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#2290913 - 11/20/23 10:10 PM Loan Term
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We have the following loan scenario –
Loan is a balloon with a loan date of 10/31/2023 and maturity date of 10/30/2028. Borrower’s first payment date is 11/30/2023.
We aren’t sure how to report our HMDA loan term. The Iowa Banker’s HMDA Data Point Guide shows that for not fully amortizing loans, we are to report loan term based off of the term to maturity rather than the amortization term. Our understanding is also that we are supposed to report only whole months. In our scenario, our term of maturity is a day shy of 60 months. In this scenario, would we report 59 months for our loan term?

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#2290915 - 11/20/23 10:38 PM Re: Loan Term LSB HMDA
raitchjay Online
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Is this loan passing your ATR test? I'm asking because for a balloon loan, the largest payment in the first 5 years (which is what you must use to qualify your borrower) would be the balloon payment itself, and for most borrowers, that would lead to an astronomical DTI. This is why most banks which originate balloon mortgage loans will have a 61 or 62 month term. As to your specific question:

Official Interpretation
Paragraph 4(a)(25)
1. Amortization and maturity. For a fully amortizing covered loan, the number of months after which the legal obligation matures is the number of months in the amortization schedule, ending with the final payment. Some covered loans do not fully amortize during the maturity term, such as covered loans with a balloon payment; such loans should still be reported using the maturity term rather than the amortization term, even in the case of covered loans that mature before fully amortizing but have reset options. For example, a 30-year fully amortizing covered loan would be reported with a term of “360,” while a five year balloon covered loan would be reported with a loan term of “60.”

I would report your loan as 59 months.
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#2290925 - 11/21/23 03:15 PM Re: Loan Term raitchjay
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The loan in this scenario is a business purpose loan. Since it is not consumer purpose/subject to Reg Z, our understanding is that this loan would be ATR exempt - is that correct?

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#2290944 - 11/21/23 06:38 PM Re: Loan Term LSB HMDA
raitchjay Online
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Correct.
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#2291837 - 12/20/23 05:45 PM Re: Loan Term LSB HMDA
Melissa S Offline
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raitchjay, what am I missing here. The loan in question closed 10/31/23 and has a 5 year maturity to 10/30/28. Wouldn't the term be reported as 60 months? The loan is on the books for 2 months in 2023, 12 months in each of 2024 through 2027, and 10 months through 2028. That's 60 months. 10/30/2028 is the end of the 5th year; 10/31/28 would begin the 6th year, or the 61st month.
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#2291839 - 12/20/23 06:42 PM Re: Loan Term LSB HMDA
raitchjay Online
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Not sure if the FIG covers this scenario or not, and i'm about to leave so i can't check it, but there's nothing in 1003.4(a)(25) that discusses handling partial months. 10-31-2023 to 10-30-2028 is not 60 full months; it's 59 full months and a partial month.
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#2291840 - 12/20/23 06:43 PM Re: Loan Term LSB HMDA
rlcarey Online
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There is a mix of HMDA and ATR questions/statements here - and they do not mix. They are totally separate issues. So, it may be a 60-month loan for HMDA, but it is going to be a ballon loan for ATR. For ATR it is the highest payment during the first five years after the date on which the first regular periodic payment will be due for a loan.
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#2291841 - 12/20/23 06:43 PM Re: Loan Term LSB HMDA
raitchjay Online
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Although actually, this from the commentary would seem to apply:

2. Non-monthly repayment periods. If a covered loan or application includes a schedule with repayment periods measured in a unit of time other than months, the financial institution should report the covered loan or application term using an equivalent number of whole months without regard for any remainder.
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#2291842 - 12/20/23 06:44 PM Re: Loan Term LSB HMDA
raitchjay Online
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Yes, i brought ATR into the mix originally wondering if this loan was passing ATR....then the OP stated it was a business purpose loan. For HMDA, i believe 59 months is the correct answer.
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#2291843 - 12/20/23 07:07 PM Re: Loan Term LSB HMDA
Dan Persfull Online
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Bloomington, IN
From the GIR

When the term to maturity (or, for a variable-rate transaction, the initial fixed-rate period) is not in whole years, the Financial Institution uses the number of whole years closest to the actual loan term (or the initial fixed-rate period). If the actual loan term
(or the initial fixed-rate period) is exactly halfway between two whole years, the Financial Institution uses the shorter loan term. The Financial Institution rounds a term shorter than six months to one year, including a term for a variable-rate Covered Loan with no initial, fixed-rate period. Comment 4(a)(12)-4.iii.

If the amortization period is longer than the transaction’s term to maturity (or for an approved but not accepted Application would have been longer than the transaction’s term to maturity), a Financial Institution must use the term to maturity to determine the
applicable APOR. Comment 4(a)(12)-4.iv.


I know this is primarily addressing determining the APOR but if these are the instructions for determining the number of months to maturity for APOR purposes then it stands to reason they would be the instructions for also determining the number of months to report for the loan term.
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