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#2075711 - 04/26/16 04:52 PM Unsecured Home Improvement
George Offline
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I have a couple different scenarios regarding unsecured HI, both dealing with multiple investment properties. How would these get reported, if at all? Any help is greatly appreciated!

Scenario 1: Part unsecured, part auto secured to make improvements on "some rental properties."
Scenario 2: Cash out on one investment property to "do maintenance" on other investment properties

Neither give addresses of the other properties. I am pretty sure they are HI, but what properties would I report in these cases? Do I report these at all?

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#2075735 - 04/26/16 06:01 PM Re: Unsecured Home Improvement George
TMatt87 Offline
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First, if these are unsecured, you have to have a way to classify the loan as home improvement (certain code, color coded files, etc) for them to be HMDA reportable. If you do classify them as such, you report the property information for the dwelling being improved.
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#2075752 - 04/26/16 06:34 PM Re: Unsecured Home Improvement George
hmdagal Offline
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Also, you can't pick and choose which unsecured loan applications to report - either you classify and report them or you don't.

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#2075782 - 04/26/16 07:33 PM Re: Unsecured Home Improvement George
George Offline
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Fair enough, not trying to pick and choose. But, what do I report if we aren't given specific addresses that are getting improved?

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#2075837 - 04/26/16 11:03 PM Re: Unsecured Home Improvement George
Darth HMDA, CRCM, CAMS Offline
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I would not classify any unsecured loans (or secured lines) as home improvement. If you don't have to report it - don't report it (that's my opinion.

Do you classify these loans as home improvement currently? (separate product, flag in the system, etc.?)

Did the branch loan officer taking that application collect GMI and get a purpose of cash out letter?

Yikes!
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#2075876 - 04/27/16 01:54 PM Re: Unsecured Home Improvement George
Dan Persfull Offline
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Bloomington, IN
Scenario 1: Part unsecured, part auto secured to make improvements on "some rental properties."

As the others have said non-dwelling secured home improvement loans must also be identified as a home improvement loan to be reportable. You have to go with what your policy is. Do you or do you not classify them as home improvement loans?

Scenario 2: Cash out on one investment property to "do maintenance" on other investment properties

If the investment property is a dwelling then you need to make the loan officer contact the borrower and get the address of the property being improved, assuming that property is also a dwelling. Management must have procedures in place to properly collect the necessary information for accurate reporting (see page 2 of the GIR). If the loan officers are not collecting this information then management does not have proper procedures in place.
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#2075877 - 04/27/16 01:54 PM Re: Unsecured Home Improvement George
hmdagal Offline
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If you do choose to classify and report them, you need to obtain and report the address of the property that's to be improved.

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#2075880 - 04/27/16 02:05 PM Re: Unsecured Home Improvement George
George Offline
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Thanks y'all, I appreciate it! I am going to do some more research on our procedures as I am new to this bank and was thrown into HMDA; my old bank did more straight forward/simple loans, so I am realizing I don't know HMDA like I thought I knew HMDA...

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#2075985 - 04/27/16 05:48 PM Re: Unsecured Home Improvement George
David Dickinson Offline
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One more thing. You state:
Scenario 2: Cash out on one investment property to "do maintenance" on other investment properties
Maintenance isn't necessarily home improvement. Be sure to get the specifics of what this term really means.
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#2076008 - 04/27/16 06:52 PM Re: Unsecured Home Improvement George
George Offline
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Will do, David! Also, if something as simple as color coding files counts as classifying, then would using the term "home improvement" on the worksheet/write-up be sufficient enough to classify?

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#2076011 - 04/27/16 07:09 PM Re: Unsecured Home Improvement George
TMatt87 Offline
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I would say probably not in that scenario. Generally, if you can pull a report or easily identify all of your home improvement loan, then you have a classification system. If you have to go through each loan and look at the write-up to determine the purpose, then you don't have them classified.
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#2076018 - 04/27/16 07:16 PM Re: Unsecured Home Improvement George
raitchjay Offline
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Agree with TMatt. Color-coding a file serves to segregate files into a particular class. Writing "home improvement" on a worksheet does nothing of the kind.
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#2076020 - 04/27/16 07:19 PM Re: Unsecured Home Improvement George
George Offline
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Perfect! Thank y'all!

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#2076031 - 04/27/16 07:57 PM Re: Unsecured Home Improvement George
George Offline
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Ok, so on our Code Sheet, there is a "Loan Purpose Code" for Home Improvement. However, for our "Call Report Code," we are coding them as "other." So they are HMDA reportable?
Last edited by George; 04/27/16 09:12 PM.
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#2076071 - 04/27/16 09:24 PM Re: Unsecured Home Improvement George
TMatt87 Offline
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Can you pull a report based on the loan purpose code of "Home Improvement" and get a list of all your home improvement loans? If so, then you have a classification system and I would say they are reportable.
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#2076073 - 04/27/16 09:27 PM Re: Unsecured Home Improvement George
George Offline
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Thank you TMatt! I know I have been a pain on this and probably beaten it down more than it should have, so I greatly appreciate your help (all of you)!

