Last year, we released a web-based tool that provides the public with easier access to mortgage data for 2007 through 2012. Today, we’re updating the database with 2013 data, in coordination with the Federal Financial Institutions Examination Council.
The Home Mortgage Disclosure Act or HMDA requires many financial institutions to maintain, report, and publicly disclose information about mortgages. HMDA data for 2013 included approximately 17 million records from 7,190 financial institutions.
If you’re new to HMDA data, start with our introductory video. You’ll learn about the data, how it’s collected, why it’s useful, and what variables it contains. Then, check out our maps and charts.
Explore the data and do your own analyses. You can start with our suggested filters, and then customize them to fit your needs. Use the summary tables to compare data across state, loan type, and more. Want a chart? You can create a summary table and then download it to create a chart using your favorite software.
Share your findings
We’re excited to see what you do, and encourage you to explore the data. Leave us a comment with your ideas or use #cfpbdata on Twitter to share what you find.
In-person testing of the forms in cities across the country from consumers and from people in the mortgage industry, both before proposing the new disclosures and after;
Online publication of various iterations of prototypes of the forms as we tested them and getting more than 27,000 clicks and comments to tell us what worked (and what didn’t);
Quantitative validation study with about 850 consumers of how well consumers understand the new disclosures compared to the ones currently in use (we’ll talk more about the results of that study in the days to come); and
Ongoing dialogue with industry groups, financial institutions, consumer advocates, policymakers from across government, and designers throughout the design process.
This testing and iteration process occurred alongside legally required feedback such as a Small Business Review Panel before we issued the proposed rule, and the public comment period for the proposed rule.
We started this prototyping and research even before the Bureau began regulating consumer financial products and services. In the process, we established a pattern of public inclusion in what we create. We have since taken on additional projects that rely on this pattern to succeed. In each case, we believe it has made us better at our work and will continue to do so.
In April 2012, we introduced a beta version of a tool to help students compare the costs of college. Based on the feedback we got, we made improvements and re-released it along with a number of other tools to help students understand paying for college.
Now we’re working on similar tools to help people interested in owning a home. In each case, we continue to take feedback. We don’t believe that products to help consumers understand their options are ever complete. When we make new consumer tools, we commit to analyzing how people use them. The tools should change as we understand more about what’s useful or necessary, and what’s not.
A few months ago, we created a new platform to publish home mortgage data. Not every good idea for using consumer financial market data is ours; these platforms give the public access to data about their own experiences.
Last month, we launched a prototype tool to make regulations easier to read, understand, and use. After a series of user interviews and a number of prototype usability tests, we’ve piloted eRegulations with one regulation. Before making any decisions on what to do with it next, we’re asking people who need to understand changes to Regulation E to use it and let us know how it works for them.
Prototyping better disclosures
The prototyping efforts of Know Before You Owe laid the groundwork for another initiative. Federal consumer finance regulations should protect consumers, not hinder innovations that help them. Through Project Catalyst, we work with innovators to do just that. Someone who spots a way to make regulations more innovation-friendly can work with us to design experiments. Someone who thinks there’s a way to make disclosures clearer can work with us to start a trial that tests how well their idea works.
Open source software
Source code written by our staff is public domain by default. Anyone can use and build on it as long as it meets a few standards. And we are committed to publishing it in an online source code community. CFPB Open Tech gives the public easy access to free, open source software they can use as the basis for their own new tools and approaches. In turn, we get to review ideas from other developers and decide whether to use them to make our software better.
In short, we value building things with public participation. It comes back to the same basic point: if you know people are going to have to use something, you should work with them to figure out what makes it useful. It’s an idea we have espoused since the start of Know Before You Owe, one we’re going to continue to build on.
Two and a half years ago, we began a line of work we call Know Before You Owe. The work that we did as part of that project helped lead us to the TILA-RESPA final rule we issued Wednesday. Among other things, that rule requires new mortgage disclosures: a Loan Estimate the consumer gets when applying for a mortgage, and a Closing Disclosure when the consumer is ready to close on the mortgage. Today we’re looking back at the project that helped get us here.
What is Know Before You Owe?
When you buy a financial product or service, you should understand the terms you’re offered before you sign on the dotted line. You should be able to compare different products effectively and make the right choices for yourself and your family. And the information you use to make those decisions should be clear and easy to understand.
