The Home Mortgage Disclosure Act (HMDA) was enacted into law during 1975 and was implemented by Regulation C of the Federal Reserve Board. Over the years, many amendments to the original law and regulation have occurred. Nevertheless, the purpose of HMDA has remained intact, which is to determine whether financial institutions are serving the housing needs of the communities where they reside without discrimination and with the help of public funds to attract private investment to areas that need it. Several types of loans are HMDA-reportable.
Home Purchase Loans
HMDA requires that any loan secured by real estate made for the purpose of purchasing a home is reportable on an annual basis to the Federal Financial Institutions Examination Council (FFIEC), which is the federal reporting agency of the Federal Reserve Board. The reporting mechanism used is called the Loan Application Register (LAR), which serves as a log for reportable loans. The home may not exceed more than four units of living space. Furthermore, the purpose of the loan may not be for the purchase of land, construction, the assumption of a mortgage or any other purpose except for intention of purchasing a home.
Home Improvement Loans
Any loan used, at least in part, for the purpose of improving or remodeling a home whether it is secured or unsecured by real estate, is considered a home improvement loan. The loan can also be used to improve the property the home is on. These types of loans are HMDA-reportable to the FFIEC via the LAR log sheet.
Refinancing
A refinancing is any new secured home loan used to replace or satisfy another secured home loan to the same borrower. However, if a portion of the refinancing is used to also purchase another secured property or to improve the existing property, the refinancing is considered a multipurpose loan. In these cases, the second intent of the refinancing listed as home purchase or home improvement is the loan type that is HMDA-reportable per the LAR sheet. Home-equity lines of credit partially used for home purchases or improvements are reportable only upon the option of the lender. However, if the lender reports one HELOC loan during the calendar year, it must report all HELOCs for that year.
Loan Application Register (LAR)
All reportable HMDA loans must be reported as a separate line item upon the LAR sheet, which is then sent on an annual basis to the FFIEC. Each lender must list preset data that includes the date of the loan application, loan type, loan amount, and property location and disposition of the application (approved or not approved). Optional information that will be collected upon the approval of the borrower includes name, ethnic background, race, sex and income.