The questions and answers below pertain to compliance with the Home Mortgage Disclosure Act (HMDA).
This is a Compliance Aid issued by the Consumer Financial Protection Bureau. The Bureau published a Policy Statement on Compliance Aids, available here, that explains the Bureau’s approach to Compliance Aids. Please note that these HMDA Frequently Asked Questions were last updated on November 10, 2021, and have not been updated to reflect the 2022 NCRC et al. v. CFPB Order, final rules, guidance, or interpretations issued after that date. On December 6, 2022, the Bureau issued a blog post to address questions regarding the NCRC Order.
As of January 1, 2022, the loan-volume thresholds are 100 closed-end mortgage loans in each of the two preceding calendar years and 200 open-end lines of credit in each of the two preceding calendar years. The Bureau issued a final rule in April 2020 that set the closed-end mortgage loan threshold at 100 in each of the two preceding calendar years, effective July 1, 2020, and set the open-end line of credit threshold at 200 in each of the two preceding calendar years, effective January 1, 2022, upon the expiration of the temporary threshold of 500 open-end lines of credit.
For loan-volume thresholds in effect prior to January 1, 2022, see the HMDA institutional and transactional coverage charts.
Updated Nov. 10, 2021
2. My institution originated 400 closed-end mortgage loans and 199 open-end lines of credit in calendar year 2020 and 600 closed-end mortgage loans and 499 open-end lines of credit in calendar year 2021. My institution has met all other Regulation C institutional coverage criteria. Is my institution required to collect and report HMDA data for calendar year 2022 on closed-end mortgage loans and open-end lines of credit?
Your institution will be required to collect and report data about its closed-end mortgage loans for calendar year 2022 because it originated at least 100 closed-end mortgage loans in each of the two preceding calendar years (2020 and 2021).
Your institution will not be required to collect and report data about its open-end lines of credit for calendar year 2022 because it did not originate at least 200 open-end lines of credit in each of the two preceding calendar years (2020 and 2021).
effective January 1, 2022.
Updated Nov. 10, 2021
3. My institution originated 100 closed-end mortgage loans and 200 open-end lines of credit in calendar year 2020 and 190 closed-end mortgage loans and 250 open-end lines of credit in calendar year 2021. My institution has met all the other Regulation C institutional coverage criteria. Is my institution required to collect and report HMDA data for calendar year 2022 on closed-end mortgage loans and open-end lines of credit?
Yes, your institution will be required to collect and report data about its closed-end mortgage loans and open-end lines of credit for calendar year 2022 because it originated at least 100 closed-end mortgage loans in each of the two preceding calendar years (2020 and 2021) and it originated at least 200 open-end lines of credit in each of the two preceding calendar years (2020 and 2021).
effective January 1, 2022.
Updated Nov. 10, 2021
4. My financial institution met the loan-volume threshold for closed-end mortgage loans and all other Regulation C institutional coverage criteria, but it did not meet the loan-volume threshold for open-end lines of credit. Can my financial institution collect and report data about its open-end lines of credit even though it did not meet the loan-volume threshold for open-end lines of credit?
Yes. A financial institution that meets the loan-volume threshold for closed-end mortgage loans and all other Regulation C institutional coverage criteria may voluntarily opt to report applications, originations, and purchases of its open-end lines of credit even though it did not meet the open-end line of credit threshold. It is thus not required to report data on its open-end lines of credit transactions. However, a financial institution that voluntarily opts to report such data must report all the applications, originations, and purchases of its open-end lines of credit that would be covered transactions if it had met the open-end line of credit threshold.
section 4.1.2, 12 CFR § 1003.3(c)(12), and comment 3(c)(12)-2 to Regulation C.
Updated Nov. 10, 2021
5. My financial institution originated less than 500 closed-end mortgage loans and less than 500 open-end lines of credit. I heard that my financial institution was exempt from collecting and reporting data.
Effective July 1, 2020, if your financial institution originated at least 100 closed-end mortgage loans in each of the two preceding calendar years and met all other Regulation C institutional coverage criteria, your financial institution will be required to collect and report data about its closed-end mortgage loans. Similarly, effective January 1, 2022, if your financial institution originated at least 200 open-end lines of credit in each of the two preceding calendar years and met all other Regulation C institutional coverage criteria, your financial institution will be required to collect and report data about its open-end lines of credit.
