Q: We have an applicant who is doing a cash-out refinancing. They stated they will use the funds for a purchase of another dwelling, but it is at an unknown, future date. Would this still make it a “Home Purchase” loan for HMDA purposes?
A:Yes, you would code this as a “Home Purchase” loan. You can rely on the applicant’s representation as to the use of the loan proceeds. For a multi-purpose loan, “home purchase” trumps “refinance.”
Reference: A financial institution may rely on the oral or written statement of an applicant regarding the proposed use of covered loan proceeds.
Comment 1 to 12 CFR § 1003.4(a)(3):https://www.consumerfinance.gov/rules-policy/regulations/1003/4/#4-a-3-Interp-1
Section 1003.4(a)(3) requires a financial institution to report the purpose of a covered loan or application. If a covered loan is a home purchase loan as well as a home improvement loan, a refinancing, or a cash-out refinancing, an institution complies with § 1003.4(a)(3) by reporting the loan as a home purchase loan.
Comment 3 to 12 CFR § 1003.4(a)(3):https://www.consumerfinance.gov/rules-policy/regulations/1003/4/#4-a-3-Interp-3
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