On August 27, 2020, the Consumer Financial Protection Bureau (CFPB) released its second report on the publicly released data submitted under the Home Mortgage Disclosure Act (HMDA) for 2019 mortgage lending activity. The new report provides an updated review of new and revised HMDA data points that were mandated for HMDA reporting in the CFPB’s 2015 Rule.
The report offers a thorough review of the selected data points, providing insight into the types of products, applicant characteristics, property characteristics and pricing outcomes that were not available in HMDA data prior to 2018. Below we provide highlights from the report relevant to analyzing and using the HMDA data.
New product characteristics allow grouping applications as forward or reverse mortgages while introducing open-end lines of credit (i.e., home equity line of credit or “HELOC”) as additional reportable products. These data points provide important context for grouping reverse mortgage products separately from forward mortgages and gaining important insight into the HELOC lending market.
Additional product characteristics regarding loan term, amortization status (i.e., introductory rate period), non-amortizing features (e.g., balloon payment, interest-only payment, etc.) and other factors provide crucial context for distinguishing distinct types of products. Similarly, the new data points permit the identification of loans for business or commercial purposes, cash-out refinances versus non-cash-out refinances, and investment properties. The report highlights how these various characteristics correspond with different application characteristics and underwriting outcomes, underscoring the value of the new HMDA data points.
For example, the report suggests that business or commercial purpose status improves the ability to identify non-natural persons (e.g., corporations, partnerships, etc.) for which demographic information (e.g., race, ethnicity, sex, etc.) cannot be recorded. Identifying non-natural persons can provide a more accurate benchmark when evaluating the frequency of non-reported demographic information for potential HMDA reporting issues.
In the report, the CFPB notes that underwriting and pricing disparities between prohibited basis group (i.e., race/ethnicity minority, female only or older applicants) and non-prohibited basis group (i.e., non-Hispanic White, male or younger applicants) members cannot be fully explained by HMDA data alone; however, newly reported underwriting factors – such as credit score, combined loan to value ratio (CLTV) and debt-to-income ratio (DTI) – help to explain some of the observed disparities. These new factors provide regulators much more relevant information that can aid in selecting institutions to examine and defining the scope of their reviews prior to notifying the lenders.
Overall, the CFPB report demonstrates the usefulness of the new and revised HMDA data points for analyzing the mortgage market. We find the new information enhances the ability to select peer institutions and benchmark marketing performance, Fair Lending disparities and HMDA reporting patterns for our clients.