# Home Mortgage Disclosure (Regulation C) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2019-22561 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** October 29, 2019 - **Citation:** 84 FR 57946 ## Text BUREAU OF CONSUMER FINANCIAL PROTECTION 12 CFR Part 1003 [Docket No. CFPB-2019-0021] RIN 3170-AA76 Home Mortgage Disclosure (Regulation C) AGENCY: Bureau of Consumer Financial Protection. ACTION: Final rule; official interpretation. SUMMARY: The Bureau of Consumer Financial Protection (Bureau) is amending Regulation C to adjust the threshold for reporting data about open-end lines of credit by extending to January 1, 2022, the current temporary threshold of 500 open-end lines of credit. The Bureau is also incorporating into Regulation C the interpretations and procedures from the interpretive and procedural rule that the Bureau issued on August 31, 2018, and implementing further the Economic Growth, Regulatory Relief, and Consumer Protection Act. DATES: This final rule is effective on January 1, 2020, except for the amendments to § 1003.2 in amendatory instruction 6, the amendments to § 1003.3 in amendatory instruction 7, and the amendments to supplement I to part 1003 in amendatory instruction 8, which are effective on January 1, 2022. FOR FURTHER INFORMATION CONTACT: Jaydee DiGiovanni, Counsel; or Amanda Quester or Alexandra Reimelt, Senior Counsels, Office of Regulations, at 202-435-7700 or https://reginquiries.consumerfinance.gov/. If you require this document in an alternative electronic format, please contact CFPB_Accessibility@cfpb.gov. SUPPLEMENTARY INFORMATION: I. Summary of the Final Rule Regulation C, 12 CFR part 1003, implements the Home Mortgage Disclosure Act (HMDA), 12 U.S.C. 2801 through 2810, and includes institutional and transactional coverage thresholds that determine whether financial institutions are required to collect, record, and report any HMDA data on closed-end mortgage loans or open-end lines of credit (collectively, coverage thresholds). 1 In the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA), 2 Congress added partial exemptions from HMDA's requirements that exempt certain insured depository institutions and insured credit unions from reporting some but not all HMDA data for certain transactions. The final rule incorporates into Regulation C and implements further the EGRRCPA partial exemptions. It also extends for two years a temporary adjustment to Regulation C's institutional and transactional coverage threshold for open-end lines of credit. 3 1 HMDA requires financial institutions to collect, record, and report data. To simplify review of this document, the Bureau generally refers herein to the obligation to report data instead of listing all of these obligations in each instance. 2 Public Law 115-174, 132 Stat. 1296 (2018). 3 When amending the Bureau's commentary, the Office of the Federal Register requires reprinting of certain subsections being amended in their entirety rather than providing more targeted amendatory instructions and commentary. The subsections of regulatory text and commentary included in this document show the complete language of those subsections. In addition, the Bureau is releasing an unofficial, informal redline to assist industry and other stakeholders in reviewing the changes that it is finalizing to the regulatory text and commentary of Regulation C. This redline can be found on the Bureau's regulatory implementation page for the HMDA Rule at https://www.consumerfinance.gov/policy-compliance/guidance/hmda-implementation/. If any conflicts exist between the redline and this final rule, this final rule is the controlling document. A. Extension of Temporary Adjustment to Open-End Coverage Threshold In an October 2015 final rule (2015 HMDA Rule), the Bureau established institutional and transactional coverage thresholds in Regulation C, and these thresholds affect whether financial institutions need to report any information under HMDA for transactions. 4 The 2015 HMDA Rule set the closed-end threshold at 25 loans in each of the two preceding calendar years, and the open-end threshold at 100 open-end lines of credit in each of the two preceding calendar years. In 2017, before those thresholds took effect, the Bureau temporarily increased the open-end threshold to 500 open-end lines of credit for two years (calendar years 2018 and 2019). The final rule extends to January 1, 2022, the current temporary threshold of 500 open-end lines of credit for open-end institutional and transactional coverage. The Bureau intends to address in a separate final rule the changes it proposed to the permanent coverage thresholds for open-end lines of credit and closed-end mortgage loans. 5 In the interim, extending the current temporary increase in the open-end coverage threshold for an additional two years will allow the Bureau to consider fully the appropriate level for the permanent open-end coverage threshold for data collected beginning January 1, 2022, after reviewing additional comments relating to that aspect of the proposal. Such an extension will ensure that any institutions that are covered under the new permanent open-end coverage threshold have until January 1, 2022 to comply. 4 Home Mortgage Disclosure (Regulation C), 80 FR 66128 (Oct. 28, 2015). 5 See Home Mortgage Disclosure (Regulation C); Reopening of Comment Period, 84 FR 37804 (Aug. 2, 2019). B. Implementation of Partial Exemptions The final rule also implements further the partial exemptions from HMDA's requirements that the EGRRCPA recently added to HMDA. In August 2018, the Bureau issued an interpretive and procedural rule to implement and clarify the EGRRCPA amendments to HMDA (2018 HMDA Rule). 6 The 2018 HMDA Rule clarifies that insured depository institutions and insured credit unions covered by a partial exemption have the option of reporting exempt data fields as long as they report all data fields within any exempt data point for which they report data; clarifies that only loans and lines of credit that are otherwise HMDA reportable count toward the thresholds for the partial exemptions; clarifies which of the data points in Regulation C are covered by the partial exemptions; designates a non-universal loan identifier for partially exempt transactions for institutions that choose not to report a universal loan identifier; and clarifies the exception to the partial exemptions for insured depository institutions with less than satisfactory examination histories under the Community Reinvestment Act of 1977 (CRA). The final rule incorporates into Regulation C these interpretations and procedures, with minor adjustments, by adding new § 1003.3(d) relating to the partial exemptions and making various amendments to the data compilation requirements in § 1003.4. The final rule further implements the EGRRCPA by addressing certain additional interpretive issues relating to the partial exemptions that the 2018 HMDA Rule did not specifically address, such as how to determine whether a partial exemption applies to a transaction after a merger or acquisition. 6 Partial Exemptions from the Requirements of the Home Mortgage Disclosure Act Under the Economic Growth, Regulatory Relief, and Consumer Protection Act (Regulation C), 83 FR 45325 (Sept. 7, 2018). II. Background A. HMDA and Regulation C HMDA requires certain depository institutions and for-profit nondepository institutions to report 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). The purposes of HMDA are to provide the public with loan data that can be used: (i) To help determine whether financial institutions are serving the housing needs of their communities; (ii) to assist public officials in distributing public-sector investment so as to attract private investment to areas where it is needed; and (iii) to assist in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes. 7 Prior to enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act), Regulation C required reporting of 22 data points and allowed for optional reporting of reasons an institution denied an application. 8 7 12 CFR 1003.1. 8 As used in this final rule, the term “data point” refers to items of information that entities are required to compile and report, generally listed in separate paragraphs in Regulation C. Some data points are reported using multiple data fields. B. Dodd-Frank Act In 2010, Congress enacted the Dodd-Frank Act, which amended HMDA and transferred HMDA rulemaking authority and other functions from the Board of Governors of the Federal Reserve System (Board) to the Bureau. 9 Among other changes, the Dodd-Frank Act expanded the scope of information relating to mortgage applications and loans that institutions must compile, maintain, and report under HMDA. Specifically, the Dodd-Frank Act amended HMDA section 304(b)(4) by adding one new data point, the age of loan applicants and mortgagors. The Dodd-Frank Act also added new HMDA section 304(b)(5) and (6), which requires the following additional new data points: Information relating to the total points and fees payable at origination (total loan costs or total points and fees); the difference between the annual percentage rate (APR) associated with the loan and a benchmark rate or rates for all loans (rate spread); the term of any prepayment penalty; the value of real property to be pledged as collateral; the term of the loan and of any introductory interest rate on the loan; the presence of contract terms allowing non-amortizing payments; the channel through which the application was made; and the credit scores of applicants and mortgagors. 10 New HMDA section 304(b)(6) in addition authorizes the Bureau to require, “as [it] may determine to be appropriate,” a unique identifier that identifies the loan originator, a universal loan identifier (ULI), and the parcel number that corresponds to the real property pledged as collateral for the mortgage loan. 11 New HMDA section 304(b)(5)(D) and (6)(J) further provides the Bureau with the authority to mandate reporting of “such other information as the Bureau may require.” 12 9 Public Law 111-203, 124 Stat. 1376, 1980, 2035-38, 2097-101 (2010). 10 Dodd-Frank Act section 1094(3), amending HMDA section 304(b), 12 U.S.C. 2803(b). 11 Id. 12 Id. C. 2015 HMDA Rule In October 2015, the Bureau issued the 2015 HMDA Rule implementing the Dodd-Frank Act amendments to HMDA. 13 Most of the 2015 HMDA Rule took effect on January 1, 2018. 14 The 2015 HMDA Rule implemented the new data points specified in the Dodd-Frank Act, 15 added a number of additional data points pursuant to the Bureau's discretionary authority under HMDA section 304(b)(5) and (6), 16 and made revisions to certain pre-existing data points to clarify their requirements, provide greater specificity in reporting, and align certain data points more closely with industry data standards, 17 among other changes. 13 80 FR 66128 (Oct. 28, 2015). 14 Id. at 66128, 66256-58. 15 The following 12 data points in 12 CFR 1003.4(a) implement specific provisions in HMDA section 304(b)(5)(A) through (C) or (b)(6)(A) through (I): ULI (1003.4(a)(1)(i)); property address (1003.4(a)(9)(i)); rate spread (1003.4(a)(12)); credit score (1003.4(a)(15)); total loan costs or total points and fees (1003.4(a)(17)); prepayment penalty term (1003.4(a)(22)); loan term (1003.4(a)(25)); introductory rate period (1003.4(a)(26)); non-amortizing features (1003.4(a)(27)); property value (1003.4(a)(28)); application channel (1003.4(a)(33)); and mortgage loan originator identifier (1003.4(a)(34)). Id. 16 For example, the 2015 HMDA Rule added a requirement to report debt-to-income ratio in § 1003.4(a)(23). Id. at 66218-20. 17 For example, the 2015 HMDA Rule replaced property type with number of total units and construction method in § 1003.4(a)(5) and (31). Id. at 66180-81, 66227. It also requires disaggregation of ethnicity and race information in § 1003.4(a)(10)(i). Id. at 66187-94. The 2015 HMDA Rule requires some financial institutions to report data on certain dwelling-secured, open-end lines of credit, including home-equity lines of credit. Prior to the 2015 HMDA Rule, Regulation C allowed, but did not require, reporting of home-equity lines of credit. The 2015 HMDA Rule also established institutional coverage thresholds based on loan volume that limit the definition of “financial institution” to include only those institutions that either originated at least 25 closed-end mortgage loans in each of the two preceding calendar years or originated at least 100 open-end lines of credit in each of the two preceding calendar years. 18 The 2015 HMDA Rule separately established transactional coverage thresholds that are part of the test for determining which loans are excluded from coverage and were designed to work in tandem with the institutional coverage thresholds. 19 18 Id. at 66148-50, 66309 (codified at 12 CFR 1003.2(g)(1)(v)). The 2015 HMDA Rule excludes certain transactions from the definition of covered loans, and those excluded transactions do not count towards the threshold. Id. 19 Id. at 66173, 66310, 66322 (codified at 12 CFR 1003.3(c)(11) and (12)). D. 2017 HMDA Rule and December 2017 Statement In April 2017, the Bureau issued a notice of proposed rulemaking to address certain technical errors in the 2015 HMDA Rule, ease the burden of reporting certain data requirements, and clarify key terms to facilitate compliance with Regulation C. 20 In July 2017, the Bureau issued a notice of proposed rulemaking (July 2017 HMDA Proposal) to increase temporarily the 2015 HMDA Rule's open-end coverage threshold of 100 for both institutional and transactional coverage, so that institutions originating fewer than 500 open-end lines of credit in either of the two preceding calendar years would not have to commence collecting or reporting data on their open-end lines of credit until January 1, 2020. 21 In August 2017, the Bureau issued the 2017 HMDA Rule, which, inter alia, temporarily increased the open-end threshold to 500 open-end lines of credit for calendar years 2018 and 2019. 22 In doing so, the Bureau indicated that the two-year period would allow time for the Bureau to decide, through an additional rulemaking, whether any permanent adjustments to the open-end threshold are needed. 23 20 Technical Corrections and Clarifying Amendments to the Home Mortgage Disclosure (Regulation C) October 2015 Final Rule, 82 FR 19142 (Apr. 25, 2017). 