Ensuring Mortgage Information Privacy: CFPB

black-woman-computerThe 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. In 2017 lenders provided HMDA information for almost 17.3 million records. The information is used to gauge lender community investment activities and 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. The big items on the information list include:

  • Property address
  • Loan purpose
  • Property value
  • Type of occupancy
  • Age
  • Ethnicity
  • Race
  • Credit score
  • Interest rate
  • Introductory rate period
  • Loan term
  • Non-amortizing features
  • Debt-to-income ratio (DTI)
  • Combined loan-to-value ratio (LTV)
  • Non-amortizing features
  • Origination charges
  • Discount points
  • Rate spread for all loans
  • Lender credits
  • Total loan cost or total points and fees
  • Prepayment penalty term
  • Manufactured home secured property type
  • Manufactured home land property interest
  • Multi-family affordable units

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."

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: Prevent Identity Theft When Buying a Home

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."

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 - proposed new HMDA privacy regulations in May 2019. Their purpose, 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."

The opportunity to comment on the CFPB proposals closes in July. What happens next will depend on the comments received by the government, but new privacy safeguards seem likely at this point.

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