[Federal Register Volume 59, Number 112 (Monday, June 13, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-14262]
[[Page Unknown]]
[Federal Register: June 13, 1994]
=======================================================================
-----------------------------------------------------------------------
FEDERAL RESERVE SYSTEM
12 CFR Part 203
[Regulation C; Docket No. R-0839]
Home Mortgage Disclosure
AGENCY: Board of Governors of the Federal Reserve System.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Board is publishing for public comment proposed changes to
Regulation C (Home Mortgage Disclosure) and to the instructions and
reporting forms that financial institutions must use in complying with
the annual reporting requirements under the regulation. The principal
reasons for the proposed amendments are to respond to the statutory
provisions regarding earlier availability of the HMDA disclosure
statements to the public; help improve the quality of the HMDA data;
and provide clarifications requested by financial institutions that
report under HMDA. The amendments would set an earlier deadline for
reporting HMDA data to supervisory agencies; require reporting in
machine-readable format; require institutions to keep their loan
application registers current during the year as data are being
collected; and make a number of other changes.
DATES: Comments must be received on or before August 10, 1994.
ADDRESSES: Comments should refer to Docket No. R-0839 and be sent to
William W. Wiles, Secretary, Board of Governors of the Federal Reserve
System, Washington, DC 20551. They may also be delivered to the guard
station in the Eccles Building courtyard on 20th Street, NW. (between
Constitution Avenue and C Street on 20th Street NW (between
Constitution Avenue and C Street, NW.) between 8:45 a.m. and 5:15 p.m.
weekdays. Comments received will be available for inspection and
copying by any member of the public in the Freedom of Information
Office, room B-1122 of the Eccles Building, between 9 a.m. and 5 p.m.
weekdays.
FOR FURTHER INFORMATION CONTACT: Jane Jensen Gell or W. Kurt
Schumacher, Staff Attorneys, or John C. Wood, Senior Attorney, Division
of Consumer and Community Affairs, Board of Governors of the Federal
Reserve System, Washington, DC 20551, at 202/452-2412; for the hearing
impaired only, contact Dorothea Thompson, Telecommunications Device for
the Deaf, at 202/452-3544.
SUPPLEMENTARY INFORMATION:
(1) Background
The Board's Regulation C (12 CFR part 203) implements the Home
Mortgage Disclosure Act of 1975 (HMDA) (12 U.S.C. 2801 et seq.). The
regulation requires most mortgage lenders located in metropolitan
statistical areas (MSAs) to report annually to federal supervisory
agencies, and disclose to the public, information about their home
mortgage and home improvement lending activity. The reports and
disclosures cover loan originations, applications that do not result in
originations (for example, applications that are denied or withdrawn),
and purchases of loans. Information reported includes the location of
the property to which the loan or application relates; the race or
national origin, gender, and income of the applicant; and the type of
purchaser for loans sold in the secondary market. For denied
applications, lenders are also permitted to report the reasons for
denial.
Lenders are required to report originations, applications, and
purchased loans for each calendar year to their supervisory agency by
March 1 of the following year. The reports are made on a HMDA Loan/
Application Register (HMDA-LAR) in a transaction-by-transaction format;
for reports containing more than 100 entries, lenders currently are
expected to submit the data in automated form (magnetic tape or
diskette). The lender's supervisory agency submits the data to the
Federal Reserve Board, which processes the data on behalf of member
agencies of the Federal Financial Institutions Examination Council
(FFIEC) and the Department of Housing and Urban Development. The Board
then prepares public disclosure statements for each reporting lender
and aggregate reports covering the data for all lenders in a
metropolitan area. The statements are sent to lenders, generally by
July or August, and the lenders are required to make the statements
available to the public at their home office and at certain branch
offices.
Although lenders must make the disclosure statements available
within three business days, they have a thirty-day period within which
to review the statements prepared by the Board and to report any
discrepancies to the agencies. After necessary revisions have been
made, the Board prepares and sends disclosure statements for all
reporting lenders in each MSA, along with aggregate disclosure tables
covering all such lenders, to a central data depository in each MSA.
The central depositories are usually public libraries, regional
planning agencies, or other public offices; the disclosures are
generally sent to the depositories by October.
