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July 14, 2004


To: The Chief Executive Officer
All Farm Credit System Institutions

From: Roland E. Smith, Director
Office of Examination

Subject: Regulation C, Home Mortgage Disclosure Act


By Informational Memorandum dated October 2, 2003, the Farm Credit Administration (FCA) informed Farm Credit System (FCS) institutions of recent changes made by the Board of Governors of the Federal Reserve System to Regulation C, (1) the implementing regulation for the Home Mortgage Disclosure Act (HMDA), as amended, (2) as well as to the commentary interpreting the regulation. FCA provided a copy of the final rule, which can be found at 67 FR 7222 (February 15, 2002). The Federal Deposit Insurance Corporation recently issued a Financial Institution Letter (FIL-71-2004) that highlighted certain of the changes to Regulation C. FIL-71-2004 also provided information on HMDA reference and resource material that is available on various Websites. The purposes of this Informational Memorandum are to provide FCS institutions with this useful FIL, as well as to remind FCS institutions of the expanded coverage of the revised regulation and to emphasize an expanded reporting requirement in the regulation. Both of the changes were effective January 1, 2004, for data to be reported by March 1, 2005.

Expanded Coverage
Nondepository lender coverage is expanded to include nondepository lenders originating at least $25 million of home purchase loans, including refinancings of home purchase loans, per year. The existing 10 percent of total loan volume test is retained.

Expanded Reporting Requirement
Under §§ 203.4(a) and 203.5 of the revised regulation, financial institutions are required to collect and report data regarding applications for, and originations and purchases of, "home purchase loans" and "refinancings" for each calendar year. A home purchase loan is defined as "a loan secured by and made for the purpose of purchasing a dwelling."(3) The commentary explains that a farm loan – that is, a loan to purchase property primarily for agricultural purposes – is not a home purchase loan even if the property includes a dwelling.(4) Farm loans, therefore, are not reportable, even if there is a dwelling on the property.

In contrast, the refinancingof a farm loan is reportable as long as both the new loan and the replaced loan are secured by a dwelling, (5) even though the farm loan was not reportable when originally made. A refinancing is defined as "a new obligation that satisfies and replaces an existing obligation by the same borrower, in which . . . [f]or reporting purposes, both the existing obligation and the new obligation are secured by liens on dwellings."(6) In a refinancing, the agricultural purpose of the replaced (or new) obligation is not relevant to whether the new obligation is reportable.

If you have any questions about this memorandum, please call Thomas J. Holland, Director, Special Examination and Supervision Division, Office of Examination, at (703) 883-4483, or write to him on the Internet at e-mail address hollandt@fca.gov.

Attachments

FIL-71-2004, Home Mortgage Disclosure Act
Home Mortgage Disclosure Act Frequently Asked Questions



1) 12 CFR Part 203.
2) 12 USC 2801 et seq.
3) 67 FR 7237 (Feb. 15, 2002) (codified at 12 CFR § 203.2(h)).
4) 67 FR 7248 (Feb. 15, 2002) (codified at 12 CFR Part 203, Supp. I, section 203.2(h), commentary 3).
5) www.ffiec.gov/hmda/faqreg.htm, the Frequently Asked Questions (FAQ) section of the HMDA page of the Website of the Federal Financial Institutions Examination Council (FFIEC). A copy of the FAQs is attached
5) 67 FR 7237 (Feb. 15, 2002) (codified at 12 CFR § 203.2(k)(2)).






















12 CFR Part 203.
12 USC 2801 et seq.
67 FR 7237 (Feb. 15, 2002) (codified at 12 CFR § 203.2(h)).
67 FR 7248 (Feb. 15, 2002) (codified at 12 CFR Part 203, Supp. I, section 203.2(h), commentary 3).


Attachments

FIL-71-2004, Home Mortgage Disclosure Act
Home Mortgage Disclosure Act Frequently Asked Questions