Home Mortgage Disclosure

FEDERAL RESERVE SYSTEM

12 CFR Part 203

[Regulation C; Docket No. R-0839]

Home Mortgage Disclosure

AGENCY: Board of Governors of the Federal Reserve System.

ACTION: Proposed rule.

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SUMMARY: The Board is publishing for public comment proposed changes to

Regulation C (Home Mortgage Disclosure) and to the instructions and

reporting forms that financial institutions must use in complying with

the annual reporting requirements under the regulation. The principal

reasons for the proposed amendments are to respond to the statutory

provisions regarding earlier availability of the HMDA disclosure

statements to the public; help improve the quality of the HMDA data;

and provide clarifications requested by financial institutions that

report under HMDA. The amendments would set an earlier deadline for

reporting HMDA data to supervisory agencies; require reporting in

machine-readable format; require institutions to keep their loan

application registers current during the year as data are being

collected; and make a number of other changes.

DATES: Comments must be received on or before August 10, 1994.

ADDRESSES: Comments should refer to Docket No. R-0839 and be sent to

William W. Wiles, Secretary, Board of Governors of the Federal Reserve

System, Washington, DC 20551. They may also be delivered to the guard

station in the Eccles Building courtyard on 20th Street, NW. (between

Constitution Avenue and C Street on 20th Street NW (between

Constitution Avenue and C Street, NW.) between 8:45 a.m. and 5:15 p.m.

weekdays. Comments received will be available for inspection and

copying by any member of the public in the Freedom of Information

Office, room B-1122 of the Eccles Building, between 9 a.m. and 5 p.m.

weekdays.

FOR FURTHER INFORMATION CONTACT: Jane Jensen Gell or W. Kurt

Schumacher, Staff Attorneys, or John C. Wood, Senior Attorney, Division

of Consumer and Community Affairs, Board of Governors of the Federal

Reserve System, Washington, DC 20551, at 202/452-2412; for the hearing

impaired only, contact Dorothea Thompson, Telecommunications Device for

the Deaf, at 202/452-3544.

SUPPLEMENTARY INFORMATION:

(1) Background

The Board's Regulation C (12 CFR part 203) implements the Home

Mortgage Disclosure Act of 1975 (HMDA) (12 U.S.C. 2801 et seq.). The

regulation requires most mortgage lenders located in metropolitan

statistical areas (MSAs) to report annually to federal supervisory

agencies, and disclose to the public, information about their home

mortgage and home improvement lending activity. The reports and

disclosures cover loan originations, applications that do not result in

originations (for example, applications that are denied or withdrawn),

and purchases of loans. Information reported includes the location of

the property to which the loan or application relates; the race or

national origin, gender, and income of the applicant; and the type of

purchaser for loans sold in the secondary market. For denied

applications, lenders are also permitted to report the reasons for

denial.

Lenders are required to report originations, applications, and

purchased loans for each calendar year to their supervisory agency by

March 1 of the following year. The reports are made on a HMDA Loan/

Application Register (HMDA-LAR) in a transaction-by-transaction format;

for reports containing more than 100 entries, lenders currently are

expected to submit the data in automated form (magnetic tape or

diskette). The lender's supervisory agency submits the data to the

Federal Reserve Board, which processes the data on behalf of member

agencies of the Federal Financial Institutions Examination Council

(FFIEC) and the Department of Housing and Urban Development. The Board

then prepares public disclosure statements for each reporting lender

and aggregate reports covering the data for all lenders in a

metropolitan area. The statements are sent to lenders, generally by

July or August, and the lenders are required to make the statements

available to the public at their home office and at certain branch

offices.

Although lenders must make the disclosure statements available

within three business days, they have a thirty-day period within which

to review the statements prepared by the Board and to report any

discrepancies to the agencies. After necessary revisions have been

made, the Board prepares and sends disclosure statements for all

reporting lenders in each MSA, along with aggregate disclosure tables

covering all such lenders, to a central data depository in each MSA.

The central depositories are usually public libraries, regional

planning agencies, or other public offices; the disclosures are

generally sent to the depositories by October.

