When an applicant provides their demographic information (race, sex, and ethnicity) in connection with a HMDA-reportable application, they can give you whatever they want. The HMDA FAQs are very clear that you should not correct any of the information provided by the applicant even if you know it is wrong or doesn’t make sense. The FAQs state:
2. Should a financial institution correct information provided by the applicant for race or ethnicity when the applicant has entered clearly incorrect or inappropriate information on the application?
No. Pursuant to Instruction 8 of Appendix B to Regulation C, 12 CFR Part 1003, a financial institution reports the ethnicity and race of the applicant as provided by the applicant. Therefore, a financial institution should not correct the race or ethnicity as reported by the applicant, even if the applicant has entered clearly incorrect or inappropriate information.
To help lenders remember to not touch demographic information provided by the applicant, David came up with what he calls the “MC Hammer Rule”, which he explains in the video.
Published 2026/03/16
