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The Future of HMDA Data: Implications for Understanding Discrimination

This article discusses the Home Mortgage Disclosure Act (HMDA) and its implications for understanding discrimination in mortgage lending. It explores the current fields included in HMDA data, limitations of the current system, and potential new fields that could provide better pricing information, sustainability factors, creditworthiness indicators, and other relevant data. The article also provides an overview of the CFPB rulemaking process and the tensions surrounding privacy and policy/research insights.

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The Future of HMDA Data: Implications for Understanding Discrimination

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  1. The Future of HMDA Data:Implications for Understanding Discrimination Kathy Pettit, The Urban Institute Urban Affairs Association Conference March 20, 2014

  2. Home Mortgage Disclosure Act Legislation Enacted by Congress in 1975, the Act requires certain banks and other mortgage lending institutions to report information about mortgage applications to the public.

  3. Stated Purposes of HMDA Data • To assist in: • Determining whether financial institutions are successfully meeting their communities’ housing credit needs • Targeting community development funds in ways that attract private investment to areas most in need • Identifying potentially discriminatory lending patterns

  4. HMDA: The Basics • Released annually in September • 7,400 U.S. financial institutions in 2012 • 18.5 million mortgage transactions • 15.3 million home loan applications • 3.2 million loan purchases • 477,000 requests for preapprovals

  5. Current Fields • Applicant(s) characteristics: race/ethnicity, income, gender • Property characteristics: census tract, housing structure type • Application outcome and reasons for denial • Loan characteristics: occupancy, lender, purpose, interest rate spread, pre-approval

  6. New Access Tools: http://www.consumerfinance.gov/hmda/

  7. HMDA Limitations • Addressed by proposed fields • Difficult to control for creditworthiness • Difficult to understand the channel • Incomplete data on home equity loans • Addressed by new tools • Difficult for the public to use published data • Not Addressed • No performance data • Lag in reporting • No rural data

  8. Potential New Fields: Better Pricing Information • Points and fees* • Rate spreads for all loans* • Interest rate • Total origination charges • Total discount points • Risk-adjusted, pre-discounted interest rate * indicates required by Dodd-Frank

  9. Potential New Fields: Sustainability • Risky loan features* • Teaser rates, prepayment penalties, and non-amortizing features • Combined loan-to-value ratio • Qualified Mortgage status of loan

  10. Potential New Fields: Creditworthiness • Borrower credit score • Automatic underwriting systems results • Mandatory reporting of denial reasons

  11. Potential New Fields: Other • Borrower Age • Loan and Loan Officer Identifier • Broker channel • Income-restricted units under subsidy programs • Manufactured housing loan specifics • Property value • Parcel ID

  12. An overview of the CFPB rulemaking process The Bureau will issue a proposed rule to modify Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). Released in 2014 The Bureau will consider and address public comments and issue a final rule. 2015 Once the rule is effective, data collection / reporting will commence. Industry will build, buy or refine data collection systems to comply with the final rule. The Regulatory Flexibility Act, as amended by the Small Business Regulatory Enforcement Fairness Act (SBREFA) and the Dodd-Frank Act, requires the Bureau to convene a Small Business Review Panel before proposing a rule that would have a significant economic impact on a substantial number of small entities. The CFPB makes the SBREFA documents public. Started February 2014 Source: CFPB

  13. Tensions • Privacy v. Policy/Research Insights • All fields available in a restricted use file. • Limited fields in a possible public loan-level file. • Possible tabulations through online query system. • Reporting Burden v. Policy/Research Insights • Which new fields to fight hardest for?

  14. The Future of HMDA Data:Implications for Understanding Discrimination Kathy Pettit, The Urban Institute kpettit@urban.org

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