CFPB Proposes Rule to Improve Information About Access to Credit in the Mortgage Market

Bureau Aims to Simplify the Reporting Process for Financial Institutions

WASHINGTON, D.C. — Today, the Consumer Financial Protection Bureau (CFPB) proposed a rule to improve information reported about the residential mortgage market. The rule would shed more light on consumers’ access to mortgage credit by updating the reporting requirements of the Home Mortgage Disclosure Act (HMDA) regulations. The Bureau also aims to simplify the reporting process for financial institutions.

“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. “The Home Mortgage Disclosure Act helps financial regulators and public officials keep a watchful eye on emerging trends and problem areas in the mortgage market. Today’s proposal would help us understand better how to protect consumers’ access to mortgage credit while simplifying the reporting requirements for financial institutions.”

HMDA, which was originally enacted in 1975, requires many lenders to report information about the home loans for which they receive applications or that they originate or purchase. The public and regulators can use the information to monitor whether financial institutions are serving the housing needs of their communities and identify possible discriminatory lending patterns.

Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) in 2010 in response to the mortgage market crisis. The Dodd-Frank Act directed the CFPB to expand the HMDA dataset to include additional information about loans that would be helpful to better understand these aspects of the mortgage market.

In 2012, 7,400 financial institutions reported information about approximately 18.7 million mortgage applications and loans. While the HMDA dataset is the leading source of information about the mortgage market, it has not kept pace with the market’s evolution. For example, the HMDA data do not provide adequate information about certain loan features that helped contribute to the mortgage crisis, such as adjustable-rate mortgages and non-amortizing loans.

Today’s announcement is part of the Bureau’s public rulemaking process to improve HMDA that began in February when the CFPB convened a panel of small businesses to provide feedback on possible changes to the regulations. The Bureau is proposing to improve the quality and type of HMDA data as required by the Dodd-Frank Act. The Bureau is also looking at ways to make submission of data easier for lenders and to improve the user experience in accessing the public data.

Better Information About the Mortgage Market

To provide better information about residential mortgage credit, the Bureau is proposing changes to the rules that establish what data financial institutions are required to provide. The Bureau wants to improve the quality of HMDA data in today’s housing market. The proposed changes include:

  • Improving market information: In the Dodd-Frank Act, Congress directed the Bureau to update HMDA regulations by having lenders report specific new information that could help identify potential discriminatory lending practices and other issues in the marketplace. This new information includes, for example: the property value; term of the loan; total points and fees; the duration of any teaser or introductory interest rates; and the applicant’s or borrower’s age and credit score.
  • Monitoring access to credit: The Bureau is proposing that financial institutions provide more information about underwriting and pricing, such as an applicant’s debt-to-income ratio, the interest rate of the loan, and the total discount points charged for the loan. This information would help regulators determine how the Ability-to-Repay rule is impacting the market, and would also help the Bureau monitor developments in specific markets such as multi-family housing, affordable housing, and manufactured housing. The proposed rule would also require that covered lenders report, with some exceptions, all loans related to dwellings, including reverse mortgages and open-end lines of credit.

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