FREQUENTLY ASKED QUESTIONS ABOUT THE NEW HMDA DATA
1. What is the Home Mortgage Disclosure Act (HMDA)?
HMDA, enacted by Congress in 1975, requires most mortgage lenders located
in metropolitan areas to collect data about their housing-related lending
activity, report the data annually to the government, and make the data
publicly available. Initially, HMDA required reporting of the geographic
location of originated and purchased home loans. In 1989, Congress expanded
HMDA data to include information about denied home loan applications, and
the race, sex, and income of the applicant or borrower. In 2002, the Federal
Reserve Board (the Board) amended the regulation that implements HMDA (Regulation
C) to add new data fields, including price data for some loans (see Q. 9).
HMDA does not prohibit any lending activity, nor is it intended to encourage
unsound lending practices or the allocation of credit.
2. What are the purposes of HMDA?
Congress enacted HMDA to:
provide the public with information to judge whether lenders are
serving their communities;
enhance enforcement of laws prohibiting discrimination in lending;
provide private investors and public agencies with information to guide
investments in housing.
3. What are HMDA data?
HMDA data cover home purchase and home improvement loans and refinancings,
and contain information about loan originations, loan purchases, and denied,
incomplete or withdrawn applications. With some exceptions, for each transaction
the lender reports data about:
the loan (or application), such as the type and amount of the loan made
(or applied for) and, in limited circumstances, its price;
the disposition of the application, such as whether it was denied or
resulted in an origination of a loan;
the property to which the loan relates, such as its type (single-family
vs. multi-family) and location (including the census tract);
the applicant's ethnicity, race, sex, and income; and
the sale of the loan, if it was sold.
In 2004, HMDA data included a total of 33 million reported loans and applications.
More information about HMDA data can be found at http://www.ffiec.gov/hmda.
4. Are all home mortgage loans covered by HMDA?
Most home-secured loans are included in HMDA data. Some, however, are not
included. For example, a home equity loan taken out for consolidation of
credit-card debt or to pay for medical expenses is not covered by HMDA,
unless some part of the loan proceeds are also intended for home improvement
or home purchase purposes. Home equity lines of credit (HELOCs) may not
be in the data even if intended for home improvement or home purchase because
reporting HELOCs is optional. Additionally, not all mortgage lenders are
HMDA reporters. For example, a lender does not have to report HMDA data
unless it has an office in a metropolitan statistical area (MSA). As a result,
reporting of home loans made in some rural areas may be relatively low.
5. When, and in what forms, are HMDA data made available to the public?
March 31 is the earliest date
that data from the previous calendar year are required to be publicly
available. That is the date by which
must respond to any request it receives by March 1 for its "loan application
register" (LAR). The LAR is the format for data disclosure required
by law. It itemizes reportable transactions application by application,
loan by loan. Lenders are not required, however, to arrange transactions
on the LAR in any particular order (for example, by branch or by type
of loan). Any member of the public may request a modified LAR from any
lender covered by HMDA. To help preserve consumer privacy, the law requires
to remove the loan or application number and the application and action-taken
dates before making the LAR public.
September 2006 is the expected
publication date for summary tables of the 2005 data. The tables are published
by the Federal Financial
Institutions Examination Council (FFIEC). Summary tables will be available
A summary is published for every mortgage lender, broken down by each
metropolitan area in which it does business; for every metropolitan
information about different lenders' activity in the area; and for
the nation as a whole. For more information about the tables and how
to get them, go to http://www.ffiec.gov/hmda.
6. How do government agencies use HMDA data?
Government agencies use HMDA data to assist in evaluating lender compliance
with anti-discrimination laws and other consumer protection laws. The anti-discrimination
laws include the Equal Credit Opportunity Act (ECOA) and the Fair Housing
Act (FHA). These laws prohibit discrimination in home mortgage lending,
among other things, on several bases such as race, national origin, sex,
and, in the case of ECOA, age. For more information on ECOA and FHA, see
the Policy Statement on Discrimination in Lending, 59 Fed. Reg. 18266 (April
15, 1994), available at http://www.fdic.gov/regulations/laws/rules/5000-3860.html).
