Construction Method Data Point HMDA Changes
The construction method of the dwelling that is securing the property is another data point that has been slightly modified under the new rule. Changing from requiring the type of property to which the application related to reporting whether the property is site-built or a manufactured home.
One question that is often asked is if a modular home is considered site built or a manufactured home? Modular homes are those that comply with local building codes rather than those by the National Manufactured Housing Construction and Safety Standards and are not required to have HUD Certification Labels. When it comes to these types of homes, whether it is an on-frame or off-frame model does not affect how it is reported. Both would be considered to be site-built homes. Also, dwellings that are built using prefabricated components and then assembled at the permanent site would also be considered to be site-built.
In regards to multifamily dwellings, the construction method should also be reported as site-built. The only time that a multifamily dwelling is reported as a manufactured home is when the property in question is a manufactured home community.
Remember, if there are multiple properties securing the loan, then the institution should report the data on just one.
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.
HMDA Preapproval Modification and 2018 HMDA Reporting
There has been a slight modification as to what is considered to be a reportable request under the new HMDA rules. It still must be reported whether a loan or application involved a request for preapproval for a home purchase loan under the financial institution’s preapproval program. Under the rule that takes effect in 2018, the financial institution no longer has the option to decide whether or not to report a preapproval request that was approved but not accepted. These are now required to be reported.
Now what is considered to be a preapproval for HMDA purposes? An application could only be a preapproval request if it is for a home purchase. It cannot be secured by a multifamily dwelling and it cannot be for an open-end line of credit or for a reverse mortgage. The application must also be reviewed under a Preapproval Program which is where a comprehensive analysis of the applicant’s creditworthiness is conducted and the lender issues a written commitment that is for a home purchase loan; is valid for a designated period of time and up to a specified amount; and is subject only to specifically permitted conditions.
A loan or application should be reported as not involving a preapproval request in several circumstances. These are for a purchased loan, an open-end line of credit, a reverse mortgage, an application that was denied, an application that was closed for incompleteness or withdrawn, a loan for any other purpose other than a home purchase, or if the loan is secured by a multifamily dwelling.
Side note: When it comes to reporting the data for preapprovals, the only requests that are reported are those that were denied or approved but not accepted. The requests that resulted in origination will also be reported, but those will be as an originated Covered Loan.
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.
12 CFR 1003.4(a)(4)
Loan Purpose Has Slight Modification For 2018 HMDA Rules
There is a slight modification when it comes to reporting the Loan Purpose under the new HMDA rules. It still must be reported whether the loan was a Home Purchase, Home Improvement or Refinancing. Two additional data points have been added and that is for “other” and for Cash-Out refinancing. The rule does not provide a set definition as to what would constitute as a Cash-Out refinancing, it all depends upon the financial institution’s policies regarding these types of loans. The “other” category is to be used for consumer purpose transactions that are secured by a dwelling that have a purpose other than home, purchase, home-improvement, refinancing or Cash-Out refinancing.
There can be some confusion as to whether a loan is HMDA reportable. For refinances, not all loans are going to be considered reportable for HMDA purposes. If the financial institution was legally obligated to refinance the loan in question then it would not be considered to be reportable. Then there are loans that are primarily for commercial purposes. If the loan is for a Home Improvement, home purchase, or a refinancing, then that loan would be considered to be reportable.
There has been a modification as to what is considered to be a Home Improvement loan. Previously under the old HMDA rule, a loan did not necessarily have to be secured by a dwelling in order to be classified as Home Improvement. However, under the regulation that takes full effect in 2018, only the Home Improvement loans that are secured by a dwelling are to be reported.
The other modification involves multiple purpose loans. Loans that are made for home purchases have not changed; if any part of the loan is for the purchase of a dwelling, then the loan must be reported as a home purchase. For a refinance or Cash-Out refinance loan, if the proceeds of the loan are for a refinance in addition to another purpose (Home Improvement, medical expenses, etc.), then the loan would be reported as being a refinance. This change would replace current HMDA reporting practices as a Home Improvement loan no longer has priority over refinances.
The CFPB has recently proposed a correction when it comes to this data point. They are proposing to allow financial institutions the option not to report the loan purpose of a purchased loan if it was originated before January 1, 2018. This is due to possible confusion that could occur when an institution is trying to decide whether the purchased loan is reportable as simply a refinance or if it is a Cash-Out refinance.
One HMDA Data Point That Won’t Change Is The Loan Type
The loan type is one of the data points that will not undergo any changes under the new HMDA regulation. This information can be found on the application and the reporting process is very straightforward. If the loan is not insured by anyone, then it would be considered a Conventional loan and Code 1 would be reported. An institution reports Code 2 if the application is insured by the Federal Housing Administration (FHA). Also, if the Veterans Administration (VA) is guaranteeing the loan, then Code 3 is reported on the LAR. Finally, an institution reports the Loan Type as being Code 4 if the USDA Rural Housing Service (RHS) or the Farm Service Agency (FSA) is guaranteeing the application.