(2) Explanation of Proposed Amendments
One of the principal reasons the Board is proposing to amend
Regulation C is the need to make HMDA data available to the public
earlier than has been the case in the past. Statutory amendments to
HMDA enacted in 1992 provide that starting with the HMDA reports for
calendar year 1994, disclosure statements for individual lenders should
be available to the public by July 1 of the following year, and that
aggregate tables should be available at the central depositories by
September 1.
To meet this timetable, it will be necessary for the agencies to
begin processing the raw data earlier than March 1. Therefore, the
proposed amendments include a change in the deadline for data
submission, requiring lenders to submit their data by February 1
instead of March 1. Some of the other proposed amendments also are
intended, in part, to facilitate earlier availability of the data (see
discussion concerning the proposed change to Sec. 203.5(a), below).
Another important reason the Board is proposing amendments to
Regulation C relates to the accuracy of the HMDA data. The accuracy of
the HMDA reports produced under the new data collection system that was
instituted in 1990 (following an expansion of the data collected under
HMDA) has improved in each succeeding year, but concerns continue to
exist about data quality. A major part of what is involved in ensuring
data accuracy relates to matters that are in the control of reporting
institutions; for example, lending institutions must devote adequate
resources to the task of accurately compiling and checking data before
reporting it. However, to the extent that any requirements of the
regulation are unclear or complicated, consistent and accurate
reporting is more difficult. Accordingly, some of the proposed
amendments now being published are intended in whole or in part to make
the reporting requirements clearer or simpler. In addition, another
proposed amendment calls for reporting in machine-readable format; this
change also should help improve data quality, as discussed below.
The Board solicits comment generally on other ways in which
Regulation C might be changed to better address problems of accuracy of
the HMDA data. For example, would allowing or requiring all home equity
lines to be reported--rather than only the portion of a line the
borrower intends to use for home improvement or home purchase--simplify
reporting and bring about greater consistency? Would the same be true
for other categories of loans? (On a similar point, refer to the
discussion of possible changes in the types of refinancings that should
be reported, in section (3), ``Other Matters on Which the Board
Solicits Comment,'' below.) Are there areas in which explanations could
be made simpler or clearer, thereby facilitating more accurate
reporting?
The Board notes its intention to publish within the next several
months a proposed staff commentary to Regulation C. The commentary will
provide a vehicle for interpretations that would help lenders better
understand and comply with the regulation's requirements. The
commentary will supplement the detailed instructions provided in
appendix A to Regulation C for completion of the HMDA-LAR and in the
Guide to HMDA Reporting: Getting It Right, the brochure published by
the FFIEC and distributed by the individual agencies. The Board is in
the process of drafting the commentary, and solicits comment from
lenders identifying specific areas that the commentary should address.
Set forth below is a section-by-section discussion of the proposed
amendments to the regulation.
Section 203.2--Definitions
Paragraph (f)--Home Improvement Loan
The proposal would revise the regulation's definition of ``home
improvement loan'' to facilitate compliance. The existing definition
sets two conditions: first, that the loan applicant state, at the time
of the application, that the loan is for the purpose of repairing,
rehabilitating, or remodeling a dwelling; and second, that the loan be
classified in the records of the financial institution as a home
improvement loan.
One change proposed by the Board relates to the first part of the
definition--that the loan be for the purpose of repairing,
rehabilitating, or remodeling a dwelling. Questions have arisen about
situations in which a loan is made for the purpose of making
improvements to the borrower's residential property, but not, strictly
speaking, to the ``dwelling'' as defined under Regulation C. The
regulation defines dwelling as a residential structure, whether or not
attached to real property. Thus, for example, a dwelling under
Regulation C includes a house, apartment building, or mobile home, but
not necessarily the land upon which the house or other structure is
located. Some institutions have asked whether a loan for building or
repairing things such as a detached garage, a driveway, a fence, or
landscaping should qualify as a home improvement loan for HMDA
purposes.
To avoid technical distinctions based on whether a loan relates to
the structure or to the land on which it is situated, the Board
proposes to change the home improvement loan definition to focus
primarily on the applicant's statement of purpose for the loan. Thus, a
loan would qualify as a home improvement loan for HMDA purposes if the
applicant states, at the time of the loan application, that the loan is
for ``home improvement purposes.''
