Reg C states you must report a loan if a portion of the proceeds is used for home improvement AND the loan is classifed on our books as a home improvement. What if a loan is discovered with a purpose of home improvement but is not classified or coded as a home improvement loan ie unsecured? Should it be reported?

I have basically the same question, but with a little bit of a twist. We don't have any code on our system that identifies home improvement loans. We don't have a specific call report code and/or collateral code.We don't have these loans segregated in any manner, BUT the purpose on the actual loan document is noted as "home improvement" Must we report? Should we report?

The definition of "refi" is another confusing issue to me. After reading and re-reading the HMDA Getting It Right guide, it appears to me that we can consider most any loan a "refi" if it was or will be secured by a lien on the dwelling. If this is the case, do we report a refi that states it is for "debt consolidation".

Please don't refer me to that darn guide again, I just need someone to tell me what they'd do.

Well I just heard from the HMDA "help line". Stated that we should report our loans with stated purpose of "home improvement" even though not coded as such in our system.

Refinancing - the response was a vague as the HMDA Getting it Right Guide.

Still looking for your thoughts on these issues.

As a former regulator, I can tell you that we considered refi's reportable if they were originally for home purchase or home improvement. If you report refi's that were originally for debt consolidation, you could be inflating your true home loan numbers, and that would not necessarily be looked at favorably for CRA performance.

JulesB, the HMDA Getting It Right guide states:

You may report all refinancings of loans secured by one-to-four family residential dwellings, regardless of the purpose of or amount outstanding on the original loan, and regardless of the amount of new money (if any) that is for home purchase or home improvement purposes.

I would argue with any regulator (and I also used to be one) who told me that it was incorrect to report the refinance of a debt consolidation loan that is secured by a 1-4 family dwelling.

I know that this is a less technical answer, but it focuses on the spirit of the Reg absent any clear statement in the letter of the Reg.

Since HMDA appears to be focused on housing in that it wants to know about loans that we grant to help someone get in a home or loans to help someone fix-up their home, it would not seem consistent with those objectives to report information about loans for other purposes just because the bank puts a lien on the home. Based on that intent, I would not report a refinance unless it refinances a purchase or a home improvment loan. (However, I would report a refi of a refi of a refi as far as it goes as long as it eventually started with a loan to puchase or improve that property by that borrower.)

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Terry Fitz, CRP
All statements & opinions are my own and not necessarily those of my employer.

[This message has been edited by Terry Fitz (edited 02-14-2002).]

LeeS - Terry Fitz stated it better than I did. I agree with using the "spirit" and intent of the regulation, that it is designed to report loans for "home" purposes, whether to purchase a home or improve it. Yeah, it might be considered nit-picky, but that's what we looked at.

[This message has been edited by JulesB (edited 02-14-2002).]

JulesB, I didn't mean to imply that you were wrong in choosing not to report refi's unless they were for home purchase or home improvement purposes. The reg gives you that option, and I understand your reasoning behind your decision. I've always wondered myself why a bank would want to report loans that it is not required to report.

Maybe I misunderstood your previous post, but I thought you were saying that as a regulator you would consider a bank to be in error if it reported refi's of debt consolidation loans. My point was that a regulator has no right to criticize a bank for reporting refi's of all first lien loans, because the reg gives a bank that option.