We are trying to determine if a Reverse Mortgage meets the definition of a HELOC (open-end credit) and thus make it our option as to whether or not we would report reverse mortgages for HMDA. Just curious if anyone has ever considered this and if so, what was your conclusion?

I guess I'm curious why you think a reverse mortgage would meet the definition of an open-end credit?

§226.33: Requirements for Reverse Mortgages (01/01/96)

(a) Definition. For purposes of this subpart, reverse mortgage transaction means a nonrecourse consumer credit obligation in which:

(1) A mortgage, deed of trust, or equivalent consensual security interest securing one or more advances is created in the consumer's principal dwelling; and

(2) Any principal, interest, or shared appreciation or equity is due and payable (other than in the case of default) only after:

(i) The consumer dies;

(ii) The dwelling is transferred; or

(iii) The consumer ceases to occupy the dwelling as a principal dwelling.

Sounds like you consider them to be closed end. Based on that, should they be reported on the HMDA LAR? If so, would you just determine whether they are a refi or a home improvment on a loan by loan basis? If they don't have an existing lien and don't tell us that any of the funds are specifically for improvements then does that mean it wouldn't be HMDA reportable?

In some ways reverse mortgages look like open end credit because they provide multiple draws, and any repayments made by the consumer will replenish the available balance which can be drawn again like a revolving line of credit. However, I'm not sure if it meets all three criteria in Reg Z's definition of open end credit because I'm not sure if there is technically a "finance charge".

But if they are open end credit then would they be treated as a HELOC which means they would be considered optional for HMDA?

If you are reasonably contemplating the borrower to make regular repayments and advances then IMO the loan should be treated and disclosed as a HELOC, not as a reverse mortgage. The commentary to 226.33 even refers to "closed-end reverse mortgage transaction".

If you are setting these up for "repeat" transactions then I do not feel they would be reverse mortgages. "Repeat" transactions as I am referring to are transactions that are drawn, repaid and then redrawn.

Now as a side note I never researched, and I hope I never have to, the in and outs of reverse mortgages. I have strictly given you my opinion as I understand open-end credit and reverse mortgages from the provisions of Reg. Z.

My company does a good amount of reverse lending, and we do report them on our LAR only if there are funds to be used for home improvement equal to or greater than $500. We report these as Home Improvement loans, and the loan amount as the amount set aside for home repairs.