On February 7, the CFPB announced the first public phase of its rulemaking to expand the scope of HMDA data reporting, as required by the Dodd-Frank Act. The CFPB is asking small businesses to provide feedback on its initial proposal to collect new mortgage origination data from financial institutions and potential changes to the data collection and reporting process.
Proposed Data Requirements
Section 1094 of the Dodd-Frank Act transferred responsibility for HMDA and its implementing regulation to the CFPB and directed the CFPB to conduct a rulemaking to expand the collection of mortgage origination data to include, among other things: (i) the length of the loan; (ii) total points and fees; (iii) the length of any teaser or introductory interest rates; (iv) the applicant or borrower’s age and credit score; and (v) the channel through which the application was made. The Dodd-Frank Act granted the CFPB discretion to collect additional information as it sees fit.
As detailed in its outline for small businesses, in addition to the statutorily required fields, the CFPB also is considering requiring financial institutions to report more underwriting and pricing information, such as the interest rate, the total origination charges, and the total discount points of the loan, which the CFPB believes will help regulators investigate “true trouble spots” in the mortgage market. The Bureau also states that it is considering new requirements that would “more accurately capture access to credit in the mortgage market.” Specifically, the CFPB is considering requiring institutions to (i) provide an explanation of rejected loan applications; (ii) explain whether the institution considers a loan to be a Qualified Mortgage; and (iii) report the borrower’s debt-to-income ratio. The CFPB states that debt-to-income data would allow the Bureau to determine whether financial institutions are making loans that are unsuitable for borrowers.
Potential Reporting Changes
In addition to the planned expansion in the types of data to be collected, the CFPB is seeking small business feedback on how financial institutions report HMDA data. The CFPB is considering streamlining the collection process to mitigate the burden on lenders, including by possibly aligning the HMDA data requirements with “well-established data standards already in use by a significant portion of the mortgage market.” The CFPB also is proposing to standardize the reporting threshold. It explains that currently, all banks, savings associations, and credit unions that meet certain conditions must submit annual reports if they make even a single loan, while nonbank mortgage lenders typically only report if they make 100 loans and meet other conditions. The Bureau is considering requiring all banks and nonbanks that meet certain conditions to report HMDA data if they make 25 or more loans in a year. Finally, the CFPB states it is seeking to improve data entry, including by potentially streamlining the data submission and editing processes for lenders by creating an interface that will allow lenders to connect their software to a CFPB intake system. The CFPB is consulting with other federal agencies on potential data entry streamlining options.
Enhanced Access To Existing HMDA Data
The CFPB also re-launched and expanded the capabilities of its new HMDA data tool, which it originally announced in September 2013. The tool now includes additional features, which allow users to (i) filter records by, among other things, geography (state, metropolitan area, county, and census tract), borrower characteristics, loan characteristics, and property type; (ii) create summary tables (e.g. to compare refinances, home purchases, and home improvement loans over a given time period); (iii) download data and summary tables to allow researchers and software developers to incorporate the CFPB-provided HMDA data into other applications and visualizations; and (iv) save and share results, including through social media platforms.
This initial framework for enhancing HMDA data collection and reporting was released as part of the small business review process required when a potential CFPB rule could have a significant economic impact on a substantial number of small entities. In such cases, including with this HMDA proposal, the CFPB must convene a panel of representatives from the Bureau, the Chief Counsel for Advocacy of the Small Business Administration, and OMB’s Office of Information and Regulatory Affairs (the Review Panel) to meet with small business representatives. The CFPB released a fact sheet explaining the process, and a list of issues the Review Panel will discuss with small businesses. Within 60 days of convening the Review Panel, it must issue a report on the feedback received from small business, which then must be considered as the CFPB prepares a proposed rule. The small business review process is the first public step in a lengthy rulemaking process. Along the way, financial institutions of all sizes will have opportunities to weigh-in on the proposal, which could evolve over the coming months.