New CFPB Reporting Rule Includes CRE Loans
April 3, 2023
On March 30, the Consumer Financial Protection Bureau (CFPB) published its final rule requiring lenders to collect and report data on lending to small businesses, also known as Section 1071. The rule includes commercial mortgages made to small businesses with under $5 million in revenue.
Why it matters: CRE lenders may have to start collecting and reporting data on their loans. Any lender that makes 100 or more loans to small businesses in each of the preceding two years will be required to collect and report data on these loan applications and originations annually.
CREFC advocated with other rtrades to exempt CRE and multifamily from 1071 reporting. Click here for the joint trade letter and click here for CREFC’s high-level letter.
The final rule largely exempts multifamily loans, which are reported separately under the Home Mortgage Disclosure Act (HMDA), but does not exempt loans secured by commercial real estate made to a small business.
Go deeper: Will CREFC members have to comply? While we’re still reviewing the rule, the answer may not be straightforward for some lenders.
- Lenders of all types and sizes are included in the rule, even if they are not otherwise regulated by the CFPB. The expansive definition includes any partnership, company, corporation, association (incorporated or unincorporated), trust, estate, cooperative organization, or other entity that engages in any financial activity
- Originating 100 or more loans to small businesses will trigger compliance.
- “Small business” concerns (defined in 15 U.S.C. 632(a), as implemented in 13 CFR 121.101 through 121.107) with $5 million or less in gross annual revenue for its preceding fiscal year. Affiliates or subsidiaries of larger companies would likely be excluded.
- “Covered Credit Transactions” are extensions of credit primarily for business or commercial (including agricultural) purposes. This would include CRE mortgages and mezzanine debt.
- Multifamily Excluded: The 1071 rule excludes specific credit such as HMDA reportable transactions, which means multifamily loans are excluded from 1071.
Compliance Date: The compliance obligation phases in depending on the volume of covered transactions as follows:
- October 2024: 2,500 originations in both 2022 and 2023.
- April 2025: 500-2,499 originations in both 2022 and 2023.
- January 2026: 100-499 originations in both 2022 and 2023.
CREFC will continue to analyze the final rule and its impact on CRE. Please contact David McCarthy (dmccarthy@crefc.org) with questions.