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#2252103 - 04/09/21 03:25 PM ECOA monitoring
ckme Offline
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We have a construction only (new construction) loan that matures or needs additional funds, so we payoff the existing note and do a new loan. Would the second loan still be exempt from ECOA monitoring or does the refinance trump the construction?

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#2252391 - 04/15/21 12:33 PM Re: ECOA monitoring ckme
Adam Witmer Offline
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What do you mean by ECOA monitoring? I'm not sure I follow the question...
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#2252401 - 04/15/21 02:28 PM Re: ECOA monitoring ckme
ckme Offline
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Sorry, ECOA monitoring information. We are exempt from HMDA. Still trying to figure out the ECOA waterfall for collecting monitoring information.

Thanks!

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#2252412 - 04/15/21 03:49 PM Re: ECOA monitoring ckme
Adam Witmer Offline
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Thanks for the clarification as I just wasn't following the question.

The new loan is still a construction loan that you plan to replace with permanent financing, correct? The rules don't get into this particular scenario, but I would still call it a construction loan that is exempt due to it still being temporary financing.
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#2252425 - 04/15/21 04:59 PM Re: ECOA monitoring ckme
ckme Offline
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Your assumption was correct. Thank you Adam!

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#2253230 - 04/29/21 05:56 PM Re: ECOA monitoring ckme
ckme Offline
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Let me throw another one out there. We are exempt from HMDA data collection, so under Regulation B would we collect monitoring information in this scenario:

We are going to do a 12 month, interest only, draw down line of credit to payoff existing mortgage on the primary residence and for home improvements. It will be paid off and replaced with perm financing with us or another lender at maturity.

Thanks!

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#2253234 - 04/29/21 06:37 PM Re: ECOA monitoring ckme
Dan Persfull Offline
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The only temporary financing exemption in 1002.13 is for a loan to construct a dwelling.

3. Temporary financing. An application for temporary financing to construct a dwelling is not subject to § 1002.13. But an application for both a temporary loan to finance construction of a dwelling and a permanent mortgage loan to take effect upon the completion of construction is subject to § 1002.13.
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#2253235 - 04/29/21 06:39 PM Re: ECOA monitoring ckme
rlcarey Offline
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1002.13

6. Refinancings. A refinancing occurs when an existing obligation is satisfied and replaced by a new obligation undertaken by the same borrower. A creditor that receives an application to refinance an existing extension of credit made by that creditor for the purchase of the applicant's dwelling may request the monitoring information again but is not required to do so if it was obtained in the earlier transaction.
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#2254039 - 05/18/21 03:29 PM Re: ECOA monitoring ckme
ckme Offline
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Ok, now I have some commercial loan scenarios. I know that there has been many discussions about what qualifies as a refinance for ECOA monitoring but I still am stuck in the middle of the road.

I originate a business line of credit for working capital secured by my primary residence and that line of credit is exempt from data collection, but when I refinance my line of credit next year it will be subject to collection of ECOA monitoring information. I struggle because, like HMDA, inclusion of this loan as a refinance does not make sense if I am renewing an exempt loan.

Do any of you just collect the ECOA monitoring on every refinance (pays off the existing loan and execute a new promissory note for a new loan) with a first or junior lien on the primary residence? Maybe I am overthinking it!!!

Thanks.

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#2254044 - 05/18/21 03:53 PM Re: ECOA monitoring ckme
Skittles Offline
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This is from Regulation B:

(a) Information to be requested. (1) A creditor that receives an application for credit primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence, where the extension of credit will be secured by the dwelling, shall request as part of the application the following information regarding the applicant(s):
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#2254045 - 05/18/21 04:45 PM Re: ECOA monitoring ckme
raitchjay Online
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OK
I don't really understand why it doesn't make sense (and i'm not trying to be short).....but Reg. B gives the scenarios when it's required....purchase or refinance of the primary residence. So the 1st scenario doesn't fit....but the refinance of that loan does. Just like in HMDA... a construction only loan is specifically exempt....but refinancing that loan into permanent financing is a covered loan.
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#2254066 - 05/18/21 06:51 PM Re: ECOA monitoring ckme
rlcarey Offline
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It is limited to the refinance an existing extension of credit made by that creditor for the purchase of the applicant's dwelling. Refinancing a commercial loan secured by the applicant's dwelling would not be a refinancing.

