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Home arrow Business & Finance arrow The art of RF (riba-free) Islamic banking and finance

Purpose of the Act

The purpose of the HMDA is to provide the public with loan data that can be used (1) to help determine whether financial institutions are serving the housing needs of their communities, (2) to assist public officials in distributing public-sector investment to attract private investment to areas where it is needed, and (3) to assist in identifying possible discriminatory lending patterns and in enforcing antidiscrimination statutes.

It was also made very clear in the act that “neither the Act nor this regulation is intended to encourage unsound lending practices or the allocation of credit.”

Reporting Requirements

Financial institutions must report data regarding applications for home purchase loans, home improvement loans, and refinancing, whether originated, purchased, turned down, or canceled. HMDA requires lenders to report information on the following:

■ The loan, as to its type, amount, and pricing and whether the loan is subject to the Home Ownership and Equity Protection Act (15 USC 1639).

■ The property, as to its location and type, and the disposition of the application, including whether it was originated or denied; in case of denial, lenders must report the reason for declining.

■ The applicant's ethnicity, race, gender, and gross income for mortgage applicants and borrowers.

■ In case loans are sold, the type of purchaser for mortgage loans that were sold.

Denial Reasons and Other Data

Financial institutions regulated by the OCC, such as national banks, are required to provide reasons for denials. Providing reasons for denials is optional for financial institutions supervised by the Federal Reserve and the FDIC.

Disclosure

As a result of amendments to the HMDA incorporated within the Housing and Community Development Act of 1992, an institution must make its disclosure statement available to the public at its home office within three business days of receipt.

 
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