Let's say a Broker uses a 1003 app for both the 1st and 2nd mortgage loans, sends the 1003 to the lender to do the 2nd, which is a HELOC, with the loan amount written above the 1st loan amount, or it may be scribbled on the side of the application.

If we don't report HELOCs on our LAR, and we do not elect to collect HMDA data under the new Reg B monitoring/self testing rules, would we be violating Reg B by having HMDA data on the HELOC application? Has this issue been addressed by any of the regulators?

From Regulation B
202.13 Information for monitoring purposes.

(a) Information to be requested--(1) A creditor that receives an application for credit primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence, where the extension of credit will be secured by the dwelling, shall request as part of the application the following information regarding the applicant(s):
(i) Ethnicity, using the categories Hispanic or Latino, and not Hispanic or Latino; and race, using the categories American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White;
(ii) Sex;
(iii) Marital status, using the categories married, unmarried, and separated; and
(iv) Age.

I think you're ok according to Reg B.

Unfortunately this is a common practice and in essence could be a Reg B violation. However I've never seen it cited.

What we do in these instances is mark the copy of the application to be put with 2nd mortgage loan as being "piggy backed" with first mortgage request and black out the monitoring information.

I personally don't like this approach, but from a customer service view it keeps the applicant from having to complete duplicate information and (knock on wood) I haven't had any comments in previous audits.

I've never had this raised as an issue, but Melissa indicated that these applications come through brokers. You would have no way of knowing if the broker is also forwarding the same application to another institution that does report HELOC's, so maybe the information was not collected in error by the broker.

Ok...I'm confused. If the HELOC is being used to purchase or refinance their residence, why is it not acceptable to collect the data - even if we choose not to report HELOCs? Doesn't the code section I quoted above give the right to do so?

Sheryl, you are correct:

If the HELOC is part of the "purchase/refinance" transaction, collecting GMI would be no problem.

but,

If the HELOC is for some other purposee, it would not be part of the purchase/refinance transaction and GMI should not be collected.

Whew~ Thanks for the clarification! I thought I was losing it there for a moment.