REGULATION B AND THE NEW UNIFORM RESIDENTIAL LOAN APPLICATION

On September 23 the Consumer Financial Protection Bureau (CFPB) published an Official Approval concerning the new Uniform Residential Loan Application and the collection of expanded Home Mortgage Disclosure Act information about ethnicity and race in 2017. The official approval was issued on September 23, 2016. Entities may rely on the official approval beginning January 1, 2017.

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to Regulation B contained in Supplement I to Regulation B. The CFPB will consider whether to address the treatment of outdated versions of the URLA in appendix B and Supplement I to Regulation B at a later date.

Dilemma

Regulation C, as amended by the final rule published 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 CFPB 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 CFPB 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.

Solution

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 the official approval has been duly authorized by the Director of the CFPB and provides the protection afforded under section 706(e) of ECOA.

Instructions for Submitting 2017 Data

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.
    • 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.
  • 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.

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