(2) Explanation of Proposed Amendments

One of the principal reasons the Board is proposing to amend

Regulation C is the need to make HMDA data available to the public

earlier than has been the case in the past. Statutory amendments to

HMDA enacted in 1992 provide that starting with the HMDA reports for

calendar year 1994, disclosure statements for individual lenders should

be available to the public by July 1 of the following year, and that

aggregate tables should be available at the central depositories by

September 1.

To meet this timetable, it will be necessary for the agencies to

begin processing the raw data earlier than March 1. Therefore, the

proposed amendments include a change in the deadline for data

submission, requiring lenders to submit their data by February 1

instead of March 1. Some of the other proposed amendments also are

intended, in part, to facilitate earlier availability of the data (see

discussion concerning the proposed change to Sec. 203.5(a), below).

Another important reason the Board is proposing amendments to

Regulation C relates to the accuracy of the HMDA data. The accuracy of

the HMDA reports produced under the new data collection system that was

instituted in 1990 (following an expansion of the data collected under

HMDA) has improved in each succeeding year, but concerns continue to

exist about data quality. A major part of what is involved in ensuring

data accuracy relates to matters that are in the control of reporting

institutions; for example, lending institutions must devote adequate

resources to the task of accurately compiling and checking data before

reporting it. However, to the extent that any requirements of the

regulation are unclear or complicated, consistent and accurate

reporting is more difficult. Accordingly, some of the proposed

amendments now being published are intended in whole or in part to make

the reporting requirements clearer or simpler. In addition, another

proposed amendment calls for reporting in machine-readable format; this

change also should help improve data quality, as discussed below.

The Board solicits comment generally on other ways in which

Regulation C might be changed to better address problems of accuracy of

the HMDA data. For example, would allowing or requiring all home equity

lines to be reported--rather than only the portion of a line the

borrower intends to use for home improvement or home purchase--simplify

reporting and bring about greater consistency? Would the same be true

for other categories of loans? (On a similar point, refer to the

discussion of possible changes in the types of refinancings that should

be reported, in section (3), ``Other Matters on Which the Board

Solicits Comment,'' below.) Are there areas in which explanations could

be made simpler or clearer, thereby facilitating more accurate

reporting?

The Board notes its intention to publish within the next several

months a proposed staff commentary to Regulation C. The commentary will

provide a vehicle for interpretations that would help lenders better

understand and comply with the regulation's requirements. The

commentary will supplement the detailed instructions provided in

appendix A to Regulation C for completion of the HMDA-LAR and in the

Guide to HMDA Reporting: Getting It Right, the brochure published by

the FFIEC and distributed by the individual agencies. The Board is in

the process of drafting the commentary, and solicits comment from

lenders identifying specific areas that the commentary should address.

Set forth below is a section-by-section discussion of the proposed

amendments to the regulation.

Section 203.2--Definitions

Paragraph (f)--Home Improvement Loan

The proposal would revise the regulation's definition of ``home

improvement loan'' to facilitate compliance. The existing definition

sets two conditions: first, that the loan applicant state, at the time

of the application, that the loan is for the purpose of repairing,

rehabilitating, or remodeling a dwelling; and second, that the loan be

classified in the records of the financial institution as a home

improvement loan.

One change proposed by the Board relates to the first part of the

definition--that the loan be for the purpose of repairing,

rehabilitating, or remodeling a dwelling. Questions have arisen about

situations in which a loan is made for the purpose of making

improvements to the borrower's residential property, but not, strictly

speaking, to the ``dwelling'' as defined under Regulation C. The

regulation defines dwelling as a residential structure, whether or not

attached to real property. Thus, for example, a dwelling under

Regulation C includes a house, apartment building, or mobile home, but

not necessarily the land upon which the house or other structure is

located. Some institutions have asked whether a loan for building or

repairing things such as a detached garage, a driveway, a fence, or

landscaping should qualify as a home improvement loan for HMDA

purposes.

To avoid technical distinctions based on whether a loan relates to

the structure or to the land on which it is situated, the Board

proposes to change the home improvement loan definition to focus

primarily on the applicant's statement of purpose for the loan. Thus, a

loan would qualify as a home improvement loan for HMDA purposes if the

applicant states, at the time of the loan application, that the loan is

for ``home improvement purposes.''

