Mixed-Use Properties and HMDA

Changes to Treatment under HMDA

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There is a subtle but important change in the revised HMDA rules regarding mixed-use properties.

Agricultural Exclusion

You probably already know that, under the revised 2018 rules, a loan secured by a dwelling that sits on land used primarily for agricultural purposes is an excluded transaction and not HMDA reportable no matter how the loan proceeds are used. This exclusion can be found in the revised Commentary at §1003.3(c)(9).

Non-Farm Mixed-Use Properties

For non-farm mixed-use transactions, there is a similar change that is achieved in a different manner.

The comment at 1003.2(f)-4 regarding mixed-use properties tells us that “A property used for both residential and commercial purposes, such as a building containing apartment units and retail space, is a dwelling if the property’s primary use is residential.”

Not a Dwelling

If a property with a primarily residential use is a dwelling, a property with a primarily non-residential use is not a dwelling. A loan must be dwelling secured to be HMDA reportable. (The optional non-dwelling secured home improvement category is going away in 2018.)

The comment at 1003.2(i)-4 goes on to say:

“A closed-end mortgage loan or an open-end line of credit to improve a dwelling used for residential and commercial purposes (for example, a building containing apartment units and retail space), or the real property on which such a dwelling is located, is a home improvement loan if the loan’s proceeds are used either to improve the entire property (for example, to replace the heating system), or if the proceeds are used primarily to improve the residential portion of the property. An institution may use any reasonable standard to determine the primary use of the loan proceeds. An institution may select the standard to apply on a case-by-case basis.”

This means that if your property is not a dwelling, such as a mixed-use property with a primarily non-residential use, loans secured by such a property will not be HMDA reportable no matter the use of loan proceeds.

Where does this leave us?

1. Properties secured by dwellings on primarily agricultural land are not HMDA reportable due to the exclusion for agricultural use.
2. Properties secured by a primarily non-residential property are not HMDA reportable because they are not defined as a dwelling.

The same result was reached by two different paths.

This is a change from current rules which did bring loans secured by such collateral into HMDA reporting if improvements were made to the entire property or to the residential portion. Under this revision, the property is not a dwelling and any loans secured by such a property will not be reportable for HMDA regardless of use of proceeds.

“Property” is not limited to a single structure

Also, it is important to understand that a “property” does not mean just a single structure. A primarily non-residential property could consist of several structures with several being non-residential and one residential. Using a test such as square footage, the multi-structure property could very well be non-residential and loans secured by such a property will not be dwelling secured.

If you need help getting up to speed with the new HMDA rules, contact us! With the HMDA Academy, you get immediate access to 5 recorded webinars on the new rules and all future webinars through June 2019. The next webinar is scheduled for December 13, 2016.

HMDA Process Changes Coming in 2017

All HMDA reporters are affected by these changes!

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2017 HMDA Process Changes

Are you ready for the new HMDA process in 2017?

I have been asked many times recently if it is true that there are HMDA changes coming in 2017. The answer is yes! Please share this article if you have any peers in the industry who might not be aware that there are changes for 2017.  So much has been heard about the major changes coming in 2018 that many have not focused on 2017.

The rules regarding data to be reported remain the same in 2017, but the software, file format and submission process are all changing. This affects every HMDA reporter in some way, even those using vendor software.

HMDA Software

The familiar FFIEC HMDA software is going away after the 2016 HMDA submission.  For any transactions with an action date in 2017, there will be a new online browser based HMDA platform that will be used to run edits and submit HMDA data.  The FFIEC downloadable software will no longer be used after the 2016 submission.

If vendor software is not used, an institution will maintain data in a spreadsheet and upload it to the HMDA platform after conversion to a pipe delimited file using a CFPB provided conversion tool.

Web submission via the HMDA platform will be the only submission method.  There will be no mailing of paper loan application registers or disks or CD-ROMs, nor will encrypted files be emailed by financial institutions or their vendors. The 2016 submission in 1st quarter 2017 will be the last year for those filing methods.

