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HMDA Apply on Free and Clear Residence?

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Question: 
HMDA scenario- Customer uses primary residence to build a 4 plex. After the project is completed, the customer wants to use free and clear 4 plex to consolidate debts. One of those direct disbursements is going to pay off her principal residence as well as other installment obligations. Does HMDA apply on the free and clear residence and if so, why?
Answer: 

The loan is HMDA reportable. Why? See the definition of a refinancing at 203.2(k)(2) or on page 29 of the A Guide to HMDA Reporting: Getting It Right manual.

A refinancing is any dwelling-secured loan that replaces and satisfies another dwelling-secured loan to the same borrower. The purpose of the loan being refinanced is not relevant to determining whether the new loan is a refinancing for HMDA purposes. Nor is the borrower’s intended use of any addi­tional cash borrowed relevant to deter­mining whether the loan is a refinancing, though the borrower’s intended use of the funds could make the transaction a home improvement loan or a home pur­chase loan.

First published on BankersOnline.com 4/23/12

First published on 04/23/2012

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