[Federal Register Volume 65, Number 242 (Friday, December 15, 2000)]
[Proposed Rules]
[Pages 78656-78685]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-31796]



[[Page 78655]]

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Part III





Federal Reserve System





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12 CFR Part 203



Home Mortgage Disclosure; Proposed Rules

  Federal Register / Vol. 65 , No. 242 / Friday, December 15, 2000 / 
Proposed Rules  

[[Page 78656]]


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FEDERAL RESERVE SYSTEM

12 CFR Part 203

[Regulation C; Docket No. R-1001]


Home Mortgage Disclosure

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule; proposed staff interpretation.

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SUMMARY: The Board is proposing amendments to Regulation C (Home 
Mortgage Disclosure) and to the commentary that applies and interprets 
Regulation C. These amendments would simplify the definition of a 
``refinancing,'' require lenders to report requests for preapproval, 
simplify the definition of a reportable home improvement loan, require 
lenders to report home-equity lines of credit, expand coverage of 
nondepository lenders, and require lenders to report the annual 
percentage rate of a loan, whether the loan is subject to the Home 
Ownership and Equity Protection Act, and whether the loan or 
application involves a manufactured home. The Board also proposes to 
reorganize the regulation and to make other changes.

DATES: Comments must be received by March 9, 2001.

ADDRESSES: Comments directed to the Board should refer to Docket No. R-
1001 and may be mailed to Jennifer J. Johnson, Secretary, Board of 
Governors of the Federal Reserve System, 20th Street and Constitution 
Avenue, N.W., Washington, D.C. 20551, or mailed electronically to 
[email protected]. Comments addressed to Ms. Johnson may 
be delivered to the Board's mail room between 8:45 a.m. and 5:15 p.m., 
and to the security control room at all other times. Both the mail room 
and the security control room are accessible from the courtyard 
entrance on 20th Street between Constitution Avenue and C Street, N.W. 
Members of the public may inspect comments in room MP-500 of the Martin 
Building between 9:00 a.m. and 5:00 p.m. on weekdays.

FOR FURTHER INFORMATION CONTACT: John C. Wood, Counsel, James H. Mann, 
Senior Attorney, or Kathleen C. Ryan, Senior Attorney, Division of 
Consumer and Community Affairs, Board of Governors of the Federal 
Reserve System, Washington, D.C. 20551, at (202) 452-3667 or (202) 452-
2412. For users of Telecommunications Device for the Deaf (TDD) only, 
contact Janice Simms at (202) 452-4984.

SUPPLEMENTARY INFORMATION:

I. Background on HMDA and Regulation C

    The Home Mortgage Disclosure Act (HMDA) requires depository and 
certain for-profit, nondepository institutions to collect, report, and 
disclose data about originations and purchases of home mortgage and 
home improvement loans. Institutions must also report data about 
applications that do not result in originations.
    The Board's Regulation C implements HMDA. Regulation C generally 
requires that institutions report data about:
     Each application or loan, including the application date; 
the action taken and the date of that action; the loan amount; the loan 
type and purpose; and, if the loan is sold, the type of purchaser;
     Each applicant or borrower, including national origin or 
race, gender, and annual income; and
     Each property, including occupancy status and location.\1\
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    \1\ Institutions report these data to their supervisory agencies 
on an application-by-application basis using a register format. 
Institutions must make their loan/application registers available to 
the public, with certain fields redacted to preserve applicants' 
privacy. The Federal Financial Institutions Examination Council 
(FFIEC), on behalf of the supervisory agencies, compiles the 
reported data and prepares an individual disclosure statement for 
each institution, aggregate reports for all covered institutions in 
each metropolitan area, and other reports. These disclosure 
statements and reports are also available to the public.
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    HMDA data can be used to help determine whether institutions are 
serving the housing needs of their communities. The data help public 
officials target public investment to attract private investment where 
it is needed. HMDA data also assist in identifying possible 
discriminatory lending patterns and in enforcing antidiscrimination 
statutes.

II. The Board's Review of Regulation C

    The Board reviews its regulations periodically to identify ways to 
clarify and simplify the regulatory language; respond to technological 
and other developments; reduce undue regulatory burden on the industry; 
delete obsolete provisions; and improve the quality and usefulness of 
the data. The review of Regulation C began in March 1998 when the Board 
published an Advance Notice of Proposed Rulemaking (Advance Notice; 63 
FR 12329 (March 12, 1998)). In the Advance Notice, the Board identified 
several possible areas for revision, including: reporting requests for 
preapproval; exempting loans acquired in a branch acquisition; 
reporting construction loans and other temporary financing; revising 
the definitions of reportable refinancings and home improvement loans; 
reporting manufactured home loans as a separate category; and requiring 
lenders to report additional data, such as reasons for denial and the 
appraised value of the property securing a loan. The Board received 
approximately 100 comment letters. Most commenters addressed only the 
issues identified in the Advance Notice.
    The Board has received many suggestions on how it might use its 
authority under HMDA to increase understanding of the mortgage markets 
and to assist in fair lending enforcement. These suggestions have been 
the main focus of the Board's comprehensive review of the regulation 
and of its development of proposed revisions.
    Other suggestions for change related to increased public and agency 
concerns about ``predatory lending'' practices.\2\ Some of them were 
presented in Curbing Predatory Home Mortgage Lending, a report by the 
Department of Housing and Urban Development and the Department of the 
Treasury submitted to the Congress in June 2000 (HUD/Treasury Report). 
These suggestions include requiring reporting of the interest rate on a 
loan, the fees associated with a loan, whether a loan is subprime, and 
the applicant's credit score, debt-to-income ratio, and age. The Board 
received other suggestions at hearings on possible changes to the Home 
Ownership and Equity Protection Act (HOEPA) held in Charlotte, Boston, 
Chicago, and San Francisco. See 65 FR 42889 (July 12, 2000).\3\
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    \2\ While no precise definition of this term exists, predatory 
lending can be regarded as lending activities that, for example, 
involve targeting financially unsophisticated homeowners--frequently 
those having significant equity in their homes--for loans with high 
rates and fees and with repayment terms that are difficult or 
impossible to meet, thus putting their homes at risk. In addition, 
fraud or unlawful representations by brokers or lenders are often 
features of predatory lending.
    \3\ In 1994, HOEPA amended the Truth in Lending Act. 15 U.S.C. 
Sec. 1601 et seq. The Act restricts certain loan terms, such as 
balloon payments in home-equity loans, where (1) the APR exceeds by 
more than 10 percentage points the yield on Treasury securities of 
comparable maturity to the loan, or (2) the total points and fees 
payable by the consumer exceed the greater of 8 percent of the loan 
amount or a dollar figure that is adjusted annually (currently 
$451).
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    The Board has analyzed the suggestions received from these and 
other sources--focusing on whether the likely benefits from each 
suggestion exceed the probable burdens. In the review of possible 
changes to Regulation C, the Board's staff met with a wide range of 
interested parties, including industry and consumer representatives, 
and officials of financial regulatory and

[[Page 78657]]

fair lending enforcement agencies. The Board's analysis of possible 
changes has been guided by consideration of the purposes of the 
statute. In each case, the Board has considered whether changes to 
Regulation C could be proposed that might help the public and the 
regulatory agencies to better understand the mortgage markets, in light 
of changes that have been taking place in the past decade. The Board 
gave special attention to data associated with the subprime market--
given that this sector has grown substantially in recent years and also 
in light of concerns that it is the market sector in which predatory 
lending practices appear more likely to occur.
    The Board has considered carefully the many suggestions for 
amendments to Regulation C that have been received. This proposal 
reflects the Board's initial determination that Regulation C should be 
amended to reflect some of the suggestions but not others. Both types 
of suggestions are discussed below. The Board would find it helpful, in 
formulating a final rule, for the public to rank all these suggestions 
in two ways: First, by the importance or utility of the additional or 
revised data that would be reported; and second, by the cost of 
collecting and reporting those data.
    Accordingly, based on the comments and on its own analysis, the 
Board is proposing certain changes to Regulation C. Each of the Board's 
proposals directly addresses one or more of HMDA's purposes, which 
include helping to determine whether financial institutions are serving 
the housing needs of their communities and assisting in fair lending 
enforcement.
    The proposed changes pertaining to the coverage of transactions 
would broaden the data available on the home mortgage market generally 
and on the subprime market in particular; they would also reduce 
inconsistencies among the data reported. One recommended change would 
expand the coverage of nondepository lenders. Specifically, the Board 
proposes:
     Simplifying the definition of a ``refinancing.'' The 
current definition offers lenders several options for deciding which 
refinancings to report; the proposed simplification would establish a 
definition applicable to all lenders. This would generate more complete 
and consistent data.
     Requiring lenders to report requests for preapproval. The 
rule proposed would capture requests for preapproval that are 
applications for credit, which are covered by the act. Requests for 
preapproval have been excluded from reporting under HMDA because of 
earlier concerns about how to differentiate between applications for 
credit and requests for prequalification. Defining coverage narrowly 
would limit compliance burden.
     Simplifying the definition of a reportable home 
improvement loan. In a change to the present reporting system, all 
loans for the purpose of home improvement would be reported; currently, 
lenders may exclude them if they do not classify them as home 
improvement loans. This would produce more consistent data.
     Requiring lenders to report home-equity lines of credit. 
The reporting of home-equity lines of credit, which is now optional, 
would become mandatory. Research by Board staff has shown that most 
home-equity lines of credit are used in part for home improvement 
purposes, so mandatory coverage would provide more complete information 
about the home improvement market. Gathering information about home 
improvement loans has been required by HMDA since its enactment in 
1975.
     Expanding coverage of nondepository lenders. Nondepository 
lenders are particularly active in the subprime market. The Board 
proposes adding a dollar-volume threshold of $50 million to the current 
loan-percentage test to better ensure that all significant lenders are 
covered.
    The Board's proposals would also require lenders to report 
additional items of data that would enhance understanding of the home 
mortgage market generally and the subprime market in particular. 
Capturing these data would also assist fair lending enforcement. 
Specifically, the Board proposes requiring institutions to report:
     The annual percentage rate (APR) of the loan and whether 
the loan is subject to HOEPA; and
     Whether the loan or application involves a manufactured 
home.
    The Board has grouped under a single section (4(a)(9)) its 
proposals to require lenders to report additional data that it believes 
will help enhance public understanding of the home mortgage lending 
market in general and the subprime market in particular. In addition, 
as discussed under that section, the Board solicits comment on three 
other items of information (although it is not proposing their 
collection at this time): the reasons why a loan application was 
denied, the loan-to-value ratio (LTV), and the identity of an 
institution's parent company, if any.
    Clarifying the definitions of refinancings and home improvement 
loans (including mandating the coverage of home-equity lines of credit) 
is necessary if those categories of HMDA data are to be made useful to 
the agencies and the public. Covering requests for preapproval is 
necessary to fully implement the statutory coverage of an 
``application'' for credit. The narrowly drawn definition should 
mitigate the burden caused by the change. Amending the coverage test 
applicable to nondepository lenders will better ensure that significant 
participants in the mortgage market report under HMDA. The 
recommendations to require the reporting of pricing information and 
manufactured home status would produce data useful for fair lending 
analysis and helpful in understanding the subprime market. To reduce 
burden, these recommendations leverage existing regulatory definitions 
or requirements.
    Some of the proposed changes have been under consideration for 
several years. For example, the Board has recognized for some time that 
the analysis of aggregate data on certain metropolitan areas is 
complicated by the lack of separate reporting of manufactured home 
transactions, which have underwriting standards significantly different 
from those of transactions involving site-built homes. The Board has 
waited to propose the separate reporting of these loans, together with 
other revisions, so that lenders could make all upcoming changes to 
their software and data collection systems at one time and minimize 
disruption.
    There are many data collections suggested by other agencies and the 
public that, after careful consideration, the Board is not proposing; 
some of these include, for example, the credit score of the applicant, 
and certain loan terms, such as balloon payments. Generally, the Board 
determined--in the context of other changes being proposed--that in 
these and other cases a requirement to collect the additional data 
entailed burden not clearly justified by the resulting benefits. In 
some cases, the Board is proposing alternatives that the Board believes 
would generate greater benefits with less burden.
    The Board believes that, taken as a whole, the proposed changes to 
Regulation C strike an appropriate balance between benefit and burden. 
The Board took account of the fact that the proposals cannot be 
evaluated in isolation, but must be assessed in the context of 
reporting requirements under other applicable laws and regulations.
    The Board's proposal reflects its initial assessment on the merit 
of potential changes identified by the

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public and the Board's own internal review. The Board solicits the 
public's views on whether there are other ways in which to implement 
the proposed changes that would further lessen and mitigate the 
anticipated burden, on all other aspects of the proposed changes, and 
on any other issues that might warrant further review. The Board also 
would find it helpful, in formulating a final rule, for commenters to 
rank all the proposed and suggested changes on which they are 
commenting in two ways: first, by the importance or utility of the 
additional or revised data that would be reported; and second, by the 
relative cost or burden of collecting and reporting these data.

Solicitation of Comment on Alternative System of Categorizing Loans

    The Board solicits comment, as discussed below, on proposals to 
revise the definition of loan categories reported under HMDA. In 
addition, the Board solicits comment on an alternative system for 
categorizing loans. Under the current regulation, the categories of 
loans reported are (1) home purchase loans, (2) home improvement loans, 
and (3) refinancings. An alternative approach to categorizing loans 
would require the reporting of more loans, but would simplify the 
process for determining which loans must be reported. It could also 
facilitate some depository institutions' reporting of data for purposes 
of the Community Reinvestment Act of 1977 (CRA; 12 U.S.C. 2901 et 
seq.). It would potentially limit the additional burden for depository 
institutions because of its similarity to categories familiar to them 
from the Call Report or the Thrift Financial Report.\4\ The Board 
specifically solicits public comment on whether lenders would 
experience more burden than benefit under this approach.
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    \4\ The Call Report categories include first lien closed-end 
mortgage loans, junior lien closed-end mortgage loans, open-end 
mortgage loans (that is, home-equity lines of credit), and unsecured 
consumer loans, subdivided into open-end and closed-end loans. The 
Thrift Financial Report is similar, but does not subdivide closed-
end mortgage loans into first and junior liens, and shows unsecured 
home improvement loans as a subdivision of unsecured closed-end 
consumer loans. Refinancings are not treated as a separate category 
in the Call Report or Thrift Financial Report.
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    The alternative approach would eliminate refinancings and home 
improvement loans (except for unsecured home improvement loans) as 
distinct categories.\5\ Instead, the categories reported would be (1) 
home purchase loans (subdivided into first and junior liens), (2) other 
mortgage loans (similarly subdivided), (3) home-equity lines of credit, 
and (4) unsecured home improvement loans. The alternative approach 
would cover the mortgage lending market more fully than either the 
current regulation or the proposed revision--for example, by capturing 
closed-end home-equity loans that are not made for home improvement 
purposes.
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    \5\ HMDA defines a loan subject to reporting as ``a loan which 
is secured by residential real property or a home improvement 
loan,'' implying that unsecured home improvement loans are covered 
by the statute.
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III. Discussion of Proposed Revisions

    The following discussion generally tracks the regulation (including 
its appendices) as the Board proposes to reorganize it. Proposed 
revisions to the staff commentary are addressed under the sections of 
the regulation that they interpret. Also discussed under the pertinent 
sections are issues regarding which the Board does not propose any 
revision. Proposed conforming and non-substantive changes to the 
regulation and commentary generally are not separately discussed. A few 
particularly significant features of the proposed reorganization are 
discussed specifically.

Section 203.2--Definitions

2(b) Application

    Requests for preapproval. A consumer who wants to purchase a 
dwelling may request a lender to provide a ``preapproval'' or 
commitment, based on a comprehensive underwriting, to make a mortgage 
loan once the consumer identifies an acceptable property.\6\ Regulation 
C currently instructs lenders not to report these requests. Under the 
present rule, if a request for preapproval ultimately results in an 
origination, it is the origination, not the preapproval, that is 
reported. Requests for preapproval disposed of in other ways--for 
example, those that are denied--go unreported.
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    \6\ Requests for preapproval are to be distinguished from 
requests for ``prequalification.'' The latter generally involve a 
cursory review of the consumer's creditworthiness; they do not 
result in a conditional commitment to extend credit.
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    The Advance Notice asked how requests for preapproval should be 
defined in the event they are covered. One option presented was to 
direct lenders to report all requests for credit that, in the case of 
denials, trigger an adverse action notice under Regulation B (Equal 
Credit Opportunity). These include all requests regarding which: (1) 
The creditor evaluates information about the consumer; (2) decides to 
decline the request; and (3) communicates the decision to the consumer. 
Some commenters believed that, assuming the Board amended Regulation C 
to cover requests for preapproval, parallel coverage under both 
regulations would reduce compliance burden. Other commenters countered 
that adopting the Regulation B approach would distort the data, 
capturing denied requests but not requests that are approved but do not 
lead to an origination.
    The issue is whether a consumer who asks for preapproval has filed 
a credit application or whether a preapproval is a preliminary 
exercise. In August 1999, the Board published a proposed rule under 
Regulation B. 64 FR 44582 (August 16, 1999). The proposal revised the 
term ``application'' to include requests for preapproval made under 
procedures in which a creditor issues creditworthy persons a written 
commitment to extend credit that may be limited in three ways: (1) The 
lender specifies the maximum amount of credit that it commits to 
extend; (2) the lender specifies the period of time during which the 
commitment remains valid; and (3) the commitment may be subject to 
conditions.
    Based on public comment and on further analysis, the Board proposes 
to cover requests for the preapproval of home purchase loans under 
Regulation C using the same definition as in the Regulation B proposal 
of August 1999. Under this approach, only a limited number of highly-
structured preapproval programs would be covered--those most like 
programs involving traditional mortgage applications. The proposal 
would not cover more informal prequalification programs in which the 
underwriting may be less rigorous and the lender makes no binding, 
written commitment.
    The statute requires that lenders report loan applications. The 
Board believes--in this context as under Regulation B--that requests 
for preapproval, defined in the fashion proposed, represent 
applications and thus should be reported. Moreover, requests for 
preapproval are an increasingly prevalent feature of the home mortgage 
lending process, and the proposed change would provide data about this 
developing part of the market. And although information about denied 
requests for preapproval would not include the property location, 
information about the race or national origin and gender of the 
applicant could be useful in fair lending enforcement.
    The narrow scope of the proposed definition would promote the 
consistency and accuracy of the data collected--for example, all the 
data

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would include information about the amount of the commitment. The 
proposed definition would also avoid affecting home-ownership 
counseling programs, which typically do not involve a credit decision 
by a lender.
    The Board considered whether to propose requiring lenders to 
differentiate requests for preapproval from other applications--for 
example, through a separate code--or to distinguish actions taken on 
requests for preapproval from actions taken on other applications. The 
Board believes the resulting burden would likely exceed the value of 
these data. The Board does solicit comment, however, on whether lenders 
should use separate codes to identify requests for preapproval and the 
actions taken on them.
    Other matters. The current definition of an ``application'' refers 
to requests for credit made in accordance with ``procedures established 
by a financial institution.'' To conform to the Board's proposed 
revision to Regulation B, the definition would be revised to refer to 
``procedures used by a financial institution.'' This would focus the 
definition on what institutions actually do, rather than what their 
procedures state.

