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**U. S. Department of Housing and Urban Development**

Washington, D.C. 20410-8000

January 5, 1995

**MORTGAGEE LETTER 95-03**

TO: ALL NON-SUPERVISED, FHA-APPROVED MORTGAGEES AND LOAN CORRESPONDENTS

AND OTHER NON-DEPOSITORY LENDING INSTITUTIONS SUBJECT TO HMDA

REPORTING

**SUBJECT:** Home Mortgage Disclosure Act (HMDA) Update

The purpose of this letter is to clarify the Home Mortgage Disclosure
Act

(HMDA) reporting requirements and to remind recently approved HUD
mortgagees of

their reporting responsibilities. Please be advised that the deadline is
March 1, 1995 for

calendar year 1994 reports, although we will accept your report as early
as January 2nd.

Attached are some materials which may be helpful to you: (1) flow chart
of

coverage criteria for nondepository lending institutions, (2)
Broker/Loan Correspondent

scenarios and examples of their reporting responsibilities, (3) tips on
reporting and (4) a

copy of the latest HMDA Guide.

Each time you send your HMDA report to the Department \-- either your
initial

submission or corrections \-- you should receive an error report
reflecting your status after

your latest submission is processed. If you do not receive this feedback
within a

reasonable amount of time, you should view this as reason to be
concerned that your

report may not have reached us.

WHO MUST REPORT

Please refer to Attachment 1, Coverage Criteria Flow Chart and
Attachment 2,

Brokers and Loan Correspondents (including example situations).

If you are a Broker or Loan Correspondent, it is important to note that
only those

applications for which your company made the credit decision must be
considered when

interpreting the coverage criteria. If you did not make the credit
decision on any loans at

all, except for denials that you did not send forward to your
investor/sponsor, then you

did not meet the 100-loan \"origination\" threshold for HMDA. However,
you are

required to report only those withdrawals/denials that were FHA
applications to HUD.

Clarification for 1994: Denials do not count towards the 100-loan
origination threshold.

-2-

Some lenders thought they did not have to report in 1993 because they
had less

than \$10 million in assets. Effective January 1993, even if your assets
are less than \$10

million, you are required to report if you made the credit decision on
100 or more

originations of home purchase loans (including refinancings of home
purchase loans),

assuming you meet the other coverage criteria. Further, if your
institution meets all the

conditions in the coverage criteria, it must report all mortgage
activity \-- including FHA,

VA, conventional and FmHA \-- not just FHA activity. If you are exempt
from HMDA,

Regulation C, then you must report to HUD any FHA activity on which you
made the

credit decision. If you are a Loan Correspondent that does not make loan
decisions,

your sponsor bears the reporting responsibility for FHA activity. Please
note that the

same is true for FHA Title I lenders, contrary to instructions in
Mortgagee Letter 94-22;

i.e., for HMDA purposes, the sponsor bears the reporting responsibility.

If you are required to report to a regulator other than HUD, please do
not report

to HUD as well; this results in duplicate reporting. Finally, if you
find that your report-

ing status for 1994 is different from the way you reported for the 1993
cycle, please call

the HMDA hotline (202-755-7530) right away so that we may change your
reporting

panel classification for 1994. For example, if you reported only FHA
activity for 1993

but are required to report all activity for 1994, or vice versa, we need
to change your

status. If you reported in 1993 and determine that you are exempt for
1994, we need to

know that as well.

WHAT TO REPORT:

Report all applications for home-purchase and home-improvement loans

(including refinancings of both) for which action was taken \--
originated, denied,

withdrawn, etc. \-- during the calendar year covered by the current
register and loans that

you purchased during that period. Data are to be collected for both
1-to-4 family and

multifamily (5-or-more family) properties. Include applications that
were received in the

previous calendar year but were acted upon during the calendar year
covered by the

current register. Please do not report applications that were still
pending at the end of

the calendar year. Such cases increase your error count and subsequently
have to be

deleted, by you, from our HMDA database. FHA-approved lenders which have
no

activity to report should submit a negative report in the form of a
completed and signed

Transmittal Sheet along with the notation \"Negative Report\" either on
the Transmittal

itself or as an attached note.

