On this blog and elsewhere, some posters have questioned the effectiveness of disclosure as a form of consumer protection. But disclosure remains an important feature of consumer financial protection statutes (RESPA and TILA are good examples), and many regulators think it is an important, if not the only, part of an overall regulatory strategy. With that viewpoint in mind, on Friday, the Consumer Financial Protction Bureau issued this fact sheet noting that it
is taking steps to improve information reported about the residential mortgage market to help the public and financial regulators better understand borrowers’ access to credit. As a first step in the rulemaking process, the CFPB is convening a panel of small businesses to seek feedback on potential changes to mortgage information reported under the Home Mortgage Disclosure Act (HMDA). The CFPB is seeking to improve the quality of the information submitted by lenders, while streamlining the reporting process to reduce the burden on lenders.
Some the agency's research is demanded by the Dodd-Frank fanancial reform legislation. As the CFPB epxlained:
The Dodd-Frank Act specifically directed the CFPB to expand HMDA to include additional information. The CFPB will ask for small business feedback on these new requirements, including:
• Total points and fees, and rate spreads for all loans: For most consumers, a home is the biggest purchase they will ever make. It is critical that regulators understand how much borrowers are paying for their loans in the form of the total points and fees and the rate spread. These data points will significantly enhance financial regulators’ understanding of pricing outcomes and risk factors for borrowers.
• Riskier loan features including teaser rates, prepayment penalties, and non-amortizing features: Particularly in the years leading up to the mortgage crisis, certain types of loan features have been problematic for consumers. Including this information in HMDA will give financial regulators a better view of the effect of riskier loan features.
• Lender information, including a unique identifier for the loan officer and the loan: Including information such as an identifier for the loan officer who works with the borrower, a unique identifier for the loan, and information about whether the applicant or borrower works with a mortgage broker, would help regulators keep track of lenders’ business practices.
• Property value and improved property location information: The value of a property is an important part of a lender’s decision whether to make a loan and what rate to charge. Property value information will help regulators better understand lenders’ acceptances and denials, and the rates and fees they charge borrowers. Improved location information will help with analyses of local mortgage markets.
• Age and credit score: Unscrupulous lenders may target the elderly for unsuitable and costly loans – having applicant age will help regulators identify and potentially take action to discourage these schemes. Credit score will make it easier to understand why some borrowers are denied and why some borrowers pay higher rates than others. Credit score will also help regulators identify lenders who may warrant closer review.