dwelling-secured loans.” We’ll see.
A related discussion involved whether the
“home improvement” purpose should be eliminated, and whether a separate designation for
business-purpose loans should be introduced.
Property Data
Required to be added:
18. Property value: This will also allow a simple
calculation of the loan-to-value (LTV) ratio.
19. Property identifier: This would replace the
current reporting of census tract, county, state,
and MSA, and could be property address or
“geographic coordinates.” The idea is to “reduce
[banks’] geocoding burden.” The CFPB also discusses whether the government should share the
burden with lenders or even take total responsibility for geocoding.
Also being considered:
20. Financed units count and construction
method: This would replace the property type
categories reported currently with the number
of units financed and the dwelling’s construction method (manufactured or site-built).
21. Multi-family affordable housing: For multi-family properties, whether the property is deed
restricted for affordable housing.
22. Manufactured housing details, including:
■ ■ ■ The type of financing (whether the loan is
secured by real or personal property), and
■ ■ ■ Whether the borrower will lease or own the
land site.
Applicant and Borrower Data
Required to be added:
23. Age: Numerical age rather than birthdate.
24. Credit score: The numerical score (as defined
by the Fair Credit Reporting Act) that the lender
relied upon to make the credit decision. Additional information, such as the date the score
was obtained, the name of the scoring model,
and range of scores, may also be required.
Also being considered:
25. Debt-to-income (DTI) ratio: This could
include either, or even both, the front-end (just
housing debt) or back-end (all debt) ratio relied
upon when processing the application.
Lender Information Being Considered
26. Legal Entity Identifier (LEI): This would be
a new, yet-be-developed identification number
to replace the current HMDA Respondent and
Reporter ID.
This is a long list to be sure, and will require
significant programming, process, and train-
ing changes to implement. This presents many
challenges: is this information
available in any existing system
or database? If not, what will it
take to get it? How accurate will
it be? What will it take to export
into the HMDA submission sys-
tem and software?
This last question is also a
topic being considered by the
CFPB. The submission process
is a recognized burden and
the bureau may seek to imple-
ment what it calls “streamlined
reporting.” It isn’t entirely clear
what this new reporting inter-
face would look like, but the
bureau may seek to align “the
requirements… to existing industry standards
for collecting and transmitting data on mort-
gage loans and applications.”
Two possibilities are mentioned. One is
known as the Mortgage Industry Standards
Maintenance Organization, or MISMO, a
widely used free and open-access standard.
The other, which leverages MISMO, would be
similar to the Uniform Loan Delivery Dataset
(ULDD) protocols that Fannie Mae and Freddie Mac utilize.
The bureau also seeks an “interface that will
allow lenders to connect their software to a
CFPB intake system.” This may result in new
HMDA Data Entry Software (DES), to accommodate multiple users and network capabilities
(both are not possible now). The new software
would be web-based, thus updates would be automatic. An application programming interface,
or API, would also be released to allow developers the capability to integrate individual banking software with the submission system.
Privacy Concerns: One critical worry with
more detailed reporting is maintaining consumer privacy. Even if applicant-specific data
is scrubbed from public disclosures, the fear is
individuals could be identified by “backing into”
the information. The CFPB does mention consideration of this issue in their discussion.
HMDA-Reportable Applications: Notably
there is a section titled “Clarifying Reportable
Applications,” which recognizes the challenges
in determining what is reportable in the first
place. The CFPB discusses how the HMDA
definition of “application” compares to Regulations B, X, and Z, and how it could be aligned,
although they say they’re “disinclined to change
the current requirements.”
Preparing now: The CFPB’s goal is to figure
out how HMDA “can be updated to better re-
flect what is happening in the market.” These
changes are still a few years away from being
required, and again there is a good chance the
final rule will look different from what we see
here. But with the amount of information to be
collected and submitted potentially doubling,
it will be an enormous challenge for banks no
matter how prepared they think they might be.
Lastly, think about this how this additional
data (much of which will be publicly available)
will affect your fair lending performance. Don’t
spend this valuable time focusing only on the
technical requirements without also considering
how the new data will impact your fair lending
profile. Once you figure out the operational
requirements, consider running a proactive
fair lending test with your data and see if any
interesting disparities jump out. Better for the
bank to identify (and mitigate it) it before being
broadcast to the world at large.■
ABOUT THE AUTHOR
CARL G. PRY, CRCM, CRP, is a senior
director for Treliant Risk Advisors in
Washington, D.C., where he advises
clients on a wide variety of compliance,
telephone at (440) 320-4662. T H
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