Under the Home Mortgage Disclosure Act, what should a lender do if the borrower does not provide information regarding ethnicity, race, and sex during an in-person application?

Under the Home Mortgage Disclosure Act (HMDA), if a borrower does not provide information regarding ethnicity, race, and sex during an in-person application, the lender is permitted to rely on visual observation to collect this information. This provision is in place to ensure that the lender can comply with reporting requirements while respecting the borrower's right not to disclose personal demographic information voluntarily.

Using visual observation allows lenders to fulfill their obligations under the law without putting undue pressure on the borrower to provide information they may choose not to disclose. This practice aims to ensure that lenders provide fair access to credit and can demonstrate compliance with anti-discrimination laws. In this context, visual observation is a valid method for lenders to gather necessary demographic information to report, especially in cases where applicants opt out of providing such details themselves.

Collecting data through other means, like directly asking for the information beyond an initial inquiry, may lead to discomfort for the borrower and does not align with the intent of maintaining a respectful application process. Disregarding the information entirely or reporting the application without any associated demographic data would not meet the regulatory requirements set forth by HMDA, which aim to promote transparency and accountability in lending practices.