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Federal R eserve Bank OF DALLAS ROBERT D. M c T E E R , J R . P R E S ID E N T AND C H IE F E X E C U T IV E O F F IC E R April 26, 1996 DALLAS, TEXAS 75265-5906 Notice 96-38 TO: The Chief Executive Officer of each financial institution in the Eleventh Federal Reserve District SUBJECT Revised Pamphlet to the Regulation C Official Staff Commentary (Home Mortgage Disclosure) DETAILS The Board of Governors of the Federal Reserve System has published a revised pam phlet to the Regulation C Official Staff Commentary (Home Mortgage Disclosure). ENCLOSURES The new pam phlet and an updated index to regula tions are enclosed. Please insert the pamphlet, which became effective January 1, 1996, and the index in the appropriate section of your Regulations binder. For more information regarding Regulation C, please contact Eugene Coy at (214) 922-6201. For additional copies, bankers and others are encouraged to use one of the following toll-free numbers in contacting the Federal Reserve Bank of Dallas: Dallas Office (800) 333-4460; El Paso Branch Intrastate (800) 592-1631, Interstate (800) 351-1012; Houston Branch Intrastate (800) 392-4162, Interstate (800) 221-0363; San Antonio Branch Intrastate (800) 292-5810. This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) MORE INFORMATION For additional copies of this Bank’s notice or the pamphlet, please contact the Public Affairs D epartm ent at (214) 922-5254. Sincerely yours, /rft Board of Governors of the Federal Reserve System Official Staff Commentary on Regulation C Home Mortgage Disclosure 12 CFR 203; supplement I; effective January 1, 1996 Any inquiry relating to Regulation C should be addressed to the Federal Reserve Bank of the District in which the inquiry arises. February 1996 Contents Page ^^in tro d u ctio n ............................................... 1 Section 203.1—Authority, purpose, and sc o p e ............................................................ Section 203.2—D efinitions............................ Section 203.3—Exempt institutions............. 1 3 5 Page Section 203.4— Compilation of loan d a ta ............................................................... 6 Section 203.5—Disclosure and reporting . . 9 Section 203.6—Enforcement....................... 10 i Official Staff Commentary on Regulation C 12 CFR 203, supplement I; effective January 1, 1996 ^ IN T R O D U C T IO N 1. Status and citations. The commentary in this supplement is the vehicle by which the Division of Consumer and Community Affairs of the Federal Reserve Board issues formal staff interpretations of Regulation C (12 CFR 203). The parenthetical citations given are ref erences to appendix A to Regulation C, Form and Instructions for Completion of the HMDA Loan/Application Register. SECTION 203.1— Authority, Purpose, and Scope 1(c) Scope 1. General. The comments in this section ad dress issues affecting coverage of institutions, exemptions from coverage, and data-collection requirements. (Appendix A of this part, I., IV., and V.) • 2. Meaning o f refinancing. A refinancing of a loan is the satisfaction and replacement of an existing obligation by a new obligation by the same borrower. The term “refinancing” refers to the new obligation. If the existing obliga tion is not satisfied and replaced, but is only renewed, modified, extended, or consolidated (as in certain modification, extension, and consolidation agreements), the transaction is not a refinancing for purposes of HMDA. (Appendix A of this part, paragraph V.A.5. code 3.) 3. Refinancing—coverage. The regulation ba ses coverage, in part, on whether an institution originates home-purchase loans. For determin ing whether an institution is subject to Regu lation C or is exempt from coverage, an origi nation of a home-purchase loan includes the refinancing of a home-purchase loan. An insti tution may always determine the actual pur pose of the existing obligation (for example, by reference to available documents). (Appen dix A of this part, paragraphs I.B., I.C., and I.D.) Alternatively, an institution may— i. rely on the statement of the applicant that the existing obligation was (or was not) a home-purchase loan; or ii. assume that the new obligation is not a refinancing of a home-purchase loan if ei ther the existing obligation or the new ob ligation is not secured by a first lien on the dwelling. 4. Refinancing—data collection. The regula tion requires collection and reporting of data on refinancings of home-purchase and homeimprovement loans. An institution may always determine the actual purpose of the existing obligation (for example, by reference to avail able documents). (Appendix A of this part, paragraph V.A.5. code 3.) Alternatively, an institution may— i. rely on the statement of the applicant that the existing obligation was (or was not) a hom e-purchase or hom e-im provem ent loan; or ii. assume that the new obligation is a refi nancing of a home-purchase or home-im provem ent loan only if the existing obligation was secured by a lien on a dwelling; or iii. assume that the new obligation is a refi nancing of a home-purchase or home-im provement loan only if the new obligation will be secured by a lien on a dwelling. 