All edits and error checks will be run online, including the macro edits that are currently emailed after a HMDA file is submitted.  Macro edits will be presented online and the file cannot be submitted until all edits are resolved. This means processes must change to allow time to review and respond to all macro edits prior to submission.

Registration and Certification

An online certification by an individual authorized to certify to the accuracy and completeness of the data will be required prior to submission.

All HMDA reporters will be required to register to access the CFPB HMDA platform. Information on the registration process will be issued at a later date.

Availability of the HMDA Platform

The new HMDA software is expected to be made available in the summer of 2017.

Many HMDA reporting institutions run monthly or quarterly edits on their data as part of the HMDA quality control process and to comply with the requirements to have the HMDA loan application register available within 30 days of each quarter end. To assist with that process prior to the release of the new platform, the CFPB is planning to provide a solution to be used until the full HMDA platform is released. More information on the edit solution is expected in January 2017.

CFPB Resources

You can keep up to date with the technology changes at this link at the CFPB website.

The Filing Instructions Guide (FIG) for 2017 is available at this CFPB link as well as at the FFIEC site under HMDA file specifications.


If you have questions, you can contact me at this link.

Park Models, Tiny Homes and HMDA

Are all tiny homes the same under HMDA?

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Park Models and Other Tiny Homes and HMDA

I have been asked many times if tiny homes are HMDA reportable under both current HMDA rules and the revised rules going into effect 1/1/2018. I have also been asked how to treat a park model tiny home if the wheels are removed and it is placed on a foundation.

The answer depends upon the specific situation. More information is needed than simply referring to the collateral as a “tiny home”.

This article will answer these questions and discuss other aspects of tiny homes and recreational vehicles.

Park Model Homes

Some “tiny homes” are park model homes. A park model is a type of recreational vehicle built on wheels; these are specifically excluded from the definition of dwelling under the revised HMDA rules. They are excluded because park model homes are not manufactured homes built in compliance with the HUD construction code. They are legally a recreational vehicle even when the intention is to leave it in one place.

You can read about park model homes here.

Under current HMDA rules, in effect until 12/31/2017, recreational vehicles are not dwellings according to the Commentary for the definition of dwelling at 1003.2. I believe you should include park models in that category because they are classed as recreational vehicles, not subject to either site built building codes or manufactured home building codes. Many local zoning laws restrict use of park models and other recreational vehicles as full time residences.

From the current Commentary: “1003.2 Dwelling – 2. Exclusions. Recreational vehicles such as boats or campers are not dwellings for purposes of HMDA. Also excluded are transitory residences such as hotels, hospitals, and college dormitories, whose occupants have principal residences elsewhere.”

Under revised HMDA rules effective 1/1/2018, park model recreational vehicles are specifically excluded. The revised Commentary states: “EXCLUSIONS. Recreational vehicles, including boats, campers, travel trailers, and park model recreational vehicles, are not considered dwellings for purposes of § 1003.2(f), regardless of whether they are used as residences. Houseboats, floating homes, and mobile homes constructed before June 15, 1976, are also excluded, regardless of whether they are used as residences. Also excluded are transitory residences such as hotels, hospitals, college dormitories, and recreational vehicle parks, and structures originally designed as dwellings but used exclusively for commercial purposes, such as homes converted to daycare facilities or professional offices.”

Site Built Tiny Homes

Tiny homes can also be site built, some on permanent foundations, others built on skids to allow future moves to another “permanent site”. These are not park model recreational vehicles.  An applicant could construct a tiny home on land that they own. Review this article on site built tiny homes.

A site built tiny home on a permanent foundation is simply a small home and will be subject to HMDA when used as a dwelling. That is the same under current (pre-2018) and revised (effective 1/1/2018) rules; HMDA has no size standards. Of course, the house must meet local zoning laws to be a legal dwelling; that is an important factor for a financial institution to consider for a structure to be acceptable as collateral.

There are many complexities involved in building site built tiny homes. How they are taxed and treated under local zoning and tax laws can hinge on whether they are eligible for permanent electrical, water and sewer hookups.

Many city and town ordinances have very specific requirements, such as Albuquerque, NM.

