HMDA may be causing more consternation these days than what we saw with TRID. As financial institutions have been struggling with last-minute determinations of whether they qualify for exemption, whether software has been updated to assist in taking that exemption, and how to ensure all data – exempted or otherwise – is accurately captured, the last thing you want to hear about is another “doh!” moment. However, this is what we bring you today…specific to reporting “NA” for income.
The Filing Instructions Guide and the Getting It Right Guide both indicate that you should report “NA” for gross annual income for:
- Covered loans or applications for which the credit decision did not consider or would not have considered income.
- Covered loans or applications when the applicant or co-applicant is not a natural person.
- Covered loan is secured by, or application is proposed to be secured by, a multi-family dwelling.
- Purchased covered loans for which the financial institution chooses not to report the income.
- Covered loan to, or an application from, an institution’s employees to protect their privacy.
Seems pretty straight-forward, right? Well, let’s zero in on commercial purpose loans to individuals and the dwelling in question is a 1-4 family dwelling. The applicant is a natural person or persons (no legal entity borrower). The dwelling is not a multi-family dwelling. The applicant is not an employee of the financial institution. The loan was not purchased. See where we are heading with this? By all accounts, you’ve run out of reasons to report NA and must report an income figure…or have you?
Look at the first bullet point above: Covered loans or applications for which the credit decision did not consider or would not have considered income.
Ahhh…there it is. Are you truly looking at – given this scenario – gross annual income as your factor in the credit decision or are you – as is common – looking at debt service coverage, cash flow from rental income, or operating cash in making your credit decision? If you are not truly looking at the gross annual income, you should report “NA” in the income field. When determining whether to report an income figure for a transaction to a natural person or persons secured by a dwelling when the purpose is commercial, walk through the points above to determine whether you will actually be reporting an income figure.
by Angela Lucas, Sterling Compliance