2016-31386. Proposed Collection; Comment Request

AGENCY:

Federal Housing Finance Agency.

ACTION:

30-Day Notice of submission of information collection for approval from Office of Management and Budget.

SUMMARY:

In accordance with the requirements of the Paperwork Reduction Act of 1995, the Federal Housing Finance Agency (FHFA or the Agency) is seeking public comments concerning the information collection known as the “National Survey of Mortgage Originations” (NSMO), which has been assigned control number 2590-0012 by the Office of Management and Budget (OMB) (the collection was previously known as the “National Survey of Mortgage Borrowers”). FHFA intends to submit the information collection to OMB for review and approval of a three-year extension of the control number, which is due to expire on December 31, 2016.

DATES:

Interested persons may submit comments on or before January 27, 2017.

ADDRESSES:

Submit comments to the Office of Information and Regulatory Affairs of the Office of Management and Budget, Attention: Desk Officer for the Federal Housing Finance Agency, Washington, DC 20503, Fax: [phone], Email: [e-mail]. Please also submit comments to FHFA, identified by “Proposed Collection; Comment Request: `National Survey of Mortgage Originations, (No. 2016-N-16)' ” by any of the following methods:

• Agency Web site: www.fhfa.gov/​open-for-comment-or-input.
• Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments. If you submit your comment to the Federal eRulemaking Portal, please also send it by email to FHFA at [e-mail] to ensure timely receipt by the agency.
• Mail/Hand Delivery: Federal Housing Finance Agency, Eighth Floor, 400 Seventh Street SW., Washington, DC 20219, ATTENTION: Proposed Collection; Comment Request: “National Survey of Mortgage Originations, (No. 2016-N-16).”
• U.S. Mail, United Parcel Service, Federal Express, or Other Mail Service: The mailing address for comments is: Alfred M. Pollard, General Counsel, Attention: Comments/2016-N-16, Federal Housing Finance Agency, 400 Seventh Street SW., Eighth Floor, Washington, DC 20219.

We will post all public comments we receive without change, including any personal information you provide, such as your name and address, email address, and telephone number, on the FHFA Web site at http://www.fhfa.gov. In addition, copies of all comments received will be available for examination by the public on business days between the hours of 10 a.m. and 3 p.m., at the Federal Housing Finance Agency, Eighth Floor, 400 Seventh Street SW., Washington, DC 20219. To make an appointment to inspect comments, please call the Office of General Counsel at [phone].

FOR FURTHER INFORMATION CONTACT:

Forrest Pafenberg, Supervisory Economist, Office of the Chief Operating Officer, by email at [e-mail] or by telephone at [phone]; or Eric Raudenbush, Associate General Counsel, by email at [e-mail] or by telephone at [phone], (these are not toll-free numbers), Federal Housing Finance Agency, 400 Seventh Street SW., Washington, DC 20219. The Telecommunications Device for the Hearing Impaired is [phone].

SUPPLEMENTARY INFORMATION:

A. Background

The NSMO is a recurring quarterly survey of individuals who have recently obtained a loan secured by a first mortgage on single-family residential property. The survey questionnaire is sent to a representative sample of approximately 6,000 recent mortgage borrowers each calendar quarter and typically consists of between 90 and 95 multiple choice and short answer questions designed to obtain information about borrowers' experiences in choosing and in taking out a mortgage.^[1] The questionnaire may be completed either on paper or electronically online, and is available in both English and Spanish. The NSMO is sponsored by FHFA and is one component of the National Mortgage Database Project, an ongoing joint effort of FHFA and the Consumer Financial Protection Bureau (CFPB).

Section 1324 of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992 (Safety and Soundness Act) requires that FHFA prepare annually a detailed report on the residential mortgage market activities of two of its regulated entities—the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, “the Enterprises”)—and to submit that annual report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives.^[2] At a minimum, the report must: (1) Address the extent to which the Enterprises are fulfilling their statutory duties with respect to the residential mortgage markets, including their duty to serve underserved markets; (2) aggregate and analyze relevant data on income to assess the compliance of each Enterprise with statutory housing goals established under section 1331 of the Safety and Soundness Act; ^[3] (3) aggregate and analyze data on income, race, and gender by census tract and other relevant classifications, and compare such data with larger demographic, housing, and economic trends; (4) identify the extent to which each Enterprise is involved in mortgage purchases and secondary market activities involving subprime and nontraditional loans; (5) compare the characteristics of subprime and nontraditional loans purchased and securitized by each Enterprise to other loans purchased and securitized by each Enterprise; and (6) compare the characteristics of high-cost loans purchased and securitized, but not held in portfolio, by each Enterprise to such securitized loans that are retained in portfolio or repurchased by the Enterprise, including such characteristics as the purchase price of the property securing the mortgage, the loan-to-value ratio of the mortgage, the terms of the mortgage, the creditworthiness of the borrower, and any other relevant data, as determined by the Director of FHFA.^[4]

