Page 1 of 11 BUREAU O F CONSUMER FINANCIAL PROTECTION

PAPERWORK REDUCTION ACT SUBMISSION

I NFORMATION COLLECTION REQUEST

SUPPORTING STATEMENT PART A

HOME MORTGAGE DISCLO SURE (REGULATION C) 12 CFR 1003 (OMB CONTROL NUMBER: 3170

- 0008 )

OMB TERMS OF CLEARANCE:

None.

ABSTRACT:

The Home Mortgage Disclosure Act (HMDA) requires most mortgage lenders lending in metropolitan areas to collect data about their housing

- related lending activity. Annually, lenders must report those data to the appropriate federal agen cies and make the data available to the public. The Consumer Financial Pr o tection Bureau’s (CFPB) regulation requires covered financial institutions that meet certain thresholds to maintain data about home loan applications ( e.g. , the type of loan requeste d, the purpose of the loan, whether the loan was approved, and the type of purchaser if the loan was later sold), to update the information quarterly, and to report the information annually. The purpose of the information collection is: (i) to help determi ne whether financial institutions are serving the housing needs of their communities; (ii) to assist public officials in distributing public

- sector investment so as to attract private investment to areas where it is needed; and (iii) to assist in identifyi ng possible discriminatory lending patterns and enforcing antidiscrimination statutes. The information collection will assist the CFPB's examiners, and examiners of other federal supervisory agencies, in determining that the financial institutions they sup ervise comply with applicable provisions of HMDA.

PART A. JUSTIFICATION

1. Circumstances Necessitating the Data Collection

D ata reported under the Home Mortgage Disclosure Act (HMDA), 12 U.S.C. 2801

- 2810, represent the primary data source for regulators, industry, advocates, researchers, and economists studying and analyzing trends in the mortgage market for a variety of purposes, including general market and economic monitoring, as well as assessing housing needs, public investment, and possib le discrimination. Historically, HMDA has been implemented by Regulation C of the Board, 12 CFR 203 , and HMDA data has been collected and reported under OMB control

number 7100

- 0247 . Congress has periodically modified the law, and the Board has routinely updated Regulation C, in order to ensure that the data continued to fulfill the HMDA’s purposes.Page 2 of 11 Users of HMDA data, however, have consistently advocated for expansion of HMDA data to keep pace with the mortgage market’s evolution, particularly during the market’s rapid growth into nontraditional lending products and its subsequent collapse in 2008. In 2010, Congress responded to the mortgage crisis in the Dodd

- Frank Act by enacting changes to HMDA as well as directing reforms to the mortgage market a nd the broader financial system. In addition to transferring rulemaking authority for HMDA from the Board to the Bureau, section 1094 of

the Dodd

- Frank Act directed the Bureau to implement changes requiring the collection and reporting of several new data points, and authorized the Bureau to require financial institutions to collect and report such other information as the Bureau may require.

HMDA requires financial institutions to report certain information related to covered

loans. Financial instituti ons are required to report HMDA data annually to the Bureau or to the appropriate Federal agency . All reportable transactions must be recorded within 30 calendar days after the end of the calendar quarter in which final action is taken on a loan applicat ion register, which must also be disclose d to the public upon request. Financial institutions must also make their disclosure statements, which are prepared by the FFIEC from data submitted by the institutions, available to the public upon request.

The CFPB plans to issue a proposed rule to implement amendments to HMDA included

in the Dodd

- Frank Act , and to make other changes in the CFPB’s Regulation C

. The proposed rule would impose new reporting requirements by requiring financial institutions to repo rt additional information required by the Dodd

- Frank Act, as well as certain information determined by the Bureau to be necessary and proper to effectuate HMDA’s purposes. The proposed rule also modifies the scope of the institutional and transactional co verage thresholds.

2. Use of the Information

The purpose of the information collection is: (1) to help determine whether financial institutions are serving the housing needs of their communities ; (2) to assist public officials in distributing public

- section investment so as to attract private investment to areas where it is needed; and (3) to assist in identifying possible discriminatory lending patterns and enforcing

antidiscrimination statutes. The information collection will assist the CFPB ’s examiners, and examiners of other federal supervisory agencies, in determining that the financial institutions they supervise comply with the applicable provisions of HMDA.

