In 1975, the US Congress passed the Home Mortgage Disclosure Act. This act is further implemented by the Federal Reserve Board. This act requires mortgage lenders to disclose to the public, reports on public loan data.
There is a need to disclose mortgage data so that the community can be sure that the lenders are addressing the housing needs. With this data, the government can identify the home mortgage needs of individuals in a community. Also, reports on mortgage data can help the government decide if public funds are needed to finance the housing needs of people. With the mortgage data disclosed to the public, unfair practices and discriminating lending patterns can be identified.
Disclosure of public mortgage information is not only very useful to government agencies. This information can help potential investors, prospective home owners and real estate agents identify the pertinent loan data such as housing sales and interest rates in a specific area.
But the enactment of the Home Mortgage Disclosure Act does not require individuals to disclose information about their gender and ethnicity. But borrowers are still encouraged to do so because it can be very helpful in analyzing mortgage information.
The Home Mortgage Disclosure Act keeps an eye on the lending practices. If a lender is found out to be turning down loans for reasons such as gender and race, then the full force of the law will be dealt upon them. Discrimination and unfair lending practices are prohibited by the Home Mortgage Disclosure Act.
The Federal Reserve Board can also identify discrimination by reviewing the trend in approved loan applications. If it can be seen that loans are being granted to certain individuals on a neighborhood only, then an unfair lending practices may be happening. This illegal practice is called redlining. Also, if a lender seems to grant loans to a small number of people from a certain race, then they can be suspected of redlining.
The Home Mortgage Disclosure Act does not only cover initial mortgage loan applications. Information on second mortgage and refinance loan schemes should also be reported. The only exception for this is the equity line of credit. Reporting information about this is optional.
Information about home mortgage can be gathered from the lenders. Reporting of lending practices to the Federal Reserve Board is the sole responsibility of the lenders. Compliance with the ruling of the board will make sure that granting of loans is fair and just.