The predatory subprime lending crisis devastated families and communities across Chicago and the nation, particularly low-wealth communities and communities of color.
A crucial tool to fight discriminatory and predatory lending is the Home Mortgage Disclosure Act (HMDA). HMDA requires mortgage lenders to provide detailed reports of their lending to regulators and the public. Woodstock Institute uses HMDA data to track discriminatory lending practices, study patterns of community investment, and hold individual banks accountable for their lending practices.
Regulators are holding a series of public hearings, including one in Chicago on September 16, on possible revisions to HMDA. HMDA data collection must be more comprehensive in order for regulators and the public to prove abusive discriminatory lending practices and hold lenders accountable.
Why update HMDA? Why now?
Current HMDA data lacks sufficient data on underwriting and product characteristics. While patterns of discriminatory lending can be detected through current HMDA data, there is not enough information to prove that discrimination is occurring.
What data does HMDA need that it does not currently have?
In order to achieve transparency and accountability, HMDA must:
- Collect data on income documentation and debt-to-income ratios to monitor whether lenders are routinely putting borrowers into loans they can't afford;
- Close gaps in institutions that are required to report data to accurately reflect lending occurring in rural areas and smaller metropolitan areas;
- Close gaps in types of loans that are required to be reported so we have a complete picture of all mortgage credit, including home equity lines of credit and reverse mortgages;
- Report additional data for purchased loans so that banks do not get credit on Community Reinvestment Act examinations for purchasing high-cost predatory loans;
- Require disclosure of a lender’s parent company so we can detect if big banks are conducting predatory lending through affiliate institutions;
- Link data on loan performance and loan modifications to HMDA in order to connect subprime lending to high rates of foreclosure.
Woodstock Institute will be holding a conference call on September 1 to explain why HMDA must be updated and how to register for the Federal Reserve hearings. For more information on the call and how to register, click here.