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#198391 - 06/08/04 10:21 PM HMDA GMI on Fannie Freddie 1003 ????
Anonymous
Unregistered

With the new HMDA definition of refinancing we are wondering what everyone is doing about First mortage Installment Mortgage Loans to borrowers that own the property free and clear with a cash out purpose of College Tuition i.e. a purpose that is not HMDA reportable.

If the loan is taken and processed utilizing the industry standard Fannie/Freddie 1003 application, how are you avoiding the collection of government monitoring information?

Any input is appreciated..

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Lending Compliance
#198392 - 06/09/04 02:26 PM Re: HMDA GMI on Fannie Freddie 1003 ????
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,763
Central City, NE
You should not use the 1003 for home equity loans so that you avoid over-collecting GMI (a top 10 violation every year). You can order home equity applications that are similar to the 1003 but that do not have the GMI section.

Otherwise, you should be crossing out the GMI section before you provide it to the applicants.
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#198393 - 06/09/04 03:07 PM Re: HMDA GMI on Fannie Freddie 1003 ????
Sinatra Fan Offline
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Sinatra Fan
Joined: Jul 2002
Posts: 5,568
New Jersey
Quote:

With the new HMDA definition of refinancing we are wondering what everyone is doing about First mortage Installment Mortgage Loans to borrowers that own the property free and clear with a cash out purpose of College Tuition i.e. a purpose that is not HMDA reportable.

If the loan is taken and processed utilizing the industry standard Fannie/Freddie 1003 application, how are you avoiding the collection of government monitoring information?

Any input is appreciated..



The problem is that, at the time you are providing an application form to the potential applicant, you rarely know the purpose of the loan. It is also not unusual that the potential applicant may tell you one purpose for the loan, but when the completed application package arrives, the purpose has changed. It also sometimes happens that, on a cash-out refinance, when we ask the applicant the use to which he is putting the cash, he says something to the effect of "none of your business," and when we press him for an answer, he gives us an answer that we now have serious doubts as to the accuracy thereof. So this is a very serious question, without an easy answer.

I posed this question to an examiner several years ago. I said that, if when we receive a completed application we see that the purpose is not HMDA reportable, and if I then white-out any GMI provided by the applicant(s), would that be sufficient? Her answer was "yes."
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#198394 - 06/09/04 03:10 PM Re: HMDA GMI on Fannie Freddie 1003 ????
Anonymous
Unregistered

Thanks,
Just to clarify, we use the 1003 for our first mortgage loans of which over 98% are for purchase or a HMDA covered refinancing. We utilize an "application package" that our customers pick up to complete at their leisure. At the time of providing the package we only know that the customer wants a first mortgage Fannie/Freddie product loan and not the "purpose" of any cash out.

Thanks for your input.

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#198395 - 06/09/04 04:16 PM Re: HMDA GMI on Fannie Freddie 1003 ????
Deena Offline
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Deena
Joined: Nov 2000
Posts: 2,701
PA
I would not white-out anything on a loan application without getting the applicant to initial it. You could just draw a line through the information and note that it was provided by the applicant but not used by the bank. You can rely on the OSC to 202.13(b)(6) if you're questioned by your examiner.

6. Inadvertent notation. If a creditor inadvertently obtains the monitoring information in a dwelling-related transaction not covered by § 202.13, the creditor may process and retain the application without violating the regulation.
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#198396 - 06/09/04 06:54 PM Re: HMDA GMI on Fannie Freddie 1003 ????
Sinatra Fan Offline
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New Jersey
Thaks for the cite, Deena! I like your way of marking the application much better.
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#198397 - 06/09/04 07:54 PM Re: HMDA GMI on Fannie Freddie 1003 ????
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,763
Central City, NE
Quote:

I would not white-out anything on a loan application without getting the applicant to initial it. You could just draw a line through the information and note that it was provided by the applicant but not used by the bank. You can rely on the OSC to 202.13(b)(6) if you're questioned by your examiner.

6. Inadvertent notation. If a creditor inadvertently obtains the monitoring information in a dwelling-related transaction not covered by § 202.13, the creditor may process and retain the application without violating the regulation.


I also agree that you should never white out anything. I believe that the examiner was grossly wrong for telling you that.

One note, the "Inadvertent Notation" exception is only when you truly "inadvertently" collect GMI - not when you overkill the collection. If you are handing out the 1003 application all of the time and over-collecting GMI it is a problem.

Inadvertent means the applicant told you they wanted a purchase loan so you hand out the 1003. Then you find out it is to purchase a car using their house as collateral. This would be a case where you can claim "not my fault".
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