Full text of Federal Reserve Bank of New York Circulars : 10827. Home Mortgage Disclosure

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FEDERAL RESERVE BANK
OF NEW YORK
No. 10827
[ Circular
January 16,1996

HOME MORTGAGE DISCLOSURE
New Official Staff Commentary to Regulation C
To All Depository Institutions in the Second
Federal Reserve District, and Others Concerned:

The following statement has been issued by the Board of Governors of the Federal Reserve
System:
The Federal Reserve Board has published a staff commentary to its Regulation C, Home Mortgage
Disclosure, that interprets the requirements of the regulation.
The commentary provides guidance on issues such as the treatment of prequalifications, loan
applications received through a broker, participations, refinancings, home-equity lines of credit, and
mergers. The Board believes the commentary will help reduce burden and ease compliance by clarify­
ing 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 sub­
mitted to supervisory agencies no later than March 1,1997.

Enclosed is the text of the new staff Commentary to the Board’s Regulation C, as published
in the Federal Register. Questions regarding either Regulation C or the Official Staff Commentary
to that regulation may be directed to our Compliance Examinations Department (Tel. No. 212-7205914).




W

i l l ia m

J.

M

cD o nough,

President.

Federal Register / Vol. 60, No. 237 / Monday, December 11,1995 / Rules and Regulations 63393

*

Board of Governors of the Federal Reserve System
HOME MORTGAGE DISCLOSURE
OFFICIAL STAFF COMMENTARY TO
REGULATION C

Effective January 1,1996

FEDERAL RESERVE SYSTEM

3

12 CFR Part 203
[Regulation

C; Docket No. R-0681]

Home Mortgage Disclosure
AGENCY: Board of Governors of the
Federal Reserve Systran.
ACTION: Final rule; staff commentary.

[Enc. Cir. No. 10827]
CMTY C-1/96




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 w ill 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: Effective date. This rule is
effective January 1,1996.
Compliance, aate. 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.
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) 4523667 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 7,1995). 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

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

C om pletion o f HMDA L oan /A p p lication
Register) to R egulation C. Rather than
reproducing the inform ation from
A p p en d ix A in the com m entary, the
Board has incorporated that m aterial
o n ly w here necessary for clarity.
A num ber o f com m enters inquired
about the status o f A Guide to HMDA
Reporting—Getting It Right\— d ev elo p ed
by m em ber agencies o f the Federal
F inancial Institutions E xam ination
C ouncil (FFIEC) (the O ffice o f the
C om ptroller o f the Currency, th e Federal
D eposit Insurance Corporation, the
O ffice o f Thrift Supervision , the
N ational Credit U nion A d m in istration ,
and the Federal R eserve Board) and the
D epartm ent o f H ousing and Urban
D evelopm ent (HUD) n o w that th e Board
is p u b lish in g a com m entary to
R egulation C. The Guide p rovid es
inform ation in a m ore inform al m anner
that m any com m enters have found
useful (for exam ple, its step-by-step
guidance and the flow chart on
coverage). In addition, the Guide
provides u sefu l inform ation not
provided in the regulation, su ch as the
state and county cod es for co u n ties in
M etropolitan Statistical Areas (M SAs).
A ccordingly, the m em ber agen cies o f
the FFIEC and HUD contem plate
continuing to publish the Guide.

