If you're in the market for a loan, it's important to know what types of loans are covered by HMDA. This acronym stands for the Home Mortgage Disclosure Act, and it was put into place in order to help protect consumers from predatory lending practices. In this blog post, we'll provide a complete guide to what loans are covered by HMDA. We'll also discuss some of the key provisions of this act and how they can benefit you as a borrower!
What Loans Are Covered by HMDA Table of Contents
What is HMDA?
The Home Mortgage Disclosure Act (HMDA) is a federal law that requires certain financial institutions to maintain records of their home mortgage lending activity and to make those records available to the public. HMDA was enacted by Congress in 1975 and implemented by the Federal Reserve Board's Regulation C.
What Are The Benefits of HMDA?
The benefit of HMDA is to help ensure that all borrowers have access to credit on a fair and equal basis. By making loan data publicly available, it allows for greater transparency in the lending industry. It also helps to prevent discrimination by allowing regulators and consumer advocates to identify potential patterns of unfair lending practices.
What Loans Are Covered by HMDA?
All closed-end consumer loans secured by real estate located in the United States are covered by HMDA, with some limited exceptions. This includes all first mortgages, home equity lines of credit, and manufactured housing loans. Refinance loans are also included, regardless of whether they result in cash being disbursed to the borrower.
What Loans Are Not Covered by HMDA?
Now that we know what loans are covered by HMDA, let's take a look at what loans are not covered.
Additionally, any loan that is made by a financial institution that is not required to report under HMDA is also exempt. These include banks with less than $44 million in assets, credit unions, and certain types of lenders such as insurance companies and finance companies.
What Are The Three Purposes of HMDA?
There are three primary purposes of HMDA:
- To help determine whether financial institutions are serving the housing needs of their communities;
- To assist public officials in targeting investments and other assistance to areas with insufficient access to credit; and
- To enable members of the public to evaluate patterns of lending in their neighborhoods.
What Types Of Lenders Are Subject To HMDA?
All depository institutions are subject to HMDA. This includes banks, savings associations, and credit unions with asset size of $44 million or more. In addition, all nondepository financial institutions that are controlled by depository institutions, such as mortgage bankers and finance companies, are also subject to HMDA.
There are a few other types of lenders that may be required to collect and report data under HMDA depending on their business model and location.
Does HMDA Support ECOA and FHA?
Yes, both the Equal Credit Opportunity Act (ECOA) and the Fair Housing Act (FHA) are supported by HMDA. ECOA prohibits discrimination in credit transactions on the basis of race, color, religion, national origin, sex, marital status, age (provided that the applicant has the capacity to contract), or because all or part of an applicant's income derives from any public assistance program. FHA prohibits discrimination in residential real estate-related transactions on the basis of race, color, religion, national origin, sex familial status or handicap.
What About State and Local Laws?
State and local laws may also apply to lending activities. For example: if you're a bank chartered under state law, state law will apply in addition to HMDA. Check with your regulator or attorney to make sure you understand what other laws may apply to your organization.
Does HMDA Apply to Home Equity Loans?
The Home Mortgage Disclosure Act (HMDA) does not apply to home equity loans. This is because home equity loans are not considered "first-lien" mortgages. Instead, they are considered "junior-lien" mortgages. This means that they are subordinate to the first mortgage on the property.
As a result, home equity loans are not subject to the reporting requirements of HMDA. However, this does not mean that they are exempt from all regulation. Home equity loans are still regulated by other federal laws, such as the Truth in Lending Act (TILA).
Construction Loans Covered By HMDA?
Construction loans are not covered by HMDA. However, if the construction loan is converted to a permanent loan, the new loan would be subject to HMDA reporting. What this means is that any home equity lines of credit or second mortgages obtained during the construction period would not be captured under HMDA.
Are Home Improvement Loans Covered By HMDA?
Home improvement loans are also not currently included in the definition of what loans are considered "covered" under HMDA. That said, it's important to note that this could change in the future as lawmakers continue to revise and update the rules surrounding HMDA reporting.
Are Unsecured Loans HMDA Reportable?
No, unsecured loans are not reportable under HMDA. These types of loans are not covered by the Home Mortgage Disclosure Act. This means that lenders do not have to collect or report data on them. However, some lenders may voluntarily choose to do so.
What Makes a Bank HMDA Reportable?
All depository institutions that are FDIC insured and have at least one home or branch office in the US are required to submit HMDA data. This also includes any foreign branches of these banks. The purpose of this guide is to help you understand what loans are covered by HMDA so that you can make sure your bank is in compliance.
There are two main criteria that make a loan reportable under HMDA: the type of loan and the institution making the loan. Let's take a closer look at each of these:
The type of loan: HMDA covers both first-lien and subordinate-lien loans secured by properties located in the US. This includes single-family residential properties, manufactured homes, and multifamily properties.
The institution making the loan: Only depository institutions are required to report HMDA data. This means that non-banks, such as credit unions and mortgage bankers, are not subject to HMDA reporting requirements.