What is the Home Mortgage Disclosure Act (HMDA) and why is it important?
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The Home Mortgage Disclosure Act (HMDA), which has been in place for more than four decades, requires mortgage lenders to report information about their lending practices.
Yes, it’s a behind-the-scenes, business thing. But it can be a good resource for consumers and borrowers, too. Let’s dive into the HMDA, why it’s important and how you can access HMDA data online.
What is the Home Mortgage Disclosure Act (HMDA)?
The Home Mortgage Disclosure Act (HMDA) is a federal law passed in 1975 that requires mortgage lenders to collect and report loan-level data points about their portfolios and practices.
HMDA allows regulators and the public to determine whether lenders are serving the housing needs of their communities in an equitable manner. The law also aims to identify lending patterns that could be discriminatory, and provides public officials with information on mortgage lending in their communities so they can make better policy and budgetary decisions.
Consider that, before HMDA was enacted, “there were areas in which residents, often in urban and minority neighborhoods, were not able to obtain mortgages,” says Jared Maxwell, vice president and direct sales division leader with Embrace Home Loans in Middletown, Rhode Island.
Today, HMDA is enforced by the Consumer Finance Protection Bureau (CFPB).
What is included in HMDA reporting?
Among the components included in HDMA reporting are a mortgage applicant’s ethnicity, race, gender and income. “For each record, you can learn about the loan, the property characteristics, the applicant demographics and the lender,” Maxwell says.
For example, you can determine if a borrower received a mortgage or if they were denied, didn’t complete the application or something else happened to prevent the loan from being originated.
Loan-specific pricing and fee information, including negative spreads, as well as details on loan features like balloon payments and negative amortization features, are also reported. The data further includes details about preapprovals and loans sold from one institution to another.
Some data are excluded from public reporting to safeguard an applicant’s privacy, such as the applicant’s name, dates of the application and actions taken, property address and credit score. Additional fields, including exact loan amount, age, debt-to-income (DTI) ratio and property value, are modified into ranges for this same reason.
In all, lenders report:
- Application dates
- Loan types
- Loan purposes
- Loan amounts
- Mortgage rate spreads
- Property type and location
- Applicant ethnicity, race, and gender
- Applicant income
- Whether the loan was approved, denied, or the application withdrawn
- The denial reason, if applicable
Why HMDA reporting is important
HMDA data serve as a comprehensive source of publicly available information on the U.S. mortgage market. The information offers valuable insights, such as:
- Whether lenders adequately serve the mortgage lending needs in their area
- Whether there are any discriminatory lending practices occurring
- Whether an area needs public or private investment to help revitalize its property market
“For example, consumers searching for a mortgage loan can compare the publicly available lending data for differences in credit decisions, terms and pricing by age, race, ethnicity or geography among various financial institutions available to them for their lending needs,” explains Christopher Sicuranza, partner and head of the Banking, Insurance and Capital Markets Practice for Guidehouse, a management consulting firm in Washington, D.C. “Therefore, the HMDA data provide an opportunity for consumers to vote with their wallets and only do business with those financial institutions they believe align with their values based on prior lending activity.”
Lenders also use the data, says Kimberly Wachtel, corporate compliance manager for Inlanta Mortgage in Pewaukee, Wisconsin. “It can tell us a lot about our own business, what our peers are doing and where we may differ and/or align. When lenders are more in tune with their loan performance, they can better serve their communities. Financial institutions should review their data regularly to ensure their loan data lines up with their lending model,” she notes.
What has changed with HMDA reporting?
Over the years, HMDA has experienced a few facelifts to better fulfill its goals, including changing who’s required to report the data, adding pricing information and requiring more data to be collected overall, says Wachtel.
Today, mortgage lenders are required to complete more than 100 fields across several data points on either an annual or quarterly basis, based on the institution’s size, using a new reporting platform, according to Sicuranza.
“The increase in the number of data fields as well as improvements in public accessibility and the technological interface allow for all members of the public to better understand and visualize lending patterns in their communities,” says Sicuranza.
In 2018, financial institutions became obligated to report data related to home equity lines of credit (HELOCs), which was previously optional. They were further required to define coverage requirements if the institution originated at least 100 closed-end mortgages or 200 open-end lines of credit in the two preceding calendar years. The closed-end number was adjusted to 25 in 2022.
The Consumer Finance Protection Bureau (CFPB) recently began soliciting input on HMDA, as well. “In other words, even more HMDA changes may be on the way for consumers to keep on their radar,” says Sicuranza.
How to find HMDA data online
You can access HMDA data easily and for no cost online through the CFPB website. Scroll to the “Download HMDA data” section, where you have the choice of downloading data from years 2007 to 2017 or accessing more recent data and summaries, including data for a particular financial institution.
The Federal Financial Institutions Examination Council (FFIEC) also has the most recent HMDA data. There’s also a HMDA Data Browser that lets you filter, aggregate, download and visualize HMDA datasets.