New Reporting Requirements Under HMDA

In mid-January the Federal Reserve Board issued its final ruling on proposed changes to Regulation C, which implements the Home Mortgage Disclosure Act (HMDA). The amendments deal primarily with new requirements to report interest rate data on mortgage loans, but they also modify the reporting rules for the scope of loans covered under HMDA. The FRB had proposed these changes in December 2000 as part of its effort to gauge the size of the subprime lending market and address concerns about predatory lending. The new rules take effect on January 1, 2003.

Under the existing rules, depository and for-profit non-depository institutions must collect, report and disclose data about applications for and originations of home mortgage and home improvement loans. Reported data include the type, purpose and amount of the loan; race, ethnicity, sex and income of the applicant; and the location of the property. These data are used primarily to enforce fair lending laws and to determine whether financial institutions are serving the housing needs of their communities. Notably absent from the list is any information about loan price, an omission which has hampered the usefulness of HMDA data for addressing patterns and alleged problems with "high-cost" mortgage lending.

The amendments to Reg C expand the data collected by requiring lenders to do the following:

• Report the spread between a loan's annual percentage rate (APR) and the yield on the Treasury security of comparable maturity for originated loans with spreads that exceed a certain threshold. The FRB has tentatively proposed thresholds of 3 percentage points on first-lien loans and 5 percentage points on subordinate lien loans, but is seeking comment from the public about the appropriateness of these thresholds.

• Identify loans subject to the Home Ownership and Equity Protection Act (HOEPA).

• Utilize categories for reporting race and ethnicity that conform to government-wide standards established by the Office of Management and Budget, and allow applicants to record more than one race

• Report denials of applications for credit received through certain preapproval programs and identify loans made through such programs