Federal Regulatory Update

Federal Regulatory Update

The Bureau of Consumer Financial Protection (“CFPB”) issued a final rule which is effective January 1, 2018 to amend the Equal Credit Opportunity Act (“ECOA”) Regulation B.


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The final rule permits creditors additional flexibility in complying with Regulation B in order to facilitate compliance with the Home Mortgage Disclosure Act (“HMDA”) Regulation C.  The rule also adds certain model forms and removes others from Regulation B and makes various other amendments to the regulation and its commentary to facilitate the collection and retention of information about the ethnicity, sex, and race of certain mortgage applicants.  The rule is effective on January 1, 2018, except that the amendment to Appendix B revising Paragraph 1 removing the existing “Uniform Residential Loan Application” form in amendatory instruction 6 is effective January 1, 2022.


Regulation B, in part, prohibits a lender from inquiring about the race, color, religion, national origin, or sex of a credit applicant except under certain circumstances.  Two of these circumstances are requirements for creditors to collect and retain certain information about applicants for certain dwelling-secured loans and the similar applicant information the financial institutions are required to collect and report under Regulation 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 the Uniform Residential Loan Application (“URLA”) issued by Fannie Mae and Freddie Mac.


The HMDA requirement to collect and report applicant information was recently updated.  In 2016 Fannie Mae and Freddie Mac issued a new version of the URLA that complies with the recent HMDA final rule.  These changes to Regulation C and the URLA require updates to Regulation B to ensure consistency among regulations and facilitate compliance with Regulation B and Regulation C by financial institutions.


The final rule amends part of Regulation B, its commentary, and its appendices and affects when and how a creditor may collect information regarding the applicant’s ethnicity, race, and sex.


For Regulation B creditors making mortgage loans, the rule will allow creditors to collect the applicant’s information either using the aggregate ethnicity and race categories or disaggregated ethnicity and race categories and subcategories as set forth in Appendix B to Regulation C as amended by the 2015 HMDA final rule.


The Regulation B rule also makes certain changes to the Regulation B appendix.  The rule amends the 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.  The rule also removes as outdated the existing version of the URLA contained in the Regulation B appendix, effective January 1, 2022.  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 CFPB acknowledging its compliance with certain provisions of Regulation B.


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As related above, the CFPB is required to publish a notice acknowledging that the CFPB has determined that the relevant language in the redesigned URLA is in compliance with the applicable regulatory provisions of Regulation B regarding requests for protected applicant-characteristic information and certain other information.  This publication in the Federal Register is such notice.