However, if your financial institution is an insured depository institution or insured credit union that originated less than 500 closed-end mortgage loans in each of the two preceding calendar years and/or 500 open-end lines of credit in each of the two preceding calendar years, your financial institution may be eligible for partial exemptions.
For more information about partial exemptions, see Partial Exemption FAQs below. For more information about institutional coverage, see the HMDA institutional coverage charts.
Updated Nov. 10, 2021
No. To be eligible for a partial exemption, a financial institution must be either an insured depository institution as defined in Section 3 of the Federal Deposit Insurance Act or an insured credit union as defined in Section 101 of the Federal Credit Union Act. See 12 CFR § 1003.3(d)(1).
For general information on the partial exemptions, see section 4.3 of the HMDA Small Entity Compliance Guide
2. If my financial institution originated 500 or more closed-end mortgage loans in the previous calendar year, can it take advantage of the partial exemption found in 12 CFR § 1003.3(d) and collect, record, and report the limited HMDA data set for closed-end mortgage loans?
No. Section 1003.3(d)(2) of Regulation C states that a financial institution that originated fewer than 500 closed-end mortgages that are not excluded by 12 CFR § 1003.3(c)(1) through (10) or (13) in each of the two preceding calendar years can claim the partial exemption for closed-end mortgage loans. Thus, the financial institution cannot take advantage of the partial exemption if it originated 500 or more such closed-end mortgage loans in the previous calendar year. Note that, in addition to originating fewer than 500 closed-end mortgage loan in each of the two preceding calendar years, the financial institution must meet additional requirements that are not discussed in this FAQ to be eligible for the partial exemption. See 12 CFR § 1003.3(d) for the additional requirements.
For general information on the partial exemptions, see section 4.3 of the HMDA Small Entity Compliance Guide
3. If my financial institution originated 500 or more open-end lines of credit in the previous calendar year, can it take advantage of the partial exemption found in 12 CFR § 1003.3(d) and collect, record, and report the limited HMDA data set for open-end lines of credit?
No. Section 1003.3(d)(3) of Regulation C states that a financial institution that originated fewer than 500 open-end lines of credit that are not excluded by 12 CFR § 1003.3(c)(1) through (10) in each of the two preceding calendar years can claim the partial exemption for open-end lines of credit. Thus, the financial institution cannot take advantage of the partial exemption if the financial institution originated 500 or more such open-end lines of credit in the previous calendar year. Note that, in addition to originating fewer than 500 open-end lines of credit in each of the two preceding calendar years, the financial institution must meet additional requirements that are not discussed in this FAQ to be eligible for the partial exemption. See 12 CFR § 1003.3(d) for the additional requirements.
For general information on the partial exemptions, see section 4.3 of the HMDA Small Entity Compliance Guide
4. Can a financial institution that originates fewer than 500 open-end lines of credit in each of the two preceding calendar years claim the partial exemption for open-end lines of credit even if it originated 500 or more closed-end mortgage loans in one of those years?
The partial exemption for closed-end mortgage loans and the partial exemption for open-end lines of credit operate independently of one another. Thus, in a given calendar year, an eligible financial institution may be able to rely on one partial exemption but not the other. See 12 CFR § 1003.3(d)(2) and (3). The table below contains partial exemption examples that assume that the originations indicated in the table are not excluded by 12 CFR § 1003.3(c)(1) through (10) or (13), and that the financial institution meets the other eligibility requirements of 12 CFR § 1003.3(d):
Note that prior to January 1, 2022, a financial institution originating fewer than 500 open-end lines of credit in either of the two preceding calendar years is not required to collect, record, or report HMDA data for open-end lines of credit. See 12 CFR §§ 1003.2(g), 1003.3(c)(12).
Beginning on January 1, 2022, a financial institution originating 200 or more open-end lines of credit must collect, record, and report HMDA data for open-end lines of credit.
For general information on the partial exemptions, see section 4.3 of the HMDA Small Entity Compliance Guide
5. Can a financial institution that originated fewer than 500 closed-end lines mortgage loans or open-end lines of credit in each of the two preceding calendar years claim a partial exemption for the following collection year even if it knows it will originate more than 500 closed-end mortgage loans or open-end lines of credit in the following calendar year?
