HMDA Clarification

Posted By: David Dickinson

HMDA Clarification - 04/13/17 04:55 PM

The CFPB just released 150 pages of Technical Corrections and Clarification to the 2018 rules.
http://files.consumerfinance.gov/f/documents/201704_cfpb_NPRM_HMDA.pdf

I'm doing quick scan and found this about Spec House builder loans:
A home purchase loan does not include a construction-only loan or line of credit that is designed to be replaced by separate permanent financing extended to the same borrower at a later time or that is extended to a person exclusively to construct a dwelling for sale.
YEAH!
Posted By: Kathleen O. Blanchard

Re: HMDA Clarification - 04/13/17 05:26 PM

It is great that they clarified for the builder loans. I am sure they received many inquiries. I know I asked. At the time they said they would be covered but if that changed they would let us know. smile

They did answer my (and I assume others) multifamily question...as proposed here, a loan secured by 5 or more properties of less than 5 units each will be multifamily, and all fields with special reporting for multifamily will follow those rules. That is a big change and I assume this clarification will remain as proposed.
Posted By: RR Joker

Re: HMDA Clarification - 04/13/17 07:49 PM

That's the first thing I looked for. Construction -only. YAY!!!
Posted By: David Dickinson

Re: HMDA Clarification - 04/13/17 07:49 PM

I assume so too since they put it in the Technical Clarification.

If anyone sees anything of significance, please post it here. Thanks!
(together, we're better!)
Posted By: RR Joker

Re: HMDA Clarification - 04/13/17 07:56 PM

It's pretty plainly written, as well:

In addition, a loan secured
by five or more separate dwellings in more than one location is a loan secured by a multifamily
dwelling. For example, assume a landlord uses a covered loan to improve five or more rental
property dwellings located in different parts of a town, and the loan is secured by those
properties. The loan should be reported as secured by a multifamily dwelling.
Posted By: Kathleen O. Blanchard

Re: HMDA Clarification - 04/13/17 08:15 PM

I had called so many times about the multifamily (after they told me this was how to apply it) that they were annoyed with me. I just wanted a published answer, I didn't really care what the answer was.
Posted By: crcmnot

Re: HMDA Clarification - 04/13/17 09:05 PM

I am so excited right now about the construction-only loans I am doing cartwheels...........in my head!
Posted By: Kathleen O. Blanchard

Re: HMDA Clarification - 04/13/17 09:41 PM

Don't get hurt! Perhaps you should get some builder's risk insurance!
Posted By: Kathleen O. Blanchard

Re: HMDA Clarification - 04/14/17 02:04 AM

This is a lot of tweaking! Still reading.
Posted By: Kathleen O. Blanchard

Re: HMDA Clarification - 04/14/17 12:38 PM

Aggregate race and ethnicity:

I noted that the aggregate categories do not have to be completed if the applicant/borrower only chooses the subcategories in both race and ethnicity. So, presumably it will not be an "edit" if the main aggregate category is left blank but the sub (disaggregated) category is completed.

Also, if an applicant chooses both Hispanic or Latino and Not Hispanic or Latino, report both.[/b] That has been an ongoing question.
Posted By: raitchjay

Re: HMDA Clarification - 04/14/17 02:47 PM

I'm guessing banks won't be given the same leeway to correct LAR mistakes on the 2018 LAR that the CFPB has to put out the new regulation and correct it's mistakes as it goes. I'm just always amazed at the "typographical" errors (.97 for 97, for example) that they have to correct.
Posted By: bOaty

Re: HMDA Clarification - 04/18/17 04:04 PM

Very relieved to see the clarification on multifamily(yay, I won't have to keep trying to explain this to our commercial lenders!!) and the construction loans, *whew* but in my mind they have planted a new fear in my brain with the disaggregated/aggregated thing. So we just leave the main category blank? I guess once the edits are available we can see if leaving it blank would create an edit.
Posted By: RR Joker

Re: HMDA Clarification - 04/18/17 05:23 PM

Personally, I think the multi-family definition is ridiculous. It flies in the face of any other multi-family definition in existence!
Posted By: RR Becca

Re: HMDA Clarification - 04/18/17 05:53 PM

Originally Posted By RR Joker
Personally, I think the multi-family definition is ridiculous. It flies in the face of any other multi-family definition in existence!


