Last week's annoucement about a deal between the CFPB and the Federal Housing Finance Agency (FHFA) is certain to raise questions about the unannounced purposes for such a joint venture.
As you may have heard, the CFPB and FHFA jointly announced that they will create a National Mortgage Database, or NMD, touted as the first comprehensive repository of detailed mortgage loan information. Is this just another excuse for the next enforcement action, and a taxpayer-funded resource for the plaintiffs' bar? Well, perhaps.
The agencies claim they intend to use the NMD to support their “policymaking and research efforts, and to help regulators better understand emerging mortgage and housing market trends.” Or those are the carefully chosen words attributed yesterday to the CFPB's Richard Cordray, who likewise exclaimed that the database will be a valuable tool for regulators and researchers: “In order to understand what is going on in the mortgage marketplace and develop appropriate consumer protections, we must have the best facts and data.” Or how to use them to push the CFPB's agenda through pursuit of enforcement actions. After all, the NMD will be a powerful too, whether used in conjunction with enhanced HMDA data, or standing alone. Let's hope that the NMD likewise serves the more important purposes stated in the announcement, that is, (1) to monitor the relative health of mortgage markets and consumers; (2) to obtain new insights on the consumer home buying process; and (3) to monitor new and emerging products in the mortgage market.
So what will we find in the new NMD? According to the CFPB, it will include loan-level data about a mortgage including: the borrower’s financial and credit profile; the mortgage product and terms; the property purchased or refinanced; and the ongoing payment history of the loan. And, of course, the agencies also plan to share (freely, as you can imagine) the NMD's information with other federal agencies, academics, and the public (read: plaintiffs' lawyers and consumer advocacy groups). To assuage privacy concerns, the CPFB claims that the NMD "will not contain personally identifiable information and appropriate precautions will be taken by the agencies to ensure that individual consumers cannot be identified through the database or through any datasets that may be made available to researchers or the public.” Playing to the conspiracy theorists in our audience, the two agencies admit they have already begun to develop the database and expect it to be completed in 2013.
So, how soon before we see the first lawsuit or enforcement action built on NMD data? Start your office pools. The CFPB’s press release insists that the purpose of the NMD is absolutely not to identify and/or correct past violations of any federal consumer protection law, but to proactively “develop appropriate consumer protections” before there may even be a need for these protections. And yet this type of activity reflects the CFPB’s expansive interpretation of its open-ended statutory mandate under Dodd-Frank, which—as history has shown—almost always results in additional regulatory burdens for financial institutions. Stay tuned to the CFPB-Lawblog for updates, as we’ll continue to monitor this developing issue.