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Federal R eserve Bank
OF DALLAS
R O B E R T D. M c T E E R , J R .
p r e s id e n t
A N D C H IE F E X E C U T IV E O F F IC E R

December 27, 1995

DALLAS, TEXAS
7 5 2 6 5 -5 9 0 6

Notice 95-114

TO: The Chief Executive Officer of each
member bank and others concerned in
the Eleventh Federal Reserve District
SUBJECT
Staff Commentary to Regulation C
(Home Mortgage Disclosure)
DETAILS
The Board of Governors of the Federal Reserve System has published a staff
commentary to Regulation C (Home Mortgage Disclosure) that interprets the require­
ments of the regulation.
The commentary provides guidance on issues such as the treatment of
prequalifications, loan applications received through a broker, participations, refinanc­
ings, home-equity lines of credit, and mergers. The Board believes the commentary will
help reduce burden and ease compliance by clarifying application of the rules, providing
flexibility in compliance, and consolidating the guidance that is currently available from a
variety of sources.
Compliance is mandatory for collection of data that begins January 1, 1996,
which is to be submitted to supervisory agencies no later than March 1, 1997.
ATTACHMENT
A copy of the Board’s notice as it appears on pages 63393-400, Vol. 60, No.
237, of the Federal Register dated December 11, 1995, is attached.

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
(800) 592-1631,
(800) 351-1012; Houston
Branch
(800) 392-4162,
(800) 221-0363; San Antonio Branch
(800) 292-5810.

Intrastate
Interstate
Intrastate
Interstate
Intrastate
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

MORE INFORMATION
For more information, please contact Eugene Coy at (214) 922-6201. For
additional copies of this Bank’s notice, please contact the Public Affairs Department at
(214) 922-5254.
Sincerely yours,

63393

Rules and Regulations

Federal Register
Vol. 60, No. 237
Monday, December 11, 1995

This section of the FEDERAL REGISTER
contains regulatory documents having general
applicability and legal effect, most of which
are keyed to and codified in the Code of
federal Regulations, which is published under
50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by
the Superintendent of Documents. Prices of
new books are listed in the first FEDERAL
REGISTER issue of each week.

DEPARTMENT OF AGRICULTURE
Cooperative State Research,
Education, and Extension Service
7 CFR Chapter XXXI!
Office of Grants and Program Systems
AGENCY: Cooperative State Research,

Education, and Extension Service,
USDA.
ACTION: Final rule.
SUMMARY: The Cooperative State

Research, Education, and Extension
Service (CSREES) is removing 7 CFR
Chapter XXXII and 7 CFR Part 3201,
which relates to the Competitive
Research Grants Program for Forest and
Rangeland Renewable Resources.
EFFECTIVE DATE: December 11,1995.

7 CFR Part 3201—Competitive Research
Grants Program for Forest and
Ranewable Resources because the
objectives of the program have been
incorporated into the NCRIGP under
newly redesignated 7 CFR Part 3411.
This action vacates 7 CFR Chapter
XXXII.
List of Subjects in 7 CFR Part 3201
Agricultural research, Forests and
forest products, Grant programs—
agriculture, Range management,
Reporting and recordkeeping
requirements.
CHAPTER XXXII— [REMOVED AND
RESERVED]

For reasons set out in the preamble
and under the authority of Public Law
103-354, Title 7, Subtitle B, Chapter
XXXII is removed and reserved.
Done at Washington, D.C. this 29th day of
November 1995.
Colien Hefferan,

Acting Administrator, Cooperative State
Research, Education, and Extension Service.
[FR Doc. 95-29457 Filed 1 2 -8 -9 5 ; 8:45 am]
BILLING CODE 3410-22-M

FEDERAL RESERVE SYSTEM

FOR FURTHER INFORMATION CONTACT:

12 CFR Part 203

Louise Ebaugh at (202) 401-5024.

[Regulation C; Docket No. R-0881]

SUPPLEMENTARY INFORMATION:

Home Mortgage Disclosure

Background and Purpose
On July 1,1986, the Secretary of
Agriculture issued Secretary’s
Memorandum 1020-26 which abolished
the Office of Grants and Program
Systems (OGPS) and transferred all of
its authorities, responsibilities and
activities to the Cooperative State
Research Service (CSRS). Pursuant to
Public Law 103-354, the Federal Crop
Insurance Reform and Department of
Agriculture Reorganization Act of 1994,
the Secretary of Agriculture issued
Secretary’s Memorandum 1010-1,
Reorganization of the Department of
Agriculture, on October 20,1994. That
memorandum orders the abolishment of
the CSRS and the establishment of the
CSREES, which assumes the function
previously performed by the CSRS.
CSREES previously amended Chapter
XXXII by moving 7 CFR Part 3 2 0 0 National Competitive Research Intitative
Grants Program (NCRIGP) to 7 CFR Part
3411, December 8,1995. It now deletes

AGENCY: Board of Governors of the

Federal Reserve System.
ACTION: Final rule; staff commentary.
SUMMARY: The Board is publishing a
staff commentary that interprets the
requirements of Regulation C (Home
Mortgage Disclosure). The commentary
provides guidance on issues such as the
treatment under Regulation C of
prequalifications, loan applications
received through a broker,
participations, refinancings, homeequity lines, and mergers. The Board
believes the commentary will help
reduce burden and ease compliance by
clarifying application of the rules,
providing flexibility in compliance, and
consolidating the guidance that is
currently available from a variety of
sources.
DATES: E ffective date. This rule is
effective January 1,1996.
C om plian ce date. Compliance is
mandatory for collection of data that

begins January 1 ,1 9 9 6 , which is to be
submitted to supervisory agencies no
later than March 1,1997.
FOR FURTHER INFORMATION CONTACT: jane
Jensen Gell, W. Kurt Schumacher, or
Manley Williams, Staff Attorneys,
Division of Consumer and Community
Affairs, Board of Governors of the
Federal Reserve System, at (202) 452­
3667 or (202) 452-2412. For users of
Telecommunications Device for the Deaf
(TDD), please contact Dorothea
Thompson at (202) 452—3544.
SUPPLEMENTARY INFORMATION:

