On January 7, 2016, the Consumer Financial Protection Bureau (CFPB) issued a request for information (RFI) seeking feedback and additional information on what modifications may be appropriate to the CFPB’s Home Mortage Disclosure Act (HMDA) Resubmissions Guidelines under Regulations C.
In October 2015, the CFPB announced its final rule on amended Regulation C, which implements the HMDA. As part of this revision, the CFPB determined that HMDA data “must be updated to address the informational shortcomings exposed by the financial crisis and to meet the needs of homeowners, potential homeowners, and neighborhoods through the nation.” The final rule increases the number of data points that financial institutions are required to report to federal regulators, and it includes new information such as property value, the term of the loan, and information about applicants and borrowers, including their age, credit score, and debt-to-income ratio.
While the changes do not generally go into effect until January 1, 2018, with reporting due to the federal regulators by March 1, 2019, many industry organizations are already calling into question the CFPB’s changes, and the CFPB recognizes that the current resubmission guidelines may need to be updated. This has prompted the CFPB to put forth an RFI seeking public feedback on the resubmission of mortgage lending data reported under the HMDA. The RFI has 12 general questions for commenters and sets a 60-day response period. The CFPB will not separately propose and solicit comments on changes to its resubmission guidelines before finalizing and publishing changes.
Included in these questions are important issues surrounding the “data error threshold” for data resubmission under HMDA. For example, currently for institutions under examination that report fewer than 100,000 loans or application, when 10 percent or more of their HMDA data sampled contains errors in at least one field, the CFPB requires the institution to correct and resubmit its HMDA data, often at great expense. For institutions with 100,000 or more entries, the acceptable error rate is set at less than 4 percent of the sample. The CFPB’s RFI seeks alternative ways to ensure data integrity without a data error threshold calculation, suggesting that the CFPB would entertain modifying and doing away with this data error threshold analysis.
A modification of the error threshold analysis could be critical as the CFPB’s final rule changes, significantly increasing the amount of data that will have to be collected by financial institutions. The Credit Union National Association has explained that the CFPB will be pursuing a “staggering 48 data fields,” more than the 17 fields required by the HMDA. The National Association of Federal Credit Unions has also pointed out it would require “credit unions to rework their mortgage origination and servicing operations, once again setting off another round of system upgrades at great cost.”
Finally, there are general concerns that expansion of data collected under the HMDA requires the collection of consumer identification information and that greater data security will need to be developed for submission of such a vast quantity of information.
As the amount of data collected and types of organizations that will be required to collect are expanded under the CFPB’s watch, financial institutions will have to continue to be diligent, carefully reviewing CFPB’s rules and other legal guidance.