For applications NOT taken in person, AND the applicant provides the demographic information in the application, how should we (the Lender) answer the bottom part of the demographic information questions?

Example, per the form in Reg C:

"To be Completed by Financial Institution (for application taken in person):"
"Was the ethnicity of the applicant collected on the basic of visual observation or surname?"
Yes or No

"To be Completed by Financial Institution (for application taken in person):"

That seems to be pretty straight forward.

If the application is not taken in person, why would you answer the question?

So leave it blank?
This is what I thought as well. However, our internal HMDA Compliance team is saying otherwise.

They referenced the "Getting it Right Guide" - 5.1.2:

"Ethnicity, race, and sex. A Financial Institution must report the applicant’s ethnicity,
race, and sex. It must also report whether or not it collected this information on the basis of
visual observation or surname. 12 CFR 1003.4(a)(10)(i)."

https://www.ffiec.gov/hmda/pdf/2020Guide.pdf

I think your HMDA Compliance team needs to read the regulation and commentary. Plus - what portion of that sentence do they not understand? If the application is not taken in person, then they need to read Comments 10 thru 13 Appendix B to Part 1003

I believe they're also looking at the CFPB overview chart. So based on my scenario, I assume they would use Code 3 - NA? But that can be interpreted to mean that it's only NA if the applicant is a business entity.

https://files.consumerfinance.gov/f...d-reporting-overview-reference-chart.pdf

 Code 3—Not applicable
NOTE: Use Code 3 if the requirement to report the applicant’s or
borrower’s ethnicity does not apply to the covered loan or
application that your institution is reporting.


Also, looking at the CFPB's HMDA FAQ document: (question 7)

https://files.consumerfinance.gov/f/documents/cfpb_hmda_frequently-asked-questions-v6_2021-11.pdf

QUESTION 7: If a natural person applicant submits a mail, internet, or telephone application under Regulation C but does not provide race, ethnicity, or sex information, what should the financial institution report regarding whether this information was collected on the basis of visual observation or surname? ANSWER (UPDATED 3/6/2020): Regulation C, 12 CFR § 1003.4(a)(10)(i), requires that a financial institution collect the ethnicity, race, and sex of a natural person applicant or borrower, and collect whether this information was collected on the basis of visual observation or surname. Where a natural person applicant does not provide ethnicity, race, or sex information for a mail, internet, or telephone application, and a financial institution does not have an opportunity to collect this information during an in person meeting during the application process, the financial institution may report either that the information was not collected on the basis of visual observation or surname (code 2) or that the requirement to report this data field is not applicable (code 3). For consistency of data across all HMDA reporting financial institutions, the Bureau suggests, but does not require, that financial institutions use code 2.

I have found their stance on this question kinda silly (IMO).....i would vote for NA if logic was our guide....but i agree that for whatever reason, they have said that either NA or "not collected" is kosher. Therefore, i guess you could carry their same wishy-washy logic over to those questions and say "answer them or don't answer them".

If you use an electronic filing system for your HMDA (we use QuestSoft) you're going to get error codes if you don't answer those questions.
The person filing HMDA for your institution should not have to guess or come back to you to figure out which to use.
So you have to pick one and be consistent throughout your organization.
Whether that's NA or NO has been debated since the question first started appearing on the DMI form.

This is all the CFPB gives you: For consistency of data across all HMDA reporting financial institutions, the Bureau suggests, but does not require, that financial institutions use code 2.

Pick one and be consistent.