December 13, 2017
The Honorable Mick Mulvaney
Consumer Financial Protection Bureau
1700 G Street, NW
Washington, DC 20552
Dear Acting Director Mulvaney:
The Community Home Lenders Association (CHLA) is writing to urge the CFPB to delay the implementation of new data point requirements under the Home Mortgage Disclosure Act (HMDA), which are scheduled to take effect on January 1, 2018.
We also request that, if and when these new requirements are ultimately finalized, the CFPB create a more formal SAFE Harbor for good faith compliance than was provided in the case of TRID.
CHLA members – all smaller Independent Mortgage Bankers (IMBs) – are committed to providing access to credit for all mortgage borrowers. In fact, IMBs have led the way in recent years in providing access to mortgage credit, particularly for lower income and minority borrowers. CHLA also appreciates the role that HMDA plays in helping keep lenders accountable in fulfilling this access to credit role.
However, as with all regulatory requirements, HMDA requirements should be balanced and tailored to the objectives. The Trump Administration has pledged to address overly burdensome regulations which have a negative impact on the ability of private sector finance providers to make credit available to consumers.
As the sole national association exclusively representing IMBs, CHLA has issued reports and written letters this year documenting how excessive regulations and the threat of enforcement actions without the opportunity to cure problems that the CFPB identifies with a firm’s compliance efforts disproportionately affect smaller IMBs and promote undue industry concentration.
We believe the imminent expansion of HMDA data points scheduled to take place in three weeks, particularly without Safe Harbor good faith compliance protections, exemplifies our concerns. That is why we are calling on the CFPB to delay implementation for a year. This would give time for you and your staff to review concerns that a wide range of participants have expressed to date with respect to compliance issues, privacy issues, and the need for a Good Faith compliance Safe Harbor period.
CONCERNS ABOUT PROPOSED HMDA DATA EXPANSION
First, while many industry participants are prepared for the new requirements, some lenders and their vendors have expressed the need for more time to test systems and accurately implement the proposed changes.
Second, CHLA believes that the CFPB should have used a formal Administrative Procedure Act (APA) process to establish these data expansion requirements. A delay would allow the CFPB to utilize this procedure, in order to maximize public input from lenders and consumers.
Third, like many other market participants, CHLA continues to have concerns about the adequacy of consumer privacy protections with the handling of the data that is being transmitted on mortgage loans. The risk of re-identification already exists with respect to HMDA – and the proposed expansion appears to increase this risk. For consumers, this could increase the risks of invasions of privacy, identify theft, and fraud. A delay would give the CFPB more time to study whether disclosures should be made in a more aggregated form than is being proposed.
Finally, as with the rollout of TRID a few years ago, mortgage lenders are concerned about the possibility of failing to comply with new requirements in the precise way that the CFPB expects. The previous TRID rollout was illustrative. Compliance involves a detailed effort to match up new and sometimes complicated rules with a wide range of individual circumstances that lenders confront. In the case of TRID, some aspects were confusing – and in the case of the Black Hole, the CFPB’s rules were inconsistent and required subsequent changes by the CFPB almost a year after the rule took effect.
Industry participants should not face the risk of CFPB penalties when their good faith compliance efforts do not exactly match the CFPB’s expectations and interpretations. Therefore, if and when these HMDA changes are finally implemented, CHLA calls on the CFPB to establish a 6 to 12 month Safe Harbor period from enforcement action when the lender is attempting to comply in good faith.
Such a safe harbor is important to all mortgage lenders – but is particularly important to smaller IMBs, which do not have the economies of scale that large lenders have with respect to compliance efforts.
We thank you for your consideration of these requests.
COMMUNITY HOME LENDERS ASSOCIATION