The Board also proposes to eliminate the second part of the
definition, which would make the manner in which an institution
classifies a loan irrelevant to its treatment for HMDA purposes. This
part of the definition was originally intended to minimize the
regulatory burden on financial institutions, by not requiring an
institution to report a loan as a home improvement loan on its HMDA-LAR
if the institution did not record the loan as a home improvement loan
for other purposes. Many institutions now indicate that they would like
to report loans that in fact are for home improvement purposes, but
they find it difficult to do so because the loans may not be
``classified'' in the institution's records as home improvement loans.
Removing the classification test would resolve this problem. However,
the Board solicits comment on the extent to which this proposed change
would create significant compliance burdens for institutions that do
not currently record such loans on the HMDA-LAR but now would be
required to do so. Comment is also requested generally on the overall
advantages and disadvantages of making this change.
Section 203.4--Compilation of Loan Data
Paragraph (a)--Data Format and Itemization
Maintenance of LARs on current basis. The regulation currently
requires covered institutions to report HMDA data for a given calendar
year to supervisory agencies by March 1 of the following year, but does
not specify when the data must be recorded on the HMDA-LAR. The Board
proposes to require institutions to fully record transactions within
one month after final action is taken (such as origination of a loan,
or denial or withdrawal of an application). The Board believes this
approach would help in improving the accuracy and timeliness of the
HMDA data. Current-year registers would be available to examiners so
that, if problems were occurring, the supervisory agency could work
with the institution to ensure that errors were corrected well before
the relatively brief period between the end of the year and the
reporting deadline. Another advantage of the proposed change would be
that examiners and the institution itself would have ready access to
current data that could be helpful in assessing its fair lending and
community reinvestment performance.
The Board recognizes that some institutions may compile and geocode
transactions (assign MSA, state, county, and census tract codes) on a
batch basis, from time to time during the year or at year-end. The
Board solicits comment on how burdensome institutions that currently
follow this procedure would find it to record all the LAR information,
including the geographic codes, on the HMDA-LAR within one month after
final action. In addition, comment is requested on the extent to which
any burden might be reduced if the requirement were to keep the HMDA-
LAR up to date on a quarterly basis, rather than monthly. The Federal
Deposit Insurance Corporation imposes a thirty-day requirement on the
HMDA-covered institutions it supervises; the Office of the Comptroller
of the Currency proposed a similar requirement, and recently adopted a
quarterly update requirement instead (see 59 FR 26411, May 20, 1994).
The Board believes that a requirement to update the HMDA--LAR
within one month after each transaction would be an important step
toward improving the accuracy and timeliness of HMDA data reporting; if
the compliance burden appeared to outweigh the advantages, however, the
Board would consider alternatives such as quarterly updating.
Reporting income. The Board proposes to revise the regulation to
clarify how institutions report applicants' income and eliminate an
internal inconsistency that now exists. Currently, Sec. 203.4(a)(7) of
Regulation C provides that financial institutions shall collect data on
``income relied upon in processing the loan application.'' The
instructions for completing the HMDA-LAR state that if no income is
asked for or relied on in the credit decision, the lender may enter NA
(not applicable) in this field (appendix A, paragraph V.D.5.c.).
The Board proposes that lenders must report all income reflected on
the application, including income of coapplicants, whether or not the
lender relies on a particular source of income. If the lender
determined, in the course of verifying information, that some portion
of the income reported by the applicant was overstated, the lender
would enter the verified amount rather than the amount originally
reported.
Currently lenders need not report income for streamlined
refinancings in which they neither ask for nor rely on income
information. In addition, for privacy reasons, an institution need not
record applicants' income on the HMDA-LAR for loans made to the
institution's own employees. These rules will remain in place.
Section 203.5--Disclosure and Reporting
Paragraph (a)--Reporting to Agency
Change in reporting deadline. Currently, institutions are required
to file their HMDA data with supervisory agencies by March 1 following
the year to which the data relate. The Board proposes to change the due
date to February 1.
Statutory amendments contained in the Housing and Community
Development Act of 1992, 106 Stat. 3889, provide that starting with
loan and application data for calendar year 1994, the FFIEC shall make
``every effort'' to ensure that individual lenders' public disclosure
statements are available at the lenders' offices before July 1 of the
following year. Similarly, the amendments call for the FFIEC to make
both the individual disclosures and the aggregate tables available at
the central depositories before September 1.