CHANGE IN 1995 PROCESSING SCHEDULE:

The HMDA subcommittee has made a change in the 1995 processing schedule
for

1994 data. To move up the deadline for delivering the data to the
central depositories

throughout the country, the two-week period for institutions to review
and change the

preliminary disclosure statements has been eliminated. However, your
institution will

-3-

have the opportunity of reviewing its data via the Institution Register
Summary (IRS)

which we will begin generating to accompany each error report. Our final
delivery of all

data to the Federal Reserve Board is scheduled for May 24th, therefore
all corrections

would have to be received at HUD at least one week prior to that date to
allow time for

processing. Any subsequent corrections would not be reflected in your
disclosure report

nor in any of the products released to the public.

ADMINISTRATIVE SANCTIONS:

Due to the importance of accurate and timely submission of HMDA data, a

violation of HMDA is subject to administrative sanctions, including the
imposition of civil

money penalties, where applicable. An unreported, inaccurate or late
HMDA data

submission constitutes such a violation. The Mortgagee Review Board has
imposed such

penalties for noncompliance.

1994 HMDA SOFTWARE:

By now, you should have received the 1994 HMDA Software which was mailed
to

our HUD reporters in January. If you do not have the software and would
like to obtain

it, you can request it by calling the hotline. Please note that earlier
versions of the soft-

ware must not be used for 1994 data due to revised geographic boundaries
(see below).

NEW METROPOLITAN STATISTICAL AREA (MSA) DESIGNATIONS:

Beginning January 1, 1994, HMDA reporters are required to use the
current

metropolitan statistical area (MSA) designations as revised by the
Office of Management

and Budget on June 30, 1993. The 1994 HMDA software provided by the
Department

contains these new designations and will edit your records accordingly.
If you use some

other automated system to compile your data, please ensure that you are
using the

proper geographic codes. It is the responsibility of the lending
institution to obtain all

materials needed to determine the MSA, state, and county codes and the
census tract

numbers. The \"Guide\" lists the sources of geographic information and
where to obtain

them. Another alternative is to procure the services of a private vendor
which can

geocode your data or provide you with a system which conforms to the
specific reporting

requirements of HMDA.

AUTOMATION

All institutions are strongly encouraged to automate the data collection
and

reporting process. If institutions report more than 100 application and
loan entries, they

are expected to submit the data in machine-readable form. To facilitate
automated

reporting, the Department provides PC software, free of charge, for use
by institutions

that have not acquired or developed their own system.

-4-

LOAN AMOUNT AND INCOME

Please take care to report both Loan Amount and Annual Income rounded to
the

nearest thousand, as instructed. For example, a loan amount of \$98,500
should be

reported as \"00099\", not \"98500\". The latter translates to
\$98,500,000. Similarly, an

Annual Income of \$59,850 should be reported as \"0060\".

PREQUALIFICATION PROGRAMS

The Federal Reserve Board recently determined that lenders are not to
include

data about prequalifications in HMDA-LARs for CY 1994 or CY 1995. If
data about

prequalifications are or have been collected under your data collection
system, you are

asked to remove these entries before submission, but only if you can
easily do so.

AMENDMENTS TO REGULATION C

The Federal Reserve Board is in the process of publishing amendments to

Regulation C which will soon be available. Compliance is mandatory for
the collection of

data that begins January 1, 1996, to be submitted to supervisory
agencies no later than

March 1, 1997. Institutions may comply with the amendments at their
option beginning

January 1, 1995.

