We are doing a 2nd mortgage loan to payoff an existing HELOC, the borrower has a first mortgage at another FI, is the 2nd mortgage loan reportable? it does fit the definition of paying and replacing a dwelling - secured loan to the same borrower. I'm being told that its not reportable.

Is your HELOC dwelling secured [if not, it's not a HELOC]. And are you paying it off and satisfying the note? If so, you have a refinance if the borrower is the same.

Agree with Joker. HMDA = Collateral + Purpose.
If both the old and new loan are dwelling secured, then you've met the collateral part of the test.
The purpose of the new loan is to refinance an existing loan. That's the purpose part of the test.

The definition of refinance also requires a common borrower between the old and new loan. Lien status does not matter. Also, the purpose of the original loan doesn't matter.

Thank you both, that exactly what I was interpreting, we do have the HELOC secured by the dwelling. We have new auditors and some are new in the field. Thanks again.

Just jumping in here...

We have borrower that obtained a 2nd mortgage with our Bank. The 2nd Mortgage is secured by a MF dwelling. Borrower already has a 1st Mortgage with the Bank secured by the same Multi-family property. The proceeds of the 2nd mortgage will be used in part to pay off an existing Line of Credit (LOC) and the remainder of the proceeds will be used for façade restoration to the MF property used as collateral.

1. Since this is a 2nd Mortgage, would this loan be HMDA reportable or considered a HELOC? (we don't report HELOCs)
2. If HMDA reportable, would it be coded as a refinance (paying off the existing LOC) or home improvement (façade restoration)?
3. Would this be reported for CRA?

Any feedback would be greatly appreciated!

1. I'm not understanding the set-up of the 2nd mortgage. Is it an Open End LOC or just an additional advance to a closed end loan? The lien position has no bearing on reportability.

2. This year it would be HI.

3. Unsure

No it is not an Open End LOC. It is a 2nd Mortgage, closed end. They are getting a lump sum.

Then yes. For 2017 it would be reportable as a HI loan. You might, however, check on the technicality of your lien position. If you already hold the first, I would consider this an additional advance to the first. Not a second mortgage.

Great. Thanks RR Joker!

We have a HELOC that was coming up on maturity and we issued a Renewal/Modification (no new loan # or additional proceeds given to customer) and we are coding it as a closed end second mortgage with the new terms being 5year P&I amortized for 10 years.
Would this now be HMDA reportable?

It is not a HELOC any longer and it would be a HMDA reportable transaction and require all closed-end disclosures, such as TRID.

Just to clarify, there was no payoff. There was a renewal note issued to the customer prior to maturity with the new terms and payment amount. So you are saying this would be HMDA reportable. What would be the Loan Purpose category? What would trigger disclosures since there was not a new application taken? Wouldn't this just be a modification to the HELOC?

You can't modify from an open-end loan to a closed-end loan without triggering a refinance under Reg. Z with all new disclosures.

If the consumer and creditor enter into an agreement during the draw period to repay all or part of the principal balance and the amount of available credit will not be replenished as the principal balance is repaid, the creditor must give closed-end credit disclosures pursuant to subpart C for that new agreement.

Randy's above cite can be found in the Commentary to 1026.40.

It would be reportable as a refinancing. You have a closed-end dwelling secure obligation satisfying and replacing an open-end dwelling secured obligation to the same borrower.

"You can't modify from an open-end loan to a closed-end loan without triggering a refinance under Reg. Z with all new disclosures."

Where can I find this?

Commentary to Reg. Z 1026.40

iii. If the consumer and creditor enter into an agreement during the draw period to repay all or part of the principal balance and the amount of available credit will not be replenished as the principal balance is repaid, the creditor must give closed-end credit disclosures pursuant to subpart C for that new agreement. In such cases, subpart B, including the substantive rules, does not apply to the closed-end credit transaction, although it will continue to apply to any remaining open-end credit available under the plan.

Thank you for the citation. It is clear it is subject to TRID disclosures.

Why would it be HMDA reportable if the conversion was executed using a renewal/modification?