Tiny Homes as Cooperatives

There are some tiny home communities that are set up as cooperatives. This particular community in Oregon is intended for low and moderate income, but the concept could work for any income level.

Can a Park Model RV Be Changed to a Site Built Home?

I have been asked a number of times if a tiny home on wheels can be changed to a site built home.

If the wheels are removed and the home is attached to a permanent foundation, you must consider the same factors as a manufactured home that has been revamped. You will have to consider how the home is appraised, zoned, insured, etc.  Those factors can be influenced by whether the home meets local building codes. It could end up as an illegal structure that has been made more difficult to move. If it is located in a rural area without building codes this will be less of a problem.

Review my recent article on whether a manufactured home can be treated as a site built home.  The same concepts apply.

HUD states in its FAQs that a home built as a park model cannot later be changed to a manufactured home category, with a HUD label.

“I have a park model home and have made upgrades to my home. I was told I need a HUD label. How do I get one?

Regardless of the upgrades made to your park model, it is not possible to obtain a HUD label on any structure that was not produced and inspected as a manufactured home in accordance with HUD’s Manufactured Home Construction and Safety Standards and Regulations during its original construction. You may contact the Recreational Park Trailer Industry Association  http://www.rptia.org for additional information and resources regarding park model homes.”


Overall, decisions collateral must be made on a case by case basis, words every compliance officer and lender hates to hear, but there is no one size fits all.

Of course, HMDA rules do not necessarily carry over to Regulation Z when determining if a loan is secured by a dwelling. Careful training of staff to accurately report for HMDA while also complying with other regulations is critical.

HMDA Academy link to sales page

Time to Get Busy with the Revised HMDA Rules!

15 Months Until 1/1/2018 Implementation Date!

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Have you started working on HMDA yet?

Here we are, almost in the 4th quarter of 2016, just a little over 15 months from implementation of the revised HMDA rules. I know that many financial institutions have been postponing working on the revised rules because they have been busy living through the first year of TRID and implementing the Military Lending Act. If HMDA has been on a back burner, it is time to start thinking about it.

2017 Changes

There are changes, including revisions to the file creation and submission process, that go into effect January 1, 2017 for 2017 data.

You can read about the 2017 changes in this recent article, linked here.

Planning for 2018

To prepare for 2018, there is a lot to be done to get started. Start by becoming familiar with the new LAR fields.  Check out the 2018 Filing Instructions Guide (FIG)  for a quick view of what information is required.

2018 Filing Instructions Guide

Learn the revised definitions and rules. Review the regulation, commentary and analysis at the CFPB eregulations site via this link.  You want the Regulation C amendment effective 1/1/2018.

You can also find the regulation and commentary at BankersOnline at this link. The BankersOnline site provides the current regulation, followed by the revised regulation in a red font, then the current commentary followed by the revised commentary also in red font.

Project Plan

To help with your planning, you can access a template  to help you develop your project plan at these links. If you have trouble with the download, let me know.

Project Plan Template Word Version

Project Plan Template pdf

Determine where the information needed for the HMDA submission is obtained. Does your institution use multiple systems and processes? You have to consider all of those in order to plan appropriately.

If you use a vendor application origination system, find out the vendor’s plans to comply with the revised HMDA regulation. Determine where the needed data is so that it can be supplied to the origination system once the vendor provides access. The core system may have much of the data (collateral values, credit scores, etc.) but it won’t usually have the data for non-originated applications. In any case, test the data for accuracy for HMDA reporting. You will need to know credit scores and scoring systems, automated underwriting systems and results (and understand the complex rules), combined loan to value and collateral value, and several pieces of information from the TRID closing disclosure – just as a sample!

If you have a manual process, locating sources for all data is even more important because scrambling on a loan by loan basis will not be efficient and will lead to errors.

