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#2269558 - 04/22/22 08:00 PM Individual Commercial Applications
referwithcaution Offline
Junior Member
Joined: Feb 2022
Posts: 25
I am back for a second question. I will spare the introduction, but I am new to both HMDA and Banking (less than 1 year).

I have a commercial loan application to an individual. It is a renewal of a 1-4 single family investment property. I have enough experience to at least know that we report DTI for HMDA purposes, but the credit decision for all of our commercial applications is based on DSC rather than DTI. This is true also for individuals acting primarily in a business or commercial manner.

I have not looked at DSC since college, but do know that there is not a significant enough correlation for a quick/on-the-spot adjustment.

My main question is does this mean that I am required to manually calculate the DTI based on a CBR and TR? This seems contradictory to me, as this is not reporting. If this is more of a policy question, I can certainly reach out to my supervisor. I would just like some clarity beforehand.

Thank you in advance!

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#2269561 - 04/22/22 08:17 PM Re: Individual Commercial Applications referwithcaution
Melissa S Offline
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Melissa S
Joined: Jan 2015
Posts: 308
Maine
The instructions for DTI state

Enter "NA" for: Transactions for which the credit decision was made without relying on debt-to-income ratio. This can be found in 1003.4(a)(23)-4.

I work with commercial HMDA reportable loans and always enter NA in DTI as we also utilize DSC and not DTI.

I would strongly recommend this document, which is updated every year, as your guide in gathering info and completing the reporting process! It a HMDA Reference chart, complete with links to the regulation and comments for each line item.

https://files.consumerfinance.gov/f/documents/cfpb_2022-reportable-hmda-data.pdf
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#2269564 - 04/22/22 08:27 PM Re: Individual Commercial Applications Melissa S
referwithcaution Offline
Junior Member
Joined: Feb 2022
Posts: 25
It appears that I got into my own head on this one, as I was actually taught that in my training. I gave the natural person aspect misplaced importance. Thank you for the quick response!

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#2269568 - 04/22/22 09:31 PM Re: Individual Commercial Applications referwithcaution
COMPL101TX Offline
Member
Joined: Apr 2018
Posts: 93
You said this was a renewal. If this is not a refinance then you don't have a reportable loan.

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#2269581 - 04/25/22 02:19 PM Re: Individual Commercial Applications COMPL101TX
referwithcaution Offline
Junior Member
Joined: Feb 2022
Posts: 25
This is the opinion that I held. However I was advised that because our underwriting still had the credit decision to renew, it is reportable.

I looked but could not find much guidance on renewals. Do you have sources that I can cite to my management?

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#2269582 - 04/25/22 02:22 PM Re: Individual Commercial Applications referwithcaution
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 79,632
Galveston, TX
2(d) Closed-end Mortgage Loan

2. Extension of credit. Under § 1003.2(d), a dwelling-secured loan is not a closed-end mortgage loan unless it involves an extension of credit. For example, some transactions completed pursuant to installment sales contracts, such as some land contracts, depending on the facts and circumstances, may or may not involve extensions of credit rendering the transactions closed-end mortgage loans. In general, extension of credit under § 1003.2(d) refers to the granting of credit only pursuant to a new debt obligation. Thus, except as described in comments 2(d)-2.i and .ii, if a transaction modifies, renews, extends, or amends the terms of an existing debt obligation, but the existing debt obligation is not satisfied and replaced, the transaction is not a closed-end mortgage loan under § 1003.2(d) because there has been no new extension of credit. The phrase extension of credit thus is defined differently under Regulation C than under Regulation B, 12 CFR part 1002.
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#2269609 - 04/25/22 08:44 PM Re: Individual Commercial Applications rlcarey
referwithcaution Offline
Junior Member
Joined: Feb 2022
Posts: 25
Thank you for the clarification!

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