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We are a large bank originating only loans made under the general ATR rule an work with many borrowers who own residential rental properties. For those non consumer purpose loans the commercial lending area can consider stated income in reviewing the credit for approval.
At times those rental property owners need consumer loans for their personal homes, which are subject to ATR and may not be made based on stated income. My question is what figure should be used for the GAI on the HMDA LAR? The ATR figure that only considered verified income, or the figure the commercial lending area used when considering the entire relationship which did include a complete financial review which may been based off of stated income, tax returns, depreciation…etc….
HMDA says to use the income used to approve the loan. ATR is the amount we could prove. The credit memo included some stated, adding back deprec to approve at loan committee…bascially a different figure than the ATR and it is what we used to approve the loan. The fiures do not match exactly and I am wondering what an examiner would opinion would be. What is recommended to use?
The loan may have gone to Loan Committee for approval due to the entire relationship or a DTI higher than policy limit, but the ATR DTI analysis was regulation Z required.
Please understand that a loan secured by rental property can be a consumer transaction subject to the ATR rules. Also home purchase loans, home improvement loans and refinancings are HMDA reportable even if made to a business.
It seems that your actual question is, what income is reportable for HMDA purposes? HMDA requires you report the gross annual income relied on in evaluating the creditworthiness of applicants. With your mention of depreciation it appears the borrower is a business. If the borrower or applicant is a corporation, partnership or other entity that is not a natural person the instructions for the HMDA LAR.
Yes, that is my question, but regarding individuals who have not formed entities for their rentals. It came up when we had made several loans to a borrower for rental properties, that is his line of work, rental properties, and then he came back for a home loan for himself, which was subject to ATR. That is when the loan committee global figures had been approved for this borrower due to the overall relationship, however ATR documentation was also required, and when the 2 figures differed, we were trying to determine for HMDA what figure should be reported.
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