HARRISBURG — Attorney General Shapiro and 11 other Attorneys General today submitted formal legal comments urging the Consumer Financial Protection Bureau (CFPB) not to adopt new rules that would undermine regulators’ ability to enforce fair lending laws and prevent discrimination against communities of color in the mortgage lending market.
“The CFPB wants to roll back reporting requirements that are critical for regulators, like state Attorneys General, to be able to root out discrimination against communities of color in mortgage lending,” said Attorney General Josh Shapiro. “The CFPB’s proposal would open the door for financial institutions to engage in redlining and resume the very predatory lending practices that fueled the 2008 financial crash. These companies need more scrutiny—not less. I’m proud to stand with my colleague Attorneys General to oppose this brazen proposal and call on the CFPB to keep these key regulations in place to prevent discrimination. My Bureau of Consumer Protection and Civil Rights Enforcement Section will continue to stand up for the civil rights of all Pennsylvanians and combat institutional racism in housing practices.”
By hiding important data points, the CFPB deliberately turns a blind eye to financial institutions, making it easier for them to resume predatory lending practices. The amended regulations require financial institutions to report more of the data that they already collect so that more information – including the costs of the loan and any predatory attributes – would be accessible to enforcement agencies. These new data fields were set to help avoid another subprime lending crisis like the one that led to the 2008 economic recession. The CFPB noted that they struck the proper balance between the burden placed on smaller lenders and the need for data to ensure that mortgage lending is conducted in a non-discriminatory and responsible manner.
Specifically, the comment letter challenges a May 2019 CFPB proposal limiting the data financial institutions are required to report to the CFPB under the Home Mortgage Disclosure Act (HMDA), a 1975 law that requires mortgage lenders to make certain mortgage data publicly available as a check to ensure compliance with fair lending laws. In 2010, in the wake of the 2008 financial crisis, Congress amended HMDA to expand the required data and to give the CFPB the authority to require additional data as necessary to achieve the objective of greater transparency. In 2015, CFPB added 14 additional required data points and revised others. In addition to collecting more detailed information on race, some of this data includes information which lenders already collect to comply with other regulations as well as their own underwriting standards, such as loan-to-value ratio, origination charges, interest rate, debt-to-income ratio, property interest, and the reason for denial.
Now, the CFPB is soliciting comments on which data fields should be eliminated from reporting. The CFPB’s attempts to water down the data that financial institutions must report will all but ensure that the United States will not be able to prevent another financial crisis brought about by predatory lending.
Attorney General Shapiro argues that these changes undermine the core function of the HMDA and would impede the public officials’ ability to ensure that mortgage lending is being conducted in a non-discriminatory manner in their communities.
In addition to Pennsylvania, the Attorneys General of California, Connecticut, Delaware, the District of Columbia, Hawaii, Illinois, Massachusetts, Michigan, Minnesota, Oregon, and Rhode Island also signed onto the comment letter. A copy of the letter can be read here.
Attorney General Shapiro is currently investigating allegations of redlining based on evidence of financial institutions refusing to make mortgage loans in Philadelphia neighborhoods because of their racial or ethnic makeup, or otherwise unlawfully dissuading minorities from applying for mortgage loans. Consumers who believe they have been victims of discriminatory housing practices should email discrimination@attorneygeneral.gov or call the office’s Civil Rights section at (717) 787-0882.
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