3. Use of Information Technology

All covered financial institutions regulat ed by the CFPB have the option to make the required disclosures electronically and most, if not all, disclose electronically.

4. Efforts to Identify Duplication

Substantially all of the information collected is not otherwise available. N o privately

produced loan

- level mortgage databases with comprehensive national coverage exist that are easily

- accessible by the public. Private data vendors offer a few large databases for sale, butPage 3 of 11 these are typically collected via either the largest ser vicers or securitizers, and therefore none

match the near

- universal coverage of the HMDA data. Notably, unlike HMDA, almost all the commercially

- available loan

- level databases provided by vendors are for originated loans only and do not include applicatio ns that did not result in an origination.

5. Efforts to Minimize Burdens on Small Entities

The CFPB convened a Small Business Review Panel pursuant to the Small Business Regulatory Enforcement Fairness Act (SBREFA) to assess the potential impacts of that rule on

such small entities

. The CFPB has made improvements to certain elements of the proposal based on SBREFA feedback, such as commentary to address particular small entity representative

concerns. The CFPB has also incorporated the Panel recomm endations and other SBREFA feedback into the preamble in order to solicit broader feedback from all stakeholders on issues raised by the SERs. However, the CFPB is not planning in the proposal to abandon any major

element that was included in from the SB REFA outline in the proposal. This is consistent with the Panel Report, which did not recommend withdrawing any specific proposals.

6. Consequences of Less Frequent Collection and Obstacles to Burden Reduction

HMDA provides for information to be collected annually. For large financial institutions engaging in 75,000 or more transactions, the CFPB is proposing a quarterly reporting requirement. The Bureau is concerned that less frequent reporting for the highes t

- volume institutions would impair the ability of the appropriate agencies to use HMDA data to effectuate the purposes of the statute in a timely manner. Furthermore, as quarterly reporting would require financial institutions with larger transaction volu mes to edit smaller batches of reportable data several times throughout the year, the Bureau believes that quarterly reporting will facilitate and enhance compliance with HMDA, reduce reporting errors, and improve the quality of HMDA data. Finally, becaus e quarterly reporting would permit the Bureau to process a significant volume of HMDA data throughout the year, the Bureau believes the proposal would allow for the earlier release to the public of HMDA data products, including the disclosure statements,

a ggregates and tables, and loan

- level data currently released on the FFIEC website.

7. Circumstances Requiring Special Information Collection

Regulation C requires financial institutions to ret ain and make available to the public the modified loan application register for a period of three years and the disclosure statement for a period of five years. These retention provisions are required by Congress, which provided in HMDA section 304(c) tha t information required to be compiled and made available under HMDA section 304, other than loan application register information required under section 304(j), must be maintained and made available for a period of five years

. HMDA section 304(j)(6) requir es that loan application register information for any year shall be maintained and made available, upon request, for three years.

8. Consultation Outside the AgencyPage 4 of 11 In preparing the notice of proposed rulemaking , the CFPB conducted outreach on implementing the Dodd

- Frank Act amendments to HMDA and other potential changes to Regulation C by soliciting comments in Federal Register notices and by meeting with a variety of stakeholders, including trade associations, financial institutions, community group s, and other Federal agencies. The Bureau also convened a Small Business Review Panel to obtain feedback

from small financial institutions as well as the general public. To prepare the proposal, the Bureau considered both the comments presented to th e Board during its public hearings and feedback provided to the Bureau during its outreach.

Th e notice of proposed rulemaking was published in the Federal Register which provides the public 90 days to comment on the proposed rule

, including the r e v i sed i nformation collection requirements. Comments in response to this notice as well as CFPB’s response to those

comments will be summarized in the preamble to the final rule.

9. Payments or Gifts to Respondents

Not applicable.

10. Assurances of Confidentiality

Respondents are financial institutions for which CFPB provides no assurances of confidentiality. The records kept under this collection are maintained by financial institutions and reported annually. Regulation C requires this information to be made available to the public except for three fields that are redacted to protect the identities of the ind ividual applicants. The Bureau’s proposal would require that financial institutions release on the modified loan application register only the data that is currently released under Regulation C.

