CFPB Finalizes HMDA Rule
The Consumer Financial Protection Bureau yesterday finalized a long-awaited rule to modify the Home Mortgage Disclosure Act.
CFPB Director Richard Cordray said the final rule (http://files.consumerfinance.gov/f/201510_cfpb_final-rule_home-mortgage-disclosure_regulation-c.pdf), which updates reporting requirements under HMDA, would improve information reported about the residential mortgage market by providing additional reporting on consumers’ access to mortgage credit by updating the reporting requirements.
“The Home Mortgage Disclosure Act helps financial regulators, the public, housing officials, and even the industry itself keep a watchful eye on emerging trends and problem areas in the nation’s mortgage market,” Cordray said. “With today’s final rule we are shedding more light to foster better understanding of the market and also ensuring that lenders have sufficient time to come into compliance.”
Mortgage Bankers Association President and CEO David Stevens commended the CFPB for releasing what should be the final mortgage-related rule stemming from the Dodd-Frank Act. He said lenders appreciate that financial institutions will have until January 1, 2018 to adapt their reporting systems to capture the new information.
Stevens noted that MBA continues to have 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 HMDA guidelines.
“While there will be new reporting requirements for some market segments, we appreciate that the Bureau is making MISMO technology standards a core part of the new reporting,” Stevens said. “MBA wants to reiterate 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 HMDA guidelines. In the months to come, we look forward to working closely with the Bureau to ensure that consumers’ data are protected.”
HMDA, originally enacted in 1975, requires many lenders to report information about the home loans for which they receive applications or that they originate or purchase. The public and regulators can use the information to monitor whether financial institutions are serving the housing needs of their communities, to assist in distributing public-sector investment so as to attract private investment to areas where it is needed and to identify possible discriminatory lending patterns.
When Congress passed the Dodd-Frank Act in 2010, it directed the CFPB to expand the HMDA dataset to include additional information about applications and loans that would be helpful to better understand the mortgage market. The CFPB convened a panel of small businesses to provide feedback on potential changes to the rule in February 2014, and issued a proposed rule in July 2014.
Key elements of the final rule:
—Improving market information. In the Dodd-Frank Act, Congress directed the CFPB to update HMDA by having lenders report specific new information designed to improve public understanding of market conditions and could help identify emerging risks and potential discriminatory lending practices in the marketplace. This new information includes the property value, term of the loan and the duration of any teaser or introductory interest rates.
—Monitoring fair lending compliance and access to credit. Financial institutions will be required to provide more information about mortgage loan underwriting and pricing, such as an applicant’s debt-to-income ratio, interest rate of the loan and the discount points charged for the loan. The CFPB said this information would enhance the ability to screen for possible fair lending problems, helping both institutions and regulators focus their attention on the riskiest areas where fair lending problems are most likely to exist.
—Ease reporting requirements for some small banks and credit unions. The final rule retains existing provisions that ease the burden on small banks and credit unions. For example, small depository institutions that are located outside a metropolitan statistical area remain excluded from coverage. In addition, under a new standardized reporting threshold in the rule, small depository institutions that have a low loan volume will no longer have to report HMDA data. “For small lenders with few staff members, this change could make a significant impact in easing compliance costs,” the CFPB said, predicting the new threshold could reduce the overall number of banks and credit unions required to report HMDA data by as much as 22 percent.
—Align reporting requirements with industry data standards. The CFPB said it is working with the Federal Financial Institutions Examination Council and HUD to modernize the HMDA data submission process to collect information more efficiently. The Bureau completed a pilot of a new web-based tool to collect HMDA information more efficiently. Implementing this technology will reduce manual and paper-based systems currently used by regulators and reporting financial institutions. These changes will ultimately reduce associated compliance costs.
The CFPB said the final rule adopts many of the provisions proposed in 2014. However, a number of changes were made after considering comments received from the public. For example, the final rule does not include several of the data points proposed by the Bureau (such as the “risk-adjusted, pre-discounted interest rate”), and does not adopt the proposal to require reporting of all dwelling-secured transactions made for commercial purposes.
Cordray said most provisions of the final rule will take effect on January 1, 2018. Lenders would begin collecting new information in 2018 and report this information by March 1, 2019.
Resources that explain and facilitate implementation of the rule are available at: http://www.consumerfinance.gov/regulatory-implementation/hmda/.
The CFPB’s online HMDA tool is available at: http://www.consumerfinance.gov/hmda/.