II. Section-by-Section Analysis
Section 203.1—Authority, Purpose, and
Scope
1(c) Scope. Refinancings. C om m ents
1 (c)—2 through —4 deal w ith
refinancings. C om m ent 1(c)—2 states that
m odification, exten sion , and
con solid ation agreem ents (MECAs)— in
w h ich the existin g obligation is not
satisfied and replaced— are not
refinancings. Som e com m enters
suggested that the Board treat MECAs as
refinancings, on the basis that th ey m ay
serve the sam e purpose as formal
refinancings. T he Board has retained the
interpretation as proposed. T he Board
b eliev es that m oving from the current
bright-line test for refinancings to a
broader test that w o u ld in clu d e MECAs
and other typ es o f renew als and
exten sion s w o u ld increase in stitu tio n s’
com p lian ce burdens sign ifican tly in
determ ining w h ich transactions are
covered and w h ich are not.
C om m ent 1(c)—3 clarifies that, for
coverage purposes, an in stitu tion m ay
base its determ ination o f w h eth er a
transaction is a refinancing o f a h om epurchase loan on w hether a first lie n (as
o p p osed to a subordinate lien ) on a
d w ellin g is involved . For in stitu tio n s
that m eet the coverage test, com m en t
l( c ) - 4 m akes clear that the data
co llection requirem ent (in contrast to

CMTY C-2/96




coverage) d o es not d ep en d on lie n
p osition .
U nder both com m en ts, an in stitu tio n
m ay alw ays determ ine w h eth er a n e w
transaction is a refinancing for HM DA
pu rp oses based on the actual p u rp ose of
the ex istin g loan. A n in stitu tio n also has
the op tion to rely on the statem ent o f
the ap p lican t or look to the security
interest, if any.
Broker and investor institutions. T he
substance o f prop osed com m en ts 1 (c)—5
through - 1 0 has b een adopted as
p roposed, although the co m m en ts have
b een revised and reorganized. To
address the con cern s o f som e
com m enters and to a llo w the co n sisten t
u se o f th e term s “broker” and
“in v esto r” in each o f the com m en ts,
com m ent 1(c)—5 d efin es a “broker” and
“in v esto r” broadly. For exam p le, as the
term is u sed in the com m entary a broker
m ay or m ay n ot m ake the credit
d ecisio n , d ep en d in g u pon the
circum stances. T he Board has also
adopted a n e w com m en t l( c ) - 9 w h ic h
clarifies th e reporting r esp o n sib ilities of
an in stitu tion that u se s an agent.
Som e com m enters suggested revisin g
the proposed com m en ts to change the
existin g reporting resp on sib ilities.
U nder the p rop osed com m entary certain
brokers co u ld sh o w a substantial
num ber o f d en ia ls, yet have few
corresponding originations on their
H M DA-LARs. T h is is the case w h ere a
broker m akes the d e cisio n to d en y
certain ap p lica tio n s rather than sen d
them on to an in vestor for a credit
d ecisio n . A s a result, the in vestor
reports m ore originations and th e broker
m ore d en ials. A num ber o f com m enters
suggested revisin g th is approach.
T he p o sitio n stated in the final
com m entary, like the proposal, is
co n sisten t w ith A p p en d ix A ’s
in stru ction s for com p letin g the H M D A LAR, paragraphs IV.A.3 and IV.A.4.
Prior to January 1, 1993, R egulation C
sp ecified that d ie in stitu tio n in w h o se
nam e a loan clo se d reported an
origination (regardless o f w h eth er it
m ade the credit d ecisio n ), w h ile the
in stitu tion that m ade the credit d ec isio n
reported the d en ials. T hus, a broker
m ight report as an origination a loan
that w as approved in advance by an
investor. In resp on se to p u b lic
com m ent, and based on its ow n
an alysis, the Board d ecid ed in 1992 that
the rule for reporting originations in
brokered or correspondent situ ation s
sh o u ld m atch the reporting o f d en ia ls—
that is, the party m aking the credit
d e cisio n sh o u ld report both originations
and d en ia ls for HMDA p urposes. (See
the Board’s final rule revising
R egulation C, at 57 FR 56963, D ecem ber