I. Background
The Board’s Regulation C (12 CFR
Part 203) implements the Home
Mortgage Disclosure Act of 1975
(HMDA) (12 U.S.C. 2801 et seq.). HMDA
requires most mortgage lenders located
in metropolitan areas to collect data
about their housing-related lending
activity. Lenders must file reports
annually with their federal supervisory
agencies and make disclosures available
to the public. The reports and
disclosures, cover loan originations,
applications that do not result in
originations (for example, applications
that are denied or withdrawn), and loan
purchases. Information reported
includes the location of the property to
which the loan or application relates;
the race or national origin, sex, and
gross annual income of the borrower or
applicant; and the type of purchaser for
loans sold in the secondary market.
In June, the Board published a
proposed staff commentary to
Regulation C interpreting the regulation
(60 FR 30013, June 7 ,1 995). The Board
received approximately 130 comment
letters, primarily from financial
institutions and their trade associations.
The commenters generally supported
the Board’s decision to develop a staff
commentary and identified a number of
additional issues that would benefit
from interpretation. The commenters
also made a variety of specific
suggestions on the proposal.
Based on the comments received and
further analysis, the Board has revised
and reorganized many of the comments,
and has made technical and stylistic
changes to clarify the interpretations.
Except as discussed below, the Board
has retained the general substance of the
commentary as proposed.
The commentary compliments
Appendix A (Form and Instructions for

63394

Federal Register / Vol. 60, No. 237 / Monday, December 11, 1995 / Rules and Regulations

Completion of HMDA Loan/Application
Register) to Regulation C. Rather than
reproducing the information from
Appendix A in the commentary, the
Board has incorporated that material
only where necessary for clarity.
A number of commenters inquired
about the status of A Guide to HMDA
Reporting—Getting It Right!—developed
by member agencies of the Federal
Financial Institutions Examination
Council (FFIEC) (the Office of the
Comptroller of the Currency, the Federal
Deposit Insurance Corporation, the
Office of Thrift Supervision, the
National Credit Union Administration,
and the Federal Reserve Board) and the
Department of Housing and Urban
Development (HUD) now that the Board
is publishing a commentary to
Regulation C. The G uide provides
information in a more informal manner
that many commenters have found
useful (for example, its step-by-step
guidance and the flow chart on
coverage). In addition, the Guide
provides useful information not
provided in the regulation, such as the
state and county codes for counties in
Metropolitan Statistical Areas (MSAs).
Accordingly, the member agencies of
the FFIEC and HUD contemplate
continuing to publish the Guide.

coverage) does not depend on lien
position.
Under both comments, an institution
may always determine whether a new
transaction is a refinancing for HMDA
purposes based on the actual purpose of
the existing loan. An institution also has
the option to rely on the statement of
the applicant or look to the security
interest, if any.
B roker an d investor institutions. The
substance of proposed comments 1(c)—5
through - 1 0 has been adopted as
proposed, although the comments have
been revised and reorganized. To
address the concerns of some
commenters and to allow the consistent
use of the terms “broker” and
“investor” in each of the comments,
comment l(c )-5 defines a “broker” and
“investor” broadly. For example, as the
term is used in the commentary a broker
may or may not make the credit
decision, depending upon the
circumstances. The Board has also
adopted a new comment l(c )-9 which
clarifies the reporting responsibilities of
an institution that uses an agent.
Some commenters suggested revising
the proposed comments to change the
existing reporting responsibilities.
Under the proposed commentary certain
brokers could show a substantial
number of denials, yet have few
II. Section-by-Section Analysis
corresponding originations on their
Section 203.1—Authority, Purpose, an d
HMDA-LARs. This is the case where a
S cop e
broker makes the decision to deny
certain applications rather than send
1(c) Scope. Refinancings. Comments
them on to an investor for a credit
l(c )-2 through —4 deal with
refinancings. Comment l(c )-2 states that decision. As a result, the investor
reports more originations and the broker
modification, extension, and
more denials. A number of commenters
consolidation agreements (MECAs)—in
suggested revising this approach.
which the existing obligation is not
The position stated in the final
satisfied and replaced—are not
commentary, like the proposal, is
refinancings. Some commenters
suggested that the Board treat MECAs as consistent with Appendix A’s
instructions for completing the HMDArefinancings, on the basis that they may
LAR, paragraphs IV.A.3 and IV.A.4.
serve the same purpose as formal
refinancings. The Board has retained the Prior to January 1 ,1 993, Regulation C
specified that tbe institution in whose
interpretation as proposed. The Board
name a loan closed reported an
believes that moving from the current
origination (regardless of whether it
bright-line test for refinancings to a
made the credit decision), while the
broader test that would include MECAs
institution that made the credit decision
and other types of renewals and
reported the denials. Thus, a broker
extensions would increase institutions’
might report as an origination a loan
compliance burdens significantly in
that was approved in advance by an
determining which transactions are
investor. In response to public
covered and which are not.
Comment l(c )-3 clarifies that, for
comment, and based on its own
coverage purposes, an institution may
analysis, the Board decided in 1992 that
base its determination of whether a
the rule for reporting originations in
transaction is a refinancing of a homebrokered or correspondent situations
purchase loan on whether a first hen (as should match the reporting of denials—
opposed to a subordinate lien) on a
that is, the party making the credit
dwelling is involved. For institutions
decision should report both originations
that meet the coverage test, comment
and denials for HMDA purposes. (See
l(c )-4 makes clear that the data
the Board’s final rule revising
collection requirement (in contrast to.
Regulation C, at 57 FR 56963, December