2(d) Dwelling

    The Board proposes to clarify, through the staff commentary, that 
the term ``dwelling'' does not apply to transitory residences such as 
college dormitories. This responds to requests that the Board clarify 
the meaning of the term ``dwelling.''

2(e) Financial Institution

    Scope of coverage. HMDA defines a covered nondepository lender as 
``any person engaged for profit in the business of mortgage lending.'' 
Congress added this language to the statute in a 1989 amendment that 
for the first time brought unaffiliated nondepository mortgage lenders 
within the scope of HMDA.
    To implement the statutory language, the Board adopted a coverage 
test focusing on a lender's home purchase mortgage lending as a 
proportion of its overall lending volume. Specifically, a nondepository 
mortgage lender is covered if in the preceding year its home purchase 
loan originations, including refinancings of home purchase loans, 
equaled or exceeded 10 percent of all its loan originations (by dollar 
volume).\7\ The Board intended this test to avoid coverage of lenders 
that, although making some mortgage loans, arguably were not engaged 
``in the business of'' mortgage lending.
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    \7\ In addition, under Regulation C, a nondepository lender is 
exempt if its total assets, combined with those of any parent 
corporation, were $10 million or less on the preceding December 31, 
and if the institution originated fewer than 100 home purchase loans 
(again, including refinancings of home purchase loans) in the 
preceding calendar year. There is also a location test, under which 
a nondepository lender is exempt if on the preceding December 31 it 
had no office in a metropolitan area, and received applications for, 
originated, or purchased fewer than five home purchase or home 
improvement loans in a metropolitan area in the preceding calendar 
year.
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    The Board has noted for some time that this test exempts lenders 
originating large volumes of home purchase loans, when more than 90 
percent of their originations involve credit card loans or other non-
home purchase products. The HUD/Treasury Report recommended the 
modification or elimination of the 10 percent test.
    The Board proposes to preserve the existing test, while adding a 
dollar-volume threshold for home purchase loan originations (and 
refinancings) to ensure coverage of nondepository lenders that are 
significant participants in the home mortgage market. Specifically, a 
nondepository lender would be required to report HMDA data if its 
prior-year home purchase loan originations, including refinancings of 
home purchase loans, equaled or exceeded $50 million, even if they did 
not equal or exceed 10 percent of total originations.
    The average amount of a home purchase loan reported under HMDA is 
about $120,000, so a lender with annual home purchase originations 
(including refinancings) of $50 million would have originated between 
400 and 500 loans. Among mortgage lenders covered in 1999, 
approximately half reported originations of $50 million or less. This 
suggests that a coverage threshold of $50 million is a reasonable test 
of whether such a lender is ``engaged * * * in the business of mortgage 
lending.'' The Board solicits comment on whether $50 million is an 
appropriate threshold.
    Other matters. As part of the reorganization of the regulation, 
coverage criteria that currently appear in section 203.3--``Exempt 
Institutions''--would be consolidated under the definition of 
``financial institution'' in section 203.2(e). Correspondingly, several 
staff comments that now appear under section 203.3 would appear instead 
under section 203.2(e).

2(f) Home-Equity Line of Credit

    The Board proposes to define a home-equity line of credit as an 
open-end credit plan (as defined by Regulation Z) secured by a 
dwelling. This is substantially consistent with the definition that the 
Board has long applied informally.

2(g) Home Improvement Loan

    The Advance Notice solicited comment on whether the reporting 
categories currently in use should be modified to simplify compliance 
and improve the usefulness of the data. The Board received a range of 
responses. Some suggested that the Board change the existing 
categories--for example, by eliminating the requirement to report home 
improvement loans, or by eliminating the portion of the definition 
relating to how a lender classifies the loan. Others suggested 
replacing the existing home improvement and refinancing categories with 
a single category consisting of all nonpurchase loans secured by a 
dwelling.
    The Board proposes limited changes to the home improvement 
category, as discussed below.
    Classification. Regulation C defines a home improvement loan as any 
loan classified as such by the lending institution and any part of 
whose proceeds are to be used for the improvement of a dwelling or the 
related real property. This definition was intended to minimize burden 
by not requiring institutions to determine whether a loan is a home 
improvement loan for HMDA purposes if the loan is classified otherwise 
by the institution. For example, a lender that makes home improvement 
loans on an installment basis, and classifies them as installment loans 
(without differentiating between home improvement loans and loans for 
other purposes) is not required to report those home improvement loans 
under HMDA.
    The resulting data have proven to be of limited usefulness to 
examiners, community groups, and other data users. Institutions' 
classification schemes differ, making the data inconsistent; and not 
all loans for home improvement purposes are reported because some are 
classified as other types of credit.
    The Board proposes to drop the classification test. Instead, 
lenders would be required to report a loan as a home improvement loan 
if any part of the proceeds is to be used for home improvement, 
regardless of how the institution classifies the loan. In determining 
whether loan proceeds are intended for home improvement purposes, 
lenders could rely on applicants' statements, and would not be required 
to take any other steps to determine the purpose of the loan. For 
example, a lender could use a check-box on a loan application to 
determine

[[Page 78660]]

whether or not a loan is intended for home improvement purposes. (See 
proposed comment 4(a)(2)-1.)
    Redefining home improvement loans as proposed would increase 
reporting burden by requiring lenders to report a larger number of 
loans. The Board believes that this compliance burden is justified by 
the need to make home improvement loan data more consistent, complete, 
and, therefore, useful. The Board solicits comment, however, on whether 
the benefits of the proposed change justify the added burden.
    Home-equity lines of credit. If a home-equity line of credit is to 
be used for home improvement purposes, an institution currently has the 
option to report the amount of the line to be used for those purposes 
as a home improvement loan or not to report credit lines at all. 
Although most home-equity lines are used, at least in part, for home 
improvement purposes, some institutions include home-equity credit 
lines in their reported home improvement loan data while others do 
not.\8\
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    \8\ See Glenn B. Canner, Thomas A. Durkin, and Charles A. 
Luckett, ``Recent Developments in Home Equity Lending,'' Federal 
Reserve Bulletin, vol. 84 (April 1998), pp. 241-251.
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    To improve the completeness and comparability of data when lending 
proceeds are used for home improvement purposes, the Board proposes to 
require that all applications for home-equity lines of credit be 
reported. Also, to facilitate comparisons between the markets for open-
end home-equity lines and closed-end home improvement loans--which have 
distinct demographic characteristics--the Board proposes that the two 
products be reported separately. Accordingly, the Board proposes to 
exclude home-equity lines of credit from the definition of a home 
improvement loan, and to place them in their own category.
    To simplify the reporting of home-equity lines, and to make 
reporting more comparable with the reporting of home improvement loans, 
institutions would report the full amount of a credit line, rather than 
seeking to ascertain the amount that the borrower intends to use for 
home improvement purposes. The Board solicits comment on whether this 
approach would, in fact, simplify reporting, as well as on the more 
general question of whether the benefit resulting from the proposed 
changes regarding home-equity lines of credit justify the burden that 
would result from them. See section 203.4(a)(2) and Appendix A, 
paragraphs I.A.4. and I.A.6., below.

2(h) Home Purchase Loan

    A new staff comment would be added to clarify that if an 
institution making a first mortgage loan also makes a second mortgage 
loan that finances part or all of the borrower's downpayment, the 
institution reports each loan separately as a home purchase loan.

2(i) Manufactured Home

    The Board proposes to add a definition of ``manufactured home.'' 
See the discussion under section 4(a)(9), below, regarding additional 
data items relating to the home mortgage lending market in general and 
the subprime market in particular.

2(j) Metropolitan Area

    Currently, Regulation C defines ``metropolitan statistical area'' 
or ``MSA'' to mean a metropolitan statistical area or a primary 
metropolitan statistical area, as defined by the U.S. Office of 
Management and Budget (OMB). OMB is in the process of revising the 
standards for defining metropolitan areas. In August 2000, OMB 
published a notice and request for comment entitled ``Final Report and 
Recommendations From the Metropolitan Area Standards Review Committee 
to the Office of Management and Budget Concerning Changes to the 
Standards for Defining Metropolitan Areas'' (65 FR 51060 (August 22, 
2000)). The report recommended that OMB adopt a new concept called a 
``core based statistical area'' (CBSA) to replace the existing 
metropolitan statistical area and primary metropolitan statistical area 
concepts. CBSAs would be subdivided into two categories, ``micropolitan 
areas,'' which would be defined based on urban cores of 10,000 to 
49,999 population, and ``metropolitan areas,'' based on urban cores of 
50,000 or more population. The report further stated that, if OMB 
adopts the recommended standards, the first areas to be designated 
using the revised standards and Census 2000 data could be designated in 
2003.
    The Board proposes to replace the term ``metropolitan statistical 
area'' with ``metropolitan area.'' ``Metropolitan area'' would have the 
same meaning as ``metropolitan statistical area'' does currently, until 
such time as OMB adopts and implements revised standards for 
metropolitan areas; at that time, the term would refer to the areas as 
defined in the revised standards.

2(k) Refinancing

    Definition. Regulation C requires the reporting of refinancings of 
home purchase and home improvement loans. The regulation defines a 
refinancing as a loan that satisfies and replaces an existing 
obligation by the same borrower.
    The Board has adopted several successive approaches to determining 
whether an application is for the refinancing of a home purchase or 
home improvement loan. At one time, Regulation C permitted the 
reporting of refinancings only if they involved an increase in the 
outstanding principal. This approach did not adequately cover 
refinancing activity, such as rate-driven refinancings.
    For some years thereafter, Regulation C provided that a loan was 
covered if the balance owed on the existing loan, plus the amount of 
new money for home purchase or home improvement purposes, exceeded half 
of the total new loan amount. But lenders found this computation 
burdensome--for example, because they were often unable to determine 
the portion of new money used for the specified purposes. These 
difficulties also impaired the accuracy and consistency of the data.
    To facilitate compliance, Regulation C currently identifies four 
scenarios typical of the refinancing of a home purchase or home 
improvement loan. It allows lenders to select from among them in 
deciding on which refinancings to report:

    (1) The existing obligation was a home purchase or home 
improvement loan, as determined by the lender (for example, by 
reference to available documents); or
    (2) The applicant states that the existing obligation was a home 
purchase or home improvement loan; or
    (3) The existing obligation was secured by a lien on a dwelling; 
or
    (4) the new obligation will be secured by a lien on a dwelling.

    This rule eases burden, but it generates inconsistent data to the 
extent that different lenders choose different scenarios to determine 
if their refinancings are to be reported. Moreover, it is impossible 
for the data user to know what the data represent. The proposed rule 
makes it more likely that the HMDA reporting will capture refinancings 
of loans originally for home purchase or home improvement.
    In the Advance Notice, the Board solicited comment about whether 
changes to the refinancing category would produce more useful data, as 
well as whether such changes could ease compliance burden. A number of 
commenters suggested modifications. Some, including community groups, 
federal agencies, and others, contended that the existing definition 
does not result in the collection of useful data because the types of 
refinancings reported can vary widely from one

[[Page 78661]]

lender to another. Several financial institutions suggested dropping 
refinancings from coverage altogether. Others suggested permitting only 
those refinancings to be reported that satisfy and replace home 
purchase or home improvement loans, or suggested replacing the home 
improvement and refinancing categories with a single category 
consisting of all nonpurchase loans secured by a dwelling.
    Based on the public comments and its own analysis, the Board 
proposes to revise the definition of a refinancing for reporting 
purposes. A refinancing would be defined as a new obligation satisfying 
and replacing an existing obligation by the same borrower, where both 
the existing obligation and the new obligation are secured by a lien on 
a dwelling. The proposed definition would reduce the inconsistency of 
refinancing data, because all lenders would report using a single two-
pronged test.
    This expanded reporting would entail additional burden to the 
extent that lenders must adopt a different regimen for identifying 
covered refinancings. The Board believes that the increased burden 
would be outweighed by benefits of more focused coverage and more 
consistent and complete data. The Board solicits comment, however, on 
whether the proposed change strikes the right balance between benefit 
and burden.
    In addition, the Board solicits comment on whether the definition 
should include not only refinancings where the existing loan was a 
dwelling-secured loan, but in addition refinancings of unsecured debt, 
as long as the new loan is dwelling-secured. Under this alternative, 
for example, a lender that pays off a consumer's existing unsecured 
loan by extending a new, dwelling-secured loan to that consumer would 
report the new loan.
    MECAs. The Board is not proposing any changes regarding 
modification, extension, and consolidation agreements (MECAs). Several 
commenters on the Advance Notice suggested that the Board consider 
treating certain MECAs as refinancings under Regulation C. MECAs 
substitute for traditional refinancings in some states, such as New 
York and Texas, to avoid mortgage recording fees and taxes. Such 
transactions currently are not reported because they do not meet the 
definition of a refinancing (satisfaction and replacement of an 
existing mortgage loan). Some commenters suggested that lenders should 
be allowed to report MECAs that are the functional equivalent of a 
refinancing.
    The existing definition of a refinancing establishes a bright line 
test for reportable transactions, by defining refinancings as 
extensions of credit that satisfy and replace an existing loan. 
Covering other agreements that are ``functionally equivalent'' to 
refinancings would complicate the application of this test by requiring 
institutions and others to resolve innumerable questions about whether 
particular transactions are in fact functionally equivalent to 
refinancings. The Board believes that MECA data may be useful in 
certain instances, but that, under the existing loan-classification 
scheme, the advantages of a bright-line test for determining whether a 
transaction should be reported--especially in reducing compliance 
burden--outweigh the benefits of additional data on these transactions. 
Moreover, the bright-line test benefits the entire industry, whereas 
the benefits of a rule adapted to MECAs would be confined to a few 
states. Therefore, the Board does not propose to revise the definition 
of refinancing to include MECAs.

Section 203.4--Compilation of Loan Data

4(a) Data Format and Itemization

    Consistent with the proposed revisions regarding the definitions of 
``home improvement loan,'' ``refinancing,'' and ``home-equity line of 
credit,'' the Board proposes to revise the introductory material in 
section 203.4(a) so that it refers to these loan types as distinct 
categories.

4(a)(1) Application Date

    The staff commentary would be revised (proposed comment 4(a)(1)-5) 
to clarify that the date an institution receives an application is the 
date on which it or its agent first takes possession of a completed 
copy of the application.

4(a)(2) Type and Purpose of the Loan

    See the discussion of home-equity lines of credit under section 
2(f, above.

4(a)(5) Type of Action Taken and Date

    Counteroffers. The staff commentary would be revised to clarify 
that an institution must report a denial on the original terms 
requested by the applicant when the institution makes a counteroffer--
such as an offer of a different amount of credit from the amount 
requested--and the applicant does not accept the counteroffer or fails 
to respond. (See comment 4(a)(5)-1.)
    Underwriting conditions. The staff commentary would be revised to 
clarify that if an institution issues a loan approval subject to the 
applicant's meeting underwriting conditions and the applicant does not 
meet them, the institution must report the action taken as a denial. 
Currently, the staff commentary excludes from this rule the situation 
in which an approval is subject to ``customary conditions.'' Because of 
confusion about the scope of this term, and the impracticality of 
making it precise and comprehensive, the exclusion is being deleted. 
(See comment 4(a)(5)-4.)
    Other matters. As part of the reorganization of the regulation, the 
Board proposes to move some material, regarding the date action is 
taken, from Appendix A into the staff commentary. See proposed comment 
4(a)(5)-7.

4(a)(7) Race or National Origin

    See Appendix A, paragraph I.D.3., below, regarding changes to 
conform to revised OMB guidance.

4(a)(9) Additional Items

    The Board has received many suggestions that it amend Regulation C 
to require lenders to report additional data. The Board believes that 
some of the suggested additional data could be useful in helping the 
public and regulators to better understand mortgage lending patterns, 
particularly in the subprime market, and in enforcing the fair lending 
laws. Therefore, the Board proposes amending Regulation C to require 
the reporting of certain additional data, discussed below. This action 
would be taken pursuant to the Board's authority under section 305 of 
the statute to adopt new provisions to carry out the act's purposes.
    Annual percentage rate. HMDA data currently include no information 
on loan pricing. The Board proposes to require that creditors report 
the annual percentage rate (APR) charged on a loan.
    Information about the APR would permit the identification of 
subprime loans, which have different characteristics, such as denial 
rates, from other home mortgage loans. These data may also help the 
public and supervisory agencies identify practices that potentially 
raise fair lending concerns and warrant further investigation.
    Some commenters recommended that the Board require lenders to 
identify subprime loans. The Board believes, however, that disclosure 
of the APR will be effective in identifying subprime loans, as these 
loans typically are priced higher than other loans. Disclosure of the 
APR would also impose less burden on lenders, given the lack of a 
generally accepted definition of a subprime loan. Similarly, the Board 
has not adopted the

[[Page 78662]]

recommendation that lenders be required to report the interest rate and 
fees on a loan. The Board believes that the APR is a better measure of 
the overall cost of credit than the interest rate and fees on a loan, 
and would impose less burden on lenders than calculating the total fees 
on a loan.
    To minimize the burden imposed, the requirement to report the APR 
would apply only to loans that are covered by the Truth in Lending Act 
(TILA) and for which the lender is required to disclose the APR to the 
consumer. (For example, if the borrower withdraws an application before 
the lender is required to disclose the APR under Regulation Z, the 
lender would not be required to report the APR under Regulation C.) The 
APR must be calculated and disclosed by the lender to comply with TILA 
in any case, although software changes would be required to capture APR 
data for HMDA reporting purposes.
    Some loans covered by HMDA, such as loans made to corporate 
borrowers or for multifamily properties, would not be covered by the 
reporting requirement because they are not subject to TILA.\9\
---------------------------------------------------------------------------

    \9\ TILA disclosure requirements apply only to loans to 
consumers for personal, family, or household purposes; therefore, 
commercial loans are excluded. In addition, several other types of 
credit, such as public utility credit, securities credit, and credit 
over $25,000 not secured by a lien on a dwelling, are exempted from 
TILA.
---------------------------------------------------------------------------

