Definition of Refinance for HMDA

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Question:

The following statement is in several reference materials on HMDA. "If the institution is unconditionally obligated to refinance the obligation, or if the institution is obligated to refinance subject to conditions within the borrower's control, the transaction is not HMDA reportable." What does these mean? First they state "unconditionally" obligated, then or "obligated with conditions". Can you clarify?

Answer:

Generally the "unconditionally obligated" references state law. Several states have laws in place that a financial institution must refinance a balloon payment when it comes due under terms no less favorable then the original terms. Indiana, for example, has such a law for loans not secured by a first lien on real estate.

The "obligated with conditions" refers to contract terms. A financial institution may in their contract state if the borrower has less than X payments, and/or other conditions, they will refinance the balloon as long as those conditions in the contract were met.

First published on BankersOnline.com 7/11/11