On September 21, the CFPB finalized its 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 (the “Final Rule”). This Final Rule is effective on January 1, 2018, the same effective date for most of the 2015 Home Mortgage Disclosure Act (HMDA) Final Rule. The amendment removing the existing “Uniform Residential Loan Application” form is effective January 1, 2022.
Generally, the amendments set forth in the Final Rule are being adopted as proposed. The Final Rule institutes four primary changes to Regulation B:
- Applicant Information Collection for Regulation B Creditors. The Final Rule gives 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 allows 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 may either use existing aggregated categories or the new disaggregated race and ethnicity categories. The flexibility may be helpful for institutions that move in and out of being a HMDA reporting entity.
- Applicant Information Collection for HMDA Reporters. The Final Rule allows 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 also may benefit institutions move in and out of being a HMDA reporting entity, and institutions that may be uncertain about their reporting status.
- Regulation B Model Forms. The Final Rule removes the outdated 2004 Uniform Residential Loan Application (URLA) as a model form, and provides a new, one-page data collection model form that can be used to collect the revised HMDA demographic data until the 2016 URLA prepared by Freddie Mac and Fannie Mae is implemented. As we reported previously, last year the CFPB added the 2016 URLA as a model form to Regulation B.
- Voluntary Collection Authorizations. The Final Rule authorizes a financial institution that is subject to only (1) the requirement to report closed-end loans, to voluntarily report home equity lines of credit (HELOCs), and (2) to the requirement to report HELOCs, to voluntarily report closed-end loans. Moreover, the CFPB is adopting two recommendations from industry commenters that were not contained in the proposed rule. First, a financial institution may collect applicant demographic information for dwelling-secured business loans that are not reportable because the loans are not for the purposes of home purchase, refinancing, or home improvement. Second, the Final Rule permits, but does not require, creditors to collect applicant demographic information from a second or additional co-applicant. The HMDA rule requires the collection of the information for the applicant and first co-applicant.