Proposal to limit mortgage data collection would not help rural, vulnerable areas
Researchers and policymakers can track important trends in US mortgage lending thanks to a powerful data source: the Home Mortgage Disclosure Act (HMDA). Starting this year, additional data fields are due to be collected, revealing information that can help policymakers improve access to mortgages and avoid another housing crisis.
But proposed legislation gaining momentum in Congress (the Home Mortgage Disclosure Adjustment Act in the House and the Economic Growth, Regulatory Relief, and Consumer Protection Act in the Senate) would curtail the collection of these new data. Urban Institute analysis shows that the lack of data would primarily affect vulnerable rural areas and low- and moderate-income communities, particularly in the Midwest.
What would we learn from these new data?
Responding to the difficulty regulators had in understanding the mortgage market before the financial crisis, Congress specified in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act that additional data be collected.
Through 2017, HDMA data included the amount of the loan, its purpose (i.e., purchase, refinance, or home improvement), whether it is conventional or government backed, the census tract where it is located, whether it is high cost, and information about the borrower’s income, gender, and race or ethnicity.
As of 2018, new data is due to be collected on loan maturity, teaser rates, points and fees, prepayment penalties, the value of the property securing the loan, and the origination channel, as well as borrower credit score, debt-to-income ratio, and loan-to-value ratio.
These additional data will make it easier to track the progress of the Community Reinvestment Act goals and the government-sponsored enterprises’ new Duty to Serve mandate—two programs that attempt to ensure the housing market adequately serves vulnerable communities. These additional data will also make it easier to spot another risk-layering mortgage bubble, if one starts to build.
Proposed legislation would curtail information on smaller, rural loans
We determined in a recent analysis that if the proposed legislation takes effect, 72 percent of the 5,704 institutions that were expected to report data in 2017 would not report the new explanatory data in 2018 and beyond. And although these institutions originate only 7 percent of the loans by loan count and 5 percent by balance, they originate 22 percent of loans up to $70,000, 13 percent of rural loans, and 16 percent of manufactured housing loans.
The geographic concentration of the areas served by lenders who would provide less information is striking. The map below shows that information would be lost for a relatively small share of loans in the eastern and western parts of the country (other than Maine and western Massachusetts), but the Midwest would be heavily affected.
We would lose new data about 21 percent of West Virginia loans and information on 14 to 18 percent of loans in Arkansas, Iowa, Kansas, Louisiana, Nebraska, South Dakota, and Wisconsin. And some of the hardest-hit metropolitan statistical areas could lose data on more than a third of their loans, including Carbondale, IL (45 percent); Wichita Falls, TX (43 percent); Grand Island, NE (42 percent); Cumberland, MD-WV (41 percent); Danville, IL (40 percent); Sioux City, IA-NE-SD (37 percent); Cleveland, TN (33 percent); Pittsfield, MA (33 percent); Valdosta, GA (33 percent); and Cape Giradeau-Jackson, MO-IL (33 percent).
Puerto Rico would also be affected. Data for 22 percent of loans originated in Puerto Rico would be lost if the legislation were enacted. Considering that damage from Hurricane Maria, which hit the island in September 2017, continues to wreak havoc on the island’s infrastructure, this finding is concerning. Not having access to detailed information on new lending will make it more difficult to track the recovery and assess the need for additional policy actions.
We need better information to craft effective housing policies
Although the proposed changes in the reporting rules appear to cut out information about a relatively small portion of the market, the impact on certain market segments could be significant. As we continue to push for evidence-driven policymaking, the proposed measure only puts us further behind as we attempt to understand and tackle the financing issues underserved communities face.
Photo by Katrina Wittkamp/Getty Images.