WASHINGTON - Bank industry representatives want the Federal Reserve Board to provide more guidance on Home Mortgage Disclosure Act compliance.
A staff commentary, proposed on June 2, leaves too many questions unanswered, they said.
The commentary would exempt loan prequalifications from HMDA reports, clarify which home equity loans count, and give banks the option of including home loan participations.
Comments were due Aug. 7 on the commentary, which - while lacking the force of a formal regulation - provides a road map for bank compliance.
HMDA, also known as Reg C, requires banks, thrifts, credit unions, and mortgage companies to report the size and location of home loans, and the race and gender of borrowers.
The American Bankers Association said the Fed should rework a section that exempts some home refinancings. ABA senior regulatory counsel Christine A. Walika wrote that the Fed should clarify that the proposal only covers deals that don't create a new debt obligation.
The Fed also should provide examples of what qualifies as a refinancing, said Richard L. Mount, president of the Independent Bankers Association of America.
"For example, if additional funds are advanced, is that a refinancing?" Mr. Mount wrote. "And if the loan is only modified, what are some of the factors that can be taken into account to distinguish a modification from a refinancing?"
Bankers also bristled at the Fed's suggestion that it might require banks to provide disclosures for preapprovals, a process in which the bank agrees to lend a specific amount while the buyer looks for a property. The added disclosure would cause a paperwork headache, they said.
In addition, Mr. Mount said the Fed should explain how to report loans for mobile homes on rented lots. And the central bank should expand an exemption for farm loans to any property of more than 25 acres, he said. That would parallel an exemption in the Real Estate Settlement Procedures Act, he said.
Joyce M. Raidle, associate counsel at Great Western Consumer Finance Group, urged the Fed to clarify the commentary to explicitly exempt consumer loans.
"If finance companies are brought under the HMDA umbrella, the HMDA data collected from these companies will be misleading concerning how the housing credit needs of the communities in which they operate are being served," Ms. Raidle said.
She also said several parts of the commentary could be read to include purely consumer loans that have nothing to do with new home purchases.
Community activists had their own concerns. Hannah L. Kilson of the Center for Community Change faulted a Fed requirement that banks report the address of the property the bank has a lien on, rather than the location of the house bought. This would produce misleading results, she said.
Also, Ms. Kilson said the Fed must require bankers to record all counteroffers as rejections. "This is critical, since refusal to make a loan on the terms requested, requiring a larger down payment, higher interest rate, or other less favorable loan term, is one form that discrimination may take," she said.
The Fed drew cheers for not requiring banks to report home equity loans.
"Navy Federal strongly supports the board's position that home equity line reporting remains voluntary," said T.J. Hughes, president of Navy Federal Credit Union, the nation's largest. "Home equity lines of credit, like credit cards, are designed to be used repeatedly and should not be reported under Reg C."
Bankers also applauded the Fed's statement that prequalifications are not subject to HMDA.
"The additional paperwork of (prequalification) HMDA data submission would decrease our ability to provide the level of service now provided, and would provide no meaningful data," said W. Forrest Hatfields, vice president at People's Bank and Trust Co., Selma, Ala.
Prequalifications could actually distort the data because borrowers often prequalify with more than one bank, Mr. Mount said.
"It is more practical from an administrative standpoint to track all HMDA loans at closing, rather than on a theoretical or interim basis," he said.