The Home Mortgage Disclosure Act: Its Effect on Those Who Buy Homes
The Home Mortgage Disclosure Act was enacted in 1975 by Congress and then implemented by the Federal Reserve Board. Essentially, the act requires mortgage lenders to report public loan data. For answers to some frequently asked questions about the Home Mortgage Disclosure Act, keep reading.
Why do Mortgage Lenders Have to Report Loan Data?
First, the purpose is to make sure that financial institutions and mortgage lenders are serving the changing housing needs of their community. Second, it helps public officials can see where public-sector investments are needed. Third, enforcement can identify potentially discriminatory lending practices and patterns related to mortgages.
Finally, this data allows financial analysts, government economists and others to obtain statistics on loan data, housing sales, and mortgage interest rates that are very specific to each geographical area.
Do I Have to Give a Lender My Ethnicity, Race or Sex?
No, you can decline to provide that information, whether you’re applying on the phone, over the Internet or even in person. While that information helps the government recognize lending patterns and practices, it’s your choice whether you wish to volunteer that information to your mortgage lender.
How Can the HMDA (Home Mortgage Disclosure Act) Expose Discrimination?
If a lender continually turns down an unreasonably high number of applicants of certain races, ethnicities or gender, then there may be reason to suspect this lender is discriminating against this particular group of people. Whether it’s an institutional decision or an unintentional, subtle discrimination, it’s still illegal in the United States.
Another way the HMDA can expose discrimination is to look at where the applications are coming from as well as where they’re being approved. If one neighborhood is not receiving any financing, the institution may be practicing what’s called redlining – that is, when a bank or financial institution denies services to one particular neighborhood, typically an inner-city neighborhood.
Finally, if there’s a disproportionately low number of applicants from a variety of races, ethnicities and gender, then the lending institution may be discriminating by actively discouraging these borrowers from applying for a loan.
Do Second Mortgages Need to be Reported As Well?
Yes, all refinancing, second mortgages and any loans based on the equity of a home are reported. However, home equity lines of credit do not need to be reported.
As a Consumer, Do I Need to Do Anything?
Typically, no. The responsibility of coding HMDA (Home Mortgage Disclosure Act) data and submitting it belongs to the lending institution.
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Posted by ffgrdhrfsfg on March 30, 2009. Filed under HUD Homes.
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