San Francisco – October 19, 2015 – (RealEstateRama) — In response to the Consumer Financial Protection Bureau’s new Home Mortgage Disclosure Act (HMDA) rules announced earlier yesterday, Kevin Stein, associate director at the California Reinvestment Coalition released this statement:
“Our coalition members have been pushing for improvements to the Home Mortgage Disclosure Act (HMDA) since 2010, and we applaud the CFPB for the many smart, practical improvements to HMDA. While we appreciate the CFPB’s use of a balancing test to decide what reported data will later be made public, we are concerned about “consumer privacy” being used as a red herring to keep some of this important data from the public. We urge the CFPB to build on the success it has achieved with its transparent consumer complaintdatabase and to similarly make as much HMDA data publicly available as possible, while also respecting consumer’s privacy. Maximum transparency fulfills the goals of HMDA, which is to identify lending trends, to help jurisdictions determine how to best focus their investments, and to help understand if banks are helping to meet community credit needs.
We are glad to see these specific improvements in HMDA:
1) Improved Race and Ethnicity reporting: The new rules will now allow for consumers to self-report their race and ethnicity, which will allow for more accurate reporting and better analysis. As an example, the current “Asian” category is overly broad and therefore fails to capture the wide diversity of experiences of Asian American and Pacific Islander borrowers.
2) Better data on affordable housing: For loans on multi-family units, the new rules require reporting on whether any of the units in the multi-family dwelling will be income-restricted under affordable housing programs. This will allow for better analysis and understanding about the extent to which banks are meeting their obligations under the Community Reinvestment Act.
3) Age of borrowers and Reverse Mortgages: Lenders will now report on whether a mortgage is a reverse mortgage, as well as the age of the applicant or borrower. This will allow for better monitoring of senior’s housing and financial needs, especially important given the surge in baby boomers hitting retirement age.
4) Reporting by Non-Bank Lenders: Non-depository institutions who meet a certain threshold of loans will now be required to report HMDA data. As the Bureau notes, advocates have raised concerns for years about the role non-banks played in fueling the mortgage meltdown. These concerns were corroborated by GAO research and by the Financial Crisis Inquiry Commission, which found that harmful loans made by non-depository institutions played a direct and damaging role in fueling the mortgage meltdown. This is a strong step forward for transparency, creating an even playing field between lenders, and addressing fair lending, fair housing, and possible predatory lending practices.
5) Loan Denial data: The enhancements in HMDA data reporting around loan denial reasons will help further the goal of HMDA to see if communities are able to access credit, and will better help identify fair lending problems.
We are still reviewing the final rules, but we are disappointed to see the CFPB did not require HMDA data reporting on loan modifications. However, we appreciate the agency noting that it may take this issue up in the future, something we strongly support. Research by the GAO in 2014 confirmed what we’ve heard from California housing counselors throughout the mortgage meltdown- that communities of color have worse outcomes when seeking a loan modification.
The City and County of San Francisco and Bank of America have already demonstrated that banks have the capacity to report on the race and ethnicity for people seeking loan modifications. Given the disproportionate damage caused to communities of color by the foreclosure crisis, we urge the CFPB to consider implementing loan modification reporting into HMDA as soon as possible.”
Additional background: In October 2014, CRC, along with 40 other California nonprofit organizations, wrote to the CFPB, weighing in on its draft proposed HMDA rule. You can see the seven primary recommendations here.