2,1992). Thus, the commentary has
been adopted substantially as proposed.
A ffiliate b an k underwriting. In
response to public comment, the Board
has added a new comment l(c )-1 0 to
address a pre-closing review by an
affiliate bank under 12 CFR 250.250,
which interprets section 23A of the
Federal Reserve Act, Restrictions on
Transactions with Affiliates (sometimes
known as a “250.250 review”). Section
23A limits the amount of “covered
transactions” that a bank may engage in
with a single affiliate. As stated in 12
CFR 250.250, a bank has not engaged in
a covered transaction when it purchases
a loan made by the affiliate if the bank
completes an “independent evaluation
of the credit worthiness of the
mortgagor(s)” prior to the affiliate’s
committing to make the loan and the
bank promptly purchases the loan after
the loan is made. Under HMDA, when
a bank conducts an “independent credit
evaluation” of an application it must
report the action taken on the
application, rather than treat the
transaction as the purchase of an
originated loan.
Participations. Proposed comment
l(c )-1 0 would have allowed the
reporting of an institution’s partial
interest in a participation loan,
including interests in some consortium
loans, at the institution’s option. The
Board solicited comment on whether it
is appropriate to report partial interests
on the HMDA-LAR in this manner.
Based on the comments and after further
consideration, the Board has decided
that for the present the HMDA data
should not reflect partial interests in
loans. The Board has revised the
comment accordingly. Reporting partial
interests could distort the HMDA data
by showing a single loan as a number
of loans (for example, if ten lenders
participated in a loan there could be as
many as ten entries in HMDA-LARs).
The Board may consider amending
Regulation C at a later time to allow
reporting of partial interests in loans,
perhaps establishing a special code to
indicate the extent of the interest.
A ssum ptions. In response to public
comment, the Board has adopted a new
comment 1 (c)—12 dealing with
assumptions. The comment adopts and
expands upon the language found in the
FFIEC’s
G uide to HMDA Reporting—Getting it
Right!
Section 203.2—Definitions
2(b) A pplication. Comment 2 (b )-l has
been revised to clarify that while Board
interpretations of the definition of
application under Regulation B (Equal

Federal Register / Vol. 60, No. 237 / Monday, December 11, 1995 / Rules and Regulations
Credit Opportunity) (such as the
distinction between an inquiry and an
application, and the guidance
concerning application procedures) are
applicable to Regulation C,
prequalification requests are not
applications for purposes of Regulation
C, even though they may be applications
under Regulation B.
Comment 2(b)-2 addresses
prequalification requests. Several
commenters noted that institutions
sometimes process and treat
prequalification requests like other
applications; to ensure that a notice of
action taken under Regulation B is sent
if the request is denied. The Board has
revised comment 2(b)-2 to
accommodate such practices.
In the amendments to Regulation C
issued in December 1994 (59 FR 63698,
December 9,1 9 9 4 ), the Board deferred
a final determination on whether and
how lenders ought to report requests for
prequalifications (or preapprovals). (A
preapproval request is generally
considered to be a request by an
applicant for a commitment from an
institution to lend a specific amount,
subject to the applicant’s selection of
residential property that is satisfactory
to the institution. A preapproval
program may be part of or separate from
the institution’s mortgage loan
application program.) The Board stated
that institutions need not include data
about prequalifications (or
preapprovals) in their HMDA
submissions for calendar years 1994 or •
1995.
Based on the comments and upon
further analysis, the Board has
determined that for 1996 data
collection, institutions need not report
prequalification (or preapproval)
requests on th^HMDA-LAR. The Board
may consider amending Regulation C at
a later date to address whether (and
how) institutions should report some or
all prequalification (or preapproval)
requests.
2(c) Branch office.. The Board has
added a new comment 2 (c )-l to clarify
that a branch office of a credit union
meets the regulatory definition even if it
has not been approved as a branch by
a federal or state agency. The National
Credit Union Administration, which
charters and regulates federal credit
unions, does not require approval of
branch offices.
2(d) Dwelling. The Board has adopted
comment 2 (d )-l substantially as
proposed. Some commenters requested
guidance on whether the purchase of a
time-share is a purchase of a dwelling.
Because the purchase of a time-share is
the purchase of a “use” interest in the
property, it is not a purchase of a

dwelling for HMDA purposes. Other
commenters requested guidance on the
treatment of loans on structures such as
dormitories and nursing homes. An
institution need not treat these
structures as dwellings for purposes of
HMDA reporting. If an institution
wishes to report the transaction it must
determine that the structure is a
residential structure under state or
federal law.
2(f) H om e-im provem ent loan. The
Board has deleted an example in
proposed comment 2(f)(1)—1 concerning
the purchase of appliances to be
installed as fixtures. The use of the term
“fixture” generated numerous questions
from commenters. Upon further
analysis, the Board has decided not to
define the term fixture because the
Board believes the requirement that an
institution classify a loan as a homeimprovement loan suffices to
distinguish these loans from other
home-related consumer loans.
The Board has deleted proposed
comment 2(f)(1)—2, which addressed
home-improvement loans secured by a
property other than the property being
improved. Some commenters
interpreted the comment to suggest that
institutions should only report secured
home-improvement loans. Rather than
reiterate language from Appendix A—
which instructs institutions to report
both secured and unsecured homeimprovement loans—the Board opted to
delete the comment. Comment 4(a)(6)—
2 addresses how to report the property
location for a home-improvement loan
secured by a property other than the
property being improved.
Proposed comment 2(f)(2)—1 used the
example of marketing as a means of
classifying loans. Although the
comment was intended to clarify that an
institution satisfies the classification
requirement if it designs and markets a
loan product as a home improvement
loan product, some commenters
interpreted the comment as requiring an
institution to report all loans for which
the marketing might have indicated that
the loan could be used for homeimprovement. The Board has deleted
the reference because marketing
practices alone will not suffice for
classifying a loan product as a homeimprovement loan.
2(g) H om e-pu rchase loan. The Board
has revised the comments to § 203.2(g)
in response to issues raised by
commenters and to improve clarity. For
example, comments 2(g)—2 and - 3
clarify that, as is the case for homeimprovement loans, an institution may
use any reasonable standard to
determine a property’s primary use, and
may select the standard case-by-case.

