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Freedom Fridays

November 3, 2017 – Let Lenders Lend

(Quite a tongue-twister, right?)


Freedom Fridays


What does the HMDA rule do?

Beginning on January 1, 2018, most banks and other lenders will be required to report to the Consumer Financial Protection Bureau (CFPB) a wide range of new personal and demographic data from individuals seeking mortgages and other home equity loans. These rules were developed by the CFPB in 2015 to expand the scope of the Home Mortgage Disclosure Act (HMDA), which was enacted in the 1970s to prevent discriminatory lending practices.


Why this is a bad thing

Like the Department of Housing and Urban Development’s Affirmatively Furthering Fair Housing rule that I highlighted in a previous Freedom Friday post, the CFPB’s new reporting requirements were perhaps drafted with the good intention of trying to prevent racial discrimination. However, it is not at all clear that adding more HMDA reporting requirements on top of the stringent anti-discrimination rules already in place will actually have a measurable effect on preventing further instances of discriminatory lending. What does seem certain is that this requirement would double the paperwork that lenders need to fill out each and every time they offer a loan, thereby placing an enormous new regulatory burden on small and mid-size lenders.

Additionally, some of the new data that banks will need to collect and share with the CFPB, including credit scores, is very sensitive. In the wake of numerous cybersecurity breaches in recent years, do we really want to share more of our personal information with regulators who may or may not be adequately equipped to protect it?


What I am doing about it

Long-time Freedom Friday readers will know that I am no fan of the CFPB: I believe that Congress should determine appropriate banking regulations, not unelected bureaucrats, and I am committed to doing everything possible to eliminate this agency.

On the issue of the HDMA rule more specifically, I voted earlier this year in support of comprehensive financial reform legislation that included a provision to delay implementation of this regulation until January 1, 2019. That legislation, the Financial CHOICE Act (H.R. 10), is now awaiting further action in the Senate. While this is a positive first step, I don’t believe this delay goes far enough and will soon be introducing my own bill to entirely eliminate the HDMA rule.


What they are saying

“While the Home Mortgage Discloser Act was well-intentioned, the new reporting requirements are overly expansive and have the potential to add significant costs and regulatory burdens to small institutions that have an excellent track record of fairly and honestly serving their customers’ needs.” – Steven Killian, Arizona Bankers Association


“Unnecessary regulations create friction in the borrowing process, increase costs to our credit union members, and ultimately drive higher loan rates.” – TruWest Credit Union


“The HMDA rule won’t protect consumers; instead it subjects them to useless data mining that places their personal information at greater risk. The additional paperwork requirements on lenders and brokers certainly aren’t productive either.” – Darrell Covert, Realty Executives International