The Consumer Financial Protection Bureau has published proposed changes to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The HMDA was enacted by Congress in 1975, and on July 21, 2011, the rule-writing authority of Regulation C was transferred to the CFPB. HMDA requires covered depository and nondepository institutions to collect and publicly disclose information about applications for, originations of, and purchases of home purchase loans, home improvement loans, and refinancing. Historically, Regulation C – which applies to certain financial institutions, including banks, savings associations, credit unions, and other mortgage lending institutions – was utilized to help determine whether financial institutions were serving the housing needs of their communities and to spot possible discriminatory lending patterns. The proposed rule appears to be consistent with the CFPB’s goal of promoting fair lending.
The Dodd-Frank Act specifically directed the CFPB to expand HMDA to provide new information about mortgages, including but not limited to total points and fees, rate spreads, applicant age, applicant credit scores, property values, teaser rate durations, and prepayment penalties. In total, the 573-page proposed rule, released on July 24, includes the reporting of thirty-seven new data fields, twenty of which were not previously required by the HMDA. Also, the CFPB is proposing that financial institutions with large numbers of reported transactions submit their HMDA data on a quarterly, rather than an annual, basis. The CFPB hopes to align HMDA data requirements with established industry data standards, which it believes could alleviate the burden on many lenders and improve the quality of the information reported. Similarly, one of the goals of the proposed rule is to make more mortgage lending data available to the public. Just how much and what type of information that will ultimately be released to the public is currently unclear as the CFPB has to wrestle with privacy concerns.
If adopted, the proposed rule changes will likely require reporting institutions to incur significant costs to change their compliance procedures and reporting systems. However, many observers believe that any new reporting requirements will not take effect until the beginning of 2017, which should give institutions time to prepare for the new era of HMDA reporting. The comment period on the proposed rule does not close until October 29, 2014.