Income is one of the data points that will not change under the new HMDA regulation that will take effect in 2018. This data point is simple, the institution must report the income that they relied upon when making their credit decision. If the institution did not consider the borrower’s gross income when making their credit decision, then they should only report the portion that was relied upon. If there is a co-applicant and their income is also considered, then the co-applicant’s income (or what portion was relied upon) is included in the reportable income. If, however, the co-applicant is only secondarily liable, their income cannot be included.
When it comes to reporting income for applications that were withdrawn or closed for incompleteness, the institution should report the income that was provided on the application. There are instances where “Not Applicable” should be reported. These circumstances are: if the applicant is an employee, if it is secured by a multifamily dwelling, if the applicant is not a natural person, or if the institution did not consider income when making the credit decision. The HMDA regulation also gives an institution the option of reporting the income as not applicable for loans that they purchased.
There is one major exception when it comes to reporting the income on the HMDA LAR. The reportable income cannot include funds or amounts in addition to income, even if it was relied upon when making the credit decision. There was some confusion as to what type of funds fell into this exception, so the CFPB has issued a correction to this portion of the HMDA regulation, they clarified that they were excluding such things as income derived from underwriting calculations and not income from retirement accounts and other assets.
For more information on HMDA regulations, 2018 data point changes or our HMDA compliance services, please call Rhonda Wannemuehler or Betsy Reynolds at 855-734-7655.