Part of a rule from the Trump administration that affected the reporting requirements of some mortgage lenders has been partially overturned by a federal judge in favor of a coalition of community housing organizations against the Consumer Financial Protection Bureau (CFPB). The Home Mortgage Disclosure Act (HMDA), which was created to help stop violations of fair lending and fair housing, including redlining, and was administered by the CFPB under Trump appointee Kathy Kraninger, was ruled to have been “arbitrary and capricious” by the D.C. District Court. However, the alliance of community groups viewed the judgment as a vindication even though the court did not overturn the rule.

According to Jesse Van Tol, president, and chief executive officer of the National Community Reinvestment Coalition, “this ruling partially overturns a Trump-era rule that prevented a sizable portion of the mortgage industry from disclosing information about who they were approving and denying for loans.” The component of the 2020 rule that was explicitly linked to closed-end home loans was invalidated. Still, the court partially decided in favor of the CFPB by upholding portions of the regulation that directly pertained to open-end lines of credit.

While the ruling found that the Bureau’s arguments for exempting a significant portion of institutions from reporting requirements under HMDA were shaky, the presiding court did not question the CFPB’s power to enact policy.

Where Congress recently devised a framework to improve the landscape of lending institutions mandated to report some data, and where a law is designed to allow transparency in business dealings to enable the implementation of laws aimed at reducing discriminatory and poor lending practices, the Bureau’s decision to primarily revert Congress’s carefully selected balance with broad exceptions for this share of the lending market without justification is arbitrary and capricious, the opinion reads partly. To read more, click here.