CFPB Seeks to Modify HMDA Data Collection; Raises Privacy Concerns

Public comments are being requested a arnnew proposed rule for collecting data under the Home MortgagernDisclosure Act (HMDA). The Consumer Financial Protection Bureaurn(CFPB) said the new rule includes changes the could help in sheddingrnmore light on consumers’ access to mortgage credit. The Bureau saidrnit also aims to simplify the reporting process for financialrninstitutions. </p

HMDA, enacted in 1975, requires thatrnmany lenders report information regarding home loans for which theyrnreceive applications or originate or purchase. The information isrnavailable to both the public and to regulators who can use it tornmonitor whether financial institutions are serving the needs of theirrncommunities and to identify discriminatory lending patterns. ThernDodd Frank Wall Street Reform and Consumer Protection Act authorizedrnCFPB to expand the HMDA dataset to gather additional information thatrnmight be helpful to better understand certain aspects of the market.</p

In 2012, 7,400 financial institutions reported information aboutrnapproximately 18.7 million mortgage applications and loans. Whilernthe HMDA dataset is the leading source of information about thernmortgage market, CFPB says it has not kept pace with the market’srnevolution. For example, the HMDA data do not provide adequaterninformation about certain loan features that helped contribute tornthe mortgage crisis, such as adjustable-rate mortgages andrnnon-amortizing loans. rn</p

“It is critical that we shed more light on the mortgage marketrn- the largest consumer financial market in the world,” said CFPBrnDirector Richard Cordray. “The Home Mortgage Disclosure Act helpsrnfinancial regulators and public officials keep a watchful eye onrnemerging trends and problem areas in the mortgage market. Today’srnproposal would help us understand better how to protect consumers’rnaccess to mortgage credit while simplifying the reportingrnrequirements for financial institutions.”</p<pThe proposed changes to the rule are intended to improve the quality of HMDA data and include:</p

1. Specific newrn information that could help identify potential discriminatory lending practices. These include property value, term of the loan, total points and fees, information on teaser or introductory rates, and the applicants age and credit score.</p

2. Additional information on underwriting and pricing such as debt-to-income ratios, interest rates, and total discount points changed. This information would help regulators determine how the Ability-to-Repay rule is impacting the market and check on developments in specific market such as multifamily or affordable housing. This proposed rule would also require some lenders to report on all loans related to dwellings including reverse mortgages.</p

In order to simplify reporting, CFPB is trying to standardize thernreporting threshold, ease reporting requirements for small banks,rnalign the HMDA reporting requirements with industry data standards,rnimprove the electronic reporting process and improve on the ways inrnwhich the public an access and use the data while protectingrnapplicant and borrower privacy.</p

It is that privacy issue that hasrnalready raised concerns from one observer. The law firm of Ballardrnand Spahr which closely tracks CFPB activity for its clientsrnacknowledged on its CFPB blog that HMDA data has “long beenrnrecognized as providing for a less than robust assessment of mortgagernlending activity,” but it raising concerns about the proposedrnchanges in the data gathering. The expansion of the data to includernmore and sensitive borrower level data, the blog says, does raisernprivacy concerns. With the expansion of data to included creditrnscores, age, and other elements it might be possible to identifyrnspecific consumers when combined with other publicly available datarnand the firm recommends that interested parties should insist on thernFPB making consumer privacy a “paramount concern in thernconsideration of the proposed rule.”</p

The period for public comment extends until October 22, 2013. Thernentire public rule and information on how to submit comments isrnavailable at </p

http://files.consumerfinance.gov/f/201407_cfpb_proposed-rule_home-mortgage-disclosure_regulation-c.pdf</prn

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