Skip to content
BOL Conferences

New Reply Thread Options
#2306820 - 03/05/25 09:37 PM HMDA Reporting - Purpose
Anonymous
Unregistered

Hello!

We're having a bit of a back-and-forth with our Consumer Lending department on whether a loan file should have been reported as a refinance or if it should have been reported as home improvement. Borrowers were looking to get a HELOC on their primary residence and told the banker that they needed the funds to do home improvements. Underwriting completed a search and discovered that a 2nd lien was showing on the title. The borrowers provided a Statement of Pay-off and on it, the mortgage agency lists the principal balance as $0.00, lists the pay-off balance as $0.00, and has a processing fee/recording fee of $43.25. They Statement of Pay-off additionally goes on to state in writing that "there is nothing owed on this loan."

Underwriting is saying that because we didn't receive a total zero balance statement (listing the process/recording fee at $0.00) that they consider it a refinance. However, per the definition in 1003.2(p), refinances occur when a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower. The statement from the mortgage agency lists the principal and pay-off as $0.00, so I'm not sure that an existing debt obligation is being satisfied. Clerical or administrative fees to release the lien, to me, don't fall into outstanding debt, so I don't feel there is an existing obligation to satisfy.

Interested to hear what other's take from the circumstances!

Thanks

Return to Top Reply Quote Quick Reply Quick Quote
#2306821 - 03/05/25 09:42 PM Re: HMDA Reporting - Purpose Anonymous
raitchjay Offline
Power Poster
Joined: Oct 2009
Posts: 9,381
OK
Not a refinance in my opinion. HMDA refinances pay off loans, not liens.
_________________________
I'm fixin' to fix that.

Return to Top Reply Quote Quick Reply Quick Quote
#2306833 - 03/06/25 02:13 PM Re: HMDA Reporting - Purpose Anonymous
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,886
Bloomington, IN
Underwriting completed a search and discovered that a 2nd lien was showing on the title.

If this was a closed-end subordinate loan then I agree the new loan is not a refinancing for HMDA purposes. An unreleased lien is not a debt obligation as defined in Reg. C

If this was an open-end loan that the new HELOC replaced then I would have to opine the new HELOC is reportable as a refinancing regardless if the current balance on the existing open-end loan was $0.00.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top Reply Quote Quick Reply Quick Quote
#2306837 - 03/06/25 03:10 PM Re: HMDA Reporting - Purpose Anonymous
raitchjay Offline
Power Poster
Joined: Oct 2009
Posts: 9,381
OK
Dan, I'm not sure i understand what you mean.....how would a HELOC satisfy and replace another HELOC that had a zero balance?
_________________________
I'm fixin' to fix that.

Return to Top Reply Quote Quick Reply Quick Quote
#2306844 - 03/06/25 04:24 PM Re: HMDA Reporting - Purpose Anonymous
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 85,445
Galveston, TX
The fact that a processing fee may be due to get the lien released does not represent a lien or a loan secured by the property. If the underlying closed-end loan has been paid, then there is nothing to refinance. A lien supporting an open-end credit is still a valid lien supporting the current commitment and can be refinanced even if the current principal balance is zero.

Anyway, that is how I see it.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top Reply Quote Quick Reply Quick Quote
#2306846 - 03/06/25 04:32 PM Re: HMDA Reporting - Purpose rlcarey
raitchjay Offline
Power Poster
Joined: Oct 2009
Posts: 9,381
OK
Originally Posted by rlcarey
A lien supporting an open-end credit is still a valid lien supporting the current commitment and can be refinanced even if the current principal balance is zero.

I think i understand what you guys are saying now....yes i can see that.
_________________________
I'm fixin' to fix that.

Return to Top Reply Quote Quick Reply Quick Quote
#2306858 - 03/06/25 09:35 PM Re: HMDA Reporting - Purpose Anonymous
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,886
Bloomington, IN
Dan, I'm not sure i understand what you mean.....how would a HELOC satisfy and replace another HELOC that had a zero balance?

How many HELOCs are on your books with a $0.00 balance? A $0.00 balance does not mean the open-end credit obligation is no longer valid.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top Reply Quote Quick Reply Quick Quote
#2306860 - 03/06/25 09:53 PM Re: HMDA Reporting - Purpose raitchjay
raitchjay Offline
Power Poster
Joined: Oct 2009
Posts: 9,381
OK
Originally Posted by raitchjay
Originally Posted by rlcarey
A lien supporting an open-end credit is still a valid lien supporting the current commitment and can be refinanced even if the current principal balance is zero.

