If a borrower is refinancing a mortgage, sometimes our bank will do 2 loans to accomplish this, one in residential mortgage and one in consumer. Let’s say the current mortgage is $250,000. Residential approves a loan for $200,000 and consumer approves a loan for $50,000. Both of these loans would close on the same day, at the same time. Both the old loan and the 2 new loans are to the same borrower and are secured by liens on dwellings.
For HMDA reporting purposes, is either, or both, of these new loans considered a refinance or are neither one reportable?
The definition for refinancing is a new obligation (not obligations) that satisfies and replaces an existing obligation by the same borrower.
One of the new loans by itself is not enough to satisfy the existing obligation. I attended a class taught by Deborah Henderson of PBS. I asked her this question and she said that to be a refinance, one note must pay off one note. So if the 2 loans close on the same day, neither is reportable. If they close on different days, the first closed one is a paydown and the 2nd (assuming it completely satisfies) is a true refinance. I agree with her assessment, however my supervisor does not. She thinks that at least one of them should be reportable but she is not 100% sure which one. She thinks we should report the larger one.
Could you please give us a 3rd opinion on this question?