2 ,1 9 9 2 ). T hus, the com m entary has
b een adopted su b stan tially as prop osed .
Affiliate bank underwriting. In
resp on se to p u b lic com m en t, th e Board
has ad d ed a n ew com m en t l( c ) - 1 0 to
address a pre-closin g rev iew b y an
affiliate bank under 12 CFR 2 5 0 .2 5 0 ,
w h ic h interprets sectio n 23 A o f the
Federal Reserve A ct, R estrictions on
T ransactions w ith A ffiliates (som etim es
k n ow n as a “ 250.250 re v ie w ”). S ectio n
23A lim its the am ount o f “covered
tran saction s” that a bank m ay engage in
w ith a sin g le affiliate. A s stated in 12
CFR 250.250, a bank has n ot engaged in
a covered transaction w h e n it p u rch ases
a loan m ade by the affiliate if th e bank
co m p letes an “in d ep en d en t evalu ation
o f the credit w o rth in ess o f the
mortgagor(s)” prior to th e a ffiliate’s
com m itting to m ake th e loan and the
bank prom ptly p urchases th e loan after
th e loan is m ade. U nder HM DA, w h e n
a bank co n d u cts an “in d ep en d en t credit
ev a lu a tio n ” o f an ap p lication it m u st
report th e action taken on the
ap p lication , rather than treat the
transaction as the purchase o f an
originated loan.
Participations. P roposed co m m en t
l( c ) - 1 0 w o u ld have a llo w e d the
reporting o f an in stitu tio n ’s partial
interest in a participation loan,
in clu d in g interests in som e con sortiu m
loans, at th e in stitu tio n ’s op tion . T he
Board so lic ite d com m en t o n w h eth er it
is appropriate to report partial interests
on d ie H M D A -LAR in th is m anner.
Based on the com m en ts and after further
con sid eration , the Board has d e cid ed
that for th e present the HM DA data
sh o u ld not reflect partial in terests in
loans. T he Board has rev ised the
com m en t accordingly. R eporting partial
interests c o u ld distort the HM DA data
by sh o w in g a sin g le loan as a num ber
o f loan s (for exam p le, if ten len d ers
participated in a loan there c o u ld b e as
m any as ten entries in H M D A -LAR s).
The Board m ay co n sid er a m ending
R egulation C at a later tim e to a llo w
reporting o f partial interests in loan s,
perhaps estab lish in g a sp ecia l co d e to
in d icate the exten t o f the interest.
Assumptions. In resp on se to p u b lic
com m en t, th e Board has ad op ted a n ew
com m en t l( c ) - 1 2 d ealin g w ith
a ssu m p tion s. The com m en t a d op ts and
exp an d s u p on the language fou n d in the
FFIEC’s

Guide to HMDA Reporting—Getting it
Right!
Section 203.2—Definitions
2(b) Application. C om m ent 2 ( b ) - l has
b een revised to clarify that w h ile Board
interpretations o f th e d efin ition of
ap p lication u nder R egulation B (Equal

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

63395

►

Credit O pportunity) (such as the
d istinction b etw een an inquiry and an
application, and the guidance
concerning ap p lication procedures) are
applicable to R egulation C,
■*prequalification requests are not
ap plications for purposes of R egulation
C, even though th ey m ay be a p p lication s
under R egulation B.
*
C om m ent 2(b)—2 addresses
prequalification requests. Several
com m enters n oted that in stitu tio n s
som etim es p rocess and treat
prequalification requests like other
»applications, to ensure that a n o tice o f
action taken under R egulation B is sent
if the request is d enied . T he Board has
revised com m ent 2(b )-2 to
-» accom m odate su ch practices.
In the am endm ents to R egulation C
« issu ed in D ecem ber 1994 (59 FR 636 9 8 ,
D ecem ber 9 ,1 9 9 4 ), the Board deferred
a final determ ination on w heth er and
h o w lenders ought to report requests for
* prequalifications (or preapprovals). (A
preapproval request is generally
considered to be a request by an
applicant for a com m itm en t from an
institution to len d a sp ecific am ount,
» subject to the ap p lican t’s selectio n o f
residential property that is satisfactory
to the institution. A preapproval
program m ay b e part o f or separate from
the in stitu tion ’s mortgage loan
application program.) T he Board stated
-> that in stitu tion s n eed not in clu d e data
about prequalifications (or
* preapprovals) in their HMDA
su b m ission s for calendar years 1994 or
* 1995.
Based on the com m en ts and u p on
* further an alysis, the Board has
determ ined that for 1996 data
collection , in stitu tion s n eed n ot report
prequalification (or preapproval)
requests on the HM DA-LAR. T he Board
f. m ay consider am ending R egulation C at
a later date to address w hether (and
how ) in stitu tion s sh ou ld report som e or
all prequalification (or preapproval)
requests.
2(c) Branch office. T he Board has
» added a n ew com m en t 2 ( c ) - l to clarify
that a branch office o f a credit u n io n
v m eets the regulatory d efin ition ev en if it
has not been approved as a branch by
a federal or state agency. T he N ational
Credit U n ion A dm inistration, w h ich
charters and regulates federal credit
u n ion s, d oes not require approval o f
branch offices.
2 (d) D w elling. T he Board has adopted
com m ent 2 ( d ) - l substantially as
proposed. Som e com m enters requested
guidance on w hether the purchase o f a
tim e-share is a purchase o f a d w ellin g .
B ecause the purchase o f a tim e-share is
the purchase o f a “u se ” interest in the
property, it is not a purchase o f a