I think i understand what you guys are saying now....yes i can see that.
_________________________
I'm fixin' to fix that.

Return to Top Reply Quote Quick Reply Quick Quote
#2306863 - 03/06/25 10:05 PM Re: HMDA Reporting - Purpose Anonymous
raitchjay Offline
Power Poster
Joined: Oct 2009
Posts: 9,381
OK
Actually though, i don't know how a $0 loan can be "satisfied"....it can be "replaced" yes, but there is nothing to satisfy. I think you could look at it that when one HELOC is opened and the previous one (with a zero balance) closed....it only meets half the refinancing test of Reg. C.
_________________________
I'm fixin' to fix that.

Return to Top Reply Quote Quick Reply Quick Quote
#2306866 - 03/06/25 11:02 PM Re: HMDA Reporting - Purpose Anonymous
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 85,445
Galveston, TX
ii. A new open-end line of credit that satisfies and replaces an existing closed-end mortgage loan is a refinancing under § 1003.2(p).

How can you extinguish the existing obligation and it not be satisfied?
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top Reply Quote Quick Reply Quick Quote
#2306867 - 03/06/25 11:15 PM Re: HMDA Reporting - Purpose Anonymous
Cielo Offline
Member
Joined: Jun 2018
Posts: 55
I don't think I would risk that argument, raitchjay. I would see HELOCs being "satisfied" when they close at maturity or are the time it is replaced by a different HELOC, I wouldn't consider the balance as long it is opened.

My thoughts are: if a borrower gets a HELOC, uses some funds, pay downs the HELOC to $0, draws more funds, pays back to $0 balance, and doesn't touch again, when does the become satisfied? For me, open-end loans are satisfied when closed by maturity or refinance.

Return to Top Reply Quote Quick Reply Quick Quote
#2306870 - 03/07/25 04:48 AM Re: HMDA Reporting - Purpose Anonymous
raitchjay Offline
Power Poster
Joined: Oct 2009
Posts: 9,381
OK
See below.
Last edited by raitchjay; 03/07/25 06:41 AM.
_________________________
I'm fixin' to fix that.

Return to Top Reply Quote Quick Reply Quick Quote
#2306872 - 03/07/25 06:29 AM Re: HMDA Reporting - Purpose Anonymous
raitchjay Offline
Power Poster
Joined: Oct 2009
Posts: 9,381
OK
I guess the question I have is, since I haven't dealt with it before..
If bank A has an existing 1st lien HELOC and bank B wants to give the customer a 1st lien HELOC will bank A accept a payoff from the first draw of bank B's HELOC and agree to close their HELOC down and release their lien? Because unlike a closed end loan, as we have all noted, paying a HELOC down to zero doesn't mean it's extinguished. If that's the case, then yes I get it and I'm wrong.
_________________________
I'm fixin' to fix that.

Return to Top Reply Quote Quick Reply Quick Quote
#2306880 - 03/07/25 02:52 PM Re: HMDA Reporting - Purpose Anonymous
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 85,445
Galveston, TX
Typically, in our area anyway, Bank B is going to get title insurance on their loan. If the title company is insuring Bank B's loan to be in first position, they will deal with Bank A to make sure the existing lien is extinguished and thus, the existing HELOC will be closed.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top Reply Quote Quick Reply Quick Quote
#2306883 - 03/07/25 02:59 PM Re: HMDA Reporting - Purpose Anonymous
Rocky P Offline
Power Poster
Joined: Jun 2003
Posts: 7,820
Florida
One possible isssue:
Some mortgages have an open end agreement. They sometimes read that even of the loan is paid down, the lender can advance up to the original amount of the lien. if the lien is still recorded, the borrower could basically reactivate the loan.
_________________________
Integrity. With it, nothing else matters. Without it, nothing else matters.

Return to Top Reply Quote Quick Reply Quick Quote
#2306884 - 03/07/25 03:01 PM Re: HMDA Reporting - Purpose Anonymous
raitchjay Offline
Power Poster
Joined: Oct 2009
Posts: 9,381
OK
Thanks Randy.
_________________________
I'm fixin' to fix that.

Return to Top Reply Quote Quick Reply Quick Quote
Quick Reply:
HTML is disabled
UBBCode is enabled




Moderator:  MagicCity, P*Q, Truffle Royale