Disclosures
When buying a property it is very important that the buyer of the property is not in any way taken advantage of by the lending institution. It may happen that sometimes smaller lending institutions may try to take advantage of the borrower’s situation and charge a higher rate for the mortgage or any other discrepancies which may put the borrower at a disadvantage. The Government has taken steps to put a curb on such practices. There is an act which is known as the Home Mortgage Disclosure Act (HMDA). The Home Mortgage Disclosure Act was passed by the Congress in 1975 and brought into force by the Federal Reserve Board’s regulation C. In principal this act makes it mandatory to most of the financial institutions including banks, savings associations, credit associations and other lending institutions to make certain disclosures to the Government. These disclosures may include the number of mortgage applications received by the institution, whether the mortgage application has been sanctioned, the amount sanctioned, the interest and other details about the loan. The Government also seeks information on the location of the property.
These details are important for the government to analyze whether the financial institutions are playing their role in community development and if there are any discrepancies in the mortgage applications and sanctions. Another important factor that the Government tries to analyze from the HMDA is whether Government officials in distributing the public funds are attracting private investments to the areas where it is needed.
The total number of disclosures made by financial institutions in the year 2006 was around 36.8 million records submitted by as many as 8848 institutions. There is a Government institution known as the Federal Financial Institutions Examinations Council (FFIEC) which examines these records and prepares different reports for each Metropolitan Statistical Area (MSA) and Metropolitan Division (MD). This institution also prepares disclosure reports for the financial institutions.
Most of the home loans are covered in the HMDA data. There may be some which may not have records in HMDA such as a home-equity loan which is taken to pay for medical expenses or any other use. There are some cases where a home loan is not reported to the HMDA. If a financial institution does not have an office in the Metropolitan Statistical Area it is not mandatory for the institution to submit the data. Hence loans that are taken in the rural areas may not be reported to the HMDA.
If you are planning to take a home loan for buying your property it is suggested that you check the disclosure report of the financial institutions and decide on which institution to approach. These important steps help us from being put at a disadvantage.