5. The broker rule and the meaning o f “bro ker” and "investor.” For the purposes of the guidance given in this commentary, an institu tion that takes and processes a loan applica tion and arranges for another institution to ac quire the loan at or after closing is acting as a “broker,” and an institution that acquires a loan from a broker at or after closing is acting as an “investor.” (The terms used in this commentary may have different meanings in certain parts of the mortgage lending industry, and other terms may be used in place of these terms, for example in the Federal Housing Administration mortgage insurance programs.) Depending on the facts, a broker may or may not make a credit decision on an application 1 § 203.1 (and thus it may or may not have reporting responsibilities). If the broker makes a credit decision, it reports that decision; if it does not make a credit decision, it does not report. If an investor reviews an application and makes a credit decision prior to closing, the investor reports that decision. If the investor does not review the application prior to closing, it re ports only the loans that it purchases; it does not report the loans it does not purchase. Thus, an institution that makes a credit deci sion on an application prior to closing reports that decision regardless of whose name the loan closes in. (Appendix A of this part, paragraphs IV.A. and V.B) 6. Illustrations o f the broker rule. Assume that, prior to closing, four investors receive the same application from a broker; two deny it, one approves it, and one approves it and acquires the loan. In these circumstances, the first two report denials, the third reports the transaction as approved but not accepted, and the fourth reports an origination (whether the loan closes in the name of the broker or the investor). Alternatively, assume that the bro ker denies a loan before sending it to an in vestor; in this situation, the broker reports a denial. (Appendix A of this part, paragraphs IV.A. and V.B.) 7. Broker’s use o f investor’s underwriting cri teria. If a broker makes a credit decision based on underwriting criteria set by an inves tor, but without the investor’s review prior to closing, the broker has made the credit deci sion. The broker reports as an origination a loan that it approves and closes, and reports as a denial an application that it turns down (either because the application does not meet the investor’s underwriting guidelines or for some other reason). The investor reports as purchases only those loans it purchases. (Ap pendix A of this part, paragraphs IV.A. and V.B.) 8. Insurance and other criteria. If an institu tion evaluates an application based on the cri teria or actions of a third party other than an investor (such as a government or private in surer or guarantor), the institution must report the action taken on the application (loan origi2 Regulation C Commentary nated, approved but not accepted, or denied, for example). (Appendix A of this part, paragraphs IV.A. and V.B.) 9. Credit decision o f agent is decision o f prin^ cipal. If an institution approves loans through the actions of an agent, the institution must report the action taken on the application (loan originated, approved but not accepted, or denied, for example). State law determines whether one party is the agent of another. (Appendix A of this part, paragraphs IV.A. and V.B.) 10. Affiliate bank underwriting (250.250 re view). If an institution makes an independent evaluation of the creditworthiness of an appli cant (for example, as part of a preclosing re view by an affiliate bank under 12 CFR 250.250, which interprets section 23A of the Federal Reserve Act), the institution is making a credit decision. If the institution then ac quires the loan, it reports the loan as an origi nation whether the loan closes in the name of the institution or its affiliate. An institution that does not acquire the loan but takes an other action reports that action. (Appendix A of this part, paragraphs IV.A. and V.B.) 11. Participation loan. An institution that originates a loan and then sells partial inter ests to other institutions reports the loan as an origination. An institution that acquires only a partial interest in such a loan does not report the transaction even if it has participated in the underwriting and origination of the loan. (Appendix A of this part, paragraphs I., II., IV., and V.) 12. Assumptions. An assumption occurs when an institution enters into a written agreement accepting a new borrower as the obligor on