Currently Regulation C requires creditors to report information regarding loans and applications made for one of three purposes:
- Home purchase;
- Home improvement; or
Reporting of home equity lines of credit (HELOCs) used for these purposes is generally optional.
Under Regulation C’s existing transaction reporting regime, certain loans that are secured by residential real property need not be reported (e.g., home equity loans with no stated purpose, HELOCs, certain reverse mortgages). Yet home improvement loans must be reported even if they are not secured by a dwelling. Moreover, at times creditors may find it difficult to identify the borrower’s purpose for some loans or resolve reporting questions when loans are for multiple purposes.
The CFPB is considering an amendment to require institutions to report information concerning all dwelling-secured loans, rather than tying coverage primarily to the purpose of the loan. The revision would:
- Eliminate reporting of home improvement loans that are not secured by a dwelling;
- Capture all home equity loans;
- Capture all HELOCs, by eliminating optional reporting; and
- Capture all reverse mortgages.
The revision would also require that HELOCs and reverse mortgages be identified by loan type, to distinguish them in the data from other categories of loans with different pricing structures and features.
The revision would apply the dwelling-secured test for reporting under HMDA both to applications for loans to be secured by a dwelling and purchases of loans secured by a dwelling. The CFPB believes:
- The proposal would establish a more streamlined, bright-line approach that may be simpler for covered institutions to apply than the current rules that generally rely on a consumer’s stated purpose for the loan.
- The approach would yield more consistent and more useful data.
The author believes the proposed revision will accomplish the CFPB’s goals and will significantly increase the number of loans reported.
The next article in this series explores the expanded data to be collected for each loan and application.