In 1993, the individual lenders' disclosure statements for 1992
lending activity became available to the public the first week of
August, and the disclosure statements and aggregate reports became
available at central depositories the first week of November. This
year, the processing schedule calls for disclosures to be available at
institutions in July and at central depositories in October. Thus,
progress is being made toward meeting the statutory targets for earlier
availability of HMDA data. But given the high volume of data being
processed, the Board believes it is necessary to move up the date for
submitting the raw data to supervisory agencies.
Reporting in Machine-Readable Format. In processing the HMDA data,
the Board and the other agencies use various means to identify and
correct data errors. For example, the data are run through computerized
edit checks designed to detect errors and omissions in the data fields.
Where these are found, the agencies send the reports back to the
institution for correction.
Lenders whose HMDA-LAR contains more than 100 line entries are
generally expected by the agencies to submit their data in machine-
readable format, such as PC diskette or magnetic tape. The Board and
the other agencies have encouraged lenders to submit their HMDA-LARs in
automated form, and all but one of the agencies provide PC software
that can be used to compile data on diskettes. This software has built-
in edit checks for accuracy and is furnished free of charge. Software
packages that are widely available from private vendors also contain
the computerized edits used by the Board. Nonetheless, many lending
institutions still submit their HMDA data in paper form, and the
agencies have found that these paper submissions tend to contain a
substantially higher number of errors than submissions in machine-
readable form.
The Board proposes to require that all institutions report HMDA
data in machine-readable form and that they edit their data before
submitting it, either using the agency-supplied HMDA software or using
the same edits in private vendors' software.
The proposed change would help lenders to ensure submission of
accurate data.
The overall accuracy of the data has improved each year since 1990,
the first year of expanded reporting under the amendments in the
Financial Institutions Reform, Recovery and Enforcement Act of 1989, in
part because institutions have increasingly submitted data by diskette,
magnetic tape, or Fedline. However, further improvements in data
quality are needed, and the pre-edited reporting of data in machine-
readable form would help in bringing about such improvements. Machine-
readable reporting would also assist the agencies in meeting the new
public disclosure deadlines, by reducing the time needed to enter the
data from each reporting institution into the HMDA processing database.
The Board recognizes that some financial institutions subject to
HMDA might not have the computer capability to compile and report their
data in machine-readable form. The Board solicits comment, therefore,
on whether requiring machine-readable data submission from all
institutions would create a hardship for some, and if so, whether
supervisory agencies should have discretion to grant waivers from this
requirement on a case-by-case basis. For example, a waiver might be
granted in a case where an institution does not itself own or have
ready access to a personal computer nor have access through a service
provider.
Paragraph (e)--Notice of Availability
The Board proposes to make a technical change to Sec. 203.5(e)
concerning the notice of availability that institutions are required to
post. Pursuant to amendments contained in the Housing and Community
Development Act of 1992, lending institutions must now make available
to the public not only their disclosure statements but also their loan/
application registers (after deleting certain data fields). These
statutory amendments were incorporated into Regulation C in March 1993
(see 58 FR 13403, March 11, 1993).
The proposed change will revise the notice language to reflect that
HMDA data in addition to disclosure statements are available from
institutions.
Appendix A--Form and Instructions for Completion of HMDA Loan/
Application Register
II. Required Format and Reporting Procedures
Paragraph A. The Board proposes to require that all HMDA-covered
institutions submit data in machine-readable form, except that
supervisory agencies may have discretion to grant relief from this
requirement in cases of hardship. See the discussion of this proposed
change under Sec. 203.5(a), above.
Paragraph E. A new paragraph II. E. would be added to the HMDA-LAR
instructions to reflect the proposed requirement that the HMDA-LAR be
kept current within one month of final action during the year as
transactions occur. See the discussion under Sec. 203.4(a), above.
III. Submission of HMDA-LAR and Public Release of Data
Paragraph A. The proposal includes a change in the reporting
deadline from March 1 to February 1; paragraph III. A. in the
instructions would be revised accordingly. See the discussion on this
proposed change under Sec. 203.5(a), above.