an existing obligation. An institution reports as a home-purchase loan an assumption (or an ap plication for an assumption) in the amount of the outstanding principal. If a transaction does not involve a written agreement between a new borrower and the institution, it is not an assumption for HMDA purposes and is not re ported. (Appendix A of this part, paragraphs IV.A. and V.B.) § 203.2 Regulation C Commentary SECTION 203.2— Definitions 2(b) Application Consistency with Regulation B. Board in terpretations that appear in the official staff commentary to Regulation B (Equal Credit Opportunity, 12 CFR 202, supplement I) are generally applicable to the definition of an ap plication under Regulation C. However, under Regulation C the definition of an application does not include prequalification requests. (Appendix A of this part, paragraph IV.A.) 2. Prequalification. A prequalification request is a request by a prospective loan applicant for a preliminary determination on whether the prospective applicant would likely qualify for credit under an institution’s standards, or on the amount of credit for which the pro spective applicant would likely qualify. Some institutions evaluate prequalification requests through a procedure that is separate from the institution’s normal loan application process; others use the same process. In either case, Regulation C does not require an institution to report prequalification requests on the HMDALAR, even though these requests may consti tute applications under Regulation B. (Appen dix A of this part, paragraphs I. and IV.A.) 2(c) Branch Office 1. Credit union. For purposes of Regulation C, a “branch” of a credit union is any office where member accounts are established or loans are made, whether or not the office has been approved as a branch by a federal or state agency. (See 12 USC 1752.) (Appendix A of this part, paragraphs I., V.A.7., and V.C.) 2. Depository institution. A branch of a de pository institution does not include a loan production office, the office of an affiliate, or the office of a third party such as a loan bro ker. (Appendix A of this part, paragraphs I., V.A.7., and V.C.) (But see appendix A of this part, paragraph V.C.7., which requires certain depository institutions to report property loca tion even for properties located outside those MSAs in which the institution has a home or branch office.) 3. Nondepository institution. A branch of a nondepository institution does not include the office of an affiliate or other third party such as a loan broker. (Appendix A of this part, paragraphs I., V.A.7., and V.C.) (But see ap pendix A of this part, paragraph V.C.6., which requires certain nondepository institutions to report property location even in MSAs where they do not have a physical location.) 2(d) Dwelling 1. Scope. The definition of “dwelling” is not limited to the principal or other residence of the applicant or borrower, and thus includes vacation or second homes and rental proper ties. A dwelling also includes a mobile or manufactured home, a multifamily structure (such as an apartment building), and a condo minium or a cooperative unit. Recreational ve hicles such as boats or campers are not dwell ings for purposes of HMDA. (Appendix A of this part, paragraphs I.B., IV., and V.A.5.) 2(e) Financial Institution 1. Branches o f foreign banks—treated as a bank. A federal branch or a state-licensed in sured branch of a foreign bank is a “bank” under section 3(a)(1) of the Federal Deposit Insurance Act (12 USC 1813(a)), and is cov ered by HMDA if it meets the tests for a de pository in stitutio n found in sections 203.2(e)(1) and 203.3(a)(1) of Regulation C. (Appendix A of this part, paragraphs I.A. and 1.B.) 2. Branches and offices o f foreign banks— treated as a for-profit mortgage lending insti tution. Federal agencies, state-licensed agen cies, state-licensed uninsured branches of for eign banks, commercial lending companies owned or controlled by foreign banks, and en tities operating under section 25 or 25A of the Federal Reserve Act, 12 USC 601 and 611 (Edge Act and agreement corporations) are not “banks” under the Federal Deposit Insur ance Act. These entities are nonetheless cov ered by HMDA if they meet the tests for a nondepository mortgage lending institution found in sections 203.2(e)(2) and 203.3(a)(2) of Regulation C. (Appendix A of this part, paragraphs I.C. and I.D.) 3 § 203.2 2(f) Home-Improvement Loan 1. Definition. A home-improvement loan is a loan that is made for the purpose of home improvement and that is classified by the in stitution as a home-improvement loan. (Ap pendix A of this part, paragraphs IV. and V.A.5. code 2.) 