HMDA at 35

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

1975 – 1989: Anti-Redlining

Congress passed HMDA in 1975 as a tool to end bank redlining of lower-income, predominantly minority, urban, and older neighborhoods. HMDA does not prohibit redlining, allow people to sue banks to stop it, or penalize lenders that engage in redlining. Instead, HMDA relies on the power of public disclosure of lending data to prevent redlining.

Initially, HMDA required lenders to disclose only the location of each home mortgage loan they made; it did not require lenders to disclose any information about the demand for loans, including the number of loan applications they received. Studies using this HMDA data often showed that lenders made relatively low numbers of home mortgage loans in low-income or predominantly minority neighborhoods. Lenders defended themselves against redlining charges by claiming there was limited demand for loans from these neighborhoods. The Fed generally agreed with lenders, stating that HMDA data were limited in their ability to show redlining because the data did not show the creditworthiness of the loan applicants or the level of demand for loans. Neither the Fed nor other federal agencies with authority under the Community Reinvestment Act (CRA) or the Fair Housing Act (FHA) to investigate redlining took action to investigate the findings. As a result, although there was strong evidence of redlining, the evidence had little impact.

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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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