    HOEPA status. Obtaining information on the volume and pattern of 
lending covered under HOEPA would be useful for better understanding 
the mortgage market, particularly the subprime market. The Board 
proposes to require that HMDA reporters indicate whether a loan is 
covered by the HOEPA provisions as implemented in Regulation Z. To 
limit the burden imposed, reporting of this item would be required only 
for the same loans that would be subject to the APR-reporting 
requirement (loans covered by Regulation Z and for which the lender is 
required to disclose an APR).
    Manufactured home status. Currently, loans to purchase mobile and 
other manufactured homes are reported together with loans to purchase 
site-built or other types of housing. The Advance Notice solicited 
comment on whether the Board could improve the usefulness of the HMDA 
data by requiring reporters to identify transactions involving mobile 
homes. (The Advance Notice referred to ``mobile homes,'' which are a 
type of manufactured home. This proposal employs the broader term.)
    Many commenters--including the federal agencies charged with 
enforcing the fair lending laws--believed that the Board should require 
creditors to distinguish loans and applications that involve 
manufactured homes from other transactions. These commenters contended 
that such a requirement would further HMDA's purpose of providing the 
public with data useful in identifying possible discriminatory lending 
patterns and in enforcing antidiscrimination statutes. Manufactured 
home loans are typically underwritten differently from other home 
mortgage loans and have different denial rates. So distinguishing 
manufactured home transactions, commenters believed, would help those 
analyzing HMDA data to determine whether a lender's high denial rates 
are due to its focus on manufactured home lending rather than to some 
potentially unlawful practice. Other commenters--such as financial 
institution trade associations--opposed distinguishing transactions 
involving manufactured homes.
    Based on the comments and on its own analysis, the Board proposes 
to require that creditors identify manufactured home loans and 
applications. The proposal would identify these loans by using a widely 
understood definition that appears in the Department of Housing and 
Urban Development (HUD) regulation that establishes construction and 
safety standards for manufactured homes.
    Solicitation of comment on certain data collections not proposed. 
The Board solicits comment on whether it should consider requiring the 
collection of three items that are discussed below. Their collection is 
not proposed at this time
    Denial Reasons. The statute permits, but does not require, a 
financial institution to report the reasons why a loan application was 
denied. Regulation C similarly gives institutions the option to report 
this information, although under section 305 the Board could make such 
reporting mandatory.
    Institutions supervised by the Office of the Comptroller of the 
Currency and the Office of Thrift Supervision must report denial 
reasons under those agencies' rules. For institutions not required to 
report reasons for denial, the level of reporting has varied widely by 
supervisory agency. For example, in 1999, denial reasons were reported 
for approximately 77 percent of the loan/application register entries 
for denied loans submitted to the Federal Deposit Insurance Corporation 
and for approximately 64 percent of the entries for denied loans 
submitted to the Board. By contrast, about 34 percent of the entries 
for denied loans reported to HUD included denial reasons.
    Most commenters who addressed this issue--including several 
financial institutions, one banking trade association, regulatory 
agencies, and civil rights and community groups--supported requiring 
all institutions covered by HMDA to report reasons for denial. These 
commenters argued that requiring such reporting would facilitate the 
identification of potential discrimination, and that all lending 
institutions should be subject to the same rules. They pointed out that 
reporting denial reasons in all cases would allow better comparison of 
data from different lenders. They also contended that reporting denial 
reasons would not be burdensome, because lenders currently must provide 
the reasons to applicants under the Equal Credit Opportunity Act and 
Regulation B (or at least inform them of their right to know the 
reasons).
    Some commenters--primarily financial institutions--opposed 
mandatory reporting. These commenters maintained that denial reasons 
are not a reliable fair lending indicator because they may oversimplify 
the reasons for a credit decision. Thus, these commenters contended, 
users of the HMDA data could be led to believe that discrimination 
exists when in fact it does not. Some commenters also opposed mandatory 
reporting on the basis of cost and burden; others argued that the 
requirement is unnecessary, since examiners can obtain denial reasons 
from loan files.
    Based on the comments and on its own initial analysis of the 
benefit and burden of collecting and reporting denial reasons, the 
Board does not propose to require reporting of denial reasons under 
Regulation C. The Board requests comment, however, on the value of 
requiring these data, relative to the burden that would be imposed on 
lenders.
    Loan-to-Value Ratio/Appraised Value. In the Advance Notice, the 
Board requested comment on whether the appraised value of the property 
that secures a loan should be reported. Some commenters, primarily 
community groups, supported requiring lending institutions to report 
appraised value, or related information such as LTV, noting that such 
information could assist in identifying discriminatory practices in the 
performance and use of appraisals. Commenters stated that appraisals 
have a significant role in credit decisions affecting low-income 
communities, and that discrimination involving appraisals remains 
difficult to document.
    The majority of commenters who addressed the issue--and almost all 
the financial institutions that addressed it--

[[Page 78663]]

opposed a requirement to report either appraised value or LTV ratio, 
maintaining that the data would not be comparable, and thus not useful, 
due to the many different methods used for determining property value. 
Commenters also argued that reporting appraised value is unnecessary 
because examiners can get the information from loan files; that 
appraised value would not provide a reliable indicator of possible 
credit discrimination because many other factors enter into a credit 
decision; and that collection and reporting for appraised value would 
add cost and burden to HMDA compliance. Commenters noted that the 
information could not be reported in many instances; for example, a 
loan application may be denied or withdrawn before an appraisal is 
conducted.
    The Board solicits comment on the relative merits of requiring that 
lenders report LTV or appraised value, in light of the potential burden 
imposed on institutions.
    Identity of Parent Company. Regulation C previously required HMDA 
reporters to indicate the name of any parent company on the Transmittal 
Sheet. The requirement was eliminated a few years ago as part of a set 
of amendments to the regulation; at the time, the Board noted that the 
change would reduce burden, and that data users could ascertain the 
reporting institution's parent from National Information Center (NIC) 
data. 63 Fed. Reg. 52140 (September 30, 1998).
    Many users of HMDA data clearly find it useful to have information 
on parent-subsidiary relationships included in HMDA data, rather than 
available only in a separate database. Although the additional 
reporting burden imposed by the suggested requirement would likely be 
minimal, there is another way to make data on parent-subsidiary 
relationships available without requiring any additional reporting. 
Board staff, in the course of processing reported HMDA data to produce 
the public disclosures, could add parent-subsidiary information based 
on NIC data. Although this option would increase the processing cost 
for the agencies slightly, it would avoid increasing reporting 
requirements for lending institutions, and would likely produce 
significantly more accurate and complete information on parent-
subsidiary relationships. The Board requests comment on the comparative 
benefit and burden of requiring institutions, rather than the agencies, 
to provide these data.

4(b) Collection of Data on Race or National Origin, Sex, and Income

4(b)(2) Optional Collection

    Regulation C currently provides, in accordance with the statute, 
that depository institutions with assets on the preceding year-end of 
$30 million or less may, but need not, collect the data on applicants' 
race or national origin, sex, and income. Also in accordance with the 
statute, Regulation C entirely exempts from coverage a depository 
institution with total assets on the preceding year-end at or below the 
threshold set annually by the Board based on changes in the Consumer 
Price Index for Urban Wage Earners and Clerical Workers. In 1999, the 
Board set this threshold at $30 million for data collection in 2000.
    Thus, institutions with assets of less than $30 million are now 
exempt not only from collecting certain types of data, but from the 
entire regulation. The more limited exemption is superfluous; the Board 
proposes to delete it.

4(d) Excluded Data

4(d)(3) Temporary Financing

    The Board is not proposing any change to this provision.
    Reporting. Regulation C generally does not permit lenders to report 
temporary financing. Rather than defining temporary financing, 
Regulation C provides illustrations, such as bridge and construction 
loans. While data about some of these loans are captured when a loan is 
converted to permanent financing, some persons have expressed concern 
that construction-only loans are not being reported. Also, some 
institutions have requested that Regulation C include a general, 
precise definition of temporary financing.
    The Advance Notice solicited comment on the usefulness of data on 
construction lending and the burden of collecting such data. A few 
commenters, including community groups, believed the data would be 
useful and encouraged coverage. These commenters noted that some 
institutions offer only construction loans and do not provide permanent 
financing. These institutions are thus unable to report significant 
portions of their home lending activity.
    The majority of commenters on this issue, however, believed that 
reporting construction lending generally would be duplicative because 
much of the same data would be captured when the permanent loan is 
reported. Some commenters also expressed concern about the difficulty 
of reporting the required property location information for properties 
that may lack street addresses at the construction phase.
    The Board is not proposing to cover construction loans or other 
temporary financing. In some cases, the data would not be duplicative--
such as where a lender originates construction loans but does not offer 
permanent financing. But these instances appear to be relatively few. 
Imposing additional burden industry wide would not be justified.
    Time period. The Advance Notice also requested comment on whether 
the regulation should define ``temporary loans'' in terms of a time 
period. Some commenters suggested various periods, ranging from no more 
than one year to three or more years. Others supported leaving the term 
defined by example. In the absence of any generally accepted timeframe 
for ``temporary financing,'' the Board is not proposing a ``bright-
line'' definition. Instead, the regulation will continue to offer 
examples--such as construction financing.

4(d)(6) Purchased Loans

    Branch acquisition. HMDA requires institutions to report all loans 
that they purchase, including loans purchased in bulk. Under the 
authority conferred by Section 305 of the statute, the Board has 
excluded loans acquired through a merger or acquisition from the 
reporting requirements of Regulation C. See 60 FR 63996 (December 11, 
1995).
    The Advance Notice solicited comment on whether HMDA data for loans 
purchased as part of a branch acquisition are useful or whether the 
exclusion currently allowed for loans obtained through a merger should 
be extended to such loans. Most commenters who addressed this issue--
primarily financial institutions--believed the data would not be useful 
and need not be reported. These commenters argued that the purchase of 
a loan as part of a branch acquisition, like the purchase of loans as 
part of a merger, is not primarily a credit decision but rather is 
incidental to an investment decision--in this case, to acquire the 
branch. These commenters also contended that such reporting is 
burdensome. Some commenters, including community groups and a few 
financial institutions, urged the Board not to expand the merger 
exception because doing so would reduce the publicly available data 
about creditors' loan acquisitions.
    Based on the comments and its own analysis, the Board proposes to 
exclude loans purchased as part of a branch acquisition from HMDA's 
reporting requirements. A ``branch acquisition'' entails the purchase 
of all the assets and liabilities of a branch of a depository

[[Page 78664]]

institution; it need not involve the purchase of the branch's physical 
facilities. Loans purchased as part of a branch asset sale (not 
including sale of the branch's liabilities) would continue to be 
reported.
    Bulk purchases. The Board is not proposing any change regarding 
bulk purchases. A number of commenters on the Advance Notice proposed 
excluding loans acquired through bulk purchases from the reporting 
requirements. However, unlike mergers and branch acquisitions, which 
are transactions driven by a number of factors, bulk purchases 
typically are based on a credit analysis of the portfolio being sold. 
Excluding bulk purchases, therefore, would result in the loss of data 
useful in determining whether institutions are serving the housing 
needs of their communities. Accordingly, the Board is not proposing to 
exclude bulk purchases.
    Purchase of ``seasoned loans.'' The Board is not proposing any 
changes regarding the purchase of ``seasoned loans.'' The Advance 
Notice solicited comment on whether other revisions regarding purchased 
loans could improve data quality and reduce burden. The Advance Notice 
referred specifically to the possible exclusion of seasoned loans--such 
as those originated more than one or two years before the year being 
reported on. Several commenters, including financial institutions and 
trade associations, recommended excluding loans that had been 
originated, for example, more than six months, one year, or two years 
prior to purchase. These commenters contended that purchasing such 
loans does not reflect credit decisions by the acquirer, but rather 
decisions to purchase assets. They noted that reporting such loans was 
burdensome since data may be incomplete and difficult to locate.
    Other commenters believed that seasoned loans should be reported. 
These commenters (including financial institutions and community 
groups) noted, for example, that certain programs prohibit the sale of 
loans before one or two years have passed--in order to ensure the loans 
are performing. Some commenters expressed concern that institutions 
would no longer receive positive consideration for purchases of these 
loans under the CRA, which could reduce the loans' marketability. 
Certain commenters believed that the burden of tracking seasoned loans 
in order to exclude them could outweigh the benefits of lessened 
reporting requirements.
    Based on the comments and on further analysis, the Board believes 
that data on loan purchases generally, including seasoned loans, are 
useful in evaluating an institution's mortgage lending activity. The 
Board therefore does not propose to exclude seasoned loans from the 
reporting requirements.

Section 203.5--Disclosure and Reporting

5(b) Public Disclosure of Statement

    The regulation requires that a financial institution make its 
disclosure statement available to the public, under certain 
circumstances, within a specified number of ``business days.'' A 
paragraph would be added to the staff commentary to clarify that for 
this purpose a ``business day'' is any calendar day other than a 
Saturday, Sunday, or legal public holiday. (See proposed comment 5(b)-
1.)

5(f) Loan Aggregation and Central Depositories

    As part of the reorganization of the regulation, material on loan 
aggregation and central depositories that now appears in section 
203.1--``Authority, purpose, and scope''--would be moved to section 
203.5, as paragraph (f).

Section 203.6--Enforcement

    As part of the reorganization of the regulation, material from the 
staff commentary (see comments 4(a)-1 and 6(b)-1) would be moved to 
this section of the regulation. This material clarifies that certain 
actions do not violate the act or regulation.

IV. Appendix A

    The Board's proposed reorganization of the regulation entails non-
substantive revisions of Appendix A, such as redesignating several 
provisions. The Board also proposes certain substantive changes that 
would conform Appendix A to proposals discussed above.

I. Instructions for Completion of Loan/Application Register

A. Application or Loan Information

4. Purpose

    Code 5--Home-equity line of credit. The Board is proposing to 
add a code identifying home-equity lines of credit. See discussion 
under section 2(f), above.
    Code 6--Manufactured home. The Board is proposing to add a code 
for loans and applications involving manufactured homes. See the 
discussion of ``Manufactured home status'' under section 4(a)(9), 
above. A reporting entity would use this code in addition to any 
other code identifying the purpose of the transaction. For example, 
an application to purchase a single-family manufactured home would 
be coded as ``1, 6.''

6. Loan Amount

    The Board proposes to require institutions to report the full 
amount of home-equity credit lines. See discussion under section 
2(f), above.

C. Property Location

    Coordination with the CRA. Appendix A provides guidance to 
institutions that report data under the CRA regarding the reporting 
of property-location information for loans located outside the 
metropolitan areas where those lenders have offices. In response to 
inquiries from lenders, the Board proposes to clarify this guidance, 
without changing it substantively.
    These lenders must report the metropolitan area, state, and 
county where the property is located. In general, they must also 
report the census tract. However, if the property is located in an 
untracted area, they may report either ``NA'' or the block numbering 
area instead of census tract information; and if the property is 
located in a county with a population of 30,000 or less, a lender 
may report either ``NA'' or the census tract number.
    Requests for preapproval. The Board is proposing explicitly to 
include certain requests for preapproval in the definition of an 
``application'' for credit. See section 2(b), above. Since these 
requests would not include data on property location, the Board 
proposes to clarify that lenders may report ``NA'' in the property 
location fields associated with requests for preapproval.

D. Applicant Information--Race or National Origin, Sex, and Income

3. Race or National Origin of Borrower or Applicant

    The Office of Management and Budget (OMB) has revised its 
``Standards for Maintaining, Collecting, and Presenting Federal Data 
on Race and Ethnicity.'' The revised standards prescribe five racial 
designations: American Indian or Alaska Native, Asian, Black or 
African American, Native Hawaiian or Other Pacific Islander, and 
White. For data on ethnicity, the standards provide for data on 
whether individuals are Hispanic or Latino, or do not fall within 
this category. 62 Fed. Reg. 58782 (October 30, 1997). The standards 
require that respondents be offered the option of selecting one or 
more designations.
    Federal agencies use these OMB standards when racial and ethnic 
data are collected by means of respondent self-identification or by 
observers. The Bureau of the Census uses these standards, for 
example, in its decennial and other data collections.
    The Board proposes to revise Regulation C to conform to the 
revised OMB standards. The Board is also proposing to continue 
permitting institutions to report that race and ethnicity data were 
not provided by an applicant in a mail or telephone application, or 
that such data are not applicable--for example, in connection with a 
loan to a corporation rather than to a natural person.

5. Income

    The Board is not proposing any changes regarding the reporting 
of applicant income.
    Section 203.4(a)(7) of Regulation C provides that an institution 
must report the

[[Page 78665]]

``gross annual income relied upon in processing the application'' on 
its loan/application register. In some instances, institutions make 
credit decisions based only on the portion of an applicant's income 
necessary for the applicant to qualify for a loan (such as the 
applicant's earned income), rather than on the applicant's total 
annual income from all sources.
    CRA examiners evaluate a large retail institution's CRA 
performance in part based on the number and amount of home mortgages 
(as reported under HMDA) that the institution makes to low-, 
moderate-, middle-, and upper-income individuals. 12 CFR 
228.22(b)(2)(iii) and (3)(i). The CRA regulations define these 
income categories based on the median family income for an area, 
which is calculated using gross annual income. If an institution 
reports only part of an applicant's income on its loan/application 
register, the applicant may appear to be in an income category that 
is lower than the applicant's actual income category, thus 
misstating the lender's CRA performance.
    Changing Regulation C, however, would impose significant burden 
on institutions, many of which are not subject to CRA. It is unclear 
whether the difference between income relied upon and total annual 
income is large enough to have a material impact on an assessment of 
an institution's CRA performance. The Board believes that given this 
lack of information, imposing additional burden on institutions is 
not warranted.

G. Other Data

    The Board proposes to add fields regarding the APR and HOEPA 
status. See the discussion under section 4(a)(9), above, of 
additional items proposed for data collection.
    Form of Transmittal Sheet. The form of transmittal sheet that 
accompanies the loan/application register currently calls for the 
telephone and facsimile numbers of the reporting institution, but 
not for the e-mail address. The Board proposes to require the 
institution to provide its e-mail address, if one exists, on the 
transmittal sheet, for use in contacting the financial institution.

V. Appendix B

    Appendix B would be revised to clarify that if an application is 
made entirely by telephone, the reporting institution is permitted, 
although not required, to request data on race or national origin and 
sex. (Lenders are reminded, however, that these data must be requested 
when an application is taken over the Internet.) This clarification 
makes explicit the Board's longstanding views on this issue. Other 
changes would reflect the revised OMB guidance discussed above.

