Two Urban Institute (UI) analysts have raised an alarm about changes to
federal regulations that threaten to limit access to important data about the
mortgage market and credit availability for low and moderate-income borrowers
and communities. Most of the changes are coming through rulemaking at the
Consumer Financial Protection Agency (CFPB) and relate to the Home Mortgage Disclosure
Act (HMDA).
Researchers Ellen Seidman and Lauri Goodman said the loss of access to
important data has been quiet and steady. However, three current rulemakings,
one final, one proposed, and one at an early stage, promise to exacerbate the
situation and affect both the public and policymakers. They add that the
possibility the COVID-19 pandemic could trigger another credit crisis makes this
especially troubling.
In 2015 the CFPB issued a final rule regarding changes in the HMDA mandated
by the Dodd Frank Wall Street Reform and Consumer Protection Act. Those changes
increased the type, amount, and quality of mortgage data collected through the
act in order to establish a better early-warning system about problems that
created the 2008 housing crash and Great Recession. The rule also exempted
small lenders, those originating fewer than 25 mortgages a year, from reporting or eliminating data from 1,400 depository institutions or 22 percent of previous
reporters.
Three years later Congress passed the Economic Growth, Regulatory Relief,
and Consumer Protection Act which exempted depository institutions that made
fewer than 500 mortgage loans from reporting much of the new data required by
Dodd-Frank and the 2015 rule. The result was much less information, especially
about small loans and those originated in rural and low-income areas, coming
from 3,250 insured banks and credit unions, 67 percent of those covered by
HMDA.
Last month CFPB issued a new rule that raises the threshold for any HMDA
reporting from 25 annual originations to 100. This added another 1,640
depositories and 60 non-depositories to the 1,400 institutions exempted by the
2015 rule.
In releasing the new rule CFPB said it could not quantify "with precision" what
the loss of data would mean to consumers and admitted that the loss of data
about mortgages would again disproportionately affect rural and low-income
census tracts. It would also mean losing access to information on about 13
percent of multifamily loan originations. UI says the structure of this lending
and its importance to low-income families makes loss of this data especially
troubling.
Another advance notice of proposed multifamily lending rulemaking last May asked
for comments about four new fields required by the 2015 rule, including the
elimination of reporting on multifamily loans made to nonnatural persons, i.e.
business entities, reporting that has always been required under HMDA. Using
the new Dodd-Frank data generated about those borrowers for the first time in
2018 allowed Goodman and Seidman to determine that exempting multifamily loans
to nonnatural persons would eliminate HMDA reporting on 65.6 percent of all
multifamily loans (structures with five units or more) and more than 80 percent
of loans on structures with 50 units or more. This, the authors said, would
render the multifamily HMDA data useless.
CFPB is not the only agency cutting back on available data. In January, the
Office of Comptroller of the Currency (OCC) and the Federal Deposit Insurance
Corporation (FDIC) issued a notice of proposed rulemaking to modernize the
Community Reinvestment Act (CRA.) The proposed rule would both make major
changes in how banks' CRA performance is evaluated and do a complete rewrite of
the public data provisions of the CRA regulations.
UI says that the proposal would not reduce but significantly increase banks'
reporting burden. It would also mean publicly released data about small
business, small farm, and community development data would be aggregated at the
bank level and for all banks at the county level. This change, in combination
with what CFPB is doing will make it more difficult, at times nearly impossible,
to determine how well a bank is serving its communities.
Public data are important, the authors say, allowing examination of credit availability
and how it flows to low- and moderate-income communities versus their affluent
counterparts and to see what individual banks are doing in their lending to
specific areas. "We are likely to lose all of that, one regulation at a time,
notwithstanding these datasets' importance to evidence-based policymaking. Good
policymaking cannot tolerate the continuous chipping away of this important
resource."