On March 24, the CFPB announced a proposal to amend Regulation B requirements related to the collection of consumer ethnicity and race information, in order to resolve the differences between Regulation B and revised Regulation C. These proposed rule amendments are effective on January 1, 2018, the same effective date as the 2015 Home Mortgage Disclosure Act (HMDA) Final Rule.
First, the proposal would give persons who collect and retain race and ethnicity information in compliance with Regulation B the option of permitting applicants to self-identify using the disaggregated race and ethnicity categories required by the 2015 HMDA Final Rule. Aligning these rules would allow HMDA-reporting entities to comply with Regulation B without further action, while entities that do not report under HMDA but record and retain race and ethnicity data under Regulation B could either use existing aggregated categories or the new disaggregated race and ethnicity categories.
Second, the proposed amendment would remove the outdated 2004 Uniform Residential Loan Application (URLA) as a model form, and provide a new, one-page data collection model form, which is substantially similar to section X of the 2004 URLA. Eventually, non-HMDA reporting entities will be free to use the 2016 URLA prepared by Freddie Mac and Fannie Mae to collect race and ethnicity information, as previously discussed in the CFPB’s September 2016 Approval Notice. Fannie Mae and Freddie Mac have not implemented the 2016 URLA yet, and have not indicated a precise start date, and so the CFPB proposes that the 2004 URLA be removed on the cutover date the enterprises designate for use of the 2016 URLA or on January 1, 2022, whichever comes first. Note that a Demographic Information Addendum, which is identical in form to section 7 of the 2016 URLA, and which is as a replacement for section X (Information for Government Monitoring Purposes) in the current URLA, dated 7/05 (revised 6/09), has been available for use since January 1, 2017.
Third, the proposed rule would allow creditors to collect ethnicity, race and sex information from mortgage applicants in certain cases where the creditor is not required to report under HMDA and Regulation C, including creditors that submit HMDA data even though not required to do so, and creditors that submitted HMDA data in any of the preceding five calendar years. This change would primarily benefit institutions that may be required to report under HMDA and Regulation C in some years and not others, or may be uncertain about their reporting status. The CFPB believes that “allowing voluntary collection will reduce the burden of compliance with Regulation C on some entities and provide certainty regarding Regulation B compliance over time.”
Note that the CFPB is not proposing a mandatory requirement for Regulation B-only creditors to permit applicants to self-identify using disaggregated race and ethnicity categories. The CFPB believes that permitting (rather than requiring) the use of disaggregated ethnicity and race categories avoids placing costs and heightened compliance burdens on Regulation B-only creditors. Nevertheless, the CFPB believes that “many that are not subject to revised Regulation C are nevertheless likely to adopt the 2016 URLA at some point because of business considerations unrelated to Regulations B and C.”
The CFPB is seeking comments on these proposed amendments for 30 days after its publication in the Federal Register.