Sincerely yours,

![](media/image2.png){width="2.5944444444444446in"
height="0.6236111111111111in"}

Nicolas P. Retsinas

Assistant Secretary for Housing-

Federal Housing Commissioner

Attachments

\*\*\* CHANGE OF ADDRESS/PHONE NO \*\*\*

The HMDA Processing Group recently moved to new quarters and the new

Hot Line number is 202-755-7530. Please note the two addresses listed
below;

i.e., when using one of the express (person-to-person) deliveries, the
courier

address is to be used and when using regular postal service, the mailing

address is required. This is very important to avoid loss/misrouting of
your

report.

Courier Address: Department of Housing & Urban Development

Housing - Information Systems Div., HFEI

ATTN: HMDA Processing

470 L\'Enfant Plaza

East Building, Suite 3119

Washington, DC 20024

Mailing Address: Department of Housing & Urban Development

Housing - Information Systems Div., HFEI

ATTN: HMDA Processing

451 7th Street, SW Room B-133

Washington, DC 20410-8000

ATTACHMENT 1

[[ATTACHMENT 1 Click Here to Download this
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Attachment 2

BROKERS AND LOAN CORRESPONDENTS

Rules for loan applications received through loan brokers or loan
correspondents require that

the data must be reported by the entity that makes the credit decision.
The following

situations do not address the overall HMDA coverage criteria, rather
they assume that the

entity responsible for reporting these loans meets the coverage
criteria.

A.FHA Applications:

The FHA Title I and Title II \"Sponsor/Loan Correspondent\" relationship
is

somewhat different from that of the general \"Lender/Broker\" situation
in that the

FHA-approved loan correspondent originates, processes, and closes FHA
loans in

its own name. The sponsor has an agreement to acquire loans from the
loan

correspondent. Under that agreement, the loan correspondent delivers
loan

applications to the sponsor; the sponsor evaluates the application,
makes a credit

decision, and informs the loan correspondent whether it is willing to
acquire the

loan. If the sponsor approves the application, the loan closes in the
name of the

loan correspondent and is then sold to the sponsor.

In this situation, the sponsor reports as originations those loans it
purchases and

as denials those loans it decides not to approve. The loan correspondent
does not

report any of these loans or applications.

If, however, the loan correspondent denies a loan application without
review by

the sponsor, the correspondent reports the application as a denial.

B.Non-FHA Applications:

Scenario 1: Lender has an agreement to acquire loans from a broker.

Under that agreement, the broker delivers loan applications to the
lender;

the lender evaluates the application, makes a credit decision, and
informs

the broker whether it is willing to acquire the loan. If the lender
approves

the application, the loan closes in the name of the lender, or closes in
the

name of the broker and is then acquired by the lender.

In this situation, the lender reports as originations those loans it
acquires

(whether or not they closed in its name), and as denials those
applications

it decides not to approve. The broker does not report any of these loans

or applications. (If the broker denies a loan application before it is

submitted to the lender, the broker reports the application as a denial,

assuming the broker is required to report under HMDA \-- see the
attached

examples.)

Attachment 2 (Cont\'d.)

-2-

Scenario 2: Lender agrees with the broker to acquire loans that meet the

lender\'s underwriting guidelines. Lender does not review loan
applications

prior to closing; broker makes the underwriting decision.

Broker reports the originations, denials, withdrawals. Lender reports as

purchases those loans it decides to acquire.

Scenario 3: Lender agrees with the broker to purchase loans that have

government or private insurance. Lender does not review applications

prior to closing.

Broker reports the originations, denials, withdrawals. Lender reports as

purchases those loans it decides to acquire.

Attachment 2 (cont\'d.)

-3-

Examples of Reporting Requirements

for Brokers/Loan Correspondents

For ease of description, the term \"brokered\" refers to applications
for which you did not make

the credit decision; rather, your investor(s) or sponsor made that
decision. The term

\"underwrote\" refers to applications for which you did make the credit
decision. \"Denied\" refers

to those applications that you denied without sending forward to your
Investor/Sponsor for a

credit decision.

