CFPB Seeks to Modify HMDA Data Collection; Raises Privacy Concerns
Public comments are being requested a a new proposed rule for collecting data under the Home Mortgage Disclosure Act (HMDA). The Consumer Financial Protection Bureau (CFPB) said the new rule includes changes the could help in shedding more light on consumers' access to mortgage credit. The Bureau said it also aims to simplify the reporting process for financial institutions.
HMDA, enacted in 1975, requires that many lenders report information regarding home loans for which they receive applications or originate or purchase. The information is available to both the public and to regulators who can use it to monitor whether financial institutions are serving the needs of their communities and to identify discriminatory lending patterns. The Dodd Frank Wall Street Reform and Consumer Protection Act authorized CFPB to expand the HMDA dataset to gather additional information that might be helpful to better understand certain aspects of the market.
In 2012, 7,400 financial institutions reported information about approximately 18.7 million mortgage applications and loans. While the HMDA dataset is the leading source of information about the mortgage market, CFPB says it has not kept pace with the market's evolution. For example, the HMDA data do not provide adequate information about certain loan features that helped contribute to the mortgage crisis, such as adjustable-rate mortgages and non-amortizing loans.
"It is critical that we shed more light on the mortgage market - the largest consumer financial market in the world," said CFPB Director Richard Cordray. "The Home Mortgage Disclosure Act helps financial regulators and public officials keep a watchful eye on emerging trends and problem areas in the mortgage market. Today's proposal would help us understand better how to protect consumers' access to mortgage credit while simplifying the reporting requirements for financial institutions."
The proposed changes to the rule are intended to improve the quality of HMDA data and include:
1. Specific new 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.
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.
In order to simplify reporting, CFPB is trying to standardize the reporting threshold, ease reporting requirements for small banks, align the HMDA reporting requirements with industry data standards, improve the electronic reporting process and improve on the ways in which the public an access and use the data while protecting applicant and borrower privacy.
It is that privacy issue that has already raised concerns from one observer. The law firm of Ballard and Spahr which closely tracks CFPB activity for its clients acknowledged on its CFPB blog that HMDA data has "long been recognized as providing for a less than robust assessment of mortgage lending activity," but it raising concerns about the proposed changes in the data gathering. The expansion of the data to include more and sensitive borrower level data, the blog says, does raise privacy concerns. With the expansion of data to included credit scores, age, and other elements it might be possible to identify specific consumers when combined with other publicly available data and the firm recommends that interested parties should insist on the FPB making consumer privacy a "paramount concern in the consideration of the proposed rule."
The period for public comment extends until October 22, 2013. The entire public rule and information on how to submit comments is available at