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State Law and HMDA Categories

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Question: 
I have a general question about Texas Home Equity law and HMDA reporting. If under Texas law, a home equity loan is considered a refinancing or cash out refinancing regardless of whether the new loan satisfies an existing dwelling secured debt, can that be reported as a refinancing or cash out refinancing on the HMDA LAR? To my understanding, state law does not impact the reporting of loan purpose under HMDA rules. If a new loan does not satisfy an existing dwelling secured debt, should it be reported as refinancing or cash out refinancing? I’m specifically referring to the Texas A6 Home Equity loan product. Under Texas law, this product is always classified as refinancing or cash out refinancing regardless of any other definition of refinance.
Answer: 

If a new loan does not satisfy an existing dwelling secured debt, should it be reported as refinancing or cash out refinancing?

No, it would be reported as an "Other Loan" for HMDA regardless of how it might be classified in the secondary market.

First published on 01/22/2023

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