I agree. I'm grateful that they clarified what they actually want instead of leaving us guessing...but what they want makes no sense to me.
Posted By: David Dickinson

Re: HMDA Clarification - 04/18/17 06:28 PM

^^^^^ Agree to Becca & Joker.

bOaty said:
Quote:
So we just leave the main category blank?

Correct. As M.C. Hammer said "Can't touch this". If the applicant selects any race (main or sub), you report exactly what they say. If they select any ethnicity, you report exactly what they say. Same with sex. Don't touch what they say.

Therefore, if they mark a sub-race or sub-ethnicity, you transfer that info to the LAR and don't select a main category.
However, if they don't select a race and/or ethnicity & you see them during the application process, you pick race(s) and ethnicity(ies) but can't choose subcategories. Its that simple. smile That's why the instructions to competing the Demo Info (Appendix B) is now 3 pages long!
Posted By: bOaty

Re: HMDA Clarification - 04/18/17 07:06 PM

Thanks, David!

The thing that I like about multifamily is we do a lot of apartment lending and a good number of those are big complexes but each building is only four units. So if you have 150 units but they are all in a 4-plex, under the current rules we have to call those a 1-4 family which also makes no sense at all either.
Posted By: RR Becca

Re: HMDA Clarification - 04/18/17 07:39 PM

What makes my head hurt is them wanting to call 15 rental houses with individual addresses scattered across 3 counties (don't laugh, we have some like that) multi-family.
Posted By: rlcarey

Re: HMDA Clarification - 04/18/17 07:46 PM

Hey, I'll take a rule that I might not agree with over ambiguity any day of the week when it comes to regulations.
Posted By: raitchjay

Re: HMDA Clarification - 04/18/17 07:50 PM

Agree.....as long as it's clear what they want, it doesn't matter to me if they want to have a field to report lawns with pink flamingos in the yard.
Posted By: bOaty

Re: HMDA Clarification - 04/18/17 08:49 PM

Ssshhh! That might be the next thing they come up with!!!
Posted By: Sinatra Fan

Re: HMDA Clarification - 04/18/17 10:09 PM

Originally Posted By RR Becca
What makes my head hurt is them wanting to call 15 rental houses with individual addresses scattered across 3 counties (don't laugh, we have some like that) multi-family.


So, for HMDA purposes, such a loan will be reported as a multifamily loan in 2018 and beyond. For CRA (Regulation BB), since the examiners always use HMDA data to evaluate the institution, will such loans also be considered multifamily loans?
Posted By: Kathleen O. Blanchard

Re: HMDA Clarification - 04/20/17 06:34 PM

Originally Posted By Sinatra Fan
Originally Posted By RR Becca
What makes my head hurt is them wanting to call 15 rental houses with individual addresses scattered across 3 counties (don't laugh, we have some like that) multi-family.


So, for HMDA purposes, such a loan will be reported as a multifamily loan in 2018 and beyond. For CRA (Regulation BB), since the examiners always use HMDA data to evaluate the institution, will such loans also be considered multifamily loans?


At this point I would have to say no but I need to ponder that and all of its implications. I should look at the Call Report definitions.
Posted By: Kathleen O. Blanchard

Re: HMDA Clarification - 04/20/17 06:36 PM

Re race and ethnicity, I think that leaving the aggregate categories blank when an applicant only selects the disaggregate category is going to greatly complicate fair lending analysis. I would like to see the rule say that the applicant can do that, but that the FI or the system should then "assume" the aggregate category.
Posted By: Kathleen O. Blanchard

Re: HMDA Clarification - 04/20/17 07:12 PM

Originally Posted By Kathleen B
Originally Posted By Sinatra Fan
Originally Posted By RR Becca
What makes my head hurt is them wanting to call 15 rental houses with individual addresses scattered across 3 counties (don't laugh, we have some like that) multi-family.


