In October 2014, the California Reinvestment Coalition and 40 additional California organizations sent a letter to the Consumer Financial Protection Bureau, urging updates to the Home Mortgage Disclosure Act that will increase transparency while allowing regulators, advocates, and industry to identify troubling trends, such as widowed homeowners being unnecessarily pushed into foreclosure. The recommendations are included below:
Office of the Executive Secretary
Consumer Finance Protection Bureau
1700 G. St. NW
Washington DC 20552
RE: Docket No. CFPB-2014-0019: California community group comments
Dear Ms. Jackson:
The undersigned community groups submit this letter to the Consumer Financial Protection Bureau (CFPB) in response to the recent proposal to amend the Home Mortgage Disclosure Act (HMDA) regulations.
We appreciate the great care that CFPB has taken to craft this proposal, and that the proposal suggests enhancements to HMDA that go beyond the requirements of the Dodd-Frank Act, as well as CFPB’s recent improvements to the HMDA website in response to recommendations by community groups.
At the same time, we have a number of concerns with this proposal, and feel that it does not go far enough to ensure that the data reported to the public meets the stated goals of HMDA; namely, to help the public determine if financial institutions are serving community housing needs, assist public officials in deciding how to distribute public investments, and identify possible discriminatory lending patterns. Specifically, our concerns with this proposal include:
1. The failure to address key priorities, such as:
a.The inclusion of loan modification data as required reporting;
b.The disaggregation of the overly broad “Asian” race category;
c.The absence of any fields relating to language access, including (at a minimum) American Sign Language, Braille, Chinese, Korean, Spanish, Tagalog and Vietnamese;
d.Whether a borrower will own the property with a non-borrowing party (the widows and orphans/successors in interest issue); and
e.Whether the borrower received pre-purchase housing counseling.
2. While proposing major advancements in some areas, the proposal does not go far enough:
a.Loans for multifamily rental housing should document the level of affordability of all units, include the number of bedrooms, and include construction lending;
b.Commercial loan and HELOC coverage should require reporting on whether a home secured loan was taken out for a “small business” purpose.
3.The reluctance of CFPB to require automatic disclosure to the public of all data collected pursuant to HMDA and the undue credence given to industry’s purported concerns about consumer privacy.
We discuss these concerns in greater detail below.
Loan Modifications: The performance of financial institutions in modifying loans is and will continue to be a major factor in determining whether they are meeting local housing needs and complying with fair housing and fair lending laws. We urge the CFPB to include in its final rule the requirement that financial institutions report data on all loan modification applications, denials, and modification terms, broken out by race, ethnicity, gender and age of applicants and census tract; and that this data be publicly disclosed.
The CFPB has the authority to require detailed reporting of loan modification data. The HMDA statute speaks to the Bureau’s broad authority to provide for any “adjustments … for any class of transactions” (see 12 USC §2804) it deems proper to serve the goals of the Act. Loan modifications represent the very kind of transaction Congress contemplated when crafting the Act, as they go to the heart of current efforts to serve the housing needs of our communities and to protect homeownership and equity in our neighborhoods.
The federal Home Affordable Mortgage Program (HAMP) and recent Department of Justice settlement agreements with large servicers are evidence of the prominence of loan modifications as part of federal housing policy and enforcement.
This data will also help answer the very serious question of whether discrimination is occurring in the foreclosure prevention context. The California Reinvestment Coalition and the National Housing Resource Center have conducted surveys of nonprofit housing counseling agencies serving thousands of consumers a month, and found that housing counselors report repeatedly that borrowers of color are receiving worse loss mitigation outcomes than white borrowers.
Similarly, the National Community Reinvestment Coalition found that people of color in Washington, D.C., were more likely to go into foreclosure, even after controlling for borrower, loan, and neighborhood characteristics. NCRC also surveyed homeowners seeking loan modifications and found that servicers pushed African American borrowers to foreclosure faster than white borrowers, and that white HAMP-eligible borrowers were more likely to receive a loan modification than African American and Latino HAMP-eligible borrowers.
Community groups nationally have decried the uneven distribution of loan modification, including loan modification relief offered as part of implementation of the National Mortgage Settlement and more recent Department of Justice settlement agreements with JPMorgan Chase, Citibank and Bank of America. Indeed, in March of last year, over 100 groups under the umbrella of Americans for Financial Reform signed a letter to the Office of Mortgage Settlement Oversight calling for greater transparency and accountability to ensure that banks comply with their fair lending obligations, and remedy the damage of foreclosures in communities of color and other low-to-moderate income communities.
