Is Your Financial Institution in Compliance With the HMDA?Debbie Wilson
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The HMDA was enacted by Congress in 1975 over public concern of credit shortages in urban neighborhoods. The thought was that financial institutions had contributed to the decline of geographic areas by failing to provide adequate home financing to qualified applicants with reasonable terms and conditions. The act was passed to stop home financing discrimination.
Information Disclosed Under HMDAThe HMDA covers two main types of lenders. The first category of lenders includes banks, saving associations, and credit unions. The second category of lenders encompasses non-depository, for-profit, mortgage lending institutions. Under the HMDA, lenders must report every loan and application they have dealt with in a calendar year. Then the Federal Financial Institutions Examination Council (FFIEC) then reviews the data as it pertains to race, national origin, sex, and income. Finally, it will analyze credit decisions, rates and terms, looking for patterns that could indicated discrimination.
Financial Lending Institution ComplianceTo determine if your financial lending institution is in compliance with the HMDA, the FFIEC makes their findings a matter of public record. All lending institutions covered under the HMDA must post a notice at the home office and branches to indicate the availability of the report. The lending institution must then make this information available upon customer request.
While the HMDA is an important disclosure tool, it is critical to understand that it relies on public scrutiny for its effectiveness. It does not prohibit specific activity or establish mortgage loan quotas. Rather it is used by administrations to ensure lending institutions are serving the needs of their communities, by government officials to make public sector investments and focus efforts, and by individual consumers to prevent discriminatory lending patterns.
About the Author
Debbie Wilson owns and operates a lakeside resort. Her previous experience includes profitability consulting for a national healthcare company. Debbie holds a B.A. in Business Management with a minor in Physical Education.