Compliance Blog

Written by David Park, Regulatory Compliance Counsel, NAFCU

Last week, it was reported that recently confirmed Director Kraninger was going to halt efforts to rebrand the CFPB into the Bureau of Consumer Financial Protection (Bureau) except for official reports, legal filings and other items specific to the office of the Director of the Bureau. In other news, the Bureau issued final policy guidance related to the disclosure of loan-level HMDA data. So at least we received a little clarity before the holidays.

Section 1003.5(c) of Regulation C currently requires that a credit union make available a written notice advising that the credit union’s loan/application register, as modified by the Bureau to address privacy concerns, may be obtained from the Bureau’s website. The 2015 HMDA Rule set forth the balancing test that the Bureau intended to use “to determine whether and how HMDA data should be modified prior to its disclosure to the public in order to protect applicant and borrower privacy while also fulfilling HMDA's public disclosure purposes.”  See, 80 Fed. Reg. 66127, 66133. The final rule clarified that borrower privacy interests arise if the disclosure of unmodified HMDA loan-level data “would either substantially facilitate the identification of an applicant or borrower or disclose information about an applicant or borrower that is not otherwise public and that may be harmful or sensitive.” See, 80 Fed. Reg. 66127, 66134.

Using this balancing test, the Bureau determined that some data should be excluded to protect borrower privacy while other data should be modified. The final policy guidance issued last week described which loan-level HMDA data would be disclosed without modification and which loan-level HMDA data would be completely excluded.  The final policy guidance also addressed which loan-level HMDA data would be modified before being disclosed to protect against privacy concerns.

Under the guidance, the following loan-level data would be completely excluded:

• The universal loan identifier.
• The application date.
• The date of action taken on a covered loan or application.
• The address of the property that was to serve as collateral for the loan.
• The credit scores relied on in making the credit decision.
• The Nationwide Mortgage Licensing System and Registry identifier for the mortgage loan originator.
• The result obtained from the automated underwriting system used to evaluate the loan application.
• Free-form text fields used to report data on the applicant’s race or ethnicity; the name and version of the credit scoring model used to generate credit scores relied on in making the credit decision; the principal reason for the denial of an application; and the name of the automated underwriting system used by the financial institution.

And the following loan-level data would be modified before being disclosed by the Bureau:

• Amount of the covered loan. The Bureau will disclose the midpoint for the $10,000 interval into which the reported value falls and indicate whether the reported value exceeds the applicable dollar limitation on the obligations that can be sold to Fannie Mae or Freddie Mac. The example from the guidance is “for a reported value of $117,834, disclose $115,000 as the midpoint between values equal to $110,000 and less than $120,000[.]”
• Value of the property serving as collateral. The Bureau will disclose the midpoint for the $10,000 interval into which the reported value falls.
• Age of the applicant. The Bureau will disclose age by binning the values into these ranges:
  • 25 to 34.
  • 35 to 44.
  • 45 to 54.
  • 55 to 64.
  • 65 to 74.
  • All values under 25 are binned into an under 25 category.
  • All values over 74 are binned into an over 74 category.
  • Indicate whether reported age is 62 or higher.
• Debt-To-Income ratio (DTI). The Bureau will disclose DTI with or without modification depending on the DTI:
  • If DTI is greater than or equal to 36% and less than 50%, then DTI is disclosed without modification.
  • Otherwise, DTI will be binned into the ranges below:
    • All values 60% or higher are binned into a 60% or higher category.
    • All values under 20% are binned into an under 20% category.
    • 50% to less than 60%.
    • 30% to less than 36%.
    • 20% to less than 30%.
• Total number of individual dwelling units related to the property securing the covered loan and for properties that include multifamily dwellings, the number of affordable units related to the property. The Bureau had initially proposed to disclose this data as reported, but it will report this data by binning the total number of dwelling units into the ranges below and disclosing affordable units as a percentage of the value reported for total units rounded to the nearest whole number:
  • 5 to 24.
  • 25 to 49.
  • 50 to 99.
  • 100 to 149.
  • 150 and over.

All other loan-level HMDA data not specifically identified in the final policy guidance will be publicly disclosed by the Bureau as reported. The final policy guidance applies to data collected in 2018 and on. But it is worthy to note here that the Bureau intends to commence a rulemaking this spring to identify modifications to loan-level HMDA data that are appropriate under the balancing test. So there will be more to follow on this in the future.