What Makes a Loan HMDA Reportable?

The Home Mortgage Disclosure Act (HMDA) is a federal law that enhances transparency within the mortgage lending industry. Enacted in 1975, its purpose is to shed light on lending patterns, particularly in metropolitan areas. It helps identify potential discriminatory practices and assists public officials in fair distribution of public investments. Data provides insights into how financial institutions serve community housing needs, promoting accountability. HMDA monitors fair lending and fosters an equitable financial landscape.

Institutional Coverage

Financial institutions subject to HMDA reporting must meet specific criteria. For banks, savings associations, and credit unions, the primary determinant is asset size. Institutions with total assets of $56 million or less (as of December 31 of the preceding year) are generally exempt. This threshold is adjusted annually by the Consumer Financial Protection Bureau (CFPB) based on changes in the Consumer Price Index.

Beyond asset size, institutions also consider lending volume. They must have originated at least 25 closed-end mortgage loans or 200 open-end lines of credit in each of the two preceding calendar years. A home or branch office must be in a Metropolitan Statistical Area (MSA) or Metropolitan Division (MD) on the preceding December 31. They must also have originated at least one home purchase loan or refinancing secured by a first lien on a one-to-four-unit dwelling in the preceding calendar year. Federally regulated or insured institutions, or those selling loans to Fannie Mae or Freddie Mac, typically fall under HMDA if other criteria are met.

Loan Type and Purpose Coverage

A loan becomes HMDA reportable primarily based on its type and purpose, if not excluded. A “covered loan” is broadly defined as a closed-end mortgage loan or an open-end line of credit secured by a dwelling. Loan proceeds’ use dictates reportability, not just collateral.

Loans for home purchase, home improvement, and refinancings are generally considered covered loans. A home purchase loan acquires a dwelling; a home improvement loan repairs, rehabilitates, or upgrades it. Refinancings replace an existing dwelling-secured loan with a new one by the same borrower, often for better terms or debt consolidation. For example, a HELOC for a kitchen renovation is reportable as home improvement. If used solely for debt consolidation or medical expenses, it is not reportable unless it also funds a home purchase or improvement.

Business or commercial loans are reportable if secured by a dwelling and categorized as home purchase, home improvement, or refinancing. This means a loan’s residential purpose makes it reportable, even if a business is the borrower. A “dwelling” is any residential structure, regardless of attachment to real property. This includes:
Principal residences
Second homes
Vacation homes
Individual condominium units
Cooperative units
Manufactured homes
Investment properties

Covered Transactions and Properties

Beyond the loan’s type and purpose, HMDA reporting is triggered by specific actions related to a covered loan and the property’s characteristics. Reportable transactions include loan originations (closed and funded loans). Applications that do not result in an origination are also reportable, including those denied, withdrawn, or approved but not accepted.

Loans purchased by a financial institution from another entity are also reportable if they meet the covered loan definition. This captures lending activity across the mortgage market, regardless of the initial originator. The property securing the loan must be a HMDA-defined dwelling located within a Metropolitan Statistical Area (MSA) or Metropolitan Division (MD).

A “dwelling” includes single-family homes, individual condominium units, and manufactured homes. A multifamily dwelling houses five or more families. Mixed-use properties are reportable if the residential portion is the primary use.

Common Exclusions from Reporting

While HMDA’s scope is broad, several types of loans and transactions are excluded from HMDA reporting. Loans originated or purchased by an institution acting in a fiduciary capacity (e.g., as a trustee) are excluded because the institution is not acting in its primary lending role.

Loans secured by unimproved land are generally excluded, as the collateral does not meet the dwelling definition. Temporary financing loans are not reportable. An example is a construction-only loan to a builder for a dwelling for sale, with no permanent financing.

Agricultural loans, even if dwelling-secured, are typically excluded because their primary purpose is not residential housing finance. Purely commercial loans not for home purchase, home improvement, or refinancing are not reportable, even if secured by a residential structure. This also applies to structures originally designed as dwellings but used exclusively for commercial purposes, such as a home converted into an office.