Home Mortgage Lending by Applicant Race/Ethnicity: Do HMDA Figures Provide a Distorted Picture?

The views expressed are the author's and do not necessarily reflect the views of the Federal Reserve Bank of Chicago or the Federal Reserve System. Abstract The Home Mortgage Disclosure Act of 1975 (HMDA) was designed to further the goal of fair access to mortgage credit and requires lenders to report information including the location, loan amount, income, and the race/ethnicity and sex of the applicant(s) for each application taken by the lender. However, the race/ethnicity of applications taken by mail or phone is not provided in a significant proportion of applications. Given the widespread use of HMDA data by lenders, community groups, researchers, and regulators and the importance of mortgage lending as a public policy issue, the strengths and shortcomings of the data must be clearly understood. The main findings are that reported approval rates by race/ethnicity are significantly overstated for refinance and home improvement loans, whereas home purchase loans are little affected by this reporting problem. A review of trends in how race/ethnicity is reported and in the technology of mortgage lending leads to the reasonable conjecture that missing race/ethnicity will become a bigger and bigger problem in the near future.