Nat'l Cmty. Reinvestment Coal. v. Consumer Fin. Prot. Bureau
| Decision Date | 23 September 2022 |
| Docket Number | Civil Action 20-2074 (BAH) |
| Parties | NATIONAL COMMUNITY REINVESTMENT COALITION, et al., Plaintiffs, v. CONSUMER FINANCIAL PROTECTION BUREAU, Defendant. |
| Court | U.S. District Court — District of Columbia |
For nearly fifty years, the Home Mortgage Disclosure Act (“HMDA”), 12 U.S.C. § 2801, et seq., has provided a window to glean who is being given access to credit to purchase homes across the United States and who is not. Without prohibiting any particular conduct HMDA promotes transparency that enables enforcement of other laws and scrutiny of lending practices. HMDA requires covered lenders to collect specified data on mortgages and mortgage applications, with mandated public release of these data to provide communities and public officials “with sufficient information to enable them to determine whether depository institutions are filling their obligations to serve the housing needs of the communities and neighborhoods in which they are located.” Id. § 2801(b). HMDA data also assist public officials in determining how to distribute “public sector investments . . . to improve the private investment environment,” id., and “in identifying possible discriminatory lending practices and enforcing antidiscrimination statutes,” Home Mortgage Disclosure (Regul. C), 12 C.F.R. § 1003.1(b)(1)(iii).
Plaintiffs which include five nonprofit organizations-the National Community Reinvestment Coalition (“NCRC”) Montana Fair Housing (“MFH”), Texas Low Income Housing Information Service (“TxLIHIS”), Empire Justice Center (“EJC”), and the Association for Neighborhood & Housing Development (“ANHD”)-and the City of Toledo, Ohio, assert, without any dispute from defendant, that HMDA data have been invaluable in “uncovering and addressing redlining, fair lending violations, and other inequitable lending practices” over the decades. Pls.' Mem. Supp. Mot. Summ. J. ( ) at 6, ECF No. 14. As examples, plaintiffs cite investigative reporting that garnered a 1989 Pulitzer Prize by documenting the barriers faced by Black communities in Atlanta, Georgia to accessing mortgage loans and the “widening” gap between the rates at which Black and White residents with the same income levels were approved for mortgages by local banks. See Admin. Rec. (“AR”) at 1716-24 (Bill Dedman, The Color of Money, Atlanta J.-Const., May 1, 1988, at ¶ 1). This series prompted the U.S. Department of Justice to take “enforcement action against a prominent Atlanta lender for violating federal lending discrimination laws.” Pls.' Mem. at 6.
More recently, HMDA data have been used, inter alia, by plaintiff EJC to assess mortgage lending patterns in communities across New York, see Pls.' Mot., Ex. 3, Decl. of EJC L. Dir. Jonathan Feldman (“Feldman Decl.”) ¶¶ 3-7, ECF No. 14-3 (); and by plaintiff TxLIHIS to “track modern day redlining” by “investigating the number, amount, and providers of home mortgage loans on a census tract level for several major counties in Texas” and “monitor . . . public investments in housing,” id., Ex. 4, Decl. of TxLIHIS Advoc. Co-Dir. Adam Pirtle (“Pirtle Decl.”) ¶¶ 3, 4, ECF No. 14-4.
The federal agency statutorily tasked under HMDA with collecting and distributing data on mortgages, mortgage applications, and lines of credit secured by dwellings, and promulgating rules and regulations governing which lenders must collect and report these data, is the Consumer Financial Protection Bureau (“CFPB”). 12 U.S.C. §§ 2802(1); 2804. In implementing HMDA, CFPB rules and regulations distinguish between “closed-end mortgage loans” and “open-end lines of credit.” A “[c]losed-end mortgage loan” is “an extension of credit that is secured by a lien on a dwelling,” 12 C.F.R. § 1003.2(d), like the traditional 30-year mortgage millions of Americans use to purchase their homes. An “[o]pen-end line of credit” is an extension of credit “up to any limit set by the creditor,” upon which the consumer may draw repeatedly throughout the plan's term as the outstanding balance is repaid, and which is also secured by a lien on a dwelling. Id. § 1003.2(o)(1).[1]
In 2015, CFPB overhauled the existing HMDA data collection and reporting requirements. Upon determining that the existing rules for closed-end mortgage loans presented an administrative burden on lending institutions, CFPB promulgated a rule exempting from the disclosure requirements those lending institutions issuing fewer than 25 closed-end mortgage loans. Home Mortgage Disclosure (Regul. C), 80 Fed.Reg. 66128 (Oct. 28, 2015) (codified at 12 C.F.R. pt. 1003) (the “2015 Rule”). Offsetting this contraction of HMDA data collection requirements, CFPB, for the first time, also required lending institutions to collect and submit information on open-end lines of credit secured by dwellings, with an exception for institutions issuing fewer than 100 such loans, id. at 66149, accompanied by a three-year delay in the effective date for lenders to adjust to the new open-end lines of credit requirements, id. at 66162. In the end, the 2015 Rule exempted “22 percent of depository institutions” that had previously been required to report HMDA data, which resulted in a significant loss of data in certain census tracts.” Id. at 66148. Nonetheless, according to CFPB, these thresholds balanced the need for “sufficient data for analyzing mortgage lending at the national, local, and institutional levels” with the need to avoid burdening “lower-volume” lenders with substantial “compliance costs.” Id. at 66146.
