Garnet Capital Advisors Blog

The Consumer Financial Protection Bureau has released the final list of what pieces of information banks must report to the government about home mortgages. Loan industry groups say the costs of the regulations may still outweigh any good done by widening the net of data.

From nine data points to 48
The new rule, which runs to a whopping 800 pages, specifies new items banks must file under the Home Mortgage Disclosure Act. Before the reform, banks had to provide nine fields of information about loans they originated. The data is made public each year, providing a trove of information both for regulators, the industry and anyone interested in the mortgage market. The new regulations require 25 new data points and make changes to 14 others, according to American Banker.

Banks and financial institutions still have time to digest the new requirements. The government won't require collection of the new data points to begin until 2018. And actual reporting of that data won't take place until 2019.

'Significant reporting burdens'
Even so, trade groups like the National Association of Federal Credit Unions see a considerable burden coming.

"While NAFCU and our members support HMDA requirements that further the goal of ensuring fair lending and anti-discriminatory practices," said the association's director of regulatory affairs, Alicia Nealon, "we are concerned that some of the additional reporting requirements will not achieve these goals and may only serve to impose significant additional compliance and reporting burdens on responsible lenders like credit unions who work to meet their members' needs with safe, sound and fair products."

The American Bankers Association praised the long timetable for implementation but still expressed concerns.

"We appreciate the time and attention the Bureau has applied in considering industry comments to prepare the final HMDA rule," said Frank Keating, president and CEO of the ABA. "We are pleased that the Bureau has extended the compliance date and excluded the collection of data on most commercial transactions, as ABA advocated."

A statement from Keating indicated he was still worried about customer data security and the "significant" increase in required data.

Low-volume originators exempted from new rule
The final rule exempts financial institutions that have low loan volume and, presumably, lack the staff to handle the new requirements. Small banks outside Metropolitan Statistical Areas also get a pass from collecting the new data points. Overall, 22 percent fewer institutions will be forced to file HMDA data.

Not surprisingly, the CFPB defended the balance struck with the new rule.

"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," Bureau Director Richard Cordray said 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."

More disclosures about fees and terms
A summary of the 800-page rule prepared by the bureau lists 48 total data points that will be required. New ones include:

• Property address (before, only location by state, county and Census tract was required.)
• Applicant's age.
• Credit score of applicant.
• Applicant's debt-to-income ratio.
• Whether loan is for a business or commercial purpose.

Several of the new pieces of data concern disclosing fees and terms of the loan. Attorney Colgate Selden of Alston & Bird had this to say about the changes.

"The final rule requires lenders to disclose the pricing of a home loan down to a level they've never had to disclose before which can be very revealing," Selden said. "The pricing details will paint a full picture for regulators when looking for discrimination at institutions and it could affect pricing competition."

A finer tool to detect bias?
Ferreting out bias in loan markets has become a key aim of the CFPB. In recent months it has gone after several car loan companies, making settlements with them to force changes to processes deemed to have resulted in people of color paying more for loans than whites.

Loan sale advisory firm Garnet Capital Advisors is continually monitoring the loan market, including evolving regulatory standards that may make an impact on loan portfolio sale decisions.