Bank Solutions Group

Experts in the Business of Banking


BSG Blog

Addressing Upcoming Changes in HMDA Directed by the Dodd Frank Act – Part 2

15 March 2015

A two part series

Part Two: Being proactive is the Way to go!

In part one of this series, we discussed a brief history of HMDA. The goal of this regulation has always been to collect comprehensive information about the lending practices of financial institutions. We also noted that changes in the regulation have been directly related to changes in the mortgage industry.

The Dodd Frank Act is yet another example of how occurrences in the banking industry have affected regulation. The official statement of CFPB director Rich Cordray describes how the Dodd Frank Act has been impacted by the most recent financial meltdown.

When Congress enacted the Dodd-Frank Act in 2010, it specifically tasked us, the Consumer Financial Protection Bureau, with getting better information from mortgage lenders. Congress directed us to improve HMDA reporting because, just as Louis Brandeis, America’s original consumer advocate and later a distinguished Supreme Court Justice, observed, “Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.”

With that thought in mind, the Dodd Frank Act added several specific new requirements to HMDA. These new requirements include the following:

  • The total points and fees
  • the term of the loan
  • the length of any teaser interest rates
  • the borrower’s age
  • the borrower’s credit score and credit score. This new data may be made available to the public, consistent with the privacy interests of borrowers and applicants
  • The Proactive Approach

As we mentioned in part one of this series, the above list of changes to HMDA are already known because they are written into the Dodd Frank Act. We suggested that for these changes, your bank could immediately start collecting this additional information, taking comfort in knowing that these will eventually be required.

In addition to these Dodd Frank mandated changes, the changes CFPB has been empowered to look at additional ways that HMDA can be changed to require data collection that can help with analysis of the mortgage industry. The February statement makes it clear that the CFPB is taking this duty seriously and is considering a number of additional changes.

“So we are considering other types of information that would give regulators a better view of developments in all segments of the housing marketplace. We are considering asking financial institutions to include more underwriting and pricing information, such as an applicant’s debt-to-income ratio, the interest rate, the total origination charges, and the total discount points of the loan. This will help regulators spot troublesome trends in mortgage markets around the country.”

The following is a list of changes being considered by the CFPB and their explanation: