The CFPB issued a proposed rule amending Regulation C to expand data reporting requirements for mortgage industry participants. The proposed rule is 573 pages and our Mortgage Banking Group will analyze the proposal and work with clients on its impact. Comments are due on or before October 22, 2014.
Because of the absence of important loan and borrower data elements, HMDA data has long been recognized as providing for a less than robust assessment of mortgage lending activity. Dodd-Frank sought to address the issue by directing the CFPB to expand the HMDA reporting categories. Proposed new data elements include the credit score and age of the applicant, the property’s value (which provides for the determination of the loan to value ratio), the total points and fees, the term to maturity, and the duration of any loan.
The expansion of HMDA data to include more and sensitive borrower and transaction information presents serious privacy concerns. By combining HMDA data along with other publicly available data, it is possible that the identity of specific consumers can be determined from the Loan Application Registers of mortgage lenders that must be made available under HMDA. With the expansion of HMDA data to include credit score, age and other elements, the privacy concern will be magnified. Addressing this concern in the press release announcing the proposal, the CFPB states that it is “looking at ways to improve how the public can securely use HMDA data to protect applicant and borrower privacy.” The industry and interested parties should insist on the CFPB making consumer privacy a paramount concern in the consideration of the proposed rule.
In announcing the proposal, the CFPB also states that it “views implementation of the Dodd-Frank Act changes to HMDA as an opportunity to assess other ways to improve upon the data collected, reduce unnecessary burden on financial institutions, and streamline and modernize the manner in which financial institutions collect and report HMDA data.”
CFPB Director Richard Cordray said, “It is critical that we shed more light on the mortgage market – the largest consumer financial market in the world.” He continued to say that HMDA “helps financial regulators and public officials keep a watchful eye on emerging trends and problem areas in the mortgage market.”
The CFPB claims the proposed rule aims to: (1) improve market information, data access, and the electronic reporting process; (2) monitor access to credit; (3) standardize the reporting threshold; (4) ease reporting requirements for some small banks; and (5) align reporting requirements with industry data standards. Our Mortgage Banking Group will assess these aspects of the proposal.