The Home Mortgage Disclosure Act (HMDA) was passed in 1975 in order to mitigate discriminatory practices in the mortgage market based on gender or race. Furthermore, this act also helps in stemming the trend of redlining in which certain geographical locations are discriminated against because of being a low income neighborhood or for ethnic or race issues. The law regulated and helps in decreasing discrimination by making it compulsory for some companies to disclose information related to their mortgage and mortgage lending practices.

• In addition to the above features HMDA also requires financial institutions to maintain and annually disclose data concerning home procurements, home purchase pre-approvals, home development, and refinance applications concerning 1 to 4 unit and multifamily residences. What’s more it also requires branches and loan centers to exhibit a HMDA placard or a poster. There are several criteria for a company in the United States to come under the purview of this Act.
• Although the criteria for coming under this Act vary from one year to another, there are many basic points that are taken into consideration. The company in question must have at least $37 million in assets, it should have made at least one mortgage loan in the preceding year, and the company is either Federally insured or has intended to sell at least one loan to Fannie Mae or Freddie Mac or is Federally regulated. Approximately 8600 companies are covered by HMDA.
• The companies that are covered under HMDA are required to maintain a Loan Application Register (LAR) in which details about the loan and other features related to the applicants is spelled out. The data included in the LAR usually comprises of the loan amount, the ethnicity of the applicant, the race of the applicant, the gender, whether the loan was approved or denied, the reason for the denial of the loan, if the denied loan had a specific interest rate that was above the threshold, the type of the loan, the location of the property, and the purpose of the loan.
• All the above mentioned factors are taken into account in order to judge whether the lending practices in the mortgage market are fair and legal in nature. There are several ways to determine and pinpoint if any company is following discriminatory practices in the mortgage market. For instance if a disproportionately large number of applications related to a particular race, gender, or geographical are rejected then there might be reason to suspect discrimination based on these factors which is illegal in the United States.
• The most common form of discrimination is called as redlining which involves discrimination based on the geographical location of the residence of the applicant. Usually lenders will increase the cost of a loan by hiking the interest rate on the same and this discrimination has its roots in the pre-dominance of ethnic minorities or a particular race or sex in that locale. Such discrimination that has its roots in race or religion or gender is deemed illegal in the United States. The practice of lending to low income white people and denying higher income African-Americans the same loan has been observed at least in the 1990’s.
• Therefore the basic aim of this Act is to stop discrimination in the mortgage market and provide legal and fair lending practices to consumers and mortgagors.

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