Please help me settle a debate with the head of compliance. Under the new HMDA definition for Refinancing, it says that any dwelling-secured loan that replaces and satisfies another dwelling-secured loan to the same borrower. and - Purpose is not relevent. and - intended use is not relevent. Ok, seems simple enough :confused: However, what about the things that are listed in the beginning of the reg as excluded (temporary financing, home equity lines of credit). If a loan was not reported originally because it fell in these categories but is then refinanced, should it be reported as a HMDA loan with a purpose of 3?
It is nice to be back after years of absence. We all need a support group. :crazy:

Yes, Paula.

One of the "unintended consequences" of 2004 HMDA is that if you make a Non-HMDA loan secured by a dwelling in 2003 and refinance that loan in 2004 it IS HMDA reportable.

Example: A commercial purpose loan made to a corporation that has a dwelling as additional collateral IS HMDA reportable when you refinance this year (or later). A crop loan additionally secured by a dwelling IS HMDA reportable when refinanced this year (or later).

Since the issue with "refinancing" for HMDA is the extinguishing and replacing of the obligation (Promissory Note), you can always modify the existing obligation (promissiory note) on a commercial loan. Then it is NOT a refinance since you are just "extending, increasing or renenwing" without executing a NEW obligation.

By-the-way, how the Fed. will deal with the change in the statistics that will come from the reporting of 2004 HMDA data next year, especially when consumer groups attempt to compare 2004 data to 2003 data, is anybody's guess.

Hope this helps.

Thanks for your quick response. Problem is, the compliance officer and I aren't disagreeing on those kind of loans. We are disagreeing on specifically those defined as temporary financing (construction loans) and Home Equity lines of credit. While we rarely pay of the note for the refi of a construction loan, usually just modify, it does happen. The HELOCs are a different matter. They are often paid off with a new note issued. they don't have an icon showing me pulling my hair out.

As long as your new loan is not a line of credit or temporary financing, it would be reportable. Of course, both deals also have to be secured by a dwelling. Also, if you are paying off a construction loan with permanent financing, the new loan would be reported as a purchase, not a refi.

Here's what HMDAHELP told me:

HMDAHELP answer:
"Based on the specific scenario you described below, a refinance of a HELOC will still be optional to report on HMDA."


Question:
If a financial institution does not report Home Equity Lines of Credit, what, if any, is the reporting requirement under the following circumstance:

"Consumer closes a Home Equity Loan (closed-end loan) that is secured by a dwelling and replaces it with a Home Equity Line of Credit (open-end loan) that is secured by a dwelling."

The above situation appears to meet the definition of "refinance" and would therefore be reportable. However, the new loan is a non-reportable loan (HELOC). Does this make a difference?

I may have misunderstood - I thought the situation was reversed - an existing HELOC was being paid off with a new closed end loan. If this is the case, I still believe it is reportable. However, as HMDA Help said, a closed end loan being paid off with a HELOC would not be reportable.

Ok, let me see if I understand this. If a loan was originally non reportable under the HMDA rules (temp financing, Home Equity lines of Credit) then it would still be non reportable, even if it is being refinanced, despite the fact that it is secured by residential real estate. So on the other side, the only loans that are now reportable as a refinance that weren't reported in the past, are those that could not be reported originally because they were not purchase money. Is that the whole thing in a very big nut shell?

We have chosen the option not to report our HELOCs. However, sometimes we will pay off that HELOC and replace it with a closed-end 2nd DOT. In this case, you would have a reportable refinance under the 2004 definition because the note that you are paying off was secured by a dwelling and your new note is secured by a dwelling. Your new note is not optional reporting because it is no longer a HELOC. Does this help?

I agree with this - original not HMDA reportable by definition or falls under optional, later refinanced and new loan type or criteria meets 2004 refinance definition, new loan no longer meets definitions of optional reporting either - gets put on the LAR.