HMDA: Business Purpose Home Equity Exclusion

HMDA-reporting financial institutions are required to collect and report specific information regarding any applications (for a loan or line) that will be secured by a dwelling and for a specific HMDA purpose. These include dwelling-secured applications to:

  1. Purchase a Dwelling;
  2. Refinance a Dwelling;
  3. Improve a Dwelling; or,
  4. Other (aka home equity).

While the first three are pretty self-explanatory (although there can still be exceptions and things to consider), the fourth is often the cause of confusion. You see, the “Other” purpose only applies to consumer-purpose, home equity loans and/or lines. For example, if someone applies for a dwelling-secured loan/line and they will use the proceeds to purchase a vehicle for their child, it is a HMDA-reportable transaction. If the proceeds will be used to purchase a vehicle for their business; however, it is not a HMDA-reportable transaction. Unfortunately, this doesn’t mean you can just ignore all applications for business purpose, home equity purposes. If those get refinanced later on down the road, they likely will be HMDA reportable as a Refinance.

David explains more in the video.


HMDA Resources!

Published
2024/02/09

 
David Dickinson

David Dickinson

David’s banking career began as a field examiner for the FDIC in 1990. He later became a Compliance Officer and Loan Officer for a small bank. In 1993, he established Banker’s Compliance Consulting. Along with his amazingly talented Team, he has written numerous compliance articles for prestigious banking publications and has developed compliance seminars that Banker’s Compliance Consulting produces.

He is an expert in compliance regulations. He is also a motivational speaker and innovative educator. His quick wit and sense of humor transforms the usually tiring topic of compliance into an enjoyable educational experience. David is on the faculty of the American Bankers Association National Compliance Schools and has served on the faculty of the Center for Financial Training for many years. He also is a frequent speaker at the ABA’s Regulatory Compliance Conference. He is also a trainer for hundreds of webinars, is a Certified Regulatory Compliance Manager (CRCM) and has been a BankersOnline Guru for many years. The American Bankers Association honored David with their Distinguished Service Award in 2016.

David and his wife Karen have three adult children, four grandchildren (none of whom live at home!) and two cats (of which Dave is allergic … the cats, not the children!). They recently moved to an acreage outside of Lincoln, Nebraska where he gets to play with his tractor. When possible David can be found fishing, making sawdust in his shop, or playing the guitar and piano. He also enjoys leading worship at his church.

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