So, for HMDA purposes, such a loan will be reported as a multifamily loan in 2018 and beyond. For CRA (Regulation BB), since the examiners always use HMDA data to evaluate the institution, will such loans also be considered multifamily loans?


At this point I would have to say no but I need to ponder that and all of its implications. I should look at the Call Report definitions.


The Call Report has this to say about multifamily properties (and that is what drives loans to be reported as secured by multifamily properties for CRA and thus not small business or small farm). These are typical building/complex multifamily structures, not standalone 1-4 family properties.

1.d Secured by multifamily (5 or more) residential properties. Report (on the FFIEC 041, in
column B; on the FFIEC 031, in columns A and B for large institutions and highly complex
institutions – as defined for assessment purposes – with foreign offices, and in column B for
all other institutions with foreign offices) all other nonfarm residential loans secured by real
estate as evidenced by mortgages (FHA and conventional) or other liens that are not
reportable in Schedule RC-C, part I, item 1.c. Specifically, include loans on:

(1) Nonfarm properties with 5 or more dwelling units in structures (including apartment
buildings and apartment hotels) used primarily to accommodate households on a more or
less permanent basis.

(2) 5 or more unit housekeeping dwellings with commercial units combined where use is
primarily residential.

(3) Cooperative-type apartment buildings containing 5 or more dwelling units.

Exclude loans for multifamily residential property construction and land development
purposes and loans secured by vacant lots in established multifamily residential sections or in
areas set aside primarily for multifamily residential properties (report in Schedule RC-C, part I,
item 1.a,(2)). Also exclude loans secured by nonfarm nonresidential properties (report in
Schedule RC-C, part I, item 1.e).
Posted By: Kathleen O. Blanchard

Re: HMDA Clarification - 04/20/17 08:10 PM

Re multifamily (HMDA v. CRA). It would be useful if the HMDA definition applied to 5 or more rental properties. The example is of a landlord, but I have (in Private Banking) had customers with more than 5 second homes, none of which were rented and which were often cross collateralized. That could open up the door to align CRA which has to do with providing affordable housing. I don't know that the call report would be changed, but perhaps the Q and A could provide guidance.
Posted By: Sinatra Fan

Re: HMDA Clarification - 04/20/17 08:20 PM

Thanks so much Kathleen for your expert and comprehensive thought and response! My initial thought was that multifamily is truly multifamily, not what another regulation (or another regulator's interpretation) calls multifamily. Your responses confirm that.

I often ask the question here at the bank, "If you call a dog's tail a leg, how many legs does a dog have?" The answer: Four; calling a tail a leg doesn't make it a leg.

We have, and will continue to treat scattered-site loans as 1-4 family (when the underlying properties are 1-4 family dwellings) for reporting and other purposes. Beginning in 2018, I'll probably need to keep a separate spreadsheet of such loans that will be reported as multifamily for HMDA, but not for any other purpose, for explanation and reconciliation reasons.
Posted By: bOaty

Re: HMDA Clarification - 04/20/17 08:22 PM

We recently did a HUGE loan on a really big apartment complex that was entirely affordable housing through a local housing agency but all of the buildings were 4-plexes.

A little leeway on the multifamily definition would really be appreciated.
Posted By: Kathleen O. Blanchard

Re: HMDA Clarification - 04/20/17 08:26 PM

Originally Posted By Sinatra Fan
Thanks so much Kathleen for your expert and comprehensive thought and response! My initial thought was that multifamily is truly multifamily, not what another regulation (or another regulator's interpretation) calls multifamily. Your responses confirm that.

I often ask the question here at the bank, "If you call a dog's tail a leg, how many legs does a dog have?" The answer: Four; calling a tail a leg doesn't make it a leg.

