Possible HMDA changes to be proposed
AML AND COMPLIANCE NEWS |
In an effort to improve overall reporting about borrower access to credit in residential mortgage markets, the Consumer Financial Protection Bureau (CFPB or Bureau) is convening a panel of small businesses to gather feedback on potential changes to the Home Mortgage Disclosure Act (HMDA).
Since 2010, when passage of the Dodd-Frank Act transferred mortgage rulemaking for the HMDA to the CFPB, the Bureau has been following Congressional direction to add more data points that may help isolate negative mortgage market trends. To that end and as a response to the process developed in the Small Business Regulatory Enforcement Fairness Act or SBREFA, the CFPB will ask the panel for feedback on the following new requirements:
- Total points, fees and rate spreads for all loans. Since a home is the biggest purchase most consumers ever make, it’s vital that regulators understand how much borrowers are paying in total cost for their loans. This knowledge will aid the Bureau’s understanding of pricing outcomes and risk factors for borrowers.
- Riskier loan features. In the years leading to the mortgage crisis, teaser rates, prepayment penalties and nonmortizing features were significant problems for consumers. By including this information as part of the HMDA data collection, regulators will have a better view of how such loan features affect borrowers.
- Specific lender information. The Bureau believes that providing a unique identifier for a given loan, or the loan officer who works with a specific borrower, would help regulators keep more accurate track of lenders’ business practices.
- Property value and location information. Because the value of a property is crucial to any lender’s decision to make a loan (and what rate to charge), better property value information will help the CFPB gain insight on acceptances, denials, rates and fees. In addition, improved location information will aid in analyzing local mortgage markets.
- Age and credit score. To better monitor possible targeting of elderly borrowers for unsuitable or costly loans, the CFPB believes documentation of an applicant’s age will help regulators identify and discourage such schemes. Credit score inclusion on loan documents will make it easier to understand why some borrowers are denied and why others pay higher or lower rates.
As part of the panel discussion, the Bureau also will seek feedback on a range of potential rule changes, such as mandatory reporting of reasons for loan denial, debt-to-income ratio, combined loan-to-value ratio, total origination charges, total discount points and whether the loan is a “qualified mortgage.” In addition, the CFPB is asking for feedback on ways it can streamline data reporting, standardize the threshold for annual HMDA reports and improve data entry tools.
The CFPB is considering proposals related to the information required about each loan or application, which lenders are required to report HMDA data, potential operational improvements in the HMDA compliance system, and the types of loans and applications that must be reported.