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A question has arisen from a loan assistant regarding HMDA coverage for a previously originated loan that is being modified. Loan A was originated in 2014 in the amount of 250,000. It was and remains secured by a residential rental property. The lender is planning on increasing the balance of Loan A to pay off Loan B, which is dwelling secured. 12 CFR § 1003.2(d) and commentary stress the concept of (new) extension of credit. Is my original thought the modification is not reportable because there is not a new extension of credit correct?
As long as it isn’t a refinance – the existing debt is not satisfied and replaced -I think you’re correct.
From the FFIEC HMDA Guide to Getting it Right:
Under Regulation C, an “extension of credit” generally requires a new debt obligation. Comment 2(d)-2. Thus, for example, a loan modification where the existing debt obligation is not satisfied and replaced is not generally a covered loan (i.e., closed-end mortgage loan or open-end line of credit) under Regulation C. Except as described below, if a transaction modifies, renews, extends, or amends the terms of an existing debt obligation, but the existing debt obligation is not satisfied and replaced, the transaction is not a covered loan. It is important to note that Regulation C defines the phrase “extension of credit” differently than Regulation B, 12 CFR Part 1002.8 Comment 2(d)-2 and 2(o)-2.
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