With the House of Representatives preparing to take up bipartisan legislation to ease the regulatory burden on community banks, one provision of the bill continues to be misrepresented on Capitol Hill. As minority community bankers ourselves, we want to set the record straight.
Opponents of the Economic Growth, Regulatory Relief and Consumer Protection Act falsely claim the bill would disrupt data collection and reporting on the ethnicity, race and sex of borrowers under the Home Mortgage Disclosure Act. We live in and serve communities of color, so we want to be clear that the bill would do no such thing.
The truth is this legislation maintains these and other longstanding HMDA data fields. Community banks that have been required to collect and report HMDA data on covered mortgage loans will continue to do so. This process has been in place for decades, with lenders collecting and reporting 23 HMDA data fields. They would be completely unaffected by the legislation.
Instead, the pending legislation would reform only the dramatic expansion of reporting mandates imposed by the Consumer Financial Protection Bureau in 2015. It would exempt certain low-volume community banks with satisfactory or better Community Reinvestment Act ratings only from the 25 additional data fields mandated by the 2015 rule. Due to the concentration of the banking system in the hands of the nation’s largest financial firms, the vast majority of mortgage loans would continue to be reported under the 2015 standards.
Applying these same standards to minority and other community banks, however, only discourages locally based lending and exacerbates industry consolidation. Like the rest of the bill, the idea is to take a more common-sense approach to regulatory mandates. This important provision would ensure substantial HMDA data will continue to be reported without overburdening low-volume lenders that are already strained by a CFPB rule that more than doubled the workload.
The burden of the new data fields cannot be understated. The new HMDA regulations pose significant systems and operational challenges for community banks and third-party vendors. The consumer bureau itself has estimated that additional variable costs of the new rule would be approximately $23 per application for “low-complexity institutions” — a significant burden for local institutions like ours. Add to those new costs the legal liability of incorrectly filling out any one of the many new data fields, and the cost of mortgage lending to local institutions begins to outweigh the benefit. We don’t want to see that happen, and that’s why we are standing up to ensure policymakers understand the facts.
Community bank lending is essential to communities of all kinds. The goal of community bank regulatory relief is to restore balance to the local institutions that already have a built-in incentive to do right by their customers, so they can continue to do so. By reforming complex regulations on local banks while focusing oversight on the risky financial firms that caused the crisis, Congress can promote true community-based growth that extends beyond stock market gains and shareholder dividends.
Members of Congress should vote their conscience on the legislation before them, but they should first have all the facts. As the House considers this legislation, let’s discard the misinformation circulating in Washington and do what’s right for community banks and the communities we serve.