VI. Reorganization of the Regulation

    Currently, formal guidance for compliance with HMDA is contained in 
Regulation C, in the instructions for completing the loan/application 
register (Appendix A to the regulation), in the instructions for the 
collection of certain applicant data (Appendix B), and in the staff 
commentary. Informal guidance is provided in the FFIEC's ``A Guide to 
HMDA Reporting: Getting It Right!'' Compliance officers and other 
commenters have expressed concern about having to consult several 
sources to locate a requirement or interpretation dealing with a 
particular issue.
    The Advance Notice solicited comment on the benefit of 
incorporating all of the interpretive materials into the commentary, 
reducing the instructions in Appendix A to code descriptions, and 
reorganizing the material within the regulation. These changes were 
supported by most of the commenters that addressed them--including both 
data reporters and data users. They believed that a reorganization 
would make the regulation easier to understand and decrease possible 
misinterpretations by reporters and others. For these commenters, the 
benefits of simplification outweighed the burden of learning a new 
system of organization.
    Several financial institutions opposed any changes. They considered 
Regulation C easy to understand and expressed concern that the benefits 
of reorganization did not justify the burden of relearning the 
regulation. A few commenters recommended streamlining the reporting 
requirements, rather than the interpretive material, to reduce burden.
    Based on the comments and its own analysis, the Board has 
reorganized the regulation and commentary, eliminated redundant 
provisions, revised the instructions to make reporting easier, and made 
other changes--such as rewording some provisions--so that the 
regulation becomes easier to use.
    The cross-references to Appendix A in the staff commentary would be 
deleted; they would be unnecessary in view of the simplification and 
reorganization of Appendix A. ``A Guide to HMDA Reporting: Getting It 
Right!'' will continue to be published, in a format reflecting the 
reorganized regulation.
    Provisions of the regulation, appendices, and commentary are 
redesignated as indicated in the tables below. The first five tables 
identify redesignated provisions in the first five sections of the 
regulation and in the corresponding paragraphs of the staff commentary; 
the sixth and seventh tables identify redesignated provisions in 
Appendices A and B. While the tables present a substantially complete 
summary of the proposed reorganization, they should not be used as a 
substitute for a detailed comparison of the proposal with the existing 
regulation.

                             Table 1.--Section 203.1--Authority, Purpose, and Scope
----------------------------------------------------------------------------------------------------------------
                   Current                                                  Proposed
----------------------------------------------------------------------------------------------------------------
Commentary 203.1(c)-2, 3, 4..................  Regulation 203.2(k)
Commentary 203.1(c)-5........................  Commentary 203.1(c)-2
Commentary 203.1(c)-6........................  Commentary 203.1(c)-3
Commentary 203.1(c)-7........................  Commentary 203.1(c)-4
Commentary 203.1(c)-8........................  Commentary 203.1(c)-5
Commentary 203.1(c)-9........................  Commentary 203.1(c)-6
Commentary 203.1(c)-10.......................  Commentary 203.1(c)-7
Commentary 203.1(c)-11.......................  Commentary 203.1(c)-8
Commentary 203.1(c)-12.......................  Commentary 203.1(c)-9
Regulation 203.1(d)..........................  Regulation 203.5(f)
----------------------------------------------------------------------------------------------------------------


                                      Table 2.--Section 203.2--Definitions
----------------------------------------------------------------------------------------------------------------
                   Current                                                  Proposed
----------------------------------------------------------------------------------------------------------------
Regulation 203.2(f)..........................  Regulation 203.2(g)
Regulation 203.2(g)..........................  Regulation 203.2(h)
Regulation 203.2(h)..........................  Regulation 203.2(j)
Commentary 203.2(e)-1........................  Commentary 203.2(e)-5

[[Page 78666]]

 
Commentary 203.2(e)-2........................  Commentary 203.2(e)-6
Commentary 203.2(f)-1........................  Deleted
Commentary 203.2(f)-2........................  Commentary 203.4(a)(2)-1
Commentary 203.2(f)-3........................  Deleted
Commentary 203.2(f)-4........................  Deleted
Commentary 203.2(f)-5........................  Commentary 203.2(g)-1
Commentary 203.2(f)-6........................  Commentary 203.2(g)-2
Commentary 203.2(f)-7........................  Commentary 203.4(g)(4)-2
Commentary 203.2(f)-8........................  Commentary 203.2(g)-3
Commentary 203.2(g)-6........................  Deleted
----------------------------------------------------------------------------------------------------------------


                                  Table 3.--Section 203.3--Exempt Institutions
----------------------------------------------------------------------------------------------------------------
                   Current                                                  Proposed
----------------------------------------------------------------------------------------------------------------
Regulation 203.3(a)(1).......................  Regulation 203.2(e)(1)
Regulation 203.3(a)(2).......................  Regulation 203.2(e)(2)
Regulation 203.3(b)..........................  Regulation 203.3(a)
Regulation 203.3(c)(1).......................  Commentary 203.2(e)-1
Regulation 203.3(c)(2).......................  Regulation 203.3(b)
Commentary 203.3(a)-1........................  Commentary 203.2(e)-1
Commentary 203.3(a)-2........................  Commentary 203.2(e)-2
Commentary 203.3(a)-3........................  Commentary 203.2(e)-3
Commentary 203.3(a)-4........................  Commentary 203.4(c)-1
----------------------------------------------------------------------------------------------------------------


                                Table 4.--Section 203.4--Compilation of Loan Data
----------------------------------------------------------------------------------------------------------------
                   Current                                                  Proposed
----------------------------------------------------------------------------------------------------------------
Commentary 203.4(a)-1........................  Regulation 203.6(b)(3)
Commentary 203.4(a)(2)-1.....................  Commentary 203.2(g)-4
Commentary 203.4(a)(3)-1.....................  Deleted
Commentary 203.4(a)(3)-2.....................  Commentary 203.4(a)(3)-1
Commentary 203.4(a)(4)-3.....................  Deleted
Commentary 203.4(a)(4)-4.....................  Commentary 203.4(a)(4)-3
Commentary 203.4(d)-1........................  Deleted
----------------------------------------------------------------------------------------------------------------


                                Table 5.--Section 203.5--Disclosure and Reporting
----------------------------------------------------------------------------------------------------------------
                   Current                                                  Proposed
----------------------------------------------------------------------------------------------------------------
Regulation 203.5(a)..........................  Regulation 203.5(a)(1)
Regulation 203.5(b)(1).......................  Regulation 203.5(b)(2)
Regulation 203.5(b)(2).......................  Regulation 203.5(b)(3)
Commentary 203.5(a)-1........................  Commentary 203.5(a)-4
Commentary 203.5(a)-2........................  Commentary 203.5(a)-5
----------------------------------------------------------------------------------------------------------------


                                               Table 6. Appendix A
----------------------------------------------------------------------------------------------------------------
                   Current                                                  Proposed
----------------------------------------------------------------------------------------------------------------
I.A..........................................  Deleted
I.B..........................................  Deleted
I.C..........................................  Deleted
I.D..........................................  Deleted
I.E..........................................  Regulation 203.5(a)(2)
I.F..........................................  Regulation 203.3(a)(3)
II.A.........................................  Commentary 203.5(a)-1
II.B.........................................  Commentary 203.5(a)-2
II.C.........................................  Commentary 203.5(a)-3
II.D.........................................  Commentary 203.5(a)-3
II.E.........................................  Regulation 203.4(a)(8)
III.A........................................  Deleted
III.B........................................  Commentary 203.5(a)-6
III.C........................................  Commentary 203.5(a)-7
III.D.1......................................  Regulation 203.5(b)(1) and (2); Commentary 203.5(b)-1
III.D.1.a....................................  Regulation 203.5(b)(3)

[[Page 78667]]

 
III.D.1.b....................................  Regulation 203.5(b)(3)
III.D.2......................................  Commentary 203.5(b)-2
III.E.1......................................  Regulation 203.5(c)
III.E.2......................................  Commentary 203.5(c)-1
III.E.3......................................  Regulation 203.5(c)
III.F.1......................................  Commentary 203.5(e)-1
III.F.2......................................  Commentary 203.5(e)-2
IV.A.1.......................................  Commentary 203.4(a)-1(i)
IV.A.2.......................................  Commentary 203.4(a)-1(ii)
IV.A.3.......................................  Commentary 203.4(a)-1(iii)
IV.A.4.......................................  Commentary 203.4(a)-1(iv)
IV.A.5.......................................  Commentary 203.4(a)-1(v)
IV.B.........................................  Deleted
V.A.1........................................  1st paragraph App.A.I.A.1; 2nd paragraph Commentary 203.4(a)(1)-4
V.A.2........................................  App. A.I.A.2
V.A.3........................................  App. A.I.A.3
V.A.4........................................  App. A.I.A.4
V.A.5........................................  App. A.I.A.4; explanatory material regarding home purchase,
                                                HELOCs, deleted
V.A.6........................................  App. A.I.A.5
V.A.7........................................  App. A.I.A.5
V.A.8........................................  App. A.I.A.6
V.B.1........................................  App. A.I.B.1
V.B.2........................................  App. A.I.B.1
V.B.3........................................  App. A.I.B.2
V.C..........................................  App. A.I.C
V.C.1........................................  App. A.I.C.1
V.C.2........................................  App. A.I.C.2
V.C.3........................................  App. A.I.C.3
V.C.4........................................  App. A.I.C.4
V.C.5........................................  App. A.I.C.5
V.C.6........................................  Deleted
V.C.7........................................  App. A.I.C.6
V.D..........................................  App. A.I.D
V.D.1........................................  App. A.I.D.1
V.D.2........................................  App. A.I.D.2; App.B. I.B.5
V.D.3........................................  App. A.I.D.3
V.D.4........................................  App. A.I.D.4
V.D.5........................................  App. A.I.D.5
V.E.1., 2.a, b, c, e.........................  App. A.I.E.
V.E.1., 2.d..................................  Commentary 203.4(a)(8)-2
V.F..........................................  App. A.I.F
VI...........................................  App. A.II.
----------------------------------------------------------------------------------------------------------------


                                               Table 7. Appendix B
----------------------------------------------------------------------------------------------------------------
                   Current                                                  Proposed
----------------------------------------------------------------------------------------------------------------
I.B.2........................................  App. B.I.B.3
I.B.3........................................  App. B.I.B.4
I.B.4........................................  App. B.I.B.5
I.B.5........................................  Deleted
----------------------------------------------------------------------------------------------------------------

VII. Form of Comment Letters

    Comment letters should refer to Docket No. R-1001, and, when 
possible, should use a standard typeface with a type size of 10 or 12 
characters per inch. This will enable the Board to convert the text to 
machine-readable form through electronic scanning, and will facilitate 
automated retrieval of comments for review. Comments may, of course, be 
transmitted electronically to the address provided in this notice. 
Also, comments may be submitted on 3\1/2\ or 5\1/2\ inch computer 
diskettes in any IBM-compatible DOS-or Windows-based format, if 
accompanied by an original document in paper form.

VIII. Paperwork Reduction Act

    In accordance with section 3506 of the Paperwork Reduction Act of 
1995 (44 U.S.C. Ch. 35; 5 CFR 1320 Appendix A.1), the Board has 
reviewed the proposed revisions under the authority delegated to the 
Board by OMB. The Federal Reserve may not conduct or sponsor, and an 
organization is not required to respond to, this information collection 
unless it displays a currently valid OMB number. The OMB control number 
is 7100-0247.
    The information collection requirements that would be revised by 
this rulemaking appear in 12 CFR part 203. The information collection 
is mandatory under 12 U.S.C. 2801-2810. It generates data used to help 
determine whether financial institutions are serving the housing needs 
of their

[[Page 78668]]

communities, to help target investment to promote private investment 
where it is needed, and to provide data to assist in identifying 
possible discriminatory lending patterns and in enforcing 
antidiscrimination statutes.
    The respondents are all types of financial institutions that meet 
the tests for coverage under the regulation. Under the Paperwork 
Reduction Act, however, the Federal Reserve accounts for the burden of 
the paperwork associated with the regulation only for state member 
banks, their subsidiaries, subsidiaries of bank holding companies, U.S. 
branches and agencies of foreign banks (other than federal branches, 
federal agencies, and insured state branches of foreign banks), 
commercial lending companies owned or controlled by foreign banks, and 
organizations operating under section 25 or 25A of the Federal Reserve 
Act (12 U.S.C. 601-604a; 611-631). Other federal agencies account for 
the paperwork burden for the institutions they supervise. Respondents 
must maintain their loan/application registers and modified registers 
for three years, and their disclosure statements for five years.
    The current estimated annual burden for this information collection 
varies from 10 to 10,000 hours, depending on individual circumstances, 
with estimated averages of 202 hours for state member banks and 160 
hours for mortgage banking subsidiaries and other respondents. The 
current estimated annual burden for the 625 institutions under Federal 
Reserve supervision is approximately 122,000 hours.
    The proposed revisions would increase by 10 to 20 percent the 
overall burden imposed on institutions with respect to the data 
collection and reporting requirements. The majority of the proposed 
revisions would require new information to be reported on the loan/
application registers (requests for preapproval, home-equity lines of 
credit, APR of a loan, HOEPA status of a loan, and whether a loan is 
for manufactured housing) as well as redefined information (home 
improvement loans and refinancings). These proposed revisions would 
require extra training for all lenders. The hourly paperwork burden 
will increase due to the new requirements. The modification of the 
coverage test for nondepository lenders would increase by a small 
amount--probably well under 5 percent--the number of those lenders 
required to report HMDA data. The proposed exclusion for the reporting 
of loans acquired in a branch acquisition would slightly decrease the 
overall burden. The Federal Reserve expects individual institution 
burden to vary according to the amount and types of lending done by the 
institution.
    In order to quantify the burden estimates, the Federal Reserve 
solicits comment on the incremental burden associated with collecting 
and reporting information on: requests for preapproval, home-equity 
lines of credit, the redefinition of home improvement loans and 
refinancings (as well as on the alternative of collecting and reporting 
information on nonpurchase home loans generally), APR data, HOEPA 
status, and manufactured housing status. The Federal Reserve also 
solicits comment on how many institutions have a ``structured'' 
preapproval program that would be covered by the proposed HMDA 
revisions and how long it would take those institutions to collect and 
report the preapproval data. The Federal Reserve solicits comment on 
the number of hours on average an institution spends training its staff 
in a year when no revisions are proposed and how many hours the 
institution foresees training staff to review these revisions.
    The Board's Legal Division has determined that HMDA data collection 
and reporting are required by law; completion of the loan/application 
register, submission to the Federal Reserve, and disclosure to the 
public upon request are mandatory. The data, as modified according to 
the regulation, are made publicly available and are not considered 
confidential. Information that might identify an individual borrower or 
applicant is given confidential treatment under exemption 6 of the 
Freedom of Information Act (5 U.S.C. 552(b)(6)).
    The Paperwork Reduction Act requires that the Board solicit comment 
on: (a) Whether the proposed revised collection of information is 
necessary for the proper performance of the Federal Reserve's 
functions, including whether the information has practical utility; (b) 
the accuracy of the Federal Reserve's estimate of the burden of the 
proposed revised information collection, including the cost of 
compliance; (c) ways to enhance the quality, utility, and clarity of 
the information to be collected; and (d) ways to minimize the burden of 
information collection on respondents, including through the use of 
automated collection techniques or other forms of information 
technology. Comments on the collection of information should be sent to 
OMB, Paperwork Reduction Project (7100-0247), Washington, D.C. 20530, 
with copies of such comments sent to Mary M. West, Federal Reserve 
Clearance Officer, Mail Stop 97, Board of Governors of the Federal 
Reserve System, Washington, D.C. 20551.

IX. Initial Regulatory Flexibility Analysis

    In accordance with section 3(a) of the Regulatory Flexibility Act 
(5 U.S.C. 603(a)), the Board's Division of Research and Statistics has 
prepared a preliminary regulatory analysis of this proposal. A copy of 
the analysis may be obtained from Publications Services, Board of 
Governors of the Federal Reserve System, Washington, D.C. 20551, at 
(202) 452-3245. A summary of the preliminary analysis follows.
    The major changes proposed for the regulation involve bringing more 
institutions and transactions under requirements for data collection 
and reporting and requiring more data on each covered transaction. 
Among the proposed revisions, those increasing the transactions covered 
and the data that are required to be reported for each transaction are 
the most significant in terms of potential benefits and in increasing 
regulatory burden. The proposal would affect all institutions currently 
within the scope of the regulation, including covered small 
institutions. The number of institutions that would newly be brought 
under the regulation is probably fairly limited; no newly covered 
institution would be a small mortgage lender in that, to be covered, 
institutions would have originated $50 million or more of home-purchase 
loans (including refinancings of such loans) in the prior calendar year 
and they may have significant other lending activities as well.
    The draft proposal does not arise from a need to implement specific 
legislative changes. Rather, it is a consequence of Board policy to 
review its regulations periodically and a desire to update the 
regulation to reflect mortgage markets better, enhance consumer 
protection, and comply with new guidance from the Office of Management 
and Budget concerning collection of data on race and ethnicity by 
federal agencies.
    It is difficult to quantify the benefits and costs associated with 
the proposed changes to the regulation. The expanded coverage will 
provide data to help identify possible discriminatory lending patterns 
and assist regulators in conducting examinations under the CRA and 
other laws. The data will also help inform the public about 
developments in the mortgage market by revealing the distribution of 
annual percentage rates on home loans and by ensuring that information 
is available about a significant and growing segment of the home loan 
market, home-equity lines of credit.

[[Page 78669]]

    Although the proposed changes may offer a number of benefits they 
also will impose significant costs on lenders by requiring changes to 
their current procedures and systems for collecting and reporting 
required data. The regulatory agencies will take steps to mitigate 
these costs, but start-up costs for financial institutions to revise 
current computer and compliance systems are likely to be significant. 
The regulatory agencies themselves will also incur costs to revise 
computer software used to edit the HMDA data prior to its release to 
the public and to prepare required reports for both the regulated 
institutions and the public.

List of Subjects in 12 CFR Part 203

    Banks, Banking, Federal Reserve System, Mortgages, Reporting and 
recordkeeping requirements.

Text of Proposed Revisions

    Certain conventions have been used to highlight the proposed 
revisions to the text of Regulation C, Appendix B (including the Sample 
Data-Collection Form), and the Official Staff Commentary. New language 
is shown inside arrows, while language that would be deleted is set off 
in brackets. However, these conventions are not used in Appendix A 
because of the substantial number of changes; likewise, the changes to 
the forms in Appendix A are not highlighted, because these forms--which 
are very detailed--are easier to read without the conventions.
    For the reasons set forth in the preamble, the Board proposes to 
revise 12 CFR part 203 to read as follows:

PART 203--HOME MORTGAGE DISCLOSURE (REGULATION C)

Sec.
203.1  Authority, purpose, and scope.
203.2  Definitions.
203.3  Exempt institutions.
203.4  Compilation of loan data.
203.5  Disclosure and reporting.
203.6  Enforcement.
Appendix A to Part 203--Form and Instructions for Completion of HMDA 
Loan/Application Register
Appendix B to Part 203--Form and Instructions for Data Collection on 
Race or National Origin and Sex
Supplement I to Part 203--Staff Commentary

    Authority: 12 U.S.C. 2801-2810.


Sec. 203.1  Authority, purpose, and scope.