21 Home Mortgage Disclosure (Regulation C) Temporary Increase in Institutional and Transactional Coverage Thresholds for Open-End Lines of Credit, 82 FR 33455 (July 20, 2017). 22 Home Mortgage Disclosure (Regulation C), 82 FR 43088 (Sept. 13, 2017). 23 Id. at 43095. The 2017 HMDA Rule also, among other things, replaced “each” with “either” in § 1003.3(c)(11) and (12) to correct a drafting error and to ensure that the exclusion provided in that section mirrors the loan-volume threshold for financial institutions in § 1003.2(g). Id. at 43100, 43102. Recognizing the significant systems and operations challenges needed to adjust to the revised regulation, the Bureau issued a statement in December 2017 (December 2017 Statement) indicating that, for HMDA data collected in 2018 and reported in 2019, the Bureau did not intend to require data resubmission unless data errors are material. 24 The December 2017 Statement also explained that the Bureau did not intend to assess penalties with respect to errors in data collected in 2018 and reported in 2019. 25 As explained in the statement, any supervisory examinations of 2018 HMDA data would be diagnostic to help institutions identify compliance weaknesses and would credit good-faith compliance efforts. In its December 2017 Statement, the Bureau indicated that it intended to engage in a rulemaking to reconsider various aspects of the 2015 HMDA Rule, such as the institutional and transactional coverage tests and the rule's discretionary data points. The Board, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Office of the Comptroller of the Currency (OCC) released similar statements relating to their supervisory examinations. 26 24 Bureau of Consumer Fin. Prot., “Statement with Respect to HMDA Implementation” (Dec. 21, 2017), https://files.consumerfinance.gov/f/documents/cfpb_statement-with-respect-to-hmda-implementation_122017.pdf. 25 The statement also indicated that collection and submission of the 2018 HMDA data will provide financial institutions an opportunity to identify any gaps in their implementation of amended Regulation C and make improvements in their HMDA compliance management systems for future years. Id. 26 As part of its spring 2018 Call for Evidence series of Requests for Information, the Bureau issued a Request for Information Regarding the Bureau's Adopted Regulations and New Rulemaking Authorities, 83 FR 12286 (Mar. 21, 2018) (RFI on Adopted Regulations) and a Request for Information Regarding the Bureau's Inherited Regulations and Inherited Rulemaking Authorities, 83 FR 12881 (Mar. 26, 2018). The RFI on Adopted Regulations did not request feedback on the 2015 HMDA Rule nor that rule's subsequent amendments because the Bureau had previously announced in the December 2017 Statement that it intended to engage in a rulemaking process to reconsider the 2015 HMDA Rule. However, the Bureau received a few comments relating to HMDA in response to the RFI on Adopted Regulations. The Bureau considered these comments as well as other input it has received from stakeholders through its efforts to monitor and support industry implementation of the 2015 HMDA Rule and the 2017 HMDA Rule in developing the May 2019 Proposal and the Advance Notice of Proposed Rulemaking that the Bureau released simultaneously with the May 2019 Proposal. E. EGRRCPA and 2018 HMDA Rule On May 24, 2018, the President signed into law the EGRRCPA. 27 Section 104(a) of the EGRRCPA amends HMDA section 304(i) by adding partial exemptions from HMDA's requirements for certain insured depository institutions and insured credit unions. 28 New HMDA section 304(i)(1) provides that the requirements of HMDA section 304(b)(5) and (6) shall not apply with respect to closed-end mortgage loans of an insured depository institution or insured credit union if it originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years. New HMDA section 304(i)(2) provides that the requirements of HMDA section 304(b)(5) and (6) shall not apply with respect to open-end lines of credit of an insured depository institution or insured credit union if it originated fewer than 500 open-end lines of credit in each of the two preceding calendar years. Notwithstanding the new partial exemptions, new HMDA section 304(i)(3) provides that an insured depository institution must comply with HMDA section 304(b)(5) and (6) if it has received a rating of “needs to improve record of meeting community credit needs” during each of its two most recent examinations or a rating of “substantial noncompliance in meeting community credit needs” on its most recent examination under section 807(b)(2) of the CRA. 29 27 Public Law 115-174, 132 Stat. 1296 (2018). 28 For purposes of HMDA section 104, the EGRRCPA provides that the term “insured credit union” has the meaning given the term in section 101 of the Federal Credit Union Act, 12 U.S.C. 1752, and the term “insured depository institution” has the meaning given the term in section 3 of the Federal Deposit Insurance Act, 12 U.S.C. 1813. 29 12 U.S.C. 2906(b)(2). On August 31, 2018, the Bureau issued an interpretive and procedural rule (2018 HMDA Rule) to implement and clarify section 104(a) of the EGRRCPA and effectuate the purposes of the EGRRCPA and HMDA. 30 The 2018 HMDA Rule clarifies that insured depository institutions and insured credit unions covered by a partial exemption have the option of reporting exempt data fields as long as they report all data fields within any exempt data point for which they report data; clarifies that only loans and lines of credit that are otherwise HMDA reportable count toward the thresholds for the partial exemptions; clarifies which of the data points in Regulation C are covered by the partial exemptions; designates a non-universal loan identifier for partially exempt transactions for institutions that choose not to report a ULI; and clarifies the exception to the partial exemptions for insured depository institutions with less than satisfactory CRA examination histories. The 2018 HMDA Rule also explains that, because the EGRRCPA does not provide a specific effective date for section 104(a) and because there are no other statutory indications that section 104(a) becomes effective upon regulatory action or some other event or condition, the best interpretation is that section 104(a) took effect when the EGRRCPA became law on May 24, 2018. In the 2018 HMDA Rule, the Bureau stated that it anticipated that, at a later date, it would initiate a notice-and-comment rulemaking to incorporate the interpretations and procedures into Regulation C and further implement the EGRRCPA. As discussed in part III below, in May 2019 the Bureau issued a notice of proposed rulemaking (May 2019 Proposal) that sought public comment on such an incorporation and further implementation. 31 After reviewing the comments received, the Bureau now issues this final rule that incorporates the interpretations and procedures into Regulation C and further implements the EGRRCPA. 30 83 FR 45325 (Sept. 7, 2018). Prior to issuing the 2018 HMDA Rule, the Bureau, the Board, the FDIC, the NCUA, and the OCC released statements on July 5, 2018, reiterating or referring to their December 2017 compliance statements and providing information about formatting and submission of 2018 loan/application registers. See, e.g., Bureau of Consumer Fin. Prot., “Statement on the Implementation of the Economic Growth, Regulatory Relief, and Consumer Protection Act Amendments to the Home Mortgage Disclosure Act” (July 25, 2018), https://www.consumerfinance.gov/about-us/newsroom/bureau-consumer-financial-protection-issues-statement-implementation-economic-growth-regulatory-relief-and-consumer-protection-act-amendments-home-mortgage-disclosure-act/. 31 Home Mortgage Disclosure (Regulation C), 84 FR 20972 (May 13, 2019). F. HMDA Coverage Under Current Regulation C The Bureau's estimates of HMDA coverage and the sources used in deriving those estimates are explained in detail in the Bureau's analysis under Dodd-Frank Act section 1022(b) in part VII below. 32 The Bureau estimated in the May 2019 Proposal that currently there are about 4,960 financial institutions required to report their closed-end mortgage loans and applications under HMDA. The Bureau estimated that approximately 4,263 of these current reporters are depository institutions and approximately 697 are nondepository institutions. The Bureau estimated that together, these financial institutions originated about 7.0 million closed-end mortgage loans in calendar year 2017. The Bureau estimated that among those 4,960 financial institutions that are currently required to report closed-end mortgage loans under HMDA, about 3,300 insured depository institutions and insured credit unions are partially exempt for closed-end mortgage loans under the EGRRCPA and the 2018 HMDA Rule, and thus are not required to report a subset of the data points currently required by Regulation C for these transactions. 32 See infra part VII.D.1. As discussed further in part VII below, the Bureau's analyses in the May 2019 Proposal were based on HMDA data collected in 2016 and 2017 and other sources. In part VII of this final rule, the Bureau has supplemented the analyses from the May 2019 Proposal relating to the provisions to implement the EGRRCPA and the provisions to extend the temporary open-end coverage threshold with the 2018 HMDA data that were released to the public on August 30, 2019. See infra part VII.E.2 & VII.E.3. As explained in more detail in part VII.E.3 and table 3 below, under the temporary 500 open-end line of credit coverage threshold set in the 2017 HMDA Rule, the Bureau estimated in the May 2019 Proposal that currently there are about 333 financial institutions required to report about 1.23 million open-end lines of credit under HMDA. Of these institutions, the Bureau estimated that approximately 318 are depository institutions and approximately 15 are nondepository institutions. None of these 333 institutions are partially exempt. In comparison, if the open-end coverage threshold were to adjust to 100 on January 1, 2020 pursuant to the 2017 HMDA Rule, the Bureau estimated in the May 2019 Proposal that the number of reporters would be about 1,014, who in total originate about 1.41 million open-end lines of credit. The Bureau estimated that approximately 972 of these open-end reporters would be depository institutions and approximately 42 would be nondepository institutions. The Bureau estimated that, among the 1,014 financial institutions that would be required to report open-end lines of credit under a threshold of 100, about 618 insured depository institutions and insured credit unions are partially exempt for open-end lines of credit under the EGRRCPA and the 2018 HMDA Rule, and thus would not be required to report a subset of the data points currently required by Regulation C for these transactions. III. Summary of the Rulemaking Process On May 2, 2019, the Bureau issued the May 2019 Proposal relating to Regulation C's coverage thresholds and the EGRRCPA partial exemptions under HMDA and requested public comment. 33 The May 2019 Proposal was published in the Federal Register on May 13, 2019. 33 84 FR 20972 (May 13, 2019). The Bureau also issued concurrently with the May 2019 Proposal an Advance Notice of Proposed Rulemaking to solicit comment, data, and information from the public about the data points that the 2015 HMDA Rule added to Regulation C or revised to require additional information and Regulation C's coverage of certain business- or commercial-purpose transactions. Home Mortgage Disclosure (Regulation C) Data Points and Coverage, 89 FR 20049 (May 8, 2019); see also Home Mortgage Disclosure (Regulation C), 80 FR 66128 (Oct. 28, 2015). The Advance Notice of Proposed Rulemaking was published in the Federal Register on May 8, 2019. In the May 2019 Proposal, the Bureau proposed two alternatives to amend Regulation C to increase the current 25-loan coverage threshold for reporting data about closed-end mortgage loans so that institutions originating fewer than either 50 closed-end mortgage loans, or alternatively 100 closed-end mortgage loans, in either of the two preceding calendar years would not have to report such data. The May 2019 Proposal proposed an effective date of January 1, 2020 for the amendment to the closed-end coverage threshold. The May 2019 Proposal also proposed to adjust the coverage threshold for reporting data about open-end lines of credit by (a) extending to January 1, 2022 the current temporary coverage threshold of 500 open-end lines of credit, and (b) setting the permanent coverage threshold at 200 open-end lines of credit upon the expiration of the proposed extension of the temporary coverage threshold. In the May 2019 Proposal, the Bureau also proposed to incorporate into Regulation C the interpretations and procedures from the interpretive and procedural rule that the Bureau issued on August 31, 2018 to implement and clarify section 104(a) of the EGRRCPA, 34 and proposed to make other changes to effectuate section 104(a). 34 Partial Exemptions from the Requirements of the Home Mortgage Disclosure Act Under the Economic Growth, Regulatory Relief, and Consumer Protection Act (Regulation C), 83 FR 45325 (Sept. 7, 2018). The comment period for the May 2019 Proposal closed on June 12, 2019. 35 The Bureau received over 300 comments from lenders, industry trade associations, consumer groups, consumers, members of Congress, and others. As discussed in more detail below, the Bureau has considered these comments in adopting this final rule. 35 A separate comment period related to the Paperwork Reduction Act closed on July 12, 2019. 84 FR 20972 (May 13, 2019). Among the comments received were a number of letters expressing concern that the national loan level dataset for 2018 and the Bureau's annual overview of residential mortgage lending based on that data (collectively, the 2018 HMDA Data) would not be available until after the close of the comment period for the May 2019 Proposal. Stakeholders asked to submit comments on the May 2019 Proposal that reflect consideration of the 2018 HMDA Data. To allow for the submission of such comments, the Bureau reopened the comment period on certain aspects of the proposal until October 15, 2019. 36 Specifically, the Bureau reopened the comment period with respect to: (1) The Bureau's proposed amendments to the permanent coverage threshold for closed-end mortgage loans, (2) the Bureau's proposed amendments to the permanent coverage threshold for open-end lines of credit, and (3) the appropriate effective date for any amendment to the closed-end coverage threshold. 