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#122357 - 10/14/03 03:03 PM
HMDA - Refinancing
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Anonymous
Unregistered
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Somewhere along the line we are confused and hope that someone can help us.
In the new 2004 requirements, the definition of refinance is changing:
(k) Refinancing means a new obligation that satisfies and replaces an existing obligation
by the same borrower, in which:
(1) For coverage purposes, the existing obligation is a home purchase loan (as
determined by the lender, for example, by reference to available documents; or as
stated by the applicant), and both the existing obligation and the new obligation are
secured by first liens on dwellings; and
(2) For reporting purposes, both the existing obligation and the new obligation are
secured by liens on dwellings.
My question has to do with what is the difference between "coverage" and "reporting"? Coverage refers to 1st lien status and reporting just indicates the loan must be secured by a dwelling. What are we not getting? Thanks so much!
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#122358 - 10/14/03 03:48 PM
Re: HMDA - Refinancing
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Anonymous
Unregistered
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If I am not mistaken, Coverage Test determines if you need to report and Reporting Test determines what you need to report. If you are a current HMDA reporter, you have passed the Coverage Test and just worry about the reporting test. It is indeed confusing in the way it is worded.
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#122359 - 10/14/03 09:40 PM
Re: HMDA - Refinancing
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Anonymous
Unregistered
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Is this saying that the only refinance is where the original loan purpose was a home purchase secured by a first lien and the refinance has to also be secured by a first lien in order to be "covered", but to be "reported" it only has to be secured by a lien on a dwelling, doesn't matter what lien status? Is this saying refis of home improvement loans are not "covered" or "reported"?? Please help, can someone decipher this HMDA code? Why does "covered" refer to 1st lien and "reported" doesn't seem to care?? Thanks so much! 
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#122360 - 10/15/03 01:58 PM
Re: HMDA - Refinancing
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10K Club
Joined: Aug 2002
Posts: 47,530
Bloomington, IN
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I'll give this a try, but I don't have my GIR available for confirmation.
Coverage relates to whether your FI is required to report. Certain tests have to be met and one of them is if your FI has made first mortgage purchase or refinance loans during the reporting period. Therfore to meet this test you have to had made a purchase first mortgage loan or refinanced a purchase first mortgage loan.
The reporting requirement for 2004, if your FI meets the coverage test, is simply if the current loan is secured by a dwelling and the new loan is secured by a dwelling, the loan is reportable.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#122361 - 10/15/03 08:24 PM
Re: HMDA - Refinancing
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Gold Star
Joined: Sep 2001
Posts: 314
Midwest
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Dan got it right. (That was a joke - HMDA: Getting it Right - Get it?) Anyway. I had a tough time with this too, primarily because the training presentation on the FFIEC website lumps the two together in spite of the fact that they are two separate issues. This same question was raised at the Cincinnati Fed's HMDA 2004 training seminar yesterday. They confirmed Dan's position. Any loan secured by a dwelling that refinances any loan secured by a dwelling is HMDA reportable as a refinance regardless of the purpose of those loans or the lien position. They also confirmed that cross-collateralization / spreader clauses stating that the dwelling secures "all other current and future loans" with the borrower don't cause the loan to be HMDA reportable.
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All statements are my own and not necessarily those of my employer.
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#122365 - 10/31/03 09:14 PM
Re: HMDA - Refinancing
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10K Club
Joined: Aug 2002
Posts: 47,530
Bloomington, IN
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Clint, your scenario would not be reportable under 2003 rules, but if you refinanced that loan in Jan 2004 instead of Nov 2003 the loan would be reportable under the new 2004 rules.
Was this is a mistake, IMO yes.
Was this what Congress intended, again not IMO.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#122366 - 10/31/03 09:17 PM
Re: HMDA - Refinancing
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Diamond Poster
Joined: Feb 2003
Posts: 2,362
Colorado
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Change the date on your second loan to 2004 and you got it! Until 1/1/04, we're still using the old definition which allowed, but did not require you to treat this as a refinance. As of 1/1/04, you are required to treat that as a refinance for HMDA purposes.
IMO the Fed did make a mistake in drafting it this way, and no, I don't think it's consistent with the purposes of HMDA. The implications are actually much bigger on the commercial side than on the consumer side, but from what I've heard, they now know all the implications and are still not planning to make any subsequent change to the definition of refinance.
_________________________
Opinions are mine and not necessarily my employer's.
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#122367 - 10/31/03 09:29 PM
Re: HMDA - Refinancing
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10K Club
Joined: Aug 2002
Posts: 47,530
Bloomington, IN
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Clint also keep in mind that in 2004 that in a scenario where you're refinancing a loan secured by a dwelling and and the new loan is secured by a dwelling the following will apply:
If any proceeds are to purchase a dwelling it is reported as a purchase.
If any proceeds are for home improvement, and none for purchase, it is reported as a home improvement loan (regardless of how you classify the loan).
If none of the proceeds are for a purchase or home improvement, then it is reported as a refinance.
