The Home Mortgage Disclosure Act (HMDA) data provide an interesting lens through which to view the “Mortgage Meltdown” and its impacts on the demographics of mortgage lending. The data also provide clues about the future focus of examination and enforcement activity, as well as about areas of possible reputation and litigation risk. Our analysis of the 2008 HMDA data suggests that regulatory attention on underwriting may increase, and that fairness in FHA and VA lending is likely to receive greater scrutiny.
A key public policy motivation behind HMDA data reporting requirements – and their expansion to include pricing in 2004 – was to increase market transparency with respect to credit availability and equal credit opportunity, in addition to providing regulators a tool for monitoring and enforcement. However, we have learned over the past few years that a variety of broad market factors can cause large swings in fair lending performance measures that have little to do with the fairness of mortgage lending. Some recent factors that have had an influence on the HMDA data include changes in
- short-term interest rates in relation to long-term rates (the yield curve);
- market credit risk premia and liquidity risk;
- the availability and cost of private mortgage insurance relative to government insurance or guarantees; and
- lender credit standards.
In this paper, we provide some insights on major trends in the HMDA data, both in the aggregate and by state, and in terms of differences by racial, ethnic and income group. These statistics should help readers benchmark where their institution stands in relation to the overall market. We also suggest what the data may indicate about the direction of regulatory attention, which fair lending compliance professionals should consider in focusing their monitoring and analysis efforts.