We have, and will continue to treat scattered-site loans as 1-4 family (when the underlying properties are 1-4 family dwellings) for reporting and other purposes. Beginning in 2018, I'll probably need to keep a separate spreadsheet of such loans that will be reported as multifamily for HMDA, but not for any other purpose, for explanation and reconciliation reasons.


I think the burden or extra recordkeeping is a valid comment to submit.

I actually knew about this multifamily thinking months ago via questions submitted to the CFPB related to my HMDA work, but I only shared it with a limited audience. I even told the CFPB that I couldn't really do anything with that information unless they published something on this radically different viewpoint. I am sure I am not the only one to say that. It was not something that was intuitively obviously in the revised rule and commentary. From that perspective, I am glad it is out there for the industry to review and respond.
Posted By: TMatt87

Re: HMDA Clarification - 04/20/17 11:22 PM

Following up with what Boaty said, if we have 5 individual single family dwellings, that would be considered multi-family. However, if we had 4 four-plexes, that would be 1-4 family?
Posted By: RR Joker

Re: HMDA Clarification - 04/21/17 03:38 PM

No, both of those scenarios for future HMDA would be 'multi-family'. For HMDA.
Posted By: raitchjay

Re: HMDA Clarification - 04/21/17 03:52 PM

How many 1-4's do you have to have before it will be considered multi-family? Just more than one?
Posted By: bOaty

Re: HMDA Clarification - 04/21/17 04:17 PM

Anything five units or more would be multifam. If you had a duplex and a triplex you would have a multifamily, same with two fourplexes.
Posted By: raitchjay

Re: HMDA Clarification - 04/21/17 04:28 PM

Oh ok.....got it. Thanks Boaty.
Posted By: bOaty

Re: HMDA Clarification - 04/21/17 05:04 PM

Sure!
Posted By: Kathleen O. Blanchard

Re: HMDA Clarification - 04/21/17 05:41 PM

Five units is what was conveyed to me as the controlling factor. It could still be made clearer, to avoid agonizing. Here is what the analysis section of the proposed clarification says:

"During implementation of the Final Rule, the Bureau was asked whether loans that are secured by five or more separate dwellings that each contain fewer than five individual dwelling units in more than one location are loans secured by multifamily dwellings. For example, a landlord might use a covered loan to improve five or more single-family dwellings in different locations, with those properties securing the loan. Because such a loan would not be secured by a housing complex or manufactured home community, it is not clear under § 1003.2(f) as adopted by the Final Rule how it should be reported. The Bureau believes that such a loan should be reported as secured by a multifamily dwelling. As with loans that are secured by multifamily dwellings in one location, the information that would be excluded from reporting under revised § 1003.4(a), such as the debt-to-income ratio discussed above, might also not be easily available, relevant, or useful for loans secured by five or more separate non-multifamily dwellings in more than one location. Consequently, to facilitate implementation and ensure the relevance and usefulness of the data collected, the Bureau proposes to add language to comment 2(f)-2 making clear that a loan secured by five or more separate dwellings in more than one location is a loan secured by a multifamily dwelling and providing an example. The Bureau solicits comment on this added language."
Posted By: RR Joker

Re: HMDA Clarification - 04/24/17 03:44 PM

VERY happy they took the realistic approach to counteroffers accepted, and later not originated. That's the ONLY thing that makes sense in handling those situations to me.
Posted By: Sinatra Fan

Re: HMDA Clarification - 04/25/17 08:55 PM

Proposed rule published today in the Federal Register: Click here
Comments due by May 25.
Posted By: Darth HMDA, CRCM, CAMS

Re: HMDA Clarification - 04/25/17 09:16 PM

Maybe the TRID proposed rule will FINALLY be finalized now haha smile
Posted By: dlucas

Re: HMDA Clarification - 05/02/17 02:57 PM

Can someone help me reconcile the new definition of multifamily dwelling with the guidance regarding improvements to mixed use multifamily dwelling? In section 2(i) of the proposal, it states:

"To resolve this apparent tension, the Bureau proposes to amend comment 2(i)-4 to clarify that the comment applies only to multifamily dwellings. The proposed amendment would clarify that the Bureau intends comment 2(i)-4 to apply to multifamily dwellings of the type referenced in the comment (for example, a building containing five or more apartment units and retail space), and not to non-multifamily dwellings that have both residential and commercial purposes (for example, a single-family dwelling with a doctor's office).

