What transactions are excluded from the HMDA transactional coverage?

Compliance > Regulation C - HMDA > 2018 Provisions
Q:  What transactions are excluded from the HMDA transactional coverage?
 
A:  Regulation C does not apply to transactions that are specifically excluded from coverage. 12 CFR 1003.3(c). Therefore, an Excluded Transaction is not a Covered Loan. The 2015 HMDA Rule retains and clarifies existing categories of transactions that are excluded from coverage.  It also expands the existing exclusion for agricultural loans, and adds new categories of transactions that excluded from coverage. Effective January 1, 2018, the following are Excluded Transactions:
 
  1. A Closed-End Mortgage Loan or an Open-End Line of Credit that a Financial Institution originates or purchases in a fiduciary capacity, such as a Closed-End Mortgage Loan or an Open-End Line of Credit that a Financial Institution originates or purchases as a trustee. 12 CFR 1003.3(c)(1); comment 3(c)(1).
  2. A Closed-End Mortgage Loan or an Open-End Line of Credit secured by a lien on unimproved land. 12 CFR 1003.3(c)(2). Generally, a loan or line of credit must be secured by a Dwelling to be a Covered Loan. The 2015 HMDA Rule also lists Closed-End Mortgage Loans and Open-End Lines of Credit secured only by vacant or unimproved land as Excluded Transactions. However, a loan or line of credit secured by a lien on unimproved land is deemed to be secured by a Dwelling (and not might not be excluded) if the Financial Institution knows, based on information that it receives from the applicant or borrower at the time the Application is received or the credit decision is made, that the proceeds of that loan or credit line will be used within two years after closing or account opening to construct a Dwelling on, or to purchase a Dwelling to be placed on, the land. Comment 3(c)(2)-1.
  3. A Closed-End Mortgage Loan or an Open-End Line of Credit that is temporary financing. A transaction is excluded as temporary financing if it is designed to be replaced by permanent financing at a later time. A loan or line of credit is not temporary financing merely because its term is short. 12 CFR 1003.3(c)(3); comment 3(c)(3)-1.
  4. The purchase of an interest in a pool of Closed-End Mortgage Loans or Open-End Lines of Credit, such as mortgage-participation certificates, mortgage-backed securities, or real estate mortgage investment conduits. 12 CFR 1003.3(c)(4); comment 3(c)(4)-1.
  5. The purchase solely of the right to service Closed-End Mortgage Loans or Open-End Lines of Credit. 12 CFR 1003.3(c)(5).
  6. The purchase of a Closed-End Mortgage Loan or an Open-End Line of Credit as part of a merger or acquisition or as part of the acquisition of all of a Branch Office’s assets and liabilities. 12 CFR 1003.3(c)(6); comment 3(c)(6)-1. For more information on mergers and acquisitions under the 2015 HMDA Rule, see Section 8.
  7. A Closed-End Mortgage Loan or an Open-End Line of Credit, or an Application for a Closed-End Mortgage Loan or Open-End Line of Credit, for which the total dollar amount is less than $500. 12 CFR 1003.3(c)(7).
  8. The purchase of a partial interest in a Closed-End Mortgage Loan or an Open-End Line of Credit. 12 CFR 1003.3(c)(8); comment 3(c)(8)-1.
  9. A Closed-End Mortgage Loan or an Open-End Line of Credit if the proceeds are used primarily for agricultural purposes or if the Closed-End Mortgage Loan or Open-End Line of Credit is secured by a Dwelling that is located on real property that is used primarily for agricultural purposes. 12 CFR 1003.3(c)(9); comment 3(c)(9)-1. The 2015 HMDA Rule directs Financial Institutions to Regulation Z’s official commentary for guidance on what is an agricultural purpose. Regulation Z’s official commentary states that agricultural purposes include planting, propagating, nurturing, harvesting, catching, storing, exhibiting, marketing, transporting, processing, or manufacturing food, beverages, flowers, trees, livestock, poultry, bees, wildlife, fish or shellfish by a natural person engaged in farming, fishing, or growing crops, flowers, trees, livestock, poultry, bees or wildlife. See comment 3(a)-8 in the official interpretations of Regulation Z, 12 CFR part 1026. A Financial Institution may use any reasonable standard to determine the primary use of the property, and may select the standard to apply on a case-by-case basis. Comment 3(c)(9)-1.
  10. A Closed-End Mortgage Loan or an Open-End Line of Credit that is or will be made primarily for business or commercial purposes, unless it is a Home Improvement Loan, a Home Purchase Loan, or a Refinancing. 12 CFR 1003.3(c)(10). Not all transactions that are primarily for a business purpose are Excluded Transactions. Thus, a Financial Institution must collect, record, and report data for Dwelling-secured, business-purpose loans and lines of credit that are Home Improvement Loans, Home Purchase Loans, or Refinancings if no other exclusion applies. For more information on determining whether a loan or line of credit is a Home Purchase Loan, Home Improvement Loan, or Refinancing, see Section 5.7. The 2015 HMDA Rule provides that, if a Closed-End Mortgage Loan or an Open-End Line of Credit is deemed to be primarily for a business, commercial, or organizational purposes under Regulation Z, 12 CFR 1026.3(a) and its official commentary, then the loan or line of credit also is deemed to be primarily for a business or commercial purpose under the 2015 HMDA Rule. Comment 3(c)(10)-2. For more information and examples of business-purpose or commercial-purpose transactions that are Covered Loans, see comment 3(c)(10)-3 and -4.
  11. A Closed-End Mortgage Loan if the Financial Institution originated fewer than 25 Closed-End Mortgage Loans in each of the two preceding calendar years. 12 CFR 1003.3(c)(11); comment 3(c)(11)-1. A Financial Institution is not required to collect, record, or report Closed-End Mortgage Loans if it originated fewer than 25 of them in each of the two preceding calendar years. However, the Financial Institution will still be required to collect and report information regarding Open-End Lines of Credit if it originated at least 100 of them in each of the two preceding calendar years. For more information on how to determine if a Financial Institution “originated” a particular loan when multiple entities are involved in the transaction, see Section 4.2.3.
  12. An Open-End Line of Credit if the Financial Institution originated fewer than 100 Open-End Lines of Credit in each of the two preceding calendar years. 12 CFR 1003.3(c)(12); comment 3(c)(12)-1. A Financial Institution is not required to collect, record, or report Open-End Lines of Credit if it originated fewer than 100 of them in each of the two preceding calendar years. However, the Financial Institution will still be required to collect and report information regarding Closed-End Mortgage Loans if it originated at least 25 of them in each of the two preceding calendar years. For more information on how to determine if a Financial Institution “originated” a particular line of credit when multiple entities are involved in the transaction, see Section 4.2.3.
 
 
ADDITIONAL INFORMATION:
This information was obtained from the CFPB’s Home Mortgage disclosure (Regulation C) Small Entity Compliance Guide.  https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201512_cfpb_hmda_small-entity-compliance-guide.pdf
 

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