IBA Compliance Connection

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We have a commercial loan for which we required a dwelling as additional collateral. We did not report the loan on our HMDA loan application register (LAR) because the loan purpose was not to purchase or improve the dwelling. If we refinance this loan and again require the dwelling as additional collateral, is the loan reportable under HMDA as a refinance?

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Yes, this loan would be reportable as a refinancing under Regulation C.

Under the current version of Regulation C, a refinance is reportable under the Home Mortgage Disclosure Act (HMDA) if both the existing and new obligation are secured by liens on a dwelling. As stated in FFIEC Guidance, “[t]he purpose of the loan being refinanced is not relevant to determining whether the new loan is a refinancing for HMDA purposes.” While the original loan was not HMDA reportable, as it was not a home purchase or home improvement loan, the refinancing is HMDA reportable.

Note that this answer will not change when the 2015 HMDA Final Rule takes effect on January 1, 2018. The 2015 HMDA Final Rule’s amended definition of “refinancing” includes a dwelling-secured loan if “a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower.” Again, the loan purpose is irrelevant. Consequently, even after the 2015 HMDA Final Rule takes effect, the loan you described (a closed-end, dwelling-secured commercial mortgage loan that satisfies and replaces an existing a closed-end, dwelling-secured commercial mortgage loan) would be reportable as a refinancing.

For resources related to our guidance, please see:

  • (Currently effective through December 31, 2017) Regulation C, 12 CFR 1003.2 (“Refinancing means a new obligation that satisfies and replaces an existing obligation by the same borrower, in which . . .  (2) For reporting purposes, both the existing obligation and the new obligation are secured by liens on dwellings.”)

  • FFIEC, A Guide to HMDA Reporting: Getting It Right! (2013), printed page 28 (“A refinancing is any dwelling-secured loan that replaces and satisfies another dwelling-secured loan to the same borrower. The purpose of the loan being refinanced is not relevant to determining whether the new loan is a refinancing for HMDA purposes. Nor is the borrower’s intended use of any additional cash borrowed relevant to determining whether the loan is a refinancing, though the borrower’s intended use of the funds could make the transaction a home improvement loan or a home purchase loan. . . .”)

  • (As effective January 1, 2018) Regulation C, 12 CFR 1003.2(p) (“Refinancing means a closed-end mortgage loan or an open-end line of credit in which a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower.”)
  • (As effective January 1, 2018) Regulation C, 12 CFR 1003.2(d) (“Closed-end mortgage loan means an extension of credit that is secured by a lien on a dwelling and that is not an open-end line of credit under paragraph (o) of this section.”)