Therefore, the Bureau believes any operational costs from adopting the 2016 URLA are part of the normal course of business and are not a cost of the final rule. New Documents Creditors subject to the Home Mortgage Disclosure Act should be aware, however, that data collection may be called for under Regulation C (12 CFR part 1003), which generally requires creditors to report, among other things, the sex and race of an applicant on brokered applications or applications received through a correspondent. This will allow the information to be available for monitoring and enforcing compliance with ECOA, Regulation B, and other Federal or State statutes or regulations. 20. [12] Fair Credit Reporting Act (Reg V) FCRA is intended to ensure consumer reports are accurate and used for permissible purposes. 1691b. Fannie Mae, Selling Guide: Single Family Seller Servicer, at B1-1-01 (Dec. 16, 2014), available at https://www.fanniemae.com/content/guide/selling/b1/1/01.html;; Freddie Mac, Single-Family Seller/Servicer Guide (Sep. 21, 2016), 3401.7, available at http://www.freddiemac.com/singlefamily/guide/bulletins/snapshot.html. Regulation B protects consumers and prohibits lenders from discriminating based on age, gender, ethnicity, nationality, or marital status. 2. The laws that cover collection policies and procedures are mandated by federal and state governments. 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 also deemed to be in compliance with Regulation B 1002.13(a)(1)(i) even though applicants are asked to self-identify using categories other than those explicitly provided in that section. The Bureau received no comments specifically addressing the revisions to proposed comment 13(b)-1, and so is finalizing it as proposed. There are three reasons, however, that this rule will likely have a limited effect on fair lending analysis. Covered institutions will report the disaggregated information provided by applicants. Section 1002.12(b)(1) provides that a creditor must retain certain records for 25 months, or 12 months for business credit. Does Reg B require receipt of all required conditions before a credit approval can be made? Video and other electronic-application processes. 1. for fair lending practices. Accordingly, the undersigned certifies that this final rule will not have a significant economic impact on a substantial number of small entities. procedures. 09/29/2017 at 8:45 am. The requirements of the regulation apply only to an account for which an agreement for EFT services to or from the account has been entered into between: i. Under this section, procedural requirements of the regulation do not apply to certain types of credit. [32] When a creditor collects ethnicity and race information pursuant to 1002.13(a)(1)(i)(B), the applicant must be offered the option to select more than one ethnicity designation and more than one racial designation. An applicant's age can be requested if it appears that they cannot legally sign a contract. B-2. The Bureau does not believe that consumers will experience any costs or benefits from this provision except to the extent that financial institutions achieve cost savings and pass any such cost savings on to their customers. In the case of a conflict between state and federal law, federal law prevails. The other alternative would permit collection of applicant demographic information for any covered loan under Regulation C with no timeframe restriction, even if the creditor was not a financial institution under Regulation C. The Bureau is not adopting these proposed alternatives. Changes to Applicant Information Collection for Regulation B Creditors, C. Changes to Applicant Information Collection for HMDA Reporters, A. More information and documentation can be found in our Until the ACFR grants it official status, the XML Information required by Regulation C. Regulation C, 12 CFR part 1003, generally requires creditors covered by the Home Mortgage Disclosure Act (HMDA) to collect and report information about the race, ethnicity, and sex of applicants for certain dwelling-secured loans, including some types of loans not covered by 1002.13. For the reasons provided below, the Bureau is adopting 1002.13(a) and comments 13(a)-7 and 13(a)-8 as proposed. 13. Regulation C implements HMDA and sets out specific requirements for the collection, recording, reporting, and disclosure of mortgage lending information, including a requirement to collect and report applicant demographic information. The final rule will make three substantive changes to Regulation B, along with other clarifications, minor changes, and technical corrections to align the language of Regulation B with Regulation C as amended by the 2015 HMDA Final Rule. The Bureau did not propose changes to Regulation C in this rulemaking. The Bureau proposed to amend comment 13(c)-1 to reference two data collection model forms the Bureau proposed to provide in the Regulation B appendix. 29. The requirements of 1002.13 apply only if an application relates to a dwelling that is or will be occupied by the applicant as the principal residence. Some Regulation B-only creditors sell mortgages to the Enterprises, and would benefit from being able to use the 2016 URLA. Two commenters opposed the collection of applicant demographic information on the basis of visual observation or surname under any circumstances. Status of New Uniform Loan Application and Collection of Expanded Home Mortgage Information About Ethnicity and Race in 2017, 81 FR 66930 (Sept. 29, 2016). 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. A creditor may devise its Start Printed Page 45697own disclosure so long as it is substantially similar. The Bureau may reevaluate the need for mandatory disaggregated collection under 1002.13 after implementation of the 2015 HMDA Final Rule and transition to the 2016 URLA, when more information is available on creditor collection practices. While every effort has been made to ensure that [2] Under Regulation B, a lender may not request information about an applicants sex, national origin, color, or other information not related to creditworthiness. 