Using HMDA data as a regulatory screen for fair lending compliance

This paper describes and evaluates the Federal Reserve System's recently developed program designed to use HMDA data as a screening device for fair lending enforcement. The program is designed to identify institutions showing potentially discriminatory patterns in their treatment of minority mortgage applicants vis-a-vis nonminority applicants. The program also selects specific loan files to pull for additional information in cases where a more comprehensive evaluation might be appropriate. This paper discusses the motivation behind the adoption of the program and its innovative ''matched-pair'' method and assesses its value and potential shortcomings.