Home Mortgage Disclosure Act: A Synopsis and Recent Legislative History, The

Journal of Real Estate Research, The, Oct-Dec 2007 by McCoy, Patricia A

Abstract

This article describes the provisions of the federal Home Mortgage Disclosure Act (HMDA), tracing its legal evolution since 1989, when Congress expanded HMDA to require reporting of home mortgage lending by ethnicity and race. HMDA requires most lenders to report the demographic makeup and geographic distribution of home mortgages to the federal government. The 1989 amendments and later developments transformed HMDA from a law exclusively concerned with geographic disinvestment to one concerned with lending disparities by ethnicity and race. In the process, HMDA evolved from an obscure reporting statute to a flashpoint for debates over lending discrimination and subprime lending.

The Home Mortgage Disclosure Act of 1975 (HMDA or the Act),1 the focus of this issue of the Journal of Real Estate Research, was one in a series of federal antipoverty laws enacted by the United States Congress in the 1960s and 1970s. Congress passed the first of these statutes in 1968, when it enacted Title VIII of the Civil Rights Act prohibiting discrimination in housing finance.2 In the 1970s, as urban centers continued to decline, Congress passed three more statutes designed to address the twin ills of discrimination and disinvestment. One of these statutes was the Home Mortgage Disclosure Act; the other two were the Equal Credit Opportunity Act of 1974 (ECOA)3 and the Community Reinvestment Act of 1977 (CRA).4

The Home Mortgage Disclosure Act was a direct response to mortgage redlining and urban blight. In the Act, Congress declared that banks and thrifts had "contributed to the decline of certain geographic areas by their failure ... to provide adequate home financing to qualified applicants on reasonable terms and conditions."5 Congress had two purposes in mind in enacting HMDA: to ascertain whether banks and thrifts were serving the housing needs of their communities and to target public spending in underserved neighborhoods more effectively to spur private investment.6 In recent years, federal regulators have also articulated a third purpose behind HMDA, which is to help identify lending discrimination and enforce the federal antidiscrimination laws.7 This third purpose differs from the first by focusing on discrimination based on prohibited categories including ethnicity and race, rather than on discrimination based on geographic locale.

Unlike Title VIII, ECOA, and CRA, HMDA is strictly a reporting statute. The Act requires lenders to compile and disclose annual data on the demographic makeup and geographic distribution of housing-related loans. The Act does not place affirmative obligations on lenders apart from reporting and does not authorize private lawsuits for HMDA violations. Congress gave the Federal Reserve Board (the Board) authority to issue regulations implementing HMDA.8

This article traces the historical evolution of HMDA since 1989, when Congress, in its first major amendments to HMDA, expanded the Act to cover most residential mortgage lenders and mandated the disclosure of lending patterns by ethnicity and race. The story starts with the 1989 savings and loan bailout legislation, when an odd alliance of banks and consumers convinced Congress to change HMDA from a law regulating banking institutions alone to a law regulating virtually all residential mortgage lenders. That same law spurred HMDA's evolution from a statute exclusively concerned with geographic disparities in mortgage lending by income to one also concerned with lending disparities by ethnicity and race. This development occurred in fits and starts, often over opposition from lenders, first during the savings and loan crisis and later when lenders came under press scrutiny for abusive lending. Similarly, HMDA enforcement is much more serious today than it was at HMDA's inception in 1975, now that HMDA features statutory reporting deadlines and agency sanctions for reporting violations. In the process of these changes, HMDA underwent a remarkable transformation from a musty reporting statute to a flashpoint for debates over racial disparities and subprime lending. Just as HMDA provides a mirror into mortgage redlining, income inequality, and race discrimination, HMDA's evolving shape has been a product of continued debates in this country about economic disparities and persistent discrimination by race.

HMDA's Coverage

Originally, HMDA only applied to banks, savings associations, credit unions, and their mortgage lending subsidiaries.9 Depository institutions complained that they were competitively handicapped by having to comply with HMDA while nonbank mortgage lenders did not. Consumer groups and civil rights groups also sought to expand the reach of HMDA. Together, these groups formed an alliance to convince Congress, in the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (FIRREA), to expand HMDA as part of the cleanup of the savings and loan debacle in order to level the competitive playing field for shaky banks and thrifts. The 1989 amendments broadened HMDA by reaching independent non-depository lenders with offices in metropolitan statistical areas and more than $10 million in assets.10