CFPB Asks for Feedback on Home Mortgage Disclosure Act

The Consumer Financial Protection Bureau (CFPB) is requesting feedback from the public on resubmission of mortgage lending data that is reported under the Home Mortgage Disclosure Act (HMDA). The federal agency finalized a new reporting requirement for the HMDA in October of 2015. Due to the new requirements, the resubmission guidelines may also need changing. This is why the Bureau is asking the public for help on what changes may be best.

The Home Mortgage Disclosure Act

Congress originated the HMDA in 1975. Enforcement fell under the Federal Reserve Board's Regulation C. in  2011. Authority to write rules for Regulation C was transferred to the CFPB when it was formed by the Consumer Protection Act of 2010 (Dodd-Frank Act). The HMDA stipulates that lenders must report data about the home loan applications they receive, purchase, and originate. This allows regulators and the public to monitor whether or not lenders are properly serving the housing needs for the communities in which they are located. It also helps with the distribution of public-sector investing and brings additional private investments when needed. One of the primary purposes of the HMDA is to prevent discriminatory lending practices by identifying any inappropriate patterns in the origination of home loans.

It is imperative that the information gathered is accurate to fulfill the purposes of the HMDA. The CFPB conducts examinations to ensure the data reported is accurate and establishes resubmission guidelines that detail when the lending institutions will correct and resubmit data.

Request for public feedback

Some have asked the CFPB if its guidelines for resubmission of mortgage lending data would be changed to reflect the additional data submission required under the new rules. The Bureau is asking the public to comment on any changes to the resubmission guidelines needed under the new regulations. More specifically, the CFPB's resubmission error thresholds and how these thresholds should be calculated. The Bureau also asks for comments on whether or not the thresholds should change according to the size of a submission or the type of data in the submission. The CFPB also would like to know public opinion on what the consequences of exceeding a threshold should be. Other points in the request for information are about how the CFPB reviews lending data, processes that can be carried out by technology, improvements to the data collection process, and any input that will help the Bureau reduce errors in the HMDA data. The request for information is open for 60 days after its publication in the Federal Register. More information about the request for information is available at the Consumer Financial Protection Bureau website.

An ongoing effort to improve the mortgage industry

Richard Cordray is director of the CFPB. He reiterated the importance of the HMDA to protect the public from discriminatory lending practices and provide accurate information about home lending in communities across the country. The purpose of the Bureau is to make regulations and guidelines clear and streamlined for consumers. In addition to protecting the public by establishing and enforcing rules for lenders, the Bureau takes complaints from consumers, promotes mortgage education, studies consumer behavior, monitors the housing and mortgage market for an new risks to borrowers and home buyers, and strives to eliminate any unfair or abusive lending practices.

The Consumer Financial Protection Bureau was established as a result of the housing market collapse. That market collapse resulted in hundreds of thousands of foreclosures and even more properties with title problems. It is essential that all home buyers are aware they can turn to the CFPB with any question or concerns and that they have a personal title insurance policy in addition to the policy required by their lender.

The CFPB Continues Striving For Transparency in Mortgage Market Practices

The Consumer Financial Protection Bureau (CFPB) strives to empower consumers by providing them with the information they need to make prudent decisions about their finances. Part of that mission involves simplifying the industry jargon and legalese associated with contracts and most financial documents. Their primary purpose is to educate consumers about abusive practices. They also

actively supervise the conduct of lending institutions and other financial service companies. The CFPB analyzes market information and consumer data to determine the best policies for protecting consumers. The CFPB has just updated rules for loan disclosure and mortgage market practices.

The Integrated Disclosure Rule Rollout

There were vocal critics of the Integrated Disclosure Rule when details were first released in 2013. Combining the Truth in Lending Act (TILA) with the Real Estate Settlement Practices Act (RESPA), it became known as Integrated Disclosure, or TRID. Despite approximately two years to prepare for the implementation, the rollout was not as smooth as the CFPB had hoped. The rule was delayed by two months because the CFPB felt the lending industry needed more time to prepare. There remains some uncertainty of how to best lock interest rates for borrowers on closings that may be delayed to comply with the integrated disclosure rule. Historically, most rate locks were for 30 days and at not cost to the borrower. To meet with the "Know Before You Owe" requirements, some closings are delayed and require rate locks of 45 and 60 days. For a borrower to lock an interest rate for that term, they may incur hundreds or thousands of dollars in additional fees.

Prior to the integrated disclosures rule, many lenders were accused of bumping up interest rates on home loans just prior to closing and tacking on additional fees like prepayment penalties. TRID prevents any last-minute changes by giving borrowers three days to review all loan documents prior to signing. Consumers can also walk away from transactions without penalty, under some circumstances.

The CFPB has just updated rules about lending practices and understands that TRID is the biggest change the mortgage industry has had in the past 40 years. Full implementation requires updates to existing software and changes in how vendors supply market data interest rate information to banks and other lending institutions. The CFPB is expected to re-evaluate implementation and report on progress of adapting the TRID rule later in 2016.

Updates to the Home Mortgage Disclosure Act

The CFPB has just updated rules regarding the Home Mortgage Disclosure Act (HMDA). The rule was enacted over 40 years ago by Congress in response to the allegation that banks were not properly servicing some communities. The HMDA addresses this concern in three ways:

It shows whether or not lenders are properly serving the housing needs of their community.

Provides information to public officials so they can make informed decisions on policies for the local area.

Reveals any lending patterns that may be considered discriminatory.
The CFPB has just updated rules to the HMDA that should improve lending data for local, regional and national housing markets. Lenders will be required to report property value, loan terms, an prepayment penalties, and the specifics of any introductory interest rates or teasers. Additionally, lenders mus provide more information than they did previously on underwriting policies. The new data requirements will be effective on January 1, 2018. The compiled data, edited to maintain privacy of applicants and borrowers, will be available to the public in 2019.

When individuals apply for a loan, they will be asked to provide their race, ethnicity, sex, and income. This information is used by consumer groups, researchers, and regulators to ensure all people are receiving fair treatment and an equal opportunity to realize the American dream of home ownership.