Laurie Goodman, Wei Li, Carlos Martín, Jim Parrott, Kathy Pettit, and Peter Tatian contributed to this post.
In 2010, Congress directed the new Consumer Financial Protection Bureau (CFPB) to collect more and better mortgage application and origination data. In July, the CFPB released its comprehensive proposal to improve mortgage data collection. We like six things in particular about the CFPB’s proposal.
Whatever your theory about why the last decade’s mortgage crisis happened, or even when it started, the underlying facts come from Home Mortgage Disclosure Act (HMDA) data. HMDA is a powerful statute: it requires mortgage lenders to publish a good deal of information about the applications they get, and the loans they make and buy. HMDA enlists the public--researchers, media, advocates, local officials, community residents, and others--in making national and local policy for the $10 trillion mortgage market. HMDA data also enable regulators to set standards and benchmarks and evaluate the performance of lenders and the market.
But comprehensive as HMDA data are, critical information is missing. When Congress passed the Dodd Frank Act in 2010, it tasked the CFPB with fixing this problem. Congress specified some new fields and authorized the CFPB to add others—a good thing because even in the four years since Dodd Frank passed, the mortgage market has continued to change.
In July, the CFPB released its comprehensive proposal to implement the Dodd Frank changes, as well as to make the entire HMDA process more efficient. While the CFPB’s proposal only covers data available to regulators, not to the public, it's a critical first step to enhancing public understanding of the market. HMDA is essential to our work as researchers and, in general, we like what the CFPB has done. Today, a group of Urban Institute researchers are publishing a draft comment letter that we will submit to the CFPB shortly.
Here's what we like most about the CFPB’s proposal:
- It is thoughtful and comprehensive. The CFPB has thoughtfully and comprehensively integrated the new information required by Dodd Frank, including credit score, age, application channel, and total points and fees. The proposal includes the level of detail for these fields needed to make them useful, such as the credit score model used and a breakdown of points and fees.
- It requires unique loan identifiers. By implementing the Dodd Frank requirement for unique identifiers, especially a unique loan identifier, it will be possible to follow a mortgage as it is bought and sold and to better understand the market players.
- It collects more information about property use. We learned during the housing crisis that just knowing whether a property is “owner occupied” or not doesn't tell us nearly enough about how a mortgage is likely to perform.
- It collects more information about rentals, manufactured housing, reverse mortgages and HELOCs. The proposal includes additional information about rental properties (including the number of units in the property securing the loan) and manufactured housing. Both rental housing and manufactured housing are increasingly important parts of our housing stock, especially for lower income families. Similarly, more information is required about reverse mortgages and home equity lines of credit, both important to an aging American population.
- It flags QM. The proposal requires lenders to “flag” whether a loan is a qualified mortgage (QM) under the CFPB’s regulations, and to explain why. This is especially important for understanding the impact of the QM rule, which has the potential to reshape the mortgage market.
- It keeps public disclosure the same for now. The proposal leaves in place the set of data currently released to the public, enabling the public, including state and local officials, continued access to current HMDA data while the CFPB engages in separate rulemaking to determine how best to balance HMDA’s disclosure imperative with legitimate privacy concerns.
As described in our comments, we don't think the CFPB has gotten everything right, and we provide suggestions for improvement. We also recognize that reporting HMDA data is a complex process and appreciate both the CFPB’s efforts to make the process easier for lenders and that change inevitably is challenging to HMDA reporters.
But we're now four years past Dodd Frank. The housing market still has not fully recovered, and many communities continue to struggle. Mortgage credit remains extremely tight. It's time to move ahead with HMDA changes to provide greater understanding of what is going on, an important step toward getting all communities in this country firmly back on track.
We urge the CFPB to move forward as quickly as possible to complete this rulemaking. And then to get on with the process of determining how much data, in what form, will be available to the public. Enlisting the public in public policy is the heart and soul of HMDA. Urban researchers are eager to help.