As if it's possible to hate a reg more than RESPA, HMDA is truly a bureaucratic nightmare!

Question I have - we have opted NOT to report Equity Lines of Credit for HMDA. Frankly, customer's dislike the intrusive questions of "About how much will you use this for Home Improvement?", and the logistical issues of trying to figure that out is a compliance nightmare just waiting in the wings to pounce during an exam.

BUT...., refinances are supposed to be reported to HMDA. If a HELOC will refinance the existing first on the property, or the existing Home Improvement loan, do we need to report it? Or can we take the position that - we've elected not to report HELOCS (as allowed by the Regulation) so no HELOCS will be reported.

The follow up question for that is - IF a HELOC that refinances a first is not reported, does it still trigger HMDA reporting for the next year? You know, if you make one **bloody** purchase or refinance of purchase loan, you are on the hook for HMDA for the following year.

Andy - I'll trade HMDA horror stories for any Reg CC horror stories that you have!!!

[This message has been edited by Bonnie M (edited 11-21-2001).]

Why would you need to worry about reporting a HELOC if you have chosen not to do HMDA reporting on these loans?

You've seen the light! I've been preaching for years not to report HELOC's because of what you describe. However, my sources at the Federal Reserve tell me that when the HMDA changes come out, we will most likely lose the option of reporting HELOC's, but that's another story.

Bonnie, you said "BUT...., refinances are supposed to be reported to HMDA." Not exactly true. Refinances of Purchases and HI's are to be reported but a pure home equity loan that is refinanced is not not a HMDA loan. If you refinance a HELOC and turn it into a closed-end home equity loan, or originate a new HELOC to payoff purchase money or HI money, you do not have to report this as a HMDA loan. HELOC's are optional even if all of the money is for home improvement. Another section [section V. A.5. Code 3(c) of appendix A] gives you even more latitute. It says - If you are uncertain of the original purpose of the loan, you may report all refinancings, but are not required to.

I'm confused by your second statement: "IF a HELOC that refinances a first is not reported, does it still trigger HMDA reporting for the next year? You know, if you make one **bloody** purchase or refinance of purchase loan, you are on the hook for HMDA for the following year."

Can you further explain? Or maybe somebody else understands and can answer.

The scenario is this - customer owes about $5,000 from his ORIGINAL mortgage used to purchase the home.

Customer decides to get a HELOC (hey - it's a handy thing to have....) and rather than going in second position, we advance some of the money to payoff the original purchase money first so that the HELOC will now be in first position.

My two-fold question is:
1a. Does the HELOC need to be reported since it refinanced a purchase money loan? I'm fairly confident that the HELOC still doesn't have to be reported (at least right now it doesn't) if we have elected not to report ANY HELOCs.

1b. Does this HELOC trigger the HMDA reporting for the next year because we did a refinance of purchase money?

I start out in January of each year wondering if THIS will be the year that we can get by without doing ANY loans that are purchase money OR are a refinance of purchase money because then I get to ignore HMDA reporting for the next year.

So far - that hasn't happened. We always seem to find a way to make a loan that refi's purchase money.

I am an enthusiastic follower of Bob Chamness' opinion which is any exemption that applies works and it overrides coverage. Using Bob's happy view of exemptions, the HELOC status would over-ride the refinance status and the loan would not be reportable.

Other reasoning brings me to the same conclusion. It is an error to place too much emphasis on the refinancing aspect of the transaction. If you do that, there is no clear line and eventually everything can be traced back to a purchase. I intrepret refinance to mean a loan that really does simply refinance the loan used to purchase the dwelling for purposes such as to restructure the amortization, payments, or interest rate of that purchase loan. Refinancing does not include the transformation of that loan into a different animal such as the transaction you describe. Different purpose, different goal, and as you say, hey -- it's a handy thing to have. So why not use the HELOC to pay off the original mortgage? Sure, why not? That doesn't make it a refinancing.

We report HELOCs on HMDA. When reading through the HMDA guide, it only mentions HELOCs in reference to home purchase or home improvement. HELOCs are never mentioned in the refinance sections. If we refinance a HELOC and the customer writes on the refinance app that it is for home improvement, do we report that refinanced HELOC?

Hardee har har har. Texas doesn't have HELOCs so you'll win that one.

In retrospect, compliance was so easy when we had only a few branches, little mortgage lending and no credit card portfolio. At least we haven't brought back those credit cards.

Yes, but only the portion designated for HI.