The Home Mortgage Disclosure Act (HMDA) appeared in the list of most common violations cited by both the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve during 2024 as found in the July 2025 edition of the FDIC’s Consumer Compliance Supervisory Highlights and the first 2025 issue of the Federal Reserve’s Consumer Compliance Outlook.

Brad Stumpe, Audit and Assurance partner and Compliance and Loan Review Practice Leader, presented the most common HMDA violations in a recent Anders webinar – Banking on Compliance: Avoiding the Most Common Violations.

Common HMDA Violations

Under HMDA, if you originated less than 500 closed-end OR 500 open-end mortgage loans in each of the two previous calendar years, you are eligible for a partial exemption for that loan type and can report details on a smaller data set. While not taking advantage of the partial exemption is not a violation, you  have enough to do without creating more work for yourself than is necessary. In most situations, it’s best to take advantage of a break like this.

Both the reporting thresholds and the partial-exemption thresholds are applied separately to closed- and open-end loans. Your status for one loan type has absolutely no impact on your status for the other loan type. You can be exempt, partially exempt or a full reporter for closed-end loans and also exempt, partially exempt or a full reporter for open-end loans.

Universal Loan Identifier (ULI)

The Federal Reserved listed the inclusion of personally identifiable information in the ULI, calling out the inclusion of partially redacted names. Beware of including any personally identifiable information, including birthdays or social security numbers.

Application Date

Two main issues were identified regarding application date. The first occurs when there are multiple applications in file and something later than the date on the earliest application is reported. This can get confusing – perhaps that first application wasn’t truly an application under HMDA. If you have an application form that didn’t count as an application, then be sure the file is clearly documented as to why you are using that later date – and be consistent so that all similar situations are handled the same.

The other issue with application dates is confusion between prequalifications and preapprovals. No matter what you call it at your institution, Regulation C has a very specific definition for preapprovals. You have to have a program under which all underwriting on the applicant has been completed – including verifications. A written commitment to loan up to a certain amount for a designated period of time with limited conditions is also required. This must be under an established program – not just to accommodate an ad hoc request. If you have a preapproval program, you report those applications. If you only have a request for a prequalification, those prequalifications are not applications and do not go on the Loan Application Register (LAR) unless and until they turn into applications.

Loan Purpose

When it comes to multiple purpose loans, there’s a precedence that must be followed, and it has nothing to do with how much of the proceeds are going towards a certain purpose. The order of precedence is Purchase, Refinance, Home Improvement, Other. If you have any funds that are going for a home purchase, even if it isn’t a majority of the funds, you report it as a purchase. If you have a combination of funds for refinance and home improvement, then you report it as a refinance, regardless of how much is being used for each purpose.

The second common violation identified in the loan purpose field deals with the difference between a refinance (code 31) versus a cash out refinance (code 32). You report code 32 only if the fact that cash is being taken out impacts the way the loan is processed or impacts the loan terms. Even if you are taking out $75,000 in cash, if it does not impact how the application is processed or the terms of the loan, report it as a normal refinancing (code 31). Many of our clients only report a cash-out refinance (code 32) for applicable secondary market loans and not for portfolio loans.   

Action Taken

A common scenario here is that a person applies for a $100,000 loan, but the appraisal comes back and only supports a $90,000 loan. The loan officer asks if the applicant wants to proceed with a $90,000 loan and they decline. It’s incorrect to report this as a withdrawal because the applicant turned down the lower offer. It should be coded as a denial because the applicant’s request for a $100,000 loan was denied.

The next common scenario here is that a person submits an application and then disappears for a couple of months while you ask for additional information. You close the file as incomplete and report it that way. Unless you sent a Notice of Incomplete Application under Reg B (ECOA),  then you should not report code #5 – File Closed for Incompleteness.

Census Tract

The Federal Reserve listed errors due to recording the incorrect code. This can happen when multiple properties are involved and information isn’t consistently entered for one property. For instance, occupancy, property type, etc. are entered for one property and the census tract is entered for another. With HMDA, consistency is king. The Federal Reserve also mentioned violations for entering a specific census tract when not applicable (NA) should have been reported.

Borrower Information

For gross annual income, the agencies discussed reporting a numeric value instead of NA for a bank employee and not using the gross annual income relied upon when making the credit decision. If you exclude certain income from underwriting, such as a bonus, be sure you don’t include that in the reported amount. We also see instances when a numeric value is reported instead of NA when there is a non-natural person applicant.

Co-Applicant Demographic Information

When there is no co-applicant, it’s common to see the codes reported for NA rather than the codes for no co-applicant. For age, we often see the note date rather than the application date used to calculate the age. In other instances, the birth year is subtracted from the application year, resulting in an error if the applicant’s birthday hasn’t yet occurred in the application year.

Loan Term

The main error that occurs here is reporting the amortization term rather than the loan term when the loan isn’t fully amortizing.

Debt-to-Income Ratio

Debt-to-Income (DTI) Ratio goes hand in hand with gross annual income. If you get that wrong, then the DTI will likely be wrong as well. On the technical side, we sometimes see a ratio that is reported on the LAR carried to a different number of decimal places than the ratio on the underwriting sheet.

Number of Dwelling Units

Take a look at the appraisal. When there’s a discrepancy in the number of units, that should be noted somewhere in the file, and you probably need to discuss this with the appraiser.

Loan Amount  

Errors here are most common in applications that do not result in an origination. Returning to the example where the applicant requested a loan for $100,000 and the appraisal only supported $90,000. You counteroffer for $90,000 and the applicant doesn’t accept. What do you report – $90,000 or $100,000? If the loan does not result in origination, you report the original amount, so $100,000. Another example on loan amount is if you add fees to the loan amount and nothing in file shows that the applicant requested this. If the application does not result in origination, you go back to the original amount requested.

Credit Score and Related Information

A common error here is reporting a credit score for both the applicant and co-applicant when only one was relied on. Let’s say two people apply for a loan. One has a middle credit score of 800 and the other, 650. If you used the lowest middle score, then you only report the score of 650, along with the name and version of the credit scoring model that produced that score of 650. Additionally, like demographic information, we’ll also see the NA codes (8888) reported instead of 9999 for no co-applicant when there is not a co-applicant.

There are many small ways for a financial institution to report the incorrect code, leading to violations that eat into their time and your bottom line. A trusted advisor with deep experience in the banking industry could help your organization keep on top of shifting regulations.

Anders Banking and Financial Institutions advisors work closely with leaders of a wide range of financial institutions, helping them maintain high compliance standards. Learn how Anders advisors can help your institution stay focused on your financial mission, and the associated costs, request a meeting below.