More Assistance

If you want more assistance including training, charts explaining the various requirements, and answers to your specific questions, then consider membership in the HMDA Academy.  There are three webinars previously presented recorded and available for all members.  More HMDA Academy webinars are planned for the Fall, covering business purpose loans, multi-purpose loans, multiple collateral loans, and more.  These webinars will be available individually, but it is more cost effective to pay one fee for the HMDA Academy and have the added benefits of charts and consulting assistance by way of submitting your questions. Every question gets careful consideration and follow up, including emails and calls if needed.

You can read about the HMDA Academy at this link, and can contact me with questions or for more information by clicking here.


New HMDA Platform Effective 1/1/2017

The New Format Is Only Four Months Away

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The new HMDA Platform goes into action January 1, 2017.  The actual reporting rules for 2017 HMDA are not changing – the same codes and responses will be reported following current rules. The overall file format and the process to prepare and submit the data is changing. This affects individual field setup, if you create your own LAR, as well as the overall file submission process.

The familiar FFIEC HMDA software will not be utilized after the 2016 data submissions in early 2017. Data collected for calendar year 2017 will utilize a web-based (online) data submission and edit-check system. This new web-based system is called the “HMDA Platform”. Effective with the 2017 data, no other submission formats will be accepted.

For 2018 data and beyond, the same type of system will be used, but of course the data will be the revised HMDA rules will be followed.

Registration to use the HMDA Platform

HMDA filers will have to register online to obtain login credentials and establish an account prior to using the new system that will be effective January 1, 2017. This new registration provides security not present in the current system. Instructions for this registration will be published at a later date.

HMDA filers will, once registered and signed in, be able to upload the HHMDA LAR, confirm the filing stage of the LAR, run edits and check data validity, and lastly will be able to submit the HMDA LAR.

Filing institutions will certify the accuracy and completeness of the LAR online.

Details on this new online HMDA Platform to be used as of 1/1/2017 will be provided by the CFPB before year end.

Interacting with the HMDA Platform

The new online system will walk filers through the filing process. Edits will be provided and addressed online, even at the submission stage.  There will be no emailing or faxing of edits.

Submitting a HMDA file

Financial institutions will select the HMDA LAR to be uploaded from a local or network file. The latest uploaded file will override any previously uploaded unsubmitted file.

Files that are not in the required pipe delimited format with the correct number of data fields will trigger an error message.  The data will have to be corrected and uploaded again.

Creating Pipe Delimited Text Files

As of 1/1/2017, HMDA LAR files must be in a pipe delimited text file. The current space delimited “dat” file will no longer be used.  The CFPB will provide a HMDA LAR formatting tool to assist in creation of pipe delimited files. This will be useful for financial institutions that do not utilize vendor software that will provide the required file format. Information on this tool will be released by the CFPB.

HMDA edits

The online HMDA Platform will ensure that the HMDA LAR is accurate and complete via an online interactive process. Filers will be informed of the current stage of the review, items that need to be corrected, and what the next steps are for completing the submission of the final HMDA LAR. Edits will be reported back to the institution at each stage via the online Platform.

For data collected in 2017, the edits are listed in Section 4 of the FIG for HMDA data collected in 2017. Edits for data collected in 2018 will be released at a later date.

The 2017 and 2018 FIGs are available at this link.

Syntactical and validity edit review

The HMDA Platform will notify the institution of the syntactical or validity edits and identify the affected rows. A list of edits will be available for download.

All syntactical and validity edits must be addressed prior to submission. Once changes have been made, the revised pipe delimited file will be revealed via the HMDA Platform and rechecked at that time.

Quality and macro quality edits

After confirmation that there are no syntactical or validity edits, the financial institution will be taken through a review of any quality and/or macro quality edits identified. All quality and macro quality edits will be confirmed or corrected via the online HMDA Platform. Required explanations will be made online. An updated file must be uploaded if any corrections are made.

Certification of HMDA LAR

After review and correction of all edits, an authorized representative of the filing institution must certify the completeness and accuracy of the HMDA LAR via the HMDA Platform.

Final Submission

The HMDA Platform will acknowledge the time and date of submission via a summary screen. After filing, a confirmation receipt will be provided.

