BY DAVID M. SKANDERSON, PH.D.
CONGRATULATIONS! If you are reading this article, you survived the “Big Bang” of Home Mortgage Disclosure Act data collection. Your bank is now smoothly and accurately collecting all the new HMDA data fields (as many as 110 possible data fields per application!), and you will be ready to start
submitting all those data fields electronically to the Consumer Financial Protection
Bureau (Bureau) by March 1, 2019. Right? Well, let’s hope so.
Now that you have that job nicely squared away,
it’s time to start thinking about how your bank will
be affected by the Goliath expansion of publically
available HMDA data coming in the future. The release of the new HMDA data could come as early as
late-March 2019, if the Bureau holds to its ambitious
plans. The expanded public data will have profound
implications for mortgage lenders’ regulatory, litigation, public policy and reputation risk exposure. The
new public data will allow regulatory agencies to
search more broadly for fair lending and other compliance risks, and to target institutions more precisely
for examination and enforcement. It will also provide
rich data mining opportunities for private litigants
and advocacy groups, as well as for researchers and
policy makers. Managing those risks is going to require some planning and analysis.
A Balancing Act
The Bureau described its approach to setting HMDA
disclosure policy in terms of a “balancing test.” The Bu-
reau interpreted HMDA, as amended by the Dodd-Frank
Act, to require that it balance HMDA’s core disclosure
purposes and consumer privacy in deciding which
data fields to disclose and how to disclose them. The
Bureau decided to issue Policy Guidance on the topic,
which gives it flexibility in modifying its approach in
the future if its view of that balance changes. As such,
the Policy Guidance is both non-binding on the Bureau
and is exempt from notice-and-comment rulemaking
requirements under the Administrative Procedures Act.
Nevertheless, the Bureau invited public comments for
60 days after publishing its proposal before issuing its
final Policy Guidance—a window that will be closed
by the time this article is published.
Proposal for Public Release
of Loan-Level Data
What will actually be released to the public, and what
risks will it pose to your bank? When the Bureau issued
its final HMDA reporting rules on October 28, 2015, it
deferred answering the question of how the expanded
data would be disclosed. The much-anticipated answer
arrived on September 25, 2017, with the publication of
the Bureau’s proposed Policy Guidance.
The short answer is that the great majority of the
new data fields will be disclosed to the public in their
raw, unmodified form. However, a handful of the most
sensitive data fields will be excluded from public release,
and others will be published in modified form, to reduce
the risks to consumer privacy. The various free-form
text entry fields also will be excluded from public release because of the practical difficulties of compiling,
reviewing and publishing those fields.
SHUTTERS TOCK/ TIPPA PATT