Paragraphs B and C.-- Requirement to report total HMDA-LAR entries
on transmittal sheet. The regulation requires that a transmittal sheet
accompany an institution's HMDA-LAR data submission, containing general
information such as the name, address, and identifying numbers of the
institution. Currently, the transmittal sheet does not ask for the
total number of transaction line entries contained in the HMDA
submission, although the instructions encourage institutions to provide
this record count in a cover letter.
The Board proposes to amend Regulation C to require financial
institutions to report on the transmittal sheet (in both the paper-copy
and machine-readable versions) the total number of line entries
included in the data submission. Respondents also will be asked to send
a transmittal sheet with any subsequent submission of data, rather than
only with the initial submission. An institution will sometimes send
HMDA data to its supervisory agency in more than one submission when
revisions to the initial submission are necessary, for example, or
because transactions were found to have been inadvertently omitted. The
count on the transmittal sheet for each submission will help the
agencies verify the number of line entries submitted by the institution
at that time. This change would help reduce the likelihood of any data
being lost during the collection process.
Paragraph G. Posters. The Board is providing suggested language for
the notice of availability that lenders are required to post in their
home and branch offices in metropolitan areas. The revised notice
reflects the fact that HMDA data besides disclosure statements are now
available from financial institutions. See the discussion of proposed
changes to Sec. 203.5(e), above.
V. Instructions for Completion of Loan/Application Register
A. Application or loan information. 5. Explanation of purpose
codes. Code 2: Home improvement. The proposal includes changes in the
definition of home improvement loans for HMDA reporting purposes. The
HMDA-LAR instructions would be revised to reflect the proposed changes.
See the discussion of home improvement loan issues under Sec. 203.2(f),
above.
8. Loan amount. f. Reporting counteroffers. The proposal clarifies
that counteroffers are to be reported as loan denials if the applicant
does not accept the counteroffer, not as applications withdrawn or
approved but not accepted. This clarification conforms with the
treatment of counteroffers in Regulation B (Equal Credit Opportunity).
C. Property location. 5. Outside MSA. Financial institutions are
encouraged but not required to enter geographic information for loans
on property located outside the MSAs in which they have a home or
branch office (or outside any MSA). The proposed rule clarifies that,
if a lender enters data in the property location fields of the HMDA-LAR
for these loans, the data must accurately reflect the location of the
property in question.
(3) Other Matters on Which the Board Solicits Comment. In addition
to seeking comment on the proposed amendments, the Board solicits
comment on other matters related to HMDA reporting: prequalification
programs, refinancing transactions, and the collection of racial or
ethnic information, as discussed below.
Prequalification programs. Regulation C requires lenders to compile
and report data on applications for loans as well as on loan
originations. The Board has received questions about mortgage lenders'
prequalification programs, asking whether and when a request for
prequalification must be treated as a credit application for purposes
of HMDA reporting. The answer depends on the outcome of the
prequalification decision.
The definition of application under HMDA is virtually identical to
the definition established by the Board's Regulation B (Equal Credit
Opportunity). Accordingly, lenders are directed to the guidance
provided in the Official Staff Commentary to Regulation B, comments
2(f)-1 through -4, on differentiating between applications and
inquiries. The commentary states that if a lender--in giving
information to a consumer--evaluates information about the consumer,
decides to decline a credit request, and communicates this to the
consumer, the creditor has treated that inquiry as an application for
credit (by virtue of having made a credit decision). In the case of
Regulation B, the creditor must then comply with the notification rules
on adverse action.
In regard to HMDA reporting, the same rule applies, and a lender
that turns down a prequalification request (because of the homebuyer's
poor credit history, for example) must report it as a loan denial on
its HMDA-LAR.
Prequalification requests that are approved, on the other hand,
will be reported on the HMDA-LAR at a later stage in the process, after
homebuyers have found the property they want to purchase and the lender
has evaluated a formal loan application, not at the time of the
prequalification approval. Thus, the lender will report when: (1) the
lender originates a loan; (2) the lender has made a firm loan offer
that the applicant does not accept; (3) the applicant expressly
withdraws the mortgage application; (4) the lender closes the file for
incompleteness; or (5) the lender denies the mortgage loan application.