The Board also proposes to eliminate the second part of the

definition, which would make the manner in which an institution

classifies a loan irrelevant to its treatment for HMDA purposes. This

part of the definition was originally intended to minimize the

regulatory burden on financial institutions, by not requiring an

institution to report a loan as a home improvement loan on its HMDA-LAR

if the institution did not record the loan as a home improvement loan

for other purposes. Many institutions now indicate that they would like

to report loans that in fact are for home improvement purposes, but

they find it difficult to do so because the loans may not be

``classified'' in the institution's records as home improvement loans.

Removing the classification test would resolve this problem. However,

the Board solicits comment on the extent to which this proposed change

would create significant compliance burdens for institutions that do

not currently record such loans on the HMDA-LAR but now would be

required to do so. Comment is also requested generally on the overall

advantages and disadvantages of making this change.

Section 203.4--Compilation of Loan Data

Paragraph (a)--Data Format and Itemization

Maintenance of LARs on current basis. The regulation currently

requires covered institutions to report HMDA data for a given calendar

year to supervisory agencies by March 1 of the following year, but does

not specify when the data must be recorded on the HMDA-LAR. The Board

proposes to require institutions to fully record transactions within

one month after final action is taken (such as origination of a loan,

or denial or withdrawal of an application). The Board believes this

approach would help in improving the accuracy and timeliness of the

HMDA data. Current-year registers would be available to examiners so

that, if problems were occurring, the supervisory agency could work

with the institution to ensure that errors were corrected well before

the relatively brief period between the end of the year and the

reporting deadline. Another advantage of the proposed change would be

that examiners and the institution itself would have ready access to

current data that could be helpful in assessing its fair lending and

community reinvestment performance.

The Board recognizes that some institutions may compile and geocode

transactions (assign MSA, state, county, and census tract codes) on a

batch basis, from time to time during the year or at year-end. The

Board solicits comment on how burdensome institutions that currently

follow this procedure would find it to record all the LAR information,

including the geographic codes, on the HMDA-LAR within one month after

final action. In addition, comment is requested on the extent to which

any burden might be reduced if the requirement were to keep the HMDA-

LAR up to date on a quarterly basis, rather than monthly. The Federal

Deposit Insurance Corporation imposes a thirty-day requirement on the

HMDA-covered institutions it supervises; the Office of the Comptroller

of the Currency proposed a similar requirement, and recently adopted a

quarterly update requirement instead (see 59 FR 26411, May 20, 1994).

The Board believes that a requirement to update the HMDA--LAR

within one month after each transaction would be an important step

toward improving the accuracy and timeliness of HMDA data reporting; if

the compliance burden appeared to outweigh the advantages, however, the

Board would consider alternatives such as quarterly updating.

Reporting income. The Board proposes to revise the regulation to

clarify how institutions report applicants' income and eliminate an

internal inconsistency that now exists. Currently, Sec. 203.4(a)(7) of

Regulation C provides that financial institutions shall collect data on

``income relied upon in processing the loan application.'' The

instructions for completing the HMDA-LAR state that if no income is

asked for or relied on in the credit decision, the lender may enter NA

(not applicable) in this field (appendix A, paragraph V.D.5.c.).

The Board proposes that lenders must report all income reflected on

the application, including income of coapplicants, whether or not the

lender relies on a particular source of income. If the lender

determined, in the course of verifying information, that some portion

of the income reported by the applicant was overstated, the lender

would enter the verified amount rather than the amount originally

reported.

Currently lenders need not report income for streamlined

refinancings in which they neither ask for nor rely on income

information. In addition, for privacy reasons, an institution need not

record applicants' income on the HMDA-LAR for loans made to the

institution's own employees. These rules will remain in place.

Section 203.5--Disclosure and Reporting

Paragraph (a)--Reporting to Agency

Change in reporting deadline. Currently, institutions are required

to file their HMDA data with supervisory agencies by March 1 following

the year to which the data relate. The Board proposes to change the due

date to February 1.

Statutory amendments contained in the Housing and Community

Development Act of 1992, 106 Stat. 3889, provide that starting with

loan and application data for calendar year 1994, the FFIEC shall make

``every effort'' to ensure that individual lenders' public disclosure

statements are available at the lenders' offices before July 1 of the

following year. Similarly, the amendments call for the FFIEC to make

both the individual disclosures and the aggregate tables available at

the central depositories before September 1.

