Why The CFPB’s Latest HMDA Guidance Is So Important

January 8, 2019 at 9:31 am 1 comment

The CFPB has released an extremely important guidance outlining what HMDA data will be made available to the public this year and under what conditions. If you are a credit union subject to HMDA reporting requirements, this is good news. But even if you’re credit union isn’t subject to it you should pay attention. This is  a new stage in the country’s seemingly never-ending debate about how best to determine the extent of racial bias embedded in the home buying process and how best to deter and minimize this bias in the future.

It’s a discussion which should be getting more attention than it is. On one side are those who believe that racial bias is endemic in the home buying process and that greater access to key underwriting data will prove their claims. On the other side are those who take a John Adams “dam lies and statistics” approach when it comes to this type of data. They are concerned that with enough data, even legitimate practices will be made to look discriminatory.

This debate is nothing new when it comes to The Home Mortgage Disclosure Act (HMDA) which was passed by Congress in 1975 as a way of assessing mortgage lending to minorities. It accomplishes this goal by making HMDA institutions fill out a Loan Application Register (LAR) detailing characteristics of all mortgage applicants and applications. This information is available to examiners and to anyone in the general public with the gumption to request it from a bank branch.

Dodd-Frank made two crucial changes to this LAR. First, it added several additional data points that now have to be collected. The result is an explosion in the collection of highly detailed information about mortgage applications. The second crucial policy shift was to mandate that financial institutions send this information to the CFPB. Starting this year, HMDA data will be available to researchers and plaintiff lawyers with the touch of a button. This is a big deal.

Because the information now being retrieved is so granular, the CFPB is responsible for determining what, if any, data should be withheld from the public so as to protect individual privacy interests. The guidance recently released by the CFPB details the data points that will be shielded from public review and the criteria that it used in making this determination.

Under the approach taken by the CFPB, the disclosure of loan level HMDA data creates risks to applicant and borrower interests where at least one data field or a combination of data fields “substantially facilitates the identification of an applicant or borrower” and at least one data field or combination of data fields discloses information about the applicant or borrower that is not public and “may be harmful and sensitive.” Among the information to be withheld from the public or modified before its release are data fields detailing the borrower or applicant’s debt to income ratio; the Universal Loan Identifier; the application date; the property address; the credit score relied on in making the lending decision and the “result generated by the automated underwriting system” used in making the lending determination (the executive summary contains a chart of the exclusions).

The CFPB also signaled that it would be considering making additional amendments to Regulation C later this year. All of this is sure to get the attention of democratic policy makers and promises to once again heighten the debate over how best to monitor home buying in this country.

Entry filed under: Compliance, Mortgage Lending, Regulatory. Tags: , , , .

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1 Comment Add your own

  • 1. Michael Galligan  |  January 8, 2019 at 11:13 am

    HMDA so near and dear to my heart.

    Reply

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Authored By:

Henry Meier, Esq., Senior Vice President, General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association. In addition, although Henry strives to give his readers useful and accurate information on a broad range of subjects, many of which involve legal disputes, his views are not a substitute for legal advise from retained counsel.

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