What is the purpose of HMDA?

• A. To track lending patterns and prevent redlining
• B. To regulate interest rates on mortgages
• C. To protect mortgage lenders from lawsuits
• D. To mandate free credit reports

Answer: (A)

HMDA (the Home Mortgage Disclosure Act) focuses on transparency in mortgage lending. It requires certain lenders to collect and report data on loan applications, originations, and outcomes, broken down by borrower characteristics and geography. This data makes it possible for regulators and the public to see lending patterns and identify discriminatory practices, such as redlining, and to assess access to credit across communities. That is why this option is the best choice: HMDA is about tracking lending patterns and identifying unfair practices, not about setting interest rates, shielding lenders from lawsuits, or mandating free credit reports.