63395

Section 203.3—E xem pt Institutions
3(a) E xem ption b a sed on location,
asset s iz e,1or n u m ber o f h om e-p u rch ase
loans. Comment 3(a)—3 addresses
reporting requirements for bulk
purchases where no merger or
acquisition of an institution is involved.
Several commenters expressed concerns
about data quality for these purchased
loans. Commenters noted that a lender
may only review a small percentage of
the total loan purchase, and be unaware
that information required to be reported
on the HMDA-LAR is missing for some
loans in the bulk putchase. The Board
recognizes the reporting difficulties
associated with bulk purchases, but
believes that HMDA requires the
reporting of t lese data in an accurate
and complete manner.
Section 203.4— C om pilation o f Loan
Data
4(a) Data fo rm a t an d item ization.
Paragraph 4(a)(1)—A pplication date.
The Board has revised comments
4(a)(1)—1 and - 2 to clarify that while an
institution is allowed flexibility, its
approach in reporting the application
date for its entire HMDA submission
should be generally consistent (such as
by routinely using one approach within
a particular division of the institution or
for a category of loans).
The Board has revised comment
4 (a)(l)-3 to clarify that the comment
applies to all reinstated applications
(not only counteroffers and denials).
P aragraph 4(a)(2)— Type an d
p u rpose. In response to comments on
proposed comment 2(f)(1)—4, the Board
has added a new comment 4(a)(2)-l
concerning loans that are for more than
one covered purpose (home purchase,
home improvement, or refinancing).
Paragraph 4(a)(3)— Occupancy.
Proposed comment 4(a)(3)-l dealt with
the occupancy status for properties
located outside the MSAs in which an
institution has a home or branch office,
and allowed an institution to report the
actual occupancy status. The final
comment makes this rule applicable .
also to a multifamily property loan.
Although Appendix A is written more
narrowly, the Board believes this more
permissive rule will reduce compliance
burden and will not adversely affect
data quality.
Paragraph 4(a)(4)—Loan am ount. In
response to requests by commenters, the
Board has added a new comment
4(a)(4)—4 concerning the loan amount to
be reported in the case of an assumption
of a loan.
Proposed comment 4(a)(4)—4 has been
deleted, consistent with the position
taken on the nonreporting of loan

63396

Federal Register / Vol. 60, No. 237 / Monday, December 11, 1995 / Rules and Regulations

participations. (See discussion of
4(a)(7)—1 through - 5 for greater
comment l ( c ) - l l , above.)
guidance. For example, comment
Paragraph 4(a)(5)—Type o f action
4(a)(7)-3 clarifies that a creditor is not
taken an d date. Comment 4(a)(5)—1
required to collect monitoring
deals with the “action taken” code to be information if the face-to-face meeting
used for counteroffers. A change has
occurs after the application process is
been made to illustrate that
complete, and comment 4(a)(7)—4
counteroffers may contain other terms
clarifies that a joint applicant may enter
different from those initially requested
the government monitoring information
besides loan amount. Counteroffers that
on behalf of an absent co-applicant. The
are not accepted by the applicant are to
Board has expanded comment 4(a)(7)-5
be reported as denials. If there are a
to address the treatment of remote
series of offers or counteroffers, an
electronic application processes that use
institution reports only the final action
text communication (such as Internettaken at the conclusion of the
based services) rather them “live” oral
negotiations. In addition, in some
and visual communication. Such
circumstances a rejected counteroffer
applications are treated as mail
that is reinstated and accepted by the
applications.
applicant need not be reported as a
In com e data. The Board has revised
denial. (See comment 4(a)(l)-3.)
and reorganized the comments
Comment 4(a)(5)-2 deals with
concerning the reporting of income data.
rescinded transactions. Some
For example, proposed comment
commenters asked whether they must
4(a)(7)—5 provided that institutions must
consistently report the action taken in
report all income used to make the
the case of a loan rescission as either
credit decision, even if the funds were
“approved but not accepted” or as “loan not included in the debt-to-income
originated.” The Board believes that a
ratio. Proposed comment 4(a)(7)-7
strict requirement is not warranted in
provided that an institution should not
light of the small number of loans that
report the income of cosigners and
are rescinded.
guarantors, even if the creditor relied on
Comment 4(a)(5)—4 relates to
that income in making the credit
conditional approvals. The proposal
decision. Commenters believed that
stated that if an institution approves an
guarantors’ and cosigners’ income
application subject to conditions that *
should be reported if that income was
are not met, the action is reported as a
in fact relied upon by the creditor.
denial. In response to comments, the
Several commenters noted that to do
Board has revised the comment to
otherwise is inconsistent with the
reflect that not all instances of failure to general rule that creditors report the
satisfy conditions should be classed as
income relied on. Some commenters
denials. For example, if a loan
made a distinction between cosigners,
application is approved subject to
who are primarily liable on the
routine conditions such as attendance at obligation, and guarantors, who are
the closing or payment of closing costs,
secondarily liable. They suggested that
and such conditions are not met, the
an institution should report the income
action is reported as approved but not
of cosigners but not guarantors. Based
accepted, rather than denied. However,
on the comments received and upon
loan approval subject to an
further analysis, the Board has revised
underwriting condition (such as a larger and consolidated the proposed
downpayment or obtaining a cosigner or comments into comment 4(a)(7)—6 to
guarantor) is reported as a denial if the
clarify that institutions report the
condition is not met.
income of applicants and cosigners (but
Comment 4(a)(5)—5 gives options for
not guarantors) to the extent relied upon
reporting the date of action taken for
in making the credit decision.
applications approved but not accepted.
Paragraph 4(c) O ptional data. In
In response to comments received, the
response to comments, comment 4 (c )-l
options have been expanded.
has been modified to reflect that state
Paragraph 4(a)(6)—Property location.
regulations also may require the
In response to comments and to
reporting of the reasons for denial.
improve the usefulness of the HMDA
Section 203.6—E nforcem ent
data, the Board has revised proposed
6(b) B on a fid e errors. Comment 6(b)—
comment 4(a)(6)—1 and added a new
1 states that an error is bona fide only
comment to indicate that for hom eif the institution maintains reasonable
improvement loans involving multiple
procedures to avoid the error. To
properties, an institution should
provide an example of reasonable
generally report the location of the
procedures, the proposed comment had
property being improved.
Paragraph 4(a)(7)—A pplican t an d
used the word “audit” in the sense of
in com e data. A pplicant data. The Board examine and check. Because some
has revised and reordered comments
commenters interpreted this as a

