HMDA Visual Observation Field
This HMDA video talks about the visual observation field for the demographic information and discusses what code to use when the applicant was not seen in person.
Video Transcript
The following is a transcript of this video.
In today's topic, we're going to look at the HMDA visual observation field for HMDA reporters.
This visual observation field has a couple of options. The first option is Code 1 - whether you collected the information on the basis of visual observation or surname. Code 2 is you did not collect the information on the basis of visual observation or surname. Code 3 is not applicable and Code 4 is no co-applicant. So these are the four codes we have for the visual observation field for HMDA reporters.
The question you may have run into is do you use Code 2 or Code 3 - Code 2 being not collected and Code 3 being NA - when you have an application that was not taken face to face.
Well, to me it would appear that you would use NA because the visual observation rule does not apply. You're never going to make a visual observation when you don't see an applicant face to face. However, that's just one camp. There's actually two camps in this battle. Some people have been fighting this out. The second camp says that you should not use NA, you should use Code 2 because the NA chart provided by the CFPB does not say to use NA when the application was not taken face to face.
So there's kind of this two camps thing going on where Camp 1 thinks that you should list NA or Code 3 and Camp 2 thinks that you should not list NA but you should list code 2. So which one do you use?
Well, that's really going to be up to you. But my thought is that NA appears appropriate, and here's why. If you look at Item 10 to Appendix B of Regulation C, you can see that it says “if the applicant chooses not to provide the information for application - this is key - taken in person. First of all, the whole preface to all of this is the application is taken in person. Then you note this fact on the collection form and then collect the applicant's ethnicity, race, and sex on the basis of visual observation or surname. Then it goes on to say, you must report whether the applicant's ethnicity, race, and sex was collected on the basis of visual observation or surname.
So you're only going to do this for an application taken in person - at least that's what Camp 1 is saying. Now the CFPB implementation chart for NA fields does say that you're going to list it if it's collected on the basis of visual observation or surname. Again, if you collected it. So under that section it says, there's a note that says, use Code 3 if the requirement to report the applicant's or borrower's ethnicity - and this goes on for race and gender as well, the same note is there for each section - but if their ethnicity, race, or gender does not apply to the covered loaner application that your institution is reporting.
Again, my whole thought is you're never gonna have visual observation if you don't see them in person so it would not apply. But again, that's just one of two camps. So you're gonna have to determine which is correct for you.
My thought is that there are three reasons to use the NA code for the Visual Observation field. The first reason in the NA chart is that the applicant is a business. So an entity other than a natural person. The second option is when the demographic information was collected in 2017 through a face-to-face application but you choose for whatever reason to not report codes 1 or 2 because it technically wasn't required to be collected at that point, because it was collected in 2017. The reporting requirements are 2018, which will be long gone very soon. And I believe the third option - I'm in Camp one - is to report it when the application was not taken face to face.
At some point the CFPB could come out and give us further clarification. If they do, I will keep you informed on this site so it's important to take a look at that. Also, we’re having reports that some vendors are giving validity errors if you report in NA or if you don't report NA for this, so you may have to go with what your vendor provides. But again, watch our site if there is updated information from the CFPB, we will be sure to tell you that.
That’s all we have for you today.