This information is usually presented in writing, in forms like disclosures, contracts, and offer letters. We believe that the best way to make sure this information is clear is for the people who actually have to use the information to help us design them. So that’s exactly what we asked people to do. We call this project Know Before You Owe.
How does it apply to mortgages?
We started Know Before You Owe in May 2011 with mortgage disclosures. In the Dodd-Frank Act, Congress directed us to combine the existing disclosures you get when you apply for and close on a mortgage: the Truth in Lending disclosures, the Good Faith Estimate, and the HUD-1 Settlement Statement. These disclosures contain some of the basic facts about home loans, and they should help you pick the right mortgage product for you. But they have overlapping information and complicated terms, and they can be just plain difficult to understand.
The idea is to create a single, simpler set of forms so that when you shop for a mortgage, and then again when you close on one, you can understand the basic information you need to pick the right mortgage loan for you.
Over the course of about a year, we qualitatively tested the forms with consumers, lenders, and settlement agents across the country to see how people would use the forms. We saw how they understood different types of mortgages, different terms, and different versions of the forms. We supplemented this this qualitative testing by posting the forms here on consumerfinance.gov and asking people to weigh in. Over the course of the project, we received more than 27,000 comments that helped us improve the disclosures we proposed.
What’s the final rule all about?
In July of last year, we proposed the rule that would require the new forms. As expected, we got a lot more comments: more than 2,800 of them. Since the proposal, we’ve been reviewing these comments to improve the rule. We’ve also conducted a quantitative validation study with about 850 consumers in 20 locations across the country. The study compared our new forms against the existing forms. We conducted additional qualitative testing. And we reviewed what information you told us we should add to the rule to make compliance easier.
The last big milestone in getting to a final rule was … issuing the rule, which we did last Thursday. The rule we submitted to the Federal Register had a lot of information and instruction about the new disclosures: what needs to be in them; what kinds of loans and which lenders need to use them; when to start using the new forms; and more. Along with the new rule, the notice contains information about the testing, analysis, and other work we did to develop the rule. And we posted a number of other things to help people understand the rule: what it means for consumers and for industry, additional testing results, and more.
When we first proposed the TILA-RESPA disclosure rule, we got a lot of questions about the length of the document containing the rule. We synthesized those questions into one representative question and wrote a post to give you some answers. Now that we’re finalizing the rule, we wanted to do it again to talk about what’s changed in the last sixteen months.
So, what’s different?
Sure. Directness is probably the best approach. But let’s back up.
We received more than 27,000 individual comments and emails on the disclosure prototypes we posted throughout the supplemental Know Before You Owe project for mortgage disclosure. That’s on top of all the in-person testing we did with dozens of consumers. We also tested them with industry to make sure they could understand and use the disclosures in their business. That was all before we issued the proposal.
Once we proposed the rule, we received almost 3,000 comments, including comments received during the public comment period and additional information submitted to the record. That didn’t surprise us; this is a significant rule that affects two major federal regulations, consumers’ experience in shopping for and closing on mortgages, and almost the entire residential real estate industry. We spent a lot of time analyzing the comments and figuring out the best way to respond to them.
Did they lead to any changes to the rule?
We made a few significant changes. First, the proposal had two provisions we didn’t include in the final rule:
We aren’t including the “all-in APR,” as some referred to it. This provision in the proposal would have changed the definition of the finance charge, which is used to calculate the annual percentage rate, or APR. The change might have cost industry a lot and might have affected the types of loans available to consumers. A number of other mortgage rules are about to go into effect that might make these effects even bigger.
We’re going to keep looking at this. The Dodd-Frank Act requires us to report on this rule five years after its effective date, and we’ll study this issue as part of that.
The proposal required machine-readable record retention. However, we heard that the data standard we were proposing wasn’t specific enough. In principle, we still think this is a good idea, but we’re going to do additional study and spend more time discussing with stakeholders before requiring any particular standard.
We also changed a couple other requirements you should be aware of.
