Home Mortgage Disclosure Act Overview

Mortgage shoppers often find it surprising that lenders ask them about their race, gender, age, and ethnicity when they complete the loan application process.

Lenders don't request this data in error. This data is required by federal law, the Home Mortgage Disclosure Act (HMDA). It's confusing, but it's not discriminatory. Let's clarify.

HMDA Overview

The HMDA was enacted by Congress in 1975. It requires lenders to collect, disclose, and report data on mortgages they originate. HMDA was initially enforced by Federal Reserve. However, rule-making and enforcement were transferred to Consumer Financial Protection Bureau (CFPB), July 21, 2011.

The CFPB and other policymakers can use the HMDA data from lenders to:

• Find out if lenders are meeting the housing needs in your community.

• Identify possible discriminatory lending patterns.

• Information to assist private investors and public agencies in making housing investment decisions.

The CFPB Updates HMDA Rules And Reporting Procedures Regularly, But They Still Require Core Data From Lenders:

• Date of application

• Loan type (conventional loan, FHA, VA, etc.)

• The amount of the loan

• Lender term

• Status of the lien (Is it a first or a second mortgage?

• Loan purpose (purchase, refinance, home improvement, etc.)

• Rate spread (to determine whether a lender is at par with the prevailing rates in their region at a given moment)

• Term of the introductory rate period

• Total origination points and fees

• Type of property

• Location of property (state, county, and MSA, census tract).

• Number of property parcel

• Property value

• Occupancy Type (owner occupied, non-owner occupied)

• Prepayment penalty period (if any).

• Negative amortization (if applicable)

• No matter if the application was pre-approved or not

• Universal loan identifier

• An identifier for loan originator

• Borrower income

• The score for Borrower Credit

• The action was taken (loan approval, denial, withdrawal, etc.). Date and time of action

• Reason for loan denial (if denied)

• Borrower ethnicity

• Borrower race

• Borrower gender

• Age of the borrower

U.S. Mortgage Application Must Request Race & Ethnicity Data

These three items are required for every federally required mortgage application, regardless of whether it is completed by hand or over the phone.

The section for loan applications called "Information For Government Monitor Purposes" contains questions about race, gender, and ethnicity.

The Federal Government requests the following information for certain types of loans that are related to a dwelling to verify compliance with fair housing, equal credit opportunity, and home mortgage disclosure laws. This information is not mandatory, but you are encouraged to provide it. Lenders are not allowed to discriminate based on this information or whether you choose it. Please include both your ethnicity and your race when you provide the information. You can check multiple designations for the race. Federal regulations require that you provide information about ethnicity, race, and sex. If this is a paper application, the lender will note this information on the basic visual observation and your surname. Please check the box below if you don't wish to provide the information. (The lender must carefully review the material above to make sure that it meets all applicable state laws for the type of loan being applied for. "

Two Separate Laws For Government Monitoring And Anti-Discrimination

HMDA is government monitoring of the three regulatory goals mentioned above. This is why mortgage applications require information about race, gender, age, and ethnicity.

The Equal Credit Opportunity Act (ECOA), a 1974 law, makes it illegal to discriminate against borrowers based on race or national origin.

This can be confusing as ECOA states that lenders cannot use race, gender, or ethnicity to make loan decisions. However, HMDA states that lenders must request information about race, gender, and ethnicity for government monitoring purposes.

It all comes down to the intent of the lender and your perception of that intent. Did the lender use this data to make a loan decision, thus violating ECOA? Or were they simply collecting it to monitor compliance with HMDA and government monitoring purposes?

What To Do If You Feel Discriminated Against

If you have concerns about mortgage discrimination or feel you have been discriminated against, you can follow the CFPB's complaint process or call the CFPB on 855-411-2372.