On September 20, 2017, the CFPB issued a final rule amending Regulation B, which implements the Equal Credit Opportunity Act (“ECOA”). The amendment provides creditors flexibility in complying with requirement of collecting government monitoring information under Regulation B. It ensures consistency with the amendments to Regulation C, which implements Home Mortgage Disclosure Act (“HMDA”), and facilitate transition to the new Uniform Residential Loan Application (“URLA”). The final rule will come into effect on January 1, 2018.
The final rule is particularly applicable to mortgage lenders. The final rule amends Regulation B’s requirements on when and how a lender may collect applicant’s information concerning ethnicity, race, and sex. More specifically, the new rule will allow lenders to collect the applicant’s information using either the aggregate ethnicity and race categories or disaggregated ethnicity and race categories and subcategories, as specified in Appendix B to Regulation C as amended in 2015. For lenders reporting under HMDA, the final rule clarifies that compliance with collection of applicant information under Regulation C generally satisfies the requirements under Regulation B. This would also ensure lender compliance with Regulation B when collecting applicants’ information when using the new URLA.
Although the final rule does not require non HMDA reporting lenders change their compliance practice, it allows such lenders to voluntarily adopt the new rule requirements for collecting applicant information, without violating ECOA’s requirements. This would provide consistency to lenders that voluntarily report information under Regulation C, who have reported such information in the past five years, or who may report such information in near future. It would also help such non HMDA reporting lenders to transition to the new URLA.
To facilitate compliance with the new requirements, the new rule also amends Appendix B of Regulation B and provides two alternatives: (i) a new model form for collecting aggregate applicant information in compliance with the new requirements, or (ii) use of Regulation C Appendix B model form for collecting disaggregated applicant race and ethnicity information.
Finally, the new rule will remove the existing URLA form from Appendix B effective January 1, 2022. However, it will not be replaced by the new URLA, which received an official approval by the CFPB of compliance with the requirements to collect applicant information under ECOA and HMDA.
Required Action
Mortgage lenders should review and amend their ECOA policy and procedures to ensure conformance to the new requirements by the effective date of January 1, 2018.
If you have any question regarding this new rule, please reach out to our contact attorney.
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