2. Statement o f the applicant. An institution may rely on the oral or written statement of an applicant regarding the proposed use of loan proceeds. (Appendix A of this part, paragraphs IV. and V.A.5. code 2.c.) 3. Home-equity lines. An institution that has chosen to report home-equity lines of credit reports as a home-improvement loan only the part of a home-equity line that is intended for home improvement. An institution that reports home-equity lines reports the disposition of all applications, not just originations. (Appendix A of this part, paragraphs IV. and V.A.5. code 2.c.) 4. Classification requirement. An institution has “classified” a loan as a home-improvement loan if it has entered the loan on its books as a home-improvement loan, or has otherwise coded or identified the loan as a home-improvement loan. For example, an in stitution that has booked a loan or reported it on a “call report” as a home-improvement loan has classified it as a home-improvement loan. An institution may also classify loans as home-improvement loans in other ways (for example, by color-coding loan files). (Appen dix A of this part, paragraphs IV. and V.A.5. code 2.) 5. Improvements to real property. Home im provements include improvements both to a dwelling and to the real property on which the dwelling is located (for example, installation of a swimming pool, construction of a garage, or landscaping). (Appendix A of this part, paragraphs IV. and V.A.5. code 2.) 6. Commercial and other loans. A loan for improvement purposes originated outside an institution’s consumer lending division (such as a loan to improve an apartment building made through the commercial loan depart ment) is reported if the institution classifies it 4 Regulation C Commentary as a home-improvement loan. (Appendix A of this part, paragraphs IV. and V.A.5. code 1.) 7. Multiple-purpose loan. A loan for home improvement and for other purposes is treated/ as a home-improvement loan even if less than 50 percent of the total loan proceeds are to be used for improvement, provided the institution classifies the loan as a home-improvement loan. (Appendix A of this part, paragraphs IV. and V.A.5. code 2.) (But see comment (2)(f)-3 of this supplement on home-equity lines of credit.) 8. M ixed-use property. A loan to improve property used for residential and commercial purposes (for example, a building containing apartment units and retail space) satisfies the purpose requirement if the loan proceeds are primarily to improve the residential portion of the property. If the loan proceeds are to im prove the entire property (for example, to re place the heating system), the loan satisfies the purpose requirement if the property itself is primarily residential. An institution may use any reasonable standard to determine the pri mary use of the property, such as by square footage or by the income generated. An insti tution may select the standard to apply on a case-by-case basis. To report the loan as a home-improvement loan, the institution must also classify it as such. (Appendix A of this part, paragraphs IV. and V.A.5. code 2.) 2(g) Home-Purchase Loan 1. Multiple properties. A home-purchase loan includes a loan secured by one dwelling and used to purchase another dwelling. (Appendix A of this part, paragraphs IV. and V.A.5. code 1.) 2. Mixed-use property. A loan to purchase property used primarily for residential pur poses (for example, an apartment building containing a convenience store) is a homepurchase loan. An institution may use any rea sonable standard to determine the primary use of the property, such as by square footage or by the income generated. An institution may select the standard to apply on a case-by-case basis. (Appendix A of this part, paragraphs IV.A., IV.B.l., and V.A.5. code 1.) § 203.3 Regulation C Commentary 3. Farm loan. A loan to purchase property used primarily for agricultural purposes is not a home-purchase loan even if the property in^ n k id e s a dwelling. An institution may use any ^ ^ B so n a b le standard to determine the primary use of the property, such as by reference to the exemption from Regulation X (Real Estate Settlement Procedures, 24 CFR 3500.5(b)(1)) for a loan on property of 25 acres or more. An institution may select the standard to ap ply on a case-by-case basis. (Appendix A of this part, paragraphs IV.B.l. and V.A.5. code 1.) 4. Commercial and other loans. A homepurchase loan includes a loan originated outside an institution’s residential mortgage lending division (such as a loan for the purchase o f an apartm ent building made through the commercial loan department). For home-purchase loans, there is no classification test. (Appendix A of this part, paragraphs IV. and V.A.5. Code 1.) 