Government agencies use HMDA data to identify institutions, loan products,
or geographic markets that show disparities in loan applications or originations
by race, ethnicity, or other characteristics that may warrant further investigation
under ECOA or FHA. With the addition of price data for higher-priced loans,
the agencies are also able to identify in the HMDA data price disparities
that may warrant further investigation (see Q. 13, 15 and 16). If disparities
are found to violate ECOA or FHA, certain federal agencies are authorized
to compel lenders to cease discriminatory practices and, among other remedies,
obtain monetary relief for victims.
In addition, the agencies responsible
for evaluating insured depository institutions under the Community Reinvestment
Act (CRA) use HMDA data
to evaluate institutions' records of helping to meet community mortgage
credit needs. For more information about CRA, go to http://www.ffiec.gov/cra.
7. Who reports HMDA data?
Banks, savings and loan associations,
credit unions, and mortgage and consumer finance companies are required
to report HMDA data if
they meet the law's
criteria for coverage. Generally, whether a lender is covered by HMDA
The lender's asset size (for example, an institution with assets of
$34 million or less on December 31, 2004, did not have to collect HMDA
data in 2005);
Whether the lender has an office in a metropolitan statistical area;
8. What is the
Federal Reserve Board 's role in HMDA?
the Federal Reserve Board (the Board) to write rules to carry out HMDA.
The Board's HMDA rules are known as Regulation "C" (12
CFR Part 203). The Board also provides guidance about HMDA through a
staff commentary (12 CFR Part 203, Supp. I). Additionally, the Board assists
in publishing the manual, "A Guide to HMDA Reporting: Getting it Right!" (available
- PDF 1MB (PDF Help),
processing the reported data, and publishing summary tables each year
(see Q. 5).
Price Data on "Higher-Priced Loans"
9. What price data are available under HMDA?
The price data take the form
of a "rate spread." Lenders must
report the spread (difference) between the annual percentage rate (APR)
on a loan and the rate on Treasury securities of comparable maturity – but
only for loans with spreads above designated thresholds. So rate spreads
are reported for some, but not all, reported home loans.
The APR represents the cost of credit to the consumer. It captures not
just the contract-based interest rate on a loan, but also the points and
fees that a consumer pays and other finance charges such as premiums for
private mortgage insurance. Lenders must calculate and disclose the APR
to consumers under a separate law, the Truth in Lending Act.
Lenders also report price information
in the form of a "flag" indicating
whether a loan exceeds the price triggers of the Home Ownership and Equity
Protection Act (HOEPA). Those triggers are substantially higher than
the thresholds for reporting rate spreads. The rate-spread thresholds
HOEPA triggers are discussed below (see Q. 10, 20).
10. Which loans
are deemed "higher-priced" and
therefore have their prices reported?
A loan's rate spread (see Q. 9) must be reported if the spread
exceeds the threshold set by the Board in Regulation C. For first-lien
loans, the threshold is three percentage points above the Treasury
security of comparable maturity; for second-lien loans, which tend
to have higher prices, the threshold is five percentage points above
the Treasury security of comparable maturity. The Board chose the thresholds
in the belief that they would exclude the vast majority of prime-rate
loans and include the vast majority of subprime-rate loans. From year
to year, however, the proportion of subprime-rate loans that have their
prices reported may vary because of changes in the interest rate environment
(see Q. 27).
11. Why is the requirement to report price data limited to higher-priced
The higher-priced mortgage market has grown substantially in the last decade.
Its expansion has afforded some consumers greater access to home mortgage
credit. The growth of the higher-priced mortgage market, however, has raised
concerns that consumers in this market lack the information needed to negotiate
the best terms and may be vulnerable to unfair or deceptive practices. Also,
the wider range of prices in this market has raised concerns that price
differences may reflect unlawful discrimination rather than legitimate risk-
and cost-related factors.
In contrast, the prime market's
limited variation in prices helps allay concerns about market efficiency
and consumer protection.
prime market is not without risk of unlawful discrimination or violation
of other consumer protection laws, the banking agencies use their routine
examinations of depository institutions to address that risk (see Q.
12. Is price information reported on all mortgage loans that have prices
above the price reporting thresholds?
