Hi all - I am having a difference of opinion with one of my loan officers. Here's the background.

A few years ago, a business was granted a LOC for the purpose of providing working capital for that business. The loan was secured by a 2nd mortgage on the business owners personal residence. Skip to a few months ago and the borrower applied for a 5 year loan to term out the line of credit. The new term loan was also to be secured by a second mortgage on the personal residence.

My feeling is that this is a reportable loan as we have a dwelling secured loan paying off and replacing a dwelling secured loan to the same borrower.

My loan officer is arguing that this is not reportable as the purpose of the term loan is to term out a LOC, which is an "Other" purpose, and therefore not HMDA reportable.

Expert guidance/opinions needed please.

Thank you,

I don't know how this loan wouldn't meet the definition of a HMDA refinance. The LOC is getting paid OFF, right?

that is correct. The LOC was being paid off and terminated.

In my opinion the first loan is secured by a dwelling and is being paid off (refinanced) into a term loan secured by a dwelling so it is HMDA reportable.

thank you Skittles and Raitchjay. I believe the Loan officer is making his determination based on 1) the original LOC was not HMDA reportable and 2) the purpose of the term loan is not to purchase a residence or provide for home improvements and the refi purpose does not apply as the original loan was not for HMDA purposes.

Right. I don't know what argument the LO is trying to make exactly......(i never really understand why LO's try to argue about what is and isn't HMDA reportable anyway...it's not like they typically have a very good understanding of regulations).

End of editorial.

"...and the refi purpose does not apply as the original loan was not for HMDA purposes."

Where in Reg. C's definition of a refinance does the LO think it says that the loan being paid off had to have been HMDA reportable? It simply says a dwelling-secured loan being satisfied and replaced by a dwelling-secured loan to the same borrower.

The LO's do not read the HMDA regulation, they rely on me for that. I had created a "cheat sheet" for the officers to use with their loan requests to assist ME in gathering the required information. On that I had put; what is the purpose of the loan: Dwelling purchase, Dwelling refinance or Dwelling improvements. The LO was arguing this term loan was not a dwelling refinance because the LOC was not a dwelling loan.

The LOC was secured by the borrower's primary residence. How is that not a dwelling-secured loan (in his eyes)?

I believe he is looking at the loan needing to be dwelling secured with a dwelling related purpose. And in his opinion, the term loan does not have a dwelling related purpose because it is terming out a LOC.

Show him the definition in Reg. C of a "refinance". There's nothing in the definition about a "dwelling-related purpose".

The "dwelling-related purpose", if he must have one, is that a dwelling-secured loan is getting satisfied and replaced by another dwelling-secured loan to the same borrower.

And then really blow his/her mind by telling them it doesn't have to be the same dwelling.

Seriously though.....LO's (people in general, really) need to be asking questions instead of arguing when they really don't know what they're talking about. IMHO. Sorry...i'm sort of mad for you that this LO is arguing with you about something they obviously have very little knowledge of.

Good point Skittles. I think I will do that!

Raitchjay, I think I blew his mind - as Skittles says - when I did read him the definition of HMDA refinance. He continued though, to be stuck on the phrase on my cheat sheet purpose: dwelling refinance. LOC not dwelling related (purpose wise) so this term loan was not a dwelling refinance - in his mind. How it could not be a dwelling refi when both line and loan are dwelling secured is beyond me, but there you have it.

I promised him I would post the question here and report back.

Thanks for having my back!

Maybe adjust your cheat sheet to replace the words "dwelling refinance" with "a dwelling secured loan being satisifed and replaced with a new dwelling secured loan to the same borrower". It's wordier, but straight out of the regulation and maybe it will head off such questions in the future. Just a thought.

Exactly. I'm going to have to!

The Loan Officer's argument doesn't hold because his definition of a refinance is different than the HMDA definition.

I agree with Skittles and raitchjay (and you) that this is reportable.