    (a) Authority. This regulation is issued by the Board of Governors 
of the Federal Reserve System (``Board'') pursuant to the Home Mortgage 
Disclosure Act (12 U.S.C. 2801 et seq.), as amended. The information-
collection requirements have been approved by the U.S. Office of 
Management and Budget (``OMB'') under 44 U.S.C. 
3501 et seq. and have been assigned OMB numbers 1557-0159, 3064-0046, 
1550-0021, [and] 7100-0247 , and 2502-0529, for 
institutions reporting data to the Office of the Comptroller of the 
Currency, the Federal Deposit Insurance Corporation, the Office of 
Thrift Supervision, [and] the Federal Reserve System, and 
the Department of Housing and Urban Development (``HUD''), 
respectively [; numbers]. A number for the 
National Credit Union Administration [and the Department of Housing and 
Urban Development are] is pending.
    (b) Purpose. (1) This regulation implements the Home Mortgage 
Disclosure Act, which is intended to provide the public with loan data 
that can be used:
    (i) To help determine whether financial institutions are serving 
the housing needs of their communities;
    (ii) To assist public officials in distributing public-sector 
investments so as to attract private investment to areas where it is 
needed; and
    (iii) To assist in identifying possible discriminatory lending 
patterns and enforcing antidiscrimination statutes.
    (2) Neither the act nor this regulation is intended to encourage 
unsound lending practices or the allocation of credit.
    (c) Scope. This regulation applies to certain financial 
institutions, including banks, savings associations, credit unions, and 
other mortgage lending institutions, as defined in Sec. 203.2(e). 
The regulation [It] requires an institution to 
report data to its supervisory agency about home purchase 
loans, [and] home improvement loans, 
refinancings, and home equity lines of credit 
that it originates or purchases, or for which it receives 
applications; and to disclose certain data to the public.
    [(d) Loan aggregation and central data depositories. Using the loan 
data made available by financial institutions, the Federal Financial 
Institutions Examination Council will prepare disclosure statements and 
will produce various reports for individual institutions for each 
metropolitan statistical area (``MSA''), showing lending patterns by 
location, age of housing stock, income level, sex, and racial 
characteristics. The disclosure statements and reports will be 
available to the public at central data depositories located in each 
MSA. A listing of central data depositories can be obtained from the 
Federal Financial Institutions Examination Council, Washington, D.C. 
20006.]


Sec. 203.2  Definitions.

    In this regulation:
    (a) Act means the Home Mortgage Disclosure Act (12 U.S.C. 2801 et 
seq.), as amended.
    (b) Application means an oral or written request for a home 
purchase loan, a [or] home improvement loan 
, a refinancing, or a home-equity line of credit 
that is made in accordance with procedures [established] 
used by a financial institution for the type of 
credit requested. The term includes a request for a 
preapproval under procedures in which a financial institution issues to 
creditworthy persons a written commitment for a home purchase loan up 
to a specified amount that is valid for a designated period of time, 
even if issued subject to the identification of a suitable property or 
other conditions.
    (c) Branch office means: (1) Any office of a bank, savings 
association, or credit union that is approved as a branch by a federal 
or state supervisory agency, but excludes free-standing electronic 
terminals such as automated teller machines; and
    (2) Any office of a for-profit mortgage-
lending institution (other than a bank, savings association, or credit 
union) that takes applications from the public for home purchase 
loans or home improvement loans. A 
for-profit mortgage-lending institution is also 
deemed to have a branch office in a[n MSA] metropolitan 
area if, in the preceding calendar year, it received 
applications for, originated, or purchased five or more home purchase 
loans or home improvement loans 
related to [on] property located in that [MSA] 
metropolitan area.
    (d) Dwelling means a residential structure (whether or not [it is] 
attached to real property) located in a state of the United States of 
America, the District of Columbia, or the Commonwealth of Puerto Rico. 
The term includes an individual condominium unit, cooperative unit, or 
[mobile or] manufactured home.
    [(e) Financial institution means:
    (1) A bank, savings association, or credit union that originated in 
the preceding calendar year a home purchase loan (other than temporary 
financing such as a construction loan) including a refinancing of a 
home purchase loan, secured by a first lien on a one-to four-family 
dwelling if--
    (i) The institution is federally insured or regulated; or
    (ii) The loan is insured, guaranteed, or supplemented by any 
federal agency; or
    (iii) The institution intended to sell the loan to the Federal 
National

[[Page 78670]]

Mortgage Association or the Federal Home Loan Mortgage Corporation;
    (2) A for-profit mortgage-lending institution (other than a bank, 
savings association, or credit union) whose home purchase loan 
originations (including refinancings of home purchase loans) equaled or 
exceeded ten percent of its loan-origination volume, measured in 
dollars, in the preceding calendar year.]
    (e) Financial institution means:
    (1) A bank, savings association, or credit union that:
    (i) On the preceding December 31 had assets in excess of the asset 
threshold established and published annually by the Board for coverage 
by the act, based on the year-to-year change in the average of the 
Consumer Price Index for Urban Wage Earners and Clerical Workers, not 
seasonally adjusted, for each twelve month period ending in November, 
with rounding to the nearest million;
    (ii) On the preceding December 31, had a home or branch office in a 
metropolitan area;
    (iii) In the preceding calendar year, originated at least one home 
purchase loan (excluding temporary financing such as a construction 
loan) or refinancing of a home purchase loan, secured by a first lien 
on a one-to-four-family dwelling; and
    (iv) Meets at least one of the following three criteria:
    (A) The institution is federally insured or regulated;
    (B) The mortgage loan referred to in paragraph (e)(1)(iii) of this 
section was insured, guaranteed, or supplemented by a federal agency; 
or
    (C) The mortgage loan referred to in paragraph (e)(1)(iii) oF THIS 
SECTION was intended by the institution for sale to the Federal 
National Mortgage Association or the Federal Home Loan Mortgage 
Corporation; and
    (2) A for-profit mortgage-lending institution (other than a bank, 
savings association, or credit union) that:
    (i) In the preceding calendar year either:
    (A) Originated home purchase loans, including refinancings of home 
purchase loans, that equaled at least ten percent of its loan-
origination volume, measured in dollars; or
    (B) Originated home purchase loans, including refinancings of home 
purchase loans, that equaled at least $50 million;
    (ii) Had either a home office or a branch office in a metropolitan 
area, on the preceding December 31; and
    (iii) Either:
    (A) Had total assets of more than $10 million, counting the assets 
of any parent corporation, on the preceding December 31; or
    (B) Originated at least 100 home purchase loans, including 
refinancings of home purchase loans, in the preceding calendar year.
    (f) Home-equity line of credit means an open-end credit plan 
secured by a dwelling as defined in Regulation Z (Truth in Lending), 12 
CFR part 226.
    [(f)](g) Home improvement loan means any loan 
, other than a home-equity line of credit, that 
[: (1)] is for the purpose, in whole or in part, of repairing, 
rehabilitating, remodeling or improving a dwelling or the real property 
on which it is located . [; and (2) is classified 
by the financial institution as a home improvement loan.]
    [(g)](h) Home purchase loan means any loan 
secured by and made for the purpose of purchasing a dwelling.
    (i) Manufactured home means any residential structure as 
defined under regulations of the Department of Housing and Urban 
Development establishing manufactured home construction and safety 
standards (24 CFR 3280.2).
    [(h)](j) Metropolitan [statistical] area [or 
MSA] means a metropolitan area as defined by OMB.
    (k) Refinancing means a new obligation satisfying and 
replacing an existing obligation by the same borrower, where:
    (1) For coverage purposes, the existing obligation is a home 
purchase loan (as determined by the lender, for example, by reference 
to available documents, or as stated by the applicant), and both the 
existing obligation and the new obligation are secured by first liens 
on dwellings; and
    (2) For reporting purposes, both the existing obligation and the 
new obligation are secured by a lien on a dwelling.


Sec. 203.3  Exempt institutions.

    [(a) Exemption based on location, asset size, or number of home 
purchase loans. (1) A bank, savings association, or credit union is 
exempt from the requirements of this regulation for a given calendar 
year if on the preceding December 31--
    (i) The institution had neither a home office nor a branch office 
in an MSA; or
    (ii) The institution's total assets were at or below the asset 
threshold established by the Board. The asset threshold was adjusted 
from $10 million to $28 million as of December 31, 1996. For subsequent 
years, the Board will adjust the threshold based on the year-to-year 
change in the average of the Consumer Price Index for Urban Wage 
Earners and Clerical Workers, not seasonally adjusted, for each 12-
month period ending in November, with rounding to the nearest million. 
The Board will publish any adjustment in the asset figure in December 
in the staff commentary.
    (2) A for-profit mortgage lending institution (other than a bank, 
savings association, or credit union) is exempt from the requirements 
of this regulation for a given calendar year if--
    (i) The institution had neither a home office nor a branch office 
in an MSA on the preceding December 31; or
    (ii) The institution's total assets combined with those of any 
parent corporation were $10 million or less on the preceding December 
31, and the institution originated fewer than 100 home purchase loans 
(including refinancings of home purchase loans) in the preceding 
calendar year.]
    [(b)] (a) Exemption based on state law. (1) A 
state-chartered or state-licensed financial institution is exempt from 
the requirements of this regulation if the Board determines that the 
institution is subject to a state disclosure law that contains 
requirements substantially similar to those imposed by this regulation 
and that contains adequate provisions for 
enforcement.
    (2) Any state-chartered or state-licensed financial institution, or 
association of such institutions may apply to the Board for an 
exemption under this paragraph.
    (3) An institution that is exempt under this paragraph shall 
use the disclosure form required by its state law 
and submit the data required by that 
[the state disclosure] law to its state supervisory agency for purposes 
of aggregation.
    [(c)] (b) Loss of exemption. [(1) An 
institution losing an exemption that was based on the criteria set 
forth in paragraph (a) of this section shall comply with this 
regulation beginning with the calendar year following the year in which 
it lost its exemption.]
    [(2)] An institution losing a[n] state-law 
exemption under paragraph [(b)] (a) of this 
section shall comply with this regulation beginning with the calendar 
year following the year for which it last reported loan data under the 
state disclosure law.


Sec. 203.4  Compilation of loan data.

    (a) Data format and itemization. A financial institution shall 
collect data regarding applications for, and originations and purchases 
of, home purchase loans, [and] home improvement 
loans , [(including]

[[Page 78671]]

refinancings [of both)] , and home-equity lines of 
credit for each calendar year. These transactions shall be 
recorded, within thirty calendar days after the end of each calendar 
quarter in which final action is taken (such as origination or purchase 
of a loan, or denial or withdrawal of an application), on a register in 
the format prescribed in Appendix A of this part and shall include the 
following items:
    (1) An identifying number for the loan or 
loan application, and the date the application was received.
    (2) The type and purpose of the loan or 
application.
    (3) The owner-occupancy status of the property to which the loan 
or application relates.
    (4) The amount of the loan or application.
    (5) The type of action taken, and the date.
    (6) The location of the property to which the loan or 
application relates, by metropolitan 
area [MSA], state, county, and census tract, if the 
institution has a home or branch office in that metropolitan 
area [MSA].
    (7) The race or national origin and sex of the applicant or 
borrower, and the gross annual income relied on in processing the 
application.
    (8) The type of entity purchasing a loan that the institution 
originates or purchases and then sells within the same calendar year 
(this information need not be included in quarterly 
updates).
    (9) For a loan or application that is subject to Regulation Z 
(Truth in Lending, 12 CFR part 226), the following additional items:
    (i) The annual percentage rate for the loan, as calculated and 
disclosed under Sec. 226.14(b) or Sec. 226.22 of Regulation Z.
    (ii) An indication whether the loan is subject to the Home 
Ownership and Equity Protection Act of 1994, as implemented in 
Sec. 226.32 of Regulation Z.
    (b) Collection of data on race or national origin, sex, and income. 
(1) A financial institution shall collect data about the race or 
national origin and sex of the applicant or borrower as prescribed in 
appendix B of this part. [If the borrower or 
applicant chooses not to provide the information, the lender shall note 
the data on the basis of visual observation or surname, to the extent 
possible.]
    (2) Race or national origin, sex, and income data may but need not 
be collected for[--
    (i) Loans] loans purchased by the financial 
institution.[; or
    (ii) Applications received or loans originated by a bank, savings 
association, or credit union with assets on the preceding December 31 
of $30 million or less.]
    (c) Optional data. A financial institution may report the reasons 
it denied a loan application.
    (d) Excluded data. A financial institution shall not report:
    (1) Loans originated or purchased by the financial institution 
acting in a fiduciary capacity (such as trustee);
    (2) Loans on unimproved land;
    (3) Temporary financing (such as bridge or construction loans);
    (4) The purchase of an interest in a pool of loans (such as 
mortgage-participation certificates, mortgage-backed 
securities, or real estate mortgage investment conduits); 
[or]
    (5) The purchase solely of the right to service loans[.] 
; or
     (6) Loans purchased as part of a merger or acquisition, or as part 
of the acquisition of all of the assets and liabilities of a branch 
office as defined in Sec. 203.2(c)(1).
    (e) Data reporting under CRA for banks and savings associations 
with total assets of $250 million or more and banks and savings 
association that are subsidiaries of a holding company whose total 
banking and thrift assets are $1 billion or more. As required by 
[agency] regulations that implement the Community Reinvestment Act 
of 1977 (12 U.S.C. 2901 et seq.), banks and 
savings associations that had total assets of $250 million or more (or 
are subsidiaries of a holding company with total banking and thrift 
assets of $1 billion or more) as of December 31 for each of the 
immediately preceding two years [,] shall also collect the location of 
property located outside the metropolitan areas 
[MSAs] in which the institution has a home or branch office, or outside 
any metropolitan areas [MSAs].


Sec. 203.5  Disclosure and reporting.

    (a) Reporting to agency. (1) By March 1 
following the calendar year for which the loan data are compiled, a 
financial institution shall send its complete loan/application register 
to the agency office specified in appendix A of this part 
. [and] The institution 
shall retain a copy for its records for [a period of not less than] 
at least three years.
    (2) A subsidiary of a bank or savings association shall 
complete a separate loan/application register. The subsidiary shall 
submit the register, directly or through its parent, to the agency that 
supervises its parent.
    (b) Public disclosure of statement. (1) The Federal 
Financial Institutions Examination Council (``FFIEC'') will prepare a 
disclosure statement from the data each institution submits.
    [(1)] (2) A financial institution shall make 
its [mortgage loan] disclosure statement ([to be] prepared by the 
[Federal Financial Institutions Examination Council] 
FFIEC) available to the public at its home office 
no later than three business days after receiving it from the 
[Examination Council] FFIEC.
    [(2)] (3) In addition, a financial 
institution shall either--
    (i) Make its disclosure statement available to the public [(]within 
ten business days of receiving it [)] in at least one branch office in 
each additional metropolitan area [MSA] where the 
institution has offices (the disclosure statement need only contain 
data relating to the metropolitan area [MSA] 
where the branch is located); or
    (ii) Post the address for sending written requests for the 
disclosure statement in the lobby of each branch office in a[n] 
metropolitan area [MSA] where the institution has 
offices, and mail or deliver a copy of the disclosure statement, within 
fifteen calendar days of receiving a written request (the disclosure 
statement need only contain data relating to the 
metropolitan area [MSA] for which the request is 
made). Including the address in the general notice required under 
paragraph (e) of this section satisfies this requirement.
    (c) Public disclosure of loan/application register. A financial 
institution shall make its loan/application register available to the 
public after [modifying it in accordance with Appendix A.] 
removing the following information regarding each entry: the 
application or loan number, the date that the application was received, 
and the date action was taken. An institution 
shall make its modified register available following the calendar year 
for which the data are compiled, by March 31 for a request received on 
or before March 1, and within 30 days for a request received after 
March 1. The modified register need only contain data relating to the 
metropolitan area [MSA] for which the request is 
made.
    (d) Availability of data. A financial institution shall make its 
modified register available to the public for a period of three years 
and its disclosure statement available for a period of five years. An 
institution shall make the data available for inspection and copying 
during the hours the office is normally open to the public for 
business. It may

[[Page 78672]]

impose a reasonable fee for any cost incurred in providing or 
reproducing the data.
    (e) Notice of availability. A financial institution shall post a 
general notice about the availability of its HMDA data in the lobby of 
its home office and of each branch office located in a[n] 
metropolitan area [MSA]. It shall 
provide promptly upon request [provide] the 
location of the institution's offices where the statement is available 
for inspection and copying, or it may include the location in the 
lobby notice.
    (f) Loan aggregation and central data depositories. 
Using the loan data made available by financial institutions, the FFIEC 
will produce reports for individual institutions for each metropolitan 
area, showing lending patterns by location, age of housing stock, 
income level, sex, and racial characteristics. These reports, as well 
as individual institution disclosure statements, will be available to 
the public at central data depositories located in each metropolitan 
area. A listing of central data depositories can be obtained from the 
Federal Financial Institutions Examination Council, Washington, D.C. 
20006.


Sec. 203.6  Enforcement.

    (a) Administrative enforcement. A violation of the act or this 
regulation is subject to administrative sanctions as provided in 
section 305 of the act, including the imposition of civil money 
penalties, where applicable. Compliance is enforced by the agencies 
listed in appendix A [of this regulation] of this 
part.
    (b) Bona fide errors. (1) An error in 
compiling or recording loan data is not a violation of the act or this 
regulation if it was unintentional and occurred despite the maintenance 
of procedures reasonably adapted to avoid such errors.
    (2) An incorrect entry for a census tract number is a 
bona fide error, and is not a violation of the act or this regulation, 
provided that the institution maintains reasonable procedures to avoid 
such errors.
    (3) If an institution makes a good-faith effort to record all data 
concerning covered transactions fully and accurately within 30 days 
after the end of each calendar quarter, and some data are nevertheless 
inaccurate or incomplete, the error or omission is not a violation of 
the act or this regulation provided that the institution corrects and 
completes the information prior to reporting the loan/application 
register to its regulatory agency.

Appendix A to Part 203--Form and Instructions for Completion 
of HMDA Loan/Application Register

Paperwork Reduction Act Notice

    This report is required by law (12 U.S.C. 2801-2810 and 12 CFR 
part 203). An agency may not conduct or sponsor, and an organization 
is not required to respond to, a collection of information unless it 
displays a currently valid Office of Management and Budget (OMB) 
Control Number. See 12 CFR 203.1(a) for the currently valid OMB 
Control Numbers, applicable to this information collection, for the 
agencies responsible for the collection of information. Send 
comments regarding this burden estimate or any other aspect of this 
collection of information, including suggestions for reducing the 
burden, to the respective agencies and to OMB, Office of Information 
and Regulatory Affairs, Paperwork Reduction Project, Washington, 
D.C. 20503. Be sure to reference the applicable agency and its OMB 
control number, as found in 12 CFR 203.1(a), when submitting 
comments to OMB.

