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In January of 2018, just about all mortgage lenders will be required to collect approximately 50 data elements identifying specific information about the consumers obtaining mortgages from them, and the terms and conditions under which they get them.
This information is required by the CFPB under its power and guidance provided by the Dodd-Frank Act. This requirement will no doubt increase costs for lenders, which in turn will be passed on to consumers. Just another tax on homeownership! This is defended by saying it is all in the interest of protecting the consumer.
When all is said and done, the collection of the additional information is to help the CFPB and other regulators to identify the bad apples. Those lenders who are not fairly offering and providing mortgage loans to all consumers, regardless of race, color, ethnicity, or creed. Not a bad intention, but you know what they say about good intentions.
Will the reporting of this additional information accurately reflect the actual lending being done by all lenders? Not so, say the lenders.
Presently many lenders struggle with the collection of the 24 data elements required. Not so much with the loan data, since they provide the loan, but with the collection of the consumer information. Under the new rules, they will be required to capture even more information. Again, the additional loan data will be easier, albeit it will require additional programming. Still more cost to the lenders.
It’s the collection of the information about the applicant’s race and ethnicity that creates the challenges. Not because the lenders don’t want to collect this information, but because many mortgage applicants refuse to provide it.
In a world of uncertainty, many consumers do not trust lenders or the government for that matter. They believe the information is collected so the lender can identify borrowers to whom they do not want to lend. Maybe some do, but now all lenders may get penalized, which in turn will hurt consumers.
It may appear that based on this new data a lender is not properly serving minorities. When in fact, the reduced number of minority loans is really evidencing many applicants just plain refuse to provide the requested data. They have that right.
So, when they exercise their rights the lender may be penalized. Proponents say the lender must do a better job of explaining to the consumer the reasons for the collection of this information, and the intended purposes. That’s easier said than done. More responsibility, more time, and more cost for the lender. All to gather information that may be used against them in the end.
For now, lenders are required to collect the new information beginning in 2018 and report it in 2019. Many lenders are hoping that will change with the new incoming administration, but there are no guarantees.
So, if you’re a lender you better get ready to HMDA. While you’re at it, you may want to put together some educational material to explain to your applicants the purpose of the new data and that it is meant to protect them. Good luck!
Hopefully, the new administration will help to improve the economy so more people have stable employment with good potential for wage growth. That will help lenders make more loans to all, regardless of race, color, ethnicity or creed.
After all, isn’t that what consumers and lenders really want?
