What Is the Home Mortgage Disclosure Act (HMDA)?
The Home Mortgage Disclosure Act (HMDA) is a federal law that mandates mortgage lenders to maintain records pertaining to their lending practices, with submissions required to regulatory bodies. Enacted in 1975, the HMDA was initially overseen by the Federal Reserve under Regulation C, later transitioning to the Consumer Financial Protection Bureau (CFPB) for rule enforcement in 2011.
### Key Takeaways:
– The HMDA, instituted in 1975, mandates lenders to uphold specific record-keeping standards.
– Its objective is to enhance transparency and safeguard borrowers in the residential mortgage sector.
– Data collected enables regulators to monitor lending trends for compliance with fair housing laws and direct housing investment appropriately.
Understanding the Home Mortgage Disclosure Act (HMDA)
Originating in Congress in 1975 and enforced under the Fed’s Regulation C, the Home Mortgage Disclosure Act was crafted to oversee mortgage lenders’ geographic targets, identify predatory lending behaviors, and furnish mortgage market statistics to government entities.
The Federal Financial Institutions Examination Council (FFIEC) assumed responsibility for public access to mortgage information from financial institutions under the HMDA in 1980. Subsequent amendments, post the Dodd-Frank Wall Street Reform and Consumer Protection Act, included enhanced data requirements and a regulatory shift to the CFPB.
The complete Home Mortgage Disclosure Act is outlined in Title 12, Chapter 29 of the United States Code, with Regulation C being a vital component governing banking requirements under the Act.
Lenders are tasked with identifying the gender, race, and income of mortgage applicants, with the data anonymized for scrutiny by agencies, consumer groups, and bank examiners to ensure compliance with various fair housing and credit laws.
The HMDA also aids in supporting governmental community investment efforts, facilitating resource allocation assessments.
HMDA Reporting
Issuing a final rule in April 2020, the CFPB elevated the data-reporting thresholds for closed-end mortgage loans under the HMDA from 25 to 100 loans, effective July 1, 2020.
Lenders are obligated to provide the following data in compliance with the HMDA:
Reporting Requirements Under HMDA
– Applicant Information: Race, gender, ethnicity, and gross annual income
– Loan Information: Date, type, purpose, and amount
– Collateral Details: Type and location
– Loan Status: Approved, denied, withdrawn, or closed (incomplete)
Lenders must substantiate reasons for loan denials.
HMDA and Regulation C mandate specified mortgage lending information maintenance and reporting by certain lenders. In 2021, 4,338 lenders disclosed 15 million loan originations under the HMDA.
### Importance of HMDA Reporting
HMDA reporting enables regulatory scrutiny of mortgage lending trends across diverse categories, offering insights into pre-approvals, loan counts, amounts, and purposes, including government-sponsored loan approvals such as FHA, Farm Service Agency, Rural Housing Services, and Veterans Affairs loans.
These statistics serve as valuable research tools for potential borrowers and investors assessing banking and lending stocks’ performance over recent years.
Federal Regulation C mandates lenders to prominently display HMDA information posters in branch offices, accessible for public viewing online via the CFPB data repository.
What Is the Purpose of the Home Mortgage Disclosure Act?
Enacted in 1975, the Home Mortgage Disclosure Act aims to foster transparency in mortgage lending and safeguard consumers against discriminatory practices by requiring lenders to report various mortgage loan application details annually. This includes applicant information, collateral specifics, loan types, and application statuses.
How Often Do Lenders Have to Submit HMDA Reports?
Lenders must annually submit data as per HMDA requirements, reporting on their home purchase loans, refinances, and home improvement loans approvals, denials, or withdrawals by March 1 of the subsequent calendar year.
What Is the Regulation Letter for the HMDA?
The Home Mortgage Disclosure Act falls under the Federal Reserve’s Regulation C, compelling financial institutions to disclose residential mortgage data annually, including applicant and loan particulars. This data aids regulators and watchdogs in assessing lenders’ community responsiveness.
The Bottom Line
The Home Mortgage Disclosure Act, a lesser-known law passed in 1975, strives to enhance transparency in mortgage lending markets and ensure fair assessment of different mortgage applications. Annual data collection from financial institutions is critical for oversight and accountability, encompassing detailed application and applicant information.