When Congress enacted the Dodd-Frank Act in 2010, it directed the Consumer Financial Protection Bureau (CFPB) to improve Home Mortgage Disclosure Act (HMDA) reporting. Under the current HMDA collection rules, covered lenders have to report certain residential mortgage information such as the type of loan, the census tract where the property is located, and the race and ethnicity of the borrower. Improving the kinds of information collected will make it easier to identify new consumer protection concerns as they develop and to assess whether consumers have equal and fair access to mortgages.
For example, while home equity lending surged during the lead up to the mortgage crisis, lenders are not currently required to report home equity lines of credit. While older Americans are too often targeted by unscrupulous contractors peddling costly loans and making shoddy home improvements, lenders are not required to flag the age of the borrower. Similarly, teaser interest rates proliferated before the crisis, but the current HMDA database contains only limited information about the rates charged by lenders. These and other gaps in what we know hinder everyone’s ability to determine whether borrowers have access to affordable loans or to identify potential targeting of borrowers for riskier or higher-priced loans.
Under the Dodd-Frank Act, Congress said that lenders must collect and report specific new information as part of the HMDA process. These new data points include, among others:
- The total points and fees;
- The term of the loan;
- The length of any teaser interest rates;
- The borrower’s age; and
- The borrower’s credit score.
Aside from the specific changes mandated by Congress, the CFPB is also seeking feedback about how the HMDA data collection can better serve the purposes of the statute while enabling regulators and the public to better monitor access to credit – especially because mortgage lending has changed so much since the financial crisis.
So the CFPB is considering other types of information that would give regulators a better view of developments in all segments of the housing marketplace. Other information might include more underwriting and pricing information, such as:
- An applicant’s debt-to-income ratio;
- The interest rate;
- The total origination charges, and
- The total discount points of the loan.
The CFPB is also considering new requirements that would more accurately capture access to credit in the mortgage market. New requirements might include adding a data point on whether the lender considered the loan to be a “Qualified Mortgage.” This information would help regulators and the public determine how the Bureau’s rules are affecting the mortgage market.
The HMDA LAR currently contains 26 fields of data. The additions required by Dodd-Frank will add about a dozen new fields. The CFPB has the discretion to add other fields, in addition to those mandated by Doff-Frank. We expect the revised HMDA LAR to contain 40 to 50 total fields. The expanded data:
- Will increase in the work involved in collecting, verifying, submitting and analyzing HMDA data.
- Increases potential liability related to reporting errors.
- Allows the regulators to more quickly and precisely hone in on fair lending and CRA issues.
The next article in this series explores proposed operational improvements.