Many credit unions in Massachusetts will no longer have to report home equity line of credit (HELOC) data to federal regulators after the U.S. consumer watchdog agency earlier this week vowed to raise the reporting threshold.
In a statement Richard Cordray, director of the Consumer Financial Protection Bureau, said the agency would issue a proposal within the next few weeks that would exempt credit unions that originate less than 500 HELOCs in either of the previous two calendar years from reporting the data in 2018 and 2019.
Under the CFPB’s proposed reporting changes for the Home Mortgage Disclosure Act, which is set to take effect in 2018, only those credit unions that originate less than 100 HELOCs are exempt from reporting HELOC data.
“It’s a very big deal for many credit unions,” Paul Gentile, CEO of the Cooperative Credit Union Association, told Banker & Tradesman. “I commend CFPB for recognizing the burden on smaller institutions.”
First enacted in 1975, HMDA requires certain financial institutions to provide mortgage data to the public. When Congress passed the Dodd-Frank Act in 2010 and created the CFPB, Dodd-Frank directed the CFPB to expand the HMDA data set.
According to Gentile, if the HMDA HELOC change had gone into effect with the current threshold, many credit unions would have had to invest in new mortgage origination platforms to pull the data requested by federal regulators.
This could have cost hundreds of thousands of dollars, not including monthly maintenance costs, he said.
“If you regulate small guys out of business, you are only left with a few big players,” said Gentile. “We struggled to even understand what benefit HELOC [data] will be to the CFPB, especially from credit unions and community banks which have a much smaller slice of the market than the big banks.”
Gentile, along with other credit union advocacy groups, lobbied the CFPB hard to raise the threshold.
Gentile wrote an op-ed in the Credit Union Journal on the matter and also encouraged U.S. House Rep. Michael Capuano of the seventh district of Massachusetts to write to Cordray, which Capuano eventually did.
According to Capuano’s letter, the current HDMA rule would have required credit unions that originate more than 100 HELOCs to report 17 additional data points under Dodd-Frank regulation and an additional 16 to the CFPB.
“I have been contacted by a number of credit unions in my district expressing concern that the additional data collection points for HELOCs will be overly burdensome in light of the size of their institutions and may act as a deterrent to any expansion of their HELOC business beyond 100 transactions per year,” wrote Capuano in his letter.
Research on the impact of HDMA conducted by the Credit Union National Association showed that 23 percent of credit unions that currently offer HELOCs indicated they were planning to either limit their HELOC offerings or stop offering them in response to reporting burdens.
According to data in Capuano’s letter on HELOCs issued from January to June of 2016, nearly 30 credit unions were on pace to originate more than 100 HELOCS in 2016.
With the new 500 HELOC threshold, credit unions in Massachusetts such as Digital Federal Credit Union, Hanscom FCU and Jeanne D’Arc would still have to report HELOC data to the CFPB. Three more credit unions in Massachusetts were also on pace in 2016 to originate more than 500 HELOCs, according to data in Capuano’s letter.
Gentile said he still thinks the 500 number is too low and would like to see the number above 2,000, but he said the increase still would represent a significant improvement and gives credit to the CFPB for taking another look.