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HMDA: new reporting burdens.


The Home Mortgage Disclosure Act (HMDA) was originally enacted to provide citizens and public officials with information to determine if lending institutions were serving their community housing needs. As part of the S&L bailout statute (signed into law August 9, 1989), Congress made major revisions to HMDA expanding the act's coverage and requirements.

The Federal Reserve Board implemented HMDA through Regulation C. The HMDA amendments were issued as a final rule by the board December 12, 1989, published on December 15, 1989 and made effective January 1, 1990.

The changes now affect mortgage bankers and some other lending institutions not previously subject to HMDA requirements as well as institutions already covered by HMDA.

As part of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, Congress substantially revised HMDA. HMDA was enacted to provide information to citizens and public officials so they could determine whether or not lending institutions were fulfilling their obligations to serve the housing needs of their communities and surrounding neighborhoods.

While HMDA does not require any specific distribution or allocation of funds, it requires extensive record-keeping and reporting of certain loan transactions by lenders. The 1989 amendments expand the coverage of HMDA to non-banking institution and non-banking institution-related lenders.

With limited exceptions, HMDA data collection is now required of independent mortgage bankers, as well as banking institutions and mortgage banking subsidiaries of banking institutions. In addition, and again with very limited exceptions, all lenders subject to HMDA need to gather and report data on the race, sex and income of loan applicants, not simply census tract and loan amounts. Data on loan applications that do not result in closed loans will also need to be reported, making data collection more complex. Software redesign and staff reassignments may be necessary.

The remainder of this article details the amended law's key provisions.


HMDA's data-collection obligations apply to all depository institutions (banks, S&Ls, credit unions) as well as their lending subsidiaries and all independent mortgage bankers that meet the following requirements:

* The lending institution has at least $10 million in assets; and;

* The institution has an office in a metropolitan statistical area or primary metropolitan statistical area.

However, if a lending institution has assets of less than $10 million but is a subsidiary of, or is affiliated with an institution with assets totaling at least $10 million (i.e., a subsidiary of a corporation whose assets, when combined with those of the subsidiary, are at least $10 million), that lending institution may not benefit from the $10 million asset size exemption.

A non-banking institution mortgage banker will be exempt from HMDA's requirements if, in the preceding calendar year, less than 10 percent of its loan volume consisted of home purchase loans. A home purchase loan has been defined as any loan secured by and made for the purpose of purchasing a dwelling.

For the year ending December 31, 1989, institutions that had been subject to HMDA (i.e., banking institutions and their subsidiaries but not independent mortgage bankers) will continue to submit their HMDA data on the existing HMDA forms 1, 2 and 2A. Effective January 1, 1990, however, all HMDA-subject lenders, including independent mortgage bankers, must use a new loan register format prepared by the Federal Reserve Board. The new register requires that much more information be gathered and reported.

The primary and most substantive reporting requirement change is that HMDA data must now be collected on all loan applications, not just on those loans that actually close. The Federal Reserve Board has defined loan application the same way it defined loan application for Regulation B (Equal Credit Opportunity) purposes: "an oral or written request for a home purchase or home improvement loan that is made in accordance with procedures established by a creditor for the type of credit requested," even if the application form itself is incomplete.

In addition to the pre-1989 requirements to collect data on loan amount, location and type of loan, now data on the race, sex and income of applicants also must be collected. Note, however, that depository institutions with assets of less than $30 million need not collect data on race, sex and income. This limited exemption applies to these three categories of data only. The remaining data-collection requirements still apply. A loan application will be reported for HMDA purposes in the year in which a final determination on the loan is made (e.g., denial, withdrawn, loan closed) and not the year in which the application is received. If an application is received in 1989 by an institution that must collect race, sex and income data, but final disposition of the loan does not occur until 1990, the lender need only report racial and gender data in its 1990 HMDA report if that data is already in the lender's files. If not in the file, the lender is not required to obtain this information.

Loans purchased by a HMDA-subject lender also need to be included in an institution's HMDA reports. Data on race, sex and income are optional for such loans. Lenders are now obligated to report the type of investor to whom loans are sold (i.e., FNMA, private investor). The revised HMDA regulation also provides lenders with the option of explaining why loans have been denied. Lenders may initially opt to delete this extra information, but lenders, especially banking institutions, should remember that HMDA data is available to the general public and an otherwise unexplained high rejection rate of minority or female applicants, or applications from minority communities could be used to argue lender discrimination.

However, while such an accusation would be detrimental to any lender, a banking institution subject to Community Reinvestment Act reviews should give serious consideration to whether supplying this optional data would be to its advantage. Lenders may want to consult with counsel on this matter.