Section 1003.3(d)(2) and (3) of Regulation C requires that the financial institution look at the amount of loans it originated in each of the two preceding calendar years. Neither 12 CFR § 1003.3(d)(2) nor (3) requires the financial institution to consider or anticipate the number of loans it will originate for the following calendar year. See HMDA Partial Exemption FAQ #4 for partial exemption examples. Note that, in addition to originating fewer than 500 open-end lines of credit in each of the two preceding calendar years, the financial institution must meet additional requirements that are not discussed in this FAQ to be eligible for the partial exemption. See 12 CFR § 1003.3(d) for the additional requirements.
For general information on the partial exemptions, see section 4.3 of the HMDA Small Entity Compliance Guide
1. How does a financial institution calculate the check digit for the purposes of creating the universal loan identifier (ULI)?
Appendix C to Regulation C, 12 CFR part 1003 describes how to generate a check digit and validate a ULI. The procedures require a two-character check digit used to validate the ULI, which is calculated using certain standards established by the International Organization for Standardization ( www.iso.org
The Bureau created a check digit tool that can be used to generate a check digit. The check digit tool can be found at https://www.consumerfinance.gov/hmda/for-filers.
For general information on the ULI, see section 5.2 of the HMDA Small Entity Compliance Guide
Updated Mar. 19, 2018
2. Does Regulation C require a financial institution to provide the universal loan identifier (ULI) on loan documents?
No. Regulation C, 12 CFR §§ 1003.4(a) and 1003.5(a), require a financial institution merely to collect, record, and report a ULI for applications for covered loans that it receives, covered loans that it originates, and covered loans that it purchases for each calendar year. Regulation C does not require the inclusion of the ULI on loan documents themselves.
For general information on the ULI, see section 5.2 of the HMDA Small Entity Compliance Guide
Updated Mar. 15, 2018
The Global LEI Foundation website provides a list of LEI issuing organizations at https://www.gleif.org/services/lou-services/issue-new-lei. A financial institution may obtain an LEI, for HMDA reporting purposes, from any one of the issuing organizations listed on the web site.
For general information on the LEI, see section 5.2 of the HMDA Small Entity Compliance Guide
, and Regulation C, 12 CFR §§ 1003.4(a)(1)(i)(A), effective January 1, 2018, and 1003.5(a)(3)(vii), effective January 1, 2019.
Updated Mar. 15, 2018
1. When an applicant provides race or ethnicity information over the telephone is it permissible for the person taking the application to skip over the remaining race and ethnicity-related subcategories (e.g., the “Hispanic or Latino” subcategories)?
No. For applications taken by telephone, Instruction 1 of Appendix B to Regulation C, 12 CFR Part 1003 requires a person collecting the race or ethnicity information to orally state the information in the collection form unless the information pertains uniquely to applications taken in writing, for example, the italicized language in the sample data collection form. Instruction 9 of Appendix B to Part 1003 sets forth the aggregate and disaggregate subcategories reflected on the sample data collection form. In this scenario, the financial institution should orally state to the applicant all race and ethnicity categories provided in Appendix B to Part 1003—Form and Instructions for Data Collection on Ethnicity, Race, and Sex.
For general information on the collection and reporting of applicant information, see section 2.4 of the HMDA Small Entity Compliance Guide
and Appendix B to Part 1003—Form and Instructions for Data Collection on Ethnicity, Race, and Sex.
Updated Mar. 15, 2018
2. Should a financial institution correct information provided by the applicant for race or ethnicity when the applicant has entered clearly incorrect or inappropriate information on an application?
No. Pursuant to Instruction 8 of Appendix B to Regulation C, 12 CFR Part 1003, a financial institution reports the ethnicity and race of the applicant as provided by the applicant. Therefore, a financial institution should not correct the race or ethnicity as reported by the applicant, even if the applicant has entered clearly incorrect or inappropriate information.
For general information on the collection and reporting of applicant information, see section 2.4 of the HMDA Small Entity Compliance Guide
and Appendix B to Part 1003—Form and Instructions for Data Collection on Ethnicity, Race, and Sex.
