It seems like there is a regulatory update to the Home Mortgage Disclosure Act every minute! Just last month, the CFPB released updated information about the HMDA data that will be disclosed in 2019. If you're a HMDA reporter, this post is for you. Plus, you'll also get access to a new-and-improved version of our insanely popular Guide to the HMDA Changes! Don't miss it.
Faster than you can blink, the HMDA submission deadline will be here. Are you aware of all of the changes?
In December, the CFPB announced changes to the HMDA data that they will make public. Learn more about those updates and what they might mean for your HMDA monitoring here.
This new regulatory guidance from the Bureau updates the loan-level data from 2018 that will be disclosed in the 2019 public HMDA data release. According to the Bureau, these updates are designed to protect consumer information and privacy.
Some of the more sensitive data, such as property address and credit score, will not be publicly released. Other data will be converted into a range, rather than a specific number. Here are more specific details.
1. This update applies to data collected in or after 2018, and released publicly in or after 2019.
This regulatory guidance applies to loan-level data and is effective immediately, according to the Bureau's statement.
The Bureau used a balancing test to determine what data should be modified before release "to protect applicant and borrower privacy while also fulfilling HMDA’s public disclosure purposes." The regulatory update described here is the result of that balancing test.
2. You don't have to do anything for these changes to go into effect.
The Bureau is responsible for controlling the data that will be publicly released, so there is no action required of you for this change to take effect. These updates will be applied by the CFPB to the 2018 data you will be submitting in March; it shouldn't impact the data you've already collected in 2018 or that you will submit and analyze.
The 2015 Final HMDA Rule shifted the responsibility of disclosing HMDA data publicly from financial institutions to the regulatory agencies. That means that you don't have to worry about providing this data to the public anymore; you just need a disclosure that explains to consumers where they can find it.
3. The Bureau is changing the treatment of some data fields.
In particular, the Bureau will be modifying the following data fields before release:
- "The ratio of the applicant’s or borrower’s total monthly debt to the total monthly income relied on in making the credit decision;
- The number of individual dwelling units related to the property securing the covered loan or, in the case of an application, proposed to secure the covered loan; and
- The number of individual dwelling units related to the property securing the covered loan or, in the case of an application, proposed to secure the covered loan, that are income-restricted pursuant to Federal, State, or local affordable housing programs."
4. The CFPB is also completely excluding some data from public release.
According to their guidance, the following loan-level data fields will be completely exempted from public disclosure:
- "The universal loan identifier (ULI) or non-universal loan identifier (NULI).
- The date the application was received or the date shown on the application form.
- The date of action taken by the financial institution on a covered loan or application.
- The address of the property securing the covered loan or, in the case of an application, proposed to secure the covered loan.
- The credit score or scores relied on in making the credit decision.
- The unique identifier assigned by the Nationwide Mortgage Licensing System and Registry for the mortgage loan originator.
- The result generated by the automated underwriting system used by the financial institution to evaluate the application."
In particular, the exclusion of the credit score data from public release is likely to spark some conversation. Reporters and community groups have expressed a lot of interest in that data, as it is so important to housing decisions. At the same time, financial institutions are likely glad that it is excluded; public release of such sensitive information could cause issues for their customers and their business.
5. Some of the freeform data you provide will also be completed excluded.
The Bureau also states that they intend to exclude the following freeform text fields:
- "Applicant or borrower race;
- Applicant or borrower ethnicity;
- The name and version of the credit scoring model used;
- The principal reason or reasons the financial institution denied the application, if applicable; and
- The automated underwriting system name."
This means that your team's written notes in these sections will be available to the regulators, but not to the public.
6. Other data will be slightly modified to make it less precise.
Another way the CFPB will be modifying the data prior to release it by making it less precise, such as by converting it to a range.