Price information is reported on most, but not all, loans that have prices
above the price reporting thresholds. Under Regulation C, some loans are
not reportable at all, such as home equity loans for consolidation of debt
(see Q. 4). Moreover, for certain kinds of loans that Regulation C requires
be reported, a lender need not report price information. Examples in this
category include unsecured home improvement loans, assumptions, and loans
purchased from other lenders (though purchased loans would likely have been
reported by the original lenders). Finally, reporting information about
home equity lines of credit (HELOCs) is optional; a lender opting to report
HELOCs need not report price information.
13. To the extent the HMDA data indicate that minorities pay more for
loans than whites on average, does that difference prove unlawful discrimination?
No. However, such a disparity
may indicate a need for closer scrutiny. Supervisory and enforcement agencies
investigating disparities typically
collect additional information about factors that may determine loan
prices from lenders' loan files or other sources. Without information
about relevant price determinants, one cannot draw definitive conclusions
whether particular lenders discriminate unlawfully or take unfair advantage
of consumers. HMDA data include some potentially relevant determinants
of price, such as lien status, but exclude many other potential determinants,
such as borrower credit history, borrower debt-to-income ratio, and the
ratio of the loan amount to the value of the property securing the loan
(loan-to-value ratio). Therefore, price disparities by race, ethnicity,
or sex disclosed in HMDA data will not alone prove unlawful discrimination.
14. Why aren't
all pricing factors reported in HMDA data?
In 2002, when the Board adopted the requirement to report price data and
lien status, an important determinant of loan price, the Board considered
adding to HMDA data other data items relevant to loan pricing, such as loan-to-value
ratio. For each possible new data item, the Board weighed the potential
benefit and burden that would result, such as the costs of collection and
reporting. On the basis of that analysis, which relied in part on public
comments, the Board decided not to add more factors.
15. If HMDA data cannot support definitive conclusions about whether price
differences reflect unlawful discrimination, then what is the point of requiring
disclosure of price data?
Though the price data do not
support definitive conclusions, they are a useful screen, previously unavailable,
to identify lenders, products,
and geographic markets where price differences among racial or other
groups are sufficiently large to warrant further investigation. Enforcement
supervisory agencies can use the HMDA price data to better target their
resources. HMDA price data can also be a valuable part of any mortgage
16. What other tools beside the HMDA price data are used to detect price
The federal banking agencies
analyze HMDA price data in conjunction with other information to evaluate
the potential for price discrimination.
Interagency Fair Lending Examination Procedures direct examiners to identify
risk factors for discrimination by reviewing a variety of information,
including an institution's records, to understand the institution's fair
lending compliance management program. Examiners evaluate a lender's
risk of price discrimination based on several factors, including the
relationship between loan pricing and compensation of loan officers or
brokers; the presence
of broad pricing discretion; the use of a system of risk-based pricing
that is not empirically based and statistically sound; substantial disparities
among prices quoted or charged to applicants who differ in their protected
characteristics such as race or ethnicity; and consumer complaints alleging
price discrimination. The HMDA price data are analyzed in conjunction
these other factors to determine the level of risk of price discrimination.
The level of risk of price discrimination, in turn, is one of the factors
examiners consider when determining the depth and breadth of a fair lending
examination by a federal banking agency.
17. Why do some borrowers pay higher prices than others?
Many factors affect the price
of a mortgage loan. Some factors, such as a borrower's credit history,
debt-to-income (DTI) ratio, or the ratio of the loan amount to the value
of the property that secures
the loan (LTV),
are used by lenders to set loan prices because they have been shown to
predict whether or not borrowers will pay their loans as agreed. Generally,
with poor credit histories or high DTI or LTV ratios represent increased
risk of non-payment, which lenders offset with a higher price to such
Other factors that may affect
loan price include the price the lender pays for the money it lends to
borrowers ("cost of funds"),
the type of loan product and whether its rate and terms are fixed or
the lender holds its loans in portfolio or sells them in the secondary
market, and whether the lender extends credit through its own loan
officers or independent
brokers. Discretionary pricing by loan officers and brokers can also
produce differing loan prices, although discretionary pricing is not,
unlawful. Unfortunately, price disparities may also be the result of
unfair or deceptive behavior by lenders or brokers, or unlawful discrimination
on the basis of race, ethnicity, or sex.
