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58 | TH E M R EP O RT O R I G I NAT I O N S E R V I C I N G DATA G O V E R N M E N T S E C O N DA R Y M A R K E T THE LATEST GOVERNMENT CFPB Proposes ECOA Regulation Changes The bureau intends to allow more flexibility in the way lenders collect information on borrower's ethnicity and race. T he Consumer Finan- cial Protection Bureau released a proposal to amend certain regula- tions in the Equal Credit Oppor- tunity Act (ECOA). The intent is to provide additional flexibility for mortgage lenders in the collection of consumer ethnicity and race information. The proposed amend - ments should provide greater clarity to lenders regarding their obligations under the law, and ac- cording to the CFPB, will promote compliance with rules intended to ensure customers are treated fairly. "This law is a key part of the government's commitment to root out discrimination," said CFPB Director Richard Cordray. "This proposal will help industry comply with the law and help protect consumers against illegal discrimination." The ECOA was enacted in October 1974 to make it unlawful to discriminate against any credit applicant based on race, color, religion, national origin, or sex, except in certain circumstances. The CFPB's proposal to amend regulation B of the ECOA would provide compliance flexibility for individual mortgage lenders, and would also support the broader mortgage industry's ability to use consistent forms and compliance practices. The proposal would allow more lenders to use applica - tion forms with expanded requests for information from a consumer regarding ethnicity and race. Creditors may have to collect and retain certain information about applicants for certain loans under Regulation B, and in some cases, fi - nancial institutions may be required to report applicant information under Regulation C. The CFPB previously issued amendments to Regulation C in October 2015, in - cluding changes to the collection of ethnicity and race information from applicants. The proposed amend- ments to Regulation B would give credit institutions additional flex- ibility in how it collects applicant information, so that they may better align with Regulation C. The proposal would allow creditors to collect information from applicants in situations when they would otherwise not be required to do so. Financial Choice and the Year to Come An amended version of the Financial Choice Act has a high probability of success, an industry expert says. W ith the cur- rent administra- tion at the helm, many anticipate major changes in financial regula- tion and the lending industry. In a brief titled, "Financial Regulation in the Era of Donald Trump" for Indiana State University Networks Financial Institute, Chris Whalen stated that the passage of the 2010 Dodd-Frank law and the regula- tions and legal undertakings that followed it put the U.S. financial sector under the greatest con- straints since the Great Depres- sion. "In the aftermath of the 2008 financial crisis, the focus of politicians in both parties was to punish banks and other financial services companies for a variety of offenses, real and imagined," Whalen said. "In many respects, the provisions of the Dodd-Frank law were designed to chastise banks and other companies for perceived wrong doing, especially abuses of consumers." The question now is, how will the Trump administration deal with financial regulation, and where does financial regulation rank on the list of priorities? A challenge that will need to be addressed is the problem of "too big to fail." Whalen noted that the aftermath of the bailouts caused widespread anger. This anger increased dramatically in the following foreclosure crisis. "Meanwhile, virtually no executives of the major U.S. banks and financial institutions were subject to legal sanctions for acts of financial fraud and malfeasance," Whalen said. "Instead the victims of the 2008 crisis—namely the shareholders of the largest financial institutions— have been repeatedly punished via fines and lopsided legal settlements." Regulatory entities are already high-priority targets for President Trump, most notably the Consumer Financial Protection Bureau (CFPB). The president's team has indicated support of the Financial Choice Act, which, among other things, would modify aspects of Dodd-Frank. The Choice Act would help to reform the CFPB, which, according to Whalen, "has been especially harmful to the mortgage industry and has caused the cost of servicing a mortgage to rise several fold since 2008." Additionally, the Choice Act would give regional and community banks a way to avoid most aspects of Dodd- Frank regulations, and a policy of bankruptcy not bailouts, which would force big bank's parent companies to file bankruptcy and restructure, instead of the current Dodd-Frank policy, which allows for bailouts. "Some or all of the provisions of the Financial Choice Act could eventually become law. A modified version of legislation could be made palatable to both parties in the Senate and, despite Democratic opposition, could become law far more easily than either a tax reform bill or ACA reform," Whalen concluded. "There are a number of other issues that may catch the attention of the new President next year, but an amended version of the Financial Choice Act has the highest probability of success in 2017. Needless to say, the financial services industry including banks, insurers and nonbank financial institutions will be very supportive of passage of some form of the Financial Choice Act." "This proposal will help industry comply with the law and help protect consumers against illegal discrimination." —Richard Cordray, Director, CFPB