Consumer Bureau Introduces New Mortgage Tool
By Christine DiGangi
Successful problem solving often depends on the tools you're given: The better your information, the more equipped you are to identify and solve an issue. That's the idea behind the Consumer Financial Protection Bureau's new mortgage data tool and the new data-reporting requirements it plans to propose this year.
The CFPB today announced the release of its new online tool for exploring Home Mortgage Disclosure Act data, which allows people to sift through the data available on home loans made in their communities and compare it to other locations. The tool is meant to help people gain a better understanding of consumer access to credit in their areas, CFPB officials said.
The Dodd-Frank Act tasked the CFPB with expanding the data collected through HMDA, which the bureau is tackling this year. The bureau will seek public feedback on what should be included in the data and plans to determine the new data points mortgage lenders must report, though the requirements won't need to be met in 2014.
"We are considering asking financial institutions to include more underwriting and pricing information, such as an applicant's debt-to-income ratio, the interest rate, the total origination charges, and the total discount points of the loan," said CFPB Director Richard Cordray. "This will help regulators spot troublesome trends in mortgage markets around the country."
The CFPB is also interested in requiring lenders to report the borrower's age and credit score, the term of the loan and whether the loan meets the qualified mortgage standard. The bureau is putting together a Small Business Review Panel, in which it will engage and seek feedback from community banks, credit unions and other entities that may be affected by the new rules.
In explaining the coming changes, Cordray referenced some signs of the recent housing crisis that may have been easier to address if more comprehensive data had been available. He mentioned the surge in home equity lending leading up to the bust, and the increased use of teaser interest rates -- the initial rate on an adjustable-rate mortgage that would reset to a much higher rate after the initial period.
"Teaser interest rates proliferated before the crisis, but the current HMDA database contains only limited information about the rates charged by lenders," Cordray said. "These and other gaps in what we know hinder everyone's ability to determine whether borrowers have access to affordable loans or to identify potential targeting of borrowers for riskier or higher-priced loans."
As the process of determining new data-reporting requirements begins, the public already has access to the data comparison tool through the CFPB's website, where anyone can see some mortgage trends within certain loan products, metropolitan areas and racial groups. The tool would eventually be enhanced with whatever additional data the CFPB requires from lenders.
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