18. How can a consumer obtain the best price on a loan?
It is important that borrowers shop, compare, and negotiate the price and
other terms of their loans. For more information about shopping for a mortgage
loan, go to www.mymoney.gov or call 1-888-MYMONEY.
Data on HOEPA Loans
are required to report a loan's HOEPA status.
What is HOEPA?
Lenders are required to report
whether a loan is subject to the provisions of the Home Ownership and
Equity Protection Act (HOEPA).
as part of the Truth in Lending Act, imposes substantive limitations
and additional disclosures on certain types of home mortgage loans
or fees above a certain percentage or amount. For more information about
HOEPA, see the Board's Regulation Z, 12 CFR part 226, sections 31,
32 and 34.
20. What is the difference between a HOEPA loan and a higher-priced loan
reported under HMDA?
Many, but not all, HOEPA loans
are reported under HMDA; there are some kinds of home equity loans that
HOEPA covers that HMDA does not
require to be reported (see Q. 4). Moreover, only a minority of loans
their rate spreads reported under HMDA are HOEPA loans, because HMDA's
threshold rate for reporting a loan's rate spread is much lower than
the threshold rate for HOEPA's coverage of a loan. On first lien loans,
for example, HMDA-reportable loans must have their rate spread reported
if the APR exceeds the yield on comparable Treasury securities by three
or more percentage points (see Q. 9, 10), while HOEPA covers loans with
APRs that exceed the comparable Treasury yield by more than eight percentage
points – a much higher threshold. An alternative test for HOEPA coverage
(whether the points and fees exceed 8 percent of the total loan amount)
also sets a high threshold. In short, Congress limited HOEPA's protections
and disclosures to the highest-priced loans in the subprime home mortgage
market, while the Board set HMDA's price thresholds to include the
vast majority of subprime-rate mortgage loans.
21. Does the requirement in Regulation C to report HOEPA status impose
any new obligations on lenders?
Under the amendments to Regulation
C, lenders are required to report whether a loan is subject to the requirements
of HOEPA. The amendments
C do not, however, affect any of HOEPA's requirements or limitations.
Lenders should already have in place procedures for monitoring and complying
with the provisions of HOEPA.
Other Items in HMDA Data that Aid Interpretation of Price Data
22. Why must lenders report the lien status of a loan?
Lenders report whether a loan
is or would be secured by a lien on a dwelling and, if so, whether a first
lien or a subordinate (junior)
lien. A loan's
lien status determines what rate-spread reporting threshold applies to
the loan (see Q. 9, 10). Also, because lien status is an important
determinant of loan price (interest rates on first-lien loans are generally
rates on junior-lien loans), lien status differences may explain some
23. Why must lenders identify loans involving manufactured homes?
HMDA has long required lenders to identify whether a loan or application
involved a one-to-four family home or a multi-family home. Lenders also
must identify whether a loan or application involves a manufactured home.
Generally speaking, manufactured homes are factory-built homes essentially
ready for occupancy when they leave the factory. The market for credit to
finance manufactured home purchases is somewhat different from the market
for credit to finance site-built home purchases. For example, applications
for manufactured home financing are denied at much higher rates than applications
for site-built home financing. Identification of manufactured home loans
will make it easier to identify the sources of differences in denial rates,
and will improve understanding of manufactured home financing.
Year-To-Year Comparison of HMDA Data
24. How has the reporting of borrower ethnicity and race under HMDA changed?
In 2002, the Board amended Regulation
C's rules for collection of
information about applicants' ethnicity and race, to conform them
to revised standards of the Office of Management and Budget (OMB) for
collection of such data. These standards are available at http://www.whitehouse.gov/omb/fedreg/1997standards.html.
The new rules for collecting ethnicity and race information under HMDA
effective with the collection of 2004 data. Therefore, the change may
complicate comparisons based on race between HMDA data preceding 2004
and HMDA data
from 2004 and later years. For more information about the changes, go
to http://www.federalreserve.gov/boarddocs/press/bcreg/2004/20041210/attachment2.pdf - PDF 128k (PDF Help)
25. How will
changes in OMB's
standards for defining metropolitan and micropolitan statistical areas
affect comparison of HMDA data preceding
2004 with data from 2004 and later years?