Updated Mar. 15, 2018
3. Should a financial institution correct spelling or other errors made by the applicant in providing ethnicity and race information in the free form text fields for Other Hispanic or Latino, American Indian or Alaska Native, Other Asian, or Other Pacific Islander?
No. Instruction 8 of Appendix B to Regulation C, 12 CFR Part 1003 states that a financial institution “must report the ethnicity, race, and sex of an applicant as provided by the applicant.” Therefore, a financial institution should not correct the race or ethnicity as reported by the applicant, even to correct spelling or other errors.
For general information on the collection and reporting of applicant information, see section 2.4 of the HMDA Small Entity Compliance Guide
and Appendix B to Part 1003—Form and Instructions for Data Collection on Ethnicity, Race, and Sex.
Updated Mar. 15, 2018
4. What should a financial institution report for race or ethnicity when the information provided on a written application is illegible?
Instruction 8 of Appendix B to Regulation C, 12 CFR Part 1003 states that a financial institution “must report the ethnicity, race, and sex of an applicant as provided by the applicant.” The rule does not address illegibility. Issues associated with illegible applicant information may be addressed by a financial institution’s compliance management system.
For general information on the collection and reporting of applicant information, see section 2.4 of the HMDA Small Entity Compliance Guide
and Appendix B to Part 1003—Form and Instructions for Data Collection on Ethnicity, Race, and Sex.
Updated Mar. 15, 2018
5. What should a financial institution report for race and ethnicity if an applicant selects “I do not wish to provide this information” and also self identifies using one or more of the aggregate or disaggregate race or ethnicity categories for an application taken by mail, internet, or telephone?
In these situations, the financial institution should report the code(s) for the race or ethnicity information, as applicable, provided by the applicant and should not report the code for “Information not provided by the applicant in a mail, internet, or telephone application” (Code 3 for Ethnicity or Code 6 for Race).
Instruction 13 of Appendix B to Regulation C, 12 CFR Part 1003 provides that “if an applicant provides partial or complete information on ethnicity, race, and sex and also checks the ‘I do not wish to provide this information’ box on an application that is taken by mail or on the internet, or makes that selection when applying by telephone, you must report the information on race, ethnicity, and sex that was provided by the applicant.” Thus, when an applicant’s race or ethnicity information is provided by mail, internet, or telephone, the financial institution reports only the race or ethnicity information, as applicable, provided by the applicant, and the financial institution should not report the code for “Information not provided by the applicant in a mail, internet, or telephone application.”
If, however, the applicant checks only the “I do not wish to provide this information” box and does not provide other race or ethnicity information on an application that is taken by mail or on the internet, or makes that selection when applying by telephone, then Instruction 11 of Appendix B to Part 1003 provides that the financial institution must report the code for “information not provided by applicant in mail, internet, or telephone application.”
For general information on the collection and reporting of applicant information, see section 2.4 of the HMDA Small Entity Compliance Guide
and Appendix B to Part 1003—Form and Instructions for Data Collection on Ethnicity, Race, and Sex.
Updated Mar. 15, 2018
Whether or not a financial institution reports the ethnicity, race, and sex of a co-signer depends on whether the co-signer is a guarantor or a co-applicant. For a guarantor, Instruction 4 to Appendix B to Regulation C, 12 CFR part 1003 states that if a loan or application includes a guarantor, a financial institution does not report the guarantor’s ethnicity, race, and sex. Therefore, if the co-signer is a guarantor according to the terms of the legal obligation as interpreted under applicable law, a financial institution does not report the co-signer’s ethnicity, race, and sex. For a co-applicant, Instruction 5 to Appendix B requires that a financial institution report the co-applicant’s ethnicity, race, and sex.
Updated Nov. 14, 2018
7. If a natural person applicant submits a mail, internet, or telephone application under Regulation C but does not provide race, ethnicity, or sex information, what should the financial institution report regarding whether this information was collected on the basis of visual observation or surname?
Regulation C, 12 CFR § 1003.4(a)(10)(i), requires that a financial institution collect the ethnicity, race, and sex of a natural person applicant or borrower, and collect whether this information was collected on the basis of visual observation or surname. Where a natural person applicant does not provide ethnicity, race, or sex information for a mail, internet, or telephone application, and a financial institution does not have an opportunity to collect this information during an in person meeting during the application process, the financial institution may report either that the information was not collected on the basis of visual observation or surname (code 2) or that the requirement to report this data field is not applicable (code 3).