37 After reviewing the comments it receives by the October 15, 2019 deadline, the Bureau anticipates that it will issue a separate final rule in 2020 addressing the permanent thresholds for closed-end mortgage loans and open-end lines of credit. The Bureau therefore generally does not discuss the proposed amendments to those permanent threshold provisions for the remainder of this document. 36 84 FR 37804 (Aug. 2, 2019). 37 Id. at 37806. The Bureau concluded that further comment was not necessary with respect to the other aspects of the May 2019 Proposal. 38 The Bureau therefore did not reopen the comment period with respect to the May 2019 Proposal's proposed two-year extension of the temporary coverage threshold for open-end lines of credit or the provisions in the May 2019 Proposal that would incorporate the EGRRCPA partial exemptions into Regulation C and further effectuate EGRRCPA section 104(a). This final rule addresses these aspects of the May 2019 Proposal. 38 Id. IV. Legal Authority The Bureau is issuing this final rule pursuant to its authority under the Dodd-Frank Act and HMDA. 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. 39 The term “consumer financial protection 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.” 40 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.” 41 Both HMDA and title X of the Dodd-Frank Act are Federal consumer financial laws. 42 Accordingly, the Bureau has authority to issue regulations to implement HMDA. 39 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. 40 12 U.S.C. 5581(a)(1)(A). 41 12 U.S.C. 5512(b)(1). 42 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. 43 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. 44 43 12 U.S.C. 2804(a). 44 Id. V. Section-by-Section Analysis Section 1003.2 Definitions 2(g) Financial Institution Regulation C requires financial institutions to report HMDA data. Section 1003.2(g) defines financial institution for purposes of Regulation C and sets forth Regulation C's institutional coverage criteria for depository financial institutions and nondepository financial institutions. 45 In the 2015 HMDA Rule, the Bureau adjusted the institutional coverage criteria under Regulation C so that depository institutions and nondepository institutions are required to report HMDA data if they: (1) Originated at least 25 closed-end mortgage loans or 100 open-end lines of credit in each of the two preceding calendar years, and (2) meet all of the other applicable criteria for reporting. In the 2017 HMDA Rule, the Bureau amended § 1003.2(g) and related commentary to increase temporarily from 100 to 500 the number of open-end originations required to trigger reporting responsibilities. 46 In the May 2019 Proposal, the Bureau proposed to amend §§ 1003.2(g)(1)(v)(B) and (g)(2)(ii)(B) and 1003.3(c)(12) and related commentary to extend to January 1, 2022, the current temporary open-end coverage threshold of 500 open-end lines of credit. For the reasons discussed below, the Bureau is finalizing the amendments relating to the two-year extension of the temporary open-end coverage threshold as proposed. 45 12 CFR 1003.2(g)(1) (definition of depository financial institution); 1003.2(g)(2) (definition of nondepository financial institution). 46 82 FR 43088, 43095 (Sept. 13, 2017). The Bureau also proposed in May 2019 to increase the permanent open-end coverage threshold to 200 open-end lines of credit effective January 1, 2022. As discussed in part III above, the Bureau has reopened the comment period relating to the May 2019 Proposal's proposed amendments to the permanent thresholds for closed-end mortgage loans and open-end lines of credit. 47 After reviewing the comments received during the reopened comment period, the Bureau intends to issue a final rule addressing the permanent open-end coverage threshold that would take effect on January 1, 2022. 47 84 FR 37804 (Aug. 2, 2019). Legal Authority for Changes to § 1003.2(g) In the 2015 HMDA Rule, the Bureau adopted the thresholds for certain depository institutions in § 1003.2(g)(1) pursuant to its authority under section 305(a) of HMDA to provide for such adjustments and exceptions for any class of transactions that in the judgment of the Bureau are necessary and proper to effectuate the purposes of HMDA. Pursuant to section 305(a) of HMDA, for the reasons given in the 2015 HMDA Rule, the Bureau found that the exception in § 1003.2(g)(1) is necessary and proper to effectuate the purposes of and facilitate compliance with HMDA. The Bureau found that the provision, by reducing burden on financial institutions and establishing a consistent loan-volume test applicable to all financial institutions, would facilitate compliance with HMDA's requirements. 48 Additionally, as discussed in the 2015 HMDA Rule, the Bureau adopted the thresholds for certain nondepository institutions in § 1003.2(g)(2) pursuant to its interpretation of HMDA sections 303(3)(B) and 303(5), which require persons other than banks, savings associations, and credit unions that are “engaged for profit in the business of mortgage lending” to report HMDA data. The Bureau stated that it interprets these provisions, as the Board also did, to evince the intent to exclude from coverage institutions that make a relatively small number of mortgage loans. 49 Pursuant to its authority under HMDA section 305(a), and for the reasons discussed below, the Bureau believes that this final rule's amendments to extend for two years the temporary thresholds for open-end lines of credit in § 1003.2(g)(1) and (2) are necessary and proper to effectuate the purposes of HMDA and facilitate compliance with HMDA by reducing burden and establishing a consistent loan-volume test, while still providing significant market coverage. 48 80 FR 66128, 66150 (Oct. 28, 2015). 49 Id. at 66153. 2(g)(1) Depository Financial Institution 2(g)(1)(v) 2(g)(1)(v)(B) Background on Reporting Data Concerning Open-End Lines of Credit Under the 2015 HMDA Rule and the 2017 HMDA Rule By its terms, the definition of “mortgage loan” in HMDA covers all loans secured by residential real property and home improvement loans whether open- or closed-end. 50 However, home-equity lines of credit were uncommon in the 1970s and early 1980s when Regulation C was first issued, and the Board's definition covered only closed-end loans. 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, which were optionally reported. 51 However, the Board's 2002 final rule left open-end reporting voluntary, as the Board determined that the benefits of mandatory reporting relative to other then proposed amendments (such as collecting information about higher-priced loans) did not justify the increased burden. 52 50 HMDA section 303(2), 12 U.S.C. 2802(2). 51 65 FR 78656, 78659-60 (Dec. 15, 2000). In 1988, the Board had amended Regulation C to permit, but not require, financial institutions to report certain home-equity lines of credit. 53 FR 31683, 31685 (Aug. 19, 1988). 52 67 FR 7222, 7225 (Feb. 15, 2002). As discussed in the 2015 HMDA 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. 53 In light of that development and the role that open-end lines of credit may have played in contributing to the financial crisis, 54 the Bureau decided in the 2015 HMDA Rule to require reporting of dwelling-secured, consumer purpose open-end lines of credit, 55 concluding that doing so was a reasonable interpretation of “mortgage loan” in HMDA and necessary and proper to effectuate the purposes of HMDA and prevent evasions thereof. 56 53 80 FR 66128, 66160 (Oct. 28, 2015). 54 Id. The Bureau stated in the 2015 HMDA Rule that research indicated that some 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 depreciation during the financial crisis. Id. 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. Id. 55 The Bureau also required reporting of applications for, and originations of, dwelling-secured commercial-purpose lines of credit for home purchase, home improvement, or refinancing purposes. Id. at 66171. 56 Id. at 66157-62. HMDA and Regulation C are designed to provide citizens and public officials sufficient information about mortgage lending to ensure that financial institutions are serving the housing needs of their communities, to assist public officials in distributing public-sector investment so as to attract private investment to areas where it is needed, and to assist in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes. The Bureau believes that collecting information about all dwelling-secured, consumer-purpose open-end lines of credit serves these purposes. As noted in the 2015 HMDA Rule, in expanding coverage to include mandatory reporting of 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. 57 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. 58 In seeking to draw such a line, the Bureau acknowledged that it was handicapped by the lack of available data concerning open-end lending. 59 This created challenges both in estimating the distribution of open-end origination volume across financial institutions and in estimating the one-time and ongoing costs that institutions of various sizes would be likely to incur in reporting data on open-end lending. 57 Id. at 66128, 66161. 58 Id. at 66149. 59 Id. To estimate the one-time and ongoing costs of reporting data under HMDA in the 2015 HMDA Rule, 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). 60 The Bureau then sought to estimate one-time and ongoing costs for a representative institution in each tier. 61 60 Id. at 66261, 66269-70. In the 2015 HMDA Rule and the 2017 HMDA Rule, the Bureau assigned financial institutions to tiers by adopting cutoffs based on the estimated open-end line of credit volume. Id. at 66285; 82 FR 43088, 43128 (Sept. 13, 2017). Specifically, the Bureau assumed the lenders that originated fewer than 200 but more than 100 open-end lines of credit were tier 3 (low-complexity) open-end reporters; lenders that originate between 200 and 7,000 open-lines of credit were tier 2 (moderate-complexity) open-end reporters; and lenders that originated more than 7,000 open-end lines of credit were tier 1 (high-complexity) open-end reporters. 80 FR 66128, 66285 (Oct. 28, 2015); 82 FR 43088, 43128 (Sept. 13, 2017). As explained below in part VII.D.1, for purposes of this final rule, the Bureau has used a more precise methodology to assign eligible financial institutions to tiers 2 and 3 for their open-end reporting, which relies on constraints relating to the estimated numbers of impacted institutions and loan/application register records for the applicable provision. 61 80 FR 66128, 66264-65 (Oct. 28, 2015); see also id. at 66284. The Bureau recognized in the 2015 HMDA Rule that the one-time cost of reporting open-end lines of credit could be substantial because most financial institutions had not reported open-end lines of credit and thus would have to develop completely new systems 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. 62 However, for tier 3, low-complexity institutions, the Bureau believed that the additional one-time costs of open-end reporting would be relatively low. Because these institutions are less reliant on information technology systems for HMDA reporting and they may process open-end lines of credit on the same system and in the same business unit as closed-end mortgage loans, their one-time costs would be derived mostly from new training and procedures adopted for the overall changes in the final rule, not distinct from costs related to changes in reporting of closed-end mortgage loans. 63 62 Id. at 66264; see also id. at 66284-85. 63 Id. at 66265; see also id. at 66284. The Bureau acknowledged in the 2015 HMDA Rule that ongoing 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 capture fully. 64 At the same time, the Bureau stated it believed that the HMDA reporting process and ongoing operational cost structure for open-end reporting would be fundamentally similar to closed-end reporting. 65 Thus, using the ongoing cost estimates developed for closed-end reporting, the Bureau estimated that for a representative tier 1 institution the ongoing operational costs would be $273,000 per year; for a representative tier 2 institution $43,400 per year; and for a representative tier 3 institution $8,600 per year. 66 These translated into costs per HMDA record of approximately $9, $43, and $57 respectively. 67 The Bureau acknowledged that, precisely because no good source of publicly available data exists concerning open-end lines of credit, it was difficult to predict the accuracy of the Bureau's cost estimates but also stated its belief that these estimates were reasonably reliable. 68 64 Id. at 66285. 65 Id. 66 Id. at 66264, 66286. 67 Id. 68 Id. at 66162. Drawing on all of these estimates, the Bureau decided in the 2015 HMDA Rule to establish an open-end coverage threshold that would require institutions that originate 100 or more open-end lines of credit in each of the two preceding calendar years to report data on such lines of credit. The Bureau estimated that this threshold would avoid imposing the burden of establishing mandatory open-end reporting on approximately 3,000 predominantly smaller-sized institutions with low-volume open-end lending 69 and would require reporting by 749 financial institutions, all but 24 of which would also report data on their closed-end mortgage lending. 70 The Bureau explained in the 2015 HMDA Rule that it believed this threshold appropriately balanced the benefits and burdens of covering institutions based on their open-end mortgage lending. 71 However, as discussed in the 2017 HMDA Rule, the Bureau lacked robust data for the estimates that it used to establish the open-end threshold in the 2015 HMDA Rule. 72 69 Id. The estimate of the number of institutions that would be excluded from reporting open-end lines of credit by the transactional coverage threshold was relative to the number that would have been covered under the Bureau's proposal that led to the 2015 HMDA 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 Home Mortgage Disclosure (Regulation C), 79 FR 51732 (Aug. 29, 2014). 70 80 FR 66128, 66281 (Oct. 28, 2015). 71 Id. at 66162. 