How is HMDA Data Used Today?

woman-computer The Home Mortgage Disclosure Act (HMDA) was passed by Congress in 1975 and implemented by the Federal Reserve Board. In July of 2011, oversight of the HMDA was transferred to the Consumer Financial Protection Bureau (CFPB), which used to be known as the Bureau of Consumer Financial Protection (BCFP).

The purpose of the HMDA is to make sure that most lenders collect and report a variety of information they receive on loan applications, including loans they originate. Keep in mind, however, that not all loans fall under HMDA guidelines. Specifically, this set of regulations aims to track mortgage data around the United States.

How is HMDA Data Used?

According to the CFPB, data gathered by the HMDA can include: property address, application date, credit score relied on in making the approval decision, results generated through underwriting, loan amount, age of borrower, borrower's debt-to-income ratio, and property value. Personal information is also collected, and includes ethnicity, gender, race, and income, and more.

This data is used for a variety of purposes, including helping governing bodies determine the housing needs of their communities. HMDA data is also used to provide specific information to public officials who may be drafting policies that make it easier for certain borrowers to qualify for a mortgage. Of course, this same data can be used to find lending patterns that are discriminatory so that changes can be made.

As an example, a 2017 analysis of HMDA data showed that the number of owner-occupied, first-lien home purchases surged to 3.7 million that year -- the highest it has been since before the housing crisis that started in 2008. The report also revealed that families of color increased their share of first-lien home purchases in 2017, which is the fourth year in a row of increases in this demographic.

The same study also revealed that the size of first-lien, owner occupied home purchase loans is on the rise for all demographic groups, which should be a good sign overall.

Once you discover the type of data that's reported via the HMDA, it's easy to see why its existence is crucial. It would be difficult for policymakers to know about the demographics of mortgage applicants without having a central location for that information to be collected. Plus, knowing applicant credit score, income, race, age, and ethnicity data can help government ensure mortgage loans are being offered fairly among all citizens regardless of their ethnic background or age.

How Many Lenders Report HMDA Data?

According to the Federal Financial Institutions Examination Council (FFIEC), the number of lenders that report HMDA data is on a downward trend. Where 7,925 institutions reported this data in 1998, 2017 reporting came from only 6,762 lenders and banks.

However, most of this downward movement can be attributed to charges in Reg C that increased reporting thresholds. In other words, regulations for reporting changed, which altered the number of lending institutions that were legally required to collect and report HMDA data.

What Do You Need to Know About the HMDA?

When it comes to HMDA reporting and other federal regulations, there's nothing consumers must do on their end other than understand laws that affect them and comply to the best of their ability. Keep in mind that, when you apply for a mortgage loan or another type of loan that falls under HMDA guidelines, the data is collected and reported to the HMDA on your behalf.

You can expect to be asked specific questions about your person, however, including your racial background. This information is now part of the process when you take out a home loan thanks to HMDA reporting rules, and it is to be used to ensure fairness and equitable distribution of mortgage loans to qualified buyers.

The Bottom Line

The Home Mortgage Disclosure Act, or HMDA, was enacted in order to begin collecting data that could be used in a variety of ways. Without its passage, it would be difficult for policymakers and officials to know if discriminatory or even predatory lending practices were taking place.

Thanks to the creation of this act in 1975, the HMDA is now the most "comprehensive source of publicly available information about the U.S. mortgage market," according to the CFPB. Not only can public officials access this important information about lending practice and borrowing trends, but consumers can use it to glean insights about housing and mortgage rates as well.

The CFPB even offers the opportunity to download HMDA data on their website, which you can access here.

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