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How Complete is HMDA? HMDA Coverage of Freddie Mac Purchases

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Abstract

The Home Mortgage Disclosure Act (HMDA) mandates the reporting of mortgage loan applications. Nearly all studies of mortgage lending patterns done in recent years rely on the data collected under HMDA. However, not all mortgages are reported under HMDA. Understanding the relationship between HMDA coverage and neighborhood characteristics is particularly important because neighborhood rates of applications and loan originations from HMDA are used by many analysts to measure neighborhood lending activity. If HMDA coverage rates vary systematically with neighborhood characteristics, then studies that use these neighborhood characteristics to explain lending activity will yield biased results. This paper presents the results of an analysis that attempts to estimate the fraction of mortgage activity that is reported under HMDA, and examines how HMDA coverage rates vary with the racial and income characteristics of the neighborhood. The basic idea for this analysis is simple: identify a group of loans from an independent (non-HMDA) source and count the fraction of those loans that appear in the HMDA data. Our independent source for loans is the loans purchased by Freddie Mac during 1992 and 1993; counts of those loans is compared with counts of loans reported as sold to Freddie Mac in 1992 and 193 HMDA datasets. The major finding of the analysis is that the HMDA dataset for 1992 is estimated to contain only around 70% of the total mortgage loans, and the coverage rate only improves to 75% in 1993, despite the increased reporting requirements for 1993. Both the 1992 and 1993 HMDA files exhibit substantial variability in coverage across census tracts and lenders, but the direction of bias is consistent. Measured HMDA coverage rates are higher in lower income census tracts, relative to higher income tracts.

Suggested Citation

  • Jim Berkovec & Peter Zorn, 1996. "How Complete is HMDA? HMDA Coverage of Freddie Mac Purchases," Journal of Real Estate Research, American Real Estate Society, vol. 11(1), pages 39-56.
  • Handle: RePEc:jre:issued:v:11:n:1:1996:p:39-56
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    Cited by:

    1. Xu, Minhong & Xu, Yilan, 2017. "Environmental Hazards and Mortgage Credit Risk: Evidence from Texas Pipeline Incidents," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258019, Agricultural and Applied Economics Association.
    2. Gyourko, Joseph & Hu, Dapeng, 2002. "Spatial distribution of affordable home loan purchases in major metropolitan areas: documentation and analysis," Regional Science and Urban Economics, Elsevier, vol. 32(5), pages 549-589, September.
    3. Michael LaCour-Little, 2007. "Economic Factors Affecting Home Mortgage Disclosure Act Reporting," Journal of Real Estate Research, American Real Estate Society, vol. 29(4), pages 479-510.
    4. D Dulani Jayasuriya & Mohamed Ayaz & Michael Williams, 2023. "The use of digital footprints in the US mortgage market," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(1), pages 353-401, March.
    5. Robert B. Avery & Kenneth P. Brevoort & Glenn B. Canner, 2007. "Opportunities and Issues in Using HMDA Data," Journal of Real Estate Research, American Real Estate Society, vol. 29(4), pages 351-380.
    6. Minhong Xu & Yilan Xu, 2020. "Environmental Hazards and Mortgage Credit Risk: Evidence from Texas Pipeline Incidents," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 48(4), pages 1096-1135, December.
    7. Onder, Zeynep, 1998. "Individual and Neighborhood Effects on FHA Mortgage Activity: Evidence from HMDA Data," Journal of Housing Economics, Elsevier, vol. 7(4), pages 343-376, December.
    8. Marsha J. Courchane, 2007. "The Pricing of Home Mortgage Loans to Minority Borrowers: How Much of the APR Differential Can We Explain?," Journal of Real Estate Research, American Real Estate Society, vol. 29(4), pages 399-440.
    9. Xu, Minhong & Xu, Yilan, 2023. "Do non-damaging earthquakes shake mortgage lenders' risk perception?," Journal of Environmental Economics and Management, Elsevier, vol. 117(C).
    10. Stuart A. Gabriel & Stuart S. Rosenthal, 2006. "Secondary Mortgage Markets and Access to Credit: 1992-2002," Working Paper 8569, USC Lusk Center for Real Estate.

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