Is Home Equity 2nd HMDA Reportable?

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Question:

We are trying to determine if a loan on our LAR should be there. One officer says it should be reported, another says it shouldn't. I have a borrower taking a home equity 2nd (no debt being paid off) on his home with the proceeds being used to help a sister purchase a condo. Is this HMDA reportable?

Answer:

First, don't consider the lien status when determining whether HMDA applies. HMDA is purpose driven and, in some cases, collateral driven.

Second, review Section 203.4(a) (concerning which types of loans are reported) and then the definitions in Section 203.2 for technical clarity. In summary HMDA applies to applications for the following 3 types of loans:

1. Home purchase loans
A loan secured by a dwelling and made for the purpose of purchasing a dwelling (can be secured by different dwellings).

2. Home improvement loans:
A) A loan secured by a dwelling in which the proceeds are used to repair, rehabilitate, remodel or improve a dwelling or the real property on which it is located; and,

B) A non-dwelling secured (or unsecured) loan in which the proceeds are used to repair, rehabilitate, remodel or improve a dwelling or the real property on which it is located and that is classified by the bank as a home improvement loan.

3. Refinancings:
A new obligation that satisfies and replaces an existing obligation by the same borrower where both the existing obligation and the new obligation are secured by liens on a dwelling regardless of the purpose of the existing obligation.

Your loan is to purchase a dwelling and it is secured by a dwelling. Based on the information you provided, your loan does not appear to meet any of the exemptions in Section 203.4(d). Therefore, I believe this loan should be reported.

First published on BankersOnline.com 07/18/05