CFPB Issues Guidance on Information Collection for Mortgage Lenders

November 30, 2017 by Bryan P. Redington, Esq.

On September 20, the Consumer Financial Protection Bureau (CFPB) modified Equal Credit Opportunity Act (ECOA) regulations to offer flexibility to mortgage lenders in the collection of race and ethnicity information from consumers. The CFPB is providing additional guidance to mortgage lenders on their responsibilities under the Act to ensure all borrowers are treated fairly. In a statement issued to the public, the CFPB also announced it was seeking comment on the proposed Home Mortgage Disclosure Act (HMDA) policy guidelines that relate to modifications made to the law to protect consumer’s privacy. As it stands now, the Bureau intends to make HMDA data available to the public after January 1, 2019. Richard Cordray, the CFPB director, iterated the agency’s commitment to protecting consumer data, saying, “The Home Mortgage Disclosure Act helps shine a light on how consumers are treated in the nation’s largest consumer financial market. The Consumer Bureau is committed to promoting fair lending and protecting consumer privacy, and will continue working to ensure that the rules work as intended.”

 

Offering Data Collection Flexibility

In March, the CFPB first proposed the rule changes to the ECOA that would provide more flexibility to mortgage lenders who are required to collect certain information about borrower’s race and ethnicity under certain lending scenarios. Under the Equal Credit Opportunity Act, federal law prohibits discrimination in financial transactions based on a consumer’s ethnicity or race. The law protects the consumer by preventing the collection of borrower data about sex, race, color, or religion unless that data is required for reporting under the CFPB’s Reg B.

The changes that are now finalized offer individual lenders and the mortgage industry in general some leeway in the conforming to the law, allowing mortgage lenders to form internal compliance rules to ensure they are acting within the law’s guidelines. The changes also remove the requirement that lenders employ different data collection practices based on their loan volume. This development will provide more options for how lenders implement forms that request information regarding race and ethnicity as required by the Uniform Residential Loan Application (URLA).

The Bureau also made changes that allow mortgage lenders required to collect and retain information about race and ethnicity under Regulation B, to do so using either the aggregate ethnicity and race categories or disaggregated ethnicity and race categories and sub-categories as outlined in Regulation C. The change also would not require Reg B creditors that are not HMDA reporters to change their compliance policies, but rather allow them the ability to adopt voluntary new practices for the collection and retention of this data.

Balancing Transparency with Protecting Privacy

The Home Mortgage Disclosure Act requires that mortgage lenders disclose certain information about their lending activity to the general public. The CFPB encourages the reporting of accurate data to better monitor lenders and ensure they are acting justly, not discriminating, and in the best interest of the consumers they serve. The reported data also allows the CFPB to determine which areas need more monitoring and what neighborhoods deserve more public-sector investment into housing.

In 2018, the CFPB will require mortgage lenders to begin disseminating certain information, including data about property value, the interest rate of the loan, and applicant’s debt-to-income ratio. These requirements were finalized in 2015 when the CFPB made changes to Reg C and implemented HMDA reporting. The reporting is central to the Bureau’s goal of making the mortgage lending process more transparent, however, balancing this reporting with consumer privacy concerns has become a challenge.

The policy guidance just issued by the Bureau aims to alleviate some of the privacy concerns while promoting the data collection and retention requirements through a more flexible reporting system. The CFPB clarified what data would need to be gathered and made available to the public through the HMDA mechanism. While the agency proposes to make the bulk of the information available to the public, it is now proposing changes to the data collection process to ensure privacy for loan applicants. Some changes proposed included removing the property address and credit score or modifying data, such as displaying the borrower’s score as a range rather than set number.

The Bureau is seeking public comment on the new proposal and will work through the official comment process before announcing the final policy guidance later this year. The public comment period will be open for 60 days following publication in the Federal Register.

On September 20, the Consumer Financial Protection Bureau (CFPB) modified Equal Credit Opportunity Act (ECOA) regulations to offer flexibility to mortgage lenders in the collection of race and ethnicity information from consumers. The CFPB is providing additional guidance to mortgage lenders on their responsibilities under the Act to ensure all borrowers are treated fairly.

In a statement issued to the public, the CFPB also announced it was seeking comment on the proposed Home Mortgage Disclosure Act (HMDA) policy guidelines that relate to modifications made to the law to protect consumer’s privacy. As it stands now, the Bureau intends to make HMDA data available to the public after January 1, 2019.

Richard Cordray, the CFPB director, iterated the agency’s commitment to protecting consumer data, saying, “The Home Mortgage Disclosure Act helps shine a light on how consumers are treated in the nation’s largest consumer financial market. The Consumer Bureau is committed to promoting fair lending and protecting consumer privacy, and will continue working to ensure that the rules work as intended.”

Offering Data Collection Flexibility

In March, the CFPB first proposed the rule changes to the ECOA that would provide more flexibility to mortgage lenders who are required to collect certain information about borrower’s race and ethnicity under certain lending scenarios. Under the Equal Credit Opportunity Act, federal law prohibits discrimination in financial transactions based on a consumer’s ethnicity or race. The law protects the consumer by preventing the collection of borrower data about sex, race, color, or religion unless that data is required for reporting under the CFPB’s Reg B.

The changes that are now finalized offer individual lenders and the mortgage industry in general some leeway in the conforming to the law, allowing mortgage lenders to form internal compliance rules to ensure they are acting within the law’s guidelines. The changes also remove the requirement that lenders employ different data collection practices based on their loan volume. This development will provide more options for how lenders implement forms that request information regarding race and ethnicity as required by the Uniform Residential Loan Application (URLA).

The Bureau also made changes that allow mortgage lenders required to collect and retain information about race and ethnicity under Regulation B, to do so using either the aggregate ethnicity and race categories or disaggregated ethnicity and race categories and sub-categories as outlined in Regulation C. The change also would not require Reg B creditors that are not HMDA reporters to change their compliance policies, but rather allow them the ability to adopt voluntary new practices for the collection and retention of this data.

Balancing Transparency with Protecting Privacy

The Home Mortgage Disclosure Act requires that mortgage lenders disclose certain information about their lending activity to the general public. The CFPB encourages the reporting of accurate data to better monitor lenders and ensure they are acting justly, not discriminating, and in the best interest of the consumers they serve. The reported data also allows the CFPB to determine which areas need more monitoring and what neighborhoods deserve more public-sector investment into housing.

In 2018, the CFPB will require mortgage lenders to begin disseminating certain information, including data about property value, the interest rate of the loan, and applicant’s debt-to-income ratio. These requirements were finalized in 2015 when the CFPB made changes to Reg C and implemented HMDA reporting. The reporting is central to the Bureau’s goal of making the mortgage lending process more transparent, however, balancing this reporting with consumer privacy concerns has become a challenge.

The policy guidance just issued by the Bureau aims to alleviate some of the privacy concerns while promoting the data collection and retention requirements through a more flexible reporting system. The CFPB clarified what data would need to be gathered and made available to the public through the HMDA mechanism. While the agency proposes to make the bulk of the information available to the public, it is now proposing changes to the data collection process to ensure privacy for loan applicants. Some changes proposed included removing the property address and credit score or modifying data, such as displaying the borrower’s score as a range rather than set number.

The Bureau is seeking public comment on the new proposal and will work through the official comment process before announcing the final policy guidance later this year. The public comment period will be open for 60 days following publication in the Federal Register.