L

CMTY C-3/96



d w ellin g for HM DA purposes. Other
com m enters requested gu id an ce on the
treatm ent o f lo a n s on structures su ch as
dorm itories and nursing hom es. A n
in stitu tion n e e d n ot treat these
structures as d w ellin g s for pu rp oses o f
HMDA reporting. If an in stitu tion
w ish e s to report th e transaction it m ust
determ ine that th e structure is a
resid en tial structure under state or
federal law .
2(f) H o m e -im p ro v e m e n t loan . T he
Board has d eleted an exam p le in
prop osed com m en t 2(f)(1)—1 con cern in g
the purchase o f ap p lian ces to be
in sta lled as fixtures. T he u se o f the term
“fixture” generated num erous q u estion s
from com m enters. U pon further
an alysis, th e Board has d ecid ed not to
defin e th e term fixture b ecau se the
Board b e lie v e s th e requirem ent that an
in stitu tion cla ssify a loan as a hom eim provem ent loan su ffices to
d istin g u ish th ese loan s from other
hom e-related con su m er loans.
T he Board has d eleted proposed
com m en t 2(f)(1)—2, w h ic h addressed
h om e-im p rovem en t loan s secured by a
property other than the property b ein g
im proved. S om e com m enters
interpreted th e com m en t to suggest that
in stitu tio n s sh o u ld o n ly report secured
hom e-im p rovem en t loans. Rather than
reiterate language from A p p en d ix A—
w h ic h instructs in stitu tio n s to report
both secured and un secu red hom eim provem ent loan s— the Board op ted to
d elete the com m ent. C om m ent 4 (a )(6 )2 addresses h o w to report the property
location for a h om e-im p rovem en t loan
secured by a property other than the
property bein g im proved.
Proposed com m en t 2(f)(2)—1 u sed the
exam p le o f m arketing as a m ean s o f
cla ssify in g loans. A lth ou gh the
com m en t w as in ten d ed to clarify that an
in stitu tion satisfies th e classification
requirem ent if it d esign s and m arkets a
loan product as a h om e im provem ent
loan product, som e com m enters
interpreted th e com m en t as requiring an
in stitu tio n to report all loan s for w h ic h
th e marketing m ight have in d icated that
the loan co u ld be u sed for hom eim provem ent. T he Board has d eleted
the reference b ecau se m arketing
practices alon e w ill not su ffice for
cla ssify in g a loan product as a hom eim provem ent loan.
2(g) H o m e-p u rch a se loan . T he Board
has revised the com m en ts to § 203.2(g)
in response to issu e s raised by
com m enters and to im prove clarity. For
exam p le, com m en ts 2(g)—2 and - 3
clarify that, as is the case for hom eim p rovem en t loan s, an in stitu tion m ay
u se any reasonable standard to
determ ine a property’s primary u se, and
m ay select the standard case-by-case.