72 82 FR 43088, 43094 (Sept. 13, 2017). The 2017 HMDA Rule explained that, between 2013 and 2017, the number of dwelling-secured open-end lines of credit financial institutions originated had increased by 36 percent. 73 The Bureau noted that, to the extent institutions that had been originating fewer than 100 open-end lines of credit shared in that growth, the number of institutions at the margin that would be required to report under an open-end threshold of 100 lines of credit would also increase. 74 Additionally, in the 2017 HMDA Rule, the Bureau explained that information received by the Bureau since issuing the 2015 HMDA Rule had caused the Bureau to question its assumption that certain low-complexity institutions 75 process home-equity lines of credit on the same data platforms as closed-end mortgages, on which the Bureau based its assumption that the one-time costs for these institutions would be minimal. 76 After issuing the 2015 HMDA Rule, the Bureau had heard reports suggesting that one-time costs to begin reporting open-end lines of credit could be as high as $100,000 for such institutions. 77 The Bureau likewise had heard reports suggesting that the ongoing costs for these institutions to report open-end lines of credit, 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 than the Bureau had estimated. 78 73 Id. 74 Id. 75 See supra notes 60-63 and accompanying text. 76 82 FR 43088, 43094 (Sept. 13, 2017). 77 Id. 78 Id. Based on this information regarding one-time and ongoing costs and new data indicating that more institutions would have reporting responsibilities under the 100-loan open-end threshold than estimated in the 2015 HMDA Rule, the Bureau proposed in 2017 to increase for two years ( i.e., until January 1, 2020) the open-end threshold to 500. 79 This temporary increase was intended to allow the Bureau to collect additional data and assess what open-end coverage threshold would best balance the benefits and burdens of covering institutions. The Bureau finalized the proposal after notice and comment in the 2017 HMDA Rule. 80 79 82 FR 33455 (July 20, 2017). 80 82 FR 43088 (Sept. 13, 2017). Comments received on the July 2017 HMDA Proposal to change temporarily the open-end threshold are discussed in the 2017 HMDA Rule. Id. at 43094-95. Developments After the 2015 HMDA Rule and the 2017 HMDA Rule As the Bureau explained in the May 2019 Proposal, several developments since the Bureau issued the 2015 HMDA Rule have affected the Bureau's analyses of the costs and benefits associated with the open-end line of credit coverage threshold. The Bureau is concerned that, in establishing a 100-loan threshold for open-end lines of credit in the 2015 HMDA Rule, it may have underestimated the number of institutions that would be covered and the reporting burden on smaller covered institutions. Table 3 in the Bureau's analysis under Dodd-Frank Act section 1022(b) in part VII.E.3 below provides the Bureau's updated coverage estimates from the May 2019 Proposal for reporting thresholds of 100 and 500 open-end lines of credit. 81 As explained in more detail in part VII.E.3, these coverage estimates indicate that the total number of institutions exceeding the open-end coverage threshold of 100 open-end lines of credit in 2018 is approximately 1,014. This estimate is significantly higher than the estimate of 749 in the 2015 HMDA Rule that was based on 2013 data. 82 81 As discussed further in the analysis under Dodd-Frank Act section 1022(b) in part VII, the Bureau's analyses in the May 2019 Proposal were based on HMDA data collected in 2016 and 2017 and other sources. For part VII of the final rule, the Bureau has supplemented the analyses with the 2018 HMDA data now available and released to the public on August 30, 2019. 82 82 FR 43088, 43094 (Sept. 13, 2017). As explained in more detail in part VII below, the estimates the Bureau used in the 2015 HMDA Rule may understate the burden that open-end reporting would impose on smaller institutions if they were required to begin reporting on January 1, 2020. For example, in developing the one-time cost estimates for open-end lines of credit in the 2015 HMDA Rule, the Bureau had envisioned that there would be cost sharing at the corporate level between the line of business that conducts open-end lending and the line of business that conducts closed-end lending, as the implementation of open-end reporting that became mandatory under the 2015 HMDA Rule would coincide with the implementation of the changes to closed-end reporting under the 2015 HMDA Rule. However, this type of cost sharing is less likely now because financial institutions have already implemented almost all of the closed-end reporting changes required under the 2015 HMDA Rule. Another development since the Bureau finalized the 2015 HMDA Rule is the enactment of the EGRRCPA, which created partial exemptions from HMDA's requirements that certain insured depository institutions and insured credit unions may now use. 83 The partial exemption for open-end lines of credit under the EGRRCPA relieves certain insured depository institutions and insured credit unions that originated fewer than 500 open-end mortgage loans in each of the two preceding calendar years of the obligation to report many of the data points generally required by Regulation C. 84 The partial exemptions are available to the vast majority of the financial institutions that will be excluded by the extension of the temporary open-end coverage threshold. 85 The EGRRCPA has thus changed the costs and benefits associated with different possible coverage thresholds, as discussed in more detail below. 83 Public Law 115-174, 132 Stat. 1296 (2018). 84 See the section-by-section analysis of § 1003.3(d) in part IV above. 85 See infra part VII.E.3. Temporary Open-End Line of Credit Threshold for Institutional Coverage of Depository Institutions As explained above, the 2015 HMDA Rule established an institutional coverage threshold in § 1003.2(g) for open-end lines of credit of at least 100 open-end lines of credit in each of the two preceding calendar years. 86 In the 2017 HMDA Rule, the Bureau amended § 1003.2(g)(1)(v)(B) and comments 2(g)-3 and -5, effective January 1, 2018, to increase temporarily the open-end threshold from 100 to 500. In addition, effective January 1, 2020, these amendments restore a permanent threshold of 100. 87 In the May 2019 Proposal, the Bureau proposed to extend the temporary increase for two years and to set the permanent coverage threshold at 200 open-end lines of credit upon the expiration of the proposed extension of the temporary coverage threshold. For the reasons discussed below, the Bureau now amends § 1003.2(g)(1)(v)(B) and comments 2(g)-3 and -5, effective January 1, 2020, to extend until January 1, 2022, the temporary open-end institutional coverage threshold for depository institutions of 500 open-end lines of credit. The Bureau is also finalizing conforming amendments to extend for two years the temporary open-end institutional coverage threshold for nondepository institutions in § 1003.2(g)(2)(ii)(B) and to align the timeframe of the temporary open-end transactional coverage threshold in § 1003.3(c)(12), as discussed below. As noted above, the Bureau intends to address in a separate final rule in 2020 the May 2019 Proposal's proposed amendment to the permanent coverage threshold for open-end lines of credit. 88 86 The 2015 HMDA Rule established complementary thresholds that determine whether a financial institution is required to report data on closed-end mortgage loans or open-end lines of credit, respectively. 80 FR 66128, 66146, 66149, 66162 (Oct. 28, 2015). The 2017 HMDA Rule corrected a drafting error to ensure the institutional coverage threshold and the transactional coverage threshold were complementary. 82 FR 43088, 43100, 43102 (Sept. 13, 2017). These institutional and transactional coverage thresholds are distinct from the thresholds for the EGRRCPA partial exemptions in new § 1003.3(d)(2) and (3). 87 82 FR 43088, 43094 (Sept. 13, 2017). In the 2015 HMDA Rule and 2017 HMDA Rule, the Bureau declined to retain optional reporting of open-end lines of credit, after concluding that improved visibility into this segment of the mortgage market is critical because of the risks posed by these products to consumers and local markets and the lack of other publicly available data about these products. Id. at 43095; 80 FR 66128, 66160-61 (Oct. 28, 2015). However, Regulation C as amended by the 2017 HMDA Rule permits voluntary reporting by financial institutions that do not meet the open-end threshold. 12 CFR 1003.3(c)(12). 88 Because the extension lasts two years, and the Bureau has not yet made a determination about its proposed permanent threshold, the final rule restores effective January 1, 2022 the threshold set in the 2015 HMDA Rule of 100 open-end lines of credit in §§ 1003.2(g) and 1003.3(c)(12), pending further Bureau action. After the reopened comment period relating to the permanent threshold closes, the Bureau intends to issue a final rule in 2020 addressing the permanent threshold for open-end lines of credit that would take effect on January 1, 2022. The Bureau received a number of comments relating to the proposed extension of the temporary open-end threshold in §§ 1003.2(g) and 1003.3(c)(12). Commenters typically discussed in a general way the open-end threshold for HMDA coverage, without distinguishing between the threshold applicable to depository institutions under § 1003.2(g)(2)(1)(v)(B) and the threshold applicable to nondepository institutions under § 1003.2(g)(2)(ii)(B). Industry commenters generally expressed support for the proposed extension. Many industry commenters described the significant costs that HMDA data collection and reporting imposes on small institutions, and some expressed concern that they might not be able to offer open-end lines of credit at all if the 100 open-end line of credit threshold takes effect. These commenters stated that the anticipated cost savings support extending the current threshold of 500 and noted that the current threshold of 500 would provide relief for over 600 institutions in 2020 and 2021. A number of industry commenters urged the Bureau to make the temporary threshold of 500 open-end lines of credit permanent, either immediately or during the two-year period of the proposed extension; to raise the open-end threshold even further ( e.g., to 1,000); or to return to optional rather than mandatory reporting of open-end lines of credit. Other commenters, including a number of consumer and civil rights groups, a bank, a State attorney general, and some members of Congress, expressed opposition to the proposal as a whole based on their concerns about the consequences of exempting institutions from HMDA. They indicated, for example, that extending the temporary threshold of 500 open-end loans for another two years could exclude a significant percentage of the market. They also expressed concern that lenders and loans might escape public scrutiny and that there would be fewer safeguards to prevent events similar to the 2008 financial crisis. However, even some commenters who opposed increasing the permanent open-end threshold recognized the need to provide additional time for lenders that will be first-time open-end reporters to prepare. The Bureau has considered the comments received and, pursuant to its authority under HMDA section 305(a) as discussed above, has decided to extend the temporary threshold of 500 open-end lines of credit for two years, as proposed. As discussed below, the extension of the temporary coverage threshold will provide additional time for the Bureau to issue a final rule in 2020 on the permanent open-end coverage threshold and for affected institutions to prepare for compliance with that final rule and will reduce HMDA costs over the next two years, while still providing significant market coverage. The Bureau continues reviewing HMDA data on open-end lines of credit that financial institutions collected in 2018 and reported to the Bureau in 2019. As explained in part III above, the Bureau reopened the comment period on the May 2019 Proposal to allow for additional comment relating to these open-end data. The two-year temporary extension of the current 500 open-end line of credit coverage threshold will ensure the Bureau has time to consider the initial open-end data submitted pursuant to the 2015 HMDA Rule and any additional comments received about that data before finalizing any change to the permanent threshold. The two-year extension of the temporary coverage threshold of 500 open-end lines of credit will also ensure that institutions that would be required to report under any new permanent threshold that the Bureau sets in 2020 to take effect in 2022 have time to adapt their systems and prepare for compliance. Consistent with feedback provided by industry stakeholders in connection with the 2015 HMDA Rule and the 2017 HMDA Rule, a number of commenters indicated in response to the May 2019 Proposal that a long implementation period is necessary when coverage changes result in new institutions having reporting obligations under HMDA. The Bureau determines that the two-year extension of the temporary coverage threshold of 500 lines of credit will provide any newly covered institutions with sufficient time to revise and update policies and procedures, implement any necessary systems changes, and train staff before any permanent threshold that the Bureau sets in 2020 takes effect in 2022. The extension of the temporary coverage threshold will also relieve institutions that originate between 100 and 499 open-end lines of credit of ongoing costs associated with reporting open-end lines of credit over the next two years. As noted above, many financial institutions and trade associations expressed in their comments how costly HMDA compliance can be on an ongoing basis for smaller institutions. In total, the Bureau estimates that extending the temporary open-end coverage threshold for two years will reduce operational costs for institutions by about $9.4 million per year in the years 2020 and 2021. 