By Lindsay Daniels, Manager, Wealth-Building Initiative, NCLR
Last month the Consumer Financial Protection Bureau (CFPB) released updates to the Home Mortgage Disclosure Act (HMDA). HMDA was established in 1975 and has been in need of modernization for some time. In a new rule, the CFPB provided several commendable wins for consumers and the pursuit of greater transparency in the housing market.
HMDA was created to shed light on whether lenders were meeting the housing needs of the community, to guide public investment, and to detect patterns of discrimination. The data we glean from HMDA has been essential in discovering who is buying homes by race, ethnicity, and loan price. This critically important national data has been used by scholars, advocates, local governments, and lenders to highlight positive and negative lending activity. And yet, many gaps in mortgage data remain. Through this new rule, the CFPB has sharpened HMDA’s focus by adding new fields to the collection tool.
The new rule distinguishes race and ethnicity more specifically than it previously had. Rather than recording borrowers as Latinos, for example, home purchasers can indicate whether they identify as Mexican or Cuban, or can fill in their nationality in a blank field. Several other important changes include greater detail on loan purpose and type, and whether or not the loan includes teaser rates or balloon payments, more information about underwriting—the process of assessing the credit and risk of a potential client—and details on reverse mortgage activity. Each of these has been a trouble area in the market, leading to abuses throughout the housing market and deeply affecting Latino families in particular.
The CFPB added these new data collection fields to ensure discriminatory patterns do not go unchecked, lenders can better serve their clients, and to ultimately see trouble on the horizon before it reaches a crisis level. These improvements are essential to advancing the CFPB’s mission to better inform lenders and consumers alike. Rather than opaque or proprietary information about market trends, the CFPB is attempting to raise the curtain and ensure that knowledge can be power for all.