We have always collected the Government Monitoring Information on purchase and "refinance of purchase" loans.

Yesterday at a training seminar, it was pointed out that we should collect it on all purchases or refinances of someone's principal dwelling, as long as it was for a consumer purpose.

Is this correct? We are an OCC regulated bank and our past practices have been based on the OCC's definiton of a "refinance" as defined by the FHA. (which points out that a "refinance" is considered a "refinance of a purchase".) Who is right here?

Any input would be appreciated. Thanks

For Reg B collect GMI for all purchases or refinances

§ 202.5 Rules concerning requests for information.

(a) General rules--(1) Requests for information. Except as provided in paragraphs (b) through (d) of this section, a creditor may request any information in connection with a credit transaction. 1
{{4-30-03 p.7214}}
(2) Required collection of information. Notwithstanding paragraphs (b) through (d) of this section, a creditor shall request information for monitoring purposes as required by § 202.13 for credit secured by the applicant's dwelling.

§ 202.13 Information for monitoring purposes.

(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):
(i) Ethnicity, using the categories Hispanic or Latino, and not Hispanic or Latino; and race, using the categories American Indian or Alaska Native, Asian, Black or African American, Native Hawaiian or Other Pacific Islander, and White;
(ii) Sex;
(iii) Marital status, using the categories married, unmarried, and separated; and
(iv) Age.
(2) Dwelling means a residential structure that contains one to four units, whether or not that structure is attached to real property. The term includes, but is not limited to, an individual condominium or cooperative unit and a mobile or other manufactured home.

You are correct that GMI is for purchase and refinance (of the PURCHASE) of the borrower's principle dwelling.

The training indicated you should collect on ALL refinances? If I have a home equity loan and I refinance it, you should not collect GMI.

For a new Home Equity proceeds not used to pay off an existing mortgage I would not collect GMI for Reg B purposes. However, if the only loan outstanding was a Home Equity loan and my borrower was refinancing to a new Home Equity, I personally would collect GMI for Reg B since it is a refinance.

Click here for a recent discussion.

But it's not a refinance of the purchase money. If you read the Commentary to §202.13(a) - comment #6 it states
"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 . . ."

Also, Comment #5 say to not collect GMI for loans such as "home improvement and debt consolidation".

You should NOT collect GMI on ALL refinancings. Only when it is purchase money.

I read comment #5 to say if the payoff of the existing mortgage is less than than the NEW MONEY for home improvements or debt conslidation then it is not a refinance and you should not collect the GMI.

And Comment #6 says if you did the purchase money loan and already collected the GMI then you do not have to collect it again if you are the one doing the refi because you should already have it in your current file.

From Commentary to Reg B

5. Transactions not covered. The information-collection requirements of this section apply to applications for credit primarily for the purchase or refinancing of a dwelling that is or will become the applicant's principal residence. Therefore, applications for credit secured by the applicant's principal residence but made PRIMARILY for a purpose other than the purchase or refinancing of the principal residence (such as loans for home improvement and debt consolidation) are not subject to information-collection requirements. An application for an open-end home equity line of credit is not subject to this section unless it is readily apparent to the creditor when the application is taken that the primary purpose of the line is for the purchase or refinancing of a principal dwelling.

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 {{4-30-03 p.7264.04}}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.

If you are an OCC bank then you need to refer to the thread I linked above. The OCC has different collection requirements and Reg. B allows the regulatory authorities to implement their own GMI collection requirements in addition to the requirements of 202.13.

However, for the purposes of Reg. B you only collect GMI for the Purchase or the refinancing of the purchase money transaction. Refinancing for any other purpose such as consolidation, home improvement, tuition, etc. are not subject to the GMI collection requirements.

I have a $100,000 mortgage on my home and I want to do a $50,000 home improvement project and I refinance my home for a $150,000 in order to get the money for the HI project my primary purpose of refinancing was for HI, therefore GMI is not collected.

Comment #6 is addressing if you are the same lender refinancing the purchase money transaction you are not require to collect GMI if you previously collected it as required. However, if you did not, or if you are not the original lender then you must collect the GMI.

So FWIW I agree with David that GMI for Reg. B purposes is only collected on RMTs and the refinancing of the RMT. If the refinancing is for any other purpose it is not subject to GMI collection.

