Understanding what makes a loan reportable under the Home Mortgage Disclosure Act (HMDA) is crucial for lenders to ensure compliance. The act, enforced by the Consumer Financial Protection Bureau (CFPB), requires certain institutions to collect and report data about their mortgage loan applications and originations. Here, we delve into the key factors that determine HMDA reportability.
The first step in understanding HMDA reportability is identifying the types of loans that are subject to reporting. Not all loans are reportable; the HMDA only covers residential mortgage loans used to purchase or refinance a property.
Loan Types Covered under HMDA
The HMDA applies to loans secured by single-family and multifamily properties. Single-family properties include detached homes, while multifamily properties refer to buildings with five or more unrelated tenants.
Loans that are secured by vacant or improved unimproved land, mobile homes, or multifamily properties with less than five units are not covered.
Purpose of the Loan
HMDA requires reporting for loans that are used to purchase or refinance a property. Loans that are used for home improvement, home purchase with subsequent home improvement, or refinancing with improvements may also be reportable.
However, loans for home equity lines of credit (HELOCs) or home equity loans (HELs) that are not used to purchase or refinance a property are generally not reportable, unless they are used to refinance an existing HEL or HELOC.
Loan Amount
Loans with an origination amount or face value of $50,000 or less are reported based on their unadjusted amount. Loans with an origination amount or face value of more than $50,000 are reported based on their unadjusted amount or their principal balance, whichever is less.
It's essential to note that loans with a principal balance of $24,000 or less do not require reporting, regardless of their origination amount.
Institutional Coverage under HMDA
Not all lenders are required to report HMDA data. The act applies to financial institutions that, during a calendar year, originated at least 25 home purchase loans, refinanced loans, or reverse mortgage loans, or have assets of $43 million or more as of December 31 of that year.
Foreign banks and credit unions that are not insured by the National Credit Union Administration (NCUA) are also subject to HMDA reporting if they meet theorigination threshold or have domestic offices with total assets of $10 million or more.
Geographical Limits
HMDA reporting is required for loans secured by properties located in the United States, Puerto Rico, the Virgin Islands, or another area subject to the jurisdiction of the United States.
However, loans secured by properties located in American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, or the trust territories are not covered by HMDA.
Understanding these factors is crucial for lenders to properly identify reportable loans and ensure compliance with the HMDA. Accurate reporting helps foster transparency in the mortgage market and guards against discriminatory lending practices.