89 89 Additional explanation of the Bureau's cost estimates and how the Bureau's estimate in this final rule of operational savings compares to its estimate in the May 2019 Proposal is provided in the Bureau's analysis under Dodd-Frank Act section 1022(b) in part VII.E.3 below. As explained in part VII below, the Bureau derived these estimates using estimates of savings for open-end lines of credit for representative financial institutions. While the extension of the temporary threshold increase will reduce market coverage compared to a lower threshold, information about a sizeable portion of the market will still be available in the next two years under the temporary threshold of 500. The Bureau has used multiple data sources, including credit union Call Reports, Call Reports for banks and thrifts, HMDA data, and Consumer Credit Panel data, to develop updated estimates about open-end originations for institutions that are active and to assess the impact of various thresholds on the numbers of institutions which report and the number of loans about which they report under various scenarios. 90 Based on this information, the Bureau estimates that, as of 2018, approximately 333 financial institutions originated at least 500 open-end lines of credit in both of the two preceding years, and approximately 1,014 financial institutions originated at least 100 open-end lines of credit in both of the two preceding years. 91 Under the temporary 500-loan open-end threshold, the Bureau estimates about 1.23 million lines of credit or approximately 78 percent of origination volume will be reported by about 5 percent of all institutions providing open-end lines of credit. 92 90 Because collection of data on open-end lines of credit only became mandatory starting in 2018 under the 2015 HMDA Rule and 2017 HMDA Rule, no single data source existed as of the time of the May 2019 Proposal that could accurately capture the number of originations of open-end lines of credit in the entire market and by lenders. In part VII of this final rule, the Bureau has supplemented the analyses from the May 2019 Proposal with the 2018 HMDA data that were released to the public on August 30, 2019. For information about the HMDA data used in developing and supplementing the Bureau estimates, see infra part VII.E.3. 91 See infra part VII.E.3 at table 3 for estimates of coverage among all lenders that are active in the open-end line of credit market at open-end coverage thresholds of 100 and 500. 92 Id. Extending the temporary threshold of 500 open-end lines of credit for two years will decrease information about the open-end line of credit market relative to the information that would be reported if the Bureau were to allow the 100-loan threshold to take effect on January 1, 2020. However, the effect of this threshold increase will be limited, because the EGRRCPA now provides a partial exemption that exempts almost all of the institutions that the temporary increase will affect from any obligation to report many of the data points generally required by Regulation C for their open-end lines of credit. In light of the EGRRCPA's partial exemption from reporting certain data for open-end lines of credit for certain insured depository institutions and insured credit unions, continuing the open-end line of credit coverage threshold at 500 will result in a much smaller loss of data than the Bureau anticipated when it adopted a permanent threshold of 100 open-end lines of credit in the 2015 HMDA Rule or when it revisited the open-end line of credit coverage threshold in the 2017 HMDA Rule. The Bureau determines that the limited decrease in information reported occasioned by the temporary adjustment to the open-end threshold is justified by the benefits discussed above of reducing the burden on smaller institutions. This burden reduction is greater than the Bureau anticipated in the 2015 HMDA Rule, because the number of institutions affected and the costs per institution associated with reporting are higher than anticipated, as explained above and in part VII below. 2(g)(2) Nondepository Financial Institution 2(g)(2)(ii)(B) Temporary Open-End Line of Credit Threshold for Institutional Coverage of Nondepository Institutions The 2015 HMDA Rule established a coverage threshold of 100 open-end lines of credit in § 1003.2(g)(2)(ii)(B) as part of the definition of nondepository financial institution. As discussed in more detail in the section-by-section analysis of § 1003.2(g)(1)(v)(B) above, the 2017 HMDA Rule amended §§ 1003.2(g)(1)(v)(B) and (g)(2)(ii)(B) and 1003.3(c)(12) and related commentary to raise temporarily the open-end coverage threshold to 500 lines of credit for calendar years 2018 and 2019. 93 In the May 2019 Proposal, the Bureau proposed to extend to January 1, 2022, Regulation C's temporary open-end threshold of 500 open-end lines of credit for institutional and transactional coverage of both depository and nondepository institutions. After the end of the extension, the May 2019 Proposal would set the threshold at 200 open-end lines of credit. The Bureau is now finalizing the amendments to extend for two years the temporary open-end institutional coverage threshold for nondepository institutions in § 1003.2(g)(2)(ii)(B) and intends to address the May 2019 Proposal's proposed amendment to the permanent coverage threshold for open-end lines of credit in a separate final rule in 2020. 94 93 82 FR 43088, 43095 (Sept. 13, 2017). 94 See supra note 88. Commenters typically discussed generally the open-end threshold for HMDA coverage, without distinguishing between the threshold applicable to depository institutions under § 1003.2(g)(2)(1)(v)(B) and the threshold applicable to nondepository institutions under § 1003.2(g)(2)(ii)(B). Comments received regarding the proposed extension of the temporary open-end threshold are discussed in the section-by-section analysis of § 1003.2(g)(1)(v)(B). For the reasons discussed in the section-by-section analysis of § 1003.2(g)(1)(v)(B), and to ensure the thresholds are consistent for depository and nondepository institutions, the Bureau is finalizing as proposed the extension to January 1, 2022 of Regulation C's temporary open-end threshold of 500 open-end lines of credit. As discussed in part III above, the Bureau has reopened the comment period relating to the May 2019 Proposal's proposed amendments to the permanent thresholds for closed-end mortgage loans and open-end lines of credit. 95 After the reopened comment period closes, the Bureau intends to issue a final rule in 2020 addressing the permanent threshold for open-end lines of credit. This permanent threshold would take effect on January 1, 2022. This final rule temporarily sets the open-end line of credit threshold for institutional coverage of nondepository institutions in § 1003.2(g)(2)(ii)(B) at 500 for calendar years 2020 and 2021, as proposed. This amendment to the open-end line of credit threshold for institutional coverage of nondepository institutions in § 1003.2(g)(2)(ii)(B) conforms to the amendment that the Bureau is finalizing with respect to the two-year extension of the temporary open-end threshold for institutional coverage for depository institutions in § 1003.2(g)(1)(v)(B) and the two-year extension of the temporary open-end threshold for transactional coverage in § 1003.3(c)(12). 95 84 FR 37804 (Aug. 2, 2019). Pursuant to its authority under HMDA section 305(a) as discussed above, the Bureau is extending for two years the temporary threshold for open-end lines of credit in § 1003.2(g)(2)(ii)(B). The Bureau determines that this final rule's amendments to § 1003.2(g)(2)(ii)(B) will effectuate the purposes of HMDA by ensuring significant coverage of nondepository mortgage lending. This extension also facilitates compliance with HMDA by reducing burden on smaller institutions and excluding nondepository institutions that are not engaged for profit in the business of mortgage lending. The Bureau believes that the reasons provided for extending the temporary open-end threshold for depository institutions in the section-by-section analysis of § 1003.2(g)(1)(v)(B) above apply to the temporary threshold for nondepository institutions as well. Additionally, the extension of the temporary threshold in § 1003.2(g)(2)(ii)(B) will promote consistency by subjecting nondepository institutions to the same threshold that applies to the depository institutions that make up the bulk of the open-end line of credit market. According to the Bureau's estimates, nondepository institutions account for only a small percentage of the institutions and loans in the open-end line of credit market. 96 Table 3 in the Bureau's analysis under Dodd-Frank Act section 1022(b) in part VII.E.3 below provides coverage estimates for nondepository institutions at the current temporary threshold of 500 open-end lines of credit that the Bureau is extending. 96 See infra part VII.E.3 at table 3. Section 1003.3 Exempt Institutions and Excluded and Partially Exempt Transactions 3(c) Excluded Transactions 3(c)(12) As adopted in the 2015 HMDA Rule, § 1003.3(c)(12) provides an exclusion from the requirement to report open-end lines of credit for institutions that did not originate at least 100 such loans in each of the two preceding calendar years. This transactional coverage threshold was intended to complement an open-end reporting threshold included in the definition of financial institution in § 1003.2(g), which sets forth Regulation C's institutional coverage. The 2017 HMDA Rule replaced “each” with “either” in § 1003.3(c)(12) to correct a drafting error and to ensure that the exclusions provided in that section mirror the loan-volume thresholds for financial institutions in § 1003.2(g). 97 As discussed in more detail in the section-by-section analysis of § 1003.2(g), in the 2017 HMDA Rule the Bureau also amended §§ 1003.2(g) and 1003.3(c)(12) and related commentary to raise temporarily the open-end threshold in those provisions to 500 lines of credit for calendar years 2018 and 2019. 98 In the May 2019 Proposal, the Bureau proposed to extend to January 1, 2022, Regulation C's current temporary open-end threshold for institutional and transactional coverage of 500 open-end lines of credit and then to set the threshold at 200 open-end lines of credit upon the expiration of the proposed extension of the temporary threshold. Comments regarding the proposed temporary adjustment to the open-end threshold are discussed in the section-by-section analysis of § 1003.2(g)(1)(v)(B). 97 82 FR 43088, 43102 (Sept. 13, 2017). 98 Id. at 43095. For the reasons discussed in the section-by-section analysis of § 1003.2(g)(1)(v)(B), the Bureau is now extending to January 1, 2022, Regulation C's 500 open-end line of credit threshold. As discussed in part III above, the Bureau has reopened the comment period relating to the May 2019 Proposal's proposed amendments to the permanent thresholds for closed-end mortgage loans and open-end lines of credit. 99 After reviewing the comments received during the reopened comment period, the Bureau intends to issue a final rule in 2020 addressing the permanent threshold for open-end lines of credit that would take effect on January 1, 2022. To align the two-year extension of the temporary open-end threshold for institutional coverage in § 1003.2(g) with the timeframe for the transactional coverage threshold, the Bureau is also extending the temporary open-end threshold for transactional coverage in § 1003.3(c)(12) and comments 3(c)(12)-1 and -2 to 500 for calendar years 2020 and 2021, as proposed. 99 84 FR 37804 (Aug. 2, 2019). 3(d) Partially Exempt Transactions Section 104(a) of the EGRRCPA amended HMDA section 304(i) by adding partial exemptions from HMDA's requirements that apply to certain transactions of eligible insured depository institutions and insured credit unions. In the 2018 HMDA Rule, the Bureau implemented and clarified HMDA section 304(i) by addressing a set of interpretive and procedural questions relating to the partial exemptions. The Bureau proposed in § 1003.3(d) and related commentary to incorporate the partial exemptions and the interpretations and procedures from the 2018 HMDA Rule into Regulation C and further implement HMDA section 304(i) by addressing additional questions that have arisen with respect to the partial exemptions. 100 For the reasons stated below, the Bureau is now finalizing the proposed amendments relating to partial exemptions in § 1003.3(d) and its associated commentary as proposed. 100 This final rule includes related amendments in § 1003.4 and its commentary referencing § 1003.3(d) that are discussed in the section-by-section analysis of § 1003.4. The Filing Instructions Guide for HMDA Data Collected in 2020 (2020 FIG) provides guidance to financial institutions on how to indicate in their HMDA submissions if they are invoking a partial exemption. See Fed. Fin. Insts. Examination Council (FFIEC), “Filing Instructions Guide for HMDA Data Collected in 2020” (Sept. 2019), https://s3.amazonaws.com/cfpb-hmda-public/prod/help/2020-hmda-fig.pdf. Although some commenters expressed general opposition to the May 2019 Proposal in its entirety, there were no specific concerns articulated in the comments regarding the regulation text and commentary that the Bureau proposed to implement EGRRCPA. Commenters that discussed the proposed amendments relating to EGRRCPA generally expressed support for the Bureau's implementation of section 104(a) of the EGRRCPA. A few commenters specifically expressed support for the Bureau's interpretation on issues related to partial exemptions after a merger or acquisition and for the guidance related to determining loans and lines of credit that would be considered originations and counted towards the thresholds for partial exemptions. Many industry commenters stated that they appreciated the Bureau quickly implementing the provisions of the EGRRCPA and did not suggest any changes to the proposed regulation text and commentary relating to the partial exemptions. A group of 148 national and local organizations also expressed their support for the Bureau's proposed commentary clarifying that a financial institution that is not itself an insured credit union or an insured depository institution is not eligible for a partial exemption even if it is an affiliate of an insured credit union or an insured depository institution. 