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CFPB approves FHLMC/FNMA revised uniform residential loan application; collection of HMDA ethnicity and race information in 2017

Posted in Mortgages

In a notice published in today’s Federal Register, the CFPB announced that it has given its “official approval” to a revised and redesigned Uniform Residential Loan Application (2016 URLA) and to the collection of expanded Home Mortgage Disclosure Act information on ethnicity and race in 2017.

2016 URLA.  The 2016 URLA approved by the CFPB was issued by the Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association and is included as an attachment to the CFPB’s notice.  The notice indicates that the CFPB’s staff has determined that the relevant language in the 2016 URLA complies with the provisions in Regulation B (which implements the ECOA) that limit requests by creditors for certain information in applications, such as information about race and other protected characteristics, a spouse, marital status, or income from alimony and certain other sources.  The CFPB stated that while a creditor’s use of the 2016 URLA is not required under Regulation B, a creditor that uses the 2016 URLA without any modification that would violate these Regulation B provisions would be in compliance with such provisions.

The CFPB noted that a version of the URLA dated January 2004 is included in appendix B to Regulation B as a model form and describes the safe harbor provided in appendix B for creditors that use the model form.  The CFPB also noted that the Official Staff Commentary to Regulation B provides that creditors can use a previous version of the URLA dated October 1992 without violating Regulation B.  The CFPB stated that its official approval “is being issued separately from, and without amending” the Official Staff Commentary and that it will consider whether to address the treatment of outdated versions of the URLA in the Commentary at a later date.

Expanded HMDA Information Collection.  The amendments to Regulation C (which implements HMDA) finalized in 2015 will require financial institutions covered by HMDA to permit applicants to self-identify using disaggregated ethnic and racial categories beginning January 1, 2018.  In the notice, the CFPB stated that before such date, such inquiries would not be allowed under Regulation B Section 1002.5(a)(2) which limits inquiries by creditors about race or other protected characteristics.  Believing there will be significant benefits to permitting creditors to ask consumers to self-identify before January 1, 2018, the CFPB gave approval for a creditor “at any time from January 1, 2017, through December 31, 2017…at its option, [to] permit applicants to self-identify using disaggregated ethnic and racial categories as instructed in appendix B to Regulation C, as amended by the 2015 HMDA final rule.”  A creditor adopting that practice “shall not be deemed to violate” Section 1002.5(a)(2) and “shall also be deemed to be in compliance with  Regulation B § 1002.5(a)(2) even though applicants are asked to self-identify using categories other than those explicitly provided in that section.”

The notice also includes instructions for creditors to use to submit information concerning ethnicity and race collected under the approval  in connection with applications received from January 1, 2017 through December 31, 2017.  The instructions distinguish between applications on which final action is taken during the 2017 calendar year and those on which final action is taken on or after January 1, 2018.

For applications on which final action is taken during the 2017 calendar year, a financial institution is directed to submit the information on ethnicity and race using only the aggregate categories and codes provided in the filing instructions guide for HMDA data collected in 2017, even if the financial institution has permitted applicants to self-identify using disaggregated categories pursuant to the approval.  For applications on which final action is taken on or after January 1, 2018, a financial institution is given the option to submit the information on ethnicity and race using disaggregated categories if the applicant provided such information instead of using the transition rule adopted by the 2015 HMDA final rule or to submit the information using the transition rule.