11. Justification for Sensitive Questions

The informat ion collection includes personally identifiable information regarding mortgage applicants or mortgagors. The information collected includes loan number and information that may indirectly identify an individual such as address, race/ethnicity, sex, annual income, and credit score associated with their mortgage.

A system of records notice is not applicable because information is not retrieved by direct

identifier.

Privacy impacts are evaluated throughout the proposed rule and specifically highlighted in Privacy Considerations under Part II. B and the discussion of the modified loan application register in Part V of the supplementary information

.

The information con tains material that might be considered sensitive in nature, such as the race or national origin, gender, and income of loan applicants. When the information is

disclosed to the public, it is redacted to omit the dates of application, dates of decisions o n applications, and application numbers to prevent identification of individual applicants.Page 5 of 11 Additionally, the Bureau is proposing to “freeze” the modified loan application register so that it contains only the information currently reported under Regulati on C. If the modified loan application register contains no new data points, the risk of the modified register interacting with the agencies’ loan

- level release of those data in ways that create additional privacy risk is removed, providing the agencies w ith increased flexibility to apply any necessary privacy protections in a way that maximizes utility of the loan

- level data to users and to adjust those protections as risks evolve.

12. Estimated Burden of Information Collection

Hours:

The CFPB estimates that the reporting, ongoing recordkeeping , and third party disclosure requirement costs allocated to the CFPB under Regulation C is currently approximately
1, 787 ,000 hours per year , excluding the proposed changes

. Including the proposed changes and operation s modernization, the time burden for annual and quarterly CFPB reporters would be
1, 694 ,000 and 1 8 3 ,000 hours per year, respectively, for a total estimate of 1, 87 7 ,000 burden

hours per year. This represents an increase o f approximately 90 ,000 burden hours per year for HMDA reporters that report to the CFPB

. The Burea u estimates that

, including the proposed changes, the proposed burden would be approximately 4, 654 ,000 hours per year for all HMDA

reporters

. 1 This represents an increase of approximately 3 11 ,000 hours per year over the current burden for all HMDA reporters of 4, 343 ,000 hours.

This proposed rule has three Information Collections under the PRA: (1) Reporting Requirements, ( 2 ) Record k eeping Requirement s
, and (3) Third P arty D isclosure R equirements

Each of these Information Collections is discussed in turn.

Given that HMDA is a data collection statute

, the Bureau view s most tasks that financial institutions undertake to gather and report data as covered by the Reporting Requirements. Based on initial outreach efforts, the Bureau identified 18 tasks that financial institutions conduct when gathering and reporting data under HMDA 2 . These outreach efforts also determined that the time and monetary cost of conducting these 18 tasks differed by financial institutions’ level of complexity. To capture the relationships between institutions’ complexity and reporting costs for each of these 18 tasks, the Bureau developed three representative financial in stitutions reflecting low

- , moderate

- and high

- complexity. (In the following discussion, these are referred to as tier 3, 2, and 1 financial institutions respectively.) For the PRA burden analysis, we

estimate d the time each of the three representative le nders spend on each of the 18 tasks. We

1 The Bureau estimates that, for all HMDA reporters, the burden hours will be approximately 3, 356 ,000 to 5

, 953 ,000 hours per year. 4, 654 ,000 is approximately the mid

- point of this estimated range.

2 These are transcribing data, resolving reportability questions, trans ferring data to HMDA Management System (HMS), geocoding, standard annual edit and internal checks, researching questions, resolving question responses, checking post

- submission edits, filing post

- submission documents, creating public loan application regi ster

, distributing public loan application register , distributing disclosure report, using vendor HMS software, training, internal audits, external audits

, exam preparation , exam assistance, training, internal audits, and external audits.Page 6 of 11 then took these institution

- level estimates and aggregate d up to the market level. All of these time estimates assume all aspects of the proposed rule, as well as the operations mod ernization improvements being sep arately considered, will be adopted.

