2016-23555. Status of New Uniform Residential Loan Application and Collection of Expanded Home Mortgage Disclosure Act Information About Ethnicity and Race in 2017

AGENCY:

Bureau of Consumer Financial Protection.

ACTION:

Bureau Official Approval.

SUMMARY:

The Bureau of Consumer Financial Protection (Bureau) is publishing a notice pursuant to the Equal Credit Opportunity Act concerning the new Uniform Residential Loan Application and the collection of expanded Home Mortgage Disclosure Act information about ethnicity and race in 2017.

DATES:

This official approval is issued September 23, 2016. Entities may rely on part III of this Bureau official approval beginning January 1, 2017.

FOR FURTHER INFORMATION CONTACT:

James Wylie, Counsel, Office of Regulations, Consumer Financial Protection Bureau, 1700 G Street NW., Washington, DC 20552, at 202-435-7700.

SUPPLEMENTARY INFORMATION:

I. Background

The Bureau of Consumer Financial Protection (Bureau) administers the Equal Credit Opportunity Act (ECOA), 15 U.S.C. 1691, et seq. and its implementing regulation, Regulation B, 12 CFR part 1002. Section 706(e) of ECOA, as amended, provides that no provision of ECOA imposing liability shall apply to any act done or omitted in good faith in conformity with any official rule, regulation, or interpretation thereof by the Bureau or in conformity with any interpretation or approval by an official or employee of the Bureau duly authorized by the Bureau to issue such an interpretation or approval. This notice (Bureau official approval) constitutes such an interpretation or approval, and therefore section 706(e) protects a creditor from civil liability under ECOA for any act done or omitted in good faith in conformity with this notice.

II. New Uniform Residential Loan Application Status Under Regulation B

The Federal Home Loan Mortgage Corporation and the Federal National Mortgage Association (collectively, the Enterprises), under the conservatorship of the Federal Housing Finance Agency (FHFA), issued a revised and redesigned Uniform Residential Loan Application on August 23, 2016, included as an attachment to this notice (2016 URLA).^[1] This issuance was part of the effort of these entities to update the Uniform Loan Application Dataset (ULAD) in conjunction with the 2016 URLA. Bureau staff has reviewed the 2016 URLA in accordance with the request by FHFA and the Enterprises for a Bureau official approval of the 2016 URLA under ECOA and Regulation B.

A. Background

A version of the URLA dated January 2004 is included in appendix B to Regulation B as a model form. Appendix B provides that the use of model forms included in appendix B is optional under Regulation B but that, if a creditor uses an appropriate appendix B model form, or modifies a form in accordance with instructions provided in appendix B, that creditor shall be deemed to be acting in compliance with § 1002.5(b) through (d). Regulation B comment appendix B-1 provides that a previous version of the URLA, dated October 1992, may be used by creditors without violating Regulation B.

This Bureau official approval is being issued separately from, and without amending, the official interpretations to Regulation B contained in Supplement I to Regulation B. The Bureau will consider whether to address the treatment of outdated versions of the URLA in appendix B and Supplement I to Regulation B at a later date.

B. Bureau Official Approval

Regulation B § 1002.5(b) provides rules concerning requests for information about race, color, religion, national origin, or sex. Section 1002.5(c) provides rules concerning requests for information about a spouse or former spouse. Section 1002.5(d) provides rules concerning requests for information regarding marital status; income from alimony, child support, or separate maintenance; and childbearing or childrearing. Bureau staff has determined that the relevant language in the 2016 URLA is in compliance with these regulatory provisions. A creditor's use of the 2016 URLA is not required under Regulation B. However, a creditor that uses the 2016 URLA without any modification that would violate § 1002.5(b) through (d) would act in compliance with § 1002.5(b) through (d). The issuance of this Bureau official approval has been duly authorized by the Director of the Bureau and provides the protection afforded under section 706(e) of ECOA.

