What Is the Home Mortgage Disclosure Act?

The Home Mortgage Disclosure Act (HMDA) is a federal act approved in 1975 that requires mortgage lenders to keep records of certain key pieces of information regarding their lending practices which they must submit to regulatory authorities. It was implemented by the Federal Reserve through Regulation C.

Key Takeaways

  • The Home Mortgage Disclosure Act (HMDA) is a law passed in 1975 that mandates mortgage lenders maintain certain records.
  • The goal is to create greater transparency and borrower protections in the residential mortgage market.
  • This data also allows regulators and analysts to monitor trends in housing and mortgage borrowing and lending.

Home Mortgage Disclosure Act Explained

The Home Mortgage Disclosure Act and Regulation C include requirements for regulatory submissions and public disclosures. 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.

In general, the primary purposes of the Home Mortgage Disclosure Act and Regulation C are to monitor the geographic targets of mortgage lenders, provide an identification mechanism for any predatory lending practices, and to provide reporting statistics on the mortgage market to the government. The HMDA helps to support the community investment initiatives sponsored by government programs, with HMDA contributing to the oversight of the initiatives through statistical reporting. HMDA also helps government officials to identify any predatory lending practices which may be affecting mortgage loan issuance. HMDA submissions also provide a means for analyzing government resource allocations and ensuring that resources are appropriately allocated to fund community initiatives.

In 1980, th  Federal Financial Institutions Examination Council (FFIEC) was given the responsibility of facilitating public access to mortgage information from financial institutions in accordance with the Home Mortgage Disclosure Act of 1975. The HMDA asks lenders to identify the sex, race, and income of those applying for or obtaining mortgages. This data allows the FFIEC to monitor trends in housing and mortgage borrowing and lending, such as, for example, a reported increase in mortgage borrowing by blacks and Hispanics as of 1993.

HMDA Reporting

Under HMDA and Regulation C certain mortgage lenders are required to maintain records of specified mortgage lending information for reporting purposes. In 2017, 6,762 lenders were required to report HMDA statistics with 16.3 million loan records reported.

HMDA reporting allows regulators to analyze information on mortgage loans and mortgage lending trends from a variety of angles. Information from HMDA reporting includes a wide variety of statistics such as the number of pre-approvals made, the number of mortgages granted, loan amounts, and statistics on 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, Farm Service Agency, Rural Housing Services, and Veterans Affairs loans.

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 www.FFIEC.gov.

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 their core business.