On July 24, 2014, the Consumer Financial Protection Bureau (CFPB) proposed amendments to the Home Mortgage Disclosure Act (HMDA), including new and clarified reporting requirements that could have a major impact on financial services firms. Although the CFPB hinted that a new rule was forthcoming, the size and scope of the proposed changes took many industry observers by surprise.
A detailed document that includes all 573 pages of the proposed rule can be downloaded from the CFPB website; however, the key changes can be summarized and grouped into five broad categories:
The new reporting requirements are designed to generate information that is more detailed, timely and accurate, giving the CFPB the data it needs to better analyze and enforce fair lending laws, monitor and identify trends and issues in various market sectors, and assess the effectiveness of the “Ability to Repay” rules. In this regard, it will generate public benefits. However, the new requirements will likely create a significant burden for banking and nonbanking financial institutions. Institutions already spend a great deal of time and money complying with the existing rules for annual HMDA reporting, and the need to provide an expanded set of data on a quarterly basis could significantly add to level of effort and related costs.
Affected institutions should consider conducting an internal assessment to understand how the proposed rule will impact their systems and processes — and then begin creating a road map for compliance. Institutions might also contact the CFPB during the comment period (which ends October 22, 2014) to share information with the CFPB regarding the level of effort needed to achieve compliance with the new requirements and to provide technical comments as appropriate.
Posted by Tom Rollauer, Executive Director, Center for Regulatory Strategies, Deloitte & Touche LLP, John Graetz, Principal, Deloitte & Touche LLP and Tamara Milliken, Director, Deloitte & Touche LLP