Sorry, I forgot to paste the following. From Oursisnottoreasonwhy cite above:

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 {{4-30-03 p.7264.04}}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.

After consulting our FDIC regulator and our outside auditors, I must respectfully disagree with Dan and David.

The regulation does not care what the loan being refinanced was originally used for it does not matter if the current loan was a purchase money loan or if the loan was a cash out refi for debt consolidation, only that there currently is an existing mortgage loan. Comment 6. "Refinancings. A refinancing occurs when an existing obligation is satisfied and replaced by a new obligation undertaken by the same borrower." However comment 6 of the regulation does establish a very limited exception to collecting GMI if the lender doing the refi was also the lender that originated a Purchase Money loan. If that is the circumstance then per comment 6 the lender "may request GMI again but is not required to do so if it was obtained in the earlier transaction" (as it should have been).

Once you have established per Comment 6 that you are dealing with a refinancing, because there is an existing obligation that you intend to payoff with your new loan, then you look at the primary purpose of the refinancing, which per our regulator and outside auditors is determined by the larger of 1) the balance of the mortgage being paid off or 2) the new money being disbursed. If the balance of the mortgage being paid off is greater than the new money being disbursed then you collect GMI. However, if the new money being disbursed is greater than the mortgage being paid off then you do not collect GMI.

How do you reconcile 202.13#5?
Transactions not covered. The information-collection requirements of this section apply to applications for credit primarily for the purchase or refinancing of a dwelling that is or will become the applicant's principal residence. Therefore, applications for credit secured by the applicant's principal residence but made primarily for a purpose other than the purchase or refinancing of the principal residence (such as loans for home improvement and debt consolidation) are not subject to the information-collection requirements.

If you say all "refinances" trump this comment, then you'll be the first person I've ever heard of saying this. I also want to see the comment that supports this trumping. For instance, the HMDA FAQ specifically says to report all refinances, regardless of original purpose. Reg B doesn't have any such guidance or comments.

I also produce a Real Estate Matrix that indicates to only collect GMI (under Reg B) for purchases and refinance (of purchase money). Regulators all over the U.S. use it and call to discuss with me and commend us for it. Not one has ever said this section was wrong. You can find the matrix at our website:
http://www.bankerscompliance.com/compliance-resources/free-downloads.htm

I'm not saying I know it all (many of you know better than that) but this will be the first time I've heard this interpretation.

For Reg B purposes

Comment 5 indicates that if the loan is not primarily for the purchase or refinance (3 possible situations - 1) the new money request is more than the payoff of the current mortgage balance or 2) the application is for a second mortgage or 3) the borrowers currently own their home free and clear and want to use it for collateral for a new consumer purpose loan) you would not collect GMI.

Example current mortgage payoff is $5,000 borrower wants to do an addition to their home for $100,000 - do not collect GMI because the primary purpose of the loan is for other than refinancing the current mortgage balance. Or if they want to leave the first mortgage in place and do this as a second mortgage do not collect GMI.

Flipped around if the current mortgage payoff is $100,000 borrower wants to do an addition for $5,000 - collect GMI because the loan is primarily for the refinancing of the current mortgage. However in this example if they want to leave the first alone and do a second mortgage for the home improvements you would not collect GMI for the new second mortgage since the loan is not primarily for the purchase or refinancing of the principal residence but for home improvement.

This is how we've been told to do it.

I know I don't know it all and it would be much simpler if we just collected GMI for all mortgage loans for Reg B purposes.

That's not how I read it. I simply read it to say "don't collect GMI unless is to purchase or refinance the purchase of the borrower's principal dwelling." I think it tells us not to collect on HI and HE loans.


That I agree with! And for HMDA too. It's crazy that we even have to spend time and energy debating this. It's worse when it comes to HMDA. Banks are required to collect and report GMI on ALL refinancings, HI and purchases, yet it's illegal to collect GMI on a home equity loan. What's up with that?!?

Not sure we're going to solve this one. Have a great 3 day weekend!

I too am in the FDIC Chicago Region (since you are located in IL I am assuming you are in the Chicago Region) and I will stand by my interpretation of 202.13 and my agreement with David.

Why do you insert the words "the purchase" after the word refinance? The reg simply says refinance.

