What is Regulation C?

In the U.S., Regulation C implements the Home Mortgage Disclosure Act of 1975 that mandates certain financial institutions disclose mortgage data to the public. The regulation was enacted out of concern over financial institutions discriminatory mortgage lending practices leading to credit shortage in certain urban neighborhoods.

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How Does Regulation C Work?

The regulation makes it mandatory for the financial institutions to provide the public with the loan information that helps in scrutinizing whether the institutions are serving the housing credit needs of the neighborhood and the community they are located in. It also enables authorities to identify any discriminatory lending patterns by the financial institutions. It also helps the authorities in targeting public investments from the private sector as needed All of the government supported (in any capacity) financial institutions providing mortgages need to annually disclose specified data, including the quantity and amounts of mortgages provided by them. The data should also clearly mention the census profiles including the neighborhood where the property is located. The Bureau of Consumer Financial Protection continues to amend Regulation C to meet the current needs. This includes amendments to comply with the section 1094 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). Several new reporting requirements were added, and several existing requirements were clarified further. The Bureau has also modified the institutional and transactional coverage of Regulation C. Lending institutions having a total asset of $10 million or less may take advantage of an exemption from the Regulation C. Institutions located outside the metropolitan statistical areas are also exempted from this regulation. The data provided by the financial institutions must include the information on mortgage origination, purchase of homes and home-improvement loans, and it must be classified according to the census profile of the borrowers. The institutions also need to disclose data about the loan denials, withdrawn loan applications, and dismissed applications. They should also mention the loan applications that were approved but were not accepted by the borrowers. The aim of this regulation is to prevent any discriminatory practices by the lending institutions and maintain transparency in the mortgage process. The information provided by the institutions are attached to geo-locations and demographics from the census zone. If the authorities notice that a particular institution is regularly denying a loan to a certain section of the population based on their ethnicity or area of residence, the institution might can face penalties.