The Consumer Financial Protection Bureau has amended Reg. C—Home Mortgage Disclosure (12 CFR Part 1003) to reduce the number of lenders that must file reports but require more data to be collected and reported. According to the bureau, the amendments will reduce the number of banks and credit unions that must file Home Mortgage Disclosure Act reports by about 22 percent, but will require those that must report to collect up to 48 data points for each loan or application. The amendments also are intended to make it easier for institutions to file reports by making data collection consistent with established industry standards.
HMDA requires lenders to collect and report information on home loan applications, originations, and purchases. The information is published and can be used for several regulatory purposes, including identifying potential home loan discrimination. According to the bureau, the Dodd-Frank Act expanded the information that is to be collected in an effort to make available information about practices that were seen as having contributed to the mortgage crisis, such as adjustable-rate loans and loans with non-amortization features. A proposal to implement the changes was announced in July 2014.
Covered institutions. The rule amendments retain and expand existing exemptions for smaller financial institutions. The bureau says that a new reporting threshold will exclude small depository institution lenders with low loan volumes. Institutions that originated fewer than 25 closed-end loans or 100 open-end loans during the two previous calendar years will be exempt from reporting obligations.
Covered transactions. The definition of the types of transactions that are covered by the HDMA rule is being changed to what the CFPB calls a “dwelling-secured standard,” as opposed to the current “purpose-based test,” for consumer-purpose loans and applications. For business-purpose loans, the rule will use both a dwelling-secured test and purpose-based test.
The treatment of preapproval requests also is being changed. Covered institutions will be required to report information on home purchase loan preapproval requests that are approved but not accepted. Requests for preapprovals of open-end lines of credit, reverse mortgages, and purchase loans to be secured by multifamily residences will not be reportable covered transactions.
Data points. The summary of reportable data provided by the bureau shows that the amendments require lenders to collect and report 25 new data points and that 12 existing data points are being modified. The CFPB’s notice says that the total 48 data points can be separated into four categories:
- information about applicants, borrowers, and underwriting, including age, credit score, debt-to-income ratio, and automated underwriting system results;
- information about the property securing the loan, such as construction method and property value, as well as additional information about manufactured and multifamily housing;
- information about the loan’s features, such as additional pricing information, loan term, interest rate, introductory rate period, non-amortizing features, and the type of loan; and
- unique identifiers, such as a universal loan identifier, property address, loan originator identifier, and a legal entity identifier for the financial institution.
Reporting burden. According to the bureau, it will be easier for covered institutions to file reports because many of the data points to be collected are the same as or similar to data that institutions already collect for processing, underwriting, pricing, or secondary-market sale purposes. The data points also “align with well-established industry data standards.” This consistency will reduce the reporting burden and also provide better quality, more useful data, the CFPB believes.
Reaction. In reaction to the bureau’s release of a final rule regarding modifications to Regulation C, which will implement changes to the Home Mortgage Disclosure Act, leading trade associations have commended the bureau for its action, but continue to urge caution.
NCRC. According to National Community Reinvestment Coalition President and CEO John Taylor, had this expansion of rules been enacted earlier, it would have provided an early warning system that could have prevented the housing crisis. “This expansion of Home Mortgage Disclosure Act data is a very positive thing for consumers everywhere,” said Taylor. “This data will serve to increase the fairness of mortgage markets for all Americans.”
However, said Taylor, the bureau’s work is not done. The CFPB now must ensure that “all of the data elements collected that pose no privacy concerns are released to the public. Detailed public disclosure gives increased transparency to the market, and allows members of the public to detect lending discrimination and abuse.”
ABA. Also commending the bureau for its action is the American Bankers Association. However, Frank Keating, ABA CEO and President, said that the trade association continues to be concerned “about the privacy of bank customers’ data and ensuring that their information is properly protected” and the “appropriate balancing of costs and benefits in order to maintain consumer access to the full variety of mortgage products.”
MBA. The Mortgage Bankers Association applauds the CFPB, but has reiterated its concerns about data security and consumer privacy in light of all the additional detailed information on consumers that the government will be collecting and disclosing under the new guidelines.
ICBA. Opposing the CFPB’s final rule is the Independent Community Bankers of America, which believes that the rule only add to the already excessive regulatory burdens placed on community banks. “While ICBA appreciates the CFPB’s provision of a two-year implementation period and its efforts to exempt some small-volume lenders, the overall costs of the expanded HMDA reporting requirements outweigh the benefits,” ICBA President and CEO Camden R. Fine said.
The trade association noted that the bureau’s final rule requires financial institutions to report 48 data fields for each borrower—greatly exceeding the statutory requirement laid out by Congress. This “extraneous data reporting will require additional costly system upgrades for community banks, but will not necessarily provide a better understanding of lending practices,” said the ICBA.
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