On September 20, the Consumer Financial Protection Bureau issued proposed policy guidance that would modify a mortgage disclosure law in an effort to protect applicants’ and borrowers’ privacy.
In 2015, the CFPB finalized changes to the Home Mortgage Disclosure Act (“HMDA”), which requires lenders to report and disclose to the public certain information about their mortgage lending activities. The HMDA’s purpose is to help determine whether financial institutions are serving the housing needs of their communities; to assist public officials in distributing public-sector investment and attracting private investment in areas where it is needed; and to identify possible discriminatory lending patterns and enforce anti-discrimination statutes. To achieve these goals, the CFPB plans to disclose most of the collected data to the public in 2019.
The CFPB proposes to exclude the following data from public disclosure to protect the privacy of applicants and borrowers:
- the universal loan identification number;
- the application date;
- the date of action taken by the financial institution on a covered loan or application;
- the address of the property securing the loan or, in the case of an application, proposed to secure the loan;
- the applicant’s credit score relied on in making the credit decision;
- the unique identification number assigned by the Nationwide Mortgage Licensing System and Registry for the mortgage loan originator;
- the result generated by the automated underwriting system used by the financial institution to evaluate the application; and
- free-form text fields used to report the following: applicant or borrower race and ethnicity; the name and version of the credit scoring model used to generate each credit score or credit scores relied on in making the credit decision; the principal reason or reasons the financial institution denied the application, if applicable; and the automated underwriting system name.
The CFPB also proposes to reduce the specificity of some information disclosed to the public. For instance, the applicant’s or borrower’s age will be published as a range rather than as a specific number, and property values or loan amounts will be reported in $10,000 increments.
The CFPB has said that these proposed changes seek to maintain a balance of privacy risks and benefits of disclosure, and it has invited public comment on the proposals.
Also on September 20, in a related action, the CFPB issued a final rule modifying Equal Credit Opportunity Act regulations to provide flexibility and clarity to mortgage lenders in the collection of consumer ethnicity and race information. ECOA is aimed at protecting against discrimination in the financial marketplace and restricts lenders’ ability to ask consumers about their race, color, religion, national origin, or gender, except in certain circumstances. The finalized rule now allows lenders to ask mortgage applicants more detailed questions about their race and ethnicity and provides lenders the ability to use a broader range of uniform documents, including the Uniform Residential Loan Application.