In some cases, lender decisions on prequalifications that are
approved may ultimately not be reported on the HMDA-LAR; if a homebuyer
who has been prequalified for credit does not later pursue a formal
application for a mortgage loan, the lender has no reporting
obligations under HMDA (and no notification requirements under
Regulation B).
For denials of prequalification requests that are reportable under
HMDA, there are questions about how a lender can comply with the
reporting requirements with regard to the loan amount, loan type, and
property location data fields on the HMDA-LAR. Generally speaking, a
property location will not ``exist'' at the prequalification stage if
the prospective homebuyer does not yet have a purchase contract on, or
has not requested financing for, a specific property. Thus, the lender
should enter NA (not applicable) in each of the location fields in such
instances. For loan amount, if the prospective homebuyer has not
requested a particular amount of credit, the regulation currently does
not provide any alternative code. The Board requests comment on whether
a code such as NA (not applicable) will suffice, or whether a special
code--indicating that the transaction is a prequalification--would be
more appropriate and useful. Similar issues arise with respect to loan
type in cases where prospective borrowers have not specified during the
prequalification process the type of loan they are seeking.
The Board requests comment about other compliance issues related to
prequalifications, and contemplates that guidance regarding these
matters will be provided in the commentary to Regulation C to be issued
later this year.
Reporting of refinancings. The regulation requires lenders to
report refinancings, which are defined as loans involving the
satisfaction of an existing obligation and its replacement by a new
obligation undertaken by the same borrower. The Board solicits comment
on the reporting of transactions that are not technically refinancings,
but that serve as the functional equivalent of refinancings. In some
regions, transactions are structured as modifications of existing
obligations (sometimes called modification, extension, and
consolidation agreements or ``MECAs''), rather than as replacements
thereof, often in order to reduce borrower costs associated with a
refinancing (for example, title insurance fees).
Institutions have inquired whether they should report such
transactions, which serve the same purpose as refinancings and normally
entail the same underwriting procedures. The Board solicits comment on
this matter. The Board also solicits comment on what types of
modifications should not be subject to reporting (such as the simple
modification of a loan term from 25 to 15 years), as well as the basis
for any such distinctions. Other issues on which comment is requested
include whether the reporting of such transactions should be limited to
cases where a new lender is offering the modification, or should also
be available to the original lender.
Another matter on which the Board seeks comment concerns the
current exclusion for certain refinancings based on the purpose of the
transaction. Under existing Regulation C, a refinancing is to be
reported only if the loan being refinanced was a home purchase or home
improvement loan, or was a refinancing of such a loan. In addition, a
refinancing is reported only if the amount outstanding on the loan
being refinanced, plus the amount of any new money for home purchase or
home improvement purposes, is equal to more than 50 percent of the
total new loan amount. For example, if a borrower refinances a home
purchase loan only for the purpose of getting a lower interest rate on
the outstanding balance, and therefore does not obtain any new money,
the refinancing is reported because the amount outstanding on the
original loan is equal to 100 percent of the new loan amount.
Similarly, if a borrower refinances a home purchase loan and obtains
new money to be used entirely for home improvement purposes, then again
the refinancing is reported because here again, the amount outstanding
plus new money for ``covered purposes'' (home improvement and home
purchase) is equal to 100 percent of the new loan amount. At the other
extreme, if a borrower refinances a loan with an outstanding balance of
$20,000 and obtains $40,000 of new money to be used for starting a new
business, the refinancing is not reported because the amount
outstanding plus new money for ``covered purposes'' is equal to only
one-third of the new loan amount.
This purpose test for determining whether refinancings are to be
reported under Regulation C has generated a substantial number of
questions from lenders. For example, the purpose of the loan being
refinanced may not be clear at the time the borrower applies for the
refinancing. In some cases, a loan has been refinanced repeatedly, new
money having been obtained each time; and the calculations necessary to
determine whether more than 50 percent of the total new loan amount is
for covered purposes become difficult. An alternative approach that
would be easier to understand and apply would be to treat all
refinancings as subject to reporting on the HMDA-LAR. Although such an
expansion in coverage would result in the disclosed data's being less
tied to the home purchase and home improvement categories, it is not
clear that the resulting data would be less useful. The Board solicits
comment on the advantages and disadvantages of these changes, both for
reporting institutions and for users of HMDA data.