The rule requires a three-day waiting period after issuing the Closing Disclosure before closing the mortgage. In the proposed rule, we said lenders should reissue that disclosure any time there are more than minor changes, followed by a new three-day waiting period. Comments suggested this might lead to frequent delays in closing mortgages. That’s clearly not good. But also not good: consumers not having time to think through significant changes. So we kept the consumers’ reviewing time in mind as we more narrowly defined the requirements.
The new waiting period now comes only if there are substantial changes to the APR, the loan product itself changes (like a fixed rate loan becomes an adjustable rate or interest only mortgage), or the lender adds a prepayment penalty. And just to be sure, the rule guarantees consumers the right to examine the Closing Disclosure on request on the day before closing even without substantial changes.
The rule also requires lenders to issue the initial Loan Estimate within three days of a consumer applying for a mortgage. In the proposed rule, we included Saturdays in that three-day period. Smaller businesses like community banks and credit unions told us they’re usually closed Saturdays and this would force them to be open. That seemed like a pretty significant burden, one we didn’t want to impose, so the three-day period now includes only days the lender is actually open. If you’re open on Saturday, Saturday counts; if you’re not, it doesn’t.
Does that significantly lengthen the rule?
At least for the regulatory language, it actually isn’t much longer. The proposed amendments to regulations were 209 pages. For the final rule, that’s 279 pages.
So why does the document you sent the Federal Register seem a lot bigger than before?
It is. The preamble provides context for the proposed forms and regulatory changes. The mortgage market is big, and mortgage disclosure regulation has 43 years of history. Also, before writing the rule, we spent a lot of time talking to industry and consumers and analyzing costs and benefits. That’s a lot of context, and that means a long preamble.
If that paragraph looks familiar, it should. We wrote it when we proposed the rule. We just copied and pasted it here. (Hey, it’s still accurate, except 43 years is now 44.) This time, the preamble contains even more information. We have a responsibility to acknowledge and explain our reactions to the comments we received in the public comment period. Again, there were almost 3,000 of them. Some of them asked us to study something or to provide evidence or more explanation for things we had decided. As you’ll see in the table below, this accounts for the bulk of the increase.
Finally, based on these public comments, we modified some of the guidance and interpretations that accompany the rule. We had to explain what we were changing and why. That also made it longer, but it also clarifies a number of things that we heard weren’t clear in the proposal. We believe that in the long run, this clarity will make compliance easier for industry.
Here’s a quick breakdown of what’s in the document:
Proposed amendments to regulations
Proposed guidance regarding compliance with the amended regulations
Okay, bottom-line this. What does the new rule do?
This rule is about improving the way consumers get loan information when they apply for and close on a mortgage. Most of the requirements are about two disclosure documents, the Loan Estimate and the Closing Disclosure. There are also some key provisions about timing. Yesterday’s post describes the basic requirements, and it details why the new disclosures improve the experience of getting a mortgage.
How long does industry have to comply with this?
The rule generally is effective for any loan applications that a lender receives on or after August 1, 2015. Some provisions become applicable right on August 1, 2015, because they apply to things that can happen before an application is received. For industry, that probably seems fast. For consumers, it may seem like a long time. Our goal was to give industry enough time to make system changes, devise new business practices, and train staff. Consumers will be better off if industry has the time and support it needs to understand and comply with the rule. To that end, in the next few months we’ll start an implementation support program for mortgage providers and servicers who will have to comply.
Can I hear from you as you release more information about the rule?
Yes! If you want to hear from us about the implementation support efforts, sign up here. [put an email signup form to the right] We’re also creating tools to help consumers interested in owning a home. Sign up on our Owning a Home page to be one of the first to know as we release them.
Today, we’re issuing the TILA-RESPA final rule. This rule improves the way consumers receive information about mortgage loans, both when they apply and when they’re getting ready to close. Alongside the rule, we’re publishing information to help industry understand what the requirements are, such as how to fill out the disclosure forms. Helping with that understanding will be an ongoing process. We’re also publishing information about the project that got us here and what the new rule means for consumers.
We want it to be easier for consumers to shop effectively for mortgages and to make the decisions that work for them. We want consumers who are confident in the information they receive, the lenders they work with, and their ability to make good comparisons. This rule is a key part of that effort, so we’ve spent a lot of time testing the new disclosures with consumers who will receive them as well as industry who will have to explain them to consumers. The results of that testing show that our new disclosures make information clearer and easier to use.
