[Understudy]

We are denying a loan for “unverifiable income”. (Evidently we could not obtain W2 or tax transcripts on the borrower). How should the HMDA income be reported for this situation? Should we report the income from initial 1003 or 0 or NA?

[jholzknecht]

You are required to report the gross annual income relied on in the applicant data required by 1003.4(a)(10). Use the same income figure when calculating the debt-to-income figure required by 1003.4(a)(23). Report the income figure you relied on. If you did not calculate a debt-to-income ratio report NA.

Enter code 6 for the reason for denial – unable to verify information.

[Gholloway]

If we deny the loan based on the credit score ONLY — could we report income as “NA” since the income was not relied upon in making the credit decision?

[jholzknecht]

It appears that you evaluated income but income was not the reason for denial. Even when a decision is not made, such as a withdrawn application, you should report the income relied on in processing the application.

[Gholloway]

To clarify — we have applications where the income may or may not be included. Income is not evaluated or considered until after the applicant “passes” the credit score requirement. If the credit score is not sufficient the application is denied based on credit. In these cases, where income was not evaluated YET, is reporting income as “NA” acceptable? thank you

[jholzknecht]

Neither Regulation C nor the Commentary has anything exactly on point, but in my opinion comment 4(a)(10)(iii) – 5 comes closest. It states, “Section 1003.4(a)(10)(iii) requires a financial institution to report the gross annual income relied on in processing the application if a credit decision was not made.

Example: Assume an institution received an application that included an applicant’s self-reported income, but the application was withdrawn before a credit decision that would have considered income was made.
• The financial institution reports the income information relied on in processing the application at the time that the application was withdrawn or the file was closed for incompleteness.”

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