Assisting distressed borrowers and saving homes from foreclosure is integral to reviving the housing market. Yet, a February General Accounting Office (GAO) report that analyzed nonpublic HAMP data confirmed the concerns of community groups in finding statistically significant differences in the rate of denials and cancellations of trial modifications, and in the potential for re-defaults of loan modifications for Limited English Proficient and African-American borrowers and other populations.
Although the public disclosures are currently limited, the HAMP program does in fact require loan modification reporting and disclosure with the added requirement that servicers report data by race and ethnicity in the public disclosure. This is an important precedent.
Directly consistent with the statutory purposes of HMDA, local governments are keen to understand whether, where and to whom loan modification relief is offered so that they can determine if financial institutions are meeting the needs of their communities and to identify whether further policy responses are necessary. As one example, the City and County of San Francisco, in its Request for Proposals for the city’s banking and credit card business, requests bank applicants to provide local data on the race, ethnicity, and census tract of foreclosure filings and loan modifications, broken out by type of modification.
The San Francisco experience suggests not only that local governments are interested in such data, but also that banks are capable of providing it. To its credit, Bank of America has provided such data to the City and County. But all financial institutions should report this data to all jurisdictions via HMDA.
The data to be reported for loan modifications should be substantially the same as data currently collected under HMDA, in that loan modifications—like mortgages—are transactions which are secured by homes and require underwriting. Ideally, all loan modifications should be reported separately in HMDA data as a separate category under “loan purpose,” or possibly “loan type.”
If reporting in the current HMDA database is not feasible, we urge the CFPB to collect and publicly disclose loan modification information separately. Federal regulators are capable of this type of reporting; for example, the FFIEC currently does separate data collecting and public disclosure of Primary Mortgage Insurance (PMI).
Disaggregating Asian American Pacific Islander Communities in HMDA Data: The HMDA data on race and ethnicity has been ineffective in capturing the diversity of experiences of Asian American and Pacific Islander borrowers. While the HMDA data overall show that “Asian” borrowers tend to experience outcomes at least as favorable as whites, some sub-groups within the AAPI population experience less success in accessing homeownership and staving off foreclosure. We ask the CFPB to require the disaggregation of this data to better reflect the experiences of households within the AAPI community.
A 2007 report by the Census Bureau, entitled, “The American Community: Asians 2004,” part of the American Community Survey report series, analyzed experiences of several subcategories of Asian American families, including: Asian, Bangladeshi, Cambodian, Chinese, Filipino, Hmong, Indonesian, Japanese, Korean, Laotian, Malaysian, Pakistani, Sri Lankan, Taiwanese, Thai, Vietnamese, and other Asian. The report noted various differences in experiences for these groups, including differences in owner occupancy and home value.
We support the analysis of the National Coalition for Asian Pacific American Community Development that a workable, federal precedent for disaggregating the broad “Asian” race category exists in Section 4302 of the Affordable Care Act, which calls for data reporting for Asian subcategories which include Asian Indian, Chinese, Filipino, Japanese, Korean, Vietnamese, and Other Asian, as well as Native Hawaiian and Other Pacific Islander subcategories including Native Hawaiian, Guamanian or Chamorro, Samoan, and other Pacific Islander.
HMDA should require disaggregated data for “Asians” that allow borrowers to identify as Cambodian, Chinese, Filipino, Hmong, Indian, Japanese, Korean, Laotian, Thai or Vietnamese American, amongst other subgroups.
Capturing Language Access. Relatedly, immigrant and Limited English Proficient borrowers and communities have been preyed upon by unscrupulous brokers, lenders and loan servicers over the last several years with painful results. While Census data show that 18 percent of Americans speak languages other than English in their homes, almost 40 percent of Californians fall into this category; more than half of this population speaks English less than “very well.” Spanish, Chinese, Tagalog, Vietnamese and Korean are spoken by approximately 83 percent of all Californians who speak a language other than English.
In the summer of 2006, a series of borrowers and housing counselors testified at Federal Reserve Board hearings held in San Francisco regarding the then-increasing prevalence of “bait-and-switch” tactics perpetrated on borrowers who negotiated their loans in a non-English language but received English-only documents with less favorable terms than promised.
