Welcome to the Utah Housing Coalition HMDA Training

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Welcome to the Utah Housing Coalition HMDA
Training

• Presenter
• Anita Garrett, CRCM

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HOME MORTGAGE DISCLOSURE ACT (HMDA) REGULATION C

• Overview

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Scope of Presentation

• The history and purpose of the HMDA data
  collection
• The new pricing data
• Its impact on fair lending evaluations
• Its impact on affordable housing
• How the data can be used to monitor an
  institution's lending programs and explore new
  lending opportunities.

4
HMDA Background

• Enacted by Congress in 1975
• Implemented by Federal Reserve Boards Regulation
  C
• Made permanent in 1988
• Amended in 1989 to require reporting of data
  about applications received and about applicant
  and borrower characteristics
• Amended in 2002 to add additional fields,
  including price data.

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Purpose of HMDA

• Makes information publicly available that shows
  whether financial institutions are serving
  housing credit needs of their neighborhoods and
  communities
• Helps identify possible discriminatory lending
  patterns and assists regulatory agencies in
  enforcing compliance with nondiscrimination
  statutes
• Provides private investors and public agencies
  with information to guide investments in housing

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What are the HMDA data?

• HMDA data cover home purchase and home
  improvement loans and refinancings, and contain
  information about loan originations, loan
  purchases, and denied, incomplete or withdrawn
  applications. With some exceptions, for each
  transaction the lender reports data about
• the loan (or application)
• the disposition of the application
• the property to which the loan relates, and
• the applicant's ethnicity, race, sex, and income.

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The New Price Data

• The 2002 Amendment, which added the new price
  data, was enacted in order to keep pace with
  changes in the industry in recent years,
  including
• Technological advancements and the practice of
  credit scoring resulting in new strategies for
  analyzing, underwriting, and pricing mortgage
  loans.
• The reassessment of the nature of mortgage
  lending abuses.

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The New Price Data

• In general, the price data are the adjusted
  annual percentage rates (APRs) of higher-priced
  loans, loans with rates that exceed certain
  thresholds set by the Federal Reserve Board.
• They take the form of a rate spread.

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The New Price Data

• Lenders must report the spread (difference)
  between the annual percentage rate on a loan and
  the rate on Treasury securities of comparable
  maturity but only for loans with spreads above
  designated thresholds.
• So prices will be reported for some, but not all,
  home loans.

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The Impact on Fair Lending Evaluations

• According to the Federal Reserve, only 2 of the
  8,853 lenders that submitted data had a
  statistically significant difference in the
  incidence of higher-priced loans after
  accounting for factors included in the HMDA
  data.
• Source HMDA Data Explain Most Variations in
  Price, American Banker, Wednesday, September
  14, 2005

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The Impact on Fair Lending Evaluations

• Some of those discrepancies could be explained by
  other factors not contained in the data, such as
• Borrowers Credit History
• Debt-to-Income Ratio
• Ratio of the Loan Amount to the Value of the
  Property

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The Impact on Affordable Housing
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The Mortgage Loan Spectrum
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• Last year 19 of all home-loan originations were
  subprime, up from just 5 in 1994.
• Source HMDA Data Explain Most Variations in
  Price, American Banker, Wednesday, September
  14, 2005

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The Need For Financial Education

• Several recent studies of consumer behavior
  suggest that borrowers with poor credit ratings
  are at a disadvantage for a number of reasons--in
  particular, a lack of financial education. But
  even more troubling is evidence that many of
  these borrowers assume that their credit standing
  is worse than it actually is and, as a result,
  don't shop and negotiate for the best terms
  possible.

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Working Together . . .

• Using HMDA information, lenders and community
  groups can work together to identify the
  particular segments of their communities that may
  need additional financial education or, perhaps,
  new, more-competitive products.

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Public Availability of HMDA Data

• Data must be maintained on a LAR in a format
  prescribed by Regulation C
• A modified register must be made available to the
  public upon request (application or loan number,
  application date and action date removed to
  protect applicants privacy)

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Data Submission

• HMDA data must be submitted to the Banks
  regulatory agency by March 1 each year
• March 31st is the earliest date that data from
  the previous calendar year are publicly available

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Disclosure Statement

• A Disclosure Statement is prepared by the FFIEC
  using HMDA data submitted by the institution.
• The Institution must make the Statement available
  to the public upon request.
• The Disclosure Statement must remain available to
  the public for five years.

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Aggregate Tables

• Aggregate Tables are prepared by FFIEC and made
  available at a central data depository in each
  MSA.
• They are also available online at www.FFIEC.gov.

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In Summary

• A cooperative review of the HMDA data between
  lenders and community groups can
• Identify credit demand that might otherwise have
  been overlooked
• Encourage the establishment of partnerships
  between lenders and community organizations to
  meet credit needs and
• Identify geographic areas where financial
  education is needed.

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Questions?