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We currently have a HMDA reportable loan that has an individual as the borrower and a business as the co-borrower. Would we report the annual income or not? Thanks in advance!
You will report the gross annual income relied upon in making the credit decision for the individual applicant. Because the co-applicant is not a natural person, you would not report income for the co-applicant.
HMDA Appendix A states the following:
6. Income. Enter the gross annual income that your institution relied on in making the credit decision.
a. Round all dollar amounts to the nearest thousand (round $500 up to the next $1,000), and show in thousands. For example, report $35,500 as 36.
b. For loans on multifamily dwellings, enter “NA.”
c. If no income information is asked for or relied on in the credit decision, enter “NA.”
d. If the applicant or co-applicant is not a natural person or the applicant or co-applicant information is unavailable because the loan has been purchased by your institution, enter “NA.”
I saw this on CMG yesterday and have to disagree as we were cited for this several years ago during an exam on one loan. It was the same situation and we reported income. The examiner referenced the same item “d” as above. It states “if the applicant or co-applicant is not a natural person…enter NA”, meaning either of them. Whereas for ethnicity & race you are reporting for each applicant, for income it is one field that is a total and if either is not a natural person it will therefore be reported as “NA” as referenced in item d.
The guidance on this point is less than pefectly clear. The Commentary to Regulation C states, “If two persons jointly apply for a loan and both list income on the application, but the institution relies only on the income of one applicant in computing ratios and in evaluating creditworthiness, the institution reports only the income relied on.” If this section used the term “natural person” instead of “person” the answer would be more clear. Since a “person” can be an individual or a business entity this section causes the confusion.
Most examiners take the approach mentioned in Angie’s comment above. For that reason it is best to use “NA” if either the applicant or co-applicant is not a natural person.
This dilemma is not made any more clear in the revised Regulation C rules that are effective on January 1, 2018.
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