5. Construction and permanent financing. A home-purchase loan includes both a combined construction/permanent loan and the perma nent financing that replaces a constructiononly loan. It does not include a constructiononly loan, which is considered “temporary fi nancing” under Regulation C and is not re ported. (Appendix A of this part, paragraphs .A. and B.2, and V.A.5. code 1.) Home-equity line. An institution that has chosen to report home-equity lines of credit reports as a home-purchase loan only the part that is intended for home purchase. An institu tion may rely on the applicant’s oral or writ ten statement about the proposed use of the funds. An institution that reports home-equity lines reports the disposition of all applications, not just the originations. (Appendix A of this part, paragraphs IV. and V.A.5. code 1.) SECTION 203.3— Exempt Institutions 3(a) Exemption Based on Location, Asset Size, or Number of HomePurchase Loans 1. General. An institution that ceases to meet the tests for HMDA coverage (such as the 10 percent test for nondepository institutions) or becomes exempt may stop collecting HMDA data beginning with the next calendar year. For example, a bank whose assets drop to $10 million or less on December 31 of a given year reports data for that full calendar year, but does not report data for the succeeding calendar year. (Appendix A of this part, para graph I.) 2. Coverage after a merger. Several scenarios of data-collection responsibilities for the cal endar year of a merger are described below. Under all the scenarios, if the merger results in a covered institution, that institution must begin data collection January 1 of the follow ing calendar year. (Appendix A of this part, paragraph I.) i. Two institutions are exempt from Regula tion C because of asset size. The institu tions merge. No data collection is required for the year of the merger (even if the merger results in a covered institution). ii. A covered institution and an exempt insti tution merge. The covered institution is the surviving institution. For the year of the merger, data collection is required for the covered institution’s transactions. Data collection is optional for transactions han dled in offices of the previously exempt institution. iii. A covered institution and an exempt insti tution merge. The exempt institution is the surviving institution, or a new institution is formed. Data collection is required for transactions of the covered institution that take place prior to the merger. Data col lection is optional for transactions taking place after the merger date. iv. Two covered institutions merge. Data col lection is required for the entire year. The surviving or resulting institution files ei ther a consolidated submission or separate submissions for that year. 3. Mergers versus purchases in bulk. If a cov ered institution acquires loans in bulk from another institution (for example, from the re ceiver for a failed institution) but no merger or acquisition of an institution is involved, the institution reports the loans as purchased 5 § 203.3 loans. (Appendix A of this part, paragraph V.B.) SECTION 203.4— Compilation o f Loan Data 4(a) Data Format and Itemization 1. Quarterly updating. An institution must make a good-faith effort to record all data concerning covered transactions—loan origina tions (including refinancings), loan purchases, and the disposition of applications that did not result in originations— fully and accurately within 30 days after the end of each calendar quarter. If some data are inaccurate or incom plete despite this good-faith effort, the error or omission is not a violation of Regulation C provided that the institution corrects and com pletes the information prior to reporting the HMDA-LAR to its regulatory agency. (Ap pendix A of this part, paragraph II.E.) 2. Updating—agency requirements. Certain state or federal regulations, such as the Fed eral Deposit Insurance Corporation’s regula tions, may require an institution to update its data more frequently than is required under Regulation C. (Appendix A of this part, para graph II.E.) 3. Form o f updating. An institution may maintain the quarterly updates of the HMDALAR in electronic or any other format, pro vided the institution can make the information available to its regulatory agency in a timely manner upon request. (Appendix A of this part, paragraph II.E.) Paragraph 4(a)(1) Application Date 1. Application date—consistency. In reporting the date of application, an institution reports the date the application was received or the date shown on the application. Although an institution need not choose the same approach for its entire HMDA submission, it should be generally consistent (such as by routinely us ing one approach within a particular division of the institution or for a category of loans). (Appendix A of this part, paragraph V.A.2.) 2. Application date—application forwarded by 6 Regulation C Commentary a broker. For an application forwarded by a broker, an institution reports the date the ap plication was received by the broker, the date the application was received by the institution or the date shown on the application, though an institution need not choose th ? same approach for its entire HMDA submis sion, it should be generally consistent (such as by routinely using one approach within a par ticular division of the institution or for a cate gory of loans). (Appendix A of this part, para graph V.A.2.) 