Throughout this portion of the guidance, the Bureau uses the term "bin" or "binning" to refer to the process of clustering a specific number into a range. They also use the terms "top-coding" and "bottom-coding," which means that numbers over or under a certain value are just included in the range above a certain threshold. You'll see these terms in action in the bullet point about "age of applicant or borrower" below.
Here are the data fields that will be adjusted:
- Amount of the loan applied for and/or approved.
- "With respect to the amount of the loan or the amount applied for, the Bureau intends to disclose the midpoint for the $10,000 interval into which the reported value falls. The Bureau also intends to indicate whether the reported value exceeds the applicable dollar amount limitation on the original principal obligation in effect at the time of application or origination, as provided under 12 U.S.C. 1717(b)(2) and 12 U.S.C. 1454(a)(2)."
- Age of the applicant or borrower.
- "With respect to the age of an applicant or borrower, the Bureau intends to bin reported values into the following ranges: 25 to 34; 35 to 44; 45 to 54; 55 to 64; and 65 to 74; bottom-code reported values under 25; top-code reported values over 74; and indicate whether the reported value is 62 or higher."
- Applicant or borrower's debt-to-income ratio.
- "With respect to the ratio of the applicant’s or borrower’s total monthly debt to the total monthly income relied on in making the creditdecision, the Bureau intends to disclose without modification reported values greater than or equal to 36 percent and less than 50 percent. The Bureau also intends to bin reported values into the following ranges: 20 percent to less than 30 percent; 30 percent to less than 36 percent; and 50 percent to less than 60 percent; bottom-code reported values under 20 percent; and top-code reported values of 60 percent or higher."
- Property value.
- "With respect to the value of the property securing the covered loan or, in the case of an application, proposed to secure the covered loan, the Bureau intends to disclose the midpoint for the $10,000 interval into which the reported value falls."
- Number of individual dwelling units in the property.
- "With respect to the number of individual dwelling units related to the property securing the covered loan or, in the case of an application, proposed to secure the covered loan, the Bureau intends to bin reported values into the following ranges: 5 to 24; 25 to 49; 50 to 99; 100 to 149; and 150 and over."
- Number of income-restricted dwelling units in the property.
- "With respect to the number of individual dwelling units related to the property securing the covered loan or, in the case of an application, proposed to secure the covered loan, that are income-restricted pursuant to Federal, State, or local affordable housing programs, the Bureau intends to disclose reported values as a percentage, rounded to the nearest whole number, of the value reported for the total number of individual dwelling units related to the property securing the covered loan.
Despite all of these efforts to ensure consumer privacy, there remain serious concerns among industry experts that the release of such data may jeopardize consumer privacy.
In particular, the risks noted were "predatory" marketing, social engineering attacks on consumers, undermine fraud detection, enable financial fraud, identification of primary and secondary homes for the purposes of invasion or theft, target vulnerable consumers, and identity theft. The modifications above are in response to those concerns, although the Bureau did say that "none of the general comments it received provide a sufficient basis to make changes to the proposed policy guidance."
7. The data that is publicly disclosed will continue to change.
The CFPB has made it clear that they intend to keep discussing and finalizing the data that will be publicly available. At the start of the policy guidance, they note that they intend to open formal rule-making conversations in May 2019 to determine more definitive modifications or adjustments to the publicly released HMDA data and incorporate them into a legislative rule. They later note that Keep an eye out for more updates in the months to come.
TRUPOINT Viewpoint: To make sure you're up-to-date, you might want to get our free Guide to HMDA Changes. This free 50+ page info kit outlines the requirements of the HMDA rule, key changes, links to free resources and regulatory guidance, best practices, and much more. We have recently changed the formatting to include a table of contents and a few other features. Even if you've requested it before, consider getting the new version here:
Remember that TRUPOINT helps hundreds of financial institutions nationwide analyze HMDA data for compliance risk, and even provides HMDA transmittal! If you're interested in learning more, send a note to firstname.lastname@example.org and we will be in touch within one business day.