Regulators Offer Guidance on HMDA

Federal banking regulators have issued public guidance in a question and answer format that discusses the background and uses of the new Home Mortgage Disclosure Act pricing data that identifies subprime loans for the very first time and the limitations of that data."If the new HMDA data show that minorities pay more for loans than whites on average, will that difference prove unlawful discrimination? No. However, such a disparity indicate a need for closer scrutiny," the guidance says. Lenders are expected to use this guidance in responding to questions or accusations about their subprime lending activities. (Upon request, mortgage lenders are required to release their 2004 HMDA, including the new pricing data, starting March 31.) The guidance notes that the HMDA data is limited and does take into account credit scores, debt-to-income ratios and other factors that are important in pricing a loan. "Though the price data do not support definitive conclusions, they are a useful screen, previously unavailable, to identify lenders, products, applicants, and geographic markets where differences among racial or other groups are sufficiently large to warrant further investigation," the guidance says.