10.3 HMDA: Loan Application Register (LAR) Compilation, Demographic Collection & Submission

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1. Collection of Applicant Demographic Information (12 CFR §1003.4(a)(10) & Appendix B)

Financial institutions must request the ethnicity, race, and sex of each natural person applicant and co-applicant on covered loans and applications. This requirement operates as a specific statutory exception to Regulation B's general prohibition against inquiring about protected characteristics.

A. Delivery Channel Rules & The Visual Observation Mandate

The regulatory procedure for collecting applicant demographics depends strictly on the medium through which the application is taken:

1. In-Person Applications

• When an application is taken face-to-face, the loan officer must present the applicant with the standard demographic collection form (or collection section of the Uniform Residential Loan Application - URLA) and verbally explain that the federal government requests this information to monitor compliance with federal statutes.
• The applicant must be informed that providing the information is voluntary and that choosing not to provide it will not adversely affect the application.
• The Visual Observation & Surname Rule: If the applicant declines to self-report ethnicity, race, or sex (or leaves the fields blank during an in-person meeting), the loan officer must legally complete the information based on visual observation and surname.
• The loan officer must check the box indicating that the demographic data was collected based on visual observation or surname.

2. Remote Applications (Mail, Telephone, or Internet)

• For applications received by mail, telephone, or electronic/internet platforms, the institution must provide the required disclosures and request the demographic information.
• Prohibition on Visual Observation Guessing: If the applicant declines to provide the information or leaves it blank on a remote application, the lender must NOT attempt to guess ethnicity, race, or sex based on the applicant's name, speech, or surname.
• The lender must select the code indicating "Information not provided by applicant in mail, internet, or telephone application" and check "No" for visual observation/surname.

3. Hybrid / Transition Scenarios

• If an application begins remotely (e.g., submitted online) but the applicant subsequently meets in person with the loan officer at any point prior to final action taken, and the applicant had left the demographic fields blank, the loan officer must collect the information based on visual observation and surname during the in-person meeting.
• Electronic Video Applications: An application taken via real-time video conferencing (e.g., Zoom, Teams) where the loan officer can see the applicant is legally classified as an in-person application, triggering the visual observation requirement if the applicant declines to self-report.

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B. Disaggregated Categories vs. Aggregate Categories

Regulation C Appendix B establishes expanded, disaggregated reporting categories to capture nuanced demographic distributions:

Critical Rule on Visual Observation & Disaggregated Categories

Under Appendix B, when a loan officer collects ethnicity or race based on visual observation and surname, the loan officer is strictly prohibited from selecting disaggregated subcategories.

• The loan officer may only select from the broad aggregate categories (e.g., Hispanic or Latino; Asian; Black or African American; White).
• The disaggregated subcategories (e.g., Mexican, Puerto Rican, Chinese, Vietnamese) can only be selected if the applicant affirmatively self-reports them.

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2. Compilation and Maintenance of the LAR (12 CFR §1003.5)

Regulation C establishes a dual schedule for recording data internally and transmitting data to the supervisory agencies.

A. The 30-Day Quarterly Internal Recording Rule (§1003.5(a)(1)(i))

A covered financial institution must record all covered loans and applications on its internal Loan Application Register (LAR) within 30 calendar days after the end of the calendar quarter in which final action was taken.

Compliance Function: This quarterly compilation rule ensures that institutions do not leave LAR data entry to an end-of-year rush. Examiners routinely inspect internal quarterly LAR logs during compliance examinations to verify adherence to the 30-calendar-day mandate.

B. Quarterly Reporting Requirements for Large Filers (§1003.5(a)(1)(ii))

To provide regulatory agencies with more timely visibility into credit markets, large-volume institutions are subject to mandatory quarterly electronic submissions:

• Large Filer Threshold: Any covered financial institution that reported at least 60,000 covered loans and applications (excluding purchased loans) on its HMDA LAR for the preceding calendar year.
• Quarterly Submission Deadline: Must submit its complete quarterly LAR data to the CFPB within 60 calendar days after the end of each calendar quarter (for Q1, Q2, and Q3). Final fourth-quarter data is incorporated into the annual submission.

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3. Annual Submission, Official Certification & Public Disclosure

A. Annual Submission Deadline & The CFPB Platform

Covered institutions must electronically submit their annual HMDA LAR data for the preceding calendar year by March 1 via the CFPB's web-based HMDA Platform.

• Data files must satisfy automated syntactic and validity edits prior to submission.
• Quality edits and macro-quality edits must be reviewed and explained or verified by the compliance team.

B. Official Executive Certification (§1003.5(a)(1)(i))

An authorized officer of the financial institution (such as the Chief Executive Officer, Chief Operating Officer, or Chief Risk/Compliance Officer) must review and officially certify to the accuracy and completeness of the submitted LAR data through the HMDA Platform.

• Legal Weight: A false or grossly reckless certification can expose executive management to individual civil money penalties and administrative enforcement actions.

C. Public Disclosure Rules & Lobby Notices (§1003.5(b), (c))

Under modernized Regulation C procedures, institutions are no longer required to print physical copies of their modified LAR or FFIEC disclosure statements for public inspection in branch lobbies:

1. Branch Lobby Notice Requirement: A financial institution must post a clear and conspicuous written notice in the lobby of its home office and each physical branch office located in an MSA stating that the institution's HMDA data is available on the CFPB's website.
2. Written Notice Upon Request: When a member of the public requests HMDA data in person or in writing, the institution must provide a written notice within five business days (for disclosure statements) or within reasonable time advising that the institution's disclosure statement and modified LAR can be accessed directly at the CFPB's website (including the CFPB's web URL).
3. Public Modified LAR: The CFPB generates and publishes a modified LAR for every reporting institution that protects consumer privacy by deleting, masking or categorizing fields under the CFPB’s disclosure policy; age is disclosed in ranges rather than simply deleted.

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Data integrity and resubmission analysis

The FFIEC HMDA Examiner Transaction Testing Guidelines specify institution-level sampling and data-field error thresholds. Examiners consider which fields are erroneous, how many errors occur in each field, the sampled population and whether errors are systemic. There is no universal rule that any ten erroneous files in a 159-file sample automatically requires full-LAR resubmission. Use the current testing table and the agency’s instructions, investigate the source of each error, expand review when appropriate, correct the affected field population and resubmit when directed.

For example, a bank finds that one rate-spread mapping was wrong for an entire product. Correcting only sampled loans will leave the rest of the population wrong. Identify the effective date of the mapping change, extract every affected loan, independently recompute the field, reconcile the final submission totals and obtain authorized certification. Also preserve loan documentation supporting action taken, purpose, loan amount, demographic collection, pricing and exemptions. Reporting a placeholder value can create a new error when the filing instructions require a specific not-applicable or exempt code.