Finally, the Bureau is amending Regulation B and the associated commentary to allow creditors to collect ethnicity, race, and sex from mortgage applicants in certain cases where the creditor is not required to report under HMDA and Regulation C. These circumstances include when: (1) A creditor that is a financial institution under revised Regulation C 1003.2(g), originates a closed-end mortgage loan or an open-end line of credit that is an excluded transaction under revised Regulation C 1003.3(c)(11) or 1003.3(c)(12), if it submits HMDA data concerning those applications and loans or if it submitted HMDA data concerning closed-end mortgage loans or open-end lines of credit in any of the preceding five calendar years; (2) a creditor that submitted HMDA data in any of the preceding five calendar years but is not currently a financial institution under Regulation C 1003.2(g), collects demographic information of an applicant for a loan that would otherwise be a covered loan under Regulation C 1003.2(e), if not excluded by Regulation C 1003.3(c)(11) or 1003.3(c)(12); (3) a creditor that exceeded an applicable loan volume threshold in the first year of the two-year threshold period provided in Regulation C 1003.2(g), 1003.3(c)(11), or 1003.3(c)(12), collects, in the second year, demographic information of an applicant for a loan that would otherwise be a covered loan under Regulation C 12 CFR 1003.2(e), if the loan were not excluded by Regulation C 1003.3(c)(11) or 1003.3(c)(12); (4) a creditor that is a financial institution under Regulation C 1003.2(g), or that submitted HMDA data for any of the preceding five calendar years but is not currently a financial institution under Regulation C 1003.2(g), collects demographic information of an applicant for a loan that would otherwise be a covered loan under Regulation C 1003.2(e) if the loan were not excluded by Regulation C 1003.3(c)(10); and (5) a creditor that collects demographic information of a second or additional co-applicant for a covered loan under Regulation C 1003.2(e), or for a second or additional co-applicant for a loan described in amended 1002.5(a)(4)(i) through (v). If a creditor collects applicant information pursuant to 1002.13(a)(1)(i)(B), the applicant must be offered the option to select more than one ethnicity and more than one racial designation. This appendix also contains a data collection model form for collecting information concerning an applicant's ethnicity, race, and sex that Start Printed Page 45695complies with the requirements of 1002.13(a)(1)(i)(A) and (ii). 5. Some Regulation B-only creditors sell mortgages to the Enterprises, and would benefit from being able to use the 2016 URLA. Second, many Regulation B-only creditors will be exempt from reporting under revised Regulation C because they originate fewer than 25 closed-end mortgage loans in each of the two preceding calendar years, which means both that few consumers would be affected and any disaggregated data would likely be too sparse for statistical analysis. Indeed, given that Regulation C requires collection of certain applicant demographic information on the basis of visual observation or surname, adopting either proposal would undermine the purpose of this rulemaking by imposing different requirements in Regulation B and Regulation C.[37] Comments related to the data collection model forms are addressed in the section-by-section analysis of the Regulation B appendix. "CFPB Consumer Laws and Regulations ECOA.". One industry commenter also noted that the 2016 URLA includes a form for the collection of applicant demographic information for additional borrowers and does not necessarily limit the collection to the applicant and the first co-applicant, even though Regulation C requires financial institutions to provide the ethnicity, race and sex information only for the applicant and first co-applicant. The Equal Credit Opportunity Act (ECOA), 15 U.S.C. @*EtJ '_whyb.v'Yc:E| t%]C@bkBZSAqqu`2B6G\#; informational resource until the Administrative Committee of the Federal Regulation B and Ethnicity and Race Information Collection, Comments Related to Other Changes to Regulation B, Section 1002.5Rules Concerning Requests for Information, 5(a)(4) Other Permissible Collection of Information, Section 1002.13Information for Monitoring Purposes, Appendix B to Part 1002Model Application Forms, Model Forms for Complying With Section 1002.13(a)(1)(i), Removal of the Official Commentary to Appendix B, VII. The Bureau does not believe that these comments are relevant to the 2017 ECOA Proposal and do not provide a basis to change the approach proposed by the Bureau in the 2017 ECOA Proposal, which, as related to 1002.13, is limited to modifications that harmonize the collection requirements of Regulation B and Regulation C. For the reasons discussed above, the Bureau is adopting 1002.13(a)(1)(i) and comments 13(a)-7 and 