A manager at a HMDA-reporting institution asks why it reports loan data for public analysis rather than keeping those data solely for internal decisions. What is a purpose of HMDA?
Correct Answer
C) Support analysis of community housing needs, investment needs and potentially discriminatory lending patterns
C. HMDA supports public analysis and fair-lending oversight. The statutory purposes include assessing service to community housing needs and helping officials direct public investment. Loan data also help identify potentially discriminatory patterns and support enforcement. Scope and exceptions: A pattern can warrant investigation without by itself proving unlawful discrimination. HMDA is not intended to encourage unsound lending or allocate credit. Institutional and transaction coverage must be determined separately; this question does not establish every field required on an individual record. Source: Section 1003.1(b)–(c) — https://www.consumerfinance.gov/rules-policy/regulations/1003/1/
Why This Is the Correct Answer
C. HMDA supports public analysis and fair-lending oversight. The statutory purposes include assessing service to community housing needs and helping officials direct public investment. Loan data also help identify potentially discriminatory patterns and support enforcement. Scope and exceptions: A pattern can warrant investigation without by itself proving unlawful discrimination. HMDA is not intended to encourage unsound lending or allocate credit. Institutional and transaction coverage must be determined separately; this question does not establish every field required on an individual record.
Why the Other Options Are Wrong
Option A: Set the interest rate a lender must charge on each mortgage
HMDA is not a loan-pricing formula.
Option B: Verify each applicant's income before the lender approves credit
Its public-disclosure purpose is not income verification.
Option D: Certify the accuracy of each property appraisal before closing
Appraisal cross-checking is not the statutory purpose described here.
Exam Tip
Separate why data are collected from how a particular credit decision is made.
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