We purchase loans from third-party correspondent banks. These banks receive and complete residential mortgage loan applications and send them to us for review. We make the credit decision and then purchase the loans. In the past, we have reported these loans as “originated” under the Home Mortgage Disclosures Act (HMDA). Does that change under the new HMDA final rule that took effect this year? Do we report that these applications were submitted directly to our bank?

We believe that your bank should continue to report such loans as “originated” under the 2015 HMDA Final Rule that took effect January 1, 2018.

The 2015 HMDA Final Rule added new Official Interpretations to clarify a bank’s reporting responsibilities in transactions involving more than one financial institution: “[T]he financial institution that made the credit decision approving the application before closing or account opening reports the loan as an origination. . . If more than one institution approved an application prior to closing or account opening and one of those institutions purchased the loan after closing, the institution that purchased the loan after closing reports the loan as an origination.” Thus, when your bank makes a credit decision on a loan that it purchases, your bank should continue to report the loan as an “origination.”

For “origination” loans, the 2015 HMDA Final Rule requires you to report whether the application was submitted directly to your bank (identified in new data field number 93). The Official Interpretations clarify that a financial institution does not directly receive an application if “an applicant contacted and completed an application with a broker or correspondent that forwarded the application to a financial institution for approval. . .” In our view, your facts are analogous to this scenario, where the third-party correspondent banks receive and complete the applications and forward them to your bank to review. Consequently, these applications should be reported as not received directly by your financial institution.

For resources related to our guidance, please see:

Official Interpretations, Regulation C, 12 CFR 1003, Paragraph 4(a), Comment 2(i)(“Only one financial institution reports each originated covered loan as an origination. If more than one institution was involved in the origination of a covered loan, the financial institution that made the credit decision approving the application before closing or account opening reports the loan as an origination.It is not relevant whether the loan closed or, in the case of an application, would have closed in the institution’s name. If more than one institution approved an application prior to closing or account opening and one of those institutions purchased the loan after closing, the institution that purchased the loan after closing reports the loan as an origination. If a financial institution reports a transaction as an origination, it reports all of the information required for originations, even if the covered loan was not initially payable to the financial institution that is reporting the covered loan as an origination.”)

Official Interpretations, Regulation C, 12 CFR 1003, Paragraph 4(a), Comment 3(i)(“Financial Institution A received an application for a covered loan from an applicant and forwarded that application to Financial Institution B. Financial Institution B reviewed the application and approved the loan prior to closing. The loan closed in Financial Institution A’s name. Financial Institution B purchased the loan from Financial Institution A after closing. Financial Institution B was not acting as Financial Institution A’s agent.Since Financial Institution B made the credit decision prior to closing, Financial Institution B reports the transaction as an origination, not as a purchase. Financial Institution A does not report the transaction.”)

Regulation C, 12 CFR 1003.4(a)(33) (“. . . The data collected shall include the following items: . . . (33) Except for purchased covered loans, the following information about the application channel of the covered loan or application: (i) Whether the applicant or borrower submitted the application for the covered loan directly to the financial institution; . . .”)

Official Interpretations, Regulation C, 12 CFR 1003, Paragraph 4(a)(33)(i), Comment 1(iii) (“If an applicant contacted and completed an application with a broker or correspondent that forwarded the application to a financial institution for approval, an application was not submitted to the financial institution.”)