requirement to conduct a formal audit,
the Board has revised the comment.
List of Subjects in 12 CFR Part 203
Banks, banking, Consumer protection,
Federal Reserve System, Mortgages,
Reporting and recordkeeping
requirements.
For the reasons set forth in the
preamble, the Board amends 12 CFR
part 203 as set forth below:

PART 203—HOME MORTGAGE
DISCLOSURE (REGULATION C)
1. The authority citation for part 203
continues to read as follows:
Authority: 12 U.S.C. 2801-2810.

2. Part 203 is amended by adding a
new Supplement I—Staff Commentary
after the Appendices to read as follows:
Supplement I to Part 203—Staff
Commentary
Introduction

Status and citations.

1.
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 part 203). The parenthetical citations
given are references to Appendix A to
Regulation C, Form and Instructions for
Completion of the HMDA Loan/Application
Register.
Section 203.1—Authority, Purpose, and
Scope

Scope.
General.

1(c)
1.
The comments in this section
address issues affecting coverage of
institutions, exemptions from coverage, and
data collection requirements. (Appendix A of
this part, I., IV., and V.)
2.
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. the existing
obligation 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.
—
The regulation
bases coverage, in part, on whether an
institution originates home purchase loans.
For determining whether an institution is
subject to Regulation C or is exempt from
coverage, an origination of a home-purchase
loan includes the refinancing of a homepurchase loan. An institution may always
determine the actual purpose of the existing
obligation (for example, by reference to
available documents). (Appendix 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

Meaning o f refinancing.

K

Refinancing coverage.

Federal Register / Vol. 60, No. 237 / Monday, December 11, 1995 / Rules and Regulations
either the existing obligation or the new
obligation is not secured by a first lien on the
dwelling.
4.
The
regulation requires collection and reporting
of data on refinancings of home-purchase and
home-improvement loans. An institution
may always determine the actual purpose of
the existing obligation (for example, by
referenceto available documents). (Appendix
A o ith is part, Paragraph V .A 5. Code 3.)
Alternatively, an institution may:

Refinancing—data collection.

i. Rely on the statement of the applicant
that the existing obligation was (or was not)
a home-purchase or home-improvement loan;
or
ii. Assume that the new obligation is a
refinancing of a home-purchase or homeimprovement loan only if the existing
obligation -was secured by a lien on a
dwelling; or

iii. Assume that the new obligation is a
refinancing of a home-purchase or homeimprovement loan only if the new obligation
will be secured by a lien on a dwelling.

5. The broker rule and the weaning of
“broker” and “investor." For the purposes of

the guidance given in tjiis commentary, an
institution that takes and processes a loan
application and arranges for another
institution to acquire the' loan at or after
closing is acting as a “brokex/’ andaninstitution 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 (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 reports
only the loans that it purchases; it does not
report the loans it does not purchase. Thus,
an institution that makes a credit decision 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.
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 broker denies a loan before sending
it to an investor; in this situation, the broker
reports a denial. (Appendix A of this part,
Paragraphs IV.A. and V.B.)
7.
If a broker makes a credit decision
based on underwriting criteria set by an
investor, but without the investor’s review

Illustrations of the broker rule.

Broker’s use of investor’s underwriting
criteria.

prior to closing, the broker has made the
credit decision. 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. (Appendix A of this part,
Paragraphs IV.A. and V.B.)
8.
If an
institution evaluates an application based on
the criteria or actions of a third party other
than an investor (such as a government or
private insurer or guarantor), the institution
must report the action taken on the
application (loan originated, approved but
not accepted, or denied, for example).
(Appendix A of this part, Paragraphs IV.A.
and V.B.)
9.
If an institution approves loans
through the actions of an agent, the
institution must report the action taken on
the application (loan origipated, 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.)

Insurance and other criteria.

Credit decision of agent is decision of
principal.

10. Affiliate bank underwriting (250.250
review). If an institution makes an

independent evaluation of the
creditworthiness of an applicant (for
example, as part of a pre-closing review 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
acquires the loan, it reports the loan as an
origination whether the loan closes in. the
name of the institution or its affiliate. An
institution that does not acquire the loan but
takes another action reports that action.
(Appendix A of this part, Paragraphs IV.A.
and V.B.)
11.
An institution that
originates a loan and then sells partial
interests 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„ n., IV., and V.)
12.
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 application 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 reported.
(Appendix A of this part, Paragraphs IV.A.
and V.B.)