I. Instructions for Completion of Loan/Application Register

A. Application or Loan Information

    1. Application or Loan Number. a. Enter an identifying number 
that can be used later to retrieve the loan or application file. It 
can be any number of your choosing (not exceeding 25 characters). 
You may use letters, numerals, or a combination of both.
    2. Date Application Received. a. For paper submissions only, 
enter the date the loan application was received by your institution 
by month, day, and year, using numerals in the form MM/DD/CCYY (for 
example, 01/15/2000). For institutions submitting data in electronic 
form, the proper format is CCYYMMDD. If your institution normally 
records the date shown on the application form you may use that date 
instead. Enter ``NA'' for loans purchased by your institution.
    3. Type. Indicate the type of loan or application by entering 
the applicable code from the following:
    1--Conventional (any loan other than FHA, VA, FSA, or RHS loans)
    2--FHA-insured (Federal Housing Administration)
    3--VA-guaranteed (Veterans Administration)
    4--FSA/RHS-guaranteed (Farm Service Agency or Rural Housing 
Service)
    4. Purpose. Indicate the purpose of the loan or application by 
entering the applicable code from the following:
    Code 1--Home purchase (one- to four-family)
    Code 2--Home improvement (one- to four-family)
    a. Report both secured and unsecured loans.
    Code 3--Refinancings (one- to four-family)
    a. Do not report a refinancing if, under the loan agreement, you 
are unconditionally obligated to refinance the obligation, or you 
are obligated to refinance the obligation subject to conditions 
within the borrower's control.
    Code 4--Multifamily dwelling (home purchase, home improvement, 
and refinancings)
    a. Code 4 applies to loans and applications on dwellings for 
five or more families, including home purchase loans, refinancings, 
and loans for repairing, rehabilitating, and remodeling purposes.
    b. Do not use Code 4 for loans on individual condominium or 
cooperative units; use other Codes as applicable.
    Code 5--Home-equity line of credit (one-to-four-family)
    Code 6--Manufactured home
    a. Use the applicable Code from Codes 1-5 and also use Code 6 if 
applicable.
    5. Owner Occupancy. Indicate whether the property to which the 
loan or loan application relates is to be owner-occupied as a 
principal dwelling by entering the applicable code from the 
following:
    Code 1--Owner-occupied as a principal residence
    a. For purchased loans, use Code 1 unless the loan documents or 
application indicate that the property will not be owner-occupied as 
a principal residence.
    Code 2--Not owner-occupied as a principal residence
    a. Code 2 applies to second homes or vacation homes, as well as 
rental properties.
    Code 3--Not applicable
    a. Use Code 3 if the property to which the loan relates is a 
multifamily dwelling; is not located in a metropolitan area; or is 
located in a metropolitan area in which your institution has neither 
a home nor a branch office. Alternatively, at your option, you may 
use Code 1 or 2 for these situations, as applicable, to report the 
actual occupancy status.
    6. Loan Amount. Enter the amount of the loan or application. Do 
not report loans below $500. Show the amount in thousands, rounding 
to the nearest thousand ($500 should be rounded up to the next 
$1,000). For example, a loan for $167,300 should be entered as 167 
and one for $15,500 as 16.
    a. For a home purchase loan that you originated, enter the 
principal amount of the loan.
    b. For a home purchase loan that you purchased, enter the unpaid 
principal balance of the loan at the time of purchase.
    c. For all home improvement loans, enter the entire amount of 
the loan--including unpaid finance charges if that is how such loans 
are recorded on your books--even if only a part of the proceeds is 
intended for home improvement.
    d. Report the entire amount of a home-equity line of credit, but 
only in the year the line is established (or other action is taken, 
such as denial of an application).
    e. For refinancings, indicate the total amount of the 
refinancing, including both the amount outstanding on the original 
loan and any amount of ``new money.''
    f. For a loan application that was denied or withdrawn, enter 
the amount applied for.

B. Action Taken

    1. Type of action. Indicate the type of action taken on the 
application or loan by using one of the following codes.
    Code 1--Loan originated.

[[Page 78673]]

    a. Use Code 1 for a loan that is originated, including one 
resulting from a counteroffer (your offer to the applicant to make 
the loan on different terms or in a different amount from the terms 
or amount initially applied for) that the applicant accepts.
    Code 2--Approved but not accepted.
    a. Use Code 2 when the application is approved but the applicant 
(or a loan broker or correspondent) fails to respond to your 
notification of approval or your commitment letter within the 
specified time.
    Code 3--Application denied.
    a. Report as a denial the situation when an applicant turns down 
or fails to respond to your counteroffer.
    Code 4--Application withdrawn.
    a. Use Code 4 when the application is expressly withdrawn by the 
applicant before a credit decision was made.
    Code 5--File closed for incompleteness.
    a. Use Code 5 if you sent a written notice of incompleteness 
under Sec. 202.9(c)(2) of Regulation B (Equal Credit Opportunity) 
and the applicant failed to respond to your request for additional 
information within the period of time specified in your notice.
    Code 6--Loan purchased by your institution.
    2. Date of action. For paper submissions only, enter the date by 
month, day, and year, using numerals in the form MM/DD/CCYY (for 
example, 02/22/2000). For institutions submitting data in electronic 
form, the proper format is CCYYMMDD.
    a. For loans originated, enter the settlement or closing date.
    b. For loans purchased, enter the date of purchase by your 
institution.
    c. For applications denied, applications approved but not 
accepted by the applicant, and files closed for incompleteness, 
enter the date that the action was taken by your institution or the 
date the notice was sent to the applicant.
    d. For applications withdrawn, enter the date you received the 
applicant's express withdrawal; or enter the date shown on the 
notification from the applicant, in the case of a written 
withdrawal.

C. Property Location

    Except as otherwise provided, in these columns enter the 
applicant codes for the metropolitan area, state, county, and census 
tract for the property to which a loan relates.
    1. Metropolitan area For each loan or loan application, indicate 
the location of the property by the metropolitan area number. 
Metropolitan area boundaries are defined by OMB; use the boundaries 
that were in effect on January 1 of the calendar year for which you 
are reporting. A listing of metropolitan areas is available from 
your supervisory agency or the FFIEC.
    2. State and County. Use the Federal Information Processing 
Standard (FIPS) two-digit numerical code for the state and the 
three-digit numerical code for the county. These codes are available 
from your supervisory agency or the FFIEC.
    3. Census Tract. Indicate the census tract where the property is 
located. Notwithstanding paragraph 6:
    a. Enter the code ``NA'' if the property is located in an area 
not divided into census tracts on the U.S. Census Bureau's census-
tract outline maps (see paragraph 4 below). Alternatively, if the 
property is located in a block numbering area (BNA), you may enter 
the BNA number.
    b. If the property is located in a county with a population of 
30,000 or less in the 1990 census (as determined by the Census 
Bureau's 1990 CPH-2 population series), enter ``NA'' (even if the 
population has increased above 30,000 since 1990), or enter the 
census tract number (or the BNA number, if applicable).
    4. Census Tract Number. For the census tract number, consult the 
U.S. Census Bureau's Census Tract/Street Index for 1990, and for 
addresses not listed in the index, consult the Census Bureau's 
census tract outline maps. Use the maps from the Census Bureau's 
1990 CPH-3 series, or equivalent 1990 census data from the Census 
Bureau (such as the Census TIGER/Line file) or from a private 
publisher.
    5. Outside-Metropolitan Area. For loans on property located 
outside the metropolitan areas in which the institution has a home 
or branch office, or outside any metropolitan area, an institution 
may choose one of the following two options. Under the first option, 
the institution may enter the metropolitan area, state, and county 
codes and the census tract number. It may enter ``NA'' in the 
metropolitan area or census tract column if no code or number exists 
for the property. In the census tract column, if there is a BNA 
number for the property rather than a census tract number, the 
institution may enter the BNA number at its option. (Codes exist for 
all states and counties). Under this first option, the codes and 
tract number must accurately identify the property location in 
question. Under the second option, which is not available if 
paragraph 6 applies, an institution enters ``NA'' in all four 
columns, whether or not the codes or numbers exist for the property.
    6. Data Reporting Under CRA for Banks and Savings Associations 
with Total Assets of $250 Million or More and Banks and Savings 
Associations that are Subsidiaries of a Holding Company Whose Total 
Banking and Thrift Assets are $1 Billion or More. If you are a bank 
or savings association with total assets of $250 million or more as 
of December 31 for each of the immediately preceding two years, you 
must enter the location of property even if the property is outside 
metropolitan areas in which you have a home or branch office, or 
outside any metropolitan area. Enter this information also if you 
are a bank or savings association that is a subsidiary of a holding 
company with total banking and thrift assets of $1 billion or more 
as of December 31 for each of the immediately preceding two years.
    7. Requests for Preapproval. Notwithstanding paragraphs 1-6, if 
the application is a request for preapproval, you may enter the code 
``NA'' in all four columns.

D. Applicant Information--Race or National Origin, Sex, and Income

    Appendix B of this part contains instructions for the collection 
of data on race or national origin and sex, and also contains a 
sample form for data collection.
    1. Applicability. Report this information for loans that you 
originate as well as for applications that do not result in an 
origination.
    a. You need not collect or report this information for loans 
purchased. If you choose not to, use the Codes for ``not 
applicable.''
    b. If the borrower or applicant is not a natural person (a 
corporation or partnership, for example), use the Codes for ``not 
applicable.''
    2. Mail or Telephone Applications. Any loan applications mailed 
to applicants must contain a collection form similar to that shown 
in appendix B of this part, and you must record on your register the 
data on race or national origin and sex if the applicant provides 
it. If the applicant chooses not to provide the data, enter the Code 
for ``information not provided by applicant in mail or telephone 
application'' specified in the next paragraph. (See Appendix B for 
complete information on the collection of these data in mail or 
telephone applications.)
    3. Race or National Origin of Borrower or Applicant. Use the 
following Codes to indicate the race or national origin of the 
applicant or borrower under column ``A'' and of any co-applicant or 
co-borrower under column ``CA.''
    If an applicant selects more than one designation, use all Codes 
corresponding to the applicant's selections. If there is more than 
one co-applicant, provide the required information only for the 
first co-applicant listed on the application form. If there are no 
co-applicants or co-borrowers, use Code 8 for ``not applicable'' in 
the co-applicant column.

1--American Indian or Alaska Native
2--Asian
3--Black or African American
4--Native Hawaiian or Other Pacific Islander
5--White
6--Hispanic or Latino
7--Information not provided by applicant in mail or telephone 
application
8--Not Applicable

    4. Sex of Borrower or Applicant. Use the following Codes to 
indicate the sex of the applicant or borrower under column ``A'' and 
of any co-applicant or co-borrower under column ``CA.'' If there is 
more than one co-applicant, provide this information only for the 
first co-applicant listed on the application form. If there are no 
co-applicants or co-borrowers, use Code 4 for ``not applicable.''

1--Male
2--Female
3--Information not provided by applicant in mail or telephone 
application
4--Not applicable

    5. Income. Enter the gross annual income that your institution 
relied on in making the credit decision.
    a. Round all dollar amounts to the nearest thousand (round $500 
up to the next $1,000), and show in terms of thousands. For example, 
$35,500 should be reported as 36.
    b. For loans on multifamily dwellings, enter ``NA.''
    c. If no income information is asked for or relied on in the 
credit decision, enter ``NA.''

[[Page 78674]]

E. Type of Purchaser

    Enter the applicable code to indicate whether a loan that your 
institution originated or purchased was then sold to a secondary 
market entity within the same calendar year:
    Code 0--Loan was not originated or was not sold in calendar year 
covered by register.
    a. Use Code 0 for applications that were denied, withdrawn, or 
approved but not accepted by the applicant; and for files closed for 
incompleteness.
    b. Use Code 0 if you originated or purchased a loan and did not 
sell it during that same calendar year. If you sell the loan in a 
succeeding year, you need not report the sale.
    Code 1--FNMA (Federal National Mortgage Association)
    Code 2--GNMA (Government National Mortgage Association)
    a. Use Code 2 if you conditionally assign a loan to GNMA in 
connection with a mortgage-backed security transaction.
    Code 3--FHLMC (Federal Home Loan Mortgage Corporation)
    Code 4--FAMC (Federal Agricultural Mortgage Corporation)
    Code 5--Commercial bank
    Code 6--Savings bank or savings association
    Code 7--Life insurance company
    Code 8--Affiliate institution
    a. Use Code 8 for loans sold to an institution affiliated with 
you, such as your subsidiary or a subsidiary of your parent 
corporation.
    Code 9--Other type of purchaser

F. Reasons for Denial

    1. You are not required to enter the reasons for denial of an 
application. But if you choose to do so you may indicate up to three 
reasons using the following codes. Leave this column blank if the 
``action taken'' on the application is not a denial. For example, do 
not complete this column if the application was withdrawn or the 
file was closed for incompleteness.

1--Debt-to-income ratio
2--Employment history
3--Credit history
4--Collateral
5--Insufficient cash (downpayment, closing costs)
6--Unverifiable information
7--Credit application incomplete
8--Mortgage insurance denied
9--Other

    2. If your institution uses the model form for adverse action 
contained in Appendix to Regulation B (Form C-1 in Appendix C, 
Sample Notification Form), use the foregoing codes as follows:
    a. Code 1 for: Income insufficient for amount of credit 
requested, and Excessive obligations in relation to income.
    b. Code 2 for: Temporary or irregular employment, and Length of 
employment.
    c. Code 3 for: Insufficient number of credit references 
provided; Unacceptable type of credit references provided; No credit 
file; Limited credit experience; Poor credit performance with us; 
Delinquent past or present credit obligations with others; 
Garnishment, attachment, foreclosure, repossession, collection 
action, or judgment; and Bankruptcy.
    d. Code 4 for: Value or type of collateral not sufficient.
    e. Code 6 for: Unable to verify credit references; Unable to 
verify employment; Unable to verify income; and Unable to verify 
residence.
    f. Code 7 for: Credit application incomplete.
    g. Code 9 for: Length of residence; Temporary residence; and 
Other reasons specified on notice.

G. Other Data

    For an application or loan covered by the Truth in Lending Act 
(TILA), enter the following information:
    1. Annual Percentage Rate. Enter the annual percentage rate 
(APR) as calculated and disclosed under Regulation Z (12 CFR part 
226).
    a. If the application or loan is not subject to TILA, or is 
subject to TILA but an APR was not required to be disclosed to the 
applicant (for example, because the application was withdrawn before 
the time disclosure was required), enter ``NA.''
    b. If only an estimated APR was required to be disclosed to the 
applicant, enter the estimated APR.
    c. Enter the APR to two decimal places. If the APR was disclosed 
to the applicant showing less than two decimal places, fill the 
remaining decimal places with zeros; if showing more than two 
decimal places, the APR may be rounded or the digits beyond two 
decimal places may be truncated.
    d. In a home-equity line of credit with an introductory rate, 
where both the introductory and regular APR were required to be 
disclosed to the applicant, enter the regular APR.
    2. HOEPA status. a. If the loan or application is covered by 
TILA, but is not covered by the Home Ownership and Equity Protection 
Act of 1994 (HOEPA), as implemented in Regulation Z, Sec. 226.32, 
enter Code 0.
    b. If the loan or application is covered by TILA and by 
Sec. 226.32, enter Code 1.
    c. If the loan or application is not covered by TILA, is covered 
by TILA but no APR was required to be disclosed to the applicant, or 
for any other reason it cannot be determined whether the loan or 
application is covered by Sec. 226.32, enter Code 2.

II. Federal Supervisory Agencies

    Send your loan/application register, direct any questions, and 
direct any requests (such as for a listing of metropolitan areas or 
FIPS codes) to the office of your federal supervisory agency as 
specified below. Terms used below that are not defined in the 
Federal Deposit Insurance Act (12 U.S.C. 1813(s)) have the meanings 
given to them in the International Banking Act of 1978 (12 U.S.C. 
3101).

A. National Banks and Their Subsidiaries and Federal Branches and 
Federal Agencies of Foreign Banks

    District office of the Office of the Comptroller of the Currency 
for the district in which the institution is located.

B. State Member Banks of the Federal Reserve System, Their 
Subsidiaries, Subsidiaries of Bank Holding Companies, Branches and 
Agencies of Foreign Banks (Other than Federal Branches, Federal 
Agencies, and Insured State Branches of Foreign Banks), Commercial 
Lending Companies Owned or Controlled By Foreign Banks, and 
Organizations Operating Under Section 25 or 25A of the Federal 
Reserve Act

    Federal Reserve Bank serving the District in which the state 
member bank is located; for institutions other than state member 
banks, the Federal Reserve Bank specified by the Board of Governors.

C. Nonmember Insured Banks (Except for Federal Savings Banks) and 
Their Subsidiaries and Insured State Branches of Foreign Banks

    Regional director of the Federal Deposit Insurance Corporation 
for the region in which the institution is located.

D. Savings Institutions Insured Under the Savings Association 
Insurance Fund of the FDIC, Federally Chartered Savings Banks 
Insured Under the Bank Insurance Fund of the FDIC (but not 
Including State-Chartered Savings Banks Insured Under the Bank 
Insurance Fund), their Subsidiaries, and Subsidiaries of Savings 
Institution Holding Companies

    Regional or other office specified by the Office of Thrift 
Supervision.

E. Credit Unions and Their Subsidiaries

    National Credit Union Administration, Office of Examination and 
Insurance, 1775 Duke Street, Alexandria, V.A. 22314.

F. Other Depository Institutions

    Regional director of the Federal Deposit Insurance Corporation 
for the region in which the institution is located.

G. Other Mortgage-Lending Institutions

    Assistant Secretary for Housing, HMDA Reporting--Room 9233, U.S. 
Department of Housing and Urban Development, 451 7th Street, S.W., 
Washington, D.C. 20410.
BILLING CODE 6210-01-P

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BILLING CODE 6210-01-C

Appendix B to Part 203--Form and Instructions for Data Collection on 
Race or National Origin and Sex

I. Instructions on Collection of Data on Race or National Origin and 
Sex

    [A. Format.]
    You may list questions regarding the race or national origin and 
sex of the applicant on your loan application form, or on a separate 
form that refers to the application. (See the sample form below for 
recommended language.)
    [B.] II. Procedures.
    [1] A. You must ask the applicant for this 
information, but cannot require the applicant to provide it.
    B. You must offer the applicant the option of 
selecting one or more designations.
    [2.] C. If the applicant chooses not to 
provide the information for an application taken in person, note 
this fact on the form and note the data, to the extent possible, on 
the basis of visual observation or surname.
    [3.] D. Inform the applicant that the 
federal government is requesting his information in order to monitor 
compliance with federal statutes that prohibit lenders from 
discriminating against applicants on these bases. Inform the 
applicant that if the information is not provided where the 
application is taken in person, you are required to note the data on 
the basis of visual observation or surname.
    [4.] E. If an application is made entirely 
by telephone, [this information need not be requested] 
you are permitted to request this information but not 
required to do so. And the data need not be provided when 
an application is taken by mail, if the applicant fails to answer 
these questions on the application form. Whether an application was 
received by mail or telephone must be indicated, if it is not 
otherwise evident on the face of the application.
    [5. The ``other block is available only to the applicant who 
chooses to indicate some other appropriate category for race or 
national origin. If completing the form based on visual observation, 
do not use this category; use one of the other five categories.]
BILLING CODE 6210-01-P

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BILLING CODE 6210-01-C

Supplement I to Part 203--Staff Commentary

Introduction

    1. Status [and citations]. The commentary in this supplement is 
the vehicle by which the Division of Consumer and Community Affairs 
of the Federal Reserve Board issues formal staff interpretations of 
Regulation C (12 CFR part 203). [The parenthetical citations given 
are references to Appendix A to Regulation C, Form and Instructions 
for Completion of the HMDA Loan/Application Register.]

