What Is the Home Mortgage Disclosure Act (HMDA)?
The Home Mortgage Disclosure Act (HMDA) is a federal law that requires mortgage lenders to keep records of key pieces of information regarding their lending practices. Lenders must submit these records to regulatory authorities. Established in 1975, the HMDA was implemented by the Federal Reserve through Regulation C. In 2011, the rule-writing authority of Regulation C was transferred to the Consumer Financial Protection Bureau (CFPB).
Key Takeaways
- The Home Mortgage Disclosure Act is a law passed in 1975 that mandates mortgage lenders maintain certain records.
- The goal is to create greater transparency and protect borrowers in the residential mortgage market.
- Data collected under the HMDA allows regulators and others to monitor mortgage borrowing trends and lending for compliance with fair housing and other laws and to direct housing investment and government funding to areas where it is needed.
Understanding the Home Mortgage Disclosure Act (HMDA)
The Home Mortgage Disclosure Act was passed by Congress in 1975 and went into effect under the Fed's Regulation C. It was developed to address concerns and monitor the geographic targets of mortgage lenders by providing a way to identify predatory or discriminatory lending practices, and to report statistics on the mortgage market to the government.
In 1980, the Federal Financial Institutions Examination Council (FFIEC) was given the responsibility of facilitating public access to mortgage information from financial institutions in accordance with theHMDA. Amendments were made to the Act following the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which included the requirement of additional data points and the transfer of responsibility from the Fed to the CFPB.
The entire Home Mortgage Disclosure Act can be found in Title 12, Chapter 29 of the United States Code. Regulation C is also an important component of the Act. Regulation C was created by the Federal Reserve to overlay the requirements of the Act and designate certain additional requirements that banks must follow.
The HMDA asks lenders to identify the sex, race, and income of those applying for or obtaining mortgages, but the data is anonymized in record keeping. Government agencies, consumer groups, and bank examiners use the data to determine compliance with various federal fair housing and credit laws including the Equal Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act (CRA), and state laws.
The HMDA also helps support government-sponsored community investment initiatives by providing a means for analyzing the allocation of resources.
HMDA Reporting
In April 2020, the CFPB issued a final rule raising the data-reporting thresholds for collecting and reporting data about closed-end mortgage loans under the HMDA from 25 to 100 loans effective July 1, 2020.
In accordance with the HMDA, lenders must submit the following data:
| Reporting Requirements Under HMDA | |
|---|---|
| Applicant Information | Race, gender, ethnicity, 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 |
Lenders must submit a reason why a loan was denied.
Under HMDA and Regulation C, certain mortgage lenders are required to maintain records of specified mortgage lending information for reporting purposes. In 2021, 4,338 lenders reported 15 million loan originations under the HMDA.
Importance of HMDA Reporting
HMDA reporting allows regulators to analyze information on mortgage loans and mortgage lending trends in a number of categories, such as the number of pre-approvals made, the number of mortgages granted, loan amounts, and the purposes of individual loans.
The federal reporting also greatly details the approvals of various types of government-sponsored loans including the Federal Housing Administration (FHA), Farm Service Agency, Rural Housing Services, and Veterans Affairs loans.
While these statistics are of natural interest to potential borrowers, they can also be an important research tool for investors researching banking and lending stocks. By comparing the most recent few years' statistics, an investor can easily identify whether or not a lender is growing its core business.
Federal Regulation C requires lenders to prominently display a poster in every branch office lobby that provides information on requesting their unique HMDA statistics. These statistics can also be viewed by the public online for free at the CFPB data repository.
What Is the Purpose of the Home Mortgage Disclosure Act?
The Home Mortgage Disclosure Act is a law passed by Congress in 1975. The purpose of the Act is to promote transparency within the mortgage lending market. It also aims to protect consumers from predatory and discriminatory lending practices. This is done through the collection of data from lenders about different types of mortgage loan applications. Lenders must submit their data each year about information on residential mortgage applications, originations, and refinances. This includes information about applicants, collateral details, the types of applications, and the status of each.
How Often Do Lenders Have to Submit HMDA Reports?
Lenders are required to submit information each year in accordance with the HMDA. Information reported must include data about their "applications, originations, and purchases of home purchase loans, home improvement loans, and refinancings." This includes information about applications that were approved, denied, or withdrawn, along with any that were incomplete and closed. Reports for the calendar year must be submitted by March 1 of the following year.
What Is the Regulation Letter for the HMDA?
The Home Mortgage Disclosure Act falls under the Federal Reserve's Regulation C. This regulation requires the annual disclosures of residential mortgage loan data from financial institutions. Data reported includes details about applicants and loan types among others. The data is used by different entities, including regulators and watchdogs, who ensure that lenders are meeting the needs of the communities they serve.
The Bottom Line
Many consumers probably aren't familiar with the Home Mortgage Disclosure Act. This law was passed and approved by Congress to help bring transparency to the mortgage lending market. The government also enacted the law to help ensure that lenders approve or deny different types of mortgage applications fairly and justly. Data is collected from financial institutions each year and compiled for review. It includes application and applicant details.