101 101 These groups also stated in their comment letter that the threshold calculations for determining whether an institution reports HMDA data should be applied at the holding company level. This issue is outside the scope of the Bureau's proposal. Section 1003.3(d)(1) sets forth definitions relating to the partial exemptions, including a definition of optional data that delineates which data points are covered by the partial exemptions. Section 1003.3(d)(2) and (3) provides the general tests for when the partial exemptions apply for closed-end mortgage loans and open-end lines of credit, respectively. Section 1003.3(d)(4) addresses voluntary reporting of data that are covered by a partial exemption for a partially exempt transaction. Section 1003.3(d)(5) relates to the non-universal loan identifier that financial institutions must report for a partially exempt transaction if a ULI is not provided. Section 1003.3(d)(6) implements the statutory exception to the partial exemptions for insured depository institutions with certain less than satisfactory examination histories under the CRA. Each of these paragraphs and related commentary are discussed in more detail below. The loan thresholds added by the EGRRCPA to HMDA section 304(i) resemble in many respects the loan thresholds that determine institutional and transactional coverage in Regulation C. For example, both sets of thresholds relate to originations (rather than applications or purchases) and apply separately to closed-end mortgage loans and open-end lines of credit. In light of these similarities, the Bureau has used the institutional and transactional coverage thresholds in existing Regulation C as a model in interpreting certain aspects of the partial exemption thresholds. Because the Bureau recognizes that there are advantages to industry stakeholders and others from using consistent language to describe similar requirements, the final rule (like the proposal) uses language that parallels language in existing Regulation C wherever feasible. Comments 3(d)-1 through -5 address certain issues relating to the partial exemptions that the 2018 HMDA Rule does not specifically discuss. Comments 3(d)-1 through -3 explain how to determine whether a partial exemption applies to a transaction after a merger or acquisition. Comment 3(d)-1 describes the application of the partial exemption thresholds to a surviving or newly formed institution. Comment 3(d)-2 describes how CRA examination history is handled in the event of a merger or acquisition for purposes of § 1003.3(d)(6), which implements the exception to the partial exemptions for certain less than satisfactory CRA examination histories in HMDA section 304(i)(3). Comment 3(d)-3 describes the applicability of partial exemptions during the calendar year of a merger or acquisition and provides various examples. These comments are modeled closely on existing comments 2(g)-3 and -4, which explain how to determine whether an institution satisfies the definition of financial institution in § 1003.2(g) after a merger or acquisition. Comment 3(d)-4 relates to whether activities with respect to a particular closed-end mortgage loan or open-end line of credit constitute an origination for purposes of the partial exemption loan thresholds. Given the similarities between the coverage thresholds currently in Regulation C 102 and the partial exemption thresholds under the EGRRCPA, the Bureau believes that the same guidance for determining whether activities constitute an origination that applies for purposes of the coverage thresholds in Regulation C's definition of financial institution should apply with respect to the partial exemption thresholds. Consistent with the approach taken in existing comment 2(g)-5 for the definition of financial institution, comment 3(d)-4 refers to comments 4(a)-2 through -4 for guidance on this issue in the context of the partial exemptions. 102 See 12 CFR 1003.2(g)(1)(v) and (g)(2)(ii) and 1003.3(c)(11) and (12). Comment 3(d)-5 addresses questions about whether a financial institution that does not itself meet the requirements for a partial exemption can claim an exemption if an affiliate or parent company meets the requirements. It clarifies that a financial institution that is not itself an insured credit union or an insured depository institution 103 is not eligible for a partial exemption under § 1003.3(d)(2) and (3), even if it is owned by or affiliated with an insured credit union or an insured depository institution. This approach is consistent with HMDA section 304(i)(1) and (2), which by its terms applies “[w]ith respect to an insured depository institution or insured credit union” as defined in HMDA section 304(o). To clarify further the EGRRCPA's partial exemptions, the comment also provides an example describing when a subsidiary of an insured credit union or insured depository institution could claim a partial exemption under § 1003.3(d) for its closed-end mortgage loans. 103 For purposes of the comment, insured credit union and insured depository institution are defined in § 1003.3(d)(1)(i) and (ii), which, as explained below, mirrors how those terms are defined in HMDA section 304(o). 3(d)(1) Proposed § 1003.3(d)(1) and proposed comment 3(d)(1)(iii)-1 define terms related to the partial exemptions for purposes of proposed § 1003.3(d). As mentioned above, commenters that discussed the proposed amendments relating to the EGRRCPA generally expressed support for the Bureau's implementation of section 104(a) of the EGRRCPA and did not suggest any changes to the proposed regulation text or commentary. For the reasons discussed below, the Bureau is adopting § 1003.3(d)(1) and comment 3(d)(1)(iii)-1 as proposed. Section 1003.3(d)(1)(i) defines the term “insured credit union” to mean an insured credit union as defined in section 101 of the Federal Credit Union Act (12 U.S.C. 1752), and § 1003.3(d)(1)(ii) defines the term “insured depository institution” to mean an insured depository institution as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813). These definitions are consistent with the way HMDA section 304(o) defines the two terms for purposes of HMDA section 304. Section 1003.3(d)(1)(iii) and comment 3(d)(1)(iii)-1 define the term “optional data” for purposes of § 1003.3(d). For the reasons discussed below, § 1003.3(d)(1)(iii) generally defines optional data as the data identified in § 1003.4(a)(1)(i), (a)(9)(i), and (a)(12), (15) through (30), and (32) through (38). Comment 3(d)(1)(iii)-1 explains that the definition of optional data in § 1003.3(d)(1)(iii) identifies the data that are covered by the partial exemptions for certain transactions of insured depository institutions and insured credit unions under § 1003.3(d). It also clarifies that, if a transaction is not partially exempt under § 1003.3(d)(2) or (3), a financial institution must collect, record, and report optional data as otherwise required under part 1003. The EGRRCPA added partial exemptions to HMDA section 304(i), and the definition of optional data in § 1003.3(d)(1)(iii) specifies the data points covered by the partial exemptions. As the 2018 HMDA Rule explains, if a transaction qualifies for one of the EGRRCPA's partial exemptions, HMDA section 304(i) provides that the requirements of HMDA section 304(b)(5) and (6) shall not apply. In the 2018 HMDA Rule, the Bureau interpreted the requirements of HMDA section 304(b)(5) and (6) to include the 26 data points listed in Table 1 in the 2018 HMDA Rule, which are found in § 1003.4(a)(1)(i), (a)(9)(i), and (a)(12), (15) through (30), and (32) through (38). The Dodd-Frank Act added HMDA section 304(b)(5) and (6), which requires reporting of certain data points and provides the Bureau discretion to require additional data points. 104 In the 2015 HMDA Rule, the Bureau implemented the new data points specified in the Dodd-Frank Act (including those added in HMDA section 304(b)(5) and (6)), added a number of additional data points pursuant to the Bureau's discretionary authority, and made revisions to certain pre-existing data points to clarify their requirements, provide greater specificity in reporting, and align certain data points more closely with industry data standards. 104 HMDA section 304(b)(5) requires disclosure of the number and dollar amount of mortgage loans grouped according to measurements of: • The total points and fees payable at origination in connection with the mortgage as determined by the Bureau; • The difference between the APR associated with the loan and a benchmark rate or rates for all loans; • The term in months of any prepayment penalty or other fee or charge payable on repayment of some portion of principal or the entire principal in advance of scheduled payments; and • Such other information as the Bureau may require. HMDA section 304(b)(6) requires disclosure of the number and dollar amount of mortgage loans and completed applications grouped according to measurements of: • The value of the real property pledged or proposed to be pledged as collateral; • The actual or proposed term in months of any introductory period after which the rate of interest may change; • The presence of contractual terms or proposed contractual terms that would allow the mortgagor or applicant to make payments other than fully amortizing payments during any portion of the loan term; • The actual or proposed term in months of the mortgage loan; • The channel through which application was made; • As the Bureau may determine to be appropriate, a unique identifier that identifies the loan originator as set forth in section 5102 of this title; • As the Bureau may determine to be appropriate, a universal loan identifier; • As the Bureau may determine to be appropriate, the parcel number that corresponds to the real property pledged or proposed to be pledged as collateral; • The credit score of mortgage applicants and mortgagors, in such form as the Bureau may prescribe; and • Such other information as the Bureau may require. As explained in the 2018 HMDA Rule, the Bureau interprets the requirements of HMDA section 304(b)(5) and (6) for purposes of HMDA section 304(i) to include the 12 data points that the Bureau added to Regulation C in the 2015 HMDA Rule to implement data points specifically identified in HMDA section 304(b)(5)(A) through (C) or (b)(6)(A) through (I), which are the following: ULI; property address; rate spread; credit score; total loan costs or total points and fees; prepayment penalty term; loan term; introductory rate period; non-amortizing features; property value; application channel; and mortgage loan originator identifier. 105 As the 2018 HMDA Rule explains, the Bureau also interprets the requirements of HMDA section 304(b)(5) and (6) to include the 14 data points that were not found in Regulation C prior to the Dodd-Frank Act and that the Bureau required in the 2015 HMDA Rule citing its discretionary authority under HMDA section 304(b)(5)(D) and (b)(6)(J). Specifically, these data points are the following: The total origination charges associated with the loan; the total points paid to the lender to reduce the interest rate of the loan (discount points); the amount of lender credits; the interest rate applicable at closing or account opening; the debt-to-income ratio; the ratio of the total amount of debt secured by the property to the value of the property (combined loan-to-value ratio); for transactions involving manufactured homes, whether the loan or application is or would have been secured by a manufactured home and land or by a manufactured home and not land (manufactured home secured property type); the land property interest for loans or applications related to manufactured housing (manufactured home land property interest); the number of individual dwellings units that are income-restricted pursuant to Federal, State, or local affordable housing programs (multifamily affordable units); information related to the automated underwriting system used in evaluating an application and the result generated by the automated underwriting system; whether the loan is a reverse mortgage; whether the loan is an open-end line of credit; whether the loan is primarily for a business or commercial purpose; and the reasons for denial of a loan application, which were optionally reported under the Board's rule but became mandatory in the 2015 HMDA Rule. 106 The 2018 HMDA Rule indicates that insured depository institutions and insured credit unions need not report these 26 data points for transactions that qualify for a partial exemption, unless otherwise required by their regulator. 107 105 12 CFR 1003.4(a)(1)(i), (a)(9)(i), and (a)(12), (15), (17), (22), (25) through (28), and (33) and (34). 106 12 CFR 1003.4(a)(16), (18) through (21), (23) and (24), (29) and (30), (32), and (35) through (38). 107 Financial institutions regulated by the OCC are required to report reasons for denial on their HMDA loan/application registers pursuant to 12 CFR 27.3(a)(1)(i) and 128.6. Similarly, pursuant to regulations transferred from the Office of Thrift Supervision, certain financial institutions supervised by the FDIC are required to report reasons for denial on their HMDA loan/application registers. 12 CFR 390.147. As the 2018 HMDA Rule explains, the Bureau interprets the requirements of HMDA section 304(b)(5) and (6) not to include four other data points that are similar or identical to data points added to Regulation C by the Board and that the Bureau re-adopted in the 2015 HMDA Rule: Lien status of the subject property; whether the loan is subject to the Home Ownership and Equity Protection Act of 1994 (HOEPA); construction method for the dwelling related to the subject property; and the total number of individual dwelling units contained in the dwelling related to the loan (number of units). 108 The 2015 HMDA Rule did not alter the pre-existing Regulation C HOEPA status and lien status data requirements. 109 Construction method and total units, together, replaced the pre-existing Regulation C property type data point; the information required by the new data points is very similar to what the Board required, but institutions now must report the precise number of units rather than categorizing dwellings into one- to four-family dwellings and multifamily dwellings. 110 108 12 CFR 1003.4(a)(5), (13) and (14), and (31). 109 The 2015 HMDA Rule extended the requirement to report lien status to purchased loans and no longer requires reporting of information about unsecured loans. 80 FR 66128, 66201 (Oct. 28, 2015). 