On December 21, 2018, the Consumer Financial Protection Bureau (the “Bureau”) announced its issuance of final policy guidance describing its intentions for modification and disclosure to the public of certain loan-level data that financial institutions report under the Home Mortgage Disclosure Act (“HMDA”) and Regulation C. The guidance applies to HMDA data compiled by financial institutions in or after 2018 and made available to the public beginning in 2019. The final policy guidance identifies the HMDA data and text fields the Bureau intends to exclude from public disclosure and the HMDA data fields the Bureau intends to disclose in a modified, less precise manner to protect the privacy of mortgage applicants and borrowers.
The final policy guidance indicates that, in May 2019, the Bureau intends to commence a separate notice-and-comment legislative rulemaking under the Administrative Procedure Act to incorporate the modifications and disclosure of HMDA data into the text of Regulation C.
HMDA requires financial institutions to collect, report, and disclose information relating to mortgage applications and loans, including data concerning the race, sex, and income of applicants and borrowers. HMDA authorizes the Bureau to require financial institutions to collect, report, and disclose additional information and directs the Bureau to develop regulations to modify the public disclosure of reported data to protect the privacy of mortgage applicants and borrowers.
On October 28, 2015, the Bureau published a final rule amending Regulation C (the “2015 HMDA Final Rule”), which implemented amendments to HMDA made by the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”). In the 2015 HMDA Final Rule, the Bureau interpreted HMDA, as amended by the Dodd-Frank Act, to require the Bureau to use a balancing test to determine what modifications, if any, should be applied to the data to protect applicant and borrower privacy while also fulfilling the Bureau’s public disclosure obligations. On September 25, 2017, the Bureau published proposed policy guidance describing the balancing test and its application to loan-level HMDA data.
The Bureau developed the final policy guidance issued on December 21, 2018, after considering comments received in response to the proposed policy guidance and consulting with the prudential bank regulators, the Department of Housing and Urban Development, and the Federal Housing Finance Agency.
The final policy guidance identifies which data fields the Bureau will modify prior to public disclosure of the loan-level HMDA data, and further describes how the data will be modified to protect consumer privacy. First, the Bureau intends to exclude the following information from public disclosure:
- The universal loan identifier or non-universal loan identifier;
- The date the application was received or the date shown on the application form;
- The date of action taken by the financial institution on a covered loan or application;
- The address of the property securing the covered loan or, in the case of an application, proposed to secure the covered loan;
- The credit score or scores relied on in making the credit decision;
- The unique identifier assigned by the Nationwide Mortgage Licensing System and Registry for the mortgage loan originator; and
- The result generated by the automated underwriting system used by the financial institution to evaluate the application.
Second, the Bureau intends to exclude from disclosure the text fields used to report (1) an applicant’s or borrower’s race or ethnicity; (2) the name and version of the credit scoring model used; (3) the principal reason or reasons the financial institution denied the application, if applicable; and (4) the automated underwriting system name.
Finally, the Bureau intends to modify the data to reduce the precision of the values reported, such as by disclosing ranges – rather than specific values – for loan amount, applicant age, property value, and ratio of consumer’s total monthly debt to total monthly income.