(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.

Based on the above, I have a few questions and thoughts...

1)What does (1) mean by coverage purposes? If I understand this correctly, we would only be able to report a refinance if we had the original purchase to begin with. Is that right?

2)So if a customer uses their home to secure a automobile purchase (not reportable) and then later refinances this loan and again secures it with their home, is it reportable as a refinance?

3)If we originate a loan that pays off a construction loan from another lender, would this be reported as a purchase or not reportable at all?

4)If it is reportable, are we under obligation to find out if the other loan was for construction? I often see purpose as "refinance loan from another lender" with no other information.

...I think I am starting to confuse myself...please help!

Coverage has to do with whether your bank is subject to HMDA. Ignore those rules for determining reportability of a specific loan.

Thank you Kathleen...I am starting to over think on all the HMDA rules and am now even misreading them. I need to walk away!!!

2)So if a customer uses their home to secure a automobile purchase (not reportable) and then later refinances this loan and again secures it with their home, is it reportable as a refinance?

Yes that would be reported as a refinance.

3)If we originate a loan that pays off a construction loan from another lender, would this be reported as a purchase or not reportable at all?

This should be reported as a purchase as it is the permanent financing.


4)If it is reportable, are we under obligation to find out if the other loan was for construction? I often see purpose as "refinance loan from another lender" with no other information.

You should find out exactly what the situation is so that the loan can be reported properly. The loan officer generally knows from conversation with the borrower that they had their construction loan elsewhere and now are applying for permanent financing. This is usually a training issue to get them to understand the importance of identifying the payoff of a construction loan. For secondary market purposes these are often treated as refinances, but for HMDA they are purchases!

If management does not have or enforce the procedures to identify this information Kathleen is referring to in #4 above then they have a problem that will (could) result in CMPs in the next exam. See Management's Responsibilities on page 2 of the GIR.

Thank you very much for the help. I am fighting an up hill battle. I am the first compliance officer this bank has had ever. They have always had the loan department manager and the operations manager monitor compliance changes. Needless to say I have found some gaps. And it seems that many employees do not like my changes or my training efforts.

I myself have only been in compliance for 3 1/2 years and am far from being an expert (can't believe I passed the crcm). The bank I came from had someone dedicated to HMDA compliance so I didn't have much exposure to it. But I am getting a crash course now.

I couldn't do it without all the help from fellow Compliance Officers and Bankersonline. THANKS!