What does the Bureau mean by "the type referenced in the comment"? A building containing five or more apartment units and retail space is the most basic example and doesn't tell me anything. Are we limiting mixed use to a single building? If not, does that mean one owner's plot of land with 4 separate cottages, but he wants to improve the mechanics garage, is considered a mixed use property and therefore be a covered loan?

The Bureau also states:
"the proposed amendments to comments 2(i)-4 and 3(c)(10)-3.ii together would clarify that a loan to improve commercial space in a multifamily dwelling would not be a home improvement loan, but a loan to improve commercial space in a dwelling other than a multifamily dwelling would be a home improvement loan."

The definition of multifamily dwelling that the Bureau gives in section 2(f) CAN'T apply to section 2(i) without limiting it in some way. My question is, what do they mean by a mixed use dwelling? Is that something the Bureau can clarify?
Posted By: David Dickinson

Re: HMDA Clarification - 05/02/17 06:00 PM

Let me address the mixed use property issue you bring up. Mixed use is NOT limited to a single building.
I've had 2 phone conversations and 2 email exchanges with James Wiley at the CFPB about this. Here's a summary I wrote for our May 2016 newsletter about this topic: (the last 2 paragraphs specifically address the property with multiple buildings)

Mixed-Use Properties
Comment #4 provides clarification when properties are used for dwelling and non-dwelling related purposes.
A property used for both residential and commercial purposes, such as a building containing apartment units and retail space, is a dwelling if the property’s primary use is residential. An institution may use any reasonable standard to determine the primary use of the property, such as by square footage or by the income generated. An institution may select the standard to apply on a case-by-case basis. [Commentary to §1003.2(f) #4]

First, let’s clarify some terminology. There is no definition of “property” in Regulation C, so we contacted the CFPB and they clarified they are referring to a “parcel” of land, which might include one or multiple buildings on it. In other words, “property” can be more than just a single building. This means, “dwelling” is referring to the primary use of the entire property/parcel; not just a single home/building on the property. You may want to go back and read the Commentary to §1003.4(a)(9) #3 we quoted under the “Multifamily Dwellings” heading at the beginning of this article.

Under HMDA in 2018, determining the primary use of mixed-use property is the same as today’s rules. However, we often see people misunderstand it, so we would like to clarify. The lender needs to determine the primary use of the entire property. The Commentary says you can use square footage or income, but it also says “such as” prior to these examples. In other words, a property might have more square footage dedicated to the dwelling portion and the dwelling portion may produce more income, but that doesn’t mean the lender has to call it a dwelling. The reverse is also true. This is not something you need to apply consistently as every property and every borrower’s intended use can be different.

Single building with Mixed-Uses
Consider a single building that has both residential and commercial space. We recommend you determine why the borrower purchased the property. For instance, imagine a building located on a main street with a retail store on the first level and two levels of apartments above it. Clearly, one-third of the building is dedicated to non-dwelling purposes and two-thirds is considered a dwelling. It’s possible that a new business isn’t yet generating much income, but the two levels of apartments are. It’s likely; however, that the borrowers purchased the entire building because they wanted to operate the retail business on the first level and they didn’t want the apartments to sit unused, so they rented them out. We think the lender can classify this building as a non- dwelling. It is the lender’s responsibility to ascertain and support how they determined the primary use.

Multiple Buildings on the same property
What if there are multiple buildings on the property? The Lender will need to determine if the entire “property” or “parcel” of land is used primarily as a dwelling or not. For example, let’s say there’s a concrete company that has several business-use buildings AND a home on the same parcel of land. Just because there is a home on the land does not automatically classify this “property” as a “dwelling”. The lender can make the determination that the primary use of the property is as a non-dwelling based on such factors as specified in the Commentary (income generated, square footage, etc.)