In 1993, the individual lenders' disclosure statements for 1992

lending activity became available to the public the first week of

August, and the disclosure statements and aggregate reports became

available at central depositories the first week of November. This

year, the processing schedule calls for disclosures to be available at

institutions in July and at central depositories in October. Thus,

progress is being made toward meeting the statutory targets for earlier

availability of HMDA data. But given the high volume of data being

processed, the Board believes it is necessary to move up the date for

submitting the raw data to supervisory agencies.

Reporting in Machine-Readable Format. In processing the HMDA data,

the Board and the other agencies use various means to identify and

correct data errors. For example, the data are run through computerized

edit checks designed to detect errors and omissions in the data fields.

Where these are found, the agencies send the reports back to the

institution for correction.

Lenders whose HMDA-LAR contains more than 100 line entries are

generally expected by the agencies to submit their data in machine-

readable format, such as PC diskette or magnetic tape. The Board and

the other agencies have encouraged lenders to submit their HMDA-LARs in

automated form, and all but one of the agencies provide PC software

that can be used to compile data on diskettes. This software has built-

in edit checks for accuracy and is furnished free of charge. Software

packages that are widely available from private vendors also contain

the computerized edits used by the Board. Nonetheless, many lending

institutions still submit their HMDA data in paper form, and the

agencies have found that these paper submissions tend to contain a

substantially higher number of errors than submissions in machine-

readable form.

The Board proposes to require that all institutions report HMDA

data in machine-readable form and that they edit their data before

submitting it, either using the agency-supplied HMDA software or using

the same edits in private vendors' software.

The proposed change would help lenders to ensure submission of

accurate data.

The overall accuracy of the data has improved each year since 1990,

the first year of expanded reporting under the amendments in the

Financial Institutions Reform, Recovery and Enforcement Act of 1989, in

part because institutions have increasingly submitted data by diskette,

magnetic tape, or Fedline. However, further improvements in data

quality are needed, and the pre-edited reporting of data in machine-

readable form would help in bringing about such improvements. Machine-

readable reporting would also assist the agencies in meeting the new

public disclosure deadlines, by reducing the time needed to enter the

data from each reporting institution into the HMDA processing database.

The Board recognizes that some financial institutions subject to

HMDA might not have the computer capability to compile and report their

data in machine-readable form. The Board solicits comment, therefore,

on whether requiring machine-readable data submission from all

institutions would create a hardship for some, and if so, whether

supervisory agencies should have discretion to grant waivers from this

requirement on a case-by-case basis. For example, a waiver might be

granted in a case where an institution does not itself own or have

ready access to a personal computer nor have access through a service

provider.

Paragraph (e)--Notice of Availability

The Board proposes to make a technical change to Sec. 203.5(e)

concerning the notice of availability that institutions are required to

post. Pursuant to amendments contained in the Housing and Community

Development Act of 1992, lending institutions must now make available

to the public not only their disclosure statements but also their loan/

application registers (after deleting certain data fields). These

statutory amendments were incorporated into Regulation C in March 1993

(see 58 FR 13403, March 11, 1993).

The proposed change will revise the notice language to reflect that

HMDA data in addition to disclosure statements are available from

institutions.

Appendix A--Form and Instructions for Completion of HMDA Loan/

Application Register

II. Required Format and Reporting Procedures

Paragraph A. The Board proposes to require that all HMDA-covered

institutions submit data in machine-readable form, except that

supervisory agencies may have discretion to grant relief from this

requirement in cases of hardship. See the discussion of this proposed

change under Sec. 203.5(a), above.

Paragraph E. A new paragraph II. E. would be added to the HMDA-LAR

instructions to reflect the proposed requirement that the HMDA-LAR be

kept current within one month of final action during the year as

transactions occur. See the discussion under Sec. 203.4(a), above.

III. Submission of HMDA-LAR and Public Release of Data

Paragraph A. The proposal includes a change in the reporting

deadline from March 1 to February 1; paragraph III. A. in the

instructions would be revised accordingly. See the discussion on this

proposed change under Sec. 203.5(a), above.

