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#2193577 - 09/24/18 06:24 PM Modification Information on the LAR?
Luv2run Offline
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We currently have a program where a borrower modifis to a fixed rate after construction is completed on loan that closed as a 5/1 ARM construction perm. Certain underwriting criteria has to be met in order for this to occur. My question is, since the modification takes place this year, would we be basing rate spread, APR etc on the modified terms and reporting those numbers on the LAR?
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#2193623 - 09/24/18 11:12 PM Re: Modification Information on the LAR? Luv2run
rlcarey Online
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rlcarey
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Galveston, TX
Loan modifications are not reported in 2018.
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#2193625 - 09/25/18 01:23 AM Re: Modification Information on the LAR? Luv2run
David Dickinson Offline
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David Dickinson
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Central City, NE
Randy is right. Refer to the Commentary to §1003.2(d) #2, Commentary to §1003.2(o) #2 and Commentary to §1003.2(p) #1(iii).
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#2193639 - 09/25/18 01:19 PM Re: Modification Information on the LAR? Luv2run
Luv2run Offline
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There was an extension of credit, then the loan was modified 6 months later.....all occurring in 2018. The extension of credit is being reported on the LAR. Are you saying we only report the initial terms? I was thinking I read something somewhere about this scenario but I did not see it in the materials you referenced.
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#2193645 - 09/25/18 01:33 PM Re: Modification Information on the LAR? Luv2run
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
We currently have a program where a borrower modifis to a fixed rate after construction is completed on loan that closed as a 5/1 ARM construction perm.

If I'm reading this correctly you are modifying a 5/1 ARM to a fixed rate loan. Assuming it is a true modification it would not be reportable in 2017 or 2018.

I was thinking I read something somewhere about this scenario

There was an opinion put out in 2011 or 2012 by the FRB (I think) that said if a construction only loan was modified to permanent financing that modification would be reportable under that scenario.

Since you are modifying a 5/1 ARM to a fixed rate it doesn't appear your scenarios would fall under that opinion.
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#2193648 - 09/25/18 01:42 PM Re: Modification Information on the LAR? Luv2run
Luv2run Offline
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Thank you Dan. So since the loan was originated and modified in in 2018, from the 5/1 ARM to a Fixed Rate (a completely different rate might I add), I am to report the original terms of the 5/1 ARM on the LAR, correct?
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#2193667 - 09/25/18 03:11 PM Re: Modification Information on the LAR? Luv2run
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
For const/perm loans you have the option to report them at origination or when it goes to the permanent phase.

For a construction/permanent covered loan, the institution reports either the closing or account opening date, or the date the covered loan converts to the permanent financing. Although an institution need not choose the same approach for its entire HMDA submission, it should be generally consistent (such as by routinely using one approach within a particular division of the institution or for a category of covered loans). Notwithstanding this flexibility regarding the use of the closing or account opening date in connection with reporting the date action was taken, the institution must report the origination as occurring in the year in which the origination goes to closing or the account is opened.

Since you modified the 5/1 ARM const/perm to a fixed rate, assuming before the permanent phase kicked in, it would be my opinion you should report the loan as of its origination date.
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#2193688 - 09/25/18 05:08 PM Re: Modification Information on the LAR? Luv2run
Luv2run Offline
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We report all our construction loans as of the origination date. The modification takes place after the loan has converted to the permanent phase. I am going with reporting based on the original terms of the loan.

Thanks very much for all the input Dan!
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