Participation loan.

Assumptions.

Section 203.2—Definitions

Application.
Consistency with Regulation B.

2(b)
1.
Board
interpretations that appear in the official staff
commentary to Regulation B (Equal Credit
Opportunity, 12 CFR Part 202, Supplement I)
are generally applicable to the definition of
an application under Regulation C. However,
under Regulation C the definition of an

63397

application does not include prequalification
requests. (Appendix A of this part, Paragraph
IV.A.)
2.
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 o f credit for
which the prospective 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 HMDA-LAR,
even though these requests may constitute
applications under Regulation B. (Appendix
A of this part, Paragraphs I. and IV.A.)
2(c)
1.
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 U.S.C. 1752.) (Appendix
A of this part, Paragraphs?I.,:V.A:7., and V.C)
2.
A branch of a
depository institution does not include a loan
production office, the office of an affiliate, or
the office of a third party such as a loan
broker. (Appendix A o f 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 location even for properties located
outside those MSAs in which the institution
has a home or branch office.)
3.
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
Appendix A of this part, Paragraph V .C6.,
which requires certain nondepository
institutions to report property location even
in MSAs where they do not have a physical
location.)
2(d)
1.
The definition of “dwelling” is
not limited to the principal or other
residence of the applicant or borrower, and
thus includes vacation o r second homes and
rental properties. A dwelling also includes a
mobile or manufactured home, a multifamily
structure (such as an apartment building),
and a condominium or a cooperative u n it
Recreational vehicles such as boats or
campers are not dwellings for purposes of
HMDA. (Appendix A of this part, Paragraphs
I.B., IV., and V.A.5.)
2(e)
1.
A federal branch or a state-licensed
insured branch of a foreign bank is a “bank”
under section 3(a)(1) of the Federal Deposit
Insurance Act (12 U.S.C. 1813(a)), and is
covered by HMDA if it meets the tests for a
depository institution found in §§ 203.2(e)(1)
and 203.3(a)(1) of Regulation C. (Appendix A
of this part, Paragraphs I. A. and I.B.)
2.
—

Prequalification.

Branch office.
Credit union.

Depository institution.

Nondepository institution.

Dwelling.
Scope.

Financial institution.
Branches of foreign banks— treated as a
bank.

Branches and offices o f foreign banks
treated as a for-profit mortgage lending
institution. Federal agencies, state-licensed

agencies, state-licensed uninsured branches

63398

Federal Register / Vol. 60, No. 237 / Monday, December 11, 1995 / Rules and Regulations

of foreign banks, commercial lending
companies owned or controlled by foreign
banks, and entities operating under section
25 or 25(a) of the Federal Reserve Act, 12
U.S.C. 601 and 611 (Edge Act and Agreement
corporations) are not “banks” under the
Federal Deposit Insurance Act. These entities
are nonetheless covered by HMDA if they
meet the tests for a nondepository mortgage
lending institution found in §§ 203.2(e)(2)
and 203.3(a)(2) of Regulation C. (Appendix A
of this part, Paragraphs I.C. and I.D.)
2(f)
1.
A home-improvement loan is
a loan that is made for the purpose of home
improvement and that is classified by the
institution as a home-improvement loan.
(Appendix A of this part, Paragraphs IV. and
V.A.5. Code 2.)
2.
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.
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.
An
institution has “classified” a loan as a homeimprovement 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
institution 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).
(Appendix A of this part, Paragraphs IV. and
V.A.5. Code 2.)
5.
Home
improvements 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.
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
department) is reported if the institution
classifies it as a home-improvement loan.
(Appendix A of this part, Paragraphs IV. and
V.A.5, Code 1.)
7.
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.
A loan to improve
property used for residential and commercial

Home-improvement loan.
Definition.

Statement of the applicant.

Home-equity lines.

Classification requirement.

Improvements to real property.

Commercial and other loans.

Multiple-purpose loan.

Mixed-use property.

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
improve the entire property (for example, to
replace the heating system), the lean satisfies
the purpose requirement if the property itself
is primarily residential. An institution may
use any reasonable 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. To report the
loan as a home-improyement loan, the
institution must also classify it as such.
(Appendix A of this part, Paragraphs IV. and
V.A.5. Code 2.)
2(g)
1.
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.
A loan to purchase
property used primarily for residential
purposes (for example, an apartment building
containing a convenience store) is a homepurchase loan. An institution may use any
reasonable 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 caseby-case basis. (Appendix A of this part,
Paragraphs IV.A., IV .B .l., and V.A.5. Code 1.)
3.
A loan to purchase property
used primarily for agricultural purposes is
not a home-purchase loan even if the
property includes a dwelling. An institution
may use any reasonable 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 apply
on a case-by-case basis. (Appendix A of this
part, Paragraphs IV .B .l. and V.A.5. Code 1.)
4.
A homepurchase loan includes a loan originated
outside an institution’s residential mortgage
lending division (such as a loan for the
purchase of an apartment 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.
A home-purchase loan includes both a
combined construction/permanent loan and
the permanent financing that replaces a
construction-only loan. It does not include a
construction-only loan, which is considered
“temporary financing” under Regulation C
and is not reported. (Appendix A of this part,
Paragraphs IV.A. and B.2, and V.A.5. Code 1.)
6.
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
institution may rely on the applicant’s oral or
written statement about the proposed use of
the funds. An institution that reports homeequity lines reports the disposition of all
applications, not just the originations.
(Appendix A of this part, Paragraphs IV. and
V.A.5. Code 1.)

