|August 26, 2014|
Previously published on August 20, 2014
On July 24th, the CFPB issued a proposed rule that would amend Regulation C to implement amendments to the Home Mortgage Disclosure Act (HMDA) made by the Dodd-Frank Act. HMDA generally requires mortgage lenders to report information about loan applications they receive and about loans they originate or purchase. The resulting data set that is published is generally used by both regulators and the public to determine whether financial institutions are serving the housing needs of their communities, and also to identify potential discriminatory lending patterns.
Among other things, section 1094 of the Dodd-Frank Act amended HMDA to expand the HMDA dataset. The CFPB's proposed rule would make three significant revisions to Regulation C: (1) revise the tests for determining which financial institutions and housing-related credit transactions are covered under HMDA; (2) require financial institutions to report the new data points identified in section 1094 of the Dodd-Frank Act, in addition to certain other data points added by the CFPB; and (3) align the reporting requirements of Regulation C with existing industry standards.
First, the proposed rule would revise the tests for determining coverage of financial institutions under HMDA. To simplify the institutional coverage requirements, the proposed rule would adopt, for all financial institutions, a uniform loan-volume threshold of 25 loans. Regulation C currently has different thresholds for determining coverage based on whether a financial institution is a depository or non-depository institution.
Second, the proposed rule would add several new data points to HMDA's reporting requirements, as well as modify some existing data points. While some of the new data points were mandated by section 1094 of the Dodd-Frank Act, the CFPB is also proposing adding other additional data points using its discretionary rulemaking authority. The CFPB has grouped the new data points that it is proposing into the following four categories:
- Information about applicants, borrowers, and the underwriting process (e.g., age, credit score, debt-to-income ratio, reasons for denial of an application, the application channel, and automated underwriting system results).
- Information about the property securing the loan (e.g., construction method, property value, lien priority, number of dwelling units, etc.).
- Information about loan features (e.g., pricing information, loan term, interest rate, introductory rate period, non-amortizing features, and type of loan).
- Unique identifying information (e.g., a universal loan identifier, property address, loan originator identifier, and a legal entity identifier for the financial institution).
Third, the proposed rule would align Regulation C requirements with existing industry standards for collecting and transmitting mortgage loan data. To this end, the CFPB is proposing to align many of the HMDA data requirements with the Mortgage Industry Standards Maintenance Organization (MISMO) data standards for residential mortgage loans.
Aside from these main revisions to Regulation C, the CFPB is also proposing several other changes to clarify and provide additional guidance on existing requirements that are confusing or otherwise unclear. Comments on the proposed rule must be received on or before October 22, 2014.