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Gov't agencies team up to monitor mortgage market

(MoneyWatch) The housing market collapsed amidst a toxic cloud of risky lending and over-inflated home prices, and the government continues its efforts to clean up the mess. Most recently, the Federal Housing Finance Agency (FHFA) and Consumer Financial Protection Bureau (CFPB) announced they will partner to create a national mortgage database which will be used to support the agencies' policymaking and research efforts.

The mortgage market is the single largest market for consumer finance, but a national collection of data does not exist. Currently, most detailed information is collected by two companies, Lender Processing Services and CoreLogic, and sold in various forms to regulators. Multiple federal and state agencies also collect some data.

But some say it's not enough. "In order to understand what is going on in the mortgage marketplace and develop appropriate consumer protections, we must have the best facts and data," CFPB director Richard Cordray said in a press release.

And that information may soon be available. According to a press release from the FHFA and CFPB, the two agencies have established terms for developing, maintaining and funding the national database but do not expect early versions of the full dataset until sometime in 2013.

The agencies seek to do five important things with the development of the national mortgage database:

Monitor the relative health of mortgage markets and consumers. The database will provide detailed loan performance data including whether payments are late or on-time, as well as information on loan modifications, foreclosures and bankruptcies. The FHFA and CFPB hope this data will help policymakers better understand how various mortgage products are being used and performing.

Provide insight into consumer decision-making. A variety of housing-related agencies will be able to use the data to conduct surveys that will help them better understand consumer decision-making in areas like mortgage shopping or distressed homeownership.

Monitor new and emerging mortgage products. Using the information available in the national mortgage database, agencies will be better able to monitor performance and volume of new mortgage products, as well as identify potential problems or risk -- hopefully before they happen on a grand scale.

View more than one mortgage. Policymakers are increasingly interested in how many mortgages consumers have and how they're performing. The national mortgage database would be the first to allow regulators to analyze first and second mortgages.

Understand the impact of consumers' debt. The database will include information about borrowers' other debt obligations, including auto and student loans. This will permit policymakers to better understand emerging borrowing trends and overall consumer debt burden.

The national mortgage database will include information spanning the life of a mortgage loan from origination through servicing. It will track a variety of borrower characteristics including the borrower's financial and credit profile; the mortgage product; the property purchased or refinanced and the ongoing payment history of the loan. Data will be updated on a monthly basis and track as far back as 1998.

"This partnership between FHFA and CFPB will create a unique resource that benefits the government and public as we seek to answer important questions about how the housing finance market is evolving and changing," Edward J. DeMarco, FHFA acting director, said in a press release. "This collaborative effort is a great way to pool expertise and leverage resources for the benefit of regulators and the public."

Of course, not all homeowners will be happy about the government collecting all that information. In a press release announcing the database, the FHFA and CFPB assure consumers that it will not contain personally identifiable information. Rather, the agencies will use credit bureau files on borrowers' mortgages and payment histories, along with Home Mortgage Disclosure Act (HMDA) information and property valuation models, to create a comprehensive picture for each mortgage.

How successful this endeavor is depends on a few factors. Other agencies -- those which monitor credit and student loan data, for example -- must be willing to work with the FHFA and CFPB to provide information on individual borrowers. The database must also include information about a variety of loan types including Fannie Mae, Freddie Mac, FHA and VA loans, in order to provide as complete a picture as possible.

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