HMDA requires the use of metropolitan
statistical areas defined by OMB for a variety of purposes: determining
whether a lender has
reporting property location, providing disclosures and reports of lending
activity, and posting notices about the availability of HMDA data. For
HMDA data collected in 2003 and previous years, OMB's 1990 standards for
defining MSAs were in effect. OMB's 2000 standards, however, apply
to HMDA data collected in 2004 and later years. The application of the
new OMB standards will, therefore, affect comparisons of HMDA data for
2004 and later years with data for previous years. For more information,
http://www.federalreserve.gov/boarddocs/press/bcreg/2003/20031219/attachment.pdf - PDF 50k (PDF Help)
26. How do the transition rules affect the HMDA data?
HMDA requires lenders to report data about an application in the year in
which the application was denied or resulted in an origination. The 2002
amendments to HMDA took effect on January 1, 2004. The Board provided guidance,
in the form of transition rules, to assist lenders in collecting and reporting
data for applications received before January 1, 2004, but not acted on
until later. For more information, go to http://www.ffiec.gov/hmda/pdf/transitionrules.pdf - PDF 58k (PDF Help)
The transition rules primarily
affect lenders' 2004 data
but could also affect their 2005 data in unusual cases in which applications
before 2004 were not acted on until 2005. To help data users isolate
the effects of the transition rules, the FFIEC flagged applications
2004 in the lender disclosure reports and aggregate reports for 2004
data released in September 2005; the FFIEC will also flag pre-2004
applications in the reports for 2005 data to be released in September
2006. In addition,
lenders were encouraged to flag applications taken before 2004 on their
2004 Loan Application Registers.
27. How should year-to-year changes in the number or proportion of loans
with prices above the HMDA price reporting thresholds (higher-priced loans)
Year-to-year changes in the number
or proportion of loans with prices that exceed the thresholds for reporting
price information (higher-priced
should be interpreted with great care. Changes in the number or proportion
of higher-priced loans could be due to changes in the interest rate environment – specifically,
in the relationship between short-term and long-term interest rates. Such
changes also could be due to changes in lenders' business practices
or consumers' borrowing practices or risk profiles.
The "yield curve" displays
how the yield on an instrument varies with its maturity and, therefore,
it reflects the relationship
and long-term interest rates. The yield curve is typically upward-sloped,
that is, short-term rates are typically lower than long-term rates. Sometimes,
however, the yield curve is flat, that is, short-term rates are sometimes
close to long-term rates. And, occasionally, the yield curve inverts,
so that short-term rates are above long-term rates.
Changes in the shape of the yield curve, that is, the relationship between
short-term and long-term interest rates, can affect the reporting of higher-priced
loans. Lenders usually use relatively short-term interest rates to set mortgage
rates (for example, interest rates on maturities of less than ten years);
but, for most loans, Regulation C requires lenders to use long-term rates
(20 years or more) to determine whether to report a loan as higher-priced.
Thus, a change from one year to the next in the relationship between short-term
rates and long-term rates will cause a change from one year to the next
in the proportion of loans that are reported as higher-priced loans, all
other things being equal. For example, if short-term rates rise more than
long-term rates, then the number and proportion of loans reported as higher-priced
loans will increase if all other factors that may influence the number and
proportion of higher-priced loans, such as the business practices of lenders
and the risk profiles and borrowing practices of borrowers, remain constant.
Conversely, if short-term rates fall more than long-term rates, then the
number and proportion of loans reported as higher-priced loans will fall
if all other potentially influential factors remain constant. It is also
possible that the number or proportion of loans reported as higher-priced
could change in response to both a change in the interest rate environment
and to changes in other factors.
Short-term interest rates rose over 2004 and 2005, while long-term rates
fell over 2004 and were relatively stable over 2005. Thus, while in 2004,
short-term rates were well below long-term rates, by the end of 2005, short-term
rates and long-term rates were fairly close. Accordingly, one would expect
a higher proportion of loans originated in 2005 than of loans originated
in 2004 to be reported under HMDA as higher-priced loans. Changes in other
factors, such as the business practices of lenders or the risk profiles
or borrowing practices of borrowers, also could have affected the proportion
of loans reported as higher-priced loans.