In a letter written to the Consumer Financial Protection Bureau (CFPB) addressing proposed changes by the CFPB to its HMDA regulations, QuestSoft president Leonard Ryan urged the Bureau to delay its changes to geocoding and remove additional demographic data.
The eight page letter focused on five key areas of the new regulation:
- Bona Fide Errors and Proposed Geocoding Safe Harbor
- Demographic Data Collection – Specifically as it related to Ethnicity and Race Subcategories
- Reporting Threshold Adjustments
- NMLSR ID Reporting
- Industry Readiness
Ryan expressed concern for the future of LMI lending as a result of the CFPB plans to introduce a less accurate geocoding system but bolster it with a safe harbor. The new geocoder is expected to be 30% less accurate on results close to census tract boundaries and not be able to accommodate new addresses as quickly as products used in the industry today (including the FFIEC geocoder).
Ryan also expressed concern that a guarantee on the geocoder will eliminate the higher quality products from the market and cause accuracy concerns for the Community Reinvestment Act and the trading of Low Moderate income loans in the open market.
In the letter, Ryan continued with a detailed analysis of problems facing the industry over the new Ethnicity and Race Subcategories, urging the Bureau to provide at least one extra year due to implementation delays of both the CFPB and the GSE’s in releasing the new Uniform Residential Loan Application (URLA).
“In many ways, the demographic data additions are turning out to be the biggest train wreck of the new regulation,” Ryan said. “The lack of clarity and confusion over properly classifying borrowers has the potential to be a regulatory and fair lending compliance nightmare.”
A complete version of the letter is available at https://www.questsoft.com/hmda-hq