Paragraphs B and C.-- Requirement to report total HMDA-LAR entries

on transmittal sheet. The regulation requires that a transmittal sheet

accompany an institution's HMDA-LAR data submission, containing general

information such as the name, address, and identifying numbers of the

institution. Currently, the transmittal sheet does not ask for the

total number of transaction line entries contained in the HMDA

submission, although the instructions encourage institutions to provide

this record count in a cover letter.

The Board proposes to amend Regulation C to require financial

institutions to report on the transmittal sheet (in both the paper-copy

and machine-readable versions) the total number of line entries

included in the data submission. Respondents also will be asked to send

a transmittal sheet with any subsequent submission of data, rather than

only with the initial submission. An institution will sometimes send

HMDA data to its supervisory agency in more than one submission when

revisions to the initial submission are necessary, for example, or

because transactions were found to have been inadvertently omitted. The

count on the transmittal sheet for each submission will help the

agencies verify the number of line entries submitted by the institution

at that time. This change would help reduce the likelihood of any data

being lost during the collection process.

Paragraph G. Posters. The Board is providing suggested language for

the notice of availability that lenders are required to post in their

home and branch offices in metropolitan areas. The revised notice

reflects the fact that HMDA data besides disclosure statements are now

available from financial institutions. See the discussion of proposed

changes to Sec. 203.5(e), above.

V. Instructions for Completion of Loan/Application Register

A. Application or loan information. 5. Explanation of purpose

codes. Code 2: Home improvement. The proposal includes changes in the

definition of home improvement loans for HMDA reporting purposes. The

HMDA-LAR instructions would be revised to reflect the proposed changes.

See the discussion of home improvement loan issues under Sec. 203.2(f),

above.

8. Loan amount. f. Reporting counteroffers. The proposal clarifies

that counteroffers are to be reported as loan denials if the applicant

does not accept the counteroffer, not as applications withdrawn or

approved but not accepted. This clarification conforms with the

treatment of counteroffers in Regulation B (Equal Credit Opportunity).

C. Property location. 5. Outside MSA. Financial institutions are

encouraged but not required to enter geographic information for loans

on property located outside the MSAs in which they have a home or

branch office (or outside any MSA). The proposed rule clarifies that,

if a lender enters data in the property location fields of the HMDA-LAR

for these loans, the data must accurately reflect the location of the

property in question.

(3) Other Matters on Which the Board Solicits Comment. In addition

to seeking comment on the proposed amendments, the Board solicits

comment on other matters related to HMDA reporting: prequalification

programs, refinancing transactions, and the collection of racial or

ethnic information, as discussed below.

Prequalification programs. Regulation C requires lenders to compile

and report data on applications for loans as well as on loan

originations. The Board has received questions about mortgage lenders'

prequalification programs, asking whether and when a request for

prequalification must be treated as a credit application for purposes

of HMDA reporting. The answer depends on the outcome of the

prequalification decision.

The definition of application under HMDA is virtually identical to

the definition established by the Board's Regulation B (Equal Credit

Opportunity). Accordingly, lenders are directed to the guidance

provided in the Official Staff Commentary to Regulation B, comments

2(f)-1 through -4, on differentiating between applications and

inquiries. The commentary states that if a lender--in giving

information to a consumer--evaluates information about the consumer,

decides to decline a credit request, and communicates this to the

consumer, the creditor has treated that inquiry as an application for

credit (by virtue of having made a credit decision). In the case of

Regulation B, the creditor must then comply with the notification rules

on adverse action.

In regard to HMDA reporting, the same rule applies, and a lender

that turns down a prequalification request (because of the homebuyer's

poor credit history, for example) must report it as a loan denial on

its HMDA-LAR.

Prequalification requests that are approved, on the other hand,

will be reported on the HMDA-LAR at a later stage in the process, after

homebuyers have found the property they want to purchase and the lender

has evaluated a formal loan application, not at the time of the

prequalification approval. Thus, the lender will report when: (1) the

lender originates a loan; (2) the lender has made a firm loan offer

that the applicant does not accept; (3) the applicant expressly

withdraws the mortgage application; (4) the lender closes the file for

incompleteness; or (5) the lender denies the mortgage loan application.

