What Happens If You Don’t Answer These 3 Simple Questions

You know those 3 demographic questions you’re expected to answer when you – or your client – applies for a loan?

The questions usually ask about the borrower’s gender, ethnicity, and race.

They have a purpose and you should never leave them blank.

The primary reason you are asked to specify your demographic isn’t because our government is “spying” on us.

When it boils down to it, it’s actually because our government is working to ensure that all communities and groups are treated fairly

These questions exist because of Regulation C, the Home Mortgage Disclosure Act.

What is the Home Mortgage Disclosure Act?

Enacted in 1975, the Home Mortgage Disclosure Act (HDMA), or Regulation C, requires financial institutions to report mortgage data for tracking and trending purposes. The law requires certain lenders to collect and report a variety of information they receive on loan applications and on loans they originate. This information includes:

  • Loan details such as loan type, type of property, owner-occupancy, amount of loan, interest rate, loan term, approval (or denial), and reason for denial if denied
  • Details about the borrower, including ethnicity, race, gender, age, and location
  • Financial details about the borrower, including credit score, gross annual income, loan-to-value ratio, debt-to-income ratio, points and fees applied, lender credits, prepayment penalties, and other stats

The data reported is used to:

  • Help municipalities determine the housing needs of their communities
  • Help inform public officials when drafting certain policies that make it easier for certain borrowers to qualify for a mortgage
  • Identify lending patterns that may be discriminatory so that changes can be made

Why We Need Regulation C

If you’re applying for a mortgage – or helping guide your buyer through the process of getting pre-approved for a home loan – it’s important to know that there is a reason for the endless demographic questions posed on the application.

In short, yours or your client’s answers to these questions are helping ensure lenders, public officials, and communities are meeting housing needs appropriately.

If you’re up for a little light reading, you can browse the HDMA’s latest collected mortgage data and trends at ConsumerFinance.gov.

You can also learn more about Regulation C at Investopedia.

Do You Have Questions on the HDMA or Other Lending Regulations?

I love helping educate my clients and Realtors on financial wellness and lending legality matters alike! Call me at 480-313-7103 or email me at sam@mindfulmoneyusa.com with your questions and to learn about the latest mortgage rates, the mortgage process, and the loan program right for you.