By Mike Ferullo
Oct. 15 — Banks and other types of mortgage lenders will be required to report much more information about loan underwriting and pricing to federal regulators under a final rule announced Oct. 15 by the Consumer Financial Protection Bureau (CFPB).
The borrower's debt-to-income ratio, the interest rate of the loan, and the discount points charged for the loan are just some of the new types of information that lenders will have to submit under expanded reporting requirements of the Home Mortgage Disclosure Act (HMDA). The CFPB and other financial regulators use HMDA data to keep up with mortgage market trends and to identify possible discriminatory lending patterns among lenders.
“This information will enhance the ability to screen for possible fair lending problems, helping both institutions and regulators focus their attention on the riskiest areas where fair lending problems are most likely to exist,” the CFPB said in a Oct. 14 statement announcing the nearly 800-page rule.
Industry groups said the final rule will impose significant burdens on lenders in collecting, sorting, formatting and submitting the data to the regulators. Lenders will be required to report a total of 48 data fields for each borrower—greatly exceeding the requirements laid out by Congress, said the Independent Community Bankers of America (ICBA).
ICBA President Camden Fine said the final rule instead “adds to the excessive regulatory burdens for many community banks, which will further restrict access to credit in local communities.”
HMDA was enacted in 1975 to require banks, thrifts, credit unions and nonbank mortgage companies to disclose data to federal regulators about mortgage loans they make and applications they receive. The 2010 Dodd-Frank Act directed the CFPB to update HMDA regulations to better capture products that helped contribute to the mortgage crisis, such as adjustable-rate mortgages and non-amortizing loans.
Amid concerns that existing HMDA data was insufficient and out of date, Congress mandated that lenders report items such as the term of the mortgage loan, the property value, the length of any teaser or introductory interest rates, and the loan applicant's age and credit score.
Beyond that, the CFPB is requiring lenders to furnish additional information that it deems important, such as the borrower's debt-to-income ratio, the interest rate, and the total discount points of the loan.
“The HMDA Rule adds the data points specifically identified in the Dodd-Frank Act as well as data points that the Bureau determined will assist in carrying out HMDA’s purposes,” the CFPB said in an executive summary accompanying the final rules.
A borrower's debt-to-income ratio, for example, is a key determining factor in whether a loan counts as a qualified mortgage (QM) under the CFPB's new ability-to-repay regulations. Under the final HMDA rule, lenders would report whether the loan is a QM and how it qualifies for treatment as a QM.
Mortgage lenders had asked the bureau to scale back its rulemaking, saying that some of the planned collections go beyond the purposes of HMDA. In response, the CFPB has dropped some of the data fields it proposed in 2014, such as information related to commercial-purpose loans.
But industry groups said the final rule remains too broad. Alicia Nealon, director of regulatory affairs at National Association of Federal Credit Unions, said HMDA reporting in categories such home equity lines of credit is unnecessary and too burdensome.
“While NAFCU and our members support HMDA requirements that further the goal of ensuring fair lending and anti-discriminatory practices, we are concerned that some of the additional reporting requirements will not achieve these goals and may only serve to impose significant additional compliance and reporting burdens on responsible lenders like credit unions,” she said in a statement.
Most of the provisions of the final rule will take effect Jan. 1, 2018. Lenders will collect the new information in 2018 and then report the information by March 1, 2019. In a statement, the American Bankers Association said it was pleased about the extended compliance date, but remains concerned about the scope of required data reporting that banks are facing.
ABA President Frank Keating said another top concern is “the privacy of bank customers’ data and ensuring that their information is properly protected.”
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The CFPB statement and other rule materials are available at http://www.consumerfinance.gov/newsroom/cfpb-finalizes-rule-to-improve-information-about-access-to-credit-in-the-mortgage-market/
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