S ection 2 0 3 .3 — E x e m p t In stitu tio n s
3(a) E x e m p tio n b a se d on lo ca tion ,
a sse t size , o r n u m b e r o f h o m e-p u rch a se
loan s. C om m ent 3(a)—3 addresses
reporting requirem ents for bulk
p urchases w h ere n o m erger or
a cq u isition o f an in stitu tion is in v o lv ed .
Several com m en ters exp ressed con cern s
about data quality for th ese purchased
loans. C om m enters n o ted that a lender
m ay o n ly r ev ie w a sm all percentage o f
th e total loan p u rchase, and be unaw are
that inform ation required to be reported
on the H M D A -L A R is m issin g for som e
loan s in the b u lk purchase. T he Board
recogn izes th e reporting d ifficu lties
associated w ith b u lk purchases, but
b elie v e s that HM DA requires the
reporting o f th e se data in an accurate
and co m p lete m anner.
S ection 2 03.4— C o m p ila tio n o f Loan
D ata
4(a) D ata fo r m a t a n d ite m iza tio n .
P aragraph 4(a)(1)— A p p lic a tio n date.
T he Board has rev ised com m en ts
4(a)(1)—1 and - 2 to clarify that w h ile an
in stitu tio n is a llo w e d flex ib ility , its
approach in reporting the ap p lication
date for its en tire HMDA su b m ission
sh o u ld be g en erally co n sisten t (such as
by rou tin ely u sin g o n e approach w ith in
a particular d iv isio n o f the in stitu tion or
for a category o f loans).
T he Board h as revised com m ent
4(a)(1)—3 to clarify that the com m ent
a p p lies to all reinstated a p p lication s
(not o n ly counteroffers and den ials).
P aragraph 4(a)(2)— T yp e a n d
p u rp o se . In resp o n se to com m ents on
p rop osed co m m en t 2(f)(1)—4, th e Board
has added a n e w com m en t 4(a)(2)—1
con cern in g lo a n s that are for m ore than
o n e covered p u rp o se (hom e purchase,
h om e im p rovem en t, or refinancing).
P aragraph 4(a)(3)—O ccu p a n cy.
P roposed co m m en t 4(a)(3)—1 dealt w ith
th e o ccu p a n cy status for properties
located ou tsid e th e M SA s in w h ich an
in stitu tio n has a h o m e or branch office,
and a llo w ed an in stitu tio n to report the
actual o ccu p a n cy status. T he final
com m en t m akes th is rule applicable
also to a m u ltifa m ily property loan.
A lth ou gh A p p e n d ix A is w ritten more
narrow ly, the Board b eliev es th is more
p erm issive rule w ill reduce co m p lian ce
burden and w ill n ot adversely affect
data quality.
P aragraph 4(a)(4)—Loan a m ou nt. In
resp on se to requests by com m enters, the
Board has ad d ed a n e w com m ent
4 (a )(4)-4 con cern in g the loan am ount to
be reported in th e case o f an assum ption
o f a loan.
P roposed com m en t 4(a)(4)—4 has been
d eleted , co n sisten t w ith the p o sitio n
taken on the nonreporting o f loan