Collection of racial or ethnic information. Regulation C provides
that applicants for mortgage and home improvement loans be requested,
but not required, to provide information about their race or national
origin, gender, and income. The purpose is to gather data that may help
regulatory agencies to gauge whether a lending institution is complying
with the fair lending laws. If an applicant chooses not to provide the
information on race or national origin and gender, the loan officer is
required to enter the information on the basis of visual observation or
surname.
Currently, the categories in Regulation C for data collection on
race/national origin of applicants are:
American Indian or Alaskan Native
Asian or Pacific Islander
Black
Hispanic
White
Other
The categories that the Office of Management and Budget (OMB)
issues for government statistical purposes are substantially the same,
except that the ``other'' category is not included. OMB and others have
indicated their belief that the presence of the ``other'' category
undercuts the usefulness of the data, in that a data user has no way of
knowing what the category represents.
In adopting the monitoring provisions of Regulation C in 1989, the
Board based the categories used on Regulation B, which has contained
the ``other'' category since it was first adopted by the Board in 1976.
The Board believed that the ``other'' category served a useful
function. For example, it provides a choice to applicants who do not
identify with any of the specifically defined categories; in 1992, the
``other'' category was used in roughly 45,000 out of 10 million loan
records. The Board notes also that OMB is likely in the next few years
to propose changing the list of categories for the next decennial
census.
Comment is solicited on whether the Board should consider deleting
the ``other'' category. The Board notes that if this change were made
for Regulation C, a parallel change would be made in the monitoring
provisions of Regulation B.
(4) Economic Impact Statement. The Board's Division of Research and
Statistics has prepared an economic impact analysis of the proposed
amendments. A copy of the analysis may be obtained from Publications
Services, Board of Governors of the Federal Reserve System, Washington,
DC 20551, or by telephone at (202) 452-3245.
List of Subjects in 12 CFR Part 203
Banks, banking, Consumer protection, Federal Reserve System, Home
mortgage disclosure, Mortgages, Reporting and recordkeeping
requirements.
For the reasons set forth in the preamble, the Board proposes to
amend 12 CFR part 203 as follows:
(Certain conventions have been used to highlight the proposed
changes to the regulation and the instructions. New language is shown
inside bold-faced arrows, while language that would be removed is set
off with brackets.)
PART 203--HOME MORTGAGE DISCLOSURE (REGULATION C)
1. The authority citation for part 203 continues to read as
follows:
Authority: 12 U.S.C. 2801-2810.
2. Section 203.2 would be amended by revising paragraph (f) as
follows:
Sec. 203.2 Definitions.
* * * * *
(f) Home improvement loan means any loan that [-- (1)] is stated by
the borrower (at the time of the loan application) to be for
home improvement purposes. [the purpose of
repairing, rehabilitating, or remodeling a dwelling; and (2) is
classified by the financial institution as a home improvement loan.]
* * * * *
3. Section 203.4 would be amended by revising the second sentence
of paragraph (a) introductory text and paragraph (a)(7) as follows:
Sec. 203.4 Compilation of loan data.
(a) Data format and itemization. * * * These [data shall be
presented] transactions shall be recorded, within one month
of taking final action, on a register in the format
prescribed in appendix A of this part and shall
include the following items:
* * * * *
(7) The race or national origin and sex of the applicant or
borrower, and the income asked for or relied upon
in processing the application.
* * * * *
4. Section 203.5 would be amended by revising paragraphs (a) and
(e) as follows:
Sec. 203.5 Disclosure and reporting.
(a) Reporting to agency. By February 1 [March
1] following the calendar year for which the loan data are compiled, a
financial institution shall send [two copies of] its complete loan
application register [(if submitted in paper form)] to the agency
office specified in appendix A of this [regulation]
part, and shall retain a copy for its records for
a period of not less than three years. [A financial institution need
only submit one copy when the submission is on computer tape or
diskette.]
* * * * *
(e) Notice of availability. A financial institution shall post a
general notice about the availability of its HMDA
data [disclosure statement] in the lobbies of its home
office and any physical branch offices located in an MSA. Upon request,
it shall promptly provide the location of the institution's offices
where the statement is available. At its option, an institution may
include the location in its notice.
