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From Banking and Finance Law Daily, July 24, 2014

CFPB proposal would ease HMDA reporting burden, enhance data

By Richard A. Roth, J.D.

The Consumer Financial Protection Bureau is proposing revisions to its regulation on mortgage lending data reporting that it says will simultaneously improve the information it receives and ease the reporting burden on mortgage lenders. Reg. C—Home Mortgage Disclosures (12 CFR Part 1003), which implements the Home Mortgage Disclosure Act, requires many lenders to report information about mortgage loans they originate or purchase and about mortgage loan applications they receive. According to the CFPB, this data—which is made public—allows regulators and consumers to see whether mortgage lenders are serving their communities’ housing needs and spot possible patterns of discriminatory lending.

The bureau will accept comments on the proposal through Oct. 22, 2014.

Institutional coverage. Not all mortgage lenders are required to report mortgage lending data. According to the bureau, Reg. C currently uses different criteria for whether depository institutions and nondepository lenders are covered. Some depository institutions must file reports if they originated only one first mortgage in the prior year, while nonbanks can make 99 loans without reporting.

The proposal would establish a consistent threshold for all mortgage lenders. Any mortgage lender that meets the rule’s other criteria would be required to report HMDA data if it originated at least 25 covered loans (other than open-end lines of credit) during the prior calendar year.

According to the bureau, this change would reduce the number of reporting lenders by 25 percent without affecting the value of the data being reported.

Transaction coverage. The CFPB says that Reg. C’s criteria for which loans are covered leave gaps in the available housing market data. Reverse mortgages used to buy homes, home improvement loans, and mortgage refinancing loans are reported but not separately identified, while home equity lines of credit might not be reported at all.

The proposal generally would require lenders to collect data on and report all closed-end mortgages, all open-end lines of credit secured by the borrower’s home, and all reverse mortgages. Also, these various loan types would be identified. On the other hand, unsecured home improvement loans would not be reported. The bureau says the changes would free lenders from the need to determine the intended purpose for a home-secured loan.

Reportable data. The proposal would align the HMDA data collection requirements with the data standards already set by the Mortgage Industry Standards Maintenance Organization, according to the CFPB. This is intended to make compliance with the data collection requirements easier and to make the data more consistent.

The bureau also is proposing to add data points that lenders would need to collect and modify some existing items. Additions or changes would be made to information on:

  • applicants and borrowers, the underwriting process, application channels, automated underwriting system results, and the reasons why an application was denied;

  • the property, including the construction method, value, lien priority, and number of dwelling units, plus other information on multifamily and manufactured housing;

  • loan features, including maturities, interest rates, teaser rates, and non-amortization features; and

  • identifiers for the property, loan, loan originator, and lender.

One goal of the enhanced data is to help the CFPB assess how the Ability-to-Repay rule is affecting the market.

Reporting. The proposal would require lenders that report large amounts of data to report quarterly rather than annually. However, it would be easier for financial institutions to make data public because they would be permitted simply to refer inquiries to a publicly-available website. Lenders would no longer be obligated to make the data available in their home offices and branches or to provide it in writing on request.

The bureau added that it intends to examine improvements to electronic reporting.

Clarifications. In addition to proposing changes, the CFPB says it is taking the opportunity to address many longstanding issues identified by financial institutions or other interested persons. Proposed changes to the regulation, the staff comments, and the regulation’s instructions would clarify:

  • what structures are considered to be dwellings,

  • how manufactured homes, modular homes, and multiple properties are to be treated,

  • the applicability of the regulation to preapprovals and temporary financing,

  • reporting transactions that involve more than one institution,

  • how to report the action taken on an application, and

  • reporting the type of purchaser.

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