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

participations. (See d isc u ssio n of
com m ent 1(c)—11, above.)
Paragraph 4(a)(5)— T yp e o f a ctio n
taken a n d date. C om m ent 4 (a )(5 )-l
d eals w ith the “action taken” c o d e to be
u sed for counteroffers. A ch an ge has
b een m ade to illustrate that
counteroffers m ay con tain other term s
different from those in itia lly requested
b esid es loan am ount. C ounteroffers that
are not accepted by the ap p lican t are to
be reported as denials. If there are a
series o f offers or counteroffers, an
in stitu tion reports o n ly th e final action
taken at the con clu sio n o f the
negotiations. In addition, in som e
circum stances a rejected counteroffer
that is reinstated and accep ted b y the
app licant n eed not be reported as a
denial. (See com m ent 4(a)(1)—3.)
C om m ent 4(a)(5)—2 d eals w ith
rescin d ed transactions. Som e
com m enters asked w heth er th ey m ust
co n sisten tly report the action taken in
the case o f a loan rescissio n as either
“approved but not accep ted ” or as “ loan
originated.” T he Board b e lie v e s that a
strict requirem ent is not w arranted in
light o f the sm all num ber o f lo a n s that
are rescinded.
C om m ent 4(a)(5)-4 relates to
con d ition al approvals. T h e proposal
stated that if an institu tion approves an
ap p lication subject to c o n d itio n s that
are n ot m et, the action is reported as a
denial. In response to com m en ts, the
Board has revised the com m en t to
reflect that not all in stan ces o f failure to
satisfy co n d itio n s sh o u ld b e c la ssed as
d en ials. For exam ple, if a loan
ap p lication is approved subject to
routine con d ition s su ch as attendance at
the clo sin g or paym ent o f clo sin g costs,
and su ch con d ition s are n ot m et, th e
action is reported as approved but not
accepted, rather than d en ied . H ow ever,
loan approval subject to an
underw riting con d ition (su ch as a larger
d ow n p aym en t or obtaining a cosign er or
guarantor) is reported as a d en ia l if the
con d ition is not met.
C om m ent 4(a)(5)—5 giv es o p tio n s for
reporting the date o f action taken for
ap p lication s approved but n ot accep ted .
In resp on se to com m en ts receiv ed , th e
op tion s h ave b een expanded.
P aragraph 4(a)(6)—P ro p e rty lo ca tio n .
In resp on se to com m en ts an d to
im prove th e u sefu ln ess o f th e HMDA
data, th e Board has revised p rop osed
com m en t 4 (a )(6 )-l and ad d ed a n e w
com m ent to indicate that for h o m e im provem ent loans in v o lv in g m u ltip le
properties, an in stitu tio n sh o u ld
generally report the location o f th e
property b ein g im proved.
Paragraph 4(a)(7)—A p p lic a n t a n d
in co m e d a ta . A p p lic a n t d a ta . T h e Board
has revised and reordered com m en ts

CMTY C-4/96



4(a)(7)—1 through - 5 for greater
guidance. For exam p le, com m en t
4(a)(7)—3 clarifies that a creditor is not
required to c o lle c t m onitoring
inform ation if the face-to-face m eetin g
occurs after th e ap p lication p rocess is
com p lete, and com m en t 4(a)(7)—4
clarifies that a joint ap p lican t m ay enter
th e governm ent m onitoring inform ation
on b eh a lf o f an absent co-ap p lican t. T he
Board h as exp an d ed com m en t 4(a)(7)—5
to address th e treatm ent o f rem ote
electron ic ap p lication p ro cesses that u se
text com m u n ication (such as Internetbased services) rather than “ liv e ” oral
and v isu a l com m u n ication . S u ch
ap p lica tio n s are treated as m ail
a p p lication s.
In co m e d a ta . The Board has revised
and reorganized the com m en ts
con cern in g th e reporting o f in co m e data.
For exam p le, p rop osed com m en t
4(a)(7)—5 p rovid ed that in stitu tio n s m ust
report all in co m e u sed to m ake the
credit d e c isio n , even if th e fu n d s w ere
not in c lu d e d in the debt-to-incom e
ratio. P roposed com m en t 4(a)(7)—7
p rovid ed that an in stitu tio n sh o u ld not
report th e in co m e o f cosign ers and
guarantors, e v en if th e creditor relied on
that in co m e in m aking the credit
d ecisio n . C om m enters b elie v e d that
guarantors’ and cosign ers’ in co m e
sh o u ld b e reported if that in co m e w a s
in fact relied u p o n by th e creditor.
Several com m enters n oted that to do
oth erw ise is in co n sisten t w ith the
general ru le that creditors report the
in co m e relied on. Som e com m en ters
m ade a d istin ctio n b etw een cosign ers,
w h o are prim arily liab le o n the
obligation, an d guarantors, w h o are
secon d arily liable. T h ey suggested that
an in stitu tio n sh o u ld report th e in co m e
o f cosign ers but not guarantors. B ased
o n th e co m m en ts received and u p o n
further an a ly sis, the Board has revised
and co n so lid a ted the p rop osed
com m en ts in to com m en t 4 (a )(7 )-6 to
clarify that in stitu tio n s report th e
in co m e o f a p p lican ts and cosign ers (but
n ot guarantors) to th e exten t relied u p on
in m aking th e credit d ecisio n .
Paragraph 4(c) O p tio n a l d a ta . In
resp on se to com m en ts, com m en t 4 ( c ) - l
has b een m o d ified to reflect that state
regulations also m ay require th e
reporting o f th e reasons for d en ial.
S ectio n 2 0 3 .6 —E n forcem en t
6(b) B ona f id e errors. C om m ent 6(b)—
1 states that an error is bona fid e o n ly
i f th e in stitu tio n m aintains reasonable
p rocedures to avoid th e error. T o
p rovid e an exam p le o f reasonable
procedures, th e p rop osed com m en t had
u sed th e w ord “au d it” in th e se n se o f
ex a m in e an d check. B ecau se som e
com m en ters interpreted th is as a

