Income required for Purchased loans

Posted By: Compliance Nut

Income required for Purchased loans - 11/05/21 04:08 PM

If a loan is reported for both CRA and HMDA, does the income have to be reported for HMDA, or can NA be reported (which is how we've been doing it for years), but a new CRA officer is saying that the gross annual income must be reported on the HMDA LAR. The CRA officer is saying we need to report income on our purchased loans in order to get CRA credit.

This doesn't make sense. Has anyone ever heard this?
Posted By: Len S

Re: Income required for Purchased loans - 11/08/21 09:01 PM

The only loans that are reported for HMDA and CRA are multifamily affordable housing which is reported as a multifamily mortgage under HMDA and Community Development under CRA. Income is not reported in either situation.

On the other hand, when you purchase a HMDA mortgage you are not required to report income, but you can optionally reported. We recommend to our client that they capture the information and then determine if it helps or hurts CRA performance (under the borrower characteristics test) and voluntarily report it when it helps and not report it when it doesn't help.
Posted By: Compliance Nut

Re: Income required for Purchased loans - 11/09/21 01:39 AM

Len, can you elaborate on what you mean by "and then determine if it helps or hurts CRA performance (under the borrower characteristics test) and voluntarily report it when it helps and not report it when it doesn't help."? I am fairly new to CRA, so forgive me. :0)
Posted By: Len S

Re: Income required for Purchased loans - 11/09/21 03:52 AM

Since reporting income is not required for purchased loans when you report those loans the omission of the borrower's income dilutes your "penetration rate" under the borrower characteristics test. Therefore, not reporting the income on purchased loans dilutes your performance lending to LMI borrowers. However, if you review those loans and determine that a good many of them were to LMI borrowers (that's one reason why the big banks purchase HMDA loans - they augment their performance) then collecting and reporting that information can improve your performance.