Purchases trumps everything, home improvement trumps refinances.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#122368 - 10/31/03 09:44 PM
Re: HMDA - Refinancing
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10K Club
Joined: Nov 2000
Posts: 18,762
Central City, NE
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Quote:
If this is true, has the Fed made a mistake here in their new definition of a "refinance" ?
Is this what was intended to be reported when Congress passed the Home Mortgage Disclosure Act?
Read my post at this string
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#122369 - 10/31/03 10:00 PM
Re: HMDA - Refinancing
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Gold Star
Joined: Apr 2003
Posts: 382
Way Out West
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Dan,
I meant to put November 1, 2004 in my post, but mistyped it.
Thanks to you all for setting me straight.
_________________________
"Are you going to pull those pistols or whistle Dixie?"
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#122370 - 11/03/03 04:57 PM
Re: HMDA - Refinancing
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Member
Joined: Aug 2003
Posts: 58
WI
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Quote:
Clint, your scenario would not be reportable under 2003 rules, but if you refinanced that loan in Jan 2004 instead of Nov 2003 the loan would be reportable under the new 2004 rules.
Dan, doesn’t the current definition of refinancing require a bank to report this transaction in years previous to 2004 also? I base this question on the “Getting It Right” guide in Appendix A.5.Code 3: Refinaincings.b “Use this code whether or not you were the original creditor on the loan being refinanced, and whether or not the refinancing involves an increase in the outstanding principal.”
And Appendix A.5.Code 3:Refinancings.c “You may report all refinancings of loans secured by one-to-four-family residential dwellings, regardless of the purpose of or amount outstanding on the original loan, and regardless of the amount of new money (if any) that is for home purchase or home improvement purposes.”
Jesse
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#122371 - 11/03/03 05:18 PM
Re: HMDA - Refinancing
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10K Club
Joined: Aug 2002
Posts: 47,530
Bloomington, IN
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Jesse,
The key is "You may report ". Under the 2003 rules if the loan's purpose is not for the purpose of purchase, improvemnt or refinancing a purchase or improvement loan, then the loan is not reportable. However, the 2003 (and earlier) rule gives you the option of reporting if both loans are dwelling secured.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#122372 - 11/05/03 08:39 PM
Re: HMDA - Refinancing
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Anonymous
Unregistered
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I have another scenario that I'm hoping someone can help me with (Since the FDIC keeps hanging up on me when I call to talk to the Regulator people!).
Okay, here goes....We have a loan with a 60 month term that balloons on the 60th payment due to an amortization of 360 months. We rewrite the loan into a new loan. We leave the original Deed of Trust in place, but draw up all new documents, including a new Promissory Note. According to the rules for 2004, is this considered a refinance?
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#122374 - 11/05/03 10:09 PM
Re: HMDA - Refinancing
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Anonymous
Unregistered
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Thank you, pac!!! I appreciate the input!!
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#122375 - 11/22/03 03:34 PM
Re: HMDA - Refinancing
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Anonymous
Unregistered
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Would someone help clarify this for us. The new definition under refinancing refers to under coverage that the existing obligation is a home purchase loan and both the existing obligation and the new obligation are secured by first liens on dwellings. We can't find in the definition where it refers to refinances of home improvement loans secured by a dwelling. Are refinances of home improvement loans where the original loan was secured by a dwelling and the subsequent loan is also secured by a dwelling reportable? What are we not understanding? Thank you so much!
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#122377 - 11/24/03 08:43 PM
Re: HMDA - Refinancing
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Gold Star
Joined: Feb 2002
Posts: 335
The South
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Quote:
Okay, here goes....We have a loan with a 60 month term that balloons on the 60th payment due to an amortization of 360 months. We rewrite the loan into a new loan. We leave the original Deed of Trust in place, but draw up all new documents, including a new Promissory Note. According to the rules for 2004, is this considered a refinance?
IF, however, you just modified the existing note the loan would not be HMDA reportable.
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#122378 - 11/25/03 03:42 PM
Re: HMDA - Refinancing
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Power Poster
Joined: Apr 2001
Posts: 4,828
Between the lines
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Attended a meeting last week with FDIC and OCC reps. The question regarding the definition of refinancing came up and the FDIC sent it up to legal for a clarification. Here is what their legal said, "A refinancing takes place when the existing deed of trust is cancelled and a new deed of trust is filed." Has anyone else gotten this info. or heard this before?
BTW, OCC rep was not aware of this and they are checking with their legal gurus.
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NOLA is my Beach!
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#122380 - 11/25/03 03:51 PM
Re: HMDA - Refinancing
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10K Club
Joined: Aug 2002
Posts: 47,530
Bloomington, IN
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I have not seen that and I'm not sure if I buy into it. The mortgage/DOT is not your obligation, the note is. We use mortgages with future advance clauses. So if we do a new note, advance new money, change the interest rate and the repayment term and tie the new note back to the original mortgage, is the FDIC saying we did not do a refinance? 
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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