CFPB Finalizes New HMDA Reporting Requirements

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WASHINGTON — The Consumer Financial Protection Bureau finalized a rule Thursday that requires lenders to collect more information from borrowers as part of mortgage disclosures.

The new rule, which takes effect in 2018, would add datasets to the information lenders report to regulators under the Home Mortgage Disclosure Act. The 1975 law is a key tool policymakers use to assess the mortgage market, including whether lenders are discriminating against borrowers.

"The Home Mortgage Disclosure Act helps financial regulators, the public, housing officials, and even the industry itself keep a watchful eye on emerging trends and problem areas in the nation's mortgage market — the largest consumer financial market in the world," said CFPB Director Richard Cordray, in a press release. "With today's final rule we are shedding more light to foster better understanding of the market, and also ensuring that lenders have sufficient time to come into compliance."

The final rule requires lenders to report specifics on the property value, loan terms, the applicant's debt-to-income ratio, discount points charged on the loan and the duration of any teaser interest rates. It also requires lenders to provide information on other loans tied to a home, such as reverse mortgages and open-end lines of credit.

"This information will enhance the ability to screen for possible fair lending problems, helping both institutions and regulators focus their attention on the riskiest areas where fair lending problems are most likely to exist," the CFPB said in a press release. "This information will also help the bureau and other stakeholders monitor developments in specific markets such as multifamily housing, affordable housing, and manufactured housing."

At the same time, the agency also reduced the number of lenders who are required to report HMDA data. The final rule adds standardized reporting threshold so small lenders with low loan volumes are exempted. The agency estimates that this new threshold will reduce the number of lenders who have been required to report HMDA data by 22%.

"For small lenders with few staff members, this change could make a significant impact in easing compliance costs," the CFPB said. "However, because those lenders receive a low volume of applications and originate a low volume of mortgage loans, the change will not compromise the usefulness of the dataset."

The rule also retains an existing exemption for small depository institutions located outside of a metropolitan statistical area.

Additionally, the CFPB said it aligned its rule with similar standards and definitions that the industry already uses when gathering home loan data in order to reduce overlap in the reporting. It added that it has finished the pilot for a web-based tool that is meant to make the HMDA collection process more efficient.

"Industry stakeholders have tested the pilot and the feedback has been very positive — the new tool is simple and easy to use," the CFPB said. "Implementing this technology will reduce manual and paper-based systems currently used by regulators and reporting financial institutions. These changes will ultimately reduce associated compliance costs."

The CFPB kept most of the amendments it first proposed in July 2014. However, it did scrap a plan to require several data points, such as reporting on all dwelling-secured transactions meant for commercial purposes. That may relieve some in the industry who argued that HMDA was meant for assessing the mortgage market, not commercial loans.

The CFPB said "most" of the changes in the final rule will take effect Jan. 1, 2018. Lenders would collect the new data in 2018 which would then be reported by March 1, 2019.

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