110 Prior to 2018, Regulation C required reporting of property type as one- to four-family dwelling (other than manufactured housing), manufactured housing, or multifamily dwelling, whereas the current rule requires reporting of whether the dwelling is site-built or a manufactured home, together with the number of individual dwelling units. The Board adopted its versions of these data points before HMDA section 304(b)(5) and (6) was added to HMDA by the Dodd-Frank Act, pursuant to HMDA authority that pre-existed section 304(b)(5) and (6). Although the Bureau cited HMDA section 304(b)(5) and (6) as additional support for these four data points in the 2015 HMDA Rule, the Bureau relied on HMDA section 305(a), which predates the Dodd-Frank Act and independently provides legal authority for their adoption. 111 Given that these data points were not newly added by the Dodd-Frank Act or the Bureau, the Bureau concluded in the 2018 HMDA Rule that the EGRRCPA's amendments to HMDA section 304 do not affect them. 112 A large number of consumer advocacy and community development groups expressed their agreement with the Bureau that these data points were not affected by the partial exemptions under the EGRRCPA. 111 80 FR 66128, 66180-81, 66199-201, 66227 (Oct. 28, 2015). 112 This interpretation is consistent with the EGRRCPA's legislative history, which suggests that Congress was focused on relieving regulatory burden associated with the Dodd-Frank Act. See, e.g., 164 Cong. Rec. S1423-24 (daily ed. Mar. 7, 2018) (statement of Sen. Crapo), S1529-30 (statement of Sen. McConnell), S1532-33 (statement of Sen. Cornyn), S1537-39 (statement of Sen. Lankford), S1619-20 (statement of Sen. Cornyn). The requirements of HMDA section 304(b)(5) and (6), and thus the partial exemptions, also do not include 17 other data points included in the 2015 HMDA Rule that are similar or identical to pre-existing Regulation C data points established by the Board and that were not required by HMDA section 304(b)(5) and (6) or promulgated by the Bureau using discretionary authority under HMDA section 304(b)(5)(D) and (b)(6)(J). These are: The Legal Entity Identifier (which replaced the pre-existing respondent identifier); application date; loan type; loan purpose; preapproval; occupancy type; loan amount; action taken; action taken date; State; county; census tract; ethnicity; race; sex; income; and type of purchaser. 113 Additionally, the requirements of HMDA section 304(b)(5) and (6), and thus the partial exemptions, do not include age because the Dodd-Frank Act added that requirement instead to HMDA section 304(b)(4). 114 113 12 CFR 1003.4(a)(1)(ii), (a)(2) through (4) and (6) through (8), (a)(9)(ii), and (a)(10) and (11) and 1003.5(a)(3). 114 Dodd-Frank Act section 1094(3)(A)(i). Consistent with the scope of the new partial exemptions as explained in the 2018 HMDA Rule, the general definition of optional data in § 1003.3(d)(1)(iii) encompasses 26 of the 48 data points currently set forth in Regulation C. For ease of reference throughout § 1003.3(d), § 1003.3(d)(1)(iv) defines partially exempt transaction as a covered loan or application that is partially exempt under § 1003.3(d)(2) or (3). 3(d)(2) HMDA section 304(i)(1) provides that the requirements of HMDA section 304(b)(5) and (6) shall not apply with respect to closed-end mortgage loans of an insured depository institution or insured credit union if it originated fewer than 500 closed-end mortgage loans in each of the two preceding calendar years. The Bureau proposed § 1003.3(d)(2) and comment 3(d)(2)-1 to implement this provision. As mentioned above, commenters that discussed the proposed amendments relating to EGRRCPA generally expressed support for the Bureau's implementation of section 104(a) of the EGRRCPA and did not suggest any changes to the proposed regulation text or commentary. As explained below, the Bureau is finalizing § 1003.3(d)(2) and comment 3(d)(2)-1 as proposed. Section 1003.3(d)(2) states that, except as provided in § 1003.3(d)(6), an insured depository institution or insured credit union that, in each of the two preceding calendar years, originated fewer than 500 closed-end mortgage loans that are not excluded from part 1003 pursuant to § 1003.3(c)(1) through (10) or (c)(13) is not required to collect, record, or report optional data as defined in § 1003.3(d)(1)(iii) for applications for closed-end mortgage loans that it receives, closed-end mortgage loans that it originates, and closed-end mortgage loans that it purchases. The EGRRCPA and HMDA do not define the term “closed-end mortgage loan” for purposes of HMDA section 304(i). They also do not specify whether the term includes loans that would otherwise not be subject to HMDA reporting under Regulation C, such as loans used primarily for agricultural purposes. 115 The Bureau explained in the 2018 HMDA Rule that the term “closed-end mortgage loan” as used in HMDA section 304(i) is best interpreted to include only those closed-end mortgage loans that would otherwise be reportable under HMDA. This interpretation is consistent with how loans are counted for purposes of the thresholds in Regulation C's existing institutional and transactional coverage provisions, which are independent of the new partial exemptions and unaffected by the EGRRCPA. 116 Accordingly, in the 2018 HMDA Rule, the Bureau interpreted the term “closed-end mortgage loan” to include any closed-end mortgage loan as defined in § 1003.2(d) that is not excluded from Regulation C pursuant to § 1003.3(c)(1) through (10) or (c)(13). Section 1003.3(d)(2) incorporates that interpretation into Regulation C. 115 12 CFR 1003.3(c)(9). 116 As discussed above in the section-by-section analysis of §§ 1003.2(g) and 1003.3(c), the current definition of “depository financial institution” in § 1003.2(g)(1)(v) is limited to institutions that either (1) originated in each of the two preceding calendar years at least 25 closed-end mortgage loans that are not excluded from Regulation C pursuant to § 1003.3(c)(1) through (10) or (c)(13); or (2) originated in each of the two preceding calendar years at least 500 open-end lines of credit that are not excluded from Regulation C pursuant to § 1003.3(c)(1) through (10). See also 12 CFR 1003.3(c)(11), (12) (excluding closed-end mortgage loans from the requirements of Regulation C if the financial institution originated fewer than 25 closed-end mortgage loans in either of the two preceding calendar years, and excluding open-end lines of credit from the requirements of Regulation C if the financial institution originated fewer than 500 open-end lines of credit in either of the two preceding calendar years). The threshold of 500 open-end lines of credit for institutional and transactional coverage in Regulation C is temporary. Comment 3(d)(2)-1 provides an illustrative example of how the closed-end partial exemption threshold works. For the reasons stated in the section-by-section analysis of § 1003.3(d) above, comment 3(d)(2)-1 also provides a cross-reference to comments 4(a)-2 through -4 for guidance about the activities that constitute an origination. 3(d)(3) HMDA section 304(i)(2) provides that the requirements of HMDA section 304(b)(5) and (6) shall not apply with respect to open-end lines of credit of an insured depository institution or insured credit union if it originated fewer than 500 open-end lines of credit in each of the two preceding calendar years. The Bureau proposed § 1003.3(d)(3) and comment 3(d)(3)-1 to implement this provision. As mentioned above, commenters that discussed the proposed amendments relating to EGRRCPA generally expressed support for the Bureau's implementation of section 104(a) of the EGRRCPA and did not suggest any changes to the regulation text or commentary. The Bureau is finalizing § 1003.3(d)(3) and comment 3(d)(3)-1 as proposed. Section 1003.3(d)(3) provides that, except as provided in § 1003.3(d)(6), an insured depository institution or insured credit union that, in each of the two preceding calendar years, originated fewer than 500 open-end lines of credit that are not excluded from part 1003 pursuant to § 1003.3(c)(1) through (10) is not required to collect, record, report, or disclose optional data as defined in § 1003.3(d)(1)(iii) for applications for open-end lines of credit that it receives, open-end lines of credit that it originates, and open-end lines of credit that it purchases. The EGRRCPA and HMDA do not define the term “open-end line of credit” for purposes of HMDA section 304(i). They also do not specify whether the term includes lines of credit that would otherwise not be subject to HMDA reporting under Regulation C, such as loans used primarily for agricultural purposes. 117 The Bureau explained in the 2018 HMDA Rule its view that the term “open-end line of credit” as used in HMDA section 304(i) is best interpreted to include only those open-end lines of credit that would otherwise be reportable under HMDA. This interpretation is consistent with how lines of credit are counted for purposes of the thresholds in Regulation C's existing institutional and transactional coverage provisions, which are independent of the new partial exemptions and unaffected by the EGRRCPA. Accordingly, in the 2018 HMDA Rule, the Bureau interpreted the term “open-end line of credit” to include any open-end line of credit as defined in § 1003.2(o) that is not excluded from Regulation C pursuant to § 1003.3(c)(1) through (10). Section 1003.3(d)(3) incorporates that interpretation into Regulation C. 117 See 12 CFR 1003.3(c)(9). Comment 3(d)(3)-1 provides a cross-reference to § 1003.3(c)(12) and comments 3(c)(12)-1 and -2, which provide an exclusion for certain open-end lines of credit from Regulation C and permit voluntary reporting of such transactions under certain circumstances. While the temporary threshold of 500 open-end lines of credit is in place for institutional and transactional coverage, all of the open-end lines of credit that are covered by the partial exemption for open-end lines of credit in HMDA section 304(i)(2) are completely excluded from the requirements of part 1003 under current §§ 1003.2(g)(1)(v) and 1003.3(c)(12). For the reasons stated in the section-by-section analysis of § 1003.3(d) above, comment 3(d)(3)-1 also provides a cross-reference to comments 4(a)-2 through -4 for guidance about the activities that constitute an origination. 3(d)(4) Some data points required under Regulation C are reported using multiple data fields, such as the property address data point, which consists of street address, city, State, and Zip Code data fields. The 2018 HMDA Rule provides that insured depository institutions and insured credit unions covered by a partial exemption have the option of reporting exempt data fields as long as they report all data fields within any exempt data point for which they report data. Proposed § 1003.3(d)(4) and proposed comments 3(d)(4)-1 to -3 and 3(d)(4)(i)-1 would incorporate this aspect of the 2018 HMDA Rule into Regulation C and provide additional clarity regarding voluntary reporting of the property address data point. As mentioned above, commenters that discussed the proposed amendments relating to EGRRCPA generally expressed support for the Bureau's implementation of section 104(a) of the EGRRCPA and did not suggest any changes. For the reasons explained below, the Bureau is finalizing § 1003.3(d)(4) and comments 3(d)(4)-1 and 3(d)(4)(i)-1 as proposed. As the 2018 HMDA Rule explains, whether a partial exemption applies to an institution's lending activity for a particular calendar year depends on an institution's origination activity in each of the preceding two years. In some cases, coverage therefore cannot be determined until just before data collection must begin for a calendar year. For example, whether a partial exemption applies to closed-end mortgage loans for which final action is taken in 2020 depends on the number of closed-end mortgage loans originated by the insured depository institution or insured credit union in 2018 and 2019. Thus, an insured depository institution or insured credit union might not know until the end of 2019 what information it needs to collect in 2020 and report in 2021. Some insured depository institutions and insured credit unions eligible for a partial exemption under the EGRRCPA may therefore find it less burdensome to report all of the data, including the exempt data points, than to separate the exempt data points from the required data points and exclude the exempt data points from their submissions. 118 Even when insured depository institutions and insured credit unions have had time to adjust their systems to implement the partial exemptions, some may still find it less burdensome to report data covered by a partial exemption, especially if their loan volumes tend to fluctuate just above or below the threshold from year to year. The Bureau concluded in the 2018 HMDA Rule that section 104(a) is best interpreted as permitting optional reporting of data covered by the EGRRCPA's partial exemptions. Section 104(a) provides that certain requirements do not apply to affected institutions but does not prohibit those affected institutions from voluntarily reporting data. This interpretation is consistent not only with the statutory text but also with the apparent congressional intent to reduce burden on certain institutions. Accordingly, the Bureau interpreted the EGRRCPA in the 2018 HMDA Rule to permit insured depository institutions and insured credit unions voluntarily to report data that are covered by the partial exemptions. 118 The Bureau recognized in the 2018 HMDA Rule that this might be particularly true with respect to data submission in 2019, as collection of 2018 data was already underway when the EGRRCPA took effect, and system changes implementing the new partial exemptions may take time to complete. In the 2018 HMDA Rule, the Bureau interpreted the EGRRCPA to apply to data that are collected or reported under HMDA on or after May 24, 2018. Because data collected from January 1, 2018, to May 23, 2018, would not be reported until early 2019, the EGRRCPA relieves insured depository institutions and insured credit unions that are eligible for a partial exemption of the obligation to report certain data in 2019 that may have been collected before May 24, 2018. If optional reporting of data covered by a partial exemption were not permitted, such institutions would have had to remove exempt data previously collected before submitting their 2018 data in early 2019, a process that could have been burdensome for some institutions. Aspects of the Bureau's current HMDA platform used for receiving HMDA submissions, including edit checks 119 performed on incoming submissions, are set up with the expectation that HMDA reporters will provide data for an entire data point when data are reported for any data field within that data point. The Bureau explained in the 2018 HMDA Rule that adjusting the HMDA platform to accept submissions in which affected institutions report some, but not all, data fields in a data point covered by a partial exemption for a specific transaction would increase operational complexity and costs associated with changing the HMDA edits in the Filing Instructions Guide for HMDA Data Collected. Doing so would result in a less efficient implementation and submission process for the Bureau, HMDA reporters, their vendors, and other key stakeholders. Accordingly, the Bureau indicated in the 2018 HMDA Rule that the HMDA platform would continue to accept submissions of a data field that is covered by a partial exemption under the EGRRCPA for a specific loan or application as long as insured depository institutions and insured credit unions that choose to voluntarily report the data include all other data fields that the data point comprises. 