FHFA drives increased data collection

Two recent announcements by the Federal Housing Finance Agency (FHFA) will empower the mortgage services industry to collect and maintain data on consumer demographics and language preferences.

On May 3, 2022, the FHFA announced that Fannie Mae and Freddie Mac (GSE) will require lenders submitting loans to GSEs to use the Supplemental Consumer Information Form (SCIF) as part of the application process. Did. SCIF collects information about the borrower’s language preference (if the borrower has agreed to provide it) and any homebuyer education or housing counseling that the borrower has received. The intended result is for lenders to better understand the needs of borrowers during the home buying process. The GSE also requires lenders to report all data collected from SCIF to the entity purchasing the loan. The lender must apply the new changes to all loans with an application date after her March 1, 2023. The CFPB welcomed this announcement and advised that collecting an applicant’s language preference does not violate the Equal Credit Opportunity Act (ECOA) or its implementing regulations. CFPB director his Rohit Chopra said:

With a similar goal in mind, the GSE announced on August 10, 2022 that it would require servicers to obtain and maintain unbiased lending data on future loans (that is, during the origination process). obtained). Such data must be maintained in a queryable format and transferred with the service for the life of the loan. The fair lending data maintained includes the borrower’s race, ethnicity, age, gender, and preferred language. Servicer recommends implementing these policy changes immediately, but no later than March 1, 2023. Separate GSE announcements can be found in Fannie Mae Announcement SVC-2022-06 and Freddie Mac Bulletin 2022-17.

Thompson advised:[t]The need to collect and maintain high-quality, unbiased lending data is a lesson learned from the foreclosure crisis and the COVID-19 response,” and “[h]Providing fair lending data alongside our services helps servicers do the important job of providing assistance to borrowers in need and helps promote a sustainable and equitable housing finance system. ”

Takeaway

Currently, servicers generally do not maintain loan-level data on borrowers’ protected characteristics under the ECOA, and often do not maintain consistent language preference information. While this data limitation presents a challenge for servicers attempting to self-audit fair servicing risk, the lack of data also poses a significant hurdle for regulators seeking to identify disparities based on protected characteristics. Become. The GSE announcement fundamentally changes this dynamic. Of course, it will take a long time for the industry to accumulate a critical mass of serviced loans with actionable data. , stakeholders should start preparing for: (2) Reconsider procedures for borrowers with limited English proficiency. (3) Consider how you can take advantage of increased access to data.