3. Application date—reinstated application. If, within the same calendar year, an applicant asks an institution to reinstate a counteroffer that the applicant previously did not accept (or asks the institution to reconsider an applica tion that was denied, withdrawn, or closed for incompleteness), the institution may treat that request as the continuation of the earlier trans action or as a new transaction. If the institu tion treats the request for reinstatement or re consideration as a new transaction, it reports the date of the request as the application date. (Appendix A of this part, paragraph V.A.2.) Paragraph 4(a)(2) Type and Purpose 1. Purpose—multiple-purpose loan. If a loan is for home improvement and another covered purpose, an institution reports the loan as a home-improvement loan if the institution sifies it as a home-improvement loan, wise the institution reports the loan as home-purchase loan or a refinancing, as ap propriate. An institution may determine how to report such loans on a case-by-case basis. (Appendix A of this part, paragraphs V.A.4. and 5.) Paragraph 4(a)(3) Occupancy 1. Occupancy—actual occupancy status. If a loan relates to multifamily property, property located outside an MSA, or property in an MSA where the institution has no home or branch office, the institution may either report the actual occupancy status or report using the code for “not applicable.” (A nondepository institution may be deemed to have a home or branch office in an MSA under section 203.2(c)(2) of Regulation C.) (Appendix A of this part, paragraph V.A.7.) Regulation C Commentary § 203.4 2. Occupancy—multiple properties. If a loan 2. Action taken— rescinded transactions. If a relates to multiple properties, the institution borrower rescinds a transaction after closing, reports the owner-occupancy status of the the institution, on a case-by-case basis, may ^ jjro p e rty for which property location is being report the transaction either as an origination j^ H ^ o rte d . (See the comments to paragraphs or as an application that was approved but not ^ H a )(6 ), Property Location.) (Appendix A of accepted. (Appendix A of this part, paragraph V.B.) this part, paragraphs V.A.6. and 7.) Paragraph 4(a)(4) Loan Amount 1. Loan amount—counteroffer. If an applicant accepts a counteroffer for an amount different from the amount initially requested, the insti tution reports the loan amount granted. If an applicant does not accept a counteroffer or fails to respond, the institution reports the loan amount initially requested. (Appendix A of this part, paragraph V.A.8.f.) 2. Loan amount—multiple-purpose loan. Ex cept in the case of a home-equity line of credit, an institution reports the entire amount of the loan, even if only a part of the pro ceeds is intended for home purchase or home improvement. (Appendix A of this part, para graph V.A.8.) 3. Loan amount—home-equity line. An insti tution that reports home-equity lines of credit reports only the part that is intended for home-improvement or home-purchase pur poses. An institution may rely on the appli^ ^ a n t ’s oral or written statement about the pro m is e d use of the loan proceeds. (Appendix A of this part, paragraph V.A.8.C.) 4. Loan amount—assumption. An institution that enters into a written agreement accepting a new party as the obligor on a loan reports the amount of the outstanding principal on the assumption as the loan amount. (Appendix A of this part, paragraph V.A.8.) Paragraph 4(a)(5) Type o f Action Taken and Date 1. Action taken—counteroffers. If an institu tion makes a counteroffer to lend on terms different from the applicant’s initial request (for example, for a shorter loan maturity) and the applicant does not accept the counteroffer or fails to respond, the institution reports the action taken as a denial. (Appendix A of this part, paragraph V.B.) 3. Action taken— purchased loans. An institu tion reports the loans that it purchased during the calendar year, and does not report the loans that it declined to purchase. (Appendix A of this part, paragraph V.B.) 4. Action taken—conditional approvals. If an institution issues a loan approval subject to the applicant’s meeting underwriting condi tions (other than customary loan-commitment or loan-closing conditions, such as a clear-title requirement or an acceptable property survey) and the applicant does not meet them, the in stitution reports the action taken as a denial. (Appendix A of this part, paragraph V.B.) 5. Action taken date—approved but not ac cepted. For a loan approved by an institution but not accepted by the applicant, the institu tion reports using any reasonable date, such as the approval date, the deadline for accepting