119 The HMDA edit checks are rules to assist filers in checking the accuracy of HMDA data prior to submission. The 2020 FIG, a compendium of resources to help financial institutions file HMDA data collected in 2019 with the Bureau in 2020, explains that there are four types of edit checks: Syntactical, validity, quality, and macro quality. Table 2 (Loan/Application Register) in the 2020 FIG identifies the data fields currently associated with each data point. See FFIEC, “Filing Instructions Guide for HMDA Data Collected in 2020,” at 15-66 (Sept. 2019), https://s3.amazonaws.com/cfpb-hmda-public/prod/help/2020-hmda-fig.pdf. Section 1003.3(d)(4) incorporates the voluntary reporting interpretations and procedures from the 2018 HMDA Rule into Regulation C. Since issuing the 2018 HMDA Rule, the Bureau has also received questions relating to voluntary reporting of property address under § 1003.4(a)(9)(i). The property address data point under § 1003.4(a)(9)(i) is covered by the partial exemptions and includes State as a data field, yet State is also a separate data point under § 1003.4(a)(9)(ii)(A) that is not covered by the partial exemptions. To address possible confusion, § 1003.3(d)(4) and comment 3(d)(4)(i)-1 include additional detail about voluntary reporting of property address. Section 1003.3(d)(4) provides that a financial institution eligible for a partial exemption under § 1003.3(d)(2) or (3) may collect, record, and report optional data as defined in § 1003.3(d)(1)(iii) for a partially exempt transaction as though the institution were required to do so, provided that: (i) If the institution reports the street address, city name, or Zip Code for the property securing a covered loan, or in the case of an application, proposed to secure a covered loan pursuant to § 1003.4(a)(9)(i), it reports all data that would be required by § 1003.4(a)(9)(i) if the transaction were not partially exempt; and (ii) If the institution reports any data for the transaction pursuant to § 1003.4(a)(15), (16), (17), (27), (33), or (35), it reports all data that would be required by § 1003.4(a)(15), (16), (17), (27), (33), or (35), respectively, if the transaction were not partially exempt. Comment 3(d)(4)-1 provides an example of voluntary reporting that is permitted under § 1003.3(d)(4). Comment 3(d)(4)-2 addresses how financial institutions may handle partially exempt transactions within the same loan/application register. It explains that a financial institution may collect, record, and report optional data for some partially exempt transactions under § 1003.3(d) in the manner specified in § 1003.3(d)(4), even if it does not collect, record, and report optional data for other partially exempt transactions under § 1003.3(d). Comment 3(d)(4)-3 addresses how to handle a transaction that is partially exempt pursuant to § 1003.3(d) and for which a particular requirement to report optional data is not applicable to the transaction. The comment explains that, in that circumstance, the insured depository institution or insured credit union complies with the particular requirement by reporting either that the transaction is exempt from the requirement or that the requirement is not applicable. 120 It also explains that an institution is considered as reporting data in a data field for purposes of § 1003.3(d)(4)(i) and (ii) if it reports not applicable for that data field for a partially exempt transaction. The comment also provides examples. 120 As noted above, the 2020 FIG provides guidance to financial institutions on how to indicate in their HMDA submissions if they are invoking a partial exemption. See supra note 100. Comment 3(d)(4)(i)-1 explains that, if an institution eligible for a partial exemption under § 1003.3(d)(2) or (3) reports the street address, city name, or Zip Code for a partially exempt transaction pursuant to § 1003.4(a)(9)(i), it reports all data that would be required by § 1003.4(a)(9)(i) if the transaction were not partially exempt, including the State. The comment also explains that an insured depository institution or insured credit union that reports the State pursuant to § 1003.4(a)(9)(ii) or comment 4(a)(9)(ii)-1 for a partially exempt transaction without reporting any other data required by § 1003.4(a)(9)(i) is not required to report the street address, city name, or Zip Code pursuant to § 1003.4(a)(9)(i). The Bureau believes that this comment will help to clarify that, even though State is a property address data field under § 1003.4(a)(9)(i), reporting State does not trigger the requirement to report other property address data fields under § 1003.3(d)(4)(i), because State is also a stand-alone data point under § 1003.4(a)(9)(ii)(A) that is not covered by the partial exemptions. 3(d)(5) Pursuant to HMDA section 304(i), insured depository institutions and insured credit unions are not required to report a ULI for partially exempt transactions. 121 To ensure that partially exempt transactions can be identified in the HMDA data, the 2018 HMDA Rule requires financial institutions to provide a non-universal loan identifier (NULI) that meets certain requirements for any partially exempt transaction for which they do not report a ULI. Proposed § 1003.3(d)(5) and proposed comments 3(d)(5)-1 and -2 would incorporate the NULI requirements from the 2018 HMDA Rule into Regulation C, with minor adjustments for clarity. As mentioned above, commenters that discussed the proposed amendments relating to EGRRCPA generally expressed support for the Bureau's implementation of section 104(a) of the EGRRCPA and did not suggest any changes. With respect to the NULI, a national trade association expressed support for the clarifications on the technical issues provided in the proposal. For the reasons provided below, the Bureau is finalizing § 1003.3(d)(5) and comments 3(d)(5)-1 and -2 as proposed. 121 Prior to the passage of the Dodd-Frank Act, the Board required reporting of an identifying number for the loan or application but did not require that the identifier be universal. HMDA section 304(b)(6)(G) requires reporting of, “as the Bureau may determine to be appropriate, a universal loan identifier.” In the 2015 HMDA Rule, the Bureau interpreted ULI as used in HMDA section 304(b)(6)(G) to mean an identifier that is unique within the industry and required that the ULI include the Legal Entity Identifier of the institution that assigned the ULI. Although the EGRRCPA exempts certain transactions from the ULI requirement, loans and applications must be identifiable in the HMDA data to ensure proper HMDA submission, processing, and compliance. 122 The EGRRCPA did not change this fundamental component of data reporting, which predates the Dodd-Frank Act's HMDA amendments and existed under Regulation C prior to the 2015 HMDA Rule. Accordingly, while insured depository institutions and insured credit unions do not have to report a ULI for a partially exempt transaction, they must continue to provide certain information so that each loan and application they report for HMDA purposes is identifiable. The ability to identify individual loans and applications is necessary to facilitate efficient and orderly submission of HMDA data and communications between the institution, the Bureau, and other applicable regulators. For example, identification of loans and applications is necessary to address problems identified in edit checks done upon submission or answer questions that arise when regulators otherwise review HMDA submissions. 122 HMDA requires that covered loans and applications be “itemized in order to clearly and conspicuously disclose” the applicable data for each loan or application. 12 U.S.C. 2803(a)(2). To ensure the orderly administration of the HMDA program, § 1003.3(d)(5) and comments 3(d)(5)-1 and -2 incorporate the NULI requirements of the 2018 HMDA Rule into Regulation C with minor adjustments. As the 2018 HMDA Rule explains, a NULI does not need to be unique within the industry and therefore does not need to include a Legal Entity Identifier as the ULI does. A check digit is not required as part of a NULI, as it is for a ULI under § 1003.4(a)(1)(i)(C), but may be voluntarily included in a NULI provided that the NULI, including the check digit, does not exceed 22 characters. Beyond these important differences, there are a number of similarities between the requirements for the ULI and those for the NULI. To the extent that NULI requirements resemble requirements for the ULI, the Bureau has conformed § 1003.3(d)(5) and its commentary to the corresponding text of existing § 1003.4(a)(1)(i) and its commentary for ease of reference and consistency. Section 1003.3(d)(5) provides that, if, pursuant to § 1003.3(d)(2) or (3), a financial institution does not report a ULI pursuant to § 1003.4(a)(1)(i) for an application for a covered loan that it receives, a covered loan that it originates, or a covered loan that it purchases, the financial institution shall assign and report a NULI. It further provides that, to identify the covered loan or application, the NULI must be composed of up to 22 characters, which: • May be letters, numerals, or a combination of letters and numerals; • Must be unique within the annual loan/application register in which the covered loan or application is included; and • Must not include any information that could be used to directly identify the applicant or borrower. Comment 3(d)(5)-1 explains the requirement that the NULI must be unique within the annual loan/application register in which the covered loan or application is included. Comment 3(d)(5)-2 clarifies the scope of information that could be used to directly identify the applicant or borrower for purposes of § 1003.3(d)(5)(iii), using the same language that appears in comment 4(a)(1)(i)-2 with respect to the ULI. The final rule's requirements for the NULI are consistent with those in the 2018 HMDA Rule. However, the 2018 HMDA Rule states that the NULI must be “unique within the insured depository institution or credit union,” whereas § 1003.3(d)(5)(ii) states that the NULI must be “unique within the annual loan/application register in which the covered loan or application is included.” This adjustment and similar adjustments that appear in comment 3(d)(5)-1 clarify that the NULI must be unique within a financial institution's yearly HMDA submission but the NULI does not need to be unique across reporting years. For the same reason, the final rule does not incorporate the portion of the 2018 HMDA Rule stating that a financial institution may not use a NULI previously reported if the institution reinstates or reconsiders an application that was reported in a prior calendar year. 123 Thus, the final rule allows a financial institution to use the same NULI for a partially exempt transaction in its 2021 loan/application register that the institution used for a different partially exempt transaction in its 2020 loan/application register. Because final action on an application may be taken in a different year than the year in which a NULI is assigned (for example, for applications received late in the year), insured depository institutions and insured credit unions may opt not to reassign NULIs that they have assigned previously to ensure all NULIs included in their annual loan/application register are unique within that annual loan/application register. 123 83 FR 45325, 45330 (Sept. 7, 2018). The Bureau recognizes that some insured depository institutions and insured credit unions may prefer to report a ULI for partially exempt transactions even if they are not required to do so. As explained in the 2018 HMDA Rule and in the section-by-section analysis of § 1003.3(d)(4) above and of § 1003.4(a)(1)(i) below, voluntary reporting of ULIs for partially exempt transactions is permissible under the EGRRCPA, and no NULI is required if a ULI is provided. 3(d)(6) Notwithstanding the EGRRCPA's partial exemptions, new HMDA section 304(i)(3) provides that an insured depository institution shall comply with HMDA section 304(b)(5) and (6) if the insured depository institution has received a rating of “needs to improve record of meeting community credit needs” during each of its two most recent examinations or a rating of “substantial noncompliance in meeting community credit needs” on its most recent examination under section 807(b)(2) of the CRA. To implement this provision, proposed § 1003.3(d)(6) provided that § 1003.3(d)(2) and (3) do not apply to an insured depository institution that, as of the preceding December 31, had received a rating of “needs to improve record of meeting community credit needs” during each of its two most recent examinations or a rating of “substantial noncompliance in meeting community credit needs” on its most recent examination under section 807(b)(2) of the CRA. As mentioned above, commenters that discussed the proposed amendments relating to EGRRCPA generally expressed support for the Bureau's implementation of section 104(a) of the EGRRCPA and did not suggest any changes. For the reasons explained below, the Bureau is finalizing comment 3(d)(6)-1 as proposed. As the Bureau explained in the 2018 HMDA Rule, the EGRRCPA does not specify the date as of which an insured depository institution's two most re [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2019-22561. Public record. Not legal advice.