Regulators May Learn More From Mortgage Applications

Regulators may be collecting more information about you when you apply for a mortgage. While consumer advocates hope more information will help regulators protect mortgage borrowers against discrimination, mortgage lenders are worried about protecting their privacy.

The Federal Reserve is considering collecting more data through the Home Mortgage Data Collection Act, as well as how much and in what form statistics should be released to the public.

Regulators already collect information like the age, sex, and race of mortgage loan applicants, but the government may also gather data like your age, credit score and other details about yourself and your property.

The additional information won’t make a difference on whether your mortgage application is rejected or accepted. Government regulators try to use all those numbers to find if lenders are doing a good job serving their communities, spot mortgage lending discrimination, and decide where public investments are needed.

“Clearly, the recent mortgage crisis has highlighted the potential ramifications of a mortgage market that is not functioning well,” said Federal Reserve Governor Elizabeth Duke, in commentary prepared for a Federal Reserve public hearing. “HMDA data do not create the market or solve all market problems, but they do help us understand what is happening in the market. The time is certainly ripe for reviewing and revising the data elements, standards, and reporting formats.”

Mortgage lenders are worried about protecting borrowers’ privacy. Depending on how the information is released, there could be a risk of identity theft, said Jay Brinkmann, a senior vice president for the Mortgage Bankers Association, told the Fed at a hearing. Lenders have worked hard to safeguard their borrowers’ private information, and some have paid large fines for breaches. Lenders could be in trouble if HMDA data was used to identify particular borrowers.

On the other hand, releasing more credit information, Brinkman said, “would go a long way to putting to rest once and for all charges of racism that have been hurled at the industry by various groups over the years that have no basis in fact.”

Consumer advocates want to regulators to collect more in an attempt to prevent discrimination and other abuses.

“We are in an era of some of the most complicated mortgage products to date, and given the strain that bad mortgage loans have put on our economy, lenders should be examined with a microscope now more than ever,” stated John Taylor, president of the National Community Reinvestment Coalition, in a press release.

The Dodd-Frank financial reform act already requires regulators to gather more data about mortgage applications, but gives the new Consumer Financial Protection Bureau, which will eventually oversee HMDA data collection, a good deal of discretion.