New information reported under HMDA and its application in fair lending enforcement

Federal Reserve Bulletin, Summer, 2005 by Robert B. Avery, Glenn B. Canner, Robert E. Cook, Shannon C. Mok, Caitlin G. Coslett, Patricia J. Dykes, Sylvia A. Freeland

The changes regarding race and ethnicity will make it difficult to align the HMDA data for 2004 with those for earlier years. Most important, applicants who in 2003 were classified as Hispanic were not also classified by their race. Consequently, a comparison of lending activity by race between 2004 and earlier years might lead some to conclude that lending to certain racial groups may have changed when, in fact, the only change was in the classification system.

Changes in the Data-Collection Requirements for Sales in the Secondary Market

The secondary market for home loans is the arena in which loans already originated are bought and sold. HMDA requires that, for a given year, covered institutions report the sales of loans that they originated in that year as well the sales of loans that they purchased in that year. For each sale, the institution must also report the type of purchaser.

HMDA data have long been one of the few sources of loan-level information describing secondary-market activities. The 2004 data are reported using codes that represent revised categories for identifying the secondary-market purchasers. For the first time, the HMDA data identify loans placed in private securitizations, which represent a growing segment of the secondary market. The revisions in the reporting categories are intended to improve the utility of the data.

SUMMARY OF RESULTS FROM THE 2004 HMDA DATA

For 2004, the FFIEC prepared disclosure statements for 8,853 HMDA-reporting lenders--3,946 commercial banks, 1,017 savings institutions, 2,030 credit unions, and 1,860 mortgage companies. Of the mortgage companies, most (1,464) were independent entities--that is, institutions that were neither subsidiaries of banks nor affiliates of bank holding companies (table 1). The disclosure statements consisted of 72,246 distinct reports, each covering the lending activity of a particular institution in each metropolitan statistical area (MSA) in which it had a home or branch office (table 2). The number of reporting institutions was up 9 percent from 2003, in part because OMB's revision of MSA boundaries added, on net, 242 previously rural counties to MSAs. (21)

The number of lenders covered by HMDA is large; however, most of these institutions, whether measured by number of reported applications or loans or by asset size, are small. For 2004, 60 percent of reporting institutions provided information on fewer than 250 loans or applications, accounting for 1.7 percent of the reported data (table 3). Sixty-three percent of the reporting banks had assets of less than $250 million, and they accounted for only 2.2 percent of the applications and loans in the 2004 HMDA data. (22)

At the other end of the spectrum, the twenty-five lenders reporting the largest number of applications accounted for about 42 percent of all the applications reported in the 2004 data (data not shown in table). If HMDA reporters are further aggregated to their highest level of corporate organization (such as a bank holding company), lending is even more concentrated. The twenty-five largest organizations reporting the largest number of applications accounted for 55 percent of the applications in the 2004 data (data not shown in table).