These data-collection changes make it imperative that lenders review their loan procedures to determine the appropriate places and times during the loan application process at which the necessary HMDA data can be collected efficiently and unobtrusively. Lenders also need to designate personnel to collect this data. Under the old HMDA requirements, data collection generally could be delegated to one staff person and that staff person could collect that data upon the loan closing, but the 1989 amendments will make that procedure inadequate. Since data must be collected on loans that do not necessarily close, mechanisms and staff assignments must be designed to comply with these new requirements.

If an institution is also subject to the data-collection requirements mandated by the Fair Housing Act, compliance with HMDA will not exempt it from continued Fair Housing Act compliance. Nor will compliance with Fair Housing Act data-collection requirements exempt the institution from HMDA. Nevertheless, procedures can be crafted to minimize the administrative burdens imposed by these somewhat duplicative statutes.

Supervisory agencies

National banks report their HMDA data to the Office of the Controller of the Currency; state banks report to the Federal Deposit Insurance Corporation; credit unions report to the National Credit Union Administration; thrift institutions report to the Office of Thrift Supervision (the successor to the Federal Home Loan Bank Board); and independent mortgage bankers report to the Department of Housing and Urban Development. Subsidiary lenders of banking institutions are required to file their own independent HMDA registers.

These agencies also have the authority to examine institutions they supervise for compliance with Regulation C and impose various penalties depending on their respective enforcement powers. For example, under the terms of the savings and loan bailout act, civil penalties of up to $5,000 per day can be assessed against FDIC-insured institutions for violations of banking regulations. While few believe this provision was designed to reach HMDA violations, the authority is nevertheless there to apply these penalty provisions to HMDA enforcement.

HMDA data need to be collected on all loan applications for purchase money mortgages, refinances, home improvement loans and loans for multifamily dwellings (for either purchase or home improvement). Cooperative and condominium units and mobile or manufactured homes are included. Applications for conventional as well as government guaranteed/insured mortgages (i.e., FHA, VA, FmHA) are subject to HMDA data collection. That an applicant is applying for a loan on a property other than the applicant's principal dwelling, is not relevant for HMDA purposes.

The revised HMDA loan register will not require lenders to cross tabulate or otherwise process or analyze the raw data collected, as required previously. All that will be required will be information on an individual, loan-by-loan basis. The Federal Financial Institutions Examination Council, an arm of the federal government, will prepare summaries for each metropolitan area and institution and the council will perform all cross tabulations and other analyses.

Under pre-1989 rules, HMDA reports were due from each institution by March 31 following the close of each calendar year. Lending institutions are now required to submit their HMDA registers by March 1 following each calendar year.

As noted, the Federal Financial Institutions Examination Council will prepare summary tabulations for each lending institution. It is expected that lending institutions will receive the summaries by October following submission of raw data. While the proposed rule contained the format for such summary reports, the final rule does not include these forms. The board is still considering the final formats of these reporting forms. Within 30 days after an institution has received its summary report, that institution must make the report available to the public. These summaries must be made available to the general public for five years.

A lender need not release its raw loan register forms and data to the general public. Notices that HMDA data summaries are available must be posted in any office a lender maintains in a metropolitan or primary metropolitan statistical area. The summaries, however, need only be maintained in one office for each such area.

The Federal Reserve Board exempted New Jersey, Connecticut and Massachusetts state-chartered lending institutions from compliance with the pre-1989 amended Regulation B because the state laws governing those institutions were substantially similar to the pre-amended HMDA requirements. On December 12, 1989, the board proposed revoking those exemptions because of the increased coverage and data-collection requirements of the amended HMDA, effective January 1, 1990.

As you can see, the 1989 amendments have drastically changed HMDA. Although the Federal Reserve Board's final rule enacting the amendments was not issued until December 12, 1989, the amendments make clear, and provide no flexibility, that the revised data-collection obligations become effective January 1, 1990. Lenders should examiner their procedures to determine whether or not HMDA assigned personnel and procedures are adequate to ensure compliance with the revised regulations. If a lender is subject to HMDA for the first time, the lender must determine the most appropriate and efficient way to comply with these requirements.

Paul H. Schieber is an attorney with Blank, Rome, Comisky & McCauley, a Philadephia law firm. He is the former executive director of the Public Housing Auhorities Directors Association.
COPYRIGHT 1990 Mortgage Bankers Association of America
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1990 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Home Mortgage Disclosure Act
Author:Schieber, Paul H.
Publication:Mortgage Banking
Date:Mar 1, 1990
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