HMDA Reporting and the Re-Application

Issue/Inquiry

The Bank closed an application file for incompleteness when the applicant failed to meet all the closing conditions. Subsequently, the applicant re-applied for the loan, as required by the Bank when a commitment expires and all the conditions had not been met. The loan was then made after all the closing conditions were fulfilled. How should this be reported on the HMDA LAR?

Response Summary

The Bank has an option of reporting the transaction as a continuation of the original application or as a new transaction.

Response Detail

The Official Commentary to Regulation C states that, if, within the same calendar year, an applicant asks an institution to reinstate an application that had been previously denied or withdrawn, or closed for incompleteness, the institution may treat the transaction as a continuation of the earlier transaction or as a new transaction.

If the institution treats the application as a continuation of the earlier transaction, it reports the date on the HMDA Loan Application Register (“HMDA LAR”) as the original application date. If it reports it as a new transaction, it uses the date of the request for reinstatement as the application date. The institution, however, should generally be consistent in the approach it uses in determining the application date. Official Commentary, 1003.4(a)(1) – 1, 3.

In this case, it is required by Bank policy that a new application be submitted when a commitment has expired and the applicant has renewed the request for the loan. While the Bank may arguably treat the application as a continuation of the original application, it would be consistent with its policy of requiring a new application to report it as a new transaction.

Whenever the requirements of Regulation C are ambiguous or provide for an option, the Bank should make a choice, document its reasons for doing so, and then follow it consistently.

This entry was posted on Monday, August 21st, 2017 at 1:34 pm.