The Reporting Requirement covers 14 of the 18 operational tasks. 3 Four of the se 1 4 operational tasks are variable

- cost tasks, which vary by the number of applications. 4 With all the proposed changes and operational modernization, w e estimate that tier 3, tier 2

, and tier 1 financial institutions spend approximately 26

, 6 7

, and 3 7 1 hours per year, respectively, on these

four tasks. The estimated hours spent on these four variable tasks will be the same for annual and quarterly reporters, because the proposed adoption of quarterly reporting does not affect any

of the variable cost tasks. For the ten fixed

- cost operational tasks covered by the Reporting Requirement s , we es timate that tier 3, tier 2

, and tier 1 financial institutions required to report annually spend approximately 3 6

, 593

, and 4, 777 hours per year, respectively, on these tasks. Financial institutions with 75,000 or more transactions that would be required t o report quarterly are most likely tier 1 institutions. For these institutions, we estimate 669 burden hours in addition to the burden hours associated with annual reporting. Combining these results yields

estimates of 6 3

, 660 , and 5, 148 hours per year t hat tier 3, 2

, and 1 annually

- reporting financial

institutions spend to gather and report data under HMDA each year. The estimated burden hours for quarterly

- reporting financial institutions are approximately 5, 817 hours per year.

In 201 2 , 1 97 financial institutions reported HMDA data to the CFPB

. T hese 1 97 financial institutions are depository institutions with over $10 billion in assets

. 5 Given their large asset size, these depository institutions are likely comparable to the representative tier 1 institution. Therefore, to calculate burden hours, we assume that all 197 financial institutions that reported

HMDA data to the CFPB are tier 1 institutions. Eighteen of these 1 9 7 institutions reported over 75,000 loan application register records , and would therefore be required to report data quarterly. We estimate that the time burden for annual and quarterly reporters under the Reporting Requirements Information Collection would be approximately 921 ,000 and 105 ,000 hours per year, respectively , for a total estimated burden hours of 1,026 ,000 per year.

3 These are res olving reportability questions, transferring data to HMDA Management System (HMS), geocoding, standard annual edit and internal checks, researching questions, resolving question responses, checking post

submission edits, filing post

- submission documents u sing vendor HMS software, training, internal audits, external

audits

, exam preparation , exam assistance, training, internal audits, and external audits. As discussed below, transcribing data falls under the record keeping requirement, and creating the pub lic LAR, distributing the public LAR, and creating the notice for obtaining the disclosure statement all fall under the Third P arty D isclosure

R equirement.

4 The four variable cost tasks are transferring data to HMS, resolving reportability questions, ge ocoding, and researching questions.

5 Note even though CFPB had supervisory authority over all non

- depository institutions on all consumer financial protection related matter, nondepository institutions report HMDA data to HUD.Page 7 of 11 Total Burden

, Reporting Requirements

- Financial Institutions Reporting to the CFPB

Number of Respondents Total Burden

per Respondent Total

Burden (Rounded to Thousands)

Tier One: Annual Reporter 1 79 5, 148 hours 921

, 000 hours Tier One: Quarterly Reporter 1 8 5, 817 hours 105

, 000 hours

Tier Two 0 660 hours 0 hours

Tier Three 0 6 3 hours 0 hours

Total Estimated Burden for CFPB Respondents 1,026 ,000 hours

T he R ecord K eeping R equirement covers the requirement s that financial institutions maintain HMDA data for three years and disclosure statements for five years, maintain loan application register information for three years , and update information regarding repo rtable transactions quarterly . To maintain data, disclosure statements

, and loan application register information, the primary time burden is the time needed to copy this information to electronic data storage devices, such as a hard drive or disk. Given the prev a l e nce and low cost of modern computer technology, The Bureau believes that this time burden is negligible. We regard the task of transcribing data as the key operation al ta s k that is directly related to recordkeeping. This

task is not affected by whether the financial institution is required to report annually or quarterly, since transcribing data for reportable transactions under HMDA is not affected by reporting frequency. We calculate the burden hour s for record keeping requirement based on the estimated cost of transcribing the data. The Bureau estimates that tier 3, tier 2

, and tier 1 financial

institutions would spend approximately 19, 86, and 4,277 hours per year transcribing data, respectively.

