If the primary borrower is an entity and the co-borrower is an individual, do we report the income for the individual?

We never have and have not received any pushback from FFIEC or OCC...

It is the income that you considered in your underwriting. If you considered the income of the individual; then yes, you use it. If they are on the note as an abundance of caution, but you did not use their income in your decision process, then no.

It is not a matter of yes or no; it is whether or not it was considered.

Tater, I'm not understanding what you mean. SoccerMomQueen, that is my take as well. We had a rather lengthy discussion about this. Some felt that it was inconsistent to report the income one time, but not other times for the same situation. I think what you report needs to be supported in the file by documentation. Documentation is so critical with HMDA!

It's not just documentation, drewella. GIR pA-7 specifically states 'Enter the gross annual income that your institution relied on in making the credit decision.'

drewella, you LOs suffer from the same affliction that most LOs enter HMDA with. They want simple, easy to understand rules that are always the same. Once they accept the fact that they will have to analyze each loan, think about what the rules are, what is needed, etc.; they will be fine. It's not easy and there are no simple rules. If it were, we'd be out of a job!

The only simple rule is "Just follow the rules, don't try to get around them." Oh, and my tag line!

Yes, that is clear to me, but I can't tell you how many times over the years that I have reviewed a file to verify the data reported on a LAR and found income reporting errors. For some reason the concept of reporting the "income relied on in making the credit decision" doesn't mean the same thing to everyone!

I want to bring this back up for discussion....

"If the primary borrower is an entity and the co-borrower is an individual, do we report the income for the individual?"

I belive the answer is no in all cases, regardless of what you relied on in making the decision. See page A-7 of the GIR.

"If the applicant or coapplicant is not a natural person or the applicant or co-applicant information is unavailable because the loan has been purchased by your institution, enter “NA.”" (my emphasis)

Thoughts?

This came up in a HMDA webinar that I taught 2 weeks ago (maybe you were the one that asked it?). Here's the Q&A:

Q. For a joint app with a natural person and not a natural person, what is the code for income? In the teleconference, we thought we heard you determine that in the example of a trust and individuals applying jointly, the income would be the individual’s income. However in the HMDA Guide in Appendix A on page A-7, item 6.d. in the Income paragraph, it indicates that when the app is natural and not natural persons, the code to use is NA for the income.

A. Appendix A on page A-7, item 6.d states “If the applicant or co-applicant is not a natural person or the applicant or co-applicant information is unavailable because the loan has been purchased by your institution, enter “NA”. You are correct that this states you can enter “NA” for ANY application involving a non-natural person. To be honest, I had to look this up and learned something new. Since it is supported in the HMDA Guide, you can easily defend this action.

My personal opinion: Stating “NA” for income is a red flag and often challenged by examiners. In the case of a trust owning a home where there are co-applicants (typically husband and wife) are also listed as borrowers, you are going to have income information in the file on the co-applicants. If the loan officer is relying on the income of the co-applicant(s) to make the payments, I would still list the income of the co-applicants on the LAR.

I wasn't the one that asked it. I'm an ex-examiner (recently ex), and any time I did a HMDA review that there was income listed and one of the borrowers was a non-natural person, I made the bank change it. Business income has the potential to skew income data that is used for CRA or fair lending analysis. Say you make the loan to business and owner jointly, and rely on the $2000/mo rental income of the business only to make the loan. That translates to $24k/year, which would be a loan to a low-income borrower under CRA. Likewise if the business made $9k/month, that would be $108/year and a high income loan.

Business = NA, and that "shouldn't" be challenged by examiners.

I think you're right. I've never seen it interpreted that way (don't report income for ANY loan with an entity as a borrower/co-borrower), but I believe you are correct. The problem is "NA" for income is often challenged. But the banker should be able to back it up with the regulation.

A copy and paste from the GIR should suffice if its challenged...and reasonable (and even some unreasonable) examiners should back off.