Under the Revised HMDA Regs

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Question:

With the HMDA revision, I have read that the new definition of refinancing is a transaction in which a new obligation satisfies and replaces an existing obligation, where both the existing and the new loan are secured by a lien on a dwelling. However, in the revised reg., it says that for coverage purposes, a refinance is when the existing obligation is a home purchase loan and both the existing and the new obligation are secured by first liens on dwellings. For reporting purposes, both the existing and the new obligation are secured by liens on dwellings. What is the difference under the revised reg between coverage purposes and reporting purposes? What types of loans should be reported as refinances in the future?

Answer:

A financial institution is covered by HMDA if:

It has an office in a MSA;
It has more than $32 million in assets;
Its deposits are insured by the FDIC; and
It originates at least one home purchase loan or REFINANCE loan secured by a first lien on a dwelling.

For coverage purposes (is the institution covered by HMDA), the refinanced loan must be a first lien. For reporting purposes (does the loan go on the LAR) the lien status doesn't matter.

What gets reported as a refinance in the future is fairly broad. A loan is a refinance if:

The institution makes a loan secured by a dwelling:
Any portion of that loan is used to pay any existing debt, at any institution, regardless of the purpose of that debt; and
The existing debt is also secured by dwelling.

First published on BankersOnline.com 10/6/03