Total Burden

, Record k eeping Requireme nts

- Financial Institutions Reporting to the CFPB

Number of Respondents Total Burden

per Respondent Total

Burden (Rounded to Thousands) Tier One: Annual Reporter 179 4

, 277 hours 766 ,000 hours Tier One: Quarterly Reporter 1 8 4

, 277 hours 77 ,000 hours

Tier Two 0 86 hours 0 hours

Tier Three 0 19 hours 0 hours

Total Estimated Burden for CFPB Respondents 843 ,000 hours

T he Third P arty D isclosure R equirement covers the requirement s that financial

institutions create a public loan application register , dis tribute the public loan application registerPage 8 of 11 upon request , and provide a notice that the disclosure statement can be obtained from the FFIEC

website . These requirements correspond to three operational task s: creating the public lo an application register , distributing the public loan application register , and creating the notice for obtaining the disclosure statement. The Bureau estimates that tier 3, tier 2

, and tier 1 financial institutions would spend approximately 8, 18

, and 40 hours per year, respectively, on these operational tasks. A ll financial institutions would conduct all of these steps, so the estimated time burden would be the same for quarterly reporters and annual reporters.

Total Burden

, Third Party Disclosure Re quirements

- Financial Institutions Reporting to
the CFPB

Number of Respondents Total Burden

per Respondent Total

Burden (Rounded to Thousands) Tier One: Annual Reporter 1 79 4 0 hours 7

, 0 00 hours Tier One: Quarterly Reporter 1 8 4 0 hours 1,0 00 hours

Tier Two 0 1 8 hours 0 hours

Tier Three 0 8 hours 0 hours

Total Estimated Burden for CFPB Respondents 8

, 0 00 hours

Combining the three Information Collections, the Bureau estimates that the total burden

hours for financial institutions required to report HMDA data to the CFPB is approximately
1, 877 ,000.

To estimate the burden hours for all HMDA reporters, we follow the mapping approach

used for the discussion of the potential benefits, costs, and impacts of t he proposed rule

, described in Section VI of the supplementary information. Specifically , we allocate financial

institutions across tiers using the two distribution s described in the benefit

- cost discussion to provide upper and lower bounds for our estima tes. 6 After assigning each of the 7

, 400 HMDA

reporters 7 to a tier using the two distribut ion s , we then ma k e two adjustments. First, we adjust

the number of financial institutions to account for the estimated 1,600 depository institutions that would no longer be required to report under the proposed coverage changes, as well as the 450

non depository institutions that would have to begin reporting. Given th e small volume of

transactions processed by these financial institutions, we assume all financial institutions described under the first adjustment are most closely comparable to a representative tier 3 institution. Therefore, we reduce the number of tier 3 financial institution s by 1,150. Second, in

the 201 2 HMDA data, 2 8 financial ins titutions submitted a HMDA loan application register with 75,000 or more records, and would therefore be required to report quarterly. Given the high

6 The first distribution ass umes the following composition among financial institutions: 96% tier 3, 0% tier 2, and 4% tier 1. The second distribution assumes the following composition among financial institutions: 3 1 % tier 3 , 6 6 % tier 2, and 3% tier 1.

7 The estimate of 7400 HMDA r eporters is derived from the 2012 HMDA data.Page 9 of 11 volume of transactions reported by these financial institutions, they are likely to be most closely

compa rable to the representative tier 1 financial institution. We therefore separately itemize the

burden hour estimates for tier 1 financial institutions that would be required to report quarterly. Using both the distribution assumptions and the institution

- level hour estimates described above,

we estimate that the time burden for all institutions to gather and report data under HMDA is approximately 3, 4 00 ,000 to 6, 0 00 ,000 hours per year. The mid

- point of this range is approximately 4, 7 00,000

.