Section 1324 further requires that FHFA conduct a monthly survey to collect data needed to adequately analyze the matters that must be addressed in the annual report.^[5] In particular, the survey must collect information on the characteristics of individual prime and subprime mortgages and the creditworthiness and other characteristics of the borrowers on those mortgages.^[6] It may also address such other matters as the Director of FHFA deems to be appropriate.^[7] The statute requires that FHFA compile a database of timely and otherwise unavailable residential mortgage market information obtained from the monthly survey and to make that information available to the public.^[8]

As a means of fulfilling these and other statutory requirements, as well as to support policymaking and research regarding the residential mortgage markets, FHFA and CFPB jointly established the National Mortgage Database Project in 2012. The project is designed to provide comprehensive information about the U.S. mortgage market based on a five percent sample of residential mortgages. The project has three primary components: (1) The National Mortgage Database; (2) the quarterly NSMO; and (3) the annual American Survey of Mortgage Borrowers (ASMB).^[9] When fully complete, the National Mortgage Database will be a de-identified loan-level database of closed-end first-lien residential mortgage loans that is representative of the market as a whole, contains detailed loan-level information on the terms and performance of the mortgages and the characteristics of the associated borrowers and properties, is continually updated, has an historical component dating back to 1998, and provides a sampling frame for surveys to collect additional information.

The core data in the National Mortgage Database are drawn from a random 1-in-20 sample of all closed-end first-lien mortgage loans outstanding at any time between January 1998 and the present from the files of Experian, one of the three nationwide credit reporting agencies. The National Mortgage Database currently contains data on approximately 11.6 million mortgage loans. Between 80,000 and 100,000 mortgages, drawn from a random 1-in-20 sample of loans newly reported to Experian, are added each quarter. Additional information on the mortgages in the datasets is drawn from other existing sources, including, but not limited to the Home Mortgage Disclosure Act (HMDA) data released by the Federal Financial Institutions Examination Council (FFIEC), property valuation models, transactional data maintained by local governments, and administrative data files maintained by the Enterprises and by federal agencies. Mortgages are followed in the National Mortgage Database until they terminate through prepayment (including refinancing), foreclosure, or maturity.

The NSMO was developed to complement the National Mortgage Database by providing critical and timely information—not available from existing sources—on the range of nontraditional and subprime mortgage products being offered, the methods by which these mortgages are being marketed, and the characteristics of borrowers for these types of loans. In particular, the survey questionnaire is designed to elicit directly from mortgage borrowers information on the characteristics of borrowers and on their experiences in finding and obtaining a mortgage loan, including: Their mortgage shopping behavior; their mortgage closing experiences; their expectations regarding house price appreciation; and critical financial and other life events effecting their households, such as unemployment, large medical expenses, or divorce. The survey questions do not focus on the terms of the borrowers' mortgage loans because these fields are available in the Experian data. However, the NSMO collects a limited amount of information on each respondent's mortgage to verify that the Experian records and survey responses pertain to the same mortgage.

Each wave of the NSMO is sent to the primary borrowers on about 6,000 mortgage loans, which are drawn from a simple random sample of the 80,000 to 100,000 newly originated mortgage loans that are added to the National Mortgage Database from the Experian files each quarter (at present, this represents an approximately 1-in-15 sample of loans added to the National Mortgage Database and an approximately 1-in-300 sample of all mortgage loan originations). By contract with FHFA, the conduct of the NSMO is administered through Experian, which has subcontracted the survey administration through a competitive process to Westat, a nationally-recognized survey vendor.^[10] Westat also carries out the pre-testing of the survey materials. Wave 1 of the NSMO was mailed out in April 2014, and a new wave of the survey has been conducted each quarter since. To date, eleven quarterly waves of the survey have been completed.

