CFPB: Proposed HMDA Rule Strikes Regulatory Balance
SAN DIEGO–Officials from the Consumer Financial Protection Bureau said a new proposed rule expanding data collection requirements of the Home Mortgage Disclosure Act is a common-sense approach designed to have everyone in the industry speaking the same language.
New data collection requirements, announced last week, would go into effect on Jan. 1, 2018, with data submission taking effect Jan. 1, 2019. The proposed rule would require financial institutions 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 discount points charged for the loan.
“The new data requirements will lead to better information and lead to more prudent policymaking,” Ren Essen, program manager of mortgage data assets with the CFPB, said here at the Mortgage Bankers Association’s 102nd Annual Convention & Expo. “We think the proposed rule offers a balanced approach.”
Essen said the CFPB tried to be sensitive to the “pain points” associated with HMDA data collection. “We think this will make things more streamlined for the industry,” she said. “This should translate into data that is more comprehensive and useful and ultimately allow us to cut costs.”
Paul Mondor, the CFPB’s managing counsel in the Office of Regulations, estimated 1,400 depository institutions that are currently required to report HMDA data would no longer be required to do so, a more than 20 percent drop.
“We’re mindful of how important this data is for the public and for us,” Mondor said. “We’re also mindful of the time required by the industry to digest and implement the new data requirements. That is one of the reasons we’re looking at January 2018 for the implementation date.”
Mike Byrne, the CFPB’s manager of HMDA operations, said operationally, the new technology regime ensures that all reporting is done electronically, rather than by paper. “There will not be any faxing, or scanning of documents,” he said. “We really wanted to create a web-based experience.”
Nor will there be a downloadable application that has to be installed on a lender’s system; all of the software will be cloud-based and open source. “Everything will be web-based,” Byrne said. “Our goal is for all documentation to be sent upstream. We want the user to feel secure that they are sending documentation through a process that is safe and easy to use.”
Byrne said it is the CFPB’s intent that this be a seamless process. “You have 26 months to get ready,” he said. “We encourage you to work with mortgage technology vendors to prepare.”
Kyung Cho-Miller, executive director and general counsel with JPMorgan Chase, Washington, D.C., expressed concern that financial institutions could still be exposed to interpretation of data, noting that HMDA data do not always reflect all the criteria that goes into consideration in the loan decision process.
“It’s a balancing act,” Cho-Miller said. “Are there any risks to privacy and potential privacy breaches involving proprietary information, as well as customer information? The technology that the CFPB is proposing should reduce the burden on lenders, but we won’t know until we can test the new systems.”
Looking ahead, Essen said the CFPB is working on tech collateral issues, such as filing protocols, which should come out before the end of the year.
