Question: 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?

Answer: 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.”


  • 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   

Question: If the Bank is escrowing for flood insurance is there a regulatory requirement to also escrow for real estate taxes or can the bank waive it? 

Answer: The federal regulations only require you to escrow for taxes and hazard insurance if the loan is an HPML. Escrowing for taxes and hazard insurance can also be required by internal or investor guidelines. 


Except as provided in paragraph (b)(2) of this section, a creditor may not extend a higher-priced mortgage loan secured by a first lien on a consumer's principal dwelling unless an escrow account is established before consummation for payment of property taxes and premiums for mortgage-related insurance required by the creditor, such as insurance against loss of or damage to property, or against liability arising out of the ownership or use of the property, or insurance protecting the creditor against the consumer's default or other credit loss.  

12 CFR § 1026.35(b)(1):https://www.consumerfinance.gov/rules-policy/regulations/1026/35/#b-1

Question: If a client has a Phase 1 CTR exemption, does this client need to be have a Designation of Exempt Person (DOEP) form completed and submitted to FinCEN?

Answer: It depends. Some Phase I exempt customers need DOEPs while others do not. If your customer is another financial institution or a government entity, then you do not need to file a DOEP. But regardless, banks need to be taking the same steps to assure its determination of a customer’s initial eligibility for exemption, and to document the basis for that conclusion. This all would follow a reasonable and prudent standard. This ensures that the bank is protecting itself form loan or other fraud or loss based on misidentification of a person’s status.

Reference: Banks do not need to file a DOEP for Phase 1-eligible customers that are banks, federal, state, or local governments, or entities exercising governmental authority.
FFIEC Manual, pg. 86





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