Resubmission of HMDA Data

If the HMDA data must be resubmitted, the financial institution will be alerted that a report has already been submitted and will be prompted to confirm that they wish to refile.  The same process described for a submission will be followed for a resubmission.

Geocoding Tool

The CFPB plans to provide an online geocoding tool that will allow geocoding of a single address or a batch of addresses.  This will be a welcome tool for many institutions.


Information regarding the HMDA Platform can be located at this CFPB link, which includes a link to the Technology Preview.

The information explains pipe delimited files and how the format will be utilized for HMDA submissions. For example, blank fields will be indicated by two consecutive pipes “||”, without placing a space between the pipes.

Preparing for Changes

Those who do not use vendor software will have to become familiar with converting a spreadsheet to a pipe delimited text file using the tool that will be provided, and uploading the file to the HMDA Platform.

All HMDA filers will have to allow time to respond to all edits prior to final submission.  Under the current process, certain edits are emailed to the financial institution as a pdf file after the HMDA LAR has been submitted.  Under the new process, all edits will be processed and acknowledged or corrected online before the final file can be submitted. Time must be allocated to get through that process prior to the final submission.  That means no waiting until the last minute because more work will be required prior to submission.  Think of the edits you receive by email now; add sufficient time to your process to review that data prior to the final submission.  Also, at least for the first time submitting the 2017 data in first quarter 2018, allow additional time for the first submission using the new process.

If you use vendor software, ask how the file preparation and submission process will work. LAR creation using the new process begins 1/1/2017, just over four months from now.

When Is a Manufactured Home No Longer a Manufactured Home?

A Tricky Question

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When has a manufactured home been so changed through additions or renovations that it is no longer classified as a manufactured home, at least for regulatory purposes?

This question arises in a number of regulatory situations, including HMDA. An applicant comes to the financial institution for a loan to be secured by what was originally a manufactured home, but the structure has had extensive renovations and/or additions.  Is it still a manufactured home or is it now treated as a site built home?

Unfortunately, there is no easy answer. There is no regulatory guidance on this topic, no bright line.  The decision is going to be case by case and can be influenced by state and local laws.

Factors to Consider

The situation will have to be evaluated looking at:


How was the property appraised? The appraiser must determine what type of property is being appraised and use the corresponding rules and appropriate comparables.


How is the property insured? Is the policy a manufactured home policy or a traditional homeowner’s policy?

Investor requirements including Fannie and Freddie

Fannie Mae and Freddie Mac have their own requirements.

“Manufactured homes that have an addition or have had a structural modification are eligible under certain conditions. If the state in which the property is located requires inspection by a state agency to approve modifications to the property, then the lender is required to confirm that the property has met the requirement. However, if the state does not have this requirement, then the property must be inspected by a licensed professional engineer who can certify that the addition or structural changes were completed in accordance with the HUD Manufactured Home Construction Safety Standards. In all cases, the satisfactory inspection report must be retained in the mortgage loan file.”

Fannie Mae Rules

Freddie Mac Rules

HUD guidance

If a home has been changed, it may no longer qualify for HUD/FHA financing because the home may no longer conform to standards.

HUD Requirements


Taking these and any other pertinent factors into consideration, the financial institution would have to make a determination as to whether the property has been so transformed that it is no longer a manufactured home. Also, bear in mind that changes can invalidate the home warranty!

It might be a wise decision to always obtain an appraisal in these situations and not rely on an in house evaluation. That way you will always have an appraisal as well as an insurance policy to consider in your decision.

Denial Reasons Under the Revised HMDA Rule

Some Changes for Everyone!

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Denial Reasons and the Revised HMDA Rules

All HMDA reporters will be required to report denial reasons once the new rules go into effect as of 1/1/2018.

Under current rules, only national banks, regulated by the OCC, and former OTS banks, regulated by both the OCC and the FDIC, are required to report denial reasons. This will be a big change for all HMDA reporters that have not had to report denial reasons under the current rules.

There are 3 other changes, discussed in more detail below, that will affect everyone, even those now reporting denial reasons. These changes are the increase of reportable reasons from 3 to 4, the addition of a text field to describe the reason for denial when “Other’ is selected, and the introduction of a Not Applicable code for applications that are not denied.