Section 203.1--Authority, Purpose, and Scope

    1(c) Scope.
    1. General. The comments in this section address issues 
affecting coverage of institutions and 
exemptions from coverage [, and data-collection requirements].
    2. Meaning of refinancing. A refinancing of a loan is the 
satisfaction and replacement of an existing obligation by a new 
obligation by the same borrower. The term ``refinancing'' refers to 
the new obligation. If the existing obligation is not satisfied and 
replaced, but is only renewed, modified, extended, or consolidated 
(as in certain modification, extension, and consolidation 
agreements), the transaction is not a refinancing for purposes of 
HMDA.
    3. Refinancing--coverage. The regulation bases coverage, in 
part, on whether an institution originates home purchase loans. For 
determining whether an institution is subject to Regulation C or is 
exempt from coverage, an origination of a home purchase loan 
includes the refinancing of a home purchase loan. An institution may 
always determine the actual purpose of the existing obligation (for 
example, by reference to available documents). Alternatively, an 
institution may--
    i. Rely on the statement of the applicant that the existing 
obligation was (or was not) a home purchase loan; or
    ii. Assume that the new obligation is not a refinancing of a 
home purchase loan if either the existing obligation or the new 
obligation is not secured by a first lien on the dwelling.
    4. Refinancing--data collection. The regulation requires 
collection and reporting of data on refinancings of home purchase 
and home improvement loans. An institution may always determine the 
actual purpose of the existing obligation (for example, by reference 
to available documents). Alternatively, an institution may--
    i. Rely on the statement of the applicant that the existing 
obligation was (or was not) a home purchase or home improvement 
loan; or
    ii. Assume that the new obligation is a refinancing of a home 
purchase or home improvement loan only if the existing obligation 
was secured by a lien on a dwelling; or
    iii. Assume that the new obligation is a refinancing of a home 
purchase or home-improvement loan only if the new obligation will be 
secured by a lien on a dwelling.]
    [5.] 2. The broker rule and the meaning of 
``broker'' and ``investor.'' For the purposes of the guidance given 
in this commentary, an institution that takes and processes a loan 
application and arranges for another institution to acquire the loan 
at or after closing is acting as a ``broker,'' and an institution 
that acquires a loan from a broker at or after closing is acting as 
an ``investor.'' (The terms used in this commentary may have 
different meanings in certain parts of the mortgage lending 
industry, and other terms may be used in place of these terms, for 
example in the Federal Housing Administration mortgage insurance 
programs.) Depending on the facts, a broker may or may not make a 
credit decision on an application (and thus it may or may not have 
reporting responsibilities). If the broker makes a credit decision, 
it reports that decision; if it does not make a credit decision, it 
does not report. If an investor reviews an application and makes a 
credit decision prior to closing, the investor reports that 
decision. If the investor does not review the application prior to 
closing, it reports only the loans that it purchases; it does not 
report the loans it does not purchase. Thus, an institution that 
makes a credit decision on an application prior to closing reports 
that decision regardless of whose name the loan closes in.
    [6.] 3. Illustrations of the broker rule. 
Assume that, prior to closing, four investors receive the same 
application from a broker; two deny it, one approves it, and one 
approves it and acquires the loan. In these circumstances, the first 
two report denials, the third reports the transaction as approved 
but not accepted, and the fourth reports an origination (whether the 
loan closes in the name of the broker or the investor). 
Alternatively, assume that the broker denies a loan before sending 
it to an investor; in this situation, the broker reports a denial.
    [7.] 4. Broker's use of investor's 
underwriting criteria. If a broker makes a credit decision based on 
underwriting criteria set by an investor, but without the investor's 
review prior to closing, the broker has made the credit decision. 
The broker reports as an origination a loan that it approves and 
closes, and reports as a denial an application that it turns down 
(either because the application does not meet the investor's 
underwriting guidelines or for some other reason). The investor 
reports as purchases only those loans it purchases.
    [8.] 5. Insurance and other criteria. If 
an institution evaluates an application based on the criteria or 
actions of a third party other than an investor (such as a 
government or private insurer or guarantor), the institution must 
report the action taken on the application (loan originated, 
approved but not accepted, or denied, for example).
    [9.] 6. Credit decision of agent is 
decision of principal. If an institution approves loans through the 
actions of an agent, the institution must report the action taken on 
the application (loan originated, approved but not accepted, or 
denied, for example). State law determines whether one party is the 
agent of another.
    [10.] 7. Affiliate bank underwriting 
(250.250 review). If an institution makes an independent evaluation 
of the creditworthiness of an applicant (for example, as part of a 
preclosing review by an affiliate bank under 12 CFR 250.250, which 
interprets section 23A of the Federal Reserve Act), the institution 
is making a credit decision. If the institution then acquires the 
loan, it reports the loan as an origination whether the loan closes 
in the name of the institution or its affiliate. An institution that 
does not acquire the loan but takes another action reports that 
action.
    [11.] 8. Participation loan. An 
institution that originates a loan and then sells partial interests 
to other institutions reports the loan as an origination. An 
institution that acquires only a partial interest in such a loan 
does not report the transaction even if it has participated in the 
underwriting and origination of the loan.
    [12.] 9. Assumptions. An assumption occurs 
when an institution enters into a written agreement accepting a new 
borrower as the obligor on an existing obligation. An institution 
reports as a home purchase loan an assumption (or an application for 
an assumption) in the amount of the outstanding principal. If a 
transaction does not involve a written agreement between a new 
borrower and the institution, it is not an assumption for HMDA 
purposes and is not reported.

Section 203.2--Definitions

    2(b) Application.
    1. Consistency with Regulation B. Board interpretations that 
appear in the official staff commentary to Regulation B (Equal 
Credit Opportunity, 12 CFR part 202, Supplement I) are generally 
applicable to the definition of an application under Regulation C. 
However, under Regulation C the definition of an application does 
not include prequalification requests.
    2. Prequalification. A prequalification request is a request by 
a prospective loan applicant (other than a request for 
preapproval) for a preliminary determination on whether 
the prospective applicant would likely qualify for credit under an 
institution's standards, or on the amount of credit for which the 
prospective applicant would likely qualify. Some institutions 
evaluate prequalification requests through a procedure that is 
separate from the institution's normal loan application process; 
others use the same process. In either case, Regulation C does not 
require an institution to report prequalification requests on the 
HMDA-LAR, even though these requests may constitute applications 
under Regulation B.
    2(c) Branch office.
    1. Credit union. For purposes of Regulation C, a ``branch'' of a 
credit union is any office where member accounts are established or 
loans are made, whether or not the office has been approved as a 
branch by a federal or state agency. (See 12 U.S.C. 1752.)
    2. Depository institution. A branch of a depository institution 
does not include a loan production office, the office of an 
affiliate, or the office of a third party such as a loan broker. 
(But see appendix A of this part, Paragraph 
I.C.6 [V.C.7], which requires certain 
depository institutions to report property location even for 
properties located outside those metropolitan 
areas [MSAs] in which the institution has a home or 
branch office.)

[[Page 78681]]

    3. Nondepository institution. A branch of a nondepository 
institution does not include the office of an affiliate or other 
third party such as a loan broker. (But [see appendix A of this 
part, Paragraph V.C.6, which requires] certain nondepository 
institutions must [to] report property 
location even in metropolitan areas [MSAs] 
where they do not have a physical location.)
    2(d) Dwelling.
    1. Coverage [Scope]. The definition of 
``dwelling'' is not limited to the principal or other residence of 
the applicant or borrower, and thus includes vacation or second 
homes and rental properties. A dwelling also includes [a mobile or 
manufactured home,] a multifamily structure (such as an apartment 
building) [, and a condominium or a cooperative unit. Recreational 
vehicles such as boats or campers are not dwellings for purposes of 
HMDA].
    2. Exclusions. Recreational vehicles such as boats or 
campers are not dwellings for purposes of HMDA. Also excluded are 
transitory residences--whose occupants previously occupied principal 
residences elsewhere and expect to do so again. Examples include 
hotels, hospitals, and college dormitories.
    2(e) Financial institution.
    1. General. An institution that met the test for 
coverage under HMDA in year 1, and then ceases to meet the test (for 
example, because its assets fall below the threshold on December 31 
of year 2) stops collecting HMDA data beginning with year 3. 
Similarly, an institution that did not meet the coverage test for a 
given year, and then meets the test in the succeeding year, begins 
collecting HMDA data for the calendar year following the year in 
which it meets the test for coverage. For example, a for-profit 
mortgage lending institution (other than a bank, savings 
association, or credit union) that, in year 1, falls below the 
thresholds specified in section 203.2(e)(2)(iii), but meets one of 
them in year 2 (and otherwise meets the criteria for coverage), need 
not collect data in year 2, but begins collecting data in year 3.
    2. Adjustment of exemption threshold for depository 
institutions. Depository institutions with assets at or below $30 
million are exempt from collecting data for 2000.
    3. Coverage after a merger. Several scenarios of data-collection 
responsibilities for the calendar year of a merger are described 
below. Under all the scenarios, if the merger results in a covered 
institution, that institution must begin data collection January 1 
of the following calendar year.
    i. Two institutions are not covered by Regulation C because of 
asset size. The institutions merge. No data collection is required 
for the year of the merger (even if the merger results in a covered 
institution).
    ii. A covered institution and an exempt institution merge. The 
covered institution is the surviving institution. For the year of 
the merger, data collection is required for the covered 
institution's transactions. Data collection is optional for 
transactions handled in offices of the previously exempt 
institution.
    iii. A covered institution and an exempt institution merge. The 
exempt institution is the surviving institution, or a new 
institution is formed. Data collection is required for transactions 
of the covered institution that take place prior to the merger. Data 
collection is optional for transactions taking place after the 
merger date.
    iv. Two covered institutions merge. Data collection is required 
for the entire year. The surviving or resulting institution files 
either a consolidated submission or separate submissions for that 
year.
    4. Originations. Institutions are reminded that 
coverage depends in part on whether they have originated home 
purchase loans. To determine whether their activities with respect 
to a particular loan constitute an origination, institutions should 
consult, among other parts of the staff commentary, the discussion 
of the broker rule under Secs. 203.1(c) and 203.4(a).
    [1.] 5. Branches of foreign banks--treated 
as [a] banks. A federal branch or a state-
licensed insured branch of a foreign bank is a ``bank'' under 
section 3(a)(1) of the Federal Deposit Insurance Act (12 U.S.C. 
1813(a)), and is covered by HMDA if it meets the tests for a 
depository institution found in section[s] 203.2(e)(1) [and 
203.3(a)(1)] of Regulation C.
    [2.] 6. Branches and offices of foreign 
banks--treated as [a] for-profit mortgage lending 
institutions. Federal agencies, state-licensed 
agencies, state-licensed uninsured branches of foreign banks, 
commercial lending companies owned or controlled by foreign banks, 
and entities operating under section 25 or 25A of the Federal 
Reserve Act, 12 U.S.C. 601 and 611 (Edge Act and agreement 
corporations) are not ``banks'' under the Federal Deposit Insurance 
Act. These entities are nonetheless covered by HMDA if they meet the 
tests for a for-profit nondepository mortgage 
lending institution found in section[s] 203.2(e)(2) [and 
203.3(a)(2)] of Regulation C.
    2[(f)] (g) Home improvement loan.
    [1. Definition. A home improvement loan is a loan that is made 
for the purpose of home improvement and that is classified by the 
institution as a home improvement loan.
    2. Statement of the applicant. An institution may rely on the 
oral or written statement of an applicant regarding the proposed use 
of loan proceeds
    3. Home-equity lines. An institution that has chosen to report 
home-equity lines of credit reports as a home improvement loan only 
the part of a home-equity line that is intended for home 
improvement. An institution that reports home-equity lines reports 
the disposition of all applications, not just originations.
    4. Classification requirement. An institution has ``classified'' 
a loan as a home improvement loan if it has entered the loan on its 
books as a home improvement loan, or has otherwise coded or 
identified the loan as a home improvement loan. For example, an 
institution that has booked a loan or reported it on a ``call 
report'' as a home improvement loan has classified it as a home 
improvement loan. An institution may also classify loans as home 
improvement loans in other ways (for example, by color-coding loan 
files).]
    [5.] 1. Improvements to real property. 
Home improvements include improvements both to a dwelling and to the 
real property on which the dwelling is located (for example, 
installation of a swimming pool, construction of a garage, or 
landscaping).
    [6.] 2. Commercial and other loans. A 
home improvement loan [for improvement 
purposes] may include a loan originated 
outside an institution's [consumer] residential 
mortgage lending division (such as a loan to improve an 
apartment building made through the commercial loan 
department).[is reported if the institution 
classifies it as a home improvement loan.]
    [7. Multiple-purpose loan. A loan for home improvement and for 
other purposes is treated as a home improvement loan even if less 
than 50 percent of the total loan proceeds are to be used for 
improvement, provided the institution classifies the loan as a home 
improvement loan. (But see comment (2)(f)-3 of this supplement on 
home-equity lines of credit.)]
    [8.] 3. Mixed-use property. A loan to 
improve property used for residential and commercial purposes (for 
example, a building containing apartment units and retail space) 
[satisfies the purpose requirement] is a home improvement 
loan if the loan proceeds are used 
primarily to improve the residential portion of the property. If the 
loan proceeds are used to improve the entire 
property (for example, to replace the heating system), the loan 
[satisfies the purpose requirement] is a home improvement 
loan if the property itself is primarily residential. An 
institution may use any reasonable standard to determine the primary 
use of the property, such as by square footage or by the income 
generated. An institution may select the standard to apply on a 
case-by-case basis. [To report the loan as a home improvement loan, 
the institution must also classify it as such.]
    4. Multiple-category loans. If a loan is a home 
improvement loan as well as a refinancing, an institution reports 
the loan as a home improvement loan.
    2[(g)](h) Home purchase loan.
    1. Multiple properties. A home purchase loan includes a loan 
secured by one dwelling and used to purchase another dwelling.
    2. Mixed-use property. A dwelling-secured 
loan to purchase property used primarily for residential purposes 
(for example, an apartment building containing a convenience store) 
is a home purchase loan. An institution may use any reasonable 
standard to determine the primary use of the property, such as by 
square footage or by the income generated. An institution may select 
the standard to apply on a case-by-case basis.
    3. Farm loan. A loan to purchase property used primarily for 
agricultural purposes is not a home purchase loan even if the 
property includes a dwelling. An institution may use any reasonable 
standard to determine the primary use of the property, such as by 
reference to the exemption from Regulation X (Real Estate Settlement 
Procedures, 24 CFR 3500.5(b)(1)) for a loan on property of 25 acres 
or more. An institution may select the standard to apply on a case-
by-case basis.
    4. Commercial and other loans. A home purchase loan 
may include[s] a loan

[[Page 78682]]

originated outside an institution's residential mortgage lending 
division (such as a loan for the purchase of an apartment building 
made through the commercial loan department). [For home purchase 
loans, there is no classification test.]
    5. Construction and permanent financing. A home purchase loan 
includes both a combined construction/permanent loan and the 
permanent financing that replaces a construction-only loan. It does 
not include a construction-only loan, which is considered 
``temporary financing'' under Regulation C and is not reported.
    [6. Home-equity line. An institution that has chosen to report 
home-equity lines of credit reports as a home purchase loan only the 
part that is intended for home purchase. An institution may rely on 
the applicant's oral or written statement about the proposed use of 
the funds. An institution that reports home-equity lines reports the 
disposition of all applications, not just the originations.]
    6. Second mortgages that finance the downpayments on 
first mortgages. If an institution making a first mortgage loan to a 
home purchaser also makes a second mortgage loan to the same 
purchaser to finance part or all the home purchaser's downpayment, 
the institution reports each loan separately as a home purchase 
loan.
    7. Multiple-category loans. If a loan is a home purchase loan as 
well as a home improvement loan, refinancing, or home-equity line of 
credit, an institution reports the loan as a home purchase 
loan.

Section 203.3--Exempt Institutions

    [3(a) Exemption based on location, asset size, or number of home 
purchase loans.
    1. General. An institution that ceases to meet the tests for 
HMDA coverage (such as the 10 percent test for nondepository 
institutions) or becomes exempt may stop collecting HMDA data 
beginning with the next calendar year. For example, a bank whose 
assets are at or below the threshold on December 31 of a given year 
reports data for that full calendar year, in which it was covered, 
but does not report data for the succeeding calendar year.
    2. Adjustment of exemption threshold for depository 
institutions. For data collection in 2000, the asset-size exemption 
threshold is $30 million. Depository institutions with assets at or 
below $30 million are exempt from collecting data for 2000.
    3. Coverage after a merger. Several scenarios of data-collection 
responsibilities for the calendar year of a merger are described 
below. Under all the scenarios, if the merger results in a covered 
institution, that institution must begin data collection January 1 
of the following calendar year.
    i. Two institutions are exempt from Regulation C because of 
asset size. The institutions merge. No data collection is required 
for the year of the merger (even if the merger results in a covered 
institution).
    ii. A covered institution and an exempt institution merge. The 
covered institution is the surviving institution. For the year of 
the merger, data collection is required for the covered 
institution's transactions. Data collection is optional for 
transactions handled in offices of the previously exempt 
institution.
    iii. A covered institution and an exempt institution merge. The 
exempt institution is the surviving institution, or a new 
institution is formed. Data collection is required for transactions 
of the covered institution that take place prior to the merger. Data 
collection is optional for transactions taking place after the 
merger date.
    iv. Two covered institutions merge. Data collection is required 
for the entire year. The surviving or resulting institution files 
either a consolidated submission or separate submissions for that 
year.
    4. Mergers versus purchases in bulk. If a covered institution 
acquires loans in bulk from another institution (for example, from 
the receiver for a failed institution) but no merger or acquisition 
of an institution is involved, the institution reports the loans as 
purchased loans.]

