Lien Status for Denials and Withdrawals

Paragraph 4(a)(14) Determining lien status.....If the applicant discloses a mortgage on the property on the application and chooses a purpose of refinance, we report the lien status as a first lien even if the application was denied or withdrawn, correct? I thought I had this one down, but I recently attended a HMDA class and was told that if the application does not result in an origination, for example, because the application was denied or withdrawn, we report the application as a subordinate lien. Even if the borrower indicates that the existing mortgage will be refinanced. Is anyone else familiar with this?

You should report whatever the lien status would have been if the loan had originated.

Read the commentary to that section.

We were told the same thing at a seminar. If we had a 1st and they wanted to refinance and we did not originate it we were to report as a 2nd.

Who put on this seminar? That flies in the face of the commentary. If they wanted to refinance a 1st lien, you would end up with a 1st lien loan.

For covered loans that a financial institution originates and applications that do not result in originations, lien status is determined by reference to the best information readily available to the financial institution at the time final action is taken and to the financial institution's own procedures. Thus, financial institutions may rely on the title search they routinely perform as part of their underwriting procedures—for example, for home purchase loans. Regulation C does not require financial institutions to perform title searches solely to comply with HMDA reporting requirements. Financial institutions may rely on other information that is readily available to them at the time final action is taken and that they reasonably believe is accurate, such as the applicant's statement on the application or the applicant's credit report. For example, where the applicant indicates on the application that there is a mortgage on the property or where the applicant's credit report shows that the applicant has a mortgage—and that mortgage will not be paid off as part of the transaction—the financial institution may assume that the loan it originates is secured by a subordinate lien. If the same application did not result in an origination—for example, because the application was denied or withdrawn—the financial institution would report the application as an application for a subordinate-lien loan.