Now that the first quarter of HMDA reporting under the news rules is complete – one consistent question we receive is regarding whether a particular commercial/business purpose loan is HMDA reportable?
Under Regulation C if a closed-end mortgage loan or an open-end line of credit is for commercial/business purpose and is secured by a dwelling and is for a home purchase, refinance (dwelling secured loan replacing dwelling secured loan) or home improvement then it is HMDA reportable. Remember that on home improvement it must also be secured by a dwelling. Non-dwelling secured loans for the purpose of home improvement are no longer reportable. Also, remember a dwelling is not limited to just a 1-4 family structure but includes multifamily dwellings that contain five or more dwelling units and includes a manufactured home community.
You must look both at purpose and security to determine if the commercial/business loan is reportable. For example, if the purpose of the loan is for cash flow and it is secured by the owner’s primary dwelling, then the loan would not be HMDA reportable because the purpose is not home purchase, refinance or home improvement. However, if the borrower asks to refinance a loan secured by their dwelling for cash flow purposes for their business, the loan would be HMDA reportable because the purpose is refinance as a dwelling secured loan which replaces a dwelling secured loan.
Regulation C Section 1003.3(c)(10) and the official interpretations set forth the rules regarding closed-end mortgage loan or an open-end line of credit that is or will be made primarily for a commercial or business purpose.
Using our proprietary HMDA Scrub software, Regulatory Solutions is your source for HMDA Scrubs. Please call us at 855-734-7655 for details.