A preliminary analysis of the differences in lending patterns for lenders below and above the 100-loan closed-end threshold for Home Mortgage Disclosure Act (HMDA) reporting showed that lenders with the smaller volumes of loans appear to make more investment-purpose loans to higher-income borrowers and non-natural person borrowers than higher-volume lenders.
The report by the Consumer Financial Protection Bureau (CFPB) noted that more analysis is needed to further understand the findings and to explore the impact of threshold changes on data available for specific markets.
The report focused on 2019 HMDA data, before the bureau pushed the threshold for reporting from 25 closed-end loans to 100 last July. This change exempted those under the 100-loan threshold from the CFPB’s HMDA reporting requirements for closed-end loans under Regulation C.
In a Data Point report, the CFPB said its analysis suggests that a higher share of loans by lenders with origination volume between 25 and 100 appear to be for investment properties, made to borrowers that are non-natural persons, and made to borrowers with higher incomes, compared to lenders with reported volumes above 100.
The CFPB added that in general, the newly exempted lenders (i.e., with annual origination volumes that exceed the 25-loan threshold but fall below the 100-loan threshold) “do not appear to be more likely to lend to Black and non-White Hispanic borrowers than larger volume lenders.”
Also, it said that the relative higher percentage of loans in LMI (low- to moderate-income) areas and rural areas “does not necessarily mean the borrowers are from those areas. In fact, the patterns we observe are consistent with a possible explanation that a large share of these loans are obtained by borrowers from outside of the LMI areas buying up properties in LMI areas.”
In additional findings:
- A slightly higher percentage of loans by lenders with origination volume between 25 and 100 are secured by manufactured homes than loans by lenders with origination volume over 300.
- Reporters under the 100-loan threshold in 2019 did not look much different from reporters right above that threshold, in terms of manufactured home shares.
- The average share of loans made to manufactured home borrowers by lenders with total volume between 25 and 100 is about 4% to 5%. That translates to about 1 to 5 manufactured home loans per lender. In contrast, the shares of loans secured by investment properties are around 30% by those small lenders.