What is HMDA?
There are a lot of banking regulations and each one is incredibly important. This is true in both their purpose keeping the banking industry safe and secure and their ability to keep lending, trading, and other activities fair. Recently, the Consumer Financial Protection Bureau finalized rules that clarified exemptions and extended the current threshold for collecting and reporting data about open-end lines of credit under HMDA. But what is HMDA?
The Home Mortgage Disclosure Act or HMDA is a federal law in the US. It was enacted by the 94th congress of the United States and went into effect on December 31, 1975, signed into law by President Gerald Ford.
HMDA rose from the noticeable shortage of credit offered by banks and financial institutions in certain urban areas. As many of these urban areas declined, Congress came to believe that the decline was caused by institutions not providing home finance loans with good terms to qualified borrowers.
HMDA doesn’t necessarily prohibit financial institutions from certain actions, though. It is essentially a law that requires financial institutions to disclose important data, not only to regulatory authorities but to the public.
HMDA requires institutions to provide information to the public, allowing the people who live in a community to assess whether the institution is actually serving that community. A 1989 amendment to the law requires institutions to also provide information about the characteristics of borrowers and applicants. This information is used to ensure that lenders are not discriminating against certain individuals in their lending practices and is also used to enforce anti-discrimination laws.
HMDA and other banking regulations are an important part of the banking industry. And that’s why the understanding of regulations is important to compliance training. If you’re looking for compliance training for your financial institution, Contact us today for more information.