the offer, or the date the file was closed. Al though an institution need not choose the same approach for its entire HMDA submis sion, it should be generally consistent (such as by routinely using one approach within a par ticular division of the institution or for a cate gory of loans). (Appendix A of this part, para graph V.B.3.b.) 6. Action taken date—originations. For loan originations, an institution generally reports the settlement or closing date. For loan origi nations that an institution acquires through a broker, the institution reports either the settle ment or closing date, or the date the institu tion acquired the loan from the broker. If the disbursement of funds takes place on a date later than the settlement or closing date, the institution may use the date of disbursement. For a construction/permanent loan, the institu tion reports either the settlement or closing date, or the date the loan converts to the per manent financing. Although an institution need not choose the same approach for its entire HMDA submission, it should be generally 7 § 203.4 consistent (such as by routinely using one ap proach within a particular division of the in stitution or for a category of loans). (Appen dix A of this part, paragraph V.B.3.) Paragraph 4(a)(6) Property Location 1. Property location—m ultiple properties (home improvement/refinance o f home im provement). For a home-improvement loan, an institution reports the property being im proved. If more than one property is being improved, the institution reports the location of one of the properties or reports the loan using multiple entries on its HMDA-LAR (with unique identifiers) and allocating the loan amount among the properties. (Appendix A of this part, paragraph V.C.) 2. Property location— m ultiple properties (home purchase/refinance o f home purchase). For a home-purchase loan, an institution re ports the property taken as security. If an in stitution takes more than one property as se curity, the institution reports the location of the property being purchased if there is just one. If the loan is to purchase m ultiple properties and is secured by multiple proper ties, the institution reports the location of one of the properties or reports the loan using multiple entries on its HMDA-LAR (with unique identifiers) and allocating the loan amount among the properties. (Appendix A of this part, paragraph V.C.) 3. Property location—loans purchased from another institution. The requirement to report the property location by census tract in an MSA where the institution has a home or branch office applies not only to loan applica tions and originations but also to loans pur chased from another institution. This includes loans purchased from an institution that did not have a home or branch office in that MSA and did not collect the property-location infor mation. (Appendix A of this part, paragraph V.C.) 4. Property location—mobile or manufactured home. If information about the potential site of a mobile or manufactured home is not available, an institution reports using the code for “ not applicable.” (Appendix A of this part, paragraph V.C.) 8 Regulation C Commentary 5. Property location—use o f BN A. At its op tion, an institution may report property loca tion by using a block numbering area (BNA). The U.S. Census Bureau, in conjunction witlL state agencies, has established BNAs as s ta tf l tical subdivisions of counties in which censu? tracts have not been established. BNAs are generally identified in census data by numbers in the range 9501 to 9999.99. (Appendix A of this part, paragraph V.C.4.) Paragraph 4(a)(7) Applicant and Income Data 1. Applicant data—completion by applicant. An institution reports the monitoring informa tion as provided by the applicant. For exam ple, if an applicant checks the “other” box the institution reports using the “other” code. (Appendix A of this part, paragraph V.D.) 2. Applicant data—completion by lender. If an applicant fails to provide the requested in formation for an application taken in person, the institution reports the data on the basis of visual observation or surname. As stated in paragraph I.B.5 to appendix B of this part, the institution does not use the “other” code, but selects from the categories listed on the form. (Appendix A of this part, paragraph V.D.) 3. Applicant data—application completed in person. When an applicant meets in person with a lender to complete an application th f l was begun by mail or telephone, the institu tion must request the monitoring information. If the meeting occurs after the application pro cess is complete, for example, at closing, the institution is not required to obtain monitoring information. (Appendix A of this part, para graph V.D.) 4. Applicant data—joint applicant. A joint ap plicant may enter the government-monitoring information on behalf of an absent joint appli cant. If the