How should we report the Debt to Income Ratio for a loan on which the co-borrower is an employee of the institution (borrower is the husband of the employee)? The income of the employee/co-borrower was used to underwrite the loan, however, HMDA rules permit reporting the income as N/A to protect the privacy of the employee. We are assuming that we may also report DTI as N/A but we cannot find any specific guidance on this question. Any guidance or thoughts would be appreciated! Thank you!

The rule does not provide an exception to reporting DTI for employee loans. Therefore, if you calculated the DTI, you must report it. If you did not calculate it, you report NA.

I don't believe this has been answered yet as we have the same questions. While the FDIC examiners were in they said to report it as NA but that was just there thoughts and nothing concrete.

Agree with Adam.....i see no exemption for reporting DTI for employees.

Same with credit score for employees - no exemption. I've got some issues with this as all credit/income info on employees is typically held confidential by management.

For ATR loans, you have to calculate the DTI...whether it's an employee or not....so for those, it ought to be easy enough to find.

We have the DTI which was used, by upper management, to qualify the loan. However, this information is kept in a secure area in order to protect the privacy of the employee. Upper management simply gives the loan officer a yes or no answer regarding whether the DTI is within policy limits. It's inconsistent that income may be reported as N/A for HMDA, to protect the privacy of the employee, but that DTI would be required to be reported. Perhaps by showing N/A in the income field, the LOS won't calculate a DTI and thus this field will not populate on the HMDA software.

If we are required to report DTI then it will necessitate entering the employee's income into the LOS so that the DTI used to approve the loan is reported. Also, just by entering the DTI relied on in approving the loan will give other employees the opportunity to reverse calculate the income of the employee, which is what we have been trying to prevent all along.

How can you reverse calculate their income unless you have access to the credit report in order to know their debt? A DTI of 28% doesn't tell you anything about someone's income figure. Just restrict access to the employee's credit report.

Unfortunately, this is a perfect example of why comment letters are so important.

From the preamble to the 2015 final rule:
SUGGESTED EXCLUSIONS NOT ADOPTED
A few commenters suggested specifically excluding loans made by financial institutions to their employees. The commenters stated that it is and will continue to be difficult to report such loans and that, because such loans typically are offered on better terms than loans to non-employees, their inclusion in HMDA data will skew the dataset and will serve no purpose for fair lending testing. The final rule does not specifically exclude loans made to financial institutions' employees. It is not clear why such loans are more difficult to report than other loans, and commenters did not provide any details to explain the difficulty. Loans to employees may be made on more favorable terms than other loans, but the Bureau doubts that employee loans are originated in sufficient quantities to skew the overall HMDA data. Finally, as always, HMDA data are used only as the first step in conducting a fair lending analysis. Examiners conducting fair lending examinations will be able to identify by looking at loan files when differences in loan pricing, for example, are attributable to an applicant's or borrower's status as a financial institution's employee.

Thank you Adam for citing the information in the preamble. Regarding the calculation of the DTI, all other information, including debts, is contained on a loan underwriting form in the file. This form is used to thoroughly document compliance with ATR, so all debts are listed.

I just can't get past the fact that we can report the income as N/A......................

Thanks to all who took the time to weigh in on this question. I appreciate all the thoughts that were shared. We will proceed to report the DTI, since there doesn't appear to be any authority that would allow us to report it as N/A. Thanks again to the BOL community!

I don't disagree with the importance of comment letters, but I will also say that with a rule change as complex as this one, it takes us mere mortals working a full time job to stay compliant with all the other rules a good bit of time to work through the details and get to the point where we have the proper information to know what needs tweaking and what doesn't. By then, the comment period is usually over. It would be nice if the agency would be more effectivelyt responsive to issues identified in the implementation process - maybe under the new regime that will shift some.

I agree!!!

I completely agree, Jim. I've never had time to read and comprehend initial proposals to the level needed to write an intelligent or meaningful comment letter, but the reality is that the rule makers do throw in comments like this as it is part of the process. I'm hopeful that the mandatory "reevaluations" of rules around 5 years after implementation will help in the long-term. Those comment periods will have allowed bankers the needed time to understand the problems, concerns, or questions with the original rule.