HMDA question- owner occupancy

I'm sorry if this seems basic, but I want to make sure I'm on the same page.

1. Owner Occupancy- We have a couple who borrowed money for business expense. The parents of the son put their house up for collateral, but they did not go on the loan. We now are refinancing the loan. On the HMDA worksheet, the owner occupancy would be owner occupied? Correct. Even though the parents are not on the loan, their house will be reported (since its be refinance) and they own the house and occupy it.

Yes, it is OWNER occupancy, not BORROWER occupancy.

I'm fairly new to compliance and I saw a thread dated back in 2005 that stated "indicate whether the property to which the loan or application relates will be the borrower’s principal dwelling."

http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=321526

So had me 2nd guessing. Thank you

It goes by owner occupancy, this is from Getting it Right:
Owner Occupancy. Indicate
whether the property to which the loan or loan application
relates is to be owner-occupied as a principal residence by entering the applicable code from the following:
Code 1—Owner-occupied as a principal dwelling
Code 2—Not owner-occupied as a principal dwelling
Code 3—Not applicable

The GIR used to say borrower occupancy, but changed to owner occupancy. I can't remember what year that was, but I remember there was quite a discussion here in the Threads about it. I'll have to see if I can find it.

Found it! Prior thread...

Yes, always think in terms of "Does the OWNER of the dwelling that is being reported occupy the house?"

This thread is fairly close to my question, so I am going to piggy back off it. Mom, dad, and daughter are purchasing a property. Daughter will live in it. Mom and dad will not. Mom and dad are the borrower. Since 2 of the 3 owners won't live in the property - for HMDA purposes is this loan owner or non-owner occupied? thanks!

If any of the owners of the property live in it, i would report it as owner-occupied.

^^^ ditto

I know that many posters on BOL believe that Owner Occupancy does not necessarily have any relation to the loan applicant. I disagree, but that is beside the point.

Below is a portion of a response I received from HMDA Help today regarding an Owner Occupancy question I submitted:

"When reporting information you are reporting information about the LOAN/APPLICATION/APPLICANT. So when you would report on the "owner-occupancy" for HMDA purposes you would be looking to determine whether the property was going to be "owner-occupied" by the applicant on the loan application. All information on the LAR (loan APPLICATION register) is related to the applicant.

If you determine your situation to be a refinancing and the applicant is an LLC and not an individual person, then you have the option to use code 2 (non-owner occupied). If the business is the applicant, it can never be "owner occupied" as the owner is an entity. The owner of the business is irrelevant if their name is not listed as the applicant on the application."

I post this only because I know that Owner Occupancy questions come up fairly regularly. Take it for what it's worth.

Sgt. Pepper, thanks for sharing.

If you follow the link above where Dan quoted the 2004 and 2006 guides, I think it makes it very clear that they intended to change from borrower occupancy to Owner occupancy.

Perhaps the person that answered you has been around a very long time or they were trained by an old timer.

As for me, I am sticking with what is written until they rewrite or revise via guidance.

This advice is made based on pre 2006 changes to the HMDA requirements. You will find nothing in the regulation or the GIR to support this person's advice relating to occupancy status.

The occupancy status, since 2006, is reported based on the occupancy status of the owner of the property that is being reported, not the applicant's.

Dan - I hate to beat a dead horse but this thread has caused considerable conversation at my bank...and considerable disagreement. I'm totally confused because of the conflicting opinions. One of my associates went to the FFIEC website and downloaded this definition of occupancy from the HMDA Glossary;


The definition indicates occupancy is determined by whether the "borrower" (aka applicant?) will occupy the property. Can you supply supporting material for your statement that; Thanks for your help.

Occupancy. For a one-to-four-family
dwelling, including a manufactured
home, indicate whether the prop erty
to which the loan or application relates
will be the owner’s principal dwelling.
For multifamily dwellings (housing
five or more families), and for any
dwellings located outside MSAs or in
MSAs where you do not have home
or branch offices, you may enter either
the code for “not applicable” or the
code for the occupancy status. For
more inform ation, see Appendix A,
I.A.6, and staff comment 203.4(a)(6)-1. (From the GIR.)

Not sure where your associate got that from, Molly. There is nothing in the Glossary about occupancy and rj quoted the current directions for occupancy from the instructions in Appendix A.

In the past, the reference to occupancy related to the borrower, but it's been several years since that changed.

Hi hmdagal;
This is the link they gave me for the glossary page that "defines" occupancy at www.ffiec.gov. Go to the O's for Occupancy.

http://www.ffiec.gov/hmda/glossary.htm

I am certainly not a HMDA expert but, my bank only lends to "owner occupied principal dwelling" properties. This is a very big deal issue for us, so I need to be certain before I go to management to suggest that we may have been misinterpreting 'occupancy' all along.

6. Owner Occupancy. Indicate whether the property to which the loan or loan application relates is to be owner-occupied as a principal residence by entering the applicable Code from the following:

That's from Reg. C, Appendix A.

I did check the glossary and saw what you said was there. For me, i'd go with what the regulation and GIR says over that. My guess (and it's just a guess) is that that never got changed.

Thanks raitchjay and to all.

I agree that relying on Appendix A makes the most sense, and that's what I'll recommend. It may not make management happy but, that happens everyday around here.

Thanks again.

Molly, I have been out of the bank the past few days and apologize for not responding to your Glossary inquiry but raitchjay and hmdagal gave you the correct guidance.

The reference to "borrower" was replaced with "owner" in 2006. Based on this 2006 change you report the occupancy status based on whether the property being reported will be the owner's primary dwelling.

Hi,

So if I have a person renting and is appling for a home improvements loan on the property he is renting - the owner occupied should be "2" non owner occupied? Is this correct?

Hi

We have a person renting a house and has applied for a home improvment loan unsecured. Would this be HMDA and would the owner occupied by "2" for non-owner occupied?

Thanks

Non-dwelling secured home improvement loans are only reportable if your institution classifies them internally as such. If you do classify them as home improvement and report them, the owner occupancy would be reported as non-owner occupied.

Yes we classify as home improvement - but some staff believe because the borrower is a renter (does not own the home) it's not HMDA reportable. Your thoughts?

HMDA does not rely on the borrower for reportability. It is driven primarily by the purpose and secondarily by the collateral. The only time borrower comes into play is the definition of a reportable refinance in that it must be "to the same borrower."

Just for the sake of others who may be looking at a similar question - this has changed with 2018 HMDA and the CFPB has changed back towards basing occupancy status on the applicant/borrower, rather than the "owner."