Why Expand Denial Reason Reporting to All HMDA Reporters?

The CFPB chose to expand denial reason reporting to all HMDA reporters for several reasons presented in the Section by Section Analysis of the Final Rule as published.

  • First, the reasons an application is denied provide insight into credit decisions and help to screen for potential violations of antidiscrimination laws, such as ECOA and the Fair Housing Act.
  • Secondly, the availability of denial reasons will assist examiners in reviews of denial disparities and underwriting exceptions.
  • Lastly, the collection of the denial reasons will facilitate more efficient less burdensome fair lending examinations by all agencies, furthering HMDA’s purpose of assisting in identifying possible discriminatory lending patterns and enforcing antidiscrimination statutes.

It is the Bureau’s opinion that the change will improve the data available for statistical analysis, offsetting the increase in compliance burden for certain financial institutions.

Number of Denial Reasons Reported Increased to Four

The number of reasons to report has been increased to four to coincide with the maximum allowed under Regulation B.  The principal reasons for denying the application are reported, even if there are less than four. Review the Commentary to 1003.4(a)(16) for details.

Paragraph 3 of Commentary for this section contains special instructions for use of the model form contained in appendix C to Regulation B (Form C-1, Sample Notice of Action Taken and Statement of Reasons) or a similar form.

The reasons to be reported are primarily the same, with two differences – a description of the reason the Code 9 (Other) was used, and a new Code 10, Not Applicable.

Describing the “Other” Denial Reason

Whenever Denial Reason Code 9 “Other” is selected, the actual reason must be entered in an additional free text field on the LAR that will allow for up to 50 characters. The financial institution will choose its own wording for this field (I do recommend that the institution be consistent within its own reporting).

Reporting Not Applicable

Code 10, not applicable, is new and will be used in the first denial field for all applications that were not denied, including originations and purchased loans. The first denial field will therefore always have an entry while the other three denial columns can be left blank.

Review Your Process

These changes to denial reason reporting will certainly shine a spotlight on denial reasons, highlighting any discrepancies and inconsistencies..  If your institution is not a denial reason reporter at this time, you might want to begin collecting denial reasons now to uncover any potential reporting problems to determine if any additional training or process changes are needed.

If you want help with implementation that goes beyond typical training, consider The HMDA Academy.

HMDA Academy link

Gross Annual Income

Changes to Reporting under the Revised HMDA Rule

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There are changes  in reporting of gross annual income under the revised HMDA rules effective 1/1/2018.  The gross annual reporting requirement is at 1003.4(a)(10)(iii) of Regulation C and its Commentary. Examples in the Commentary provide clarity to common situations and to the revised sections. You must review both the rule and Commentary closely to fully understand the reporting requirements.

In general, report the gross annual income relied on in making the credit decision.

Reporting NA for Gross Annual Income

Report NA in the following situations:

  • Entity as applicant: If applicant or co-applicant is a non-natural person (an entity)
  • Income not relied on such as not required by policy or product, such as a streamlined refinance that does not consider income. This does not mean that you didn’t get that far in underwriting or income did not affect decision
  • Secured by multifamily dwelling
  • Employee application or loan (the revised Commentary simply states to comply for employee applications by reporting NA)
  • Purchased loans: can report NA if you do not choose to report income.
  • Sole reliance on assets from annuitization or asset depletion (no income other than asset reliance)

Detail on Specific Gross Annual Income Situations

Credit Decision Made

Report the gross annual income relied on in making the decision when a credit decision was made by the financial institution.

Example 1: Lender 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. Report the salary and the bonus to the extent relied upon.

Example 2: An applicant’s commission income has been earned for less than 12 months. Policy does not permit considering fewer than 12 months of commission income. Report only the portion of income considered. Do not include the applicant’s commission income in the income reported.

Example 3: Lender relies on the applicant’s verified gross income in making the credit decision. Report the verified gross income.

