The government collects lots of mortgage information but what do they do with all the data and is your information private?
Well before the Internet -- and well before what we now think of as Big Data and Artificial Intelligence (AI) -- the government was busily gathering personal information for census counts.
The Census Bureau today has data regarding virtually everyone. For the 1900 census, as an example, you can see who lived at what address as well as their age, relationships, "nativity," citizenship, occupation, education, and whether they owned or rented. However, your specific information is unlikely to see daylight for a very long time. The Census Bureau follows the "72-year rule." Under the rule, "the U.S. government will not release personally identifiable information about an individual to any other individual or agency until 72 years after it was collected for the decennial census."
The Home Mortgage Disclosure Act (HMDA)
In 1975, the Home Mortgage Disclosure Act (HMDA) went into effect, a federal law which requires lenders to collect detailed mortgage information. Each year, many millions of records are collected; the actual number waxes and wanes with interest rates, especially ballooning when refinance activity is high. That's not been the case for several years now. Regardless of the number of applicants, the reasons are the same: The information is primatily used to gauge lender community investment activities and uncover any possible discriminatory practices.
Under HMDA, lenders must provide a large variety of information to the government regarding both loan applications and financing they approve and originate as well as those they deny. The big items on the information list include:
- Property address
- Loan purpose (purchase, refi, cash-out refi, home improvement, etc.)
- Property value
- Type of occupancy
- Borrower age
- Borrower's ethnicity
- Borrower's race
- Credit score
- Borrower income
- Interest rate, including introductory or "teaser" rate
- Introductory rate period
- Loan term
- Non-amortizing features (interest-only, balloon, etc.
- Debt-to-income ratio (DTI)
- Loan-to-value (LTV) ratio or combined LTV
- Origination charges
- Discount points
- Rate spread for all loans compared to APOR
- Lender credits
- Total loan cost or total points and fees
- Prepayment penalty term, if any
- Manufactured home secured property type
- Manufactured home land property interest
- Multi-family affordable units
- If denied, reason for denial
There are other data that are collected, too, some 48 elements in all.
Privacy and mortgage data collection
It's understandable that lenders need a lot of information that many individuals regard as private - and privacy is a big deal. On one hand you really don't want to give out your Social Security number and date of birth, but on the other everyone understands that lenders need such information to assure they're not turning down your mortgage application on the basis of someone else's information - using the credit report of "Johnn Y. Smith" rather than "Johnny Smith", for example.
Figuring out where to draw the line between what's private and what isn't has never been especially clear. We "know" some things should be private but we each have a separate line that we think should not be crossed.
Related: How is HMDA data used today?
The Consumer Financial Protection Bureau (CFPB)
The legal system is not especially helpful. The idea of privacy is vaguely mentioned if it is mentioned at all. The term "privacy" can't be found in the Declaration of Independence or the Bill of Rights. How we see privacy today is largely the result of an article published by the Harvard Law Review in 1890. Written by Samuel D. Warren and Louis D. Brandeis it created the notion that there was, in fact, a right of privacy, what they called "the right to be let alone."
Today privacy concerns are more acute because there are so many ways to capture information that used to be regarded as private. The exterior of your mail is captured by Postal Service scanners. Property ownership data is available in public records. And wherever you go online, whatever link you click, is likely recorded by someone. As Sun Microsystems chief executive Scott McNealy explained in 1999 - long before today's Big Data systems - "you have zero privacy anyway. Get over it."
Related: How Safe Is Your Information With Your Mortgage Lender?
But, in fact, when it comes to HMDA you do have some expectation of privacy. The Consumer Financial Protection Bureau (CFPB) -- which actually has an acting chief privacy officer -- enacted new HMDA privacy regulations back in 2019. Their purpose of the new guidance, says the CFPB, is "to exclude certain data from the public HMDA data, including the property address and applicant's credit score. The Bureau also intends to disclose certain information with reduced precision, such as by disclosing ranges rather than specific values for an applicant's age, the amount of the loan, and the number of units in the dwelling." Reported loan amounts are made less precise, as only the mid-point of a $10,000 bracket is released, and ages of borrowers are grouped into ranges. Precise debt-to-income ratios are disclosed for DTIs between 36% and 50%; otherwise, a "lesser than / greater than" representation is revealed, if it is applicable.
All in all, the most sensitive personal identifying information is stripped from the data collected and not available to the public, including researchers and marketers. Of course, no data stored in any database anywhere is 100% secure, but at least steps are being taken to secure your personal information and keep it out of the public domain.
This article was updated by Keith Gumbinger.
Related: Prevent Identity Theft When Buying a Home
