HMDA Highlights CFPB’s Failures

My Mother was a wonderful cook and baker. Coming home from school every day found the house full of wonderful smells and treats cooling on the kitchen table. The reaction of everyone who came into the house was always “oh that smells so good!” Her reply was always, “We’ll see. After all the proof is in the pudding.” Tasting the food and seeing if was as good as it smelled was the only way to make sure there were no hidden issues that rendered it uneatable.

For the past five years the CFPB has been mixing up a menu of new “tastes” for mortgage lenders and shoving them down our throats. The purpose of this was of course, to ensure that consumers were given a fair chance to obtain a mortgage that worked for them and did not result in the overpayment of fees or interest rates. This, they said was the answer to the problems that caused the mortgage meltdown and allowed everyone who could qualify to buy a house. In order words, with these new requirements the potential risk faced by those looking to buy or refinance a home would be mitigated.

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So the question is, have the changes, such as disclosures, credit standards and complaint databases been effective? On September 21st, the FFIEC released the HMDA data from 2014. Here at last was the proof in the pudding. Would the data show that consumers were taking advantage of these changes to obtain new mortgages? Were we in fact increasing homeownership, especially among those with lower incomes and those in protected classes?

Unfortunately the initial results were, to the least, disappointing. According to Mortgage Trueview, a data analytics firm in Bountiful, Utah, exclusive of the loan purchased by other lenders, the year over year number of applications decreased by 29% compared to 2013. Applicants with incomes less than $50,000 decreased by 24% and applications from male, non-white applicants decreased 23%. The data also shows that this was not isolated to particular metropolitan areas, but was evident in 362 MSAs. The Philadelphia metropolitan area suffered a 69% decrease, the largest of any MSA.

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These numbers appear to indicate that the changes made by the CFPB do not appear to be working. In fact it some may even say that so far the CFPB has failed to make any positive change in housing despite the costs and confusion of implementing their new requirements and the tremendous costs associated with training, file reviews and ultimately fines associated with them.

Of course, there is no doubt that there may be other influences that impacted these numbers. We know that housing inventory was down and housing patterns among millennials, who’s 72 million members would normally be in their peak home buying years. However, interest rates have been consistently at their lowest levels and employment rates are high.

It appears that the CFPB is failing. Even those who eagerly anticipated the new requirements and consumer options, appear to be questioning their effectiveness. If we really want to aid consumers, more complicated disclosures and tightened credit standards do not appear to be the answer.

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