requirem ent to co n d u ct a form al audit,
th e Board h as revised th e com m ent.

List of Subjects in 12 CFR Part 203
Banks, banking, C onsum er protection,
Federal R eserve System , M ortgages,
Reporting and recordkeeping
requirem ents.
For th e reasons set forth in the
pream ble, th e Board am en d s 12 CFR
part 203 as set forth b elow :

PART 203—HOME MORTGAGE
DISCLOSURE (REGULATION C)
1. T he authority citation for part 203
co n tin u es to read as follow s:
Authority: 12 U.S.C. 2801-2810.
2. Part 203 is am en d ed by a d d in g a
n e w S u p p lem en t I— Staff C om m entary
after the A p p en d ic e s to read as follow s:

Supplement I to Part 203—Staff
Commentary
Introduction
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 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
1(c) Scope.
1. General. 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. 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
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. Refinancing—coverage. 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

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. Refinancing—data collection. 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
reference to available 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 home-purchase or home-improvement loan;
or
iL Assume that the new obligation is a
refinancing o f a home-purchase or homeimprovement loan cmly 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
w ill be secured by a lira on a dwelling.
5. The broker rule a n d th e m eaning o f
“broker" a n d “investor. ” For the purposes of
the guidance given in this commentary, an
institution that takes and processes a loan
application and arranges for another
institution to acquire the loan at or after
dosing is ac£ng as a “broker,” and an
institution that acquires a loan from a broker
at or after dosing 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,
fra example in the Federal Housing
Administration mortgage insurance
programs.) Depending on the facts, a broker
may or may Hot make a credit dedsion on an
application (and thus it may or may not have
reporting responsibilities). If the broker
makes a credit decision, it reports that
dedsion; if it does not make a credit
decision, it does not report. If an inyestor
reviews an application and makes a credit
decision prior to dosing, the investor reports
that decision. If the investor does not review
the application prior to dosing, 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 dedsion on
an application prior to closing reports that
dedsion regardless of whose name the loan
closes in. (Appendix A of this part,
Paragraphs IV.A. and V.B.)
6. Illustrations o f th e broker rule. Assume
that, prior to dosing, 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. Broker’s use o f in vestor’s underwriting
criteria. If a broker makes a credit decision
based on underwriting criteria set by an
investor, but without the investor’s review