Total Burden

, all Information Collections

- All Regulated Entities

Lower Bound Estimate Upper Bound Estimate

Number of Respondents Total Burden per respondent Total

Burden (Rounded to

Thousands ) Number of Respondents Total Burden per respondent Total

Burden (Rounded to Thousands)
Tier One

Annual Reporter 26 8 9, 464

hours 2

, 5 3 6 ,000

hours 19 4 9, 464

hours 1

, 8 3 6 ,000

hours

Tier One Quarterly Reporter 2 8 10, 133

hours 2 8 4 ,000 hours 2 8 10, 133

hours 2 84 ,000 hours

Tier Two 0 764 hours 0 hours 4, 884 764 hours 3, 730 ,000

hours

Tier

Three 5954 90 hours 536 ,000 hours 1

, 144 90 hours 103 ,000 hours

Total Estimated Burden for all Respondents (Rounded to 100 Thousands) 4,700,000 hours 8

Associated Labor Costs:

To estimate the associated labor costs, we use the burden hours described above, along with a wage rate of $28 per hour, which is the national average wage for compliance officers based on most recent National Compensation Survey from the Bureau of Labor S tatistics ( BLS )

. Based on these figures, the Bureau estimates that the ongoing record keeping and reporting costs allocated to the CFPB under Regulation C is approximately $ 52

, 5 00 ,000. For all HMDA reporters, the estimated costs are between $1 30

, 00 0,000

. 9

13. Estimated Total Annual Cost Burden to Respondents or Recordkeepers

8 The Bureau estimates that, for all HMDA reporters, the burden hours will be approximately 3, 400 ,000 to 6, 0 00,000 hours per year. 4, 700 ,000 is approximately the mid

- point of this estimated range.

9 The Bureau estimat es that the labor costs will be approximately $ 9 4

, 0 00,000 to $16 7 ,000,000

. $1 30

, 00 0,000 is the

mid

- point of this estimated range.Page 10 of 11 The non

- labor

- specific costs specific to complying with the Reporting, Record k eeping

, and Third P arty D isclosure R equirements include the annual fee for HMS software, and the

annual fee for the LEI. The Bureau estimates that this annual fee for HMS software is approximately $0 for tier 3 institutions, $8,000 for tier 2 institutions and $13,000 for tier 1

institutions The estimated annual fee for the LEI is approximately $200. Therefore, the total estimated cost is $ 2

, 6 0 0

, 0 00 for CFPB

- regulated entities and $2 4

, 2 00,000 for all regulated

entities

. 10

14. Estimated Cost to the Federal Government

There are no addition al c osts to the Federal Government.

15. Program Changes or Adjustments

Summary of Burden Changes

Burden Hours Cost Burden (O & M)

Total Annual Hours Requested 1, 87 7,000 Total Annual Costs Burden Requested $ 2

, 600

, 0 00

Current OMB Inventory 154,000 Current OMB Inventory 0 Difference (+/

- ) +1, 723 ,000 Difference (+/

- ) +$ 2

, 6 0 0

, 0 00 Program Change 87

, 6 00 Program Change $ 2

, 500

, 0 00 Discretionary 3 4, 4 00 Discretionary $ 965

, 0 00

Due to New Statute 53

, 2 00 Due to New Statute $1, 500

, 0 00

Violation 0 Violation 0 Adjustment 1, 635

, 4 00 Adjustment $ 100

, 0 00

16. Plans for Tabulation, Statistical Analysis, and Publication

The information is collected for use by the CFPB’s examination program and for disclosure to the public after deletion of certain sensitive data elements.

17. Display of Expiration Date

The OMB number will be displayed in the PRA section of the notice of final rulemaking and in the codified version of the Code of Federal Regulations. Further, the OMB control

number and ex piration date will be displayed on the Federal government’s electronic PRA

docket at www.reginfo.gov

.

18. Exceptions to the Certification Requirement

The Bureau certifies that this collection of information is consistent with the requirements

10 The Bureau estimat es that the annual non

- labor costs will be approximately $ 5

, 1 00,000 to $ 43 ,200,000

. $2 4

, 2 00,000 i s the mid

- point of this estimated range.Page 11 of 11 of 5 CFR 1320.9, and the related provisions of 5 CFR 1320.8(b)(3) and is not seeking an exemption to these certification requirements.