March


March 3:
Question:
Are investment properties with a loan purpose of Code 4 HMDA reportable?

Answer: Code 4 for “Loan Purpose” corresponds to “Other Purpose.” You do not report "Other" purpose loans that are "business purpose."

Reference: Code 4—Other purpose

Data Point “(5) Loan Purpose, Reportable HMDA Data: A Regulatory and Reporting Overview Reference Chart for HMDA Data Collected in 2020: https://files.consumerfinance.gov/f/documents/cfpb_2020-reportable-hmda-data.pdf 

The requirements of this part do not apply to: . . . (10) A closed-end mortgage loan or open-end line of credit that is or will be made primarily for a business or commercial purpose, unless the closed-end mortgage loan or open-end line of credit is a home improvement loan under § 1003.2(i), a home purchase loan under § 1003.2(j), or a refinancing under § 1003.2(p);"

§ 1003.3(c)(10): https://www.consumerfinance.gov/rules-policy/regulations/1003/3/#c-10

February

February 26

Question: In determining whether the bank reports a HELOC for HMDA purposes, does the bank need to consider denied, withdrawn and approved but not accepted HELOCs into the threshold of 200?

Answer: The count is based on the number of open-end lines of credit that the bank has originated.  
Reference: Section 1003.3(c)(12) provides that an open-end line of credit is an excluded transaction if a financial institution originated fewer than 500 open-end lines of credit in either of the two preceding calendar years. 
Comment 1 to § 1003.3(C)(12): https://www.consumerfinance.gov/rules-policy/regulations/1003/3/#3-c-12-Interp-1


February 23
Question
: In determining whether the bank reports a HELOC for HMDA purposes, does the bank need to consider denied, withdrawn and approved but not accepted HELOCs into the threshold of 200? 
 
Answer: The count is based on the number of open-end lines of credit that the bank has originated. 
 
Reference: Section 1003.3(c)(12) provides that an open-end line of credit is an excluded transaction if a financial institution originated fewer than 500 open-end lines of credit in either of the two preceding calendar years. 
Comment 1 to § 1003.3(C)(12): https://www.consumerfinance.gov/rules-policy/regulations/1003/3/#3-c-12-Interp-1 

 

February 15 -
Question: 
We are getting requests from our lending team to give a residential loan to a borrower who is an LLC. Are there issues with this?

Answer: Luckily if the borrower is an LLC or other legal entity, then the loan will not be subject to Reg. Z, which would include all of its subparts like TRID, ATR/QM, etc.: From a fair lending standpoint and even UDAAP, if it is a small business, the bank does want to make sure it has objective, detailed guidelines for when rate/terms will and will not apply. Typically, this type of loan would be classified as a commercial loan for this purpose, even if it might also be secured by the principal dwelling. If that is how it is reflected in the bank’s policy, it sounds like it would be a policy exception to give this applicant the rate and terms of a consumer loan product. So, there are considerations with that. 

Reference:

"9. Organizational credit. The exemption for transactions in which the borrower is not a natural person applies, for example, to loans to corporations, partnerships, associations, churches, unions, and fraternal organizations. The exemption applies regardless of the purpose of the credit extension and regardless of the fact that a natural person may guarantee or provide security for the credit."

January

Question: We have an applicant who is doing a cash-out refinancing. They stated they will use the funds for a purchase of another dwelling, but it is at an unknown, future date.  Would this still make it a “Home Purchase” loan for HMDA purposes?

Answer: Yes, you would code this as a "Home Purchase" loan. You can rely on the applicant’s representation as to the use of the loan proceeds. For a multi-purpose loan, “home purchase” trumps “refinance.”

Reference:

  • A financial institution may rely on the oral or written statement of an applicant regarding the proposed use of covered loan proceeds. 
  • Comment 1 to 12 CFR § 1003.4(a)(3): https://www.consumerfinance.gov/rules-policy/regulations/1003/4/#4-a-3-Interp-1
  • Section 1003.4(a)(3) requires a financial institution to report the purpose of a covered loan or application. If a covered loan is a home purchase loan as well as a home improvement loan, a refinancing, or a cash-out refinancing, an institution complies with § 1003.4(a)(3) by reporting the loan as a home purchase loan. 

Comment 3 to 12 CFR § 1003.4(a)(3): https://www.consumerfinance.gov/rules-policy/regulations/1003/4/#4-a-3-Interp-3   

Question: If the Bank is escrowing for flood insurance is there a regulatory requirement to also escrow for real estate taxes or can the bank waive it? 

Answer: The federal regulations only require you to escrow for taxes and hazard insurance if the loan is an HPML. Escrowing for taxes and hazard insurance can also be required by internal or investor guidelines. 

Reference:

Except as provided in paragraph (b)(2) of this section, a creditor may not extend a higher-priced mortgage loan secured by a first lien on a consumer's principal dwelling unless an escrow account is established before consummation for payment of property taxes and premiums for mortgage-related insurance required by the creditor, such as insurance against loss of or damage to property, or against liability arising out of the ownership or use of the property, or insurance protecting the creditor against the consumer's default or other credit loss.  

12 CFR § 1026.35(b)(1):https://www.consumerfinance.gov/rules-policy/regulations/1026/35/#b-1

Question: If a client has a Phase 1 CTR exemption, does this client need to be have a Designation of Exempt Person (DOEP) form completed and submitted to FinCEN?

Answer: It depends. Some Phase I exempt customers need DOEPs while others do not. If your customer is another financial institution or a government entity, then you do not need to file a DOEP. But regardless, banks need to be taking the same steps to assure its determination of a customer’s initial eligibility for exemption, and to document the basis for that conclusion. This all would follow a reasonable and prudent standard. This ensures that the bank is protecting itself form loan or other fraud or loss based on misidentification of a person’s status.

Reference: Banks do not need to file a DOEP for Phase 1-eligible customers that are banks, federal, state, or local governments, or entities exercising governmental authority.
FFIEC Manual, pg. 86

https://bsaaml.ffiec.gov/docs/manual/o6_AssessingComplianceWithBSARegulatoryRequirements/06.pdf

 

 

 

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