For consistency of data across all HMDA reporting financial institutions, the Bureau suggests, but does not require, that financial institutions use code 2.
Appendix B to Part 1003 provides instructions and a sample form for data collection on ethnicity, race, and sex.
Updated March 6, 2020
1. When collecting and reporting discount points, does a financial institution collect and report the total combined discount points paid by the borrower, seller, and any third party?
Yes, section 1003.4(a)(19) provides that for covered loans subject to the disclosure requirements in Regulation Z, 12 CFR 1026.19(f), a financial institution reports the points paid to the creditor to reduce the interest rate, expressed in dollars, as described in Regulation Z, 12 CFR 1026.37(f)(1)(i), and disclosed pursuant to Regulation Z, 12 CFR 1026.38(f)(1). For covered loans subject to this requirement, a financial institution reports the total discount points paid to the creditor to reduce the interest rate regardless of which party paid the points. This total is the sum of all amounts disclosed on Line A.01 of the Closing Cost Details page of the Closing Disclosure.
For example, if both the borrower and seller paid discount points to the creditor to reduce the interest rate on a covered loan, a financial institution reports on its HMDA Loan/Application Register the sum of the amounts paid by the borrower and seller, as disclosed on Line A.01 of the Closing Cost Details page of the Closing Disclosure.
For general information about HMDA reporting of discount points, see section 5.28.3 of the HMDA Small Entity Compliance Guide
Updated August 28, 2019
1. Are financial institutions required to report the credit score, DTI and CLTV relied on in making a credit decision when such data is not the dispositive factor?
Yes. Credit underwriting data such as credit score, debt-to-income ratio (DTI), and combined loan-to-value ratio (CLTV) must be reported if they were a factor relied on in making a credit decision—even if the data was not the dispositive factor. For purposes of Regulation C, it does not matter whether the application is approved or denied; if certain data was relied on in making a credit decision, such data must be reported.
For example, if the credit score was relied on in making a credit decision, the credit score must be reported. If the financial institution denied the application because the application did not satisfy one or more underwriting requirements other than the credit score, the financial institution is still required to report the credit score relied on. Comment 4(a)(15)-1. The same analysis applies to the reporting of CLTV and DTI. Comment 4(a)(24)-2 and 4(a)(23)-2.
For general information on the collection and reporting of HMDA data, see section 5 of the HMDA Small Entity Compliance Guide
Updated Jul. 28, 2020
2. When income and property value are factors in the credit decision, though not the dispositive factor, should such data points be reported?
Yes. When a credit decision is made, sections 1003.4(a)(10)(iii) and 1003.4(a)(28) require reporting of the data “relied on in making the credit decision.” Hence, if these data are relied on in making a credit decision, such data must be reported. There is no requirement in Regulation C for either of these data points to be the dispositive factor in order to be reported.
Specifically, comment 4(a)(10)(iii)-1 explains that when a financial institution evaluates income as part of a credit decision, it must report the gross annual income relied on in making the credit decision. For example, if an institution relies on the verified gross income of an applicant to make a credit decision, the institution is required to report the verified gross income. The comment does not state that verified gross annual income must be dispositive in the credit decision. Comment 4(a)(10)(iii)-1. Comment 4(a)(28)-1 provides a similar narrative for property value.
Income and property value apply the relied-on standard in a similar way to credit score, DTI, and CLTV and should therefore be reported if relied on in making a credit decision. See comments 1003.4(a)(10)(iii)-1, 4(a)(15)-1, 4(a)(23)-2, 4(a)(24)-1 and 4(a)(28)-1.
For general information on the collection and reporting of HMDA data, see section 5 of the HMDA Small Entity Compliance Guide
Updated Jul. 28, 2020
1. My financial institution originated a loan to a builder to construct a dwelling for sale. The proceeds of the loan will be used to buy a house, demolish it, and rebuild a house for sale immediately after closing. Is this transaction excluded from HMDA reporting?