information is not provided, the institution reports using the code for “ infor mation not provided by applicant in mail or telephone application.” (Appendix A of this part, paragraph V.D.) 5. Applicant data— video and other electronicapplication processes. An institution that ac cepts applications through electronic media § 203.5 Regulation C Commentary with a video component treats the applications as taken in person and collects the information about the race or national origin and sex of ^ p lic a n ts . An institution that accepts applicaB n s through electronic media without a video com ponent (for example, the Internet or fac simile) treats the applications as accepted by mail. (Appendix A of this part, paragraph V.D.) (See appendix B of this part for proce dures to be used for data collection.) 4(c) Optional Data 6. Income data—income relied upon. An insti tution reports the gross annual income relied on in evaluating the creditworthiness of appli cants. For example, if an institution relies on an applicant’s salary to compute a debt-to-income ratio but also relies on the applicant’s annual bonus to evaluate creditworthiness, the institution reports the salary and the bonus to the extent relied upon. Similarly, if an institu tion relies on the income of a cosigner to evaluate creditworthiness, the institution in cludes this income to the extent relied upon. But an institution does not include the income of a guarantor who is only secondarily liable. (Appendix A of this part, paragraph V.D.5.) 1. Loan pool. The purchase of an interest in a loan pool (such as a mortgage-participation certificate, a mortgage-backed security, or a real estate mortgage investment conduit or REMIC) is a purchase of an interest in a se curity under HMDA and is not reported on the HMDA-LAR. (Appendix A of this part, paragraph IV.B.5.) 7. Income data—co-applicant. If two persons jointly apply for a loan and both list income on the application, but the institution relies only on the income of one applicant in com puting ratios and in evaluating creditworthi:ss, the institution reports only the income lied on. (Appendix A of this part, paragraph V.D.5.) 1. Change in supervisory agency. If the su pervisory agency for a covered institution changes (as a consequence of a merger or a change in the institution’s charter, for exam ple), the institution reports data to its new su pervisory agency for the year of the change and subsequent years. (Appendix A of this part, paragraphs I., III. and VI.) 8. Income data—loan to employee. An institu tion may report “NA” in the income field for loans to employees to protect their privacy, even though the institution relied on their in come in making its credit decisions. (Appen dix A of this part, paragraph V.D.5.) 2. Subsidiaries. An institution is a subsidiary of a bank or savings association (for purposes of reporting HMDA data to the parent’s su pervisory agency) if the bank or savings asso ciation holds or controls an ownership interest that is greater than 50 percent of the institu tion. (Appendix A of this part, paragraph I.E. and VI.) P Paragraph 4(a)(8) Purchaser 1. Type o f purchaser—loan-participation in terests sold to more than one entity. An insti tution that originates a loan, and then sells it to more than one entity, reports the “type of purchaser” based on the entity purchasing the greatest interest, if any. If an institution re tains a majority interest, it does not report the sale. (Appendix A of this part, paragraph V.E.) 1. Agency requirements. Certain state or fed eral entities, such as the Office of Thrift Su pervision, require institutions to report the rea sons for denial even though this is optional reporting under HMDA and Regulation C. (Appendix A of this part, paragraph V.F.) 4(d) Excluded Data SECTION 203.5— Disclosure and Reporting 5(a) Reporting to Agency 5(e) Notice o f Availability 1. P oster— suggested text. The suggested wording of the poster text provided in appen dix A of this part is optional. An institution may use other text that meets the requirements of the regulation. (Appendix A of this part, paragraph III.G.) 9 § 203.6 SECTION 203.6— Enforcement 6(b) Bona Fide Errors 1. Bona fide error—information from third parties. An institution that obtains the property-location information for applications and loans from third parties (such as appraisers or vendors of “geocoding” services) is responsi ble for ensuring that the information reported 10 Regulation C Commentary on its HMDA-LAR is correct. An incorrect entry for a census tract number is a bona fide error, and is not a violation of the act or regu lation, provided that the institution maintains reasonable procedures to avoid such errc fl (for example, by conducting periodic check? of the information obtained from these third parties). (Appendix A of this part, paragraph V.C.)
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