The HMDA Explained
What is the HMDA, and why is it important? The following content will provide facts on the HDMA to give as much information on the topic as is necessary for homebuyers.
What is the HMDA?
The HMDA stands for the Home Mortgage Disclosure Act¹. It was initially enacted in 1975, with one clear role. All mortgage lenders are legally required to keep records of information relating to their lending. Essentially, they need to report all the different habits of their lending processes. This includes information on who asks for loans, how much money is given out, and so on.
All of this information is submitted to regulatory bodies who assess it and keep it on record. You can access public files from the HMDA online, viewing all of the data collected.
What is the Purpose of the HMDA?
The HMDA exists to create more transparency between lenders and the rest of the public. It's about building a level of trust and laying everything out on the table for people to see. During the 2008 financial crisis, a lot of people lost faith in banks and other lenders. While research from the ABA suggests that 49% of Americans now trust banks², there are many out there who are wary of all lenders. Largely, this is because it used to be very easy for lenders to take advantage of consumers.
Thanks to the HMDA, more trust can be built. Borrowers are given more protection because so much data is collected from lending authorities. With this data, regulators and watchdogs can look into any trends. Therefore, it's easy to spot negative trends that may impact the lending market. By taking affirmative action, trends can be squashed before they lead to severe financial problems.
What Data is Provided Under HMDA?
HMDA is implemented by Regulation C, and a range of data is required by financial institutions offering mortgages. Specifically, information on the mortgage products provided. This includes the number of mortgages available, as well as the categories borrower's can choose from. Data on the number of loans granted is also required, followed by info on how many pre-approvals have been made.
There is also a need for further details on the mortgages that people take out. Lenders should give data on how much money is handed out to each borrower. Furthermore, they need to provide data on why people have taken out loans. Fundamentally, as much information as possible is collected and published under the HMDA.
Why Should Homebuyers Care About the HMDA?
All of this information might help you understand the HMDA, but why do you need to care about it? Essentially, if you wish to buy a home, you should be aware of the HMDA. It can help you determine which lenders are compliant, and which ones are not. Looking at the data collected by the HMDA could help you understand different lending and borrowing patterns in your area.
This data is valuable for borrowers in multiple ways. It can help you see if lenders are correctly serving people in your neighborhoods, and it allows public officials to make better decisions about allocating funds and developing policies. You can choose to examine the date yourself or read through the highlights to pick up the key points if you so wish.
For more information on the HMDA, please refer to the source below that links to the CFPB website. This is also where you can access all the data that's previously been collected on mortgage loans and lenders. Borrowers and homebuyers have a higher degree of financial protection than ever before, but there is still a lot to learn about mortgage and borrowing money. If you need more assistance in this field, we have a plethora of educational resources that can teach you everything. You can reach out to MortgageQuote.com if you also have any questions.
Consumer Finance Protection Bureau: HMDA
ABA: Americans trust banks to keep their information safe