The HMDA rules require a financial institution to report dwelling-secured applications for the purpose of purchasing a dwelling, refinancing a dwelling, improving a dwelling or for other consumer purposes (home equity). When you have an application that has multiple purposes; however, it can cause confusion. HMDA uses a reporting hierarchy, and it is NOT based on majority wins. Here’s a little more explanation:
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Home Purchase
A loan …that is a home purchase loan… may also be a home improvement loan… and a refinancing… if the transaction is a cash-out refinancing and the funds will be used to purchase and improve a dwelling. [Commentary to §1003.2(j) #6] Report the loan as a home purchase loan. [Commentary to §1003.4(a)(3) #3]
- Refinance
If a covered loan is a home improvement loan as well as a refinancing or cash-out refinancing, but the covered loan is not a home purchase loan, an institution complies… by reporting the covered loan as a refinancing or a cash-out refinancing, as appropriate. [Commentary to §1003.4(a)(3) #3]
- Home Improvement
If a covered loan is a home improvement loan as well as for another purpose, but the covered loan is not a home purchase loan, a refinancing, or cash-out refinancing, an institution complies… by reporting the covered loan as a home improvement loan. [Commentary to §1003.4(a)(3) #3]
- Other
If a consumer-purpose loan or line is not for a home purchase, a refinance or home improvement, report the purpose as “Other” (aka consumer home equity).
So, for example, if you have a $15,000 loan where $5000 will be used to improve a dwelling and $10,000 will be used to pay off consumer credit card debt, you report the loan as a home improvement loan.
Published
2024/03/14
