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Under the new HMDA rules, CFPB is requiring lenders to gather and report additional information on borrower age and ethnicity, along with loan and fee information. In line with these changes, Fannie and Freddie created a new improved Uniform Residential Loan Application (URLA) which will assist lenders in obtaining this information. (More Data)
Under the new rules, a lender must report when they obtained an applicant’s information about their ethnicity, race, and age by either visual observation or use of their surname. Further, the new rules will provide an applicant with the options to provide this information in more detail by indicating their ethnicity and race using what is called disaggregated sub-categories.
As an example, on the current URLA, an applicant may indicate under ‘Ethnicity’ if they are, or are not, Hispanic or Latino. On the new URLA, they may indicate, when Hispanic or Latino, if they are of Mexican, Puerto Rican or Cuban descent. Or, if “Other” they can enter their specific origin, e.g. Columbian, Dominican, etc.
This information will obviously provide CFPB with much more background data on the type of consumers obtaining or being declined for financing. This data, along with other data being required, will provide them with information on the type of loans, the pricing, and the cost of the loans being provided by lenders to consumers of varying ethnicity and race.
The consumer is not required to provide this information when making the application. If they do not, the lender still must make a visual observation, or use the applicant’s surname to determine Ethnicity and race. However, they may not use these new sub-categories when making these observations. BTW, the applicant may choose, if they so desire, to indicate multiple race options. More programming!
The newly expanded applicant data is required for all applications taken as of January 1, 2018. However, CFPB says a lender may opt to collect this data for 2017 applications. To do so, Fannie and Freddie have developed a new Demographic Information Addendum which can be used to capture this data. (Addendum) They’re so helpful…
CFPB says this additional information is important because:
- It helps indicate if lenders are serving the needs of their communities
- Assists in the determining distribution of public-sector investment to attract needed private investment to certain areas; and
- Assists in identifying potentially discriminatory lending patterns, and related enforcement actions under anti-discriminatory laws. (This is the big one)
The new HMDA rules go into much more detail on the additional data required, the new reporting timing and formats, and the institutions that must report. These institutions include depository and non-depository lenders. Chances are if you’re a mortgage lender, you’re included.
You can get more info about the revised HMDA rule on CFPB’s site HERE.
Get ready to HMDA…
