Lenders Fear CFPB Disclosure Plan Goes Too Far
The Consumer Financial Protection Bureau's proposal to require more data from lenders through the Home Mortgage Disclosure Act has already sharply divided industry and consumer groups.
The plan would significantly expand HMDA requirements, including requiring lenders to disclose the age and credit score of homebuyers, the property value and interest rate details. Currently, publicly released data is primarily broken down by geography, race, gender and whether the applicant was approved.
Although the proposal released Thursday was required by the Dodd-Frank Act and has long been anticipated, those in the lending industry said they were taken aback by the amount of information the CFPB is seeking, arguing it goes far beyond the regulatory reform law.
"Our issue was that the bureau should stick to what’s required in the statute and not require additional data fields for the sole purpose of collecting more data," said Ron Haynie, executive vice president of mortgage services at the Independent Community Bankers of America. "It's not like all of this data is housed in one spot and not every bank has an automated system. We’re talking about big changes here."
But consumer groups immediately praised the proposal, saying it would disclose more data on products that spurred the financial crisis, including adjustable-rate mortgages.
"There were a lot of tricks and traps of new mortgage products during the financial crisis that" were not included in HMDA, said Ken Edwards, policy counsel for the Center for Responsible Lending. "Having real-time assessments on points and fees, high debt-to-income ratios and teaser rates would have definitely given examiners a snapshot of predatory trends in the market. The fact that we have it now on top of the new mortgage rules is critical."
The agency's proposal, which includes some data streamlining, would require lenders to disclose pricing and more information about the underwriting of a loan, including an applicant’s debt-to-income ratio and the total discount points charged. The plan would also require lenders to report other forms of financing for residential dwellings such as reverse mortgages and open-end lines of credit.
This data would help the agency determine the impact of its so-called qualified mortgage rule that was implemented in January, the agency said. The rule requires loans to meet certain underwriting criteria in return for greater legal protections.
The CFPB said the added information is necessary to get a more complete view of the mortgage market.
"It is critical that we shed more light on the mortgage market—the largest consumer financial market in the world," said CFPB Director Richard Cordray in a press release. "Today's proposal would help us understand better how to protect consumers' access to mortgage credit while simplifying the reporting requirements for financial institutions."
Still, the industry is questioning how much more data the CFPB needs, what it would do with all the information and whether it creates greater privacy risks.
"The CFPB's proposal will substantially increase the amount of publicly available information financial institutions must report on home mortgages," said Steve Zeisel, general counsel for the Consumer Bankers Association, in a written statement following the CFPB’s release. "CBA will provide comments on the proposal, to ensure any consumer privacy concerns and increased compliance costs do not outweigh the benefits of additional data reporting."
The CFPB said in its release that it was "looking at ways to improve how the public can securely use HMDA data modified to protect applicant and borrower privacy." It was also looking at how to streamline and ease the burden on lenders required to do additional reporting. For example, the CFPB is considering excluding small banks from having to report HMDA data if they make fewer than 25 mortgages a year.
The agency is also looking at allowing lenders that are already reporting similar data to the secondary market to apply the same definitions to data in the HMDA system.
However, Haynie said the proposal "goes way beyond what the intent of HMDA," especially considering the CFPB is already forming a mortgage database with the Federal Housing Finance Agency, which has data on loans owned by the government-sponsored enterprises.
"And there's a lot of lenders who don’t sell loans to the secondary market so they could now have to report a huge level of data," he said. "It just seems like increased costs and yet another reason why some banks will decide to get out of mortgage business."