MECA Loans 112511

We report MECA loans as "refinances". Are MECA loans HMDA reportable? And what are the possible ramifications if an institution over reports or over discloses data regarding these types of loans?

I refer to them as CEMA's (in New York). The rule is that a CEMA with no new money is not reportable under HMDA. If a CEMA is done with new money, and the new money is used for home purchase or home improvement, then the new money is reportable under HMDA.

MECAs are NOT HMDA reportable. If you over-report, this is considered a violation and you could be subject to civil money penalties and/or enforcement actions.

Per the FAQ on the FFIEC website:

"MECAs. Should MECAs (Modification, Extension and Consolidation Agreements) be reported under HMDA as refinancings?

Answer: No. The rule is unchanged: MECAs are not reportable as refinancings under Regulation C. See 67 Fed. Reg. 7221, 7227 (Feb. 15, 2002). The applicable comment was inadvertently omitted when the Commentary was revised in 2002; the comment will be restored when the Commentary is next revised."

However...if you "MECA" a construction or bridge loan into permanent financing..you better report the loan as a purchase somewhere along the line..

I agree with both posts. We do not report MECA's. However, we do report the "new money" portion if it is being used for home improvement. This was based on legal advice by outside counsel. We are a former OTS bank, and never had an issue with this. Our first OCC exam begins in January.

Can someone furter explain the difference between consolidation agreement and a refinance?

The question is did you "satisfy and replace". If you have loan A (dwelling secured) and then make loan B (dwelling secured) which "satisfies and replaces" Loan A it's reportable as a refinance.

The following is from the section by section analysis:

MECAs. The Board did not propose any change regarding the status of modification, extension, and consolidation agreements (MECAs). MECAs are not reported because they do not meet the definition of a refinancing (satisfaction and replacement of an existing mortgage loan). A few commenters asserted, however, that MECAs should be reported because they substitute for traditional refinancings in some states, such as New York and Texas, to avoid mortgage recording fees and taxes.

The final rule does not include MECAs as reportable under HMDA. The existing definition of a refinancing establishes a bright-line test for reportable transactions. The Board believes that MECA data may be useful in certain instances, but that, under the existing loan classification scheme, the advantages of a bright- line test for determining whether a transaction should be reported—especially in reducing compliance burden— outweigh the benefits of additional data on these transactions. Therefore, the Board has not revised the definition of refinancing to include MECAs.