Because of the following comment after the definition of a refinance:

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

That is mixing Comment 5 and Comment 6 together.

Comment 5 does not say "the refinance of the purchase".

I agree Comment 6 talks about refinancing of a purchase money loan made by the original lender but only to establish an exception to collecting GMI if the lender collected GMI in the orginal purchase money loan as required.

I contend you look to Comment 6 1st to see if you are dealing with a Refinancing is an existing obligation going to be replaced. Then to Comment 5 which establishes exemptions for collecting GMI for certain types of refinances if the loan is not "Primarily" for the refinancing, where primarily is defined as the greater of the existing loan balance or the new money requested. If the existing loan balance is greater then the new money requested the loan is primarily for refinancing an existing obligation and you collect GMI.

If the new money is greater than the existing obligation then the loan is not primarily for refinancing and you do not collect GMI.

With my post 830889 how did I mix comment 5 and 6 together?

Direct from the regulation:


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.

So explain to me how I mixed comment 5 and 6.




Show me in the Act or the Regulation where this is stated.

Pardon me... my brain just exploded. Might you have some duct tape on hand?

Because you are taking a portion of the sentence from comment 6 after the definition of refinancing and inserting it into comment 5. The question I had asked of David dealt with his reading of comment 5. Comment 5 says "The information collection requirements of this section apply to applications for credit primarily for the purchase or refinancing of" IT DOES NOT SAY "The information-collection requirements of this section apply to applications for credit primarily for the purchase or refinancing(the purchase)of". I had asked why he inserted (the purchase) in Comment 5.

I'll take some of that too......and a giant aspirin tablet.


But you guys just keep bangin' away at this one.

Ours...., any chance your regulator would be willing to review this thread and respond, in writing, supporting their interpretation of the Reg? They seem to be taking a position that most of us have not heard before (and disagree with).

I'm particulary interested in why the highlighted phrase in the following is ignored when they are defining a refinance: " (a) Information to be requested—(1) A creditor that receives an application for credit primarily to purchase (or to refinance a home purchase loan) 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):

Pass the aspirin.

Can't stop reading this any more than I could the infamous 'dueling gurus' thread. Kinda like a gapers' block for a car wreck.

Wow - I'm late for this fun little soiree, but I guess I'm confused on what the fighting's all about.

The Comment to Reg. B 202.5 (a) (2) 2 states:
2. Information required by Regulation C. Regulation C generally requires creditors covered by the Home Mortgage Disclosure Act (HMDA) to collect and report information about the race, ethnicity, sex of applicants for home-improvement loans and home-purchase loans, including some types of loans not covered by § 202.13.

So is this an esoteric question as to the correct REASON for obtaining GMI, or one of those strange little compliance glitches for banks that are not already HMDA reporters?

And if you're currently not a HMDA reporter, but you then FUND that request for a purchase or refinance of purchase loan, guess what? You're a HMDA reporter for the following year. Hurray!

I'll be more than happy to send you the application and dues invoice for chater membership in the I HATE HMDA CLUB.


Edited to add
Well after taking the daisy wheel tour of the linked threads, I now see the very esoteric argument about collecting GMI for certain HELOC applications.

However, I am curious about the addition of the word "of purchase" after the word refinance in some of the above posts. When I look at Comment 6 to 202.13(a), all it says is this:

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.

So, in the first sentance, it simply states a refi means an existing obligation is satisfied and replaced by a new one. This mirrors the latest and greatest HMDA definition of Refi.

In the next sentance, it seems to say that the only time you DON'T have to collect GMI on a refi is if it's the same creditor refinancing the purchase transaction. I don't see how that would mean that you should not collect GMI if its any other kind of refi.

28,375,678,833,212 and counting....the number of angels dancing on the head of this pin.

Now your just toying with me.

It doesn't say "or to refinance a home purchase loan"

it says or refinancing

§ 202.13 Information for monitoring purposes.

(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):

IT (and I presume you mean Reg. B and Commentary) doesn't say refinance a purchase loan, but some of the posts in this thread did.

When I read the Reg. and Commentary, it seems to me that it says you collect GMI for a refinance (existing obligation is satisfied and replaced by a new obligation undertaken by the same borrower), but that you don't need to collect the GMI if you are the lender doing a refinance of the purchase loan you originated.