III. Collection of Expanded Home Mortgage Disclosure Act Information About Ethnicity and Race in 2017

This part of this Bureau official approval addresses collection of information concerning the ethnicity and race of applicants in conformity with Regulation B from January 1, 2017, through December 31, 2017.

A. Background

With some exceptions, Regulation B § 1002.5(b) generally prohibits a creditor from inquiring about the race, color, religion, national origin, or sex of an applicant or any other person in connection with a credit transaction. Regulation B § 1002.5(a)(2) provides an exception to that prohibition for information, including information about ethnicity and race, for monitoring purposes that creditors are required to request for certain dwelling-secured loans under § 1002.13, and for information required by a regulation, order, or agreement issued by or entered into with a court or an enforcement agency to monitor or enforce compliance with ECOA, Regulation B, or other Federal or State statutes or regulations, including Regulation C.^[2] Under Regulation C § 1003.4(a)(10), lenders covered by Regulation C are required to collect, record, and report certain information, including information regarding ethnicity and race, that would be otherwise prohibited.

Regulation C, as amended by the final rule published in the Federal Register at 80 FR 66127 on October 28, 2015 (2015 HMDA final rule), will require financial institutions to permit applicants to self-identify using disaggregated ethnic and racial categories beginning January 1, 2018.^[3] However, before that date, such inquiries will not be required by Regulation C or allowed under Regulation B § 1002.5(a)(2), and therefore creditors would be prohibited by Regulation B § 1002.5(b) from requesting applicants to self-identify using the disaggregated ethnic and racial categories.

The Bureau believes there will likely be significant benefits to permitting creditors to request, before January 1, 2018, that applicants self-identify using the disaggregated ethnic and racial categories under amended Regulation C, using the processes and instructions provided in amended appendix B to Regulation C. The Bureau believes such authorization may provide creditors time to begin to implement the regulatory changes and improve their compliance processes before the new requirement becomes effective, and therefore mandatory, on January 1, 2018. Allowing for this increased implementation period will reduce compliance burden and further the purposes of HMDA and Regulation C. Some creditors may be ready to permit applicants to self-identify using disaggregated ethnic and racial categories before January 1, 2018, but could not fully transition to new forms and processes because of the prohibition in Regulation B § 1002.5(b). It may help industry adoption of those standards to allow creditors to permit applicants to self-identify using disaggregated ethnic and racial categories before January 1, 2018. Moreover, permitting applicants to self-identify using the disaggregated ethnic and racial categories as instructed in appendix B to Regulation C, as amended by the 2015 HMDA final rule, before the effective date of that rule is consistent with the purposes of ECOA and Regulation B and does not pose a risk of harm to consumers. As the Bureau explained in the 2015 HMDA final rule, the Bureau believes that, among other things, disaggregation will encourage self-reporting by applicants by offering, as the Census does, categories that promote self-identification.^[4]

B. Bureau Official Approval

At any time from January 1, 2017, through December 31, 2017, a creditor may, at its option, permit applicants to self-identify using disaggregated ethnic and racial categories as instructed in appendix B to Regulation C, as amended by the 2015 HMDA final rule. During this period, a creditor adopting the practice of permitting applicants to self-identify using disaggregated ethnic and racial categories as instructed in appendix B to Regulation C, as amended by the 2015 HMDA final rule, shall not be deemed to violate Regulation B § 1002.5(b). During this period, a creditor adopting the practice of permitting applicants to self-identify using disaggregated ethnic and racial categories as instructed in appendix B to Regulation C, as amended by the 2015 HMDA final rule, shall also be deemed to be in compliance with Regulation B § 1002.13(a)(i) even though applicants are asked to self-identify using categories other than those explicitly provided in that section. The issuance of this Bureau official approval has been duly authorized by the Director of the Bureau and provides the protection afforded under section 706(e) of ECOA.