It’s extremely important that lenders classify mixed-use properties (both single building and multiple buildings). Once you do, that property will retain that classification (a dwelling or a non-dwelling) for any subsequent loans. For example, if you classified the retail/apartment building we described above as a non-dwelling and years later the borrower wants to refinance the loan, it’s not subject to HMDA. Why? Because the building is not a dwelling according to your initial classification. Therefore, it doesn't meet the definition of refinance (dwelling secured loan replacing a dwelling secured loan). Likewise, even if the borrower applies for a loan to improve only the residential portion of the mixed-use building, it’s not a home improvement loan. Once again, because the building is classified as “non-dwelling”. We asked the CFPB these very questions and they agreed.

-----------------
(that's the end of the article. Now to address your last questions.

So the first step is to classify a property as a dwelling or not. If it's not classified as a dwelling (by the lender), then a loan secured by that property is NOT subject to HMDA - because it's not a "dwelling" [even if there's a dwelling on the property or the building contains a dwelling(s).] When I talked to the CFPB, I gave an example of a mixed use property that was primarily non-dwelling. Then I said "what if they borrow money only to be used to improve the dwelling portion. The answer was "it's not subject to HMDA because the building is not classified as a dwelling."

Does this help with your other questions?
Posted By: raitchjay

Re: HMDA Clarification - 05/02/17 06:48 PM

David....your last paragraph in the article supports the way i have (already) looked at refinancing mixed-use property--that if it's use was determined to be primarily commercial the first time, refinancing the loan didn't meet the HMDA definition because it wasn't secured by a "dwelling". IOW, the mixed-use test is determining whether or not the property is considered to be a "dwelling" for HMDA purposes. Thanks for sharing.
Posted By: dlucas

Re: HMDA Clarification - 05/03/17 02:55 PM

Thanks, David. I generally adhere to the summary written above. My confusion is in your last paragraph where you gave the example of a mixed use property that is primarily a non-dwelling. Current GIR reads:
"4. Mixed-use property. A loan to improve property used for residential and commercial purposes (for example, a building containing apartment units and retail space) is a home improvement loan if the loan proceeds are used primarily to improve the residential portion of the property." --> If we're ONLY improving the residential portion of the mixed use building, I've always reported that type of transaction even if the commercial/retail portion is significantly bigger and generates significantly more income (by all standards is primarily commercial use). Is the CFPB saying that approach is incorrect, or are they just going in a different direction under how they've written the new rule?

I think I see what you're saying under the new rule. Even though we may be improving exclusively the residential portion of the property, the property may not have been classified as a dwelling, which means it would not be a covered loan.

What about this example: One parcel with applicant's primary residence, two rental mobile homes and a garage for commercial use. Property is determined to be primary use dwelling but the loan proceeds are used to improve the garage. Under the new proposal, even improvements to the commercial portion of a non multifamily dwelling would be reportable. That would be a change from the current guidance on mixed use property, correct?

Thanks for helping me wrap my mind around this. crazy I'm saving that article above for reference later!
Posted By: bOaty

Re: HMDA Clarification - 05/03/17 09:25 PM

This statement confuses me: "The Bureau believes the proposed amendment to comment 3(c)(10)-3.ii would clarify that non-multifamily dwellings are not "mixed-use property" as described in comment 2(I)-4, even if they contain an office or other commercial space.

So if you have a building with retail on the bottom and three apartments on the top, if it's not a mixed-use property, what is it? Commercial or residential?
Posted By: Dan Persfull

Re: HMDA Clarification - 05/04/17 02:31 PM

Did you go to their comment on 3(c)(10)-3? See the last paragraph in the middle column on page 19148 of the proposed changes you got your quote from.

A closed-end
mortgage loan or open-end line of credit
to improve a dwelling other than a
multifamily dwelling, even if primarily
for a business or commercial purpose,
would be a home improvement loan
under § 1003.2(i) and would not be
excluded under § 1003.3(c)(10).

