The Home Mortgage Disclosure Act was enacted in 1975 by congress and is used, in part, in implementation of the Community Reinvestment Act (CRA) and by financial institution regulatory agencies like the Board of Governors of the Federal Reserve System (FRB), the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Office of Thrift Supervision (OTS). It is an integral part of our National Housing Policy whose purpose is to require reporting of statistics on mortgage lending by financial institutions and has been revised many times since its origination. This data is used by the Federal Financial Institutions Examination Council (FFIEC) and the above agencies for the purpose of determining if mortgage lenders in each Metropolitan Statistical Area (MSA) are meeting the credit needs of their respective housing market. This data is also used to assist public agencies in determining areas that are in need of community development.
The basic regulations and amendments of the HMDA are:
The HMDA affects lenders and borrowers alike in some ways. The regulations force both to adhere to a standard application format that gathers the required information. Some of the required information may be objectionable to the borrower and not needed by the lender to make a credit decision. The filing and record keeping requirements, along with the clerical duties related to answering requests for disclosure, add an additional expense of compliance. In addition to the financial costs of compliance, the regulation also forces a lender to take a statistical look at its lending practices and credit requirements. A lender may utilize this information as it is collected to, in effect, police itself.
Ironically, the data collected under the HMDA is mostly utilized in compliance with the Community Reinvestment Act that was passed two years after the HMDA in 1977. The CRA is what actually sets the standards and encourages lenders to meet the credit needs of the communities it serves. The CRA provides for periodic evaluations of lenders and the data is also used when a lender applies for credit facilities, mergers, and acquisitions.
The CRA and the HMDA are important parts of our National Housing Policy because they facilitate measurement of NHP goals. Discussing fair housing and fair lending does little to ensure that lenders are adhering to these directives. Through the use of the these regulations, agencies are able to determine the outcome of a lenders credit activities and whether or not they are conforming to the standards set forth as what is best for the country.