Need Clarification of Staff Commentary of Reg C

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Question:

We are trying to clarify an item from the Official Staff Commentary of Reg C - 2(g) Home Improvement loan. The commentary indicates “Classification requirement for loans not secured by a lien on a dwelling. An institution has “classified” a loan that is not secured by a lien on a dwelling as a home improvement loan if it has entered the loan on its books as a home improvement loan, or otherwise coded or identified the loan as a home improvement loan.” We have not reported any loans to our Call Report as home improvement nor are any identified as home improvement in our underwriting summaries or on our core system. However, in review of loan notes, the purpose is stated to be for a "new roof", but not specifically home improvement and it’s not "classified" as stated above as home improvement. The loan is for a condominium complex with assessments as collateral. Should this loan be included on the HMDA LAR as home improvement?

Answer:

Identifying the purpose of the loan on the application or in a credit memo is not classifying the loan as a home improvement loan.

If you identify the loan on your system by some sort of code, keep them in different colored files or a different filing area than your other loan files then you have classified them as home improvement loans.

Think of it this way. If I ask you to provide me a list of all your home improvement loans and you can do so by a code on your system or from your filing system then the loans are classified as home improvement loans. If you have to go through each loan file individually to determine what the purpose of the loan was then you have not classified them as home improvement loans.

First published on BankersOnline.com 1/24/11