The Home Mortgage Disclosure Act (HMDA), initially enacted in 1975, requires financial institutions to collect and report data on mortgage loan applications. However, not all loans are subject to reporting under HMDA. Understanding which loans are HMDA reportable is crucial for lenders to maintain compliance with the act.
HMDA reportable loans primarily consist of closed-end and open-end mortgage loans that meet certain threshold criteria. The nature of the loan, the property type involved, and the type of institution making the loan are key factors in determining reportability.
Closed-End Mortgage Loans
Closed-end mortgage loans, such as home purchase loans and refinance loans, are often HMDA reportable. However, they must meet specific criteria to be considered for reporting.
First, the loan must be for a property located in the United States or a U.S. territory. Second, the loan must be used to purchase, improve, or refinance a dwelling that will be the borrower's primary residence. Third, the loan must be secured by the dwelling, and the dwelling must be a one-to-four family residential structure.
Loan Amount Threshold
The loan amount also plays a significant role in determining reportability. For transaction types that occurred on or after January 1, 2018, closed-end mortgage loans that meet the criteria above are reportable if they are $22,144 or above. This threshold is adjusted annually based on the CPI-U (Consumer Price Index for Urban Consumers).
For transaction types that occurred before January 1, 2018, the threshold was set at $45,000. If a loan was under this threshold but renewed, refinanced, or modified to a new loan beginning on or after January 1, 2018, it became reportable under the new threshold.
Exemptions
Certain closed-end mortgage loans are exempt from HMDA reporting. These include loans made by depository institutions with assets less than $44 million, loans used to purchase a mobile home or a dwelling in a manufactured housing community, and loans insured or guaranteed by a government agency like FHA, VA, or USDA.
Additionally, loans where the borrower has a valid reason for not providing data, such as impaired creditworthiness or financial distress, are also exempt. However, the lender must document why the borrower did not provide data for the application to be considered for an exemption.
Open-End Mortgage Loans
Open-end mortgage loans, often referred to as home equity lines of credit (HELOCs), are also subject to HMDA reporting if they meet certain criteria. Unlike closed-end loans, open-end loans are not reportable if they are for a property located in a U.S. territory.
However, if the property is located in the United States, open-end loans with a loan amount of $10,000 or more are reportable. Loans with a lower amount may be reportable if the loan was used to purchase, improve, or refinance the dwelling that serves as the security for the loan.
Reportable Information
When a loan is reportable under HMDA, certain information about the loan, the borrower, and the property must be collected and reported. This includes the loan amount, the type of loan, the property type, and the race, ethnicity, and sex of the applicant if provided.
The reporting institution must file this data with the Consumer Financial Protection Bureau (CFPB) annually. This data is used to identify trends in mortgage lending, prevent discriminatory lending practices, and ensure compliance with fair lending laws.
Understanding what loans are HMDA reportable is essential for lenders to stay compliant with the act. As the rules and thresholds can change, it's crucial to stay up-to-date with the most recent guidelines from the CFPB. For any questions or uncertainties, it's always best to consult with a qualified legal or compliance professional.