13(a)-8 as proposed. Until the ACFR grants it official status, the XML Appendix B to this part provides for two alternative data collection model forms for use in complying with the requirements of 1002.13(a)(1)(i) and (ii) to collect information concerning an applicant's ethnicity, race, and sex. A purpose of ECOA, as implemented by Regulation B, is to promote the availability of credit to all creditworthy applicants without regard to protected characteristics. The President of the United States communicates information on holidays, commemorations, special observances, trade, and policy through Proclamations. Specifically, section 1022(b)(2)(A) of the Dodd-Frank Act calls for the Bureau to consider the potential costs of a regulation to consumers and covered persons, including the potential reduction of access by consumers to consumer financial products or services; the impact on depository institutions and credit unions with $10 billion or less in total assets as described in section 1026 of the Dodd-Frank Act; and the impact on consumers in rural areas. Without a corresponding record retention requirement, a creditor might collect but not retain the information, thus preventing the use of the information for these purposes. The Bureau received several additional comments about topics other than those raised by the Bureau in the 2017 ECOA Proposal. Federal Register provide legal notice to the public and judicial notice This repetition of headings to form internal navigation links 5512(b)(1)). The notice must explain why the applicant was rejected or give instructions for how the applicant can request this information. The commenter suggested that the Bureau revise 1002.5(b) to permit collection of demographic information for any additional co-applicants using the 2016 URLA. The authority citation for part 1002 continues to read as follows: Authority: In this Issue, Documents Rules for Taking Applications - 12 CFR 1002.5. 2. 09/29/2017 at 8:45 am. that agencies use to create their documents. I'd first recommend that you go review this section and the applicable Official Staff Commentary. See Fannie Mae, Guide Forms, available at https://www.fanniemae.com/singlefamily/selling-servicing-guide-forms (last visited Sept. 6, 2017) (listing all current selling and servicing guide forms); see also Freddie Mac, Forms and Documents, available at http://www.freddiemac.com/singlefamily/guide/ (last visited Sept. 6, 2017) (same). One industry commenter generally supported the proposal, noting the flexibility would reduce compliance burden. 31. As discussed above in Part V, the Bureau disagrees with the consumer advocacy group commenter that there would be little burden to Regulation B-only creditors from making the collection of disaggregated race and ethnicity categories mandatory. These scenarios Start Printed Page 45681generally involve types of loans subject to Regulation C where a creditor voluntarily reports information under Regulation C, reported such information in the past five years, or may report such information in the near future. The fifth model form, the 2004 URLA, is described in the Regulation B appendix as appropriate for residential mortgage transactions and contains a model disclosure for use in complying with current 1002.13. This PDF is These reflect FFIEC-approved procedures. procedures. Regarding the provision to allow certain creditors to voluntarily collect demographic information, the Bureau believes the financial institutions that will most likely exercise such options will be low-volume, low-complexity institutions that have made a one-time investment in HMDA collection and reporting and would like to utilize that collection process already in place. Regulation B of the Equal Credit Opportunity Act (ECOA) describes lending acts and practices that are specifically prohibited, permitted, or required. The Bureau has consulted, or offered to consult with, the prudential regulators (the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency), the Securities and Exchange Commission, the Department of Justice, the Department of Housing and Urban Development, the Federal Housing Finance Agency, the Federal Trade Commission, the Department of Veterans Affairs, the Department of Agriculture, and the Department of the Treasury, including regarding consistency with any prudential, market or systematic objectives administered by such agencies. This appendix contains five model credit application forms, each designated for use in a particular type of consumer credit transaction as indicated by the bracketed caption on each form. Revision of the Standards for the Classification of Federal Data on Race and Ethnicity, 62 FR 58782, 5878-90 (Oct. 30, 1997). Paragraph 13(b)Obtaining of information is revised. Currently the disaggregated race and ethnicity categories required by the amendments to Regulation C in the 2015 HMDA Final Rule, effective January 1, 2018, do not match the categories specified in current Regulation B. The rule also removes as outdated the existing version of the URLA contained in the Regulation B appendix, effective January 1, 2022. It outlines the rules that lenders must adhere to when obtaining and processing credit information. Having considered the comments received and for the reasons discussed above, the Bureau is finalizing 1002.5(a)(4)(i) through (iv) generally as proposed with minor wording changes for clarity, finalizing new 1002.5(a)(4)(v) and (vi), and finalizing the conforming amendments to comment 5(a)(2)-2 and new comment 5(a)(4)-1 as proposed. 