If you’ve followed us for long, you’ve likely heard us say “HMDA is an application regulation”. The point we are trying to drive home is that lenders need to know at the time they receive an application whether it’s a HMDA reportable application or not. One of the primary reasons is that the applicant’s demographic information (race, sex, ethnicity) must be collected at the time of application. HMDA doesn’t give you a lot of grace so if you collect demographic information when you shouldn’t or don’t collect it when you should, it’s a violation. There are a lot of rules for collecting demographic information and they often depend on how an application is received (by mail, by phone, in person, online, etc.). For example, in all cases the following disclaimer must be provided to the applicant before they provide their demographic information. If the application is taken by phone, that means the lender must read the disclaimer to the applicant before requesting their demographic information.
The purpose of collecting this information is to help ensure that all applicants are treated fairly and that the housing needs of communities and neighborhoods are being fulfilled. For residential mortgage lending, Federal law requires that we ask applicants for their demographic information (ethnicity, race and sex) in order to monitor our compliance with equal credit opportunity, fair housing and home mortgage disclosure laws. You are not required to provide this information, but are encouraged to do so. You may select one or more designations for “ethnicity” and one or more designations for “Race”. The Law provides that we may not discriminate on the basis of this information, or on whether you choose to provide it. However, if you choose not to provide the information and you have made this application in person, Federal regulations require us to note your ethnicity, race and sex on the basis of visual observation or surname. If you do not wish to provide some or all of this information please check below.
David explains more in the video.