The California legislature responded to this very real dynamic by passing a law meant to require a translation of most financial documents when the contract was negotiated in any of the five most-spoken non-English languages spoken in the state. Significant evidence shows that many lenders continue to fail to comply with the statute. Among the results of CRC’s housing counselling surveys was that over 60 percent of responding agencies stated that they commonly saw non-English speakers (who presumably negotiated their loans in a non-English language) who did not receive any translations of their loan. In those cases, 60 percent of the agencies noted that the loan terms that these Limited English Proficient borrowers actually received were less favorable than what they had been promised, and 65 percent reported that the loan was unaffordable when made to the borrower. In another survey, this one by Neighborhood Legal Services of Los Angeles County, 40 percent of Spanish-speaking homeowners reported that they did not fully understand the terms of their loan documents.
The February 2014 GAO report discussed above found statistically significant disparities in the rate of loan modification denials, cancellations, and re-defaults for LEP borrowers and other protected groups as compared to non-Hispanic white borrowers after analyzing certain loan modification data under the HAMP program.
To help address these problems, HMDA should be enhanced to require the reporting of loan data that include:
·The primary language spoken by the loan or loan mod applicant;
·The language in which the loan or loan modification application and contract were negotiated;
·The language of the loan documents.
Widows Data. We propose a data field be crafted to capture whether there is a co-owner of the property who is not on the loan, or where that person co-owns the property with someone who signs the deed of trust as a “guarantor.” Usually the other person is a spouse. This phenomenon is not uncommon, particularly among limited English speaking families and families of color, and can cause significant problems upon divorce or the death of one spouse. The practice could be a sign that the broker or originator is railroading the borrower into specific loan products, or that the broker or lender is wrongfully pressuring spouses to remove one spouse from title to make the broker’s or underwriter’s job easier.
Creating such a field would be consistent with the CFPB’s guidance on successors in interest, and similar concern about this issue as expressed by Fannie Mae, Freddie Mac, and the HAMP guidance and interpretive letters.
The problem of successors in interest and non-borrower spouses will only grow as the population ages. These data are especially important and relevant as the CFPB here proposes to require the reporting of reverse mortgages, where the successors in interest dilemma is all too real.
Housing Counseling. Pre-purchase housing counseling can have a significant impact on a borrower’s ability to attain, and maintain homeownership, while avoiding predators who would seek to siphon off fees and equity. We agree with the National Housing Resource Center HMDA data should include data fields relating to counseling type (counseling or education), counseling mode (in-person, phone, online) and counseling agency HUD ID.
Other concerns. We observe that though a stated goal of HMDA is to identify discriminatory lending patterns, HMDA data do not track all protected groups under various fair housing and fair lending laws. In particular, we are concerned about the growing anecdotal evidence and cases relating to discrimination against disabled persons, including where disability can be ascertained by lenders based on source of borrower income. We are also concerned about discrimination against certain religious groups. We urge the CFPB to consider whether to link HMDA to all fair lending protections, and urge CFPB fair lending enforcement staff to be vigorous in ensuring ECOA violations are challenged.
In some respects, the proposal suggests important enhancements to data collection requirements, but does not go far enough.
Loans for Affordable Multifamily Lending: A severely underutilized aspect of HMDA is its multifamily lending data. There has been little to no analysis of this data, most researchers probably do not know it exists, and multifamily lenders may not even know whether and how to report it. It is critical to understanding whether community needs are being met to know whether institutions are supporting the development of affordable rental housing. We are very pleased to see that CFPB is considering requiring lenders to report on whether multifamily loans are for affordable housing, and how many units were constructed through use of the financing.
We further urge the CFPB to require reporting on the number of bedrooms per unit to help determine whether fair lending laws are being followed, include all construction loans which are an important way for lenders to meet community credit needs, and designate whether the developer is a nonprofit organization which is mission driven to serve the community. It is also important to know the level of affordability (for very low-, low-, or moderate-income tenants) for all units of housing. There is a strong precedent for this in Fannie Mae and Freddie Mac data collection efforts. Finally, lenders should be required to report on whether such housing is targeted to particular groups, such as seniors or persons with disabilities. These projects can be harder to finance, and the manner in which financial institutions deal with them can raise fair lending issues.
For financial institutions that are financing affordable, multifamily housing, enhancing data elements and transparency would enable them to better claim credit for this important work.