B. Need For and Use of the Information Collection

FHFA views the National Mortgage Database Project as a whole, including the NSMO, as the monthly “survey” that is required by section 1324 of the Safety and Soundness Act. Core inputs to the National Mortgage Database, such as a regular refresh of the Experian data, occur monthly, though NSMO itself does not. In combination with the other information in the National Mortgage Database, the information obtained through the NSMO is used to prepare the report to Congress on the mortgage market activities of Fannie Mae and Freddie Mac that FHFA is required to submit under section 1324, as well as for research and analysis by FHFA and CFPB in support of their regulatory and supervisory responsibilities related to the residential mortgage markets. The NSMO is especially critical in ensuring that the National Mortgage Database contains uniquely comprehensive information on the range of nontraditional and subprime mortgage products being offered, the methods by which these mortgages are being marketed and the characteristics—and particularly the creditworthiness—of borrowers for these types of loans. In the future, the information may be used to provide a resource for research and analysis by other federal agencies and by academics and other interested parties outside of the government.

FHFA is also seeking OMB approval to conduct cognitive pre-testing of the survey materials. The Agency will use information collected through that process to assist in drafting and modifying the survey questions and instructions, as well as the related communications, to read in the way that will be most readily understood by the survey respondents and that will be most likely to elicit usable responses. Such information will also be used help the Agency decide on how best to organize and format the survey questionnaires.

The OMB control number for this information collection is 2590-0012. The current clearance for the information collection expires on December 31, 2016.

C. Burden Estimate

FHFA has analyzed the hour burden on members of the public associated with conducting the survey (12,000 hours) and with pre-testing the survey materials (30 hours) and estimates the total annual hour burden imposed on the public by this information collection to be 12,030 hours. The estimate for each phase of the collection was calculated as follows:

I. Conducting the Survey

FHFA estimates that the NSMO questionnaire will be sent to 24,000 recipients annually (6,000 recipients per quarterly survey × 4 calendar quarters). Although, based on historical experience, the Agency expects that only 30 to 35 percent of those surveys will be returned, it has assumed that all of the surveys will be returned for purposes of this burden calculation. Based on the reported experience of respondents to prior NSMO questionnaires, FHFA estimates that it will take each respondent 30 minutes (0.5 hours) to complete the survey, including the gathering of necessary materials to respond to the questions. This results in a total annual burden estimate of 12,000 hours for the survey phase of this collection (24,000 respondents × 0.5 hours per respondent = 12,000 hours annually).

II. Pre-Testing the Materials

FHFA estimates that it will pre-test the survey materials with 30 cognitive testing participants annually. The estimated participation time for each participant is one hour, resulting in a total annual burden estimate of 30 hours for the pre-testing phase of the collection (30 participants × 1 hour per participant = 30 hours annually).

D. Comments Received in Response to Initial Notice

In accordance with the requirements of 5 CFR 1320.8(d), FHFA published an initial notice requesting comments regarding this information collection in the Federal Register on September 13, 2016.^[11] The 60 day comment period closed on November 14, 2016. FHFA received two comment letters, one of which recommended revisions to the content of the survey questionnaire and the other of which recommended measures to increase survey response rates. FHFA has carefully considered each of the suggested revisions, but, as explained below, has decided not to implement any of those suggestions at this time.

The first comment letter was from an individual who has served in various capacities with a community association trade group and who is the president of a company that provides online technology in support of the sale, resale, finance, and refinance of homes in community associations.^[12] The letter asserts that certain questions in the NSMO questionnaire “fail to adequately and effectively recognize” the role of community associations in U.S. home ownership and that, as a result, data from the NSMO regarding community associations “has nominal heuristic and statistical value at best.” It suggests adding several questions to the NSMO questionnaire, and revising several existing questions, to elicit more information relevant to community associations.

Specifically, the letter first suggests revising Question 60 to elicit more specific information on the type of property that is associated with the respondent's mortgage and adding two questions as to whether the respondent's property is in a community association and, if so, the specific type of community association. FHFA believes that, while such questions could be suitable for a survey that focuses on housing structure, they would not be appropriate for the NSMO, which focuses on consumers' experience in seeking and obtaining a residential mortgage loan.^[13] The commenter also suggests adding a question to elicit information on the respondent's level of familiarity with various types of community association fees. Again, such a question would be beyond the scope of the NSMO, which does not attempt to capture information on the cost of a mortgage or on fees paid at origination or over the life of the mortgage.