No. In the scenario described, part of the loan will be used for purchasing a dwelling in addition to constructing a dwelling for sale. Therefore, the transaction described above is not excluded from HMDA and should be reported as a home purchase loan. A construction-only loan or line of credit is considered temporary financing and excluded from collection and reporting requirements under comment 3(c)(3)-2 if the loan or line of credit is extended to a person exclusively to construct a dwelling for sale. Comment 3(c)(3)-2 to Regulation C, 12 CFR § 1003.3(c)(3).
Updated Nov. 14, 2018
2. My financial institution originated a construction only loan to a builder exclusively to construct a dwelling for sale. My financial institution determined this loan was not HMDA reportable, as it was considered temporary financing under comment 3(c)(3)-2. After origination of the loan and construction of the house, the builder has not been able to find a buyer for the home, and would like to replace the first loan with a permanent loan and rent out the house. Is either the first or the second loan HMDA reportable?
In regard to the first loan, the fact that the house was not sold after construction, and permanent financing was unexpectedly obtained, does not render the construction-only loan reportable. However, the financial institution must report the second loan as a home purchase loan because it is permanent financing that replaces a construction-only loan under comment 2(j)-3.
Updated Nov. 14, 2018
3. My financial institution originated a construction only loan to a consumer to construct a dwelling. My financial institution determined this loan was not HMDA reportable under 12 CFR § 1003.3(c)(3), because it was designed to be replaced by permanent financing. Later, the consumer unexpectedly decided to modify this loan into permanent financing, without any new funds provided and without the construction loan being satisfied and replaced by a new obligation. Should my financial institution report the modified loan?
No. Because the original construction loan was later modified into permanent financing, without a new extension of credit occurring, the modification is not reportable, under comment 2(d)-2. Further, the original construction loan was designed to be replaced by separate permanent financing, and so it remains excluded from reporting under 12 CFR § 1003.3(c)(3).
Updated Nov. 14, 2018
4. For a combined construction/permanent loan or application, how does a financial institution report the loan term?
Regulation C, 12 CFR § 1003.4(a)(25), requires that a financial institution report the scheduled number of months after which the legal obligation will mature or terminate or would have matured or terminated.
For combined construction/permanent loans based on a single legal obligation, a financial institution reports the full loan term of the legal obligation. 12 CFR § 1003.4(a)(25). For example, if the legal obligation for such a combined construction/permanent loan includes a one-year construction phase and a 30 year permanent phase, the reportable loan term would be 31 years (372 months). Note that the financial institution reports the scheduled number of months after which the legal obligation will mature or terminate (or would have matured or terminated) without regard to whether the construction and permanent phases of such a combined construction/permanent loan are disclosed separately pursuant to Regulation Z, 12 CFR § 1026.17(c)(6)(ii).
For construction and permanent loans where the construction loan is a separate transaction, the financial institution reports only the loan term of the permanent loan. Because the separate construction loan is designed to be replaced by permanent financing, it is excluded as temporary financing under § 1003.3(c)(3).
For general information about the loan term data point, see section 5.9 of the HMDA Small Entity Compliance Guide
Updated 4/24/2019
5. For a combined construction/permanent loan, how does a financial institution report whether the loan or application involves non-amortizing features?
Regulation C, 12 CFR § 1003.4(a)(27), requires that a financial institution report whether the contractual terms of the loan include or would have included certain non-amortizing features.
For combined construction/permanent loans based on a single legal obligation, a financial institution reports whether the contractual terms of the construction phase, the permanent phase, or both include or would have included contractual features that allow payments other than fully amortizing payments (as defined in Regulation Z, 12 CFR § 1026.43(b)(2)). The financial institution reports this information without regard to whether the construction and permanent phases of such a combined transaction are disclosed separately pursuant to Regulation Z, 12 CFR § 1026.17(c)(6)(ii).
For example, assume a financial institution originates a combined construction/permanent loan based on a single legal obligation and the construction phase has interest-only payments (as defined in Regulation Z, 12 CFR § 1026.18(s)(7)(iv)). Also assume the financial institution discloses the construction and permanent phases of the loan separately pursuant to Regulation Z, 12 CFR § 1026.17(c)(6)(ii). In this situation, the financial institution reports that the loan includes interest-only payments. This is because there are interest-only payments in at least one phase of the construction/permanent loan. It does not matter that the financial institution chose to disclose separately for each phase, as the transaction is still based on a single legal obligation.