6. Refinancings. A refinancing occurs when an existing obligation is satisfied and replaced by a new obligation undertaken by the same borrower. A creditor that receives an application to refinance an existing extension of credit made by that creditor for the purchase of the applicant's dwelling may request the monitoring information again but is not required to do so if it was obtained in the earlier transaction.
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#2254072 - 05/18/21 07:10 PM Re: ECOA monitoring ckme
raitchjay Online
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OK
Randy....i'm scratching my head here.....what part of what you have quoted says it has to be a refinance of the purchase of the applicant's dwelling? Doesn't "a refinancing occurs when an existing obligation is satisfied and replaced by a new obligation undertaken by the same borrower" make it covered?
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#2254073 - 05/18/21 07:12 PM Re: ECOA monitoring ckme
raitchjay Online
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OK
The 2nd part ("A creditor that receives an application to refinance an existing extension of credit made by that creditor for th epurchase of the applicant's dwelling may request the monitoring information again but is not required to do so if it was obtained in the earlier transaction.") just reads to me as noting a certain CLASS of refinances that don't require the GMI/DI to be gathered AGAIN.
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#2254095 - 05/19/21 12:12 PM Re: ECOA monitoring ckme
Adam Witmer Offline
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This is a good question, raitchjay. I've looked at this many times over the years as some on these threads, including David Dickinson, have been adamant that a refi had to be a refi of purchase money. My understanding is that this debate stems from an old version of the rule (pre 2003/2004 possibly) that required a refi to be a refi of purchase money in order to trigger GMI. That said, the version of the rule today just doesn't say that.

Unfortunately, I've never been able to find any prefatory text/preamble on this to fully understand the change. Therefore, I used to often tip-toe the line a bit on this when teaching the topic, but I've landed in the camp that any refi triggers GMI. My reasoning is that a refinance is now defined as simply being "an existing obligation is satisfied and replaced by a new obligation undertaken by the same borrower." In addition to this, it is almost logistically impossible to get GMI right if you are only collecting it for a refi of purchase money, meaning that GMI becomes a mess for non-HMDA banks who try to differentiate between purchase money refi's and non-purchase money refi's. Logistically, it is MUCH easier to manage GMI collection if you just collect GMI for all refinancings, which IS defined as "an existing obligation is satisfied and replaced by a new obligation undertaken by the same borrower."

That said, I may have missed something in the preamble/prefatory text that explains the change and the expectation going forward, so I'd be interested to know if anyone has something that clarifies this. I did find the 2003 final rule, but don't see anything discussed about a requirement for a refinancing to be a refinance of purchase money: https://www.federalreserve.gov/boardDocs/press/bcreg/2003/20030305/attachment.pdf

Also, for reference, here is an older thread where Randy, Kathleen, and David discuss this topic - and it appears Randy was taking a literal reading of the current definition at that time, so I'd be interested to see if/why his opinion changed: https://www.bankersonline.com/forum...g-b-government-monitoring-info-and-refis
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#2254098 - 05/19/21 01:32 PM Re: ECOA monitoring ckme
raitchjay Online
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OK
Thanks Adam.
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#2254110 - 05/19/21 04:10 PM Re: ECOA monitoring ckme
rlcarey Offline
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Adam, that is because at my age my mind is old and feeble. smile
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#2254124 - 05/19/21 06:53 PM Re: ECOA monitoring ckme
Adam Witmer Offline
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laugh
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#2254261 - 05/24/21 02:19 PM Re: ECOA monitoring ckme
tryin2comply Offline
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To add to the confusion of these comments, I understand the collection of info for refinance. But what if the scenario is sort of unusual? For example: parents own resdiential property, son lives in the house. Parents are refinancing property with son as a cosigner to build his credit. The residence is son's primary residence, with no ownership rights, and parents do not live on the property. Should GMI be collected on all, the parents and son? The son will be a cosigner and the parents are refinancing. Should it be collected on all?

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#2254270 - 05/24/21 03:23 PM Re: ECOA monitoring ckme
rlcarey Offline
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The residence is son's primary residence, with no ownership rights,

That is an oxymoron. He is nothing but a renter.
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