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October 2, 2003



To: The Chief Executive Officer
All Farm Credit System Institutions

From: Roland E. Smith, Director
Office of Examination

Subject: Regulation C, Home Mortgage Disclosure Act


The Board of Governors of the Federal Reserve System has made revisions to Regulation C (12 CFR 203), the implementing regulation for the Home Mortgage Disclosure Act (HMDA) (12 USC 2801 et seq.), as amended, as well as to the commentary interpreting the regulation. Most of the changes become effective January 1, 2004, for data required to be reported by March 1, 2005. However, two changes became effective January 1, 2003, for data required to be reported by March 1, 2004.

Changes effective January 1, 2003, for data to be reported by March 1, 2004, include:

• Lenders subject to reporting data under HMDA must use 2000 census data rather than using data based on the 1990 census.

• Lenders are required to request information about race or national origin, and sex for applications taken entirely by telephone.

• Nondepository lender coverage is expanded to include nondepository lenders originating more than $25 million of home purchase loans a year. The final rule retains the existing 10 percent of total loan volume test.

• Lenders are required to request information about ethnicity, race, and sex for applications taken entirely by telephone.

• Applications covered by the regulation are expanded to include requests for a preapproval in which a lender issues a written commitment to extend a home purchase loan to the applicant up to a specified amount valid for a designated period of time, subject to limited conditions. Lenders are required to report: (1) denials of requests for preapprovals as defined in the rule, and (2) preapprovals that result in a loan origination. Lenders are also permitted, but not required, to report preapproval requests that are approved but not accepted by the applicant.

• Expansion of categories of data reported:

Loan pricing data. Lenders must report the rate spread between the annual percentage rate on a loan and the yield on comparable Treasury securities if the spread is equal to or greater than 3 percentage points for first lien loans, or equal to or greater than 5 percentage points for subordinate lien loans. To minimize burden, such reporting will be required only on originations of home purchase loans, secured home improvement loans, and refinancings (as defined below). The following are excluded from this reporting requirement: (1) applications that are incomplete, withdrawn, denied, or approved but not accepted; (2) purchased loans; and (3) unsecured home improvement loans.

HOEPA status. Lenders must report whether the loan is subject to the Home Ownership and Equity Protection Act of 1994 (HOEPA), 15 USC 1639.
Manufactured home data. Lenders must report whether a loan or application involves a manufactured home, as defined under 24 CFR 3280.2. Lenders may report the property type as a one- to four-family dwelling if they do not know at the time of application and cannot determine through reasonable means whether the loan is for a manufactured home.
Lien status. For originated loans and applications, but not purchased loans, lenders are required to report whether a loan is or would be: (1) secured by a first lien or a subordinate lien on a dwelling; or (2) not secured by a lien on a dwelling.

Simplification of the definitions of “refinancing” and “home improvement loan:”

Refinancing. The rule defines refinancing as a new obligation that satisfies and replaces an existing obligation by the same borrower, in which: (1) for coverage purposes, the existing obligation is a home purchase loan, and both the existing obligation and the new obligation are secured by first liens on dwellings; and (2) for reporting purposes, both the existing obligation and the new obligation are secured by liens on dwellings.
Home improvement loan. The rule revises the definition of home improvement loan to include all dwelling-secured loans that are made in whole or in part for home improvement purposes. Lenders may rely on applicants’ statements to determine whether a loan is for home improvement purposes, and are not required to take other steps to determine the purpose of the loan. For home improvement loans not secured by a dwelling, the current provision will still apply. These loans will be reported if the loan is for home improvement purposes and the institution classifies the loan as a home improvement loan.

Conforming HMDA data collection to Office of Management and Budget (OMB) guidance on race/ethnicity reporting:

Consistent with OMB’s guidance, an applicant will be allowed to designate all racial groups that are applicable. In addition, information regarding Hispanic or Latino ethnicity will be collected separately and prior to information on race. Under the revised standards, there are five racial designations: American Indian or Alaska Native; Asian; Black or African American; Native Hawaiian or Other Pacific Islander; and White. Applicants will be offered the option of selecting one or more racial designations. “Other” is no longer an option for race reporting.
Guidance on how to aggregate data on race and allocation of multiple race responses is included in the attached OMB Bulletin No. 00-02, Guidance on Aggregation and Allocation of Data on Race for Use in Civil Rights Monitoring and Enforcement.

OMB Bulletin No. 00-02 (March 9, 2000)
67 FR 7222 (February 15, 2002)
67 FR 30771 (May 8, 2002)
67 FR 43217 (June 27, 2002)
67 FR 43218 (June 27, 2002)