MLO Mentor is an ongoing series covering compliance best practices for mortgage loan originators (MLOs). This article discusses the Home Mortgage Disclosure Act (HMDA). Enroll in firsttuesday’s 8-Hour NMLS CE to renew your California MLO license and learn more about fraud and abuse prevention in your practice.

HMDA purpose and coverage

The federal Home Mortgage Disclosure Act (HMDA) was passed in 1975 to address concerns that lenders were contributing to the decline of some urban areas by failing to offer adequate home financing to qualified applicants on reasonable terms and conditions, in violation of their bank charters. [12 United States Code §§2801 et seq.]

From 1988 to 1992, substantial changes were made to the HMDA under the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA) and the Federal Deposit Insurance Corporation Involvement Act (FDICIA). FIRREA and FDICIA required independent mortgage lenders who met certain loan volume criteria to collect HMDA data. Thus, federal and state banks, credit unions, savings associations and independent mortgage lenders can be required by the HMDA to compile home loan application and closed loan data.

HMDA rules are promulgated under Regulation C (Reg C). [12 Code of Federal Regulations §§1003 et seq.]

In 2015, the Consumer Financial Protection Bureau (CFPB) made changes to the HMDA and Reg C according to the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Clarifying changes were made in 2017. Generally, these changes modified the types of institutions and transactions subject to HMDA and expanded the scope of the data required to be collected.

Modifications to reportable data

HMDA data added to reporting requirements in 2018 includes:

  • the property address;
  • the borrower or applicant’s age;
  • the borrower or applicant’s credit score;
  • total points and fees charged at the time of origination;
  • the total borrower-paid origination charges;
  • the total discount points paid to the lender;
  • the amount of lender credits;
  • the interest rate;
  • the term (in months) of any prepayment period;
  • the debt-to-income ratio (DTI);
  • the combined loan-to-value ratio (LTV);
  • the loan term (in months);
  • the introductory interest rate period (in months);
  • the presence of terms resulting in potential negative amortization;
  • the property value;
  • whether the property is manufactured housing;
  • the ownership of land when the property is manufactured housing;
  • the total number of units related to the property;
  • the total number of income-restricted units related to the property;
  • the lending channel, e.g., retail or broker;
  • the originator’s NMLS ID;
  • the automated underwriting system (AUS) used to evaluation the application, and the result generated by the AUS;
  • whether the loan is a reverse mortgage;
  • whether the loan is an open-end loan; and
  • whether the transaction is a business-purpose loan. [12 CFR §1003.4(a)]

Why more criteria? For example, the current HMDA data can tell regulators whether a loan exceeds high-cost loan thresholds, and by how much. Regulators can further break the data down to show how often APRs exceed the high-cost loan thresholds for different ethnicities and races, and pinpoint a potentially discriminatory pattern.

Prime loans are considered less likely to be the subject of consumer protection and fair housing violations. In the words of the Federal Reserve: “Though the 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.” [Frequently Asked Questions about the New HMDA Data from the Federal Reserve Board of Governors]

But, as the industry discovered during the financial crisis, those protections were not good enough. High-cost loans were not the only loan product used in a discriminatory fashion. What about loans which are below the high-cost loan threshold? Are there differences in interest rates offered to different groups of borrowers by race, sex or age on prime loans?  Or are greater fees charged to different groups of borrowers, even when their credit histories are similar?

Thus, the new data is intended to further assist regulators to more accurately pinpoint evidence of housing discrimination.

HMDA data reporting transitioned to electronic reporting in 2018. In 2020, the CFPB required financial institutions that report large volumes of HMDA data (60,000 or more transactions) to begin doing so quarterly, instead of annually. This would give the CFPB the ability to review HMDA data in a more timely fashion, to identify issues to be addressed.

Additionally, the current reporting requirement requires financial institutions to make their HMDA reports available at a place of business, and in branch offices. Beginning in 2018 (for data collected on 2017 loans), the new rules instead required HMDA reporters to post their data on the CFPB website.

The new rules clarify several unclear or confusing concepts in the HMDA regulations, including:

  • guidance on what types of residential structures are considered dwellings;
  • the treatment of manufactured and modular homes and multiple properties;
  • coverage of preapproval programs and temporary financing;
  • how to report a transaction that involves multiple financial institutions;
  • reporting the action taken on an application; and
  • reporting the type of purchaser for a covered loan.


HMDA data is collected on mortgage purchases, applications and originations. [12 CFR §1003.4(a)]

Whether HMDA data collection is required depends on:

  • the lender’s location;
  • the lender’s size;
  • the extent of its residential mortgage lending business in metropolitan statistical areas (MSAs); and
  • whether the transaction is also covered under HMDA.

Transactions include both closed-end mortgages and open-end lines of credit. Within this scope are:

  • loans secured by and made for the purpose of purchasing a dwelling, called a home purchase loan [12 CFR §1003.2(j)];
  • loans to improve, repair or rehabilitate the borrower’s dwelling or the real property on which the dwelling is located, called a home improvement loan [12 CFR §1003.2(i)]; and
  • loans used to refinance an existing home loan, called a [12 CFR §1003.2(p)]

A “dwelling” under HMDA

Under HMDA, a dwelling is defined as a residential structure located in the United States of America, the District of Columbia or Puerto Rico. HMDA does not require the dwelling to be attached to real property or be the applicant’s or borrower’s residence. [12 CFR §1003.2(f)]

Thus, examples of dwellings covered by HMDA include:

  • principal residences;
  • second/vacation homes;
  • investment properties;
  • residential properties attached to real property;
  • condo units;
  • cooperative units;
  • mobile/manufactured homes; and
  • apartment buildings of any number of units.

Editor’s note — It’s important to note that the term “dwelling” changes from regulation to regulation. For instance, under HMDA and Reg C, a home purchase loan applies to a loan taken out by an investor to purchase an apartment building. Neither the definition of “home purchase loan” nor the definition of “dwelling” restricts the number of units or the occupancy of the property covered by the law or regulation.

In contrast, the Equal Credit Opportunity Act and Regulation B (Reg B) define “dwelling” specifically as a one-to-four unit residential structure. These distinctions are important to determine coverage.  

On a separate note, second mortgages that finance the down payments on first mortgages are reported as separate home purchase loan transactions. Construction-only loans are considered temporary financing under Reg C. Thus, HMDA data is not collected on construction-only loans. [Official Interpretation of 12 CFR §1003.2]

HMDA Purpose

HMDA is a disclosure law. As such, it does not prohibit or endorse any particular type of lending requirements or set forth any quota for lending in any particular area to any particular type of borrower. [12 USC §2801(c)]

Rather, the information collected by HMDA is used to:

  • provide regulators and the public information required to determine whether lenders are serving the housing financing needs of their respective areas;
  • aid public officials in targeting areas in need of public and private investment; and
  • assist in identifying discriminatory lending patterns and enforcing anti-discrimination laws. [12 USC §2801; 12 CFR §1003.1]

MLOs – your knowledge and understanding of not only HMDA itself, but which lenders and types of loans HMDA applies to, is integral to your business. Next week, we’ll discuss who must report HMDA data.