What is the Home Mortgage Disclosure Act (HMDA)?
The federal Home Mortgage Disclosure Act (HMDA) requires mortgage lenders to retain crucial lending information on file. Regulators need these documents from lenders. In 1975, the Federal Reserve enacted the HMDA through Regulation C. The Consumer Financial Protection Bureau (CFPB) took over the rule-writing power of Regulation C in 2011.
Home Mortgage Disclosure Act comprehension
Congress implemented the Home Mortgage Disclosure Act in 1975 under Fed Regulation C. It identified exploitative or discriminatory lending practices and reported mortgage market information to the government to resolve complaints and monitor mortgage lenders’ regional goals.
HMDA mandated the Federal Financial Institutions Examination Council (FFIEC) to facilitate public access to mortgage information from financial institutions in 1980. The Dodd-Frank Wall Street Reform and Consumer Protection Act required more data points and transferred authority from the Fed to the CFPB, requiring amendments to the Act.
Title 12, Chapter 29 of the US Code contains the Home Mortgage Disclosure Act. Reg C is also crucial to the Act. The Federal Reserve issued Regulation C to add to the Act’s obligations for banks.
HMDA asks lenders to identify the sex, ethnicity, and income of mortgage applicants but then anonymizes the data. Government agencies, consumer organizations, and bank examiners utilize data to assess compliance with federal fair housing and credit legislation, such as the Equal Credit Opportunity Act, Fair Housing Act, CRA, and state laws.
A resource allocation analysis tool from the HMDA supports government-sponsored community investment programs.
HMDA Reporting
The CFPB published a final rule in April 2020, increasing the HMDA data-reporting limits for closed-end mortgage loans from 25 to 100, beginning July 1, 2020.
The HMDA requires lenders to disclose the following data:
| Reporting Requirements Under HMDA | |
| Applicant Information | Race, gender, ethnicity, and gross annual income |
| Loan Information | Date of application, type of loan, purpose, and amount |
| Details on Collateral | Type of collateral and location |
| Status of Loan | Approved, denied, withdrawn, or incomplete and closed |
HMDA and Regulation C compel some mortgage lenders to submit mortgage lending information. Four 338 lenders reported 15 million HMDA loan originations in 2021.
Importance of HMDA Reporting
HMDA reporting enables regulators to monitor mortgage loan activity, including pre-approvals, grants, loan amounts, and loan objectives.
Federal reporting provides extensive data on government-sponsored loan approvals, including FHA, Farm Service Agency, Rural Housing Services, and Veterans Affairs loans.
These figures interest potential borrowers, but investors analyzing banking and lending firms may use them too. The last several years’ statistics might tell an investor if a lender is developing its primary business.
Under Federal Regulation C, lenders must prominently display a notice in branch office lobbies on obtaining their unique HMDA statistics. The public can check these statistics online for free at the CFPB data repository.
Why does the Home Mortgage Disclosure Act exist?
Congress enacted the 1975 Home Mortgage Disclosure Act. The Act promotes mortgage lending transparency. Protecting customers from exploitative and discriminatory financing is another goal. Lenders provide data on mortgage loan applications. Lenders must report residential mortgage applications, originations, and refinances each year. This comprises applicant, collateral, application type, and status information.
How often must lenders submit HMDA reports?
According to the HMDA, lenders must disclose information annually. They must disclose “applications, originations, and purchases of home purchase loans, home improvement loans, and refinancings.” This contains approved, refused, withdrawn, unfinished, and closed applications. By March 1, calendar-year reports are due.
What is the HMDA Regulation Letter?
Federal Reserve Regulation C covers the Home Mortgage Disclosure Act. This rule mandates financial firms to provide residential mortgage loan data annually. The data covers applicants, loan categories, and more. Regulators and watchdogs utilize the data to ensure lenders satisfy community demands.
The Verdict
Consumers may not know about the Home Mortgage Disclosure Act. Congress enacted this measure to increase mortgage lending transparency. The government also passed the law to guarantee lenders would accept or refuse mortgage applications equitably. Annually, financial organizations provide data for assessment. It details applicants and their applications.
Conclusion
- The 1975 Home Mortgage Disclosure Act requires mortgage lenders to keep records.
- The purpose is to increase residential mortgage market transparency and safeguard borrowers.
- Regulators and others can use HMDA data to monitor mortgage borrowing patterns and lending for fair housing and other laws and focus housing investment and government money on the required locations.