CMTY C-5/96



prior to closing, the broker has made the
credit dedsion. The broker reports as an
origination a loan that it approves and doses,
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. Insurance an d other criteria. If an
institution evaluates an application based on
the criteria or adions 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. C redit decision o f agent is decision o f
principal. If an institution approves loans
through the adions of an agent, the
institution must report the adion 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. A ffiliate 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 FV.A.
and V.B.)
11. P articipation loan. 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., II., IV., and V.)
12. A ssum ptions. 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.)
Section 203.2—Definitions
2(b) A pplication.
1. C onsistency with Regulation B. 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.
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 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) Branch office.
1. C redit 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 U.S.C. 1752.) (Appendix
A of this part, Paragraphs I., V.A.7., and V.C.)
2. D epository institution. 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 of this part, Paragraphs
L, 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. N on depository 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
Appendix 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 properties. A dwelling also includes a
mobile or manufactured home, a multifamily
structure (such as an apartment building),
and a condominium or a cooperative unit.
Recreational vehicles such as boats or
campers are not dwellings for purposes of
HMDA. (Appendix A of this part. Paragraphs
LB.. 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
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. Branches a n d offices o f foreign banks —
treated as a for-profit m ortgage 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) 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
institution as a home-improvement loan.
(Appendix A of this part, Paragraphs IV. and
V. A.5. Code 2.)
2. Statement of 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 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. Improvements to real property. 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. 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
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. 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. Mixed-use property. A loan to improve
property used for residential and commercial

CMTY C-6/96



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 loan 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-improvement loan, die
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
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. Farm loan. 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. 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 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. Construction and permanent financing.
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. 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
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.)

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. Coverage after a merger. 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 transaction* 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. Mergers versus purchases in bulk. 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
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
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. Updating—agency requirements. Certain
state or federal regulations, such as the

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 n.E.)
3.
Form of updating. 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.)
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. Application date—application
forwarded by a broker. 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. 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 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 new
transaction, it report 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 classifies it as a homeimprovement loan. Otherwise the institution
reports the loan as a home-purchase loan or
a refinancing, as appropriate. 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 § 203.2(c)(2) of Regulation C.)
(Appendix A of this part, Paragraph V.A.7.)

CMTY C-7/96



2. Occupancy—multiple properties. 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. Loan amount—multiple-purpose loan.
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. Loan amount—home-equity line. 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. 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,
Paragraphs V.A.8.)
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. Action taken—rescinded transactions. If
a borrower rescinds a transaction after
closing, the institution, on a case-by-case
basis, may report the transaction either as an
origination or as an application that was
approved but not accepted. (Appendix A of
this part, Paragraph V.B.)
3. Action taken—purchased loans. An
institution 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
conditions (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 institution
reports the action taken as a denial.
(Appendix A of this part, Paragraph V.B.)
5. Action taken date—approved but not
accepted. For a loan approved by an
institution but not accepted by the applicant,

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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.
Action taken date—originations. 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.)
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 of 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. 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
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. 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.)

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

5.
Property location—use ofBNA. 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) A pplicant and income
data.
1. Applicant data—completion b y
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. A pplicant data—completion b y lender. 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. A pplicant data—application com pleted
in person. 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 pplicant data—joint applicant. 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 b y '
applicant in mail or telephone application.”
(Appendix A of this part, Paragraph V.D.)
5. A pplicant data—video and other
electronic application processes. 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. Income data—income relied upon. 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

CMTY C-8/96



guarantor who is only secondarily liable.
(Appendix A of this part, Paragraph V.D.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
computing ratios and in evaluating
creditworthiness, the institution reports only
the income relied on. (Appendix A of this
part, Paragraph V.D.5.)
8. Income data—loan to employee. 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.)
Paragraph 4(a)(8) Purchaser.

“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

1. Type of purchaser—loan participation
interests sold to more than one entity. An

Secretary o f the Board.
[FR Doc. 95-30035 Filed 12-8-95; 8:45 am]

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., HI. and VI.)
2. Subsidiaries. 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.)
5(e) Notice o f 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

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,

BILLING CODE 8210-01-P