Home Mortgage Disclosure Act

  • Date: May 20, 2011
  • Source: General Admin
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Purpose Served by the Act

The Home Mortgage Disclosure Act (HMDA), enacted by the U.S Congress in 1975 and implemented by the Federal Reserve Board's Regulation C, requires depository institutions and certain for-profit, non-depository institutions to collect, report to federal agencies, and disclose to the public data about:

  • originations and purchases of home mortgage loans for home purchase and refinancing;
  • originations and purchases of home improvement loans; and
  • loan applications that do not result in originations (for example, applications that are denied or withdrawn).
 Applicability of HMDA
A US company is covered by HMDA if
  • It has at least USD 37 million in assets (as of 2008; the limit varies each year).
  • It has made at least one home mortgage loan in the preceding year.
  • The company itself is federally insured or regulated or at least one of the loans it made was intended to be sold to Fannie Mae or Freddie Mac.
 Approximately 8,600 companies are covered by HMDA. Companies covered under HMDA are required to maintain a Loan Application Register (LAR). Each time someone applies for a home mortgage at an institution covered by HMDA, the company is required to make a corresponding entry in the LAR. The following information should be noted in the LAR; 
  • The loan amount
  • The purpose of the loan (home purchase, home improvement, refinancing)
  • The type of property involved (single-family, multifamily)
  • The loan type (conventional loan, FHA loan, VA loan or a loan guaranteed by the Farmers Home Administration)
  • The location (state, county, MSA and census tract) of the property
  • The race of the borrower(s)
  • The ethnicity (Hispanic or non-Hispanic) of the borrower(s)
  • The gender of the borrower(s)
  • Whether or not the loan was granted
  •  If the loan was denied, the reason why it was denied
  • If the loan was denied, whether the interest rate charged was over a certain threshold
  •  If the loan was subsequently sold in the secondary market, the type of entity that purchased it.

    Purpose Served by the Collected Data

The data collected under HMDA is used to:
  •  Help determine whether institutions are serving the housing needs of their communities;
  •  Help public officials target public investment to attract private investment where it is needed; and 
  • Assist  in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes. 
Data Submission and Processing
1.        The Board’s Regulation C implements HMDA. The information reported under Regulation C includes, among other items: 
  • application date;
  • loan type, purpose, and amount;
  • property location and type;
  • race, ethnicity, sex, and annual income of the loan applicant;
  • action taken on the loan application (approved, denied, withdrawn, etc.) and date of that action;
  • whether the loan is covered by the Home Ownership and Equity Protection Act (HOEPA);
  • lien status (first lien, subordinate lien, or unsecured); and
  • certain loan price information.
2.        Companies covered under HMDA are required to keep a Loan Application Register (LAR), as already said
3.        Institutions report HMDA data to their supervisory agencies, which make the data available to the public with certain fields removed to ensure applicants' privacy.
4.        On behalf of the supervisory agencies, the Federal Financial Institutions Examination Council (FFIEC) compiles the reported data and prepares an individual disclosure statement for each institution, aggregate reports for all covered institutions in each metropolitan area, and other reports.
5.        Every March, reporting institutions are required to submit their LARs to the Federal Financial Institutions Examination Council (FFIEC), an interagency body empowered to administer HMDA.
6.        FFIEC screens the data for errors and then releases it to the public electronically.
7.        All reports are made available to the public on the FFIEC website.
8.        Reporting institutions are also required to disclose their individual LARs to members of the public upon request.
Using the Data to Detect Housing Discrimination
HMDA data can be used to identify probable housing discrimination in various ways. It is important to understand that in all cases of possible discrimination, the basic regulatory inquiry revolves around whether a protected class of persons is being denied a loan or offered different terms for reasons other than objectively acceptable characteristics (e.g. income, collateral).
  •   If an institution turns down a disproportionate percentage of applications by certain races, ethnicities, or genders, then there is reason to suspect that the institution may be discriminating against these classes of borrowers by unfairly denying them credit. Such discrimination is illegal in the United States.
  •   If an institution has a disproportionately low percentage of applications by certain races, ethnicities or genders then there is reason to suspect that the institution may be discriminating against these classes of borrowers by unfairly discouraging them from applying for mortgage loans. 
  •  If an institution has a disproportionately low percentage of applications from certain areas, compared to areas immediately surrounding the area in question, then there is reason to suspect that the institution is engaging in redlining. Redlining used to be a major issue in the past. The Federal Community Reinvestment Act was introduced in 1977 to ban it as an illegal discriminative practice. The term originates by the tactic used to limit mortgage offers to a certain public of the lower class. Financial institutions tended to draw a red line around neighborhoods of poor communities where they decided not to grant home loans due to the high default rates. Under the redlining procedure, the creditworthiness and the applicant’s qualifications are not taken into account and the applicant is denied the loan. There are still such cases of prejudice obtaining.
  • If there is a disproportionate prevalence of high-interest loans to certain classes of borrowers, then there is a reason to suspect that the institution is engaging in price based discrimination. This is the most active area of compliance monitoring with respect to HMDA data, since risk management policies in many financial institutions are quick to identify outright discrimination by lending officers.


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