2017 HMDA Refinancing for reporting purposes - Refinancing means a new obligation that satisfies and replaces an existing obligation by the same borrower, in which both the existing obligation and the new obligation are secured by liens on dwellings.

2018 HMDA Refinancing - Refinancing means a closed-end mortgage loan or an open-end line of credit in which a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower.

> Whether a refinancing has occurred is determined by reference to whether, based on the parties' contract and applicable law, the original debt obligation has been satisfied or replaced by a new debt obligation. Whether the original lien is satisfied is irrelevant. For example:
o A new closed-end mortgage loan that satisfies and replaces one or more existing closed-end mortgage loans is a refinancing.
o A new open-end line of credit that satisfies and replaces an existing closed-end mortgage loan is a refinancing.
o A new debt obligation that renews or modifies the terms of, but that does not satisfy and replace, an existing debt obligation, is not a refinancing.

Why would it be HMDA reportable if the conversion was executed using a renewal/modification?

The "renewal/modification" is converting the open-end loan agreement/obligation to a closed-end loan agreement/obligation therefore it is satisfying and replacing an existing dwelling secured obligation to the same borrower.

When we do a renewal/modification agreement it says "that this obligation renews, continues, modifies and amends the terms of that certain promissory note in the principal amount of $XXX,XXX.XX, dated XX/XX/XXXX... This Note shall constitute a true modification or amendment of the terms of the original note which original note shall continue in full force and effect except as specifically modified herein. This Note shall not constitute a novation, payment in full or satisfaction of the original note, nor shall this Note in any other way supersede the original note or any of the Loan Documents. This Note shall continue to be secured by any and all collateral securing the original note.

and

The Bank's execution of this Note shall not constitute a novation, refinancing, discharge, extinguishment or refunding, nor is it to be construed as a release, waiver or modification of any of the terms, conditions, representations, warranties, covenants, rights or remedies set forth in any of the Loan Documents, except as expressly provided therein.

It seems that it would modify the terms, not satisfy and replace the obligation.

So would the applicability of HMDA be a matter of how the renewal/modification is worded; or is it that by default converting open-end to closed-end is satisfying and replacing the obligation no mater how it is contractually accomplished with regards to HMDA rules.

I appreciate the help, I am not trying to be difficult. It is just that we have just recently starting doing renewals/modifications in every instance that we can at the advice of an attorney. Everything that I know in my compliance career has been dealing with refinancing. I'm having to go to every consumer compliance regulation and re-learn it's application to renewals that do not contractually satisfy and replace the previous obligation. I don't want to get HMDA wrong, scrubbing and re-filing is not pleasant.

Also, since the transaction is subject to TRID disclosures, would it also be subject to ATR or QM, HCM, HPML, and HPCT if it otherwise meets the coverage of those rules?

When we do a renewal/modification agreement it says "that this obligation renews, continues, modifies and amends the terms of that certain promissory note in the principal amount of $XXX,XXX.XX, dated XX/XX/XXXX...

This would not apply when converting an open-end credit product to a closed-end product.

That conversion is a refinancing under Reg. Z and all required disclosures and other restrictions under Subpart C are applicable. And since the existing open-end obligations is satisfied and replaced by a closed-end obligation it would meet HMDA's definition of a refinance.

Maybe this is where I am getting hung up...

When renewing/modifying an open-end to a closed-end credit secured by a dwelling or when renewing/modifying a closed-end fixed loan to a closed-end variable rate loan, I understood that to mean you must provide the closed-end disclosures even though the renewal/modification does not satisfy and replace the existing obligation. I did not understand that to mean that if your transaction triggers disclosures, then it is a refinancing for all Regulation Z purposes even if the executed transaction doesn't contractually satisfy and replace existing obligation.

So my question is this...

Are we executing an agreement with verbiage that is outside of Regulation Z with regards to how this transaction should be executed?

You are referencing the promissory note which governs the legal obligation. How you accomplish that is a question for your legal counsel. Regardless of how you accomplish it, it will be considered a new closed-end loan under Reg. Z.