By Tim Devaney - 02/07/14 06:00 AM EST
A federal consumer watchdog is taking aim at discriminatory lending practices that target older Americans for risky mortgages and home improvement projects.
The Consumer Financial Protection Bureau (CFPB) announced Friday it is considering a new rule that would better help federal regulators flag these and other discriminatory lending cases. CFPB Director Richard Cordray said the agency plans to propose the rule later this year.
The agency might also require lenders to explain why they have rejected a loan.
"This will help regulators spot troublesome trends in mortgage markets around the country," Cordray told reporters during a press call on Thursday.
The CFPB will look out for lenders that it believes are targeting elderly people for risky, high-priced loans.
"Older Americans are too often targeted by unscrupulous contractors peddling costly loans and making shoddy home improvements," Cordray said.
Cordray said he wants to improve the data-collect process under the Home Mortgage Disclosure Act (HMDA), which was passed by Congress more than three decades ago. The current database contains information from most mortgage loans around the country about race and ethnicity of borrowers and the types of loans they are offered. But it does not include information about age.
The CFPB also plans to streamline the process, so it is more efficient and less time consuming for lenders to comply with, Cordray said.
The CFPB is also considering "leveling the playing field" between banks and nonbank financial institutions that offer loans, Cordray said. Currently, many banks are required to submit annual reports even if they only make a handful of loans. But nonbank lenders don't have to comply with these rules unless they make 100 or more loans.
"We are considering proposing a rule intended to create a more consistent threshold by requiring all banks and nonbanks that meet certain conditions to report if they make 25 or more loans in a year," Cordray said.
Consumers also have access to this mortgage data. The CFPB announced a new tool Friday that, it says, will make it easier for the public to sift through the mortgage data.
"Consumer groups can track specific metropolitan areas or they can see what is happening with specific racial or ethnic populations," Cordray said.