When two notes are cross collateralized (one note is secured by vehicles and vacant land and the other note is secured by a mortgage on a 1-4 dwelling), does the refinance of the note secured by vehicles and vacant land constitute a HMDA-reportable loan? When determing if it was HMDA-reportable, I was considering both the vehicle-secured note and the cross-collateralized mortgage-secured note to determine if it met the defintion of purchase, home improvement, or refinance under HMDA. Could you please confirm if I am considering these notes appropriately?
When examining cross-collaterializing notes, would it make any difference if both notes were secured by mortgages on improved property? In that case, my determination on which property to report on the HMDA LAR would be based on the property wtih the hightest appraisal value.
HMDA defines a “refinance” as a new obligation that satisfies and replaces an existing obligation by the same borrower, in which both the existing obligation and the new obligation are secured by a lien on a dwelling. With cross-collateral language, the collateral for one loan is also collateral for another loan. So, in your situation, if both the old loan and the new loan are secured by the dwelling, the loan is reported as a refinance.
If both existing loans are secured by a dwelling and either note is refinanced, and the refinanced note is secured by both dwellings, the loan is reported as a refinance. If the original loan is for home purchase, then you should report property location information for the property that secures the loan. Since you have multiple securing properties you may select either property for reporting location information or you may report both properties, using two lines on the LAR. In the later situation be sure to use unique loan numbers for each line and to allocate the loan amount between the two lines.