The Home Mortgage Disclosure Act, or HMDA, is a federal law that requires mortgage lenders to keep data and records about their lending practices. These records also need to be submitted to the regulatory authorities to ensure that lending institutions are within compliance with the purpose of HMDA, which is to monitor fair lending to create transparency and protect borrowers.
The regulations of HMDA can be challenging to keep track of, but all home mortgage lenders must know about HMDA reporting. Otherwise, they could face stiff penalties and even lose new business opportunities. This comprehensive guide will help you learn everything you need about HMDA regulations and how to improve your HMDA compliance management.
History of HMDA
The Home Mortgage Disclosure Act was passed by Congress in 1975. IT was implemented by the Federal Reserve Board’s Regulation C. In July of 2011, the rule-writing authority of Regulation C was moved to the Consumer Financial Protection Bureau, or CFPB. This new regulation stated that the collected public loan data could be used to determine whether financial institutions are serving the housing needs of their communities and assist public officials in distributing public-sector investments to attract private investment. HMDA also helps identify possible discriminatory lending practices that must be dealt with.
HMDA reporting entities
Financial institutions like banks, savings associations, mortgage lending institutions, and credit unions must report under HMDA. Any institution with loan origination of 200 or more open-end lines of credit must gather, record, and submit their reports to HMDA. However, if the loan or line of credit is not a closed-end mortgage loan or an open-end line of credit, it does not need to be reported. In addition, banks, credit unions, and saving associations with assets of $54 million or less are exempt from collecting and reporting HMDA data for 2013.
HMDA reporting requirements
Home purchase loans, home improvement loans, and refinancing loans are all types of loans that apply to HMDA reporting requirements. The loan must also be either an open-end line of credit or a closed mortgage loan to qualify for HMDA reporting.
The Loan Application Register (LAR) data fields required for an HMDA report include applicant information, including demographic data such as race, gender, ethnicity, and income, along with loan information like the application data and amount of the loan, along with details on collateral and the current status of the loan.
FI’s with a combined total of 60,000 applications and covered loans (excluding purchased loans) during the preceding calendar year are required to report HMDA data on a quarterly basis. FI’s have sixty days following the end of the calendar quarter to submit their HMDA Loan Application Register (“LAR”), except for the fourth quarter, which is subject to a submission deadline for the year-to-date file on March 1st.
Data collection and submission
To collect the necessary data for HMDA, you must follow the LAR submission process and carefully fill out all required fields for loans. You’ll want to ensure that you haven’t left any fields blank or have unintentionally withheld any information. Using HMDA software like HMDA Wiz will help you have more efficient data collection and submission.
Data disclosure and public access
The data collected under HMDA is the most comprehensive source of public information on the United States mortgage market available. While this might raise concerns about privacy and data anonymization, the reason that HMDA was passed was to create transparency and make it clear as to what types of loans are being placed, who is getting them, and if financial institutions are helping their communities. It’s important that data be transparent for both consumers and regulators in the industry.
HMDA non-compliance penalties
If a lending institution is not compliant with HMDA reporting, there are enforcement actions that can be taken which can seriously harm lenders. If you have errors, you will be required to resubmit data, and can risk regulatory violations and civil monetary penalties. Other enforcement actions might include audits of your institution and legal consequences if it is discovered that you are violating anti-discriminatory laws. Therefore, it is essential that you take steps to mitigate risks and ensure compliance.
Best practices for HMDA compliance
To make sure that you are meeting the HMDA compliance requirements and won’t run into any potential issues down the road, you need to know best practices for your HMDA reporting. Train all your staff members and employees and help educate them on the importance of HMDA compliance. You should also implement robust data management processes so that nothing slips under the radar. Regular audits and compliance checks with the help of HMDA software is also a great way to find issues before they become problems.
Conclusion
The HMDA was enacted to create transparency and fair lending practices in home mortgage loans. It’s become even more important over the years to remain in compliance so that your data collection and reporting is seamless. You need to stay up to date with the latest HMDA regulations and amendments, so that you aren’t ever blindsided when it is time to report. By promoting fair lending transparency in the mortgage industry, you can help improve your institution's reputation, your community and become a leader in compliance management.
Need additional support with HMDA data management?
Maintaining HMDA compliance requires more than understanding the rules. It depends on having accurate, complete, and submission-ready data supported by strong governance practices. Financial institutions often face challenges with data quality, regulatory edit checks, geocoding, reporting processes, examination readiness, and ongoing data management.
Wolters Kluwer's US Regulatory Consulting (USRC) Data Governance Services helps institutions strengthen the accuracy, integrity, and reliability of their regulatory data. Leveraging decades of regulatory experience and a team of former bankers, regulators, compliance officers, attorneys, and auditors, USRC provides end-to-end support for HMDA, CRA, and Section 1071 data management, including data processing, validation, cleanup, submission support, exam preparation, and staff augmentation.
Whether you need assistance preparing for submission, improving data quality controls, or enhancing your overall compliance program, USRC can help you build a more efficient, exam-ready reporting process with confidence.