C. Instructions for Submitting Data Collected Under This Approval

For purposes of submitting HMDA data for applications received from January 1, 2017, through December 31, 2017, and on which final action is taken during the 2017 calendar year, a financial institution shall submit the information concerning ethnicity and race pursuant to § 1003.4(a)(10), using only aggregate categories and the codes provided in the filing instructions guide for HMDA data collected in 2017, even if the financial institution has permitted applicants to self-identify using disaggregated categories pursuant to this Bureau official approval.^[5] For such applications, if an applicant selects multiple disaggregated ethnicity or race categories that correspond to a single aggregate ethnicity or race category, the financial institution shall submit the applicable code for that aggregate ethnicity or race category. If an applicant selects multiple disaggregated race categories that correspond to multiple aggregate race categories, the financial institution shall submit the applicable code for each of those aggregate race categories. If an applicant selects an “other” race or ethnicity category, with or without providing a written response, the financial institution shall submit the applicable code for that aggregate race or ethnicity category. If an applicant selects multiple aggregate ethnicity categories by either selecting both Hispanic or Latino and Not Hispanic or Latino or selecting Not Hispanic or Latino and selecting the “other” ethnicity category, with or without providing a written response, the financial institution may submit either the applicable code for Hispanic or Latino or the applicable code for Not Hispanic or Latino.

For purposes of submitting HMDA data for applications received on or after January 1, 2017, and before January 1, 2018, and on which final action is taken on or after January 1, 2018, the financial institution, at its option, may submit the information concerning ethnicity and race under § 1003.4(a)(10)(i) using disaggregated categories if the applicant provided such information instead of using the transition rule in Regulation C comment 4(a)(10)(i)-2 as adopted by the 2015 HMDA final rule, or it may submit the information in accordance with that transition rule.

IV. Regulatory Requirements

This Bureau official approval is an approval or interpretation exempt from notice and comment rulemaking requirements under the Administrative Procedure Act. See 5 U.S.C. 551, 553(b). Because no notice of proposed rulemaking is required, the Regulatory Flexibility Act does not require an initial or final regulatory flexibility analysis. 5 U.S.C. 603(a), 604(a). The Bureau has determined that this notice does not impose any new or revise any existing recordkeeping, reporting, or disclosure requirements on covered entities or members of the public that would be collections of information requiring OMB approval under the Paperwork Reduction Act, 44 U.S.C. 3501, et seq. The existing information collections required by the Equal Credit Opportunity Act (ECOA) and Regulation B have been approved by the Office Of Management and Budget under OMB Control #3170-0013, and the information collections for the Home Mortgage Disclosure Act (HMDA) and Regulation C are approved under OMB Control #3170-0008. The Bureau's approval of the revised Uniform Residential Loan Application (2016 URLA) does not add or alter any information collections approved under either rule.

V. 2016 Uniform Residential Loan Application

Dated: September 23, 2016.

David Silberman,

Associate Director, Division of Research, Markets, and Regulations, Bureau of Consumer Financial Protection.

Footnotes

1.  See 2016 URLA—Borrower Information, 2016 URLA—Additional Borrower, 2016 URLA—Unmarried Addendum, 2016 URLA—Lender Loan Information, 2016 URLA—Continuation Sheet, and 2016 URLA Demographic Information Addendum included as attachments in part V of this notice.

2.  Regulation B comment 5(a)(2)-2 explains that Regulation C generally requires creditors covered by HMDA to collect and report information about the race, ethnicity, and sex of applicants for home-improvement loans and home purchase loans, including some types of loans not covered by § 1002.13.

3.  80 FR 66314, amendments to appendix B to Regulation C effective January 1, 2018.

4.  HMDA Final Rule, 80 FR at 66190.

5.  See 2017 File Specifications in filing instructions guide for HMDA data collected in 2017, available at: http://www.consumerfinance.gov/​data-research/​hmda/​static/​for-filers/​2017/​2017-HMDA-FIG.pdf.