HMDA at 35

The improved Home Mortgage Disclosure Act can be a tool for fighting predatory lending, but it could and should go further.

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 not only overhauled Wall Street and created the Bureau of Consumer Financial Protection (BCFP), it also amended the Home Mortgage Disclosure Act (HMDA) to require lenders to disclose new information that will help advocates fight against predatory lending. Although the new disclosures will be helpful, they unfortunately do not provide enough information to maximize HMDA’s effectiveness in preventing predatory lending.

The Consumer Protection Act (CPA) amendments to HMDA continue key themes in HMDA’s history. HMDA’s mission has been expanded several times, from preventing redlining to deterring lending discrimination to deterring reverse redlining, with concomitant increases in the amount of information lenders are required to disclose. The CPA amendments again expand HMDA’s mission, and the disclosures it requires, this time to cover preventing predatory lending.

At the same time, Congress and the Federal Reserve have regularly stopped short of requiring lenders to disclose all the information necessary to accomplish HMDA’s expanding mission. As a result, the effects of the disclosures have been mixed because of the lack of complete information, despite the fact that HMDA data have shown evidence that lenders have engaged in redlining, lending discrimination, and reverse redlining. In the CPA, Congress failed to require lenders to provide enough information to identify all predatory loans, and so the impact of the CPA’s HMDA amendments may be limited as well.

But there’s hope. The new information will identify many forms of predatory loans. Additionally, BCFP is allowed to require lenders to disclose additional information. Hopefully, the BCFP will heed HMDA’s history and maximize the value of HMDA as a tool to fight predatory lending by requiring lenders to disclose enough information to identify all their predatory loans.

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Richard D. Marsico is a professor of law at New York Law School. This article is based on his “Looking Back and Looking Ahead as the Home Mortgage Disclosure Act Turns Thirty-Five: The Role of Public Disclosure of Lending Data in a Time of Financial Crisis,” Review of Banking and Financial Law 29 (2009-2010): 205.

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