In some cases, lender decisions on prequalifications that are

approved may ultimately not be reported on the HMDA-LAR; if a homebuyer

who has been prequalified for credit does not later pursue a formal

application for a mortgage loan, the lender has no reporting

obligations under HMDA (and no notification requirements under

Regulation B).

For denials of prequalification requests that are reportable under

HMDA, there are questions about how a lender can comply with the

reporting requirements with regard to the loan amount, loan type, and

property location data fields on the HMDA-LAR. Generally speaking, a

property location will not ``exist'' at the prequalification stage if

the prospective homebuyer does not yet have a purchase contract on, or

has not requested financing for, a specific property. Thus, the lender

should enter NA (not applicable) in each of the location fields in such

instances. For loan amount, if the prospective homebuyer has not

requested a particular amount of credit, the regulation currently does

not provide any alternative code. The Board requests comment on whether

a code such as NA (not applicable) will suffice, or whether a special

code--indicating that the transaction is a prequalification--would be

more appropriate and useful. Similar issues arise with respect to loan

type in cases where prospective borrowers have not specified during the

prequalification process the type of loan they are seeking.

The Board requests comment about other compliance issues related to

prequalifications, and contemplates that guidance regarding these

matters will be provided in the commentary to Regulation C to be issued

later this year.

Reporting of refinancings. The regulation requires lenders to

report refinancings, which are defined as loans involving the

satisfaction of an existing obligation and its replacement by a new

obligation undertaken by the same borrower. The Board solicits comment

on the reporting of transactions that are not technically refinancings,

but that serve as the functional equivalent of refinancings. In some

regions, transactions are structured as modifications of existing

obligations (sometimes called modification, extension, and

consolidation agreements or ``MECAs''), rather than as replacements

thereof, often in order to reduce borrower costs associated with a

refinancing (for example, title insurance fees).

Institutions have inquired whether they should report such

transactions, which serve the same purpose as refinancings and normally

entail the same underwriting procedures. The Board solicits comment on

this matter. The Board also solicits comment on what types of

modifications should not be subject to reporting (such as the simple

modification of a loan term from 25 to 15 years), as well as the basis

for any such distinctions. Other issues on which comment is requested

include whether the reporting of such transactions should be limited to

cases where a new lender is offering the modification, or should also

be available to the original lender.

Another matter on which the Board seeks comment concerns the

current exclusion for certain refinancings based on the purpose of the

transaction. Under existing Regulation C, a refinancing is to be

reported only if the loan being refinanced was a home purchase or home

improvement loan, or was a refinancing of such a loan. In addition, a

refinancing is reported only if the amount outstanding on the loan

being refinanced, plus the amount of any new money for home purchase or

home improvement purposes, is equal to more than 50 percent of the

total new loan amount. For example, if a borrower refinances a home

purchase loan only for the purpose of getting a lower interest rate on

the outstanding balance, and therefore does not obtain any new money,

the refinancing is reported because the amount outstanding on the

original loan is equal to 100 percent of the new loan amount.

Similarly, if a borrower refinances a home purchase loan and obtains

new money to be used entirely for home improvement purposes, then again

the refinancing is reported because here again, the amount outstanding

plus new money for ``covered purposes'' (home improvement and home

purchase) is equal to 100 percent of the new loan amount. At the other

extreme, if a borrower refinances a loan with an outstanding balance of

$20,000 and obtains $40,000 of new money to be used for starting a new

business, the refinancing is not reported because the amount

outstanding plus new money for ``covered purposes'' is equal to only

one-third of the new loan amount.

This purpose test for determining whether refinancings are to be

reported under Regulation C has generated a substantial number of

questions from lenders. For example, the purpose of the loan being

refinanced may not be clear at the time the borrower applies for the

refinancing. In some cases, a loan has been refinanced repeatedly, new

money having been obtained each time; and the calculations necessary to

determine whether more than 50 percent of the total new loan amount is

for covered purposes become difficult. An alternative approach that

would be easier to understand and apply would be to treat all

refinancings as subject to reporting on the HMDA-LAR. Although such an

expansion in coverage would result in the disclosed data's being less

tied to the home purchase and home improvement categories, it is not

clear that the resulting data would be less useful. The Board solicits

comment on the advantages and disadvantages of these changes, both for

reporting institutions and for users of HMDA data.

