When you take a mortgage, lenders give some of your information to the government, which has been the case ever since the Home Mortgage Disclosure Act or the HMDA went into effect in the year 1975. The provided information discloses your loan type, term, location, race and sex.
Recently, the Consumer Financial Protection Bureau has taken over the HMDA and are planning to change the policies. Now they require more information and also want to improve the way in which it is collected. A formal request for this has already been made, and an industry panel will decide and give an answer to the CFPB.
The director of CFPB told the press they wanted better information to be collected in better ways. Moreover, better access to information was also vital. The director was hopeful that this data will help in the identification and prevention of predatory practices. The director added that the information will also be useful in improving mortgage loans, which are by far the most popular consumer financial products in the country.
The Consumer Financial Protection Bureau wants more details about interest rates, mortgage types, discount points, loan fees, debt to income ratios, borrowers’ ages and their credit scores. If a loan is rejected, lenders will also have to give the reasons for doing so.
In response to CFPB’s announcement, the president of a reputed real estate firm said that mortgage transactions significantly impact the economy of the country and so collecting additional information does have its benefits. He added even the previously collected information was useful in identifying lending patterns.
Though CFPB’s request does seem to have its advantages, the costs cannot be ignored. Additional reporting means more expenses and the benefits must outweigh these for the change to take place. A real estate professional said that the CFPB can have as much information as they want, and they still will not be able to completely eliminate mortgage fraud or abuse.
If changes take place, and lenders have to provide more information to the government, mortgages will be more costly. A loan officer told us that the request may seem simple enough, but it imposes additional compliance and regulation costs, which will directly affect loan origination fees and cause them to rise.
A decision in this regard is expected to be announced by the end of this year.
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