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. 41. The Bureau proposed that the 2004 URLA be removed on the cutover date the Enterprises designate for use of the 2016 URLA or January 1, 2022, whichever comes first. 1 documents in the last year, 1408 12 U.S.C. The Enterprises, under the conservatorship of the FHFA, issued a revised and redesigned URLA on August 23, 2016 (2016 URLA). [34] Revised Regulation C 1003.2(g)(1)(v) and 1003.2(g)(2)(ii) also introduces an exclusion from the definition of financial institution, from which the duty to report HMDA data flows, for entities that, among other criteria, originated fewer than 25 closed-end mortgage loans or fewer than 100 open-end lines of credit in either of the two preceding calendar years. These included, for example, a comment supporting the collection of loan officers' demographic information, a request to collect information on whether the applicant is divorced, a request for guidance on when previously gathered applicant demographic information can be used for new applications, and a request that the Bureau provide a safe harbor for information collected in 2017. the current document as it appeared on Public Inspection on (In this document, current Regulation C refers to Regulation C prior to January 1, 2018, and revised Regulation C refers to Regulation C as it will be in effect on or after January 1, 2018, as amended by the 2015 HMDA Final Rule.) 17. ii. 1691 et seq., 12 CFR part 1002. The Bureau proposed to amend 1002.5(a)(4) to authorize creditors to collect such information under certain additional circumstances. 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. This repetition of headings to form internal navigation links However, there are certain times when such information can be collected from the applicant. 1. The rule amends the Regulation B appendix to provide two options: A model form for collecting aggregate applicant race and ethnicity information and a cross-reference to the Regulation C appendix model form for collecting disaggregated applicant race and ethnicity information. When a creditor receives an application through an unaffiliated loan-shopping service, it does not have to request the monitoring information for purposes of the ECOA or Regulation B. The Bureau received several additional comments about topics other than those raised by the Bureau in the 2017 ECOA Proposal. The second substantive change will remove the outdated 2004 URLA as a model form. Under Section 1002.5Rules concerning requests for information: b. A creditor that accepts an application by mail need not make a special request for the monitoring information if the applicant has failed to provide it on the application form returned to the creditor. The Bureau does not believe that there will be an adverse impact on access to credit resulting from any of the provisions of the final rule. Federal Reserve. The Bureau believes that the interim final rule will benefit consumers and covered persons by updating and recodifying Regulation B to reflect the transfer of authority to the Bureau and certain other changes mandated by the Dodd-Frank Act. Sec. Redlining is an unethical and illegal practice that denies loans or services to people living in majority-minority communities. (b) Securities credit (1) Definition. 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. If a creditor inadvertently obtains the monitoring information in a dwelling-related transaction not covered by 1002.13, the creditor may process and retain the application without violating the regulation. Effective January 1, 2018, amend Appendix B to Part 1002 by revising paragraph 1 and adding a Data Collection Model Form to the end of the Appendix to read as follows: 1. Moreover, the cited studies conclude only that some applicants may self-identify as different races over time and that visual observation of race is not always accurate. Id. Amendments to Equal Credit Opportunity Act (Regulation B) Ethnicity and Race Information Collection, 82 FR 16307 (Apr. Examination Procedures Your institution is required to establish procedures to ensure that it complies with the requirements of Regulation CC and to provide a copy of these procedures to all employees who perform duties affected by the regulation. All classes of transactions remain subject to 1002.4 (a), the general rule barring discrimination on a prohibited basis, and to any other provision not specifically excepted. The consumer advocacy groups stated that mandatory disaggregated collection would ensure uniform data collection practices and facilitate fair lending analysis, including identifying potential discrimination against racial and ethnic subgroups. A refinancing occurs when an existing obligation is satisfied and replaced by a new obligation undertaken by the same borrower. A large number of industry commenters supported proposed 1002.5(a)(4) and the five-year timeframe for 1002.5(a)(4)(i), (ii), and (iii). Regulation CC contains four subparts. documents in the last year, 83 In addition, comment appendix B-2 provides that the home-improvement and energy loan application form prepared by the Enterprises, dated October 1986, complies with the requirements of Regulation B for some creditors but not others, depending on whether the creditor is governed by 1002.13(a) or subject to a substitute monitoring program under 1002.13(d). The final rule may have benefits to some Regulation B-only creditors. documents in the last year, 474 Prohibited basis under Regulation B refers to a borrower's race, color, religion, national origin, sex, marital status, or age. This site displays a prototype of a Web 2.0 version of the daily 7. The President of the United States issues other types of documents, including but not limited to; memoranda, notices, determinations, letters, messages, and orders. 