Full text of Federal Reserve Bank of New York Circulars : 7894. New Regulation C, on Home Mortgage Disclosure

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FEDERAL RESERVE BANK
OF NEW YORK
r C ir c u la r N o 7 8 9 4 1
J u n e 9, 1976

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NEW REGULATION C, ON HOME MORTGAGE DISCLOSURE
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Following is the text of a statement issued today by the Board of Governors of the Federal
Reserve System:
The Board of Governors of the Federal Reserve System today announced adoption of a new reg­
ulation to implement the Home Mortgage Disclosure Act of 1975.
The Act, and the new Regulation C implementing it, become effective June 28. The regulation
was adopted substantially as proposed by the Board on March 29. A public hearing was held on April
22 and the Board received comments through May 3.
Regulation C requires lending institutions subject to the Act to disclose publicly where their
mortgage loans are made. Depository institutions subject to the Act are those that have $10 million
or more in assets, that have offices in principal metropolitan areas (Standard Metropolitan Statistical
Areas—SM SAs), that make first mortgage loans on one-to-four family residences and that are Fed­
erally insured or regulated. The Act dehnes depository institutions as commercial banks, savings banks,
savings and loan associations, building and loan associations or homestead associations (including coop­
erative banks) and credit unions. Some 4,400 commercial banks, 3,000 savings and loan associations,
470 mutual savings banks and 600 credit unions will be affected.
The Home Mortgage Disclosure Act makes the Board responsible for writing a regulation to
implement it. The regulation is to be enfqrced by the Board, the other Federal bank regulatory agen­
cies, the Federal Home Loan Bank Board and the Administrator of the National Credit Union
Administration.
The Home Mortgage Disclosure Act grew out of allegations that there are credit shortages in
some parts of large urban areas. The Act, and Regulation C, specify that nothing in them is meant to
encourage unsound lending practices or the allocation of credit.
The principal provisions of the proposed new regulation a re :
—Designation of the mortgage loan information to be disclosed.
—A sample form, suggesting how required data may be reported.
—Establishment of procedures to be followed by State-chartered depository institutions seeking
exemption from the Act.
—Requirements for reporting by geographic areas. Initial disclosure statements, for fiscal years
ending before July 1, 1976, may be made by zip code. In general, loans originated or pur­
chased after that date, on property in the areas where the lender has offices, must be re­
ported by census tract.
The data to be disclosed are to be made available at lending institutions subject to the Act. Infor­
mation to be disclosed includes the following:
—First mortgage loans to purchase residential property;
—Secured and unsecured home improvement loans.
The principal changes in the regulation from the earlier proposal as adopted, a re :
—The definition of "mortgage loan" has been narrowed, to exclude junior liens (except for
home improvement purposes) and first mortgages taken as additional collateral for business
purposes.
—The deadline for the initial disclosures required by the regulation has been extended by one
month, to September 30, to give adequate time after issuance of the regulation for lenders to
prepare the required disclosure reports.
—A provision has been added to require lenders to notify their depositors as to when the
mortgage disclosure statement of the institution is available, and to provide the name and
address of the appropriate Federal enforcement agency.
The regulation defines a mortgage loan subject to disclosure as a "residential mortgage loan" or
any "home improvement loan." A residential mortgage loan is described as a loan secured by a first
mortgage on residential real property located in a State, the District of Columbia or Puerto Rico. A
home improvement loan subject to disclosure under the regulation is an unsecured loan or a loan se^
cured by collateral other than a first mortgage if the proceeds are to be used for residential repairs, re­
habilitation or remodeling and is recorded on the lender's books as a home improvement loan.
As required by the Act, the regulation requires the breakdown of the disclosed mortgage loan in­
formation into two main categories and several classes under each main category.
The main categories a re :
(A ) Loans made originally by the depository institution.
(B ) Loans originated by another institution but purchased by the depository institution.