Then on page 19146

Comment 3(c)(10)–3.ii explains that a
closed-end mortgage loan or an openend
line of credit to improve an office,
for example, a doctor’s office, that is
located in a dwelling, would be a
covered loan.

intends comment 2(i)–
4 to apply to multifamily dwellings of
the type referenced in the comment (for
example, a building containing five or
more apartment units and retail space),
and not to non-multifamily dwellings
that have both residential and
commercial purposes

And then on page 19170

4. Mixed-use property. A closed-end
mortgage loan or an open-end line of credit
to improve a multifamily dwelling used for
residential and commercial purposes

Basically as I read the proposed changes the mixed-use exemption is going out the window unless it involves a multifamily property.
Posted By: bOaty

Re: HMDA Clarification - 05/04/17 03:21 PM

It would appear so. I was hoping that I was missing something because this just makes it more confusing especially for the commercial lenders who would handle this sort of credit. frown cry mad ::pulls hair out::
Posted By: bOaty

Re: HMDA Clarification - 05/04/17 03:31 PM

Wait, I'm confusing myself again. So do we NOT first look at a building that's not multifamily and determine if it's a dwelling or not? If the mixed used exemption is going away (on less than 5 units) are all commercial buildings with an apartment in it automatically considered dwellings?
Posted By: Dan Persfull

Re: HMDA Clarification - 05/04/17 04:45 PM

I've not read that far into it yet. We deal with very few mixed use properties.

But the following statement does imply that may be the outcome:

The Bureau believes the proposed
amendment to comment 3(c)(10)–3.ii
would clarify that non-multifamily
dwellings are not ‘‘mixed-use property’’
as described in comment 2(i)–4, even if
they contain an office or other
commercial space
.

Now with that said I've noticed these cites deal with improving the structure.

The following is in the new commentary:

4. Mixed-use properties. A property used for both residential and commercial purposes, such as a building containing apartment units and retail space, is a dwelling if the property's primary use is residential. An institution may use any reasonable standard to determine the primary use of the property, such as by square footage or by the income generated. An institution may select the standard to apply on a case-by-case basis.

So it appears for purchases you can still determine if the property is primarily used for commercial or residential purpose, but any improvement loans will have to follow multifamily guidance.

As I said this opinion is all based just on a quick read as of today of the quoted cites.
Posted By: David Dickinson

Re: HMDA Clarification - 05/04/17 05:04 PM

We've got several posts on the table that I need to address:
First, Dan - I understand. That's why I called and emailed the CFPB. They seem to say 2 things that are mutually exclusive. They say don't report a building(s) that is not classified as a dwelling, but the HI examples say you do report a HI loan that will be used to improve the dwelling portion. Every time, the CFPB (2 different rep's) said "if the lender didn't classify the building as "primarily dwelling", then HMDA is off the table." I've told them they need to make this crystal clear in upcoming training/announcements. Otherwise, it can easily be seen differently and field examiners will most likely being interpreting it differently.

Second, dlucas said: I think I see what you're saying under the new rule. Even though we may be improving exclusively the residential portion of the property, the property may not have been classified as a dwelling, which means it would not be a covered loan.
Correct!

What about this example: One parcel with applicant's primary residence, two rental mobile homes and a garage for commercial use. Property is determined to be primary use dwelling but the loan proceeds are used to improve the garage. Under the new proposal, even improvements to the commercial portion of a non multifamily dwelling would be reportable. That would be a change from the current guidance on mixed use property, correct?
If the loan is not being used to improve the dwelling or the entire parcel (that includes a dwelling), then it is not a HI loan. That's in today's rules as well as the 2018 rules. Look at the commentary to the definition of "home improvement" in today's rules and you'll see this spelled out.