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#2076085 - 04/27/16 11:00 PM Re: Unsecured Home Improvement George
Bec Offline
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The Great White North
So I have been kicking around the can at this Home Improvement deal. So say you don't really have a classification system. That all this time, at least the 4 years I have been with compliance, we have been going off the stated file comments. We do not have a loan code where I could pull a report from the database and identify HI loans and there are no color coded folders. For consistency, should I continue this practice where we scour the file comments and determine the purpose, or do I just.stop?

This would be with our unsecured or other consumer notes where the funds are only stated to be for HI right?

If I have a refinance situation and I know that some of the funds are going to be used for home improvement, would I then code that a HI loan? Or would I have the same situation as the unsecured/consumer loans because we don't classify them on the system as HI? This is more problematic as sometimes the lender will type home improvement on the application.
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#2076102 - 04/28/16 01:22 PM Re: Unsecured Home Improvement George
David Dickinson Offline
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Central City, NE
The Commentary to §1003.2 states: An institution has “classified” a loan that is not secured by a lien on a dwelling as a home improvement loan if it has entered the loan on its books as a home improvement loan, or has otherwise coded or identified the loan as a home improvement loan.

Notice it says "on it's books" and "coded"? It's a systems issue. I use this example:
If I gave you 30 minutes, could you identify all home improvement loans? If you say "Yes. All of our HI loans have a purpose code of 10 & 11 so I would build a report that identifies them", then you are classifying. If you said "Yes. All of our HI loans are in red files" or "All of our HI loans are kept in this folder/filing cabinet", then you are classifying.

If you said "No. I could open every file and look at the comments the borrower or loan officer wrote, but I couldn't do that in 30 minutes", then you are not classifying HI loans.

Bec: I don't think you have a classification system. Therefore, these loans do not meet the definition of "home improvement" as defined in §1003.2: A non-dwelling secured loan . . . and that is classified by the financial institution as a home improvement.

In 2018, this will no longer be an option. All HI loans must be secured by a dwelling. Therefore, I would stop your practice now and remove the ones you have reported on your LAR thus far in 2016.

[quote]If I have a refinance situation and I know that some of the funds are going to be used for home improvement, would I then code that a HI loan? Or would I have the same situation as the unsecured/consumer loans because we don't classify them on the system as HI? This is more problematic as sometimes the lender will type home improvement on the application.[/i]
First, it doesn't matter what the lender typed. It's how it is classified on your system (as I demonstrated above).
Second, if the refinancing/HI purpose loan is secured by a dwelling, then it is HMDA reportable as a HI loan. If the refinancing/HI purpose loan is not dwelling secured, then it's not HMDA reportable unless you classify it (on your system) as a HI loan.
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#2076438 - 04/29/16 05:46 PM Re: Unsecured Home Improvement David Dickinson
Bec Offline
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The Great White North
Oh my goodness, you couldn't have explained it any more clearer. I can't say thank you enough!!!
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#2076445 - 04/29/16 05:52 PM Re: Unsecured Home Improvement George
David Dickinson Offline
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Central City, NE
Glad to help!
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#2076692 - 05/03/16 01:25 PM Re: Unsecured Home Improvement George
Bec Offline
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The Great White North
Follow up question...
Say you have a classification system for the retail side but you don't have one for the commercial side. For instance, I can pull a report by "class code" for consumer unsecured or non real estate secured loans that the purpose is home improvement, but I don't have a similar code on the commercial side and am at the mercy of the file comments. Is it allowable to classify one kind of loan and not the other kind?
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#2076716 - 05/03/16 02:25 PM Re: Unsecured Home Improvement George
raitchjay Offline
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OK
No. Doing so means the bank is picking and choosing which non-dwelling secured HI loans to report, and which ones not to.
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#2076730 - 05/03/16 02:56 PM Re: Unsecured Home Improvement George
Bec Offline
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The Great White North
Got it. Thanks!
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#2076746 - 05/03/16 03:54 PM Re: Unsecured Home Improvement George
TMatt87 Offline
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Raitchjay, so are you saying that Bec shouldn't report her consumer non-dwelling secured home-improvement loans that can be classified as such, just because her commercial loans can't also be classified as well?

We have the exact same situation, and we report our consumer loans and not our commercial loans and haven't had any issues with examiners.
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#2076759 - 05/03/16 05:07 PM Re: Unsecured Home Improvement George
raitchjay Offline
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I'm saying that Bec (or anyone) should have a system in place to capture any and all non-dwelling secured HI loans if they classify them internally as such. IOW, it is my belief that you shouldn't have a system to capture/classify non-dwelling secured HI loans, but only apply it partially (for example, on the consumer side only) to your portfolio. I'm assuming since the question was asked that there WOULD be some non-dwelling secured HI loans on the commercial side that aren't getting reported, and IMO, that doesn't meet HMDA requirements.
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