HMDA - Definition of a Refinance.

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Question:

I participated in the January 12 HMDA seminar, and have a question from the materials. On page 12, I need some clarification on the definition of Refinance. 1) Could you define the distinction between 'coverage purposes' and 'reporting purposes'? 2) It states that "...the existing obligation is a home purchase loan..." Does this mean that a loan that has already been refinanced in the past does not qualify? How about a refinance of a home improvement loan?

Answer:

This section is often confusing. Quite frankly they could have better explained themselves in the GIR.

The coverage test is the test to determine if the financial institution has met the criteria to be covered under Reg C (HMDA) requirements. If the coverage test is met, then the loans the FI makes are now covered transactions subject to the reporting requirements.

For reporting purposes stick with the "a dwelling secured loan that is satisfied and replaced by another dwelling secure loan to the same borrower" definition for a refinancing.A refinancing of a home improvement loan would not be a reportable transaction UNLESS it meets the above definition, or if any new proceeds were used for a HMDA reportable purpose.

First published on BankersOnline.com 2/13/06