On March 21, 1975, Senator William Proxmire (D-WI) introduced S. 1281, a bill passed in the Senate on September 4. In the House, Representative Ferdinand St. Germain (D-RI) introduced H.R. 10024 on October 3, 1975, a bill that passed in the House on October 31. After conferencing in mid-December, both chambers approved the Home Mortgage Disclosure Act (HMDA), which was signed by President Gerald Ford on December 31, 1975.
In short, HMDA requires certain banks and other mortgage lending institutions to annually report information about mortgage applications and approvals or denials. Specifically, HMDA currently requires lenders to provide data about a borrower’s race or ethnicity, gender, and income. HMDA also requires data about the type of loan, its amount, and the location of the home for which the loan is made.
Well before HMDA’s enactment, community leaders living in neighborhoods with older housing stock or with significant minority populations thought that financial institutions were deliberately disinvesting in their neighborhoods. Community leaders, such as Gail Cincotta in Chicago, asserted that those institutions took residents’ saving deposits but did not reinvest that money in the form of loans to their neighborhoods, even though there were creditworthy borrowers and sound lending opportunities. The organizing, research, and advocacy of these community leaders found a champion in Senator Proxmire who became Chair of the Senate Banking Committee in 1975.
The “findings” text of the HMDA statute states that Congress understood that some financial institutions had contributed to the decline of certain geographic areas by failing to provide adequate home financing to qualified applicants on reasonable terms and conditions. The statute states that the key purpose of HMDA is to provide the public and elected officials with sufficient information to enable them to determine whether financial institutions were filling their obligations to serve the housing needs of the communities and neighborhoods in which they were located.
The practice of denying a creditworthy applicant a loan for housing in certain neighborhoods even though the applicant is otherwise eligible for the loan is called “redlining.” The term refers to the practice of mortgage lenders drawing red lines around portions of a map to indicate areas or neighborhoods in which they do not want to make loans because of the age of the housing stock or neighborhood demographics. Redlining on the basis of race is unlawful under the Fair Housing Act.
As originally drafted, the only information that had to be reported under HMDA was the number and dollar amount of loans by census tract. In 1989 the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) required lenders to identify the race, gender, and income of loan applicants, as well as whether an application was accepted or denied. FIRREA also expanded coverage to mortgage lenders not affiliated with depository institutions.
The 1975 statute specifically declared that HMDA was not intended to encourage unsound lending practices. HMDA does not set forth lending standards or establish lender responsibilities (such as a quota system for issuing mortgages in a metropolitan area), other than reporting. However, the Community Reinvestment Act of 1977 (CRA) did establish an affirmative obligation on the part of certain financial institutions to help meet the credit needs of the communities in which they operated, and linked community reinvestment records to approval of mergers and other expansion applications.
Regulations implementing HMDA, known as “Regulation C,” are at 12 CFR part 1002. Currently the Consumer Financial Protection Bureau oversees Regulation C, which was previously under the authority of the Federal Reserve Board.
Home Mortgage Disclosure Act of 1975, Public Law 94-200, http://1.usa.gov/1rhNo31.
Summary of Activities, 94th Congress: Report of the Committee on Banking, Housing, and Urban Affairs, United States Senate (1976), http://bit.ly/1op4rmf .
“History of HMDA,” Federal Financial Institutions Examination Council,
“HMDA Background and Summary,” Consumer Financial Protections Bureau, http://1.usa.gov/1q4X3bc.
Summary of S. 1281, Library of Congress, http://1.usa.gov/1uhYvOj.
Summary of HR 10024, Library of Congress, http://1.usa.gov/1oDrX9q
The Home Mortgage Disclosure Act at Thirty-Five: Past History, Current Issues, Allen Fishbein and Ren Essene, August 2010, Joint Center for Housing Studies, Harvard University, http://bit.ly/1sNynsw.