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HMDA Reporting Changes Being Considered

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Additional data requirements being considered for Home Mortgage Disclosure Act reporting could make it easier to identify cases of disparate impact. The addition of Qualified Mortgage status to HMDA reporting could shed a light on the impact of QM. Changes that would streamline HMDA reporting are also on the table.

HMDA was enacted in 1975 for regulators to monitor how financial institutions were serving housing needs in their communities and providing access to residential loans.

Initially, HMDA required lenders to disclose information about the residential loan products they offer to consumers. The law was subsequently expanded to capture information that would help identify discriminatory lending patterns.

HMDA rulemaking authority was transferred to the Consumer Financial Protection Bureau through the Dodd-Frank Wall Street Reform and Consumer Protection Act. The regulator is required by Dodd-Frank to expand the HMDA dataset to include additional data that would help identify troublesome trends.

In a report released Friday, the CFPB said it collected HMDA data from 7,400 financial institutions in 2012 on 18.7 million loan applications. Data fields include loan amount, lender name and property type and location. It also includes the applicant’s race, ethnicity and sex; loan amount; and loan purpose.

An online tool unveiled Friday by the CFPB promises to make it easier to use HMDA data that is collected.

The development of the tool, done in coordination with federal and state agencies represented on the Federal Financial Institutions Examination Council, is the first of multiple steps being taken by the bureau to improve residential lending information and better understand borrowers’ access to credit.

The tool will potentially make it easier for consumer groups, lender watchdog groups and mortgage regulators to identify potential cases of disparate impact discriminatory lending.

“Consumer groups can track specific metropolitan areas or they can see what is happening with specific racial or ethnic populations,” CFPB Director Richard Cordray said in prepared remarks for a press call.

Additional changes are being considered by the CFPB that will make it easier for mortgage lenders to provide better information.

“Better public HMDA data would help us improve upon an important resource that already allows regulators, government agencies, housing groups, and consumer rights groups to study and monitor the single most important consumer financial product in the United States: the mortgage loan,” Cordray said.

Feedback is sought from small businesses about improving HMDA rules, and the agency is convening a small business review panel, as required by the Small Business Regulatory Enforcement Fairness Act.

The panel will provide the CFPB with early feedback from small lenders and insight into how updated data could better reflect the current mortgage market.

New data fields under consideration include loan length, total points and fees, and teaser terms. The borrower’s age and credit score would also be included. Information about home-equity lines of credit, which isn’t currently reported, is being considered as an additional HMDA data requirement.

Not all new information would be made publicly available.

“We are considering other types of information that would give regulators a better view of developments in all segments of the housing marketplace,” Cordray said. “We are considering asking financial institutions to include more underwriting and pricing information, such as an applicant’s debt-to-income ratio, the interest rate, the total origination charges, and the total discount points of the loan. This will help regulators spot troublesome trends in mortgage markets around the country.”

The CFPB is also considering requiring financial institutions to include an explanation of rejected applications.

In addition, a field noting whether the lender considered the loan to be a Qualified Mortgage is being considered by the bureau.

“Including QM status in HMDA data will help regulators and the public determine how the CFPB’s rules are impacting the mortgage market,” the CFPB notice stated. “Additional information, such as the borrower’s debt-to-income ratio, will help regulators see whether financial institutions are making loans that are expensive or unsuitable for borrowers.”

Also on the table are methods of HMDA reporting that would utilize data that lenders are already collecting for loan processing, underwriting and pricing. It might also use data collected for secondary loan sales.

Updated methods would align HMDA data requirements with well-established data standards already in use by much of the mortgage market. They would also reduce the burden on lenders and potentially improve data quality.

In addition to seeking feedback through the Small Business Regulatory Enforcement Fairness Act process, the CFPB said that it is consulting with other federal agencies about improvements to HMDA data reporting and disclosure processing.

One idea is being floated to streamline the data submission and editing processes by creating an interface that will allow lenders to connect their software to a CFPB intake system.

“Approximately 70 percent of all loans eventually sold to the GSEs use the Uniform Loan Delivery Dataset of the Mortgage Industry Standards Maintenance Organization data standards for residential mortgages,” Cordray stated. “Where possible, alignment of the HMDA data requirements to this open and free standard [MISMO] already being used by most lenders provides an opportunity to improve market efficiency, market understanding, and market oversight.”

While non-bank lenders are often only required to report HMDA data if they originate at least 100 loans, the CFPB is considering lowering the threshold to 25 loans per year.

For banks, most of which must report even if they make only a single loan, the HMDA reporting threshold would be raised to 25 loans.

The CFPB HMDA tool is online at http://www.consumerfinance.gov/hmda/explore.

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