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Thursday, October 17, 2019

Demographic Monitoring under HMDA

QUESTION
We are a lender subject to HMDA reporting requirements. We need some clarification regarding reporting government monitoring information, particularly when the applicant checks more than one category for race and/or ethnicity or does not check anything at all. Do we report all categories? Just one category? If the applicant does not check anything, do we report based on observation or surname?

ANSWER
“Government Monitoring Information” is now referred to as “demographic information” of the applicant, as it was thought that consumers would be reluctant to complete a form referencing government monitoring information. In 2015, the Consumer Financial Protection Bureau amended Regulation C, the implementing regulation of the Home Mortgage Disclosure Act, to expand the reporting categories of race and ethnicity to allow for more detailed categories.

Previously, ethnicity was reported as either “Hispanic or Latino” or “not Hispanic or Latino.” The foregoing are now referred to as “aggregated ethnic categories.” In addition to the aggregate categories, there are now five subcategories under the aggregate category “Hispanic or Latino” – “Mexican,” “Puerto Rican,” “Cuban,” and “Other Hispanic or Latino.” With regard to the latter subcategory, there is a free text form in which the applicant may provide a Hispanic or Latino ethnicity not listed in the standard subcategory.

As the creditor, you must report every aggregate ethnicity category selected by the applicant. If the applicant selected both “Hispanic or Latino” and “not Hispanic or Latino,” you must report both. Additionally, you must report every ethnic subcategory selected by the applicant. However, you must not report more than a total of five aggregate ethnic categories and subcategories. If the applicant selected more than five, you must report the aggregate categories selected and any three subcategories selected. In this scenario, it is the lender’s choice as to which selected subcategories will be reported. 

The reporting categories for race have also been expanded.

There are five aggregate categories: “American Indian or Alaska Native,” “Asian,” “Black or African American,” “Native Hawaiian or Other Pacific Islander,” and “White.”  “Asian” has seven subcategories, which include “Asian Indian,” “Chinese,” “Filipino,” “Japanese,” “Korean,” “Vietnamese,” and “Other Asian.”  With respect to the latter subcategory, there is a free text form in which the applicant may provide an Asian race not listed in the standard subcategory. “Native Hawaiian or Other Pacific Islander” includes four subcategories; “Native Hawaiian,” “Guamanian or Chamorro,” “Samoan,” and “Other Pacific Islander” with the latter category again including a free text form. Additionally, the “American Indian or Alaskan Native” aggregate category includes a free text form in which the applicant can provide a particular American Indian or Alaska Native enrolled or principal tribe.

Similar to the reporting of ethnicity data, as the creditor, you must report every aggregate race category selected by the applicant. Additionally, you must report every subcategory selected by the applicant provided that the total number of aggregate and subcategories reported do not exceed five. If the total exceeds five, it is in your discretion as the lender as to which subcategories to report. For example, if the applicant selects “Asian,” “White,” “Chinese,” “Vietnamese,” “Filipino,” and “Korean,” the lender must report “Asian” and “White” and then choose three of the four subcategories to report.

In the event the applicant does not provide the ethnicity and race information and the application was  by mail, telephone, or the internet or other electronic medium which does not allow the lender to see the applicant, the lender does not need to make an additional request for the information and should leave the data fields blank. In the event the application was taken in person or was submitted via an electronic medium that allowed the lender to see the applicant, the lender must note the monitoring information on the basis of visual observation or surname. 

Note that if the lender is collecting information based upon visual observation or surname, the lender may only select from the aggregate ethnicity and race categories. If the applicant checks the “I do not wish to provide this information” box on an application taken by mail or the internet or, with respect to a telephone application, orally states that he or she does not wish to provide the required information, as the lender, you should report “information not provided by applicant in mail, internet or telephone application”. 

If the applicant provides some, but not all, of the demographic monitoring information, as the lender, you should only report selected by the applicant, even if the applicant has also selected the “I do not wish to provide this information box.” 

If an applicant who did not provide the demographic information began the application by telephone or mail and then later completes it by meeting with a loan officer in person, the loan officer should collect the information based on observation or surname.

Concerning guarantors, no demographic monitoring information should be collected. With respect to co-applicants, the demographic monitoring information for the co-applicant should be collected. If there is more than one co-applicant, the lender should only collect the first co-applicant’s information.

Joyce Wilkins Pollison, Esq.
Executive Director/Lenders Compliance Group
Director/Legal and Regulatory Compliance