Collection of racial or ethnic information. Regulation C provides

that applicants for mortgage and home improvement loans be requested,

but not required, to provide information about their race or national

origin, gender, and income. The purpose is to gather data that may help

regulatory agencies to gauge whether a lending institution is complying

with the fair lending laws. If an applicant chooses not to provide the

information on race or national origin and gender, the loan officer is

required to enter the information on the basis of visual observation or

surname.

Currently, the categories in Regulation C for data collection on

race/national origin of applicants are:

American Indian or Alaskan Native

Asian or Pacific Islander

Black

Hispanic

White

Other

The categories that the Office of Management and Budget (OMB)

issues for government statistical purposes are substantially the same,

except that the ``other'' category is not included. OMB and others have

indicated their belief that the presence of the ``other'' category

undercuts the usefulness of the data, in that a data user has no way of

knowing what the category represents.

In adopting the monitoring provisions of Regulation C in 1989, the

Board based the categories used on Regulation B, which has contained

the ``other'' category since it was first adopted by the Board in 1976.

The Board believed that the ``other'' category served a useful

function. For example, it provides a choice to applicants who do not

identify with any of the specifically defined categories; in 1992, the

``other'' category was used in roughly 45,000 out of 10 million loan

records. The Board notes also that OMB is likely in the next few years

to propose changing the list of categories for the next decennial

census.

Comment is solicited on whether the Board should consider deleting

the ``other'' category. The Board notes that if this change were made

for Regulation C, a parallel change would be made in the monitoring

provisions of Regulation B.

(4) Economic Impact Statement. The Board's Division of Research and

Statistics has prepared an economic impact analysis of the proposed

amendments. A copy of the analysis may be obtained from Publications

Services, Board of Governors of the Federal Reserve System, Washington,

DC 20551, or by telephone at (202) 452-3245.

List of Subjects in 12 CFR Part 203

Banks, banking, Consumer protection, Federal Reserve System, Home

mortgage disclosure, Mortgages, Reporting and recordkeeping

requirements.

For the reasons set forth in the preamble, the Board proposes to

amend 12 CFR part 203 as follows:

(Certain conventions have been used to highlight the proposed

changes to the regulation and the instructions. New language is shown

inside bold-faced arrows, while language that would be removed is set

off with brackets.)

PART 203--HOME MORTGAGE DISCLOSURE (REGULATION C)

1. The authority citation for part 203 continues to read as

follows:

Authority: 12 U.S.C. 2801-2810.

2. Section 203.2 would be amended by revising paragraph (f) as

follows:

Sec. 203.2 Definitions.

* * * * *

(f) Home improvement loan means any loan that [-- (1)] is stated by

the borrower (at the time of the loan application) to be for

home improvement purposes. [the purpose of

repairing, rehabilitating, or remodeling a dwelling; and (2) is

classified by the financial institution as a home improvement loan.]

* * * * *

3. Section 203.4 would be amended by revising the second sentence

of paragraph (a) introductory text and paragraph (a)(7) as follows:

Sec. 203.4 Compilation of loan data.

(a) Data format and itemization. * * * These [data shall be

presented] transactions shall be recorded, within one month

of taking final action, on a register in the format

prescribed in appendix A of this part and shall

include the following items:

* * * * *

(7) The race or national origin and sex of the applicant or

borrower, and the income asked for or relied upon

in processing the application.

* * * * *

4. Section 203.5 would be amended by revising paragraphs (a) and

(e) as follows:

Sec. 203.5 Disclosure and reporting.

(a) Reporting to agency. By February 1 [March

1] following the calendar year for which the loan data are compiled, a

financial institution shall send [two copies of] its complete loan

application register [(if submitted in paper form)] to the agency

office specified in appendix A of this [regulation]

part, and shall retain a copy for its records for

a period of not less than three years. [A financial institution need

only submit one copy when the submission is on computer tape or

diskette.]

* * * * *

(e) Notice of availability. A financial institution shall post a

general notice about the availability of its HMDA

data [disclosure statement] in the lobbies of its home

office and any physical branch offices located in an MSA. Upon request,

it shall promptly provide the location of the institution's offices

where the statement is available. At its option, an institution may

include the location in its notice.