Examples:

ACTIVITY REPORTING REQUIREMENTS

#1 Brokered 300 loans Met the 100-loan origination threshold and

Underwrote 101 loans is required to report 106 loans \-- the 101

Denied\* 5 loans on which you made the credit decision and

the 5 denials that you did not send forth

to your investor/sponsor. The 300

brokered loans will be reported by your

investor/sponsor.

#2 Brokered 300 loans Did not meet the 100-loan origination threshold,
thus

Underwrote 98 loans is exempt from HMDA, Regulation C. However, any

Denied\* 30 loans of the 98 originations and 30 denials that were

FHA must be reported to HUD in the HMDA format.

#3 Brokered 400 loans Did not do any originations at all, thus is exempt

Underwrote 0 loans from HMDA, Regulation C. However, any of the 101

Denied\* 101 loans denials that were FHA must be reported to HUD in

the HMDA format.

\* Please note that in addition to these denials, other applications for
which action was

taken without sending forth to your investor/sponsor are treated the
same \-- withdrawals,

for example.

Attachment 3

TIPS ON REPORTING YOUR HMDA DATA

1\. Respondent IDs and Mailing Labels

We identify your institution by your Respondent ID, which is your
10-digit FHA

ID (Tax-ID for those which are not FHA approved). It is very important
that all

IDs are correct on both the transmittal and loan application registers.
If the

respondent ID is incorrect, your company risks not getting credit for
reporting.

Please label the exterior of all diskettes and tapes with the following
information:

Respondent ID

Name of Institution

Address

Contact person and telephone number

Total LARs

Diskette Number (1 of 1, 1 of 2, etc.)

2\. Keep updated registers

For most institutions, HMDA is not a report that can be pulled together
in three

weeks, but rather a year-long process. Those who wait until December 31
are

asking for trouble \-- frequently having to use overtime, under stress
and prone to

making mistakes. We would encourage you to update your HMDA-LAR register

on an ongoing basis. If your institution is selected for review by the
Monitoring

Division of the Office of Lender Activities and Land Sales Registration,
one of

their tasks will be to review your HMDA register; this can occur at any
time

during the course of the year.

3\. Verify magnetic media

It is a good idea, and to your benefit, to copy your diskette(s)/tape(s)
before

sending to us. We have had damaged diskettes, corrupted files, etc.
requiring

replacements and yet some institutions had no backup to copy from. If
you are

sending tapes, please confirm that the tape can be successfully read
before

sending to us. Additionally, if you are using an IBM system, please turn
off the

\"data compression\", as this causes us a problem. Finally, please
package all tapes

and diskettes carefully as some of the \"hardware\" errors are caused by

tapes/diskettes damaged in transit.

Attachment 3 (Cont\'d.)

-2-

4\. MSA/State/County/Census Tracts

The Department can provide you with a diskette file or hard copy listing
of valid

MSA/STATE/COUNTY/CENSUS TRACT combinations. Please note, however,

that this information is intended for use only as a reference tool of
valid values for

those items. It is not to be used to choose tracts that simply pass
edits. As stated

earlier, you need to acquire the necessary tools to properly geocode
your data.

5\. Application definition

There has been some confusion regarding what constitutes an application.
Please

note reference materials listed below. In particular, the \"Commentary\"
on

Regulation B should be helpful.

6\. Observe deadlines

Each time you send in data, the Department will mail out an error
report. The

cover letter asks that you observe the ten day turnaround time for
corrections.

7\. Reference Materials

a.A Guide to HMDA Reporting, Getting it Right! This

document should be studied in its entirety. Describes

the reporting process, sources of geocoding

information, etc.

b.Regulation C, Home Mortgage Disclosure (12 CFR Part

203), issued by the Board of Governors of the Federal

Reserve System.

c.Official Staff Commentary on Regulation B, Equal Credit

Opportunity, issued by the Board of Governors of the

Federal Reserve System. See SECTION 202.2(f)

Application; paragraph 3, \"When an inquiry becomes an

application\" and paragraph 4, \"Examples of inquiries

that are not applications.\"

[[Attachment 4 Click Here to
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