Commercial loans and “small business” purpose. We are pleased that the CFPB recognized that requiring the reporting of Home Equity Lines of Credit (HELOCs) is necessary in the wake of the problematic practices associated with these loan types during the 2000s. The proposal to require reporting of home-secured loans that finance businesses will also enhance our understanding of credit needs. But to illuminate the impact of lending practices on the intersection of small business ownership, homeownership, and jobs, commercial loan and HELOC coverage should require reporting on whether a home secured loan was taken out for a “small business” purpose, alongside “home purchase,” “home improvement,” and “refinance.” This is of particular relevance in immigrant communities, where home-secured lending is often used to help finance a small business and hire workers. We also recommend creation of a “consolidate consumer debt” loan purpose category.
Covered lenders and rural areas. We are grateful that the CFPB contemplates improving HMDA’s coverage of non-depository lenders. However, we are concerned that the proposed 25-loan threshold would eliminate 1,775 depository institutions as HMDA reporters, and we urge the CFPB to reject this proposal as it would significantly reduce coverage of lending in rural counties. The requirement of one loan to trigger HMDA reporting for depository institutions should be retained. Additionally, the 25-loan threshold (for non-depositories as we suggest, or all lenders as proposed) should require reporting by all lenders originating twenty five multi-family or single family loans.
There are a number of welcome enhancements proposed for HMDA reporting. We are particularly pleased to see CFPB go beyond the statutorily required data elements, to propose inclusion of other important data. We support the inclusion of all of these extra data fields.
Universal Loan ID. To the extent that a universal identifier could be created to track a loan across the life of the loan, this would be particularly useful, especially across servicing transfers or note sales. In a market in which such transfers and sales are common, a standardized number could be useful for the consumer, regulators and for industry. We would ask that the CFPB provide a common framework for identification, or that each financial institution be required to register its identifier with the CFPB, all other relevant federal regulators and state regulators. It may be simplest to have a single registration location on-line for such a system. Identifiers should also be made publicly available.
We also support various other proposed enhancements, including:
·More transparency around lending for manufactured housing, which is a significant source of housing in California’s rural communities;
·Reasons for all loan denials;
·Age of borrower, which should be captured by actual age, or age ranges of five years;
·Points and fees, origination charges, discount points;
·Loan to value and combined loan to value;
·Reporting of race, ethnicity and gender based on visual observation and surname if data are not provided by applicant;
·Nontraditional loan features, such as Interest Only, and balloon payments;
·Expanding occupancy fields to include “investment property with rental income.” This will help uncover the growth of investor purchasers of residential properties and their impact on neighborhoods;
·Considering the role of brokers in the mortgage crisis, the proposals for identifying wholesale and retail channels will make it easier for the public to identify market participants engaged in discriminatory, abusive, or illegal practices;
·Providing for quarterly reporting for larger institutions so the data are more timely and relevant.
We greatly appreciate that the CFPB is proposing to require data reporting beyond Dodd-Frank requirements, as this will greatly assist in monitoring trends in access, affordability, and sustainability of home loans. We urge the agency to consider our additional recommendations—in particular around including loan modifications, disaggregating AAPI data, language access, refining affordable multi-family housing data—and to make all the data publicly available so that the core statutory purposes of HMDA, such as holding lenders accountable for meeting housing needs and identifying discriminatory lending patterns, can be attained.
Thank you for your consideration of our views. Should you have any questions about this letter, please contact Kevin Stein.
Advocates for Neighbors, Inc.
AnewAmerica Community Corporation
Asian Pacific Islander Small Business Program
Asian Pacific Policy & Planning Council (A3PCON)
California Coalition for Rural Housing
California Housing Partnership
California/Nevada Community Action Partnership
California Reinvestment Coalition
California Resources and Training (CARAT)
Community Action Agency of Butte County, Inc.
Community Housing Council of Fresno
Community Legal Services in East Palo Alto
East Bay Asian Local Development Corporation (EBALDC)
East Bay Housing Organizations (EBHO)
East Los Angeles Community Corporation
East Palo Alto Community Alliance Neighborhood Development Organization (EPA CAN DO)
Fair Housing Council of the San Fernando Valley
Fair Housing of Marin
Housing and Economic Rights Advocates
Inland Fair Housing and Mediation Board
Korean Churches for Community Development
Law Foundation of Silicon Valley
Montebello Housing Development Corporation
National Housing Law Project
Neighborhood Housing Services Silicon Valley
Neighborhood Partnership Housing Services
NeighborWorks Orange County
Non-Profit Housing Association of Northern California (NPH)
Northbay Family Homes
Oakland Business Development Corporation
Orange County Community Housing Corporation
Rural Community Assistance Corporation
Sacramento Hosing Alliance