Home-purchase loan.
Multiple properties.
Mixed-use property.

Farm loan.

Commercial and other loans.

Construction and permanent financing.

Home-equity line.

Section 203.3—Exempt Institutions
3(a)

Exemption based on location, asset
size, or number of home-purchase 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, Paragraph I.)
2.
Several
scenarios of data collection responsibilities
for the calendar 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 following calendar year.
(Appendix A of this part, Paragraph I.)
i. Two institutions are exempt from
Regulation C because of asset size. The
institutions 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
institution 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
handled in offices of the previously exempt
institution.
iii. A covered institution and an exempt
institution 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 collection
is optional for transactions taking place after
the merger date.
iv. Two covered institutions merge. Data
collection is required for the entire year. The
surviving or resulting institution files either
a consolidated submission or separate
submissions for that year.
3.
If a
covered institution acquires loans in bulk
from another institution (for example, from
the receiver for a failed institution) but no
merger or acquisition of an institution is
involved, the institution reports the loans as
purchased loans. (Appendix A of this part,
Paragraph V.B.)
Section 203.4—Compilation of Loan Data

Coverage after a merger.

Mergers versus purchases in bulk.

Data format and itemization.
Quarterly updating.

4(a)
1.
An institution must
make a good-faith effort to record all data
concerning covered transactions—loan
originations (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 incomplete
despite this good-faith effort, the error or
omission is not a violation of Regulation C
provided that the institution corrects and
completes the information prior to reporting
the HMDA-LAR to its regulatory agency.
(Appendix A of this part, Paragraph II.E.)
2.
Certain
state or federal regulations, such as the

Updating—agency requirements.

Federal Register / Vol. 60, No. 237 / Monday, December 11, 1995 / Rules and Regulations
Federal Deposit Insurance Corporation’s
regulations, may require an institution to
update its data more frequently than is
required under Regulation C. (Appendix A of
this part, Paragraph II.E.)
3.
An institution may
maintain the quarterly updates of the
HMDA-LAR in electronic or any other
format, provided 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.)

Form of updating.

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 using 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.
For an application
forwarded by a broker, an institution reports
the date the application was received by the
broker, the date the application was received
by the institution, 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 using one
approach within a particular division of the
institution or for a category of loans).
(Appendix A of this part, Paragraph V.A.2.)
3.
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 application that
was denied, withdrawn, or closed for
incompleteness), the institution may treat
that request as the continuation of the earlier
transaction or as a new transaction. If the
institution treats the request for
reinstatement or reconsideration as a n ew ,
transaction, it report the date of the request
as the application date. (Appendix A of this
part, Paragraph V.A.2.)

Application date—application
forwarded by a broker.

Application date—reinstated
application.

Occupancy—multiple properties.

2.
If a
loan relates to multiple properties, the
institution reports the owner-occupancy
status of the property for which property
location is being reported. (See the comments
to paragraphs 4(a)(6) Property location.)
(Appendix A of 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 institution 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.
—
Except 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
proceeds is intended for home purchase or
home improvement. (Appendix A of this
part, Paragraph V.A.8.)
3.
—
An
institution that reports home-equity lines of
credit reports only the part that is intended
for home-improvement or home-purchase
purposes. An institution may rely on the
applicant’s oral or written statement about
the proposed use of the loan proceeds.
(Appendix A of this part, Paragraph V.A.8.C.)
4.
—
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,
Paragraphs V.A.8.)

Loan amount multiple-purpose loan.

Loan amount home-equity line.

Loan amount assumption.

Paragraph 4(a)(5) Type of action taken and
date.
1. Action taken — counteroffers. If an

institution 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.)
2.
—
If
a borrower rescinds a transaction after
1.
—
If a
closing, the institution, on a case-by-case
loan is for home improvement and another
basis, may report the transaction either as an
covered purpose, an institution reports the
origination or as an application that was
loan as a home-improvement loan if the
approved but not accepted. (Appendix A of
institution classifies it as a homethis part, Paragraph V.B.)
improvement loan. Otherwise the institution
3.
—
An
reports the loan as a home-purchase loan or
institution reports the loans that it purchased
a refinancing, as appropriate. An institution
during the calendar year, and does not report
may determine how to report such loans on
the loans that it declined to purchase.
a case-by-case basis. (Appendix A of this
(Appendix A of this part, Paragraph V.B.)
part, Paragraphs V.A.4. and 5.)
4.
—
If
an institution issues a loan approval subject
1.
If to the applicant’s meeting underwriting
a loan relates to multifamily property,
conditions (other than customary loan
property located outside an MSA, or property commitment or loan closing conditions, such
in an MSA where the institution has no home as a “clear title” requirement or an
or branch office, the institution may either
acceptable property, survey) and the
report the actual occupancy status or report
applicant does not meet them, the institution
using the code for “not applicable.” (A
reports the action taken as a denial.
nondepository institution may be deemed to
(Appendix A of this part, Paragraph V.B.)
have a home or branch office in an MSA
5.
—
under § 203.2(c)(2) of Regulation C.)
For a loan approved by an
(Appendix A of this part, Paragraph V.A.7.)
institution but not accepted by the applicant,

Paragraph 4(a)(2) Type and purpose.
Purpose multiple-purpose loan.

Action taken rescinded transactions.

Action taken purchased loans.

Paragraph 4(a)(3) Occupancy.
Occupancy—actual occupancy status.

Action taken conditional approvals.

Action taken date approved but not
accepted.