24. hXmo6+}wR@ N@WMv3Asc~HRHmP0(@J-,9)|PP9hZhkhF4+Ao j1x- sjzIwK[MvS}4=$BUzw3$ The other commenter asserted that collection of applicant demographic information requires significant time and resources for Regulation B-only creditors and that the information is virtually never used. As discussed below in the section-by-section analysis for 1002.13, the Bureau is amending 1002.13(b) to permit, but not require, creditors to collect the information set forth in 1002.13(a) from a second or additional co-applicant. 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. A creditor that accepts an application by telephone or mail must request the monitoring information. Open for Comment, Economic Sanctions & Foreign Assets Control, Electric Program Coverage Ratios Clarification and Modifications, Determination of Regulatory Review Period for Purposes of Patent Extension; VYZULTA, General Principles and Food Standards Modernization, Further Advancing Racial Equity and Support for Underserved Communities Through the Federal Government, B. Regulation B covers the actions of a creditor before, during, and after a credit transaction. The Bureau is finalizing the amendments to 1002.12(b)(1)(i) and comment 12(b)-2 as proposed. documents in the last year, 1479 However, revised Regulation C will not require or permit covered institutions to use the disaggregated subcategories when collecting and reporting the applicant's ethnicity and race based on visual observation or surname.[13]. He previously held senior editorial roles at Investopedia and Kapitall Wire and holds a MA in Economics from The New School for Social Research and Doctor of Philosophy in English literature from NYU. In the 2017 ECOA Proposal, the Bureau set forth a preliminary analysis of these effects, and the Bureau requested comment and submissions of additional data that could inform the Bureau's analysis of the benefits, costs, and impacts of the proposal. Appendix B provides data collection model forms for use in complying with 1002.13 and that comply with 1002.13(c). [45] Section 1061 of the Dodd-Frank Act transferred to the Bureau consumer financial protection functions previously vested in certain other Federal agencies, including the authority to prescribe rules or issue orders or guidelines pursuant to any Federal consumer financial law and perform appropriate functions to promulgate and review such rules, Start Printed Page 45684orders, and guidelines. The prudential regulators confirm that data collected and retained by entities subject to Regulation B but not Regulation C may be used for fair lending supervision and enforcement. 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. Institutions subject to Regulation B but not Regulation C include, for example, institutions that do not have a branch or home office in a Metropolitan Statistical Area (MSA), do not meet an applicable asset threshold, or do not meet an applicable loan volume threshold. Amend 1002.13 by revising paragraph (a)(1)(i) and paragraph (b) to read as follows: (A) For ethnicity, the aggregate categories Hispanic or Latino and not Hispanic or Latino; and, for race, the aggregate categories American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White; or. Temporary financing. Regulation B's prohibition of advertising that would discourage potential applicants from applying for loans is a crucial part of redlining cases. Dodd-Frank Act Section 1022(b) Analysis, B. The Bureau also believes that permitting creditors to collect certain protected applicant-characteristic information in these circumstances provides a narrow exception to the general limitations in 1002.5(b) through (d) respects the purposes of those prohibitions. Current comment 13(b)-1 provides guidance on the forms and collection methods a creditor may use to collect applicant information under 1002.13(a). The Bureau requested comment regarding the costs and benefits associated with this provision. The rule does not add the 2016 URLA to the Regulation B appendix; that form is subject to a separate Federal Register notice issued by the Bureau acknowledging its compliance with certain provisions of Regulation B.[8]. The proposal was published in the Federal Register on April 4, 2017.[22]. The Bureau believes that most creditors will voluntarily adopt a consistent collection method because uniform practices are generally easier and less costly for creditors to implement. Because the Enterprises have not announced a cutover date for the mandatory use of the 2016 URLA, the Bureau is finalizing January 1, 2022, as the effective date for the removal of the 2004 URLA from the Regulation B appendix. If it appears that action is warranted, the Bureau will engage in further rulemaking as appropriate. The first sample form is intended for use in open-end, unsecured transactions; the second for closed-end, secured transactions; the third for closed-end transactions, whether unsecured or secured; and the fourth in transactions involving community property or occurring in community property States. Regulations B and C both contain an appendix B that provides model forms for use when collecting applicant demographic information required under the regulations. [28] 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. 03/01/2023, 828 03/01/2023, 43 Some commenters proposed other changes to Regulation B unrelated to alignment with Regulation C or applicant demographic information collection for mortgage applicants. 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). Both the Bureau's consultations with the prudential regulators and its own experience in fair lending enforcement indicate that these data are used. 5. Definition. documents in the last year, 287 Applications through loan-shopping services. The Bureau believes that, absent this change, entities that currently report race and ethnicity data under Regulation C could conclude that they have different obligations under Regulation B and Regulation C once the 2015 HMDA Final Rule goes into effect on January 1, 2018. You can find out more about our use, change your default settings, and withdraw your consent at any time with effect for the future by visiting Cookies Settings, which can also be found in the footer of the site. 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