The CFPB announced it will begin the rulemaking process for changes to the reporting requirements under the Home Mortgage Disclosure Act (HMDA). As an initial step, the CFPB will convene a Small Business Review Panel to seek early feedback on ways to improve HMDA reporting. The Dodd-Frank Act requires that the CFPB expand HMDA reporting to capture certain specific elements, including total points and fees and the difference between the APR and a benchmark rate or rates, as well as additional information that the Bureau deems necessary.
Possible Reporting Changes
According to the announcement, the CFPB is considering the following changes:
• Requiring lenders to report information that will help regulators gauge access to credit in the mortgage market. Possible required information could include: (i) an explanation of rejected loan applications; (ii) whether the lender considered the loan to be a Qualified Mortgage; and (iii) borrower’s debt-to-income ratio.
• Requiring lenders to report additional information that can alert regulators to problems in the industry, including: (i) length of the loan; (ii) total points and fees; (iii) length of any teaser or introductory interest rate; and (iv) applicant or borrower’s age and credit score.
• Requiring financial institutions to report additional underwriting and pricing information, including: (i) interest rate; (ii) total origination charges; and (iii) total discount points.
• Streamlining HMDA reporting to align with existing data collection methods already used by the mortgage industry to collect information on processing, underwriting, loan pricing, and secondary market sales.
• Imposing uniform reporting thresholds among bank and nonbank mortgage lenders. Instead of differing thresholds, the CFPB is considering a rule to require all bank and nonbank lenders to report if they make 25 or more loans in a year (provided certain additional conditions are met).
• Adopting improved methods of data entry, possibly by creating a streamlined data submission and editing interface for lenders to connect their software to a CFPB intake system.
It is clear that HMDA data will be subject to greater scrutiny from regulators, and will be even more critical for lenders in preventing fair lending claims. With the increased scope of information, regulators will have a more comprehensive picture of a lender’s credit decision for the purpose of a fair lending analysis. The inclusion of additional data on borrower creditworthiness may enable regulators to focus on loan results that more likely present a fair lending issue, although a conclusive determination will still often not be possible.
New Online Data Tool
The Bureau also unveiled a new online tool to better facilitate access to publicly-available HMDA data. The online system, created in coordination with the Federal Financial Institutions Examination Council, will give the public better ability to filter HMDA information, create summary tables, download data, and save and share results.
The online tool can be found at: http://www.consumerfinance.gov/hmda/explore
Additional CFPB resources regarding the proposed HMDA changes are linked below.
CFPB Factsheet on proposed changes: http://files.consumerfinance.gov/f/201402_cfpb_factsheet_sbrefa.pdf
Outline of proposals under consideration on which the Bureau will seek input from the Small Business Review Panel: http://files.consumerfinance.gov/f/201402_cfpb_hmda_outline-of-proposals.pdf
List of questions on which the Bureau will seek input from the Small Business Review Panel: http://files.consumerfinance.gov/f/201402_cfpb_hmda_discussion-issues-small-entity-representatives.pdf