There will also be a brand-new data collection and reporting
requirement under ECOA for small-business and minority- and
woman-owned business applications and loans, which will feel
very HMDA-like. Both requirements will be implemented by
regulations to be written by the Consumer Financial Protection
Bureau (CFPB), which has been granted regulatory authority
over both HMDA and ECOA.
This article will explain the coming requirements, but we’ll
also talk about the fair lending implications of additional information becoming available to regulators, community groups,
and the public.
Amendments to the Home Mortgage Disclosure Act (HMDA)
statute were made in Dodd-Frank Act Section 1094. Among
other things, that section transfers responsibility for HMDA
regulations from the Federal Reserve Board to the CFPB. The
bureau, not the Fed, will make these changes to the regulation.
But we have the statutory language to go on, so we know quite
a bit about what is coming.
This is the first question many people ask, so let’s get that out of
the way so we can understand how to begin planning. The HMDA
Institutions shall not be required to report
new data … before the first January 1 that occurs
after the end of the 9-month period beginning on
the date on which regulations are issued by the
Bureau in final form. 1
Let’s say the CFPB is really in a hurry and issues
final regulations on the earliest date it possibly can,
issue final regulations, then the first January 1 occurring 9 months
after would be January 1, 2014, meaning new data is collected for
the first time in 2013 (and reported in 2014).
This is certainly a little confusing, but pay attention to the final
rule’s window of opportunity (July 21, 2011, through March 2,
2012) to determine whether new data must be collected in 2012.
The last major expansion of HMDA was in 2004, when pricing
information, a HOEPA indicator, and lien status, among other
items, were added. This time around, even more data is being
added to the HMDA laundry list.
The following are the new pieces of information to be included
on HMDA-LARs in future years along with a few of the issues
to be resolved by the CFPB. For all applications and loans, the
following additional items are to be collected and submitted:
■ ■ the channel through which the application was made.
This refers to the source of the application, whether it be a retail
source (a direct channel, such as at a branch, over the phone to a
bank employee, or on the bank’s website, for example), a broker
or dealer, or some other source. Obviously it will be important
for the CFPB to delineate clear categories on the LAR to allow
for selection of the proper channel.
■ ■ the applicants’ (borrowers’) credit scores. It remains to be
seen whether this will refer to the primary applicant’s score (if a
joint application), all applicants’ scores, a “blended” or average
score, the score(s) actually used to make the credit decision, or
some other measure. Exactly which score to use must be decided
upon, as well, because there are many to choose from (FICO?
There is an important privacy consideration here: the risk of
sufficient information being made public to allow someone to
match up an individual’s LAR record with his or her credit score.
There is a provision in the revised statute to account for this. It
states that the bureau shall “modify or require modification of
itemized information, for the purpose of protecting the privacy
interests of the mortgage applicants or mortgagors that is or will
be available to the public.” 2
We’ll have to see whether that means the credit score is to be
blocked from the public version of the LAR, or perhaps reported
“in aggregate or other reasonably modified form,” as the statute
suggests in its “Standards” subsection. 3
■ ■ the loan’s (or proposed loan’s) term, in months. This
seems likely to be a numerical field (like rate spread) where a
number is entered rather than a code selected.
■ ■ Actual or proposed term (in months) of any introductory
period after which the interest rate may change. Aimed at
adjustable rate loans with introductory or promotional fixed-rate
periods, this too seems likely to be a numerical field where the
initial fixed-rate period is entered.
■ ■ An indicator of whether there are contractual terms allowing the borrower to make payments other than fully
amortizing payments at any time during the term of the
loan. This provision targets option ARMs and other nontraditional
loan products, which are pretty much extinct at this point. But if
the borrower is permitted to make a payment of less than a fully
amortizing amount, it will have to be checked.
■ ■ A SAFe Act unique identifier that identifies the loan
originator. This also will need clarification by the CFPB (
Congress agrees, as the language “as the Bureau may determine to be
appropriate” precedes this requirement). Will this be the identifier
of the first MLO who touches the file? The “main” MLO who
has contact with the applicant? Both? Someone else? We’ll need
■ ■ A universal loan identifier. Also preceded by “as the Bureau
may determine to be appropriate.” This suggests that some sort of
was in 2004,
data is being