HMDA Question Please
Posted By: Runreb
HMDA Question Please - 02/23/06 02:39 PM
What do you think about this scenario:
Original note was made six years ago to purchase rental house with scheduled monthly payments being made; refinanced in 2002 based on monthly payments with balloon; and refinanced again in 2006 but as a single payment loan.
Borrower is now emptying the rental house and will repay this '06 loan with sale of this house. Is this loan HMDA reportable or temporary? I'm thinking reportable given that payments have been made and it's not begin paid with longer term financing.
Posted By: Reed
Re: HMDA Question Please - 02/23/06 03:49 PM
ok, I'll take a stab. I'd say it's a refi. It's not a construction loan, bridge loan, or meant to be paid from permenant financing of a much longer term. It's just a short term loan.
Posted By: Dan Persfull
Re: HMDA Question Please - 02/23/06 03:51 PM
FWIW, I agree with Bliss.
Posted By: Runreb
Re: HMDA Question Please - 02/23/06 03:59 PM
If the history of the prior loans were not present would you have the same opinion given the single payment note?
Thanks again
Posted By: Dan Persfull
Re: HMDA Question Please - 02/23/06 04:05 PM
Yes. Under the Q&A the loan does not qualify as temporary financing.
Posted By: CRAatBOK
Re: HMDA Question Please - 02/24/06 08:31 PM
Hey Bliss, you go girl. Good stab.
Posted By: bgehres
Re: HMDA Question Please - 02/25/06 03:10 PM
If no money is being used for improvements I wouldn't report it. You aren't replacing a loan used to purchase the dwelling (regardless of whether that loan was HMDA reportable), it doesn't meet the definition of a refinance.
bgehres-- How is this not a refi? They refinanced an existing loan (the assumption based on the description given is that the bank replaced a dwelling secured note with another dwelling secured note). The original question was if it would qualify as temp financing because they would repay from the sale of a dwelling. I agree with Bliss, Dan, and KC--this is a reportable refi.
Posted By: bgehres
Re: HMDA Question Please - 02/27/06 04:40 PM
Excerpt from Reg C 203.2 -
(k) 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)
You're refinancing a refinance, not a purchase loan.
Since it doesn't meet the definition of a refinance, who cares if it's temp financing?
If the loan being refinanced was a purchase loan, then I would report it and not consider it temporary financing.
Posted By: Dan Persfull
Re: HMDA Question Please - 02/27/06 04:49 PM
Don't confuse coverage purposes with reporting purposes.
Your cite is a test to see if the financial institution is covered by Reg. C. If the FI meets the coverage test then they must look to the reporting tests for the loans they make. You need to read a little further in your cite for the reporting tests.
Long story short - the loan scenario as presented is a reportable refinancing for a covered institution.
Posted By: bgehres
Re: HMDA Question Please - 02/27/06 05:01 PM
Quote:
Don't confuse coverage purposes with reporting purposes.
That was the definition I was told to use for refinances. During our last exam, we had refinances of loans that were not purchase transactions and were cited for reporting them when we shouldn't have.
Posted By: Dan Persfull
Re: HMDA Question Please - 02/27/06 05:26 PM
Then your regulators are confused.
(k) 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.
If you are a covered institution then any dwelling secured loan that is satisfied and replaced by a dwelling secured loan to the same borrower is a reportable refinancing. Regardless of what any new money (if any) is used for.
Posted By: Princess Romeo
Re: HMDA Question Please - 02/27/06 05:26 PM
Quote:
Quote:
Don't confuse coverage purposes with reporting purposes.
That was the definition I was told to use for refinances. During our last exam, we had refinances of loans that were not purchase transactions and were cited for reporting them when we shouldn't have.
Was your last exam under the OLD HMDA reporting rules or the new HMDA reporting rules?
The new HMDA reporting rules state that a refinance is to be reported no matter what the purpose was of the original loan or the refinance transaction.
