Mortgage Disclosure Act: How to Comply a Disclosure Improve

When beginning our journey in the real estate market we will discover terms and laws that will give us an idea of how the homebuying process works.

If you're not a lawyer or a real estate expert it’s quite certain that questions will arise.

In this article, we will talk about mortgages and some of their aspects, such as HMDA and MDIA. Our goal is to clarify their meaning, purpose and requirements. So, continue reading to understand a little more about real estate laws you should be aware of.

Is HMDA the same as MDIA in real estate?

No, HMDA is not the same as MDIA. They play a related role in regulating mortgage lending, but they serve different purposes within that context.

What is HMDA - Home Mortgage Disclosure Act?

Basically, the HMDA requires that lenders, like banks, keep records that are relevant to the history of the property in question. This means that loans and any other related details about the history of the property must be kept on record. These records must then be made available to prospective buyers.

What is MDIA - Mortgage Disclosure Improvement Act?

MDIA, on other hand, seeks to ensure that borrowers receive clear and transparent information about their mortgage loans, including any fluctuations in payment amount. This includes loans and any other activities a lender might execute in relation to a property. A good way to understand this more clearly is to look at the changes that result from MDIA regulation:

Changes as a result of MDIA regulation

Collection of Fees

The only fee that can be charged to the borrower prior to the loan application is a credit report fee. This fee is usually between $12-35 dollars.

New Business Day Definition

Business days include Monday through Saturday now. Any timelines regarding your mortgage will also include Saturday as a business day. Sundays and federal holidays are excluded.

Timing of Disclosure

Disclosures must be done within 3 days of the application. This has always been the case. A recently added regulation prohibits the buyer from closing within 7 days of the application. This gives the client time to review the loan terms offered to them.

APR (Annual Percentage Rate) Change

The borrower must be disclosed again if the APR changes by more than .125% since the last disclosure. The borrower cannot close for 3 days from last disclosure for regular transactions (fixed mortgages). Also, a change of more than .25% on irregular transactions such as an Adjustable Rate Mortgage (ARM), requires that the borrower be re-disclosed.

What is the purpose of the MDIA?

The MDIA was put in place on June 30th, 2009, for the purpose of protecting borrowers from paying excessive fees prior to receiving loan terms or disclosure. The only fee you are obligated to pay prior to this disclosure is the credit report fee.

What type of loan requires reporting under the Home Mortgage Disclosure Act?

Financial institutions are legally obligated to record data regarding home purchase loans, home improvement loans, and refinancings on a Loan/Application Register, also known as the HMDA-LAR.

When must HMDA data be collected?

THe Home Mortgage Disclosure Act requires financial institutions to collect specific data related to mortgage lending. The following outlines the timing of data collection:

Loan Application

As soon as a borrower submits a loan application to a covered financial institution, HMDA data collection begins. Examples of covered institutions are banks, credit unions, and other mortgage lenders.

Pre-Approval Requests

HMDA data is collected when a borrower makes a pre-approval request for a mortgage loan. In a pre-approval request, the lender evaluates the borrower's credit before the loan application.

Loan Origination

HMDA data collection also occurs through the loan origination process. These data include information on the borrower, the property, and the terms of the loan.

Loan Purchases

HMDA data must be collected when institutions purchase loans from other lenders. This data ensures accuracy and compliance with HMDA regulations.

Denied or Withdrawn Applications

HMDA data must be collected and reported if a loan application is denied or the borrower withdraws the application. Reasons for denial or withdrawal are included in this data.

Post-Approval Data

In some cases, additional HMDA data may need to be collected after loan approval, such as if there are changes in the loan terms.

What is a key requirement of HMDA?

One key requirement of HMDA (Home Mortgage Disclosure Act) is that data related to mortgage lending activities be recorded and reported to regulatory agencies. The key requirements of HMDA include:

Demographic Information

Demographic information about borrowers, such as their race, ethnicity, gender, and income are required by the HDMA. This information is pivotal for fair lending analysis as well as identifying potential discriminatory lending practices.

Geographic Data

Geographic data, including the location of the property and the census tract in which it is situated, must be reported by the financial institution. This data contributes to the assessment of lending patterns as well as access to credit in different communities.

Loan Terms and Features

HMDA requires that loan terms and features be reported. These include the interest rate, loan type (e.g., fixed-rate or adjustable-rate), loan purpose (e.g., home purchase or refinancing), and whether the loan is subject to specific regulations, such as the Home Ownership and Equity Protection Act (HOEPA).

Application Outcome

The outcome of each loan application must also be reported. Specifically, any data indicating whether the application was approved, denied, or withdrawn should be included. If the loan was denied, the reasons for denial must also be recorded.

Submission and Reporting

HMDA data must be submitted to the appropriate regulatory agency annually by the specified deadline, typically March 1st of the year following the calendar year for which the data was collected.

What does HMDA data include?

HMDA data include loan information, property location, applicant information, and pricing-related data.

Home Mortgage Disclosure Act: How to Comply a Disclosure Improve