Final answer:
Under HMDA, lenders collect the ethnicity and race of loan applicants to ensure compliance with equal credit and fair housing laws. Borrowers can reassure banks of their repayment ability through a sound credit history. Studies have shown minority groups face more discrimination in housing, highlighting the importance of fair lending practices enforcement.
Step-by-step explanation:
Information Collected Under HMDA
The Home Mortgage Disclosure Act (HMDA) requires the collection of certain information from applicants seeking loans for dwellings to monitor compliance with equal credit opportunity, fair housing laws, and the HMDA itself. This information includes the ethnicity and race of the borrower and co-borrower. Applicants have the option not to provide this information; however, if an application is made in person and this information is not provided, the lender is required by federal regulation to note the information based on visual observation and surname.
In terms of broader practices, borrowers looking to reassure lenders regarding their ability to repay loans might focus on presenting a solid credit history and potentially explore additional ways to demonstrate their creditworthiness, such as providing proof of steady income or offering a larger down payment.
Discrimination in lending practices is a concern, as studies have shown that minority groups often face stiffer credit checks and have fewer housing options presented to them compared to their white counterparts. This demonstrates a need for continuous monitoring and enforcement of fair lending practices.