Having a debate on whether or not we can report an applicant's ethnicity, race, & sex by visual observation when the customer is "known" to the loan officer versus actually seeing the person during the current loan application process. We have applications being marked taken by phone but then ethnicity, race, & sex are marked based on visual observation (they saw them in the past). The officers know they are supposed to give the applicant the opportunity to self identify so we assume that is happening and the customer is indicating they don't wish to provide. My understanding is our loan officer should only mark the application as visual observation if they actually see the applicant during the present application process and being seen some time in the past does not comply.

I totally agree with your last sentence.
I think your irst mistake is assuming the LO is asking the questions. I'm willing to bet today's pay that they're not.
Second point: no you cannot use previously known information. The idea is to give the applicant the opportunity to select whatever they want on the CURRENT application. HMDA is all about reporting the information with a specific application, not one from five years ago. I always tell my LOs that if my mother called I'd still have to ask her the questions. And I'd have to mark exactly what she told me even if she was feeling fiesty and decided to say she was black today. Yes, that's an exageration, but you get my drift.

Thank you, Truffle Royale. Can I get someone else to chime in on this? I'm really hoping for one of you who are top posters in the HMDA section. In order for this to be used as my support, it'll have to be one of the very well known commenters / posters. Thanks!

Truffle is one of the top posters in the HMDA section.

I'm not a "top poster" either, but I agree with Truffle. Skittles is right, Truffle is a top poster to the HMDA forum.

Ditto on Truffle's expertise, and her answer is correct.

Thank you all. I'm afraid it'll take someone like David Dickinson, Dan Persfull, Kathleen B, Adam Witmer to support my position before it'll be given consideration. Those folks have helped get my idea accepted in the past.

Then it sounds like you need to hire one of them as a consultant to get your compliance culture up to snuff.

2. Inform the applicant that Federal law requires this information to be collected in order to protect consumers and to monitor compliance with Federal statutes that prohibit discrimination against applicants on these bases. Inform the applicant that if the information is not provided where the application is taken in person, you are required to note the information on the basis of visual observation or surname.

Nowhere in those instructions does it say that visual observation or surname can be used to fill out the DI on an application taken by phone. Sounds like your people need to put as much stock in the words of the regulation as they do someone telling them what to think.

11. If the applicant declines to answer these questions by checking the “I do not wish to provide this information” box on an application that is taken by mail or on the internet, or declines to provide this information by stating orally that he or she does not wish to provide this information on an application that is taken by telephone, you must report “information not provided by applicant in mail, internet, or telephone application.

I don't know how much more clear it can be--it doesn't say it's your option...it says you MUST report it as not provided.

I can't really add anything additional to what the others have already stated other than there is a provision in Reg. B that allows the reuse of previously collected information but even Reg. B does not allow you to record the information based on "known" customer unless you have previously collected the information with a covered loan. However there is no such provision in Reg. C to allow the reuse of previously collected information or to record it based on "known" customer.

Ok, this should be what I need. Thank you all very much.

The challenge with this question is that the Reg doesn't provide a "negative affirmation" (my term) by blatantly saying "you can't use a visual observation from a prior encounter." Questions asking for a negative affirmation are difficult because the rules may say "you can" or "you must" but they don't specifically come out and say "you can't" because it is typically implied. So, to back up your statement that a "loan officer should only mark the application as visual observation if they actually see the applicant during the present application process," we can look at a few citations.

First, Appendix B says this:
"1. You must ask the applicant for this information (but you cannot require the applicant to provide it) whether the application is taken in person, by mail or telephone, or on the internet. For applications taken by telephone, you must state the information in the collection form orally, except for that information which pertains uniquely to applications taken in writing, for example, the italicized language in the sample data collection form.

If your loan officers are stating that the information was recorded by visual observation, then auditors and examiners may start to assume exactly what Truffle assumed: that your lenders are not asking the required question. This is a common trend and is technically a violation as the applicant is supposed to be given a chance to provide the information for each application.

In addition to this, Question 11 of Appendix B explains that when an applicant declines to provide the requested information during a phone application, that you must report "information not provided by applicant in mail, internet, or telephone application." In other words, you are required to report that the information was not provided, meaning that you can't make a visual observation from a prior experience with the applicant.

Also from Appendix B:
"11. If the applicant declines to answer these questions by checking the “I do not wish to provide this information” box on an application that is taken by mail or on the internet, or declines to provide this information by stating orally that he or she does not wish to provide this information on an application that is taken by telephone, you must report “information not provided by applicant in mail, internet, or telephone application.”

Furthermore, the final rule explains that visual observation is required when an application is taken in person and the applicant does not provide it. In other words, you don't (and can't) make a visual observation for the current application when you don't see the applicant.

From the 2015 final rule:
The final rule requires financial institutions to report whether ethnicity, race, or sex information was collected on the basis of visual observation or surname when an application is taken in person and the applicant does not provide the information.

Furthermore, Appendix B (and Regulation B) clarify the difference of an electronic component that includes video. This rule also doesn't provide a negative affirmation, but makes it clear that if a communication channel includes a video component, that you treat it like a face-to-face application and make a visual observations. If there is not a video component, you treat it like it was received by phone or mail.

From Appendix B:
"3. If you accept an application through electronic media with a video component, you must treat the application as taken in person. If you accept an application through electronic media without a video component (for example, facsimile), you must treat the application as accepted by mail."

The bottom line is that, while the rules and technical citations aren't as clear as they could be for this specific topic, DI should be asked for each application as applicants are supposed to be given an opportunity to provide the information each time they apply. If a lender is making a visual observation based on "past experiences" with the applicant(s), then your lender is opening up your chances for criticism from an auditor/examiner because the information is supposed to be requested from the applicant for each application.

Now, having been a lender myself, I understand that it can be awkward for some to ask this information from someone they know personally, such as a family member. (Hey mom, what is your gender again?) So, one way that I have found works well in complying with the rules for requesting information is to have your lenders read a disclosure similar to the one on the 1003 which explains the requirements.

Got pulled away before finishing my reply, so sorry for the late reply...

Thank you!

Well, you've heard from a lot of people since making your request. I'm simply posting to add credibility to Truffle. She knows HMDA (as well as many other regulations) as well as anyone. BTW, I agree with her prior response.

At my prior bank, the compliance officer allowed GMI disclosures and answers to be archived for future use so that the officer and customer wouldn't be burdened with having to repeat the tedious task.