The key to all of this is: (bolded emphasis)
[i]4. Mixed-use properties. A property used for both residential and commercial purposes, such as a building containing apartment units and retail space, is a dwelling if the property's primary use is residential. An institution may use any reasonable standard to determine the primary use of the property, such as by square footage or by the income generated. An institution may select the standard to apply on a case-by-case basis.

Another example I gave was a mixed use building that was considered primarily non-dwelling. What if it is refinanced? The reply was "HMDA doesn't apply. It's not a dwelling according to the lender."
Posted By: bOaty

Re: HMDA Clarification - 05/04/17 05:49 PM

Wow, well I'm glad I'm not the only one that is having a hard time with this, it's clear as mud.

I'll stick to the determine if it's a dwelling first strategy but without the CFPB making it perfectly clear I imagine that the examiners could go either way on this one.
Posted By: SportsMom2

Re: HMDA Clarification - 05/16/17 01:00 PM

s this HMDA reportable?

The customer has a loan at ABC bank that is secured by a 1-4 family dwelling. The purpose is "cash out to purchase equipment". The same customer has approached our bank seeking to refinance this loan. Would this loan now qualify as HMDA reportable since the purpose is "refinance"?
Posted By: rlcarey

Re: HMDA Clarification - 05/16/17 01:19 PM

No - not currently

Refinancing means a new obligation that satisfies and replaces an existing obligation by the same borrower, in which:

(1) For coverage purposes, the existing obligation is a home purchase loan (as determined by the lender, for example, by reference to available documents; or as stated by the applicant), and both the existing obligation and the new obligation are secured by first liens on dwellings; and

(2) For reporting purposes, both the existing obligation and the new obligation are secured by liens on dwellings.
Posted By: SportsMom2

Re: HMDA Clarification - 05/16/17 01:32 PM

The borrower is the same. Please clarify.
Posted By: Dan Persfull

Re: HMDA Clarification - 05/16/17 02:01 PM

The customer has a loan at ABC bank that is secured by a 1-4 family dwelling. . . . . .The same customer has approached our bank seeking to refinance this loan.

If the new loan is also dwelling secured it would be a reportable refinancing.
Posted By: rlcarey

Re: HMDA Clarification - 05/16/17 03:00 PM

the existing obligation is a home purchase loan (as determined by the lender, for example, by reference to available documents; or as stated by the applicant),

They said the original loan was to buy equipment. So, under current definitions, it would not be reportable as a refinance as they have knowledge that the existing obligation has nothing to do with the purchase of the house..
Posted By: raitchjay

Re: HMDA Clarification - 05/16/17 03:20 PM

I'm not following Randy.....under current rules (and my understanding of those rules), a dwelling-secured loan that satisfies and replaces another dwelling-secured loan that was to fund a vacation to Hawaii or any other purpose is reportable.
Posted By: Dan Persfull

Re: HMDA Clarification - 05/16/17 03:20 PM

This section of the regulation you cited determines if the FI is covered under Reg. C:

(1) For coverage purposes, the existing obligation is a home purchase loan (as determined by the lender, for example, by reference to available documents; or as stated by the applicant), and both the existing obligation and the new obligation are secured by first liens on dwellings; and

If they are covered this section of your cite determines if the loan is reportable as a refinancing:

(2) For reporting purposes, both the existing obligation and the new obligation are secured by liens on dwellings.


The existing loan is dwelling secured. If the new loan is also dwelling secured and to the same borrower it is a reportable refinancing if the FI is a covered institution.
Posted By: rlcarey

Re: HMDA Clarification - 05/16/17 03:25 PM

Oh duh - thanks Dan - headed to coffee pot........
Posted By: John Burnett

Re: HMDA Clarification - 05/16/17 03:32 PM

Pour me a cup?
Posted By: David Dickinson

Re: HMDA Clarification - 05/16/17 05:15 PM

I just want to sympathize with Randy - keeping 2 sets of rules in my head the last several months (and 7 more to go) is hard.
Posted By: Sinatra Fan

Re: HMDA Clarification - 05/16/17 06:13 PM

This is why BOL is more needed, more important, more helpful, than ever before! smile