Hi All,

Two Questions:
1) If I have a HMDA Reportable loan where the customer will be forming an entity to be formed later, would that be considered a business entity for HMDA Purposes? Example I would report income as N/A, and GMI as if it were a business entity.

2) If I have a HMDA Reportable loan where the bank relied on income from the individual borrowers but the borrower’s income was negative, I would report the income as N/A correct?

1) The loan (if only one applicant) is either to a natural person or a non-natural person. I don't know how you can make a loan to John Doe, but treat it as if the loan is to an entity (John Doe LLC) that doesn't exist (at consummation).

2) Stealing from Dan Persfull here....there's no such thing as negative income. Debts may exceed income, but that doesn't make my income negative. If i have $20,000 in income and $30,000 in outlays, i still have an income of $20,000.

Follow up questions:

1) what if neither borrowr is a natural person? Example the loan will be made to the entity to be formed later? We have enough infomration to make a credit decision on an have an application.
2) Would that be considered a loan to a business and I do not have to collect GMI informaiton and report income as an N/A? or do I report the individual information?

1) what if neither borrowr is a natural person? Example the loan will be made to the entity to be formed later? We have enough infomration to make a credit decision on an have an application.

I hope you have your attorney involved in this. How can you legally make a loan to a non-existing entity? What happens if the entity is never formed?

I assume they are having the individuals provide guarantees, otherwise I think this is called "venture capital". Regardless, if the application is for a loan to an entity as the borrower, income is N/A.

Along the same line, we have an LLC and one member is a co-applicant? We reported his income on the LAR. Is this ok?

When the deal firms up, adjust what you have captured on the LAR including the action code since pre-closing you don't know what will happen. The LAR is not a projection.