The Basics of the Home Mortgage Disclosure Act (HMDA)?

The Home Mortgage Disclosure Act (HMDA) was enacted in 1975. The purpose of the Home Mortgage Disclosure Act was to monitor lending practices and prevent discriminatory and predatory lending practices by banks, credit unions, savings association, and for-profit mortgage lending institutions. In addition, it also was to ensure that federal resources and funding were being distributed properly. All financial institutions are required to display a poster detailing their Home Mortgage Disclosure Act statistics.

Information Captured

In order to monitor and track the lending practices, lenders are required to key documents regarding their lending practices. Some of these key documents are number of pre-approvals made, number of mortgages approved, number of mortgages declined, loan amounts, applicant statistics (age, race, sex, etc…), refinancing applications, home improvements, and price data. The data collected is complied and analyzed to determine if the lender has engaged in discriminatory and/or predatory lending as well as if the intuition is catering to its core area by reviewing the trend patterns. All disproportionate percentages found raise a flag and are reviewed to determine the cause of the disparity. The data complied and provided to the public is useful for generating new business, attracting investors, and expanding to meet community-housing needs.

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