(OVER)

Within each of these categories loan data is to be divided according to loans on property located
within the SMS As where the headquarters or branches of depository mortgage lenders are located and
loans outside those SMS As. In each case the following itemizations of information are to be made for
loans on one-to-four family residences:
1. Loans insured or guaranteed by the Federal Housing Administration, the Veterans Ad­
ministration and Farmers Home Administration.
2. Conventional mortgage loans.
3. Home improvement loans.
Loans on multifamily dwellings (more than four units) are to be reported separately.
When the property is located in an SMS A where the lender has offices, the lender is also required
to indicate mortgage loans on one-to-four family residences made to borrowers who did not, at the time
of execution of the mortgage, intend to live in the mortgaged residence.
To implement a further provision of the Act, the regulation requires, as a general rule, that mort­
gage loan disclosures on properties within SMS As where the lender is headquartered or has a branch
be itemized according to the census tract in which the property is located. However, in certain limited
circumstances reporting by zip code is permissible. Loans on properties not located in SMSAs where
the lender has an office will be reported but not itemized either by census tract or zip code.
A census tract is a small geographical territory, containing about 4,000 inhabitants into which coun­
ties in SMSAs have been divided for purposes of statistical analysis. Census tracts are laid out with the
objective of achieving some uniformity of population characteristics and economic status.
On the basis of the 1970 census, the Census Bureau has issued a series entitled "1970 Census Popu­
lation and Housing: Census Tracts, Final R ep o rts/P H C (l) Series." This contains tract maps for every
portion of all the SMSAs designated at that time and from some adjacent areas. Since 1970, the Office
of Management and Budget of the White House has redefined many SMSAs and added others. Tract
maps for the new or redefined SMSAs are readily available only to the extent they appear on the P H C (l)
series of 1970.
The Board will make available, through the Board and Reserve Banks, a list of currently defined
SMSAs showing portions for which census tract itemization would be required. The Board said it would
inform lenders of future changes in SMSAs.
As provided by the regulation:
1. To determine if it is subject to the Act, an institution with more than $10 million in assets
should refer to currently designated SMSAs.
2. Institutions subject to the Act will determine if itemization by census tract is required by
referring to the 1970 census tract series.
3. Loans in areas not included in the 1970 census tract series are to be itemized by zip code
areas.
The regulation permits use of zip code itemization in
disclosure statements for full fiscal years
ending before July 1, 1976. In general, loans originated or purchased after that date, on property in areas
where the lender has offices, must be reported by census tracts.
These provisions are intended to give institutions subject to the Act an opportunity to begin keep­
ing a record of mortgage loans by census tract, before the loans must be reported in that way. They pro­
vide time for distribution of census tract maps and materials for converting street addresses to census
tracts, and for computer programming and training personnel and are designed to reduce errors and report­
ing burdens.
For fiscal years ending by June 30, 1976, mortgage loan disclosure statements are due by Septem­
ber 30, 1976. Later year statements are due within 90 days after the end of the fiscal year. For fiscal
years straddling June 30, 1976, reporting dates differ according to whether reporting is done by zip code
or by census tract.
Complete mortgage loan data is to be made available at the home office of each institution subject
to the Act. In addition, at least one branch office in each SMSA is required to make available mortgage
loan data on properties located in that SMSA.
State chartered lenders, or a State, may apply to the Board for an exemption from Regulation C
where State laws are substantially similar to Federal requirements.
As required by the Act, the Board will carry out a study to determine the feasibility and usefulness
of requiring depository institutions outside SMSAs to make disclosures comparable to those under the
regulation. To this end, the Board welcomes comment and data from lenders and from the public regard­
ing the costs of compiling such information and itemization by zip code areas or census tracts; the
number of requests received to inspect data or to make copies; the use made of the information by the
public, and changes in lending practices that may have resulted from evaluation of the information.
T h e new R e g u la tio n C w ill be e ffec tiv e Ju n e 28, 1976. C o p ie s o f the pam p h let c o n ta in in g
the te x t o f the re g u la tio n w ill be sen t to y o u sh o rtly . In q u ir ie s th ereon m ay be d irected to o u r

Bank Regulations Department.




PAUL A . VOLCKER,