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#2222883 - 10/02/19 06:42 PM HMDA denial reason - cash flow
Banker K, CRCM Offline
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Oklahoma
We are reporting a HMDA denial to an entity. The reason we denied the loan was "Lack of Cash Flow".

Would you include this on the LAR in "Code 5" (Insufficient Cash) or in "Code 9" (Other)?

Thanks!
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#2222887 - 10/02/19 07:09 PM Re: HMDA denial reason - cash flow Banker K, CRCM
Inherent_Risk Offline
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I wouldn't do 5. I feel that's more for cash currently on hand. From the getting it right guide: "Code 5—Insufficient cash (downpayment, closing costs)." There are no ECOA reasons that would map to 5.

I would either do 1 ("Code 1—Income insufficient for amount of credit requested, and Excessive obligations in relation to income") or 9. There's a few other discussions on this.

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#2222906 - 10/02/19 09:12 PM Re: HMDA denial reason - cash flow Banker K, CRCM
Mountaineers_Fan Offline
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FWIW I would suggest code 1 - income insufficient for amount of credit requested. If I'm understanding "lack of cash flow" correctly they don't have the ability to pay their liabilities with their liquid assets.

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#2222913 - 10/03/19 10:40 AM Re: HMDA denial reason - cash flow Banker K, CRCM
Banker K, CRCM Offline
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Joined: Jan 2010
Posts: 290
Oklahoma
The reason I'm not selecting the 'income' related denial reasons is because we are dealing with an entity and therefore no income was used in the decision.

Thank you both for thinking this through with me. I am planning to report as code 9 "Other" as of now, but if anyone has any other thoughts please share!
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#2222929 - 10/03/19 02:21 PM Re: HMDA denial reason - cash flow Banker K, CRCM
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
We are reporting a HMDA denial to an entity. The reason we denied the loan was "Lack of Cash Flow".

My suggestion would be to use 9. Other - insufficient cash flow.
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#2222931 - 10/03/19 02:59 PM Re: HMDA denial reason - cash flow Banker K, CRCM
Inherent_Risk Offline
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I don't think the fact that you don't report income for an entity under 1003.4(a)(10)(iii) means you can't use code 1 for denial reasons. The denial reasons section (1003.4(a)(16)) points to the Reg B model reasons, and there's nothing there that says you can't use "Income insufficient for amount of credit requested" or "Excessive obligations in relation to income" for an entity. In fact, if you are providing an entity borrower an AAN with specific reasons and you include either of those reasons, then I think you should report code 1.

I think 9 is fine too (as long as you didn't provide an AAN with a code 1 reason), but I don't think code 1 is off limits for entity borrowers.

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