What does the rule do?
The final rule contains new rules and forms for two disclosure forms consumers receive in the process of getting a mortgage loan: the Loan Estimate, which comes three business days after application, and the Closing Disclosure, which comes three business days before closing on the loan. These disclosures are required by the Truth in Lending Act and the Real Estate Settlement Procedures Act. The new forms integrate existing disclosures and implement some new disclosure requirements from the Dodd-Frank Act.
The rule also offers some more protections for consumers. For example, consumers must receive their Closing Disclosure three business days before closing on the loan so they have time to review it. The final rule also limits the circumstances in which consumers will have to pay more for settlement services than the estimate they received.
These disclosures and requirements will be effective October 3, 2015.
What’s new about the disclosures?
For most homebuyers, a home is the biggest purchase they’ll ever make. It’s also the most complicated financially, with a lot of paperwork to review and understand. The new forms simplify and clarify a lot of information. Essentially, our forms work to allow consumers to compare loans and make better informed decisions.
The new forms are shorter than the forms under current law. Our Loan Estimate is three pages long; the existing federal disclosures it replaces run at least seven pages. Our Closing Disclosure is five pages long and combines five pages of old forms, plus new disclosures required by the Dodd-Frank Act. This is only some of the information consumers get; lenders, investors, other agencies, and states require other documents. We are working with these other parties to figure out how to reduce the paperwork burden further.
But length isn’t the only factor. The documents need to be easy to understand and use. If we reduced page count but increased confusion, we did the wrong thing. We adopted a user-centered design process in creating these forms that made us confident we could clarify as we streamlined. It turns out we were right: the public made us better at our work.
How do we know they work better?
After we proposed the rule that would have required the new forms, we worked with Kleimann Communication Group to conduct additional qualitative testing as well as a quantitative validation study to measure how well the forms work. Before beginning the study, based on the comments we received on that proposal, we made a few changes to make the forms even better for consumers. These modified versions were the ones tested in the study. Today, we’ve published a report on the study, including its methodology, but what wowed us, and what we want to share here, is the results, which are striking.
We asked participants to answer questions on a written test about a sample mortgage. Those who used our new forms provided more correct answers than those who reviewed the current forms, an improvement of 28.8 percent. The margin of error was plus or minus 4.7 percentage points. Put another way, our new forms performed significantly better than the current forms.
These results are consistent when we break down the questions by different variables in the study, such as identifying numbers from one loan or comparing two loans, experienced or inexperienced mortgage consumers, reviewing a fixed rate or an interest-only adjustable rate loan, or focusing on interest rates or on payments. Which is to say: we are confident we didn’t end up with proposed disclosures that work well for one kind of mortgage loan experience but are confusing for others.
The testing showed that it’s not just that people could understand the new disclosures; they could talk about them, too. People who used the new forms could explain why they made choices they did and offered more comments about their choices than people who used the existing forms. This suggests the new forms may help people articulate their thoughts more clearly. That could mean better discussions with spouses, financial advisers, realtors, and others who help consumers in the process. It may mean more than just better financial results; it may mean a better shopping experience.
What comes next
The next step on the TILA-RESPA rule is developing an implementation support effort. We’re already working on this. Look for information soon that helps industry understand how to comply with the new rules, what they need to do to prepare, and more.
These three areas of work – requiring good information, requiring good practices, and offering useful tools – create the foundation for a better homebuying experience, one in which consumers understand prices and risks and have the clarity they need to make the best decisions for themselves and their families.
One part of our proposed rule to improve the disclosures consumers receive when applying for and closing on a mortgage was a change to the current definition of “finance charge.” The finance charge is intended to reflect the cost of credit for consumers as a dollar amount. It’s used to calculate the Annual Percentage Rate or “APR.”
The proposed rule would eliminate numerous exceptions that exclude common costs (such as title insurance) from the finance charge. We want APR to be a more accurate reflection of the overall cost of credit. However, higher APRs and finance charges could affect the number of loans subject to other legal requirements and protections, such as special disclosures and restrictions for high-cost mortgages. In another rulemaking, we also proposed an adjustment that would prevent that from happening, by changing the coverage test for the high-cost mortgage protections to account for the higher APRs.