For construction and permanent loans where the construction loan is a separate transaction that is designed to be replaced by permanent financing, the financial institution reports only the non-amortizing features that are included in the contractual terms of the permanent loan, because the separate construction loan is excluded as temporary financing under § 1003.3(c)(3).
For general information about the non-amortizing features data point, see section 5.27 of the HMDA Small Entity Compliance Guide
Updated 4/24/2019
6. For a combined construction/permanent loan with an interest rate that changes from the construction to the permanent phase, what does a financial institution report for the interest rate under Regulation C, 12 CFR § 1003.4(a)(21)?
Regulation C, 12 CFR § 1003.4(a)(21), requires that a financial institution report the interest rate applicable to the approved application, or to the covered loan at closing or account opening.
For combined construction/permanent loans based on a single legal obligation, the construction phase is not excluded as temporary financing, so the interest rate that applies at closing or account opening is the initial interest rate for the construction phase.
For example, assume a combined construction/permanent loan is based on a single legal obligation with a 6% interest rate for the construction phase and a 4% interest rate for the permanent phase. Regardless of whether the financial institution uses combined or separate disclosures pursuant to Regulation Z, 12 CFR § 1026.17(c)(6)(ii), the financial institution reports 6% for the interest rate under § 1003.4(a)(21).
Further, comment 4(a)(21)-1 explains that for covered loans or applications subject to the disclosure requirements of Regulation Z, 12 CFR § 1026.19(e) and (f), a financial institution complies with § 1003.4(a)(21) by reporting the interest rate disclosed on the applicable disclosure. For covered loans or approved applications for which disclosures were provided pursuant to both the early and the final disclosure requirements in § 1026.19(e) and (f), a financial institution reports the interest rate disclosed pursuant to § 1026.19(f). A financial institution may rely on the definitions and commentary to the sections of Regulation Z relevant to the disclosure of the interest rate pursuant to § 1026.19(e) or (f). Thus, for the example above, the financial institution reports the interest rate disclosed on the Closing Disclosure for the transaction, if combined disclosures are used, or the Closing Disclosure for the construction phase, if separate disclosures are used pursuant to Regulation Z, 12 CFR § 1026.17(c)(6)(ii).
For construction and permanent loans where the construction loan is a separate transaction designed to be replaced by permanent financing, the financial institution reports only the initial interest rate of the permanent loan.
For general information about the interest rate data point, see section 5.24 of the HMDA Small Entity Compliance Guide
Updated 4/24/2019
7. For a combined construction/permanent loan, how does a financial institution comply with the requirement to report the first date the interest rate may change?
Regulation C, 12 CFR § 1003.4(a)(26), requires that a financial institution report the number of months, or proposed number of months in the case of an application, until the first date the interest rate may change after closing or account opening. Note that § 1003.4(a)(26) provides a single standard for reporting that does not depend on loan type or loan purpose and that applies regardless of how the interest rate adjustment that may occur is characterized.
For combined construction/permanent loans based on a single legal obligation, the construction phase is not excluded as temporary financing, so the financial institution reports the number of months, or proposed number of months, until the first date the interest rate may change after closing or account opening regardless of whether the construction and permanent phases of the loan are disclosed separately pursuant to Regulation Z, 12 CFR § 1026.17(c)(6)(ii).
If the interest rate may first change during the construction phase, the financial institution reports the number of months, or proposed number of months, after the closing or account opening until the date that the interest rate may first change. If the interest rate may first change during the permanent phase, the financial institution reports the number of months, or proposed number of months, after closing or account opening until the date that the interest rate may first change, which includes the number of months in the construction phase and any months in the permanent phase that occur before the interest rate may first change.
For construction and permanent loans where the construction loan is a separate transaction designed to be replaced by permanent financing, the financial institution reports the number of months until the interest rate may change in the permanent loan only, because the construction loan is excluded as temporary financing under § 1003.3(c)(3).
For general information about the introductory rate period data point, see section 5.25 of the HMDA Small Entity Compliance Guide
Updated 4/24/2019
