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If the bank is a HMDA-reportable institution, then the demographic information is required for applicable HMDA-covered applications. That includes documenting how the application was received and, if the application was taken face-to-face and the applicant chooses not to provide the information, recording the ethnicity, race, and sex based on visual observation or surname.
Since you are not a HMDA bank, though, you don’t have to complete the HMDA demographic section simply because the loan is a residential loan.
There is still a Regulation B/ECOA requirement that applies to certain residential mortgage applications. Under § 1002.13, when a natural person applies for credit primarily for the purchase or refinancing of a dwelling that is or will be the applicant’s principal residence, and the credit is secured by that dwelling, the bank has to request monitoring information — ethnicity, race, sex, marital status, and age.
The applicant can decline to provide the information. If the application is taken in person and the applicant declines to provide ethnicity, race, or sex, the creditor records that information based on visual observation or surname.
So I would not say that a non-HMDA bank has to complete the HMDA demographic section on every residential loan application. I would say the bank needs to determine whether the particular loan falls under Regulation B § 1002.13. If it does, then the bank has a GMI/monitoring-information requirement even though it isn’t subject to HMDA reporting.
And one other little distinction — I wouldn’t call this a requirement for every “principal mortgage loan.” The purpose of the credit, whether it is the applicant’s principal residence, and whether the dwelling secures the credit are all part of determining whether § 1002.13 applies.
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