Compliance Alliance Question of the Week

Question:
Is an "assumed" loan HMDA reportable? There was only one borrower when the loan was originated (not this year) and the loan was reported in that year. The Bank has now allowed another borrower to assume the note from the original borrower.
 
Answer:
Yes, it would be when the bank enters into a written agreement accepting a new borrower in place of an existing borrower, even if the bank does not create a new obligation.
 
i. Assumptions. For purposes of Regulation C, an assumption is a transaction in which an institution enters into a written agreement accepting a new borrower in place of an existing borrower as the obligor on an existing debt obligation. For purposes of Regulation C, assumptions include successor-in-interest transactions, in which an individual succeeds the prior owner as the property owner and then assumes the existing debt secured by the property. Under § 1003.2(d), assumptions are extensions of credit even if the new borrower merely assumes the existing debt obligation and no new debt obligation is created. See also comment 2(j)-5.
Comment 2 to §1003.2(d)(2)(i): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/Interp-2/#2-d-Interp-2-i
 
First, the HMDA Rule maintains Regulation C’s coverage of loan assumptions, even if no new debt obligation is created. A loan assumption is a transaction in which a Financial Institution enters into a written agreement accepting a new borrower in place of an existing borrower as the obligor on an existing debt obligation. The HMDA Rule clarifies that, under Regulation C, assumptions include successor-in-interest transactions in which an individual succeeds the prior owner as the property owner and then assumes the existing debt secured by the property. Assumptions are extensions of credit under the HMDA Rule even if the new borrower merely assumes the existing debt obligation and no new debt obligation is created. Comment 2(d)-2.i.
HMDA Small Entity Compliance Guide, p. 32: https://files.consumerfinance.gov/f/documents/cfpb_2018-hmda_small-entity-compliance-guide_stickered.pdf