Section 203.4--Compilation of Loan Data

    Paragraph 4(a) Data Format and Itemization.
    1. Reporting requirements. i. An institution reports 
data on covered loans that it originated and covered loans that it 
purchased during the calendar year described in the report. An 
institution reports these data even if the loans were subsequently 
sold by the institution.
    ii. An institution reports the data for applications for covered 
loans that did not result in originations--for example, applications 
that the institution denied or that the applicant withdrew during 
the calendar year described in the report.
    iii. In the case of brokered loan applications or applications 
forwarded through a correspondent, the institution reports as 
originations loans that it approved and subsequently acquired 
according to a pre-closing arrangement (whether or not they closed 
in the institution's name). Additionally, the institution reports 
the data for all applications that did not result in originations--
for example, applications that the institution denied or that the 
applicant withdrew during the calendar year covered by the report 
(whether or not they would have closed in the institution's name). 
For all of these loans and applications, the institution reports the 
required data regarding the borrower's or applicant's race or 
national origin, sex, and income.
    iv. Originations are to be reported only once. If the 
institution is the loan broker or correspondent, it does not report 
as originations loans that it forwarded to another lender for 
approval prior to closing, and that were approved and subsequently 
acquired by that lender (whether or not they closed in the 
institution's name).
    v. An institution reports applications that were received in the 
previous calendar year but were acted upon during the calendar year 
covered by the current register.
    vi. A financial institution submits all required data to its 
supervisory agency in one package, with the prescribed transmittal 
sheet. An officer of the institution certifies to the accuracy of 
the data.
    vii. The transmittal sheet states the total number of line 
entries contained in the accompanying data transmission.
    [1. Quarterly updating. An institution must make a good-faith 
effort to record all required data concerning covered transactions--
loan originations (including refinancings), loan purchases, and the 
disposition of applications that did not result in originations--
fully and accurately within 30 days after the end of each calendar 
quarter. If some data are inaccurate or incomplete despite this 
good-faith effort, the error or omission is not a violation of 
Regulation C provided that the institution corrects and completes 
the information prior to reporting the HMDA-LAR to its regulatory 
agency.]
    2. Updating--agency requirements. Certain state or federal 
regulations, such as the Federal Deposit Insurance Corporation's 
regulations, may require an institution to update its data more 
frequently than is required under Regulation C.
    3. Form of updating. An institution may maintain the quarterly 
updates of the HMDA-LAR in electronic or any other format, provided 
the institution can make the information available to its regulatory 
agency in a timely manner upon request.
    Paragraph 4(a)(1) Application number and 
application date.
    1. Application date--consistency. In reporting the date of 
application, an institution reports the date the application was 
received or the date shown on the application. Although an 
institution need not choose the same approach for its entire HMDA 
submission, it should be generally consistent (such as by routinely 
using one approach within a particular division of the institution 
or for a category of loans).
    2. Application date--application forwarded by a broker. For an 
application forwarded by a broker, an institution reports the date 
the application was received by the broker, the date the application 
was received by the institution, or the date shown on the 
application. Although an institution need not choose the same 
approach for its entire HMDA submission, it should be generally 
consistent (such as by routinely using one approach within a 
particular division of the institution or for a category of loans).
    3. Application date--reinstated application. If, within the same 
calendar year, an applicant asks an institution to reinstate a 
counteroffer that the applicant previously did not accept (or asks 
the institution to reconsider an application that was denied, 
withdrawn, or closed for incompleteness), the institution may treat 
that request as the continuation of the earlier transaction or as a 
new transaction. If the institution treats the request for 
reinstatement or reconsideration as a new transaction, it reports 
the date of the request as the application date.
    4. Application or loan number. An institution ensures 
that each reported identifying number is unique within the 
institution. If an institution's register contains data for branch 
offices, for example, the institution could use a letter or a 
numerical code to identify the loans or applications of different 
branches, or could assign a certain series of numbers to particular 
branches to avoid duplicate numbers. Institutions are strongly 
encouraged not to use the applicant's or borrower's name or social 
security number, for privacy reasons.

[[Page 78683]]

    5. Application--date of receipt. For reporting purposes, the 
date a lender or broker receives an application is the date on which 
it or its agent first takes possession of a physical or electronic 
copy of the application in completed form. State law determines 
whether one party is the agent of another. For example, if a 
completed application is received by a lender on the Friday before a 
three-day weekend, and the lender uploads the application onto its 
computer system the following Tuesday, the lender should report 
Friday's date as the date it received the application.
    6. Application--year action taken. An institution must report an 
application in the calendar year in which the institution takes 
final action on the application.
    Paragraph 4(a)(2) Type and purpose.
    1. Purpose--statement of applicant. An institution 
may rely on the oral or written statement of an applicant regarding 
the proposed use of loan proceeds. For example, a lender could use a 
check-box on a loan application to determine whether or not the 
applicant intends to use loan proceeds for home improvement 
purposes.
    [1. Purpose--multiple-purpose loan. If a loan is for home 
improvement and another covered purpose, an institution reports the 
loan as a home improvement loan if the institution classifies it as 
a home improvement loan. Otherwise the institution reports the loan 
as a home purchase loan or a refinancing, as appropriate. An 
institution may determine how to report such loans on a case-by-case 
basis.]
    Paragraph 4(a)(3) Occupancy.
    [1. Occupancy--actual occupancy status. If a loan relates to 
multifamily property, property located outside an MSA, or property 
in an MSA where the institution has no home or branch office, the 
institution may either report the actual occupancy status or report 
using the code for ``not applicable.'' (A nondepository institution 
may be deemed to have a home or branch office in an MSA under 
Sec. 203.2(c)(2) of Regulation C.)]
    [2.] 1. Occupancy--multiple properties. If 
a loan relates to multiple properties, the institution reports the 
owner occupancy status of the property for which property location 
is being reported. (See the comments to paragraph 4(a)(6), Property 
location.)
    Paragraph 4(a)(4) Loan amount.
    1. Loan amount--counteroffer. If an applicant accepts a 
counteroffer for an amount different from the amount initially 
requested, the institution reports the loan amount granted. If an 
applicant does not accept a counteroffer or fails to respond, the 
institution reports the loan amount initially requested.
    2. Loan amount--multiple-purpose loan. [Except in the case of a 
home-equity line of credit, a]An institution 
reports the entire amount of the loan, even if only a part of the 
proceeds is intended for home purchase or home improvement.
    [3. Loan amount--home-equity line. An institution that reports 
home-equity lines of credit reports only the part that is intended 
for home improvement or home purchase purposes. An institution may 
rely on the applicant's oral or written statement about the proposed 
use of the loan proceeds.]
    [4.] 3. Loan amount--assumption. An 
institution that enters into a written agreement accepting a new 
party as the obligor on a loan reports the amount of the outstanding 
principal on the assumption as the loan amount.
    Paragraph 4(a)(5) Type of action taken and date.
    1. Action taken--counteroffers. If an institution makes a 
counteroffer to lend on terms different from the applicant's initial 
request (for example, for a shorter loan maturity or in a 
different amount) and the applicant does not accept the 
counteroffer or fails to respond, the institution reports the action 
taken as a denial on the original terms requested by the 
applicant.
    2. Action taken--rescinded transactions. If a borrower rescinds 
a transaction after closing, the institution, on a case-by-case 
basis, may report the transaction either as an origination or as an 
application that was approved but not accepted.
    3. Action taken--purchased loans. An institution reports the 
loans that it purchased during the calendar year, and does not 
report the loans that it declined to purchase.
    4. Action taken--conditional approvals. If an institution issues 
a loan approval subject to the applicant's meeting underwriting 
conditions [(other than customary loan-commitment or loan closing 
conditions, such as a clear-title requirement or an acceptable 
property survey)] and the applicant does not meet them, the 
institution reports the action taken as a denial.
    5. Action taken date--approved but not accepted. For a loan 
approved by an institution but not accepted by the applicant, the 
institution reports using any reasonable date, such as the approval 
date, the deadline for accepting the offer, or the date the file was 
closed. Although an institution need not choose the same approach 
for its entire HMDA submission, it should be generally consistent 
(such as by routinely using one approach within a particular 
division of the institution or for a category of loans).
    6. Action taken date--originations. For loan originations, an 
institution generally reports the settlement or closing date. For 
loan originations that an institution acquires through a broker, the 
institution reports either the settlement or closing date, or the 
date the institution acquired the loan from the broker. If the 
disbursement of funds takes place on a date later than the 
settlement or closing date, the institution may use the date of 
disbursement. For a construction/permanent loan, the institution 
reports either the settlement or closing date, or the date the loan 
converts to the permanent financing. Although an institution need 
not choose the same approach for its entire HMDA submission, it 
should be generally consistent (such as by routinely using one 
approach within a particular division of the institution or for a 
category of loans). Notwithstanding this flexibility 
regarding the use of the closing date in connection with reporting 
the date action was taken, the year in which an origination goes to 
closing is the year in which the institution must report the 
origination.
    7. Action taken--pending applications. An institution does not 
report any loan application still pending at the end of the calendar 
year; it reports that application on its register for the year in 
which final action is taken.
    Paragraph 4(a)(6) Property location.
    1. Property location--multiple properties (home improvement/
refinance of home improvement). For a home improvement loan, an 
institution reports the property being improved. If more than one 
property is being improved, the institution reports the location of 
one of the properties or reports the loan using multiple entries on 
its HMDA-LAR (with unique identifiers) and allocating the loan 
amount among the properties.
    2. Property location--multiple properties (home purchase/
refinance of home purchase). For a home purchase loan, an 
institution reports the property taken as security. If an 
institution takes more than one property as security, the 
institution reports the location of the property being purchased if 
there is just one. If the loan is to purchase multiple properties 
and is secured by multiple properties, the institution reports the 
location of one of the properties or reports the loan using multiple 
entries on its HMDA-LAR (with unique identifiers) and allocating the 
loan amount among the properties.
    3. Property location--loans purchased from another institution. 
The requirement to report the property location by census tract in 
a[n MSA] metropolitan area where the 
institution has a home or branch office applies not only to loan 
applications and originations but also to loans purchased from 
another institution. This includes loans purchased from an 
institution that did not have a home or branch office in that 
metropolitan area [MSA] and did not collect 
the property-location information.
    4. Property location--[mobile or] manufactured home. If 
information about the potential site of a [mobile or] manufactured 
home is not available, an institution reports using the code for 
``not applicable.''
    5. Property location--use of BNA. At its option, an institution 
may report property location by using a block numbering area (BNA). 
The U.S. Census Bureau, in conjunction with state agencies, has 
established BNAs as statistical subdivisions of counties in which 
census tracts have not been established. BNAs are generally 
identified in census data by numbers in the range 9501 to 9989.99.
    Paragraph 4(a)(7) Applicant and income data.
    1. Applicant data--completion by applicant. An institution 
reports the monitoring information as provided by the applicant. For 
example, if an applicant checks the ``Asian'' 
[``other''] box the institution reports using the 
``Asian'' [``other''] code.
    2. Applicant data--completion by lender. If an applicant fails 
to provide the requested information for an application taken in 
person, the institution reports the data on the basis of visual 
observation or surname. [As stated in paragraph I.B.5 to Appendix B 
of this part, the institution does not use the ``other'' code, but 
selects from the categories listed on the form.]
    3. Applicant data--application completed in person. When an 
applicant meets in

[[Page 78684]]

person with a lender to complete an application that was begun by 
mail or telephone, the institution must request the monitoring 
information. If the meeting occurs after the application process is 
complete, for example, at closing, the institution is not required 
to obtain monitoring information.
    4. Applicant data--joint applicant. A joint applicant may enter 
the government-monitoring information on behalf of an absent joint 
applicant. If the information is not provided, the institution 
reports using the code for ``information not provided by applicant 
in mail or telephone application.''
    5. Applicant data--video and other electronic-application 
processes. An institution that accepts applications through 
electronic media with a video component treats the applications as 
taken in person and collects the information about the race or 
national origin and sex of applicants. An institution that accepts 
applications through electronic media without a video component (for 
example, the Internet or facsimile) treats the applications as 
accepted by mail. [(See Appendix B of this part for procedures to be 
used for data collection.)]
    6. Income data--income relied on. An institution reports the 
gross annual income relied on in evaluating the creditworthiness of 
applicants. For example, if an institution relies on an applicant's 
salary to compute a debt-to-income ratio but also relies on the 
applicant's annual bonus to evaluate creditworthiness, the 
institution reports the salary and the bonus to the extent relied 
upon. Similarly, if an institution relies on the income of a 
cosigner to evaluate creditworthiness, the institution includes this 
income to the extent relied upon. But an institution does not 
include the income of a guarantor who is only secondarily liable.
    7. Income data--co-applicant. If two persons jointly apply for a 
loan and both list income on the application, but the institution 
relies only on the income of one applicant in computing ratios and 
in evaluating creditworthiness, the institution reports only the 
income relied on.
    8. Income data--loan to employee. An institution may report 
``NA'' in the income field for loans to employees to protect their 
privacy, even though the institution relied on their income in 
making its credit decisions.
    Paragraph 4(a)(8) Purchaser.
    1. Type of purchaser--loan-participation interests sold to more 
than one entity. An institution that originates a loan, and then 
sells it to more than one entity, reports the ``type of purchaser'' 
based on the entity purchasing the greatest interest, if any. If an 
institution retains a majority interest, it does not report the 
sale.
    2. Type of purchaser--swapped loans. Loans 
``swapped'' for mortgage-backed securities are to be treated as 
sales; the purchaser is the type of entity receiving the loans that 
are swapped.
    4(c) Optional data.
    1. Agency requirements. Certain state or federal entities, such 
as the Office of Thrift Supervision, require institutions to report 
the reasons for denial even though this is optional reporting under 
HMDA and Regulation C.
    4(d) Excluded data.
    [1. Loan pool. The purchase of an interest in a loan pool (such 
as a mortgage-participation certificate, a mortgage-backed security, 
or a real estate mortgage investment conduit or ``REMIC'') is a 
purchase of an interest in a security under HMDA and is not reported 
on the HMDA-LAR.]
    1. Mergers, purchases in bulk, and branch 
acquisitions. If a covered institution acquires loans in bulk from 
another institution (for example, from the receiver for a failed 
institution) but no merger or acquisition of the institution, or 
acquisition of a branch, is involved, the institution reports the 
loans as purchased loans. Section 203.5'Disclosure and 
Reporting
    5(a) Reporting to agency.
    1. Submission of data. Institutions submit data to 
their supervisory agencies in an automated, machine-readable form. 
The format conforms to that of the HMDA-LAR. An institution should 
contact its federal supervisory agency for information regarding 
procedures and technical specifications for automated data 
submission; in some cases, agencies also make software for automated 
data submission available to institutions. The data are edited 
before submission, using the edits included in the agency-supplied 
software or equivalent edits in software available from vendors or 
developed in-house. (Institutions that report twenty-five or fewer 
entries on their HMDA-LAR may collect and report the data in paper 
form. An institution that submits its register in nonautomated form 
sends two copies that are typed or computer printed and must use the 
format of the HMDA-LAR (but need not use the form itself). Each page 
is numbered, and the total number of pages are given (for example, 
``Page 1 of 3'').
    2. Procedures for entering data. The required data are entered 
in the register for each loan origination, each application acted 
on, and each loan purchased during the calendar year. The 
institution should decide on the procedure it wants to follow--for 
example, whether to begin entering the required data, when an 
application is received, or to wait until final action is taken 
(such as when a loan goes to closing or an application is denied).
    3. Options for collection. An institution may collect data on 
separate registers at different branches, or on separate registers 
for different loan types (such as for home purchase or home 
improvement loans, or for loans on multifamily dwellings). Entries 
need not be grouped on the register by metropolitan area, or 
chronologically, or by census tract numbers, or in any other 
particular order.
    [1.] 4. Change in supervisory agency. If 
the supervisory agency for a covered institution changes (as a 
consequence of a merger or a change in the institution's charter, 
for example), the institution must report data to its new 
supervisory agency for the year of the change and subsequent years.
    [2] 5. Subsidiaries. An institution is a 
subsidiary of a bank or savings association (for purposes of 
reporting HMDA data to the parent's supervisory agency) if the bank 
or savings association holds or controls an ownership interest that 
is greater than 50 percent of the institution.
    6. Transmittal sheet--additional data submissions. 
Each additional data submission that becomes necessary (for example, 
because the institution discovers that data were omitted from the 
initial submission, or because revisions are called for) must be 
accompanied by a separate transmittal sheet.
    7. Transmittal sheet--revisions or deletions. If a data 
submission involves revisions or deletions of previously submitted 
data, state the total of all line entries contained in that 
submission, including both those representing revisions or deletions 
of previously submitted entries, and those that are being 
resubmitted unchanged or are being submitted for the first time. 
Depository institutions must provide a list of the metropolitan 
areas in which they have home or branch offices.
    5(b) Public disclosure of statement.
    1. Business day. For purposes of Sec. 203.5, a business day is 
any calendar day other than a Saturday, Sunday, or legal public 
holiday.
    2. Format. An institution may make the disclosure statement 
available in paper form or, if the person requesting the data 
agrees, in automated form (such as by PC diskette or computer tape).
    5(c) Public disclosure of loan/application register.
    1. Format. An institution may make the modified register 
available in paper or automated form (such as by PC diskette or 
computer tape). Although institutions are not required to make the 
modified register available in census tract order, they are strongly 
encouraged to do so in order to enhance its utility to 
users.
    5(e) Notice of availability.
    1. Poster--suggested text. [The suggested wording of the poster 
text provided in Appendix A of this part is optional. An institution 
may use other text that meets the requirements of the regulation.] 
An institution may use any text that meets the 
requirements of the regulation. Some of the federal financial 
regulatory agencies and HUD provide HMDA posters that an institution 
can use to inform the public of the availability of its HMDA data, 
or the institution may create its own posters. If an institution 
prints its own, the following language is suggested but is not 
required:

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. Inquire 
at this office regarding the locations where HMDA data may be 
inspected.
    2. Additional language for institutions making the disclosure 
statement available on request. An institution that posts a notice 
informing the public of the address to which a request should be 
sent could include the following sentence, for example, in its 
general notice: ``To receive a copy of these data send a written 
request to [address].''

Section 203.6--Enforcement

    6(b) Bona fide errors.

[[Page 78685]]

    1. Bona fide error--information from third parties. An 
institution that obtains the property-location information for 
applications and loans from third parties (such as appraisers or 
vendors of ``geocoding'' services) is responsible for ensuring that 
the information reported on its HMDA-LAR is correct. [An incorrect 
entry for a census tract number is a bona fide error, and is not a 
violation of the act or regulation, provided that the institution 
maintains reasonable procedures to avoid such errors (for example, 
by conducting periodic checks of the information obtained from these 
third parties).]

    By order of the Board of Governors of the Federal Reserve 
System, December 8, 2000.
Jennifer J. Johnson,
Secretary of the Board.

[FR Doc. 00-31796 Filed 12-14-00; 8:45 am]
BILLING CODE 6210-01-P