No Credit Decision Was Made – Application Was Withdrawn Or Closed For Incompleteness

If an application is withdrawn or closed for incompleteness prior to a credit decision having been made, report the gross annual income relied on in processing the application at the time that the application was withdrawn or the file was closed for incompleteness.

Example: An application included the applicant’s self-reported income, but the application was withdrawn before a credit decision that would have considered income was made. Report the self-reported income.

No Income Considered in the Credit Decision

When a policy or a product’s guidelines do not consider income in making the credit decision or in processing the application, report NA for gross annual income. This is different from situations where an application was withdrawn or closed for incompleteness prior to a credit decision being made and you report the income that was in file at that time..

Example: A lender offers a streamlined refinance program. Product guidelines specify that income is not taken into account in making the credit decision. Report NA even if the applicant provided income information.

Amounts Derived from Annuitization or Depletion of Assets

Do not include other assets in reported income even if they are considered in addition to income when making a credit decision.

Example: Assets such as amounts derived from annuitization or depletion of an applicant’s remaining assets may be considered in processing an application or making a credit decision. However, do not add them into income for HMDA reporting.

If there is no income other than from asset annuitization or depletion, the correct response would be NA, because amounts from such assets is not considered reportable income.

Employee Loans

The current Commentary states the following for employee loan reporting: “Income data–loan to employee. An institution may report “NA” in the income field for loans to its employees to protect their privacy, even though the institution relied on their income in making its credit decisions.”

The revised Commentary for employee loans states: “Income data—loan to employee. A financial institution complies with § 1003.4(a)(10)(iii) by reporting that the requirement is not applicable for a covered loan to, or an application from, its employee to protect the employee’s privacy, even though the institution relied on the employee’s income in making the credit decision.”  That change places employee loans in the category where the correct response is NA, such as loans to entities.

Co-applicant Income

Report only the income actually considered in making the credit decision.

Example: Two persons jointly apply for a covered loan and both list income on the application. However, the lender relies on the income of only one applicant in evaluating creditworthiness. Report only the income relied on.

Co-signer Income

If the lender relies on the income of a cosigner to evaluate creditworthiness, include the cosigner’s income but only to the extent relied on.


Do not include the income of a guarantor who is only secondarily liable. If for some reason, the guarantor also signed the note individually, you would report their income as a borrower. This comes up from time to time, but is actually a misuse of a guarantee. There is no need to obtain a guarantee from anyone who individually signs the note. You would obtain a guarantee from someone who, for example, signed as an officer of a corporate borrower if a guarantee was required.


A careful reading of the Commentary is necessary in order to fully understand how and when to report gross annual income. You cannot just read the regulation and ignore the Commentary; that will lead to many errors.

If you want help in understanding and implementing this major revision, consider  The HMDA Academy for assistance, answers to questions, and ongoing training and support.

HMDA Academy link to sales page

HMDA and the Regulation B Clock

Understanding Incomplete Applications

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Financial institutions (FIs) sometimes struggle with HMDA because a structured lending process compliant with Regulation B and the Reg B clock (the timeline for action taken) is not in place. Good procedures can save everyone time and avoid violations.

The Regulation B Clock

Under Regulation B, an FI has 30 days to take action – approve, deny, or issue a notice of incomplete application (NOIA) after receipt of an incomplete loan application. This requirement is in the Commentary at 1002.9(c)(1).

(c) Incomplete applications. (1) Notice alternatives. Within 30 days after receiving an application that is incomplete regarding matters that an applicant can complete, the creditor shall notify the applicant either:

(i) Of action taken, in accordance with paragraph (a) of this section; or

(ii) Of the incompleteness, in accordance with paragraph (c)(2) of this section.

The NOIA is used if the application is missing information that the applicant can provide. The NOIA stops the Regulation B clock.

If information from third parties, such as appraisers, is what is needed to make a credit decision, the Regulation B clock is not running. While the FI is expected to encourage quick action from third parties, and to keep the applicant informed, waiting for such information is “off the clock”.

