CFPB Approves URLA 2016 and Authorizes Early HMDA Information Gathering

On September 23, 2016, the CFPB released an official approval of the revised and redesigned Uniform Residential Loan Application (“URLA”) issued by Freddie Mac and Fannie Mae on August 23, 2016 (URLA 2016) for compliance with ECOA and Regulation B. The CFPB also approved an early adoption of the 2015 HMDA final rule. With this approval, creditors may request applicants to self-identify using disaggregated ethnic and racial categories prior to the mandatory effective date of January 1, 2018.

Federal law governs the information that may be gathered by creditors from their customers including, but not limited to, questions concerning race, color, religion, national origin, sex, marital status and information concerning spouses or former spouses. While creditors are not required to use the URLA 2016, any creditor that uses the form will act in compliance with federal rules concerning the collection of the above information. The CFPB’s approval of the URLA 2016 means any creditor who uses or modifies the form in accordance with applicable regulations will be in compliance with ECOA and will not be subject to liability.

Generally, federal law prohibits a creditor from inquiring about the race, color, religion, national origin or sex of an applicant or any other person in connection with a credit transaction. There are exceptions to this general prohibition for monitoring purposes under parts of ECOA and other federal or state statutes and regulations, including Regulation C. Regulation C requires lenders under its purview to gather certain information regarding ethnicity, race and sex that is otherwise not permitted. The 2015 HMDA final rule requires financial institutions to allow their customers the opportunity to self-identify using disaggregated ethnic and racial categories beginning January 1, 2018. 

The CFPB believes it will be beneficial if financial institutions are allowed to begin this process earlier to help ease the transition and improve compliance before the new requirement becomes effective. Beginning January 1, 2017, creditors may permit applicants the opportunity to self-identify using disaggregated ethnic and racial categories as approved by the 2015 HMDA final rule. Any creditor who takes advantage of this early compliance with the 2015 HMDA final rule will be deemed in compliance with federal law and will not be subject to ECOA liability.

While Fannie Mae and Freddie Mac indicated that creditors may not begin using the URLA 2016 until January 1, 2018, it is possible that this notice from the CFPB will enable the GSEs to permit earlier use of the URLA 2016. If not, creditors will need to rely on the form provided in Appendix B to the 2015 HMDA final rule if collecting the new race and ethnicity information prior to January 1, 2018.

The full text of the CFPB’s official approval may be found here: https://www.gpo.gov/fdsys/pkg/FR-2016-09-29/pdf/2016-23555.pdf.