5. Item II. of appendix A to Part 203 would be amended by revising

the first sentence of paragraph A., by removing the last 3 sentences of

paragraph A., and by adding a new paragraph E., as follows:

Appendix A to Part 203--Form and Instructions for Completion of HMDA

Loan/Application Register

* * * * *

II. Required Format and Reporting Procedures

A. Institutions [are expected to] shall

submit data to their supervisory agencies in an automated, machine-

readable form [unless 100 or fewer application and loan entries are

reported]. * * * [An institution that submits its register in

nonautomated form must send two copies that are typed or computer

printed. You must use the format of the loan/application register

but are not required to use the form itself. Each page must be

numbered, and the total number of pages must be given (for example,

``Page 1 of 3'').]

* * * * *

E. Applications and loans must be fully recorded on

your register, including geographic information, within one month of

final action (such as the origination, denial or withdrawal of an

application, or the purchase of a loan).

6. Item III. of appendix A to Part 203 would be amended by revising

paragraphs A., B., C., and G., as follows:

* * * * *

III. Submission of HMDA-LAR and Public Release of Data

A. You must submit the data for your institution to the office

specified by your supervisory agency no later than

February 1 [March 1] following the calendar

year for which the data are compiled. A list of the agencies appears

at the end of these instructions.

B. You must submit all required data to your supervisory agency

in one complete package, with the prescribed transmittal sheet. An

officer of your institution must certify to the accuracy of the

data. Any additional data submissions that become

necessary (for example, because you discover that data were omitted

from the initial submission, or because revisions are called for)

also must be accompanied by a transmittal sheet.

C. The transmittal sheet must state the total number

of HMDA-LAR line entries included in the accompanying data

submission. [You are encouraged to provide in a cover

letter an approximate count of the total number of line entries

contained in your data submission.] If you are a depository

institution, you also are asked to provide

[include] a list of the MSAs where you have a home or branch office.

* * * * *

G. Posters. Your agency [can] may provide

[you with] HMDA posters that you can use to inform the public of the

availability of your disclosure statement, or you may print your own

posters. If you print your own, the following language is

suggested:

Home Mortgage Disclosure Act Notice

The HMDA data about our residential mortgage lending are

available for review. The data show geographic distribution of loans

and applications; race, gender, and income of applicants and

borrowers; and information about loan approvals and denials. To

inspect our HMDA data, inquire at this office.

7. Item V. of Appendix A to Part 203 would be amended by

revising paragraphs A.5.code 2, A.8.f., and C.5., as follows:

* * * * *

V. Instructions for Completion of Loan/Application Register

A. Application or loan information

* * * * *

5. Explanation of purpose codes

* * * * *

Code 2: Home Improvement

a. Code 2 applies to loans and applications for loans that [(1)]

the borrowers have said will be used for home improvement

purposes for [repairing, rehabilitating, or remodeling]

one- to four-family residential dwellings[, and (2) are recorded on

your books as home improvement loans].

* * * * *

8. Loan amount.

* * * * *

f. Reporting counteroffers. [If you

offered to lend less than the applicant applied for, enter the

amount of the loan if the offer was accepted by the applicant. If

the offer was not accepted, enter the amount that the applicant

applied for.] If you make a counteroffer for an amount

different from the amount initially applied for, and the

counteroffer is accepted by the applicant, report it as an

origination for the amount of the loan actually granted. If the

applicant turns down the counteroffer or fails to respond, report it

as a denial for the amount initially requested. Do not report it as

a withdrawn application or as an application that was approved but

not accepted.

* * * * *

C. Property location.

* * * * *

5. Outside-MSA. For loans on property located outside the MSAs

in which you have a home or branch office (or outside any MSA), you

may enter the MSA, state, county, and census tract numbers or you

may enter the code ``NA'' in each of these columns. If

you choose to enter the numbers, they must be correct for the

property in question.

* * * * *

By order of the Board of Governors of the Federal Reserve

System, June 7, 1994.

William W. Wiles,

Secretary of the Board.

[FR Doc. 94-14262 Filed 6-10-94; 8:45 am]

BILLING CODE 6210-01-P