We in the regulation, I mean mortgage, industry are all teaching ourselves about the new HMDA requirements. One particular issue that may catch your attention is the more nuanced demographic information to be collected, and how to get that right – especially when based only on visual observation.
I’m guessing this will be a big training topic this year. So let’s break it down!
“Disaggregated” Data
Soon HMDA will require us to collect “disaggregated” demographic information. According to the dictionary, that just means we’re taking this information (race and ethnicity) and breaking them down into more specific subcategories. So we report the category for “Native Hawaiian” but then also report a subcategory such as “Guamanian” or “Samoan.”
A picture of the new 1003 addendum (available here) might explain better:
Guessing Game When Applicant Declines to Self-Report?
So the question that arises is what happens when the applicant declines to provide this new demographic information. Are originators expected to become experts in demographic differences? Could you (assuming you’re a well-traveled professional with high cultural sensitivity) accurately fill in the particular tribe that a native american applicant belongs to?
Well the good news here is that when the lender has to fill in the demographic information (i.e. when the applicant declines to self-report), we do not have to try and guess at the disaggregated subcategories–we only need to report the main categories.
These main categories are …
For Ethnicity:
Hispanic or Latino
Not Hispanic or Latino
For Race:
American Indian or Alaska Native
Asian
Black or African American
Native Hawaiian or Other Pacific Islander
White
So the good news here is that you won’t need to devote time to training originators on the difference between these ethnic and racial subcategories.
Other Scenarios to Cover in Training
Developing a training on this demographic data topic? Well prepare for all the different scenarios that can arise. Here are several that come to mind and enough information to get you started:
1) Borrower reports more than one ethnicity or race
Don’t correct the borrower, just report what they have provided. There are some nuances here, such as when the borrower selects more than 5 races. See Appendix B #9 for more info.
2) Borrower applies by mail, online, or by phone, and fails to provide demographic information but also fails to check box “I do not wish to provide this information.”
If you meet the borrower in person to complete the application, you must ask for the demographic information. If they decline, then you report that they declined and leave the disaggregated subcategories blank. But if you do not hold an in person meeting until after the application process, then you are actually not required to collect their demographic data at all. Let’s see how this plays out in practice! Appendix B #12
3) Borrower provides incomplete demographic information
Generally, you report whatever they provided.
4) Borrower provides demographic information but also selects “I do not wish to provide this information”
Except for in-person applications, you will still report the data provided. Appendix B #13.
Thank you to Ben Giumarra, Spillane Consulting Associates, Inc., a member of our Education Committee, who with the support of other experts at SCA have put together this newsletter. RIMBA has received permission to forward this to RIMBA Members as a Value Added benefit.