03/01/2023, 205 Through this proposed change, creditors taking applications for loans subject to 1002.13(a)(1) but not required to submit HMDA data under Regulation C would have the option of either maintaining their current collection practices or transitioning to the revised Regulation C collection practices and the 2016 URLA. Counts are subject to sampling, reprocessing and revision (up or down) throughout the day. documents in the last year, 1479 Is There a Gender Gap in Home Equity Loans? 33. Amendments to Equal Credit Opportunity Act (Regulation B) Ethnicity and Race Information Collection, 82 FR 16307 (Apr. Various consumer advocacy groups also opposed proposed comment 13(a)-8, arguing that the instruction could encourage creditors to develop and maintain haphazard, inaccurate, and inconsistent data collection methods. In addition, the Bureau proposed amendments adding 1002.5(a)(4) to permit creditors to collect applicant demographic information when they would not otherwise be required to do so in certain scenarios where creditors may benefit from being able to adopt Regulation C compliance practices before they become required or maintain them when they are no longer required. Although these entities need not make any changes to their race and ethnicity collection procedures, they may desire to do so in the future by adopting the 2016 URLA. The consumer advocacy groups further expressed the view that mandatory disaggregated collection would prepare lenders to submit HMDA data in the future should they cross a reporting threshold and that the burden of mandatory disaggregated collection would not be significant because the 2016 URLA makes it easy to record these categories. Accordingly, 1002.5(a)(4)(vi) permits a creditor that is collecting information regarding the ethnicity, race, and sex of an applicant or first co-applicant to collect information regarding the ethnicity, race, and sex of a second or additional co-applicant for a covered loan under Regulation C 1003.2(e), or for a loan described in paragraphs (a)(4)(i) through (v). Regulation B covers the actions of a creditor before, during, and after a credit transaction. Under Section 1002.5Rules concerning requests for information: b. The few commenters who specifically addressed the Bureau's proposed amendment to 1002.13(b) generally supported the modification, noting that it aligned with revised Regulation C and would facilitate consistent data collection. As a result, when revised Regulation C takes effect, an institution's obligation to collect and report information under Regulation C may change over time based on its prior loan volume. The Bureau Approval Notice provides that, 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 revised Regulation C. During this period, a creditor adopting the practice of permitting applicants to self-identify using disaggregated ethnic and racial categories as instructed in the Regulation C appendix is not deemed to violate Regulation B 1002.5(b). To the extent that the provision benefits firms and consumers, consumers in rural areas will see the largest benefits. A purpose of ECOA is to promote the availability of credit to all creditworthy applicants without regard to race, color, religion, national origin, sex, marital status, or age (provided the applicant has the capacity to contract) or other protected characteristics. The rule is effective on January 1, 2018, except that the amendment to Appendix B to Part 1002 revising paragraph 1 and removing the existing Uniform Residential Loan Application form in amendatory instruction 6 is effective January 1, 2022. Thus, a small entity that is in compliance with current law need not take any additional action, save those already required by the 2015 HMDA Final Rule. If the applicant(s) chooses not to provide the information or any part of it, that fact shall be noted on the form. Federal Reserve. [29] with the applicable provisions of Regulation B described below. The Bureau believes that, if a creditor voluntarily collects applicant demographic information pursuant to 1002.5(a)(4), the creditor should be required to maintain those records in the same manner as it does for protected applicant-characteristic information it is required to collect. 