The HMDA LAR submission deadline has come and gone (hooray!), but we know it is always a good time to brush up on HMDA reporting best practices.
Two areas which cause confusion are Purchased Loans and Multiple Purpose Loans. Purchased Loans are exempt from many reporting categories, such as government monitoring information, but still require several other pieces of specific information from the loan application, property appraisal, and closing documents. Multiple Purpose Loans also complicate things as it is not always clear which of the loan purpose types should be reported.
Below we provide a quick outline of some of the more obscure aspects of reporting purchased loans and multiple purpose loans.
Here’s what you need to know:
Purchased Loans
Here is a listing of data points that often lead to reporting errors:
- Loan Purpose: Reporting Loan Purpose may seem self-explanatory, however, for Purchased Loans that is not always the case. Many institutions report Loan Purpose as “exempt;” however, Loan Purpose may be marked exempt (Code 5) ONLY IF the purchased covered loan was originated prior to January 1, 2018.
- Construction Method: Knowing whether a dwelling is Site-Built or a Manufactured Home is not always self-evident or well documented in a loan file. This information is often found within the property appraisal; however, if the description is unclear as to the exact construction method, you should review documented photos of the property via the appraisal or use of Google Street View where available.
- HOEPA Status: HOEPA status must be reported for purchased loans. You may mark this as exempt ONLY IF the occupancy type of the loan is Investment Property, or if the loan would otherwise not be subject to HOEPA regulations.
- Lien Status: Purchased loans require reporting of the correct Lien Status of the related property. This information can be found on the application or in closing documentation (e.g., title work).
Multiple Purpose Loans
Multiple purpose loans can often complicate reporting because it is not always obvious which purpose to choose. The following hierarchy chart from the FFIEC’s A Guide to HMDA Reporting: Getting it Right! will help streamline decision making for reporting multiple purpose loans.
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