5. Item II. of appendix A to Part 203 would be amended by revising
the first sentence of paragraph A., by removing the last 3 sentences of
paragraph A., and by adding a new paragraph E., as follows:
Appendix A to Part 203--Form and Instructions for Completion of HMDA
Loan/Application Register
* * * * *
II. Required Format and Reporting Procedures
A. Institutions [are expected to] shall
submit data to their supervisory agencies in an automated, machine-
readable form [unless 100 or fewer application and loan entries are
reported]. * * * [An institution that submits its register in
nonautomated form must send two copies that are typed or computer
printed. You must use the format of the loan/application register
but are not required to use the form itself. Each page must be
numbered, and the total number of pages must be given (for example,
``Page 1 of 3'').]
* * * * *
E. Applications and loans must be fully recorded on
your register, including geographic information, within one month of
final action (such as the origination, denial or withdrawal of an
application, or the purchase of a loan).
6. Item III. of appendix A to Part 203 would be amended by revising
paragraphs A., B., C., and G., as follows:
* * * * *
III. Submission of HMDA-LAR and Public Release of Data
A. You must submit the data for your institution to the office
specified by your supervisory agency no later than
February 1 [March 1] following the calendar
year for which the data are compiled. A list of the agencies appears
at the end of these instructions.
B. You must submit all required data to your supervisory agency
in one complete package, with the prescribed transmittal sheet. An
officer of your institution must certify to the accuracy of the
data. Any additional data submissions that become
necessary (for example, because you discover that data were omitted
from the initial submission, or because revisions are called for)
also must be accompanied by a transmittal sheet.
C. The transmittal sheet must state the total number
of HMDA-LAR line entries included in the accompanying data
submission. [You are encouraged to provide in a cover
letter an approximate count of the total number of line entries
contained in your data submission.] If you are a depository
institution, you also are asked to provide
[include] a list of the MSAs where you have a home or branch office.
* * * * *
G. Posters. Your agency [can] may provide
[you with] HMDA posters that you can use to inform the public of the
availability of your disclosure statement, or you may print your own
posters. If you print your own, the following language is
suggested:
Home Mortgage Disclosure Act Notice
The HMDA data about our residential mortgage lending are
available for review. The data show geographic distribution of loans
and applications; race, gender, and income of applicants and
borrowers; and information about loan approvals and denials. To
inspect our HMDA data, inquire at this office.
7. Item V. of Appendix A to Part 203 would be amended by
revising paragraphs A.5.code 2, A.8.f., and C.5., as follows:
* * * * *
V. Instructions for Completion of Loan/Application Register
A. Application or loan information
* * * * *
5. Explanation of purpose codes
* * * * *
Code 2: Home Improvement
a. Code 2 applies to loans and applications for loans that [(1)]
the borrowers have said will be used for home improvement
purposes for [repairing, rehabilitating, or remodeling]
one- to four-family residential dwellings[, and (2) are recorded on
your books as home improvement loans].
* * * * *
8. Loan amount.
* * * * *
f. Reporting counteroffers. [If you
offered to lend less than the applicant applied for, enter the
amount of the loan if the offer was accepted by the applicant. If
the offer was not accepted, enter the amount that the applicant
applied for.] If you make a counteroffer for an amount
different from the amount initially applied for, and the
counteroffer is accepted by the applicant, report it as an
origination for the amount of the loan actually granted. If the
applicant turns down the counteroffer or fails to respond, report it
as a denial for the amount initially requested. Do not report it as
a withdrawn application or as an application that was approved but
not accepted.
* * * * *
C. Property location.
* * * * *
5. Outside-MSA. For loans on property located outside the MSAs
in which you have a home or branch office (or outside any MSA), you
may enter the MSA, state, county, and census tract numbers or you
may enter the code ``NA'' in each of these columns. If
you choose to enter the numbers, they must be correct for the
property in question.
* * * * *
By order of the Board of Governors of the Federal Reserve
System, June 7, 1994.
William W. Wiles,
Secretary of the Board.
[FR Doc. 94-14262 Filed 6-10-94; 8:45 am]
BILLING CODE 6210-01-P