The Home Mortgage Disclosure Act or HMDA is basically a federal law, which obliges particular mortgage lenders to gather, convey and divulge certain information about particular type of home mortgages they close.
The HMDA has been passed in order to provide the general public with the information that could help disclose whether or not mortgage lenders are able to serve the housing loan needs of their communities and neighborhoods. It also aims to assist public officials to direct public investments to the areas in the private sector where they may be needed. It has also been issued to make sure that the patterns in lending follow the stipulations of anti-discrimination policies by means of collecting and disclosing the information about the characteristics of borrowers and their applicants.
The major lending institutions such as banks and other mortgage lenders are required to report information for the Home Mortgage Disclosure Act each year. Currently the lending institutions, both nondepository and depository, that prove at least $25 million worth of mortgage loans in a year are required to report these information. The number of institutions required to report for HMDA have increased dramatically since 2004.
The information reported by the institutions are submitted to the FFIEC or the Federal Financial Institutions Examination Council, a coalition comprised of thrift and bank regulatory agencies. Data is collected every 1st of March annually.
The following data are collected:
- the loan ID number and application date
- the type of application or loan
- the purposes of the applications or the loans
- the purpose of pre-approval and origination
- the type of property being loaned or applied for and its location
- information about the owner and occupancy
- the amount loaned or the amount that has been applied for
- the status of lien for the application or the loan.
- the action taken plus the date of the action
- race, sex, gross, and ethnicity of the borrower
- the income profile of the borrower or applicant
- the type of the entity buying the loan if it is sold on a secondary market
- the spread of APR if it is higher than 3% on first mortgages or 5% for refinances
- whether or not the loan is subject to the HOEPA or the Home Ownership Equity Protection Act
The HMDA is a means of comparing the lending trends conducted by mortgage lenders. These trends are observed to make sure that lenders are acting without discrimination or anomalies. With HMDA the general public is protected.
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