63399

the institution reports using any reasonable
date, such as the approval date, the deadline
for accepting the offer, or the date the file
was closed Although an institution need not
choose the same approach for its entire
HMDA submission, it should be generally
consistent (such as by routinely using one
approach within a particular division of the
institution or for a category of loans).
.
(Appendix A of this part, Paragraph V.B.3.b.)
6.
—
For
loan originations, an institution generally
reports the settlement or closing date. For
loan originations that an institution acquires
through a broker, the institution reports
either the settlement or closing date, or the
date the institution 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 institution reports either
the settlement or closing date, or the date the
loan converts to the permanent financing.
Although an institution need not choose the
same approach for its entire HMDA
submission, it should be generally consistent
(such as by routinely using one approach
within a particular division of the institution
or for a category of loans). (Appendix A of
this part, Paragraph V.B.3.)

Action taken date originations.

Paragraph 4(a)(6) Property location.
1. Property location—multiple properties
(home improvement/refinance of home
improvement). For a home-improvement

loan, an institution reports the property being
improved. 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 multiple properties
(home purchase/refinance o f home
purchase). For a home-purchase loan, an

institution reports the property taken as
security. If an institution takes more than one
property as security, the institution reports
the location of the property being purchased
if there is just one. If the loan is to purchase
multiple properties and is secured by
multiple properties, 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.
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
applications and originations but also to
loans purchased 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 information. (Appendix
A of this part, Paragraph V.C.)
4.
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.)

Property location—loans purchased
from another institution.

Property location—mobile or
manufactured home.

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Federal Register / Vol. 60, No. 237 / Monday, December 11, 1995 / Rules and Regulations

Property location use ofBNA.

5.
—
At its
option, an institution may report property
location by using a block numbering area
(BNA). The U.S. Census Bureau, in
conjunction with state agencies, has
established BNAs as statistical subdivisions
of counties in which census 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 information as provided by the
applicant. For example,, if an applicant
checks the “other” box the institution reports
using the “other” code. (Appendix A of this
part, Paragraph V.D.)
2.
If
an applicant fails to provide the requested
information 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.
When an applicant meets in
person with a lender to complete an
application that was begun by mail or
telephone, the institution must request the
monitoring information. If the meeting occurs
after the application process is complete, for
example, at closing, the institution is not
required to obtain monitoring information.
(Appendix A of this part, Paragraph V.D.)
4.
A joint
applicant may enter the government
monitoring information on behalf o f an
absent joint applicant. If the information is
not provided, the institution reports using
the code for “ information not provided by
applicant in mail or telephone application.”
(Appendix A of this part, Paragraph V.D.)
5.
An
institution that accepts applications through
electronic media with a video component
treats the applications as taken in person and
collects the information about the race or
national origin and sex of applicants. An
institution that accepts applications through
electronic media without a video component
(for example, the-Internet or facsimile) treats
the applications as accepted by mail.
(Appendix A of this part, Paragraph V.D.)
(See Appendix B of this part for procedures
to be used for data collection.)
6.
An
institution reports the gross annual income
relied on in evaluating the creditworthiness
of applicants. 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 institution relies on the
income of a cosigner to evaluate
creditworthiness, the institution includes
this income to the extent relied upon. But an
institution does not include the income of a

Applicant data—completion by lender.

Applicant data—application completed
in person.

Applicant data—joint applicant.

Applicant data— video and other
electronic application processes.

Income data—income relied upon.

guarantor who is only secondarily liable.
(Appendix A of this part, Paragraph V.D.5.)
7.
—
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
computing ratios and in evaluating
creditworthiness, the institution reports only
the income relied on. (Appendix A of this
part, Paragraph V.D.5.)
8.
An
institution may report “NA” in the income
field for loans to employees to protect their
privacy, even though the institution relied on
their income in making its credit decisions.
(Appendix A of this part, Paragraph V.D.5.)

Income data co-applicant.

Income data—loan to employee.

Paragraph 4(a)(8) Purchaser.
1. Type of purchaser—loan participation
interests sold to more than one entity. An

institution 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 retains a majority interest it does
not report the sale. (Appendix A of. this part,
Paragraph V.E.)

4(c) Optional data.
1. Agency requirements. Certain state or

federal entities, such as the Office of Thrift
Supervision, require institutions to report the
reasons 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.
1. Loan pool. The purchase of an interest

in a loan pool (such as a mortgageparticipation certificate, a mortgage-backed
security, or a real estate mortgage investment
conduit or “REMIC”) is a purchase of an
interest in a security under HMDA and is not
reported on the HMDA-LAR. (Appendix A of
this part, Paragraph IV.B. 5.)
Section 203.5—Disclosure and Reporting

5(a) Reporting to agency.
1. Change in supervisory agency. If the

supervisory agency for a covered institution
changes (as a consequence of a merger or a
change in the institution’s charter, for
example), the institution reports data to its
new supervisory agency for the year of the
change and subsequent years. (Appendix A
of this part, Paragraphs I., III. and VI.)
2.
An institution is a
subsidiary of a bank or savings association
(for purposes of reporting HMDA data to the
parent's supervisory agency) if the bank or
savings association holds or controls an
ownership interest that is greater than 50
percent of the institution. (Appendix A of
this part, Paragraph I.E. and VI.)

Subsidiaries.

5(e) Notice of availability.
1. Poster—suggested text. The suggested

wording of the poster text provided in
Appendix 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.)
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 responsible for
ensuring that the information reported 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 regulation,
provided that the institution maintains
reasonable procedures to avoid such errors
(for example, by conducting periodic checks
of the information obtained from these third
parties). (Appendix A of this part, Paragraph
V.C.)
By order of the Secretary of the Board,
acting pursuant to delegated authority for the
Board of Governors of the Federal Reserve
System, December 4,1995.
William W. Wiles,

Secretary of the Board.

(FR Doc. 95-30035 Filed 1 2 -8 -9 5 ; 8:45 am]
BILUNG CODE 6210-01-P