(Read More: CPFB Provides Key to Using HMDA Data)</p

Data collected for 2012 from 7,400rnfinancial institutions under the HMDA were released last week by the FederalrnFinancial Institutions Examination Council (FFIEC).  The data, which covers about 19 millionrnmortgage loan actions, covers loan level data on loan applications,  originations and denials, loan amount, type,rnpurpose, property type, location, applicant characteristics (race, gender,rnincome), and pricing related data.</p

Almost simultaneously CFPB announcedrnrelease of its tool which allows researchers, agencies, and consumers to slicernand dice the data to look at individual variables at national and localrnlevels.  In announcing the tools CFPBrnsaid they will “help maximize the impact of thisrntremendous public dataset by providing a user-friendly tool to enable consumersrnto explore mortgage application and loan data at a local level.”</p

Butrnthen CFPB went on to say, “The public information is important because it helpsrnshow whether lenders are serving the housing needs of their communities; itrngives public officials information that helps them make decisions and policies;rnand it sheds light on lending patterns that could be discriminatory.”</p

And this has Morgan, a member of thernConsumer Finance Services Group at Ballard Spahr concerned.  She said the release of the data and the toolrnto access the data along with remarks from CFPB Director Richard Cordray “appeared to indicate that HMDA data may be used to identifyrninstitutions that may be discriminating against protected classes of borrowers.rnAlthough the CFPB’s emphasis was on the use of the mortgage tool by the public,rnat this time the more important message for the industry is that the CFPBrnappears to be gearing up to use HMDA data to identify institutions that may berndiscriminating.”</p

Institutions are required to collectrncertain data on mortgage related lending and the data has always been publiclyrnavailable, Morgan said, and the tool released by the CFPB merely repackages therninformation into a more consumer-friendly format.  But “a number of the data fields,rnparticularly those regarding the ethnicity, race, and sex of the borrower,rncould be used by regulators and plaintiff’s attorneys to target lenders forrnexaminations, enforcement actions, and litigation relating to discrimination.”</p

Morgan says CFPB appears to bernforeshadowing the use of HMDA data to identify institutions that may berndiscriminating.  She quotes comments fromrnthe press release that the HMDA data “can shed light on lending patterns thatrncould be discriminatory” and on Cordray’s statement that  this data “helps shine a spotlight on lendingrndisparities” and “reveals lending patterns, including some that might berndiscriminatory.’   Morgan concludes, “Thisrnuse of HMDA data may lead to targeted examinations for these institutions andrnan increase in enforcement actions under ECOA based on HMDA data.”</p

Further she says it is significantrnthat Cordray did not state that HMDA lending disparities necessarily establishrndiscrimination. “A much deeper analysis is required to determine whether andrnthe extent to which other factors (e.g., credit scores and histories,rnloan-to-value ratios, etc.) explain any statistical disparities. And, ofrncourse, we have taken issue in the past with the view that disparate impact onrna protected basis is sufficient to ground an ECOA or Fair Housing claim. Still,rnDirector Cordray’s remarks make it clear that, at a minimum, the CFPB, like thernfederal banking agencies before it, will statistically sample HMDA data torndetermine whether a lender merits a targeted fair lending examination.'</p

She fears that plaintiff’s attorneysrnmay also be tempted to cull the data “to identify lenders ripe for classrnactions and private litigation based on similar theories. However, privaternparties will have a much tougher time using HMDA data in lawsuits since, inrnlight of the manifold potential legitimate explanations of HMDA statisticalrndisparities, any violation remains speculative.'</p

At present there is actually veryrnlittle that can be done with the data on the CFPB website.  There are three available actions, a heat maprnthat can be generated to show the difference in the volume of either mortgagernapplications or originations from 2010 to 2011 or from 2011 to 2012 and sets ofrngraphical crosstabs on applications and originations nationally or by metropolitanrnstatistical area and by loan type (FHA, Conventional, VA) or by loanrnpurpose.   CFPB says it has other tools onrnthe way and has provided web designer tools for persons who wish to developrntheir own applications.  

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