The new regulation defines a refinancing as a transaction in which the new obligation and the replaced obligation are secured by a dwelling. Does it matter what the purpose of the loans were/are.....do they have to be for home improvement or home purchase or does it include loans for other purposes secured by a dwelling (wedding, college, etc.?)

Although I haven't spent much time reviewing the 1-1-04 changes to HMDA, I believe the "purpose test" has been replaced by the "collateral test". The new refi world will look something like, if Loan A is dwelling secured and it will be replaced by Loan B also dwelling secured, you have a reportable refi whether the dough was used for college or that ill-advised wedding in Las Vegas.
I hate to wish my life away, but I'm hoping to wake up some morning and find out it is actually January 15, 2004...which means I've missed all the procedure/form changes, training events, and questions from commercial lenders as to whether the HMDA changes have anything to do with them since the "old HMDA" didn't.

Best of luck to all......

In my reading the "purpose" test of the original and new loan has been eliminated. If the new loan request is to refinance and both the old and new loans are secured with a dwelling, the loan becomes HMDA reportable as a refinance.

This definition change to "refinance" makes it even more important that your business and commercial lending personnel are aware and trained on these changes because more HMDA reportable loans may be comming from their department if the loans are secured by a dwelling.

The new definition is really going to have an impact on the Commercial lenders. They love to add on the prin dwelling as an abundance of caution or incidential collateral. In 2004 these loans when refinanced will become HMDA refis. I have put our commercial dept on alert that next year they will have many more HMDA loans due to this change

In those commercial situations, we generally have the mortgage support a guaranty, rather than as direct collateral on the loan.

The purpose of HMDA is to provide the public with loan data that can be used to help determine whether financial institutions are serving the housing needs of their communities. The new definition of refi is contrary to that purpose. A refi loan to a business where a dwelling was taken as an abundance of caution, has nothing to do with serving housing needs. The public will not get true data on how a financial institution is doing, as these loans have nothing to do with meeting housing needs. If they don't change it before 2004, I can see another revision coming after they figure it out.

It seems to me the change in the definition of a refinancing will make things easier. If the new loan is secured by a dwelling and it is replacing a loan that was secured by a dwelling, it's reportable. That's pretty cut-and-dried to me.

As for our commercial lenders, they already know how to differentiate a HMDA loan from a non-HMDA loan (or at least they are expected to know), and I don't see how the change will make any difference, as it's a pretty easy definition to understand.

As for the change resulting in a distortion of a bank's true home lending record, I wouldn't lose any sleep over that. I'll let the regulators worry about it. And if we end up reporting more refinancings than we did before, it will make our home lending record look better, and what's wrong with that?

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And if we end up reporting more refinancings than we did before, it will make our home lending record look better, and what's wrong with that?

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It may appear that we are "churning" the loans. Also, if we are reporting rate spreads, isn't there a very good possibility that some of these will appear predatory because we did one of those risky "abundance of caution" loans and we actually priced for risk?

I agree with you, however, that I am NOT going to lose any sleep over it. There is nothing that I can do about it except to remind my lenders to complain to congress.

Hi David

I was wondering if I could get your feedback, along the same subject regarding H/E, H/I and Refi's.

My question is, according to our examiners, the OCC, we are required to document the POC for items such as hazard insurance on the GFE and HUD-1's for home equity/home inprovement loans. Do you know or have you heard how other national banks are addressing this?

I appreciate your input.

Your friendly neighborhood "BOL User"...

I already posed that same question and concern to the Fed. I received a response that said the Fed was aware of this but did not feel it would represent a large number of transactions. Apparently, they would rather keep the definition simpler and potentially include non-HMDA activity.

The fact that the "simple" definition would cause additional complications for SBA and business lenders as well as over-report debt consolidations was apparently not a concern.