This week, Donald Trump signed into law the "Dodd-Frank Rollback". In reality, this law is not much of a rollback. It is really just a fix to help smaller banks and lending entities better cope with the crushing tsunami of regulations that have been enacted over the past eight years.
This blog was originally started because of Dodd-Frank. The Dodd-Frank bill always benefited larger institutions at the expense of small ones. Today, in 2018, the cost of complying with regulations has made the cost of doing business so high for small lenders that many companies are closing their doors. The company I have worked for during the past eighteen months closed its doors May 31, 2018. When we notified our vendor partners that we were closing, we received an email back from our quality-control auditor that the cost of doing business is so high now that he is seeing many companies our size close the doors because they can no longer be profitable. The small mortgage bank is rapidly disappearing, due in large part to burdensome regulations.
In spite of this, big government devotees rail against ANY changes, however slight, to Dodd-Frank and so they are demonizing this rollback, which really just changed a few provisions of the law. One of the complaints from the media is that the new law will make it easier for small banks to discriminate against minorities by exempting them from some reporting requirements under the Home Mortgage Disclosure Act (HMDA)
The funny thing about this particular complaint is that the same people who are squawking about how Facebook treats data collection and individual privacy believe that all financial institutions should have to make a full report to the government under HMDA. That being the case, I thought a little comparison between Facebook and HMDA might be in order, so let's consider the facts. 1. Facebook is a private site which is joined voluntarily by individuals who choose what data to post. 2. Individuals can and do choose their own levels of privacy on Facebook. 3. Cute animal videos and photos of lunch continue to make up a large percentage of content shared on Facebook.
HMDA is quite different. 1. Until this week, virtually all institutions were required to report data from their mortgage loans to the U.S government. (The new law exempts smaller mortgage companies and banks producing fewer than 500 mortgage loans per year from the reporting requirements.) 2. There is no way for an individual to opt-out of reporting his or her data to the federal government under HMDA since it is a regulatory requirement. 3. Very little of the 2018 HMDA reporting has to do with race.
In 1975, when Congress enacted the Home Mortgage Disclosure Act, the few questions were about race and gender. Originally the law DID allow regulators to see who was making loans to minorities and who was not and to determine where under-served populations were for mortgage lending. The data was general in nature but it could serve as a tool to help regulators determine where minority communities were being concentrated and where they might be having trouble moving into homeownership.
Fast forward to 2018. Today, race and under-served communities is only a small part of the over 50 data points required by HMDA. In 2018, mortgage lenders are REQUIRED to report to the federal government the following information about every person who gets a mortgage loan:
- Name
- Age (date of birth)
- Credit score (for both you and your co-borrower if you have one)
- Which credit score model was used for your credit score
- Address of the property along with census tract data for the precise location of the property.
- Loan amount
- Amount of down payment
- How much debt you have (debt-to-income ratio)
- Whether the property is a primary residence, second home or investment property
- The interest rate you paid
- The exact points and fees (if any) that you paid
- Your sex (gender)
- Your race (as I explained before race was the original reporting on HMDA, but in 2018 race was expanded to include your exact origin. For instance, if you are Hispanic, you will expected to disclose whether you are from Mexico, Cuba, Central America, South America, etc. Asians are expected to disclose whether they are Japanese, Chinese, Korean, Vietnamese, etc. Persons from India finally have a category on the HMDA chart--which is actually long overdue in my opinion since they were traditionally categorized as Asian--but interestingly there is still no category for Middle Easterners.)
In addition to all of the above-information, the lender also has to disclose how your file was underwritten and to share some details about the types of systems used to make the determination of your credit worthiness. In all, there are over 60 separate data points that must be collected on borrowers and their finances.
Now, if that seems intrusive--it is. Not only is the new reporting onerous and invasive, it is very specific. In the past, HMDA reporting was general. Lenders reported the number of loans made to various racial and ethnic groups but the reporting was part of a general pool of data.
Not so in 2018. In 2018, for the first time ever, the federal government is assigning each mortgage loan a Universal Loan Identifier (ULI). This is essentially a federal loan number that will follow the loan as it sells from investor to investor. Although when your loan sells, your loan number with your new servicer will change, your ULI will remain the same. That means that the federal government no longer just tracks information about loans made by XYZ company to borrowers in Chicago. The government can now track mortgage loans made to John and Jane Smith on all the properties that they have purchased using a mortgage. And using that data, they can determine how much property John and Jane Smith own, how much they paid down on each property, how much they borrowed, how they manage their credit, etc.
In connection with the income data already on file with the IRS this new HMDA reporting is going to give the federal government a very close and personal look at individual Americans' finances. Granted, the information on your mortgage loan is a snapshot in time. Your credit score, debt-to-income ratio and cash in the bank are all fluid and subject to change. Still, this information gives the federal government unprecedented access to your financial life and your property.
In an era when privacy concerns are growing, Americans should be aware of this type of data collection. The media should be championing any rollback that limits the amount of data the government can collect on private citizens rather than criticizing it. And the current CFPB Director Mick Mulvaney should proceed with his plan to eliminate this massive data collection from those bigger financial institutions which will still be required to collect and report so many details of Americans' lives to Big Brother.
Big Brother IS watching--very closely. At this moment, we have a CFPB director who has been openly suspicious and critical of the very agency he directs. Mulvaney's leadership has made much needed reforms to the CFPB and its policies. But those reforms are not enough because they are tied to his leadership. Eventually Mulvaney's term will end, and then this behemoth agency and its massive data collection tools will be in the hands of someone who may not be as respectful of the rule of law.
We should all be concerned--very concerned.
Alexandra Swann's novel W: The Set, incorporates her novels The Planner and The Chosen which tell the story of an out-of-control, environmentally-driven federal government implementing Agenda 21 and NDAA. The set is available on Kindle. For more information, visit her website at http://www.frontier2000.net.