When it was pointed out that this would now require HMDA reporting if an SBA loan that included a second position lien on the business owner's house was refinanced with a new SBA loan that included a second position lien on the business owner's house, the reaction from the regulators was something along the lines of "Oh well.....deal with it. We don't think this will be that large of a problem."
Posted By: bgehres
Re: HMDA Question Please - 02/27/06 07:08 PM
Dan,
I agree with you, but I'm going to still going to use their definition (even though I too think it's wrong).
BTW - The exam was in July '05.
Posted By: Truffle Royale
Re: HMDA Question Please - 02/27/06 07:37 PM
bgehres, you said you were cited for this? Have you got their definition of a refi in writing? I'd be emailing my examiner and asking for something in writing to support this before I'd hang another submission on it.
Posted By: bgehres
Re: HMDA Question Please - 02/27/06 08:32 PM
We had to scrub our data because they said we had loans on the LAR that shouldn't have been reported.
Posted By: Truffle Royale
Re: HMDA Question Please - 02/28/06 01:33 AM
I don't mean to belabor this but I repeat my questions:
*were your actually cited?
*did you get their definition in writing?
I'm still with Dan and the others on this. Your examiner confused coverage purposes with reporting purposes. As David Dickinson has been known to say in the past, this is one of those instances I'd stand my ground with the examiners. They are not always right!
Quote:
That was the definition I was told to use for refinances. During our last exam, we had refinances of loans that were not purchase transactions and were cited for reporting them when we shouldn't have.
If I purchase a car using my home as collateral (a home equity loan), it is not HMDA reportable. If later, I refinance this loan, it is reported as a "refinance". Is this loan a dwelling purchase that is being refinanced? No, but it meets the definition in Reg C, so it is reported.
Likewise, if a small business gets a loan and the bank takes the business owners home as collateral, this loan is NOT reported (the first time). If the loan is later refinanced, it is reported (once again, as a "refinance").
There's no question about either of these scenarios or any of the other information being presented to you bgehres. You have a responsibility to your bank to ensure that they follow the regulations correctly, not what an examiner said. The next examiner won't let it slide because some examiner misinformed you. You should email this thread to your examiner and ask them to read it and call you to discuss.
Posted By: bgehres
Re: HMDA Question Please - 02/28/06 02:08 PM
I don't disagree with you about reporting either one of those situations. I'm just following what I was told from my examiner, who, if I report these loans (refi's of non-purchases) like before they will make us scrub our data again.
BTW - His argument to me was that there was no other definition of a refi in the actual regulation, therefore, that's the definition we should use.
Posted By: Dan Persfull
Re: HMDA Question Please - 02/28/06 02:23 PM
You better go to this examiner's supervisor because s/he does not know what they are doing. As David said, you are responsible to insure your institution complies with the Regulation, not the interpretation of an examiner.
Posted By: Alien
Re: HMDA Question Please - 02/28/06 05:05 PM
Quote:
"....you are responsible to insure your institution complies with the Regulation, not the interpretation of an examiner."
I think this should be the mission statement of all Audit/Compliance Departments!
Quote:
I don't disagree with you about reporting either one of those situations. I'm just following what I was told from my examiner, who, if I report these loans (refi's of non-purchases) like before they will make us scrub our data again.
BTW - His argument to me was that there was no other definition of a refi in the actual regulation, therefore, that's the definition we should use.
But we have overwhelmingly showed you that this is wrong. You even agree that it is wrong. Could it be that the examiner mis-spoke or that the examiner was misunderstood? Why would you willing choose to do something that you know is incorrect?
Report correctly. If the examiner comes back and says it is wrong, you point out their error. Your OK. If you don't report it correctly and a new examiner comes in and tells you that you are wrong, saying "last time we were told to do it this way" won't get you anywhere. The new examiner should say exactly what I said in the previous post (you must comply with the requirements).
Have you tried contacting your examiner like I suggested?