Following promulgation of the 2015 Rule, CFPB still “heard concerns” that “lower-volume institutions continue[d] to experience significant burden” from the reporting requirements, which “d[id] not justify the small amount of data such institutions would report.” Home Mortgage Disclosure (Regul. C), 85 Fed.Reg. 28364, 28368 (May 12, 2020) () (the “2020 Rule”). Such concerns from lending institutions led CFPB, in 2017, to increase the reporting threshold for open-end lines of credit to 500 loans proactively, before the reporting requirements of the 100-loan threshold took effect. See Home Mortgage Disclosure (Regul. C), 82 Fed.Reg. 43088, 43094 (Sept. 13, 2017) () (the “2017 Rule”).
Then, in 2020, “[i]n light of the concerns expressed by industry stakeholders regarding the considerable burden associated with reporting” the data “required by the 2015 HMDA Rule,” CFPB again modified its regulations to reduce further the reporting requirements for HMDA data on closed-end mortgage loans, this time quadrupling the loan-volume threshold triggering the requirement that lending institutions collect and report data on mortgages and mortgage applicants. See 2020 Rule, 85 Fed.Reg. at 28368. As for open-end lines of credit, the 2020 Rule doubled the loan-volume reporting threshold of the 2015 Rule, to which the reporting threshold automatically would have reverted with the expiration of the 2017 Rule's temporary increase. Id. at 28367. Plaintiffs, all of whom “use HMDA data in their research, education, and advocacy to promote access to credit, and thus to housing opportunities” in minority and rural communities, Pls.' Mem. at 15, initiated this lawsuit challenging the 2020 Rule as arbitrary and capricious, contrary to law, and in excess of the agency's statutory authority under the Administrative Procedure Act (“APA”), 5 U.S.C. § 706. See Compl. ¶ 2, Nat'l Cmty. Reinvestment Coal. v. CFPB, No. 20-cv-2074, ECF No. 1
Now pending before the Court are the parties' cross motions for summary judgment. See Pls.' Mot. Summ. J. ( ), ECF No. 14; Def.'s Cross-Mot. Summ. J. (“Def.'s Mot.”), ECF No. 18. For the reasons explained below, plaintiffs are entitled to partial summary judgment as to the portions of the 2020 Rule addressing closed-end mortgage loans, and defendant is entitled to partial summary judgment as to the portions of the same rule addressing open-end lines of credit.
The statutory framework and regulatory developments leading to promulgation of the 2020 Rule are discussed below, in chronological order.
In 1975, HMDA was enacted to remedy the failure of “some depository institutions . . . to provide adequate home financing to qualified applicants on reasonable terms and conditions,” which, Congress found, had “sometimes contributed to the decline of certain geographic areas.” 12 U.S.C. § 2801(a). Rather than creating a direct enforcement mechanism to ensure financial institutions were serving their communities adequately, Congress opted for a sunshine statute, acting on the belief that public knowledge of local banks' lending patterns could improve the banks' affirmative compliance with fair lending and anti-discrimination laws. See id. § 2801(b). One of the bill's sponsors explained that the new statute “would use the power of market competition-competition for the saver's dollar-to encourage lenders to do a better job in their own backyards,” because “if depositors are able to learn, through disclosure, which local lenders are treating the community fairly, lenders will become more accountable.” 121 Cong. Rec. 25160 (1975) (statement of Sen. Proxmire).
In the 1980s, after a “series of investigative reports...
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