Oral or Written NOIA

A NOIA can be oral or written, but an oral NOIA does not stop the clock from running. With an oral NOIA, if no response is received before the end of the initial 30 day period, a written NOIA must be sent or the 30 days will expire and the FI will be out of compliance. See 1002.9(c) (3) and its Commentary.

1002.9(c)(3) (3) Oral request for information. At its option, a creditor may inform the applicant orally of the need for additional information. If the application remains incomplete the creditor shall send a notice in accordance with paragraph (c)(1) of this section.

Commentary: Paragraph 9(c)(3).

1. Oral inquiries for additional information. If an applicant fails to provide the information in response to an oral request, a creditor must send a written notice to the applicant within the 30-day period specified in §§1002.9(c)(1) and (2). If the applicant provides the information, the creditor must take action on the application and notify the applicant in accordance with §1002.9(a).

The written NOIA must:

  • specify the information needed,
  • designate a reasonable period of time for the applicant to provide the information, and
  • inform the applicant that failure to provide the information requested will result in no further consideration being given to the application.

Once all information needed for a decision is received from the applicant and third parties, the application is complete and the Regulation B 30 day clock restarts.


If only an oral NOIA was utilized and the applicant does not respond, the FI will have to deny the application for incompleteness in order to close the file (assuming no other reason for denial has arisen.) That must be done before the end of the 30 day period from initial application. Only the written NOIA or pending information from a third party will stop the clock.

An oral request is appropriate for the first few weeks when working on an application, but a written NOIA is needed if the time frame waiting for information from the applicant will extend beyond the initial 30 days from application. Monitor the pipeline and issue written NOIAs before the initial 30 days expires. The only alternative to remain compliant with Regulation B is to deny for incompleteness within the initial 30 days.

An effective, efficient process is to include the NOIA language in the letter accompanying the early disclosures, along with instructions regarding intent to proceed.


Revised HMDA rules effective 1/1/2018 allow for coding an application as a denial if an adverse action notice denying for incompleteness is sent after issuing a NOIA. While that new allowed action is understandable as a way for FIs in that situation to know how to report, a better resolution is not to create a situation where you have a NOIA and a denial for incompleteness.

The adverse action notice is not required if a compliant written NOIA was issued. Issuing adverse action notices when not required inflates denial rates.  My preferred process has always been to issue the written NOIA and close the file for incompleteness. There is no benefit to issuing more denials than necessary.

Fair Lending

Bear in mind that all applicants must receive the same support and consideration. This includes time frames allowed to provide data, and verbal and written reminders that the time is almost up for the application to continue to be considered. All applicants are entitled to equal assistance for loan applications. Lack of equal assistance for protected classes can lead to higher denial and withdrawn rates and that is never a good thing.

The HMDA Academy

This topic and more are covered in The HMDA Academy. The goal is to help financial institutions to understand the rules and assist in implementation and training by providing training and tools that can be shared across product areas.

The Clock is Ticking on the First HMDA Changes

January 1, 2017 is coming fast

-- Download The Clock is Ticking on the First HMDA Changes as PDF --

2017 HMDA Changes Are Approaching

2016 is going by quickly and some HMDA changes will be effective before you know it.  The new HMDA format (a pipe delimited text file) will be used as of 1/1/2017.  Confer with your vendors or update your format!

Additionally, the 2017 loan volume test, based on lending volume in 2015 and 2016, determines if a depository financial institution will have to report for HMDA in 2017. That loan volume test then changes for 2018, based upon lending in 2016 and 2017. I recommend assessing the effect of the 2018 test before dropping reporting for 2017.

The chart below illustrates the loan volume tests for 2017 and 2018; the threshold must be met in each year, not a total over the 2 year testing period. That allows for fluctuations in loan volume in one of the two testing years. A radical change in one year will not put a financial institution over or under the threshold. And of course, the 2018 test will be ongoing as part of institutions becoming HMDA reporters, or even dropping off.

HMDA Loan Volume Test revised

If you are considering getting help for the HMDA implementation, consider The HMDA Academy…members receive training, answers to questions, and tools to help in implementation so that you do not have to create them yourself.

HMDA Questions silver (1)