In 1975, Congress enacted the Home Mortgage Disclosure Act (HMDA) requiring lenders to collect and disclose loan data. Regulatory authority for HMDA is delegated to the Federal Reserve Board (FRB), and HMDA regulations are implemented by the FRB’s Regulation C. The purpose of HMDA is to provide both lawmakers and the public with data which can be analyzed to determine whether lenders are serving the housing needs of the neighborhoods and communities in which they are located. In addition to this, HMDA is intended to help government officials efficiently and fairly channel public and private investment and also to identify discriminatory lending patterns. While HMDA provides data to lenders, regulators, and the public concerning mortgage lending practices, it does not enjoin specific activity. In other words, HMDA satisfies its legislative and regulatory purposes through disclosure, not mandates.

Given the continually shifting landscape of the housing market and lending practices over the past few decades, it is no surprise that the purposes of HMDA, as well as the reporting requirements therein, have evolved and expanded. Under Title 14 of the Dodd-Frank Act, also known as the Mortgage Reform and Anti-Predatory Lending Act (Dodd-Frank), HMDA will be expanded even further. As a result of such a changeable atmosphere, there is currently significant dialogue regarding existing and anticipated reporting requirements. This article will discuss the history of HMDA and set forth both the current reporting requirements and the anticipated additional reporting requirements as a result of Dodd-Frank.

HMDA’s Current Reporting Requirements

Currently, data for a loan or an application for a loan are to be reported if the loan or application is for a (a) home purchase, (b) home improvement, or (c) refinancing. Following is a list of the current fields required in HMDA reports. This list is accurate for HMDA submissions due on or before March 1, 2011: 

The intention of HMDA data analysis is to detect and ultimately curtail discriminatory practices in mortgage lending, but many have argued that it has fallen short in this directive. HMDA data, as currently collected, fail to provide information about the creditworthiness of the individual borrower, employment history, indebtedness, or the adequacy of any collateral offered. Also, current reporting requirements do not include adequate information to deter and detect the full range of harmful and risky lending practices, such as whether a loan is suitable for a particular borrower (“Looking Back and Looking Ahead as the Home Mortgage Disclosure Act Turns Thirty-Five,” 29 Rev. Banking & Fin. Law, 2009). At a recent congressional hearing on the meaning of HMDA data, one recommendation was to add additional data to HMDA reports so that more robust analysis can be completed.

Additions to HMDA as a Result of the Dodd-Frank Act

Not surprisingly, Dodd-Frank will bring further additions to the HMDA data reporting requirements. There are changes in store not only for the itemization of actual granted mortgage loans, but there are also substantial additions for completed applications. For completed loans, the proposed additional reporting requirements for HMDA include:

Along with the additions above for completed loans, the proposed additional HMDA reporting requirements for completed applications include itemization according to the:

In addition to the aforementioned, Dodd-Frank proposes that data should be able to be sorted on a variety of unique relevant identifiers, including that of the loan originator and the parcel number of the collateral, if applicable.

Certainly, these additions to HMDA reporting requirements may be a step in the right direction. Lenders have long maintained that HMDA data fails to include several significant credit risk factors, such as credit history, debt-to-income ratios, and loan-to-value ratios. The proposed inclusion of the applicant’s credit score will help to address one of these concerns, but questions are already arising regarding which credit score would be used or if the various scores be averaged. Requiring disclosure of the age of the borrower would help detect lenders preying on elderly borrowers. Also, requiring the reporting of the channel through which the application was made will help determine which channels are more likely to lead to predatory lending (“HMDA Turns Thirty-Five”). On the other hand, some have asked if these additions go far enough. The proposed amendments still do not address the borrower’s debt-to-income ratio, whether a loan has a balloon payment, or the time between the borrower’s previous loan and the current loan.

Of course, it is possible that the proposed changes are too burdensome, while still not being effective enough. On September 24, 2010, Jay Brinkmann, Chief Economist and Senior Vice President of Research and Economics for the Mortgage Bankers Association, testified before the Federal Reserve Board of Governors at the hearing re: “Potential Revisions to Regulation C – Implementing the Home Mortgage Disclosure Act (HMDA).” During his testimony, Mr. Brinkman addressed the regulatory burden that additional HMDA reporting will place on the mortgage industry, commenting that “the largest shares of investments in technology today are going to reporting and compliance needs, with no direct benefit to the companies or their customers. I would hope that the Fed would keep this burden and its costs in mind and minimize future changes in HMDA once these changes are made.” Clearly, it is difficult, if not impossible, to satisfy all interested parties when discussing fair lending reporting requirements under HMDA.

Dani is a Staff Attorney and Director of Eduational Services at Bankers Advisory. She is a graduate of Harvard College and received her Juris Doctor from Fordham University School of Law.

To find out more information on our compliance training programs, contact Dani at 617-489-2008 or email dani@bankersadvisory.com