, first-time, and underserved borrowers. “Consistent with the continued strong performance of the FHA single-family loan program, CHLA urges actions to lower premiums and end the life of loan policy, and to complete unfinished business in areas like revising condo rules," Olson said.
The Senate also moved to invoke cloture on Jelena McWilliams’ nomination to head the Federal Deposit Insurance Corp. in a 72-25 vote.
Among the many provisions in the Senate's extensive regulatory relief bill are a number of changes that will directly affect mortgage lenders and servicers.
The Senate is racing toward a final vote on S.2155, which includes several items that address the mortgage industry's calls for regulatory relief, as well as other calls for relief from post-crisis Dodd-Frank Act restrictions in adjacent financial-services businesses, like credit scoring.
Some of the proposed changes in the legislation sponsored by Banking Committee Chairman Mike Crapo, R-Idaho, target rules that drew broad-based complaints from the mortgage industry. But others address narrower concerns from specific sub-sets of the business, and at least one is not a relief measure, but rather restores an expired post-crisis servicing restriction.
The regulatory relief that the Crapo bill offers is aimed primarily at loosening restrictions on lenders rather than servicers, particularly if they are smaller and are nonbanks or credit unions.
The U.S. House of Representatives on Tuesday passed S.2155, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act), by a vote of 258 to 159. Having passed the U.S. Senate on March 14 by a vote of 67 to 31, the Act now goes to President Donald J. Trump, who is expected to sign it into law. Although the Act does not make the sweeping changes to the Dodd-Frank Act contemplated by other proposals, it nevertheless provides welcome regulatory relief to both smaller and larger financial institutions.
The Act makes a number of changes to provisions of Dodd-Frank and other federal laws regarding consumer mortgages, credit reporting, and loans to veterans and students. It also reduces the regulatory burdens on financial institutions—particularly financial institutions with total assets of less than $10 billion. Bank holding companies with up to $3 billion in total assets would be permitted to comply with less-restrictive debt-to-equity limitations instead of consolidated capital requirements. This change should promote growth by smaller bank holding companies, organically or by acquisition. Larger institutions should benefit from the higher asset thresholds that would apply to systemically important banks subject to enhanced prudential standards. The higher thresholds may lead to increased merger activity between and among regional and super regional banks.
The following is a summary of some of the Act's key provisions applicable to financial institutions:
Improving Consumer Access to Mortgage Credit
As critics of the Senate banking bill have rallied in recent weeks, an important argument has begun to gain traction: The legislation would make it easier for banks to discriminate.
Opponents have pointed to a provision that, at first glance, seems straightforward enough — a carve-out for small lenders from certain mortgage data reporting requirements.
But the debate around this measure is more complicated than many realize. Every policy change comes with both benefits and costs — and this particular fight highlights how difficult weighing those costs and benefits can really be, even when it comes to what can seem like a harmless tweak.
The Senate bill calls for exempting banks and credit unions that provide fewer than 500 mortgages a year from having to report on a series of expanded data points required by the Home Mortgage Disclosure Act.