Finally the letter suggests revising the answer choices for Questions 7, 39, and 50 to allow respondents to indicate, respectively: Whether they used any of the proceeds from a refinance to pay community association fees; whether and to what extent community association documents or officials may have provided them with information about mortgages or mortgage lenders; and whether and to what extent they sought input about their mortgage loan closing documents from officials of a community association. FHFA notes that each of those questions permits a respondent to choose “other” and to write in a specific answer if none of the other answer choices are applicable. To date, none of the questions have elicited an “other” response in the vein of any of the answer choices that the commenter suggests adding. Accordingly, FHFA does not see a need to revise any of the questions in the manner suggested.

The second comment letter, from a law school professor, states that the NSMO is very important to understanding the health of the mortgage market and agrees that the collection is necessary for the proper performance of FHFA functions. However, it also expresses a concern that, given the length of the survey questionnaire, those recipients who ultimately decide to respond will not be representative of the typical borrower. It suggests two ways of encouraging a response from recipients who might otherwise be reluctant to take the time to complete the survey: (1) Providing a greater incentive; and (2) allowing recipients the option of completing a shorter version of the questionnaire.

FHFA agrees that non-response bias (the bias that results when respondents differ systematically from non-respondents) is an important concern and the Agency has spent, and continues to spend, significant time considering ways to increase response rates and to mitigate the effects of non-response bias. In developing the NSMO, the Agency consulted with top experts on conducting consumer surveys, who recommended an up-front payment of five dollars as the most effective way of incentivizing survey recipients to respond. FHFA adopted this recommendation. In addition, based on the results of the first seven waves of the NSMO, these experts also evaluated the expected effect on the response rate of increasing or decreasing the number of questions and the length of the questionnaire. Both experts opined that shortening the questionnaire would not significantly increase the response rate.

With respect to the mitigation of non-response bias when analyzing survey responses, FHFA has followed best practices of survey sampling analysis. The availability in the National Mortgage Database of extensive credit and administrative data on both responding and non-responding borrowers gives FHFA the ability to construct non-response weights with more accuracy than is possible for most surveys.

E. Comment Request

In accordance with the requirements of 5 CFR 1320.10(a), FHFA is publishing this second notice to request comments regarding the following: (1) Whether the collection of information is necessary for the proper performance of FHFA functions, including whether the information has practical utility; (2) the accuracy of FHFA's estimates of the burdens of the collection of information; (3) ways to enhance the quality, utility and clarity of the information collected; and (4) ways to minimize the burden of the collection of information on members and project sponsors, including through the use of automated collection techniques or other forms of information technology. Comments should be submitted in writing to both OMB and FHFA as instructed above in the Comments section.

Dated: December 22, 2016.

Kevin Winkler,

Chief Information Officer, Federal Housing Finance Agency.

Footnotes

1.  A copy of the most recent NSMO questionnaire appears at the end of this document. In addition, copies of the questionnaire in both English and Spanish can be accessed online at: http://www.fhfa.gov/​Homeownersbuyer/​Pages/​National-Survey-of-Mortgage-Originations.aspx.

2.  See 12 U.S.C. 4544(a). Congress added the requirements of section 1324 to the Safety and Soundness Act in 2008. See Housing and Economic Recovery Act of 2008, Public Law 110-289, sec. 1125, 122 Stat. 2654, 2693-95 (2008).

3.  12 U.S.C. 4561.

4.  See 12 U.S.C. 4544(b).

5.  See 12 U.S.C. 4544(c)(1).

6.  See 12 U.S.C. 4544(c)(2)(A), (B).

7.  See 12 U.S.C. 4544(c)(2)(C).

8.  See 12 U.S.C. 4544(c)(3).

9.  While the NSMO solicits information about the experiences of borrowers who have recently obtained a mortgage, the ASMB solicits information on borrowers' experience with maintaining their existing mortgages. OMB has cleared the ASMB under the PRA and assigned it control no. 2590-0015, which expires on July 31, 2019.

10.  The Fair Credit Reporting Act, 15 U.S.C. 1681 et seq., requires that the survey process, because it utilizes borrower names and addresses drawn from credit reporting agency records, must be administered through Experian in order to maintain consumer privacy.

11.  See 81 FR 62889 (Sept. 13, 2016).

12.  The letter explains that community associations are “housing management organizations that are an out-growth of traditional subdivision and zoning controls” and include condominiums, cooperatives, and planned communities.

13.  Both the American Housing Survey (sponsored jointly by the Department of Housing and Urban Development and the Census Bureau) and the American Community Survey (sponsored by the Census Bureau) would be more appropriate vehicles for eliciting such information.