03/01/2023, 828 Commenters also requested that the Bureau increase the thresholds for being a HMDA reporter to a higher limit that would exempt more creditors from HMDA. Questions regarding ethnicity, race, sex, marital status, and age may be listed, at the creditor's option, on the application form or on a separate form that refers to the application. A creditor that enters information items from a written application into a computerized or mechanized system and makes the credit decision mechanically, based only on the items of information entered into the system, may comply with 1002.12(b) by retaining the information actually entered. 82 FR 16307, 16315 (Apr. Learn more here. Redlining is the discriminatory practice of denying services (typically financial) to residents of certain areas based on their race or ethnicity. 6. You can learn more about the standards we follow in producing accurate, unbiased content in our. It is still the case that due to the low volume of mortgages by many affected entities and the lack of reporting, disaggregated race and ethnicity data may have limited benefits. For example, Hispanic or Latino as defined by OMB for the 2010 Census refers to a person of Cuban, Mexican, Puerto Rican, South or Central American, or other Spanish culture or origin. Federal Reserve. Video and other electronic-application processes. The Bureau did not propose changes to Regulation C in this rulemaking. This temporary increase in the open-end threshold will provide time for the Bureau to consider whether to initiate another rulemaking to address the appropriate level for the open-end threshold for data collected beginning January 1, 2020. One of these commenters stated that the collection of applicant demographic information is duplicative of Regulation C and that removing this requirement in Regulation B would reduce burden. The proposal was published in the Federal Register on April 4, 2017.[22]. Regulation B 1002.2(g) defines business credit to mean, with certain exceptions, extensions of credit primarily for business or commercial purposes. The Bureau believes the final rule will provide modest benefits to such institutions, by saving on one-time adjustment costs required to shift in and out of collection. The Bureau also proposed to revise comment 13(b)-1 to reiterate that when a creditor collects only aggregate ethnicity and race information pursuant to 1002.13(a)(1)(i)(A), the applicant must be offered the option to select more than one racial designation. Although it may be true in the particular case of the community bank commenter, the Bureau believes it is not the case that Start Printed Page 45693these data are never used by regulators. Regulation B applies toall persons who, in the ordinary course of business, regularly participate in the credit decision of an applicant or borrower, including setting the terms of the credit. 5. An application for temporary financing to construct a dwelling is not subject to 1002.13. The disclosure to an applicant regarding the monitoring information may be provided in writing. The Enterprises, currently under the conservatorship of the Federal Housing Finance Agency (FHFA), prepare and periodically revise the URLA used by many lenders for certain dwelling-related loans. The Bureau Approval Notice provided that, anytime 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 the revised Regulation C appendix. Section 1002.5(a)(2) further provides that a creditor may obtain 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 and regulations. Z Two of these circumstances are a requirement for creditors to collect and retain certain information about applicants for certain dwelling-secured loans under Regulation B 1002.13 and the similar applicant information that financial institutions are required to collect and report under Regulation C, 12 CFR part 1003, which implements the Home Mortgage Disclosure Act (HMDA). The Bureau believes that depository institutions and credit unions with $10 billion or less in assets will not be differentially affected by the substantive amendments. documents in the last year, 522 Appendix B provides data collection model forms for use in complying with 1002.13 and that comply with 1002.13(c). Regulation B also includes certain optional model forms for use in complying with certain Regulation B requirements, including a model form for complying with 1002.13 that is a 2004 version of the Uniform Residential Loan Application (URLA) issued by the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) (collectively, the Enterprises). Document page views are updated periodically throughout the day and are cumulative counts for this document. The final rule will provide creditors flexibility in complying with Regulation B in order to facilitate compliance with Regulation C and transition to the 2016 URLA. 16. 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