Have you been wondering what the Home Mortgage Disclosure Act (HMDA) is?
With the dynamic nature of mortgages, the integrity of lender-borrower data is crucial. It is where the HMDA enters the picture.
After all, the average home loan in the United States reached a record high. Homeowners were also borrowing more money. If you are one of these people, you might wonder how HMDA protects your interests.
Fortunately, reading our guide can help. Continue for a lowdown on the HMDA compliance and learn more:
Table of Contents
The History of HMDA
Before 1975, the number of Americans looking to buy homes started to increase. The problem is there were several concerns surrounding mortgages. People feared possible discrimination from lenders.
More importantly, they complained of the lack of mortgages in some urban areas and smaller neighborhoods. With the scarcity of mortgage options, some areas began to decline. When Congress noticed these issues, they decided to draft and enact the HMDA Law in 1975.
The law requires lenders to collect, report, and disclose information about their loan agreements. Policymakers and regulators can use it to ensure the lenders abide by the existing lending laws.
Consumer groups can also use the data to ensure lenders avoid practicing discrimination and offer affordable mortgage options.
HMDA Compliance
The primary goal of HMDA reporting is to create greater transparency and protection. Lenders must comply by reporting information regarding the lending transaction.
They will give accurate information on the type of loan and the date of application. Also, lenders must disclose the borrower’s name, race, gender, income, and credit scores. Lastly, the lenders must report whether they approved or denied the loans, together with the reasons for their decision.
Unfortunately, not all lenders follow to perfection. Some lenders neglect sensitive parts of the procedure. They lack transaction tests of data and fail to define the roles of employees concerning data collection.
There’s also possible foresight coming from reporting exemptions. However, they are rare.
HMDA Reporting Requirements
Lenders will report their HMDA data through a loan/application register (LAR). In 2010, The Dodd-Frank Act introduced more requirements for disclosure. Lenders should now include the borrower’s age, loan rate spread, and the total points and fees.
They should also provide the property value, prepayment term, loan term, and non-amortizing features. The HMDA adapted to the changing times since it required more information from lenders.
With too much data, it is easy for lenders to commit costly errors. Investing in HMDA data integrity services helps ensure top-notch HMDA compliance.
Benefits of HMDA Compliance
HMDA compliance brings different benefits for both lenders and borrowers. It prompts lenders to value honesty and empower them to improve their services.
Meanwhile, borrowers need not hesitate when reporting discrimination. Lawmakers will also get a better picture of the latest mortgage and real estate trends.
Be Smarter With Your Investments Now
Now you know how HMDA protects you. With this information, you can borrow money more confidently. You can choose the best lender for your home loan requirements.
Do you need more helpful guides? If so, read our other posts today.
