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#2076358 - 04/29/16 03:34 PM Guidance Line of Credit
George Offline
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Not sure how to report these. Here is my scenario:

Borrow approved for GLOC, taking some of the funds to refinance an investment property. Would this be reported as a refi? What if I don't see a payoff of any other loan on the HUD/borrower's statement, does that change anything?
Last edited by George; 04/29/16 04:37 PM.
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#2076370 - 04/29/16 03:42 PM Re: General Line of Credit George
Melissa S Offline
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Do you currently normally report lines of credit to HMDA?
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#2076372 - 04/29/16 03:42 PM Re: General Line of Credit George
rlcarey Online
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rlcarey
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A guidance line - that is not credit.
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#2076376 - 04/29/16 03:47 PM Re: General Line of Credit George
Melissa S Offline
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Okay. His post heading stated General Line of Credit.
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#2076405 - 04/29/16 04:37 PM Re: General Line of Credit George
George Offline
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I apologize, I meant Guidance Line of Credit.

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#2076423 - 04/29/16 05:18 PM Re: General Line of Credit George
Dan Persfull Online
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A guidance line can work 2 ways.

Each advance is recorded on a "ledger" on the note that identifies the date and amount of each advance. I think this method is rarely used now. If this method is used then only the initial advance that was for a home purchase, home improvement or refinancing would be reported if the note is secured by a dwelling.

Each advance is evidenced by a separate note. If this method is used then each advance that was for a home purchase, home improvement or refinancing would be reported if the note is secured by a dwelling.

The advance to payoff an existing investment property you asked about would be reportable if it is dwelling secured and if the loan securing the investment property was dwelling secured. You can rely the consumer's stated purpose of the loan proceeds.
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#2076905 - 05/04/16 01:53 PM Re: General Line of Credit George
George Offline
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Dan, I mean to ask you this days ago: stated purpose is all that is needed to justify a refi, no evidence is needed?

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#2077174 - 05/05/16 01:33 PM Re: General Line of Credit George
Dan Persfull Online
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See Purpose Statement on page D-8 of the GIR.
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#2077624 - 05/09/16 03:51 PM Re: General Line of Credit George
George Offline
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Thank you sir, I appreciate it!

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#2087561 - 07/12/16 04:00 PM Re: General Line of Credit George
George Offline
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I need to revisit this really quick because I was just asked about this compared to a similar scenario, and I am doubting my decision now.

Simply put: do we HAVE to be paying off a loan directly in order for our loan to be considered a refinance?

I decided to report this loan based on the Purpose Statement from the GIR. But I chose not to report a loan under similar circumstances originated prior to this loan.

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#2087584 - 07/12/16 05:37 PM Re: General Line of Credit George
Kathleen O. Blanchard Offline

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From current Reg C definition:

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.
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#2087603 - 07/12/16 06:33 PM Re: General Line of Credit George
George Offline
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Thank you, Kathleen, but I don't know that that exactly answers my question. I know the definition, and it has always been my assumption that in order for a refi to be a refi that we need to pay off a loan directly. However, the Purpose Statement from the GIR states:

1. Purpose—statement of applicant.
An institution may rely on the oral or
written statement of an applicant regarding
the proposed use of loan proceeds.
For example, a lender could use a checkbox,
or a purpose line, on a loan application
to determine whether or not the
applicant intends to use loan proceeds for
home improvement purposes.

Does this mean that we do not have to pay off the loan ourselves? Or can we rely on the borrower's statement that he/she will payoff the existing loan with the proceeds? If so, then do we need some kind of proof of an existing loan? Otherwise, wouldn't this just be a cash out/home equity loan?

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#2087621 - 07/12/16 07:19 PM Re: General Line of Credit George
Kathleen O. Blanchard Offline

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Without evidence of the loan being paid off, I would be reluctant to call the loan a refinance.
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#2087623 - 07/12/16 07:26 PM Re: General Line of Credit George
George Offline
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That was my thought initially, then I was pointed to the statement and I just took it at face value.

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#2087625 - 07/12/16 07:31 PM Re: General Line of Credit George
Kathleen O. Blanchard Offline

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Except that a refi has very specific requirements. No one says you have to prove that a home improvement loan is used to finance improvements (unless you run it like a construction loan with inspections and draw downs), or a purchase where you actually handle the closing vs just give them funds to go buy something.

The refi definition says specifically the loan must satisfy and replace the prior dwelling secured loan. So, you are left having to show that the prior loan was satisfied and replaced.
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#2087629 - 07/12/16 07:41 PM Re: General Line of Credit George
George Offline
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Yes ma'am! Again, that had always been my understanding, but that purpose statement is just so broad that it made me think. I have submitted an email to HMDAHelp to see if they can verify this for me. But I my inclination is to agree with you, based on the definition and all else, I would say this is not HMDA reportable.

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#2087630 - 07/12/16 07:53 PM Re: General Line of Credit George
Kathleen O. Blanchard Offline

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I am pondering what if you order a subsequent lien search or other evidence of the loan being paid off. Your loan funds would still have paid off that loan theoretically.

Perhaps the easiest thing is to always require that the bank handle the payoff.
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#2087631 - 07/12/16 07:56 PM Re: General Line of Credit George
George Offline
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I agree. And without evidence, I am going to suggest that we do not report these if no other purpose is stated. At least that will keep consistency in how we report.

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#2089286 - 07/21/16 07:29 PM Re: General Line of Credit George
HMDAQueenBee Offline
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I have a question to piggyback off of this topic. What would the application date be for the advance done off the guidance line? Would it be the date the borrower requested the guidance line, or the date the advance was requested to use the funds for a purchase, home improvement or refinance of a dwelling?

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#2089299 - 07/21/16 07:54 PM Re: General Line of Credit George
Kathleen O. Blanchard Offline

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Generally, for individual advance requests under a guidance line that require approval, the date of the request (following the individual bank's process for this date determination) is the date used. This assumes the advance needs approval. Advances are then stand alone loans.

If your structure is different, the answer could be different.
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#2089322 - 07/21/16 08:27 PM Re: General Line of Credit Kathleen O. Blanchard
HMDAQueenBee Offline
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Thank you for confirming!

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#2148206 - 09/29/17 08:53 PM Officer Guidance Line George
comply1 Offline
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Can we revisit an Officer Guidance Line again? I want to make sure I understand these and the HMDA reporting. For our institution we open the Guidance Line and then any draws/request or "subnotes" as we refer to them are produced. The subnotes are booked to our core system as individual loans. For HMDA reporting we don't report the original Guidance Line (as this is a line of credit) but we do evaluate each subnote and report the individual submit if HMDA applies. This is correct.....right? (And I am talking about current reporting....not future reporting for 2018 and beyond).
Last edited by ahargrove; 09/29/17 08:55 PM.
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#2148219 - 09/30/17 02:28 AM Re: Officer Guidance Line George
David Dickinson Offline
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Central City, NE
I think you're correct on both the 2017 and 2018 HMDA rules. The Guidance Line is not a reportable transaction. Each "sub note" is reportable, if applicable.
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