HMDA requires banks to report on “applications” for cer-
tain loans. An “application” is a request for credit “that is made
in accordance with procedures used by a financial institution
for the type of credit requested.” (See Regulation B, §1002.2(f),
Regulation C, §1003.2( 1)), and Comment 1 to §1003.2 of Reg-
ulation C that the Regulation B Commentary on the definition
of application generally applies under Regulation C.)
The question is whether the bank offers the “type of credit”
requested if it is not available to non-residents. If not, there is
no application and thus no need to report under HMDA.
Comment 1 to Regulation B’s §1002.2(c)( 2)(v) offers guid-
ance on the meaning of “type of credit” through a comparison of
“types of credit” and “terms of credit.” It explains that when “an
applicant applies for credit and the creditor does not offer the
credit terms requested by the applicant (for example, the interest
rate, length of maturity, collateral, or amount of downpayment),
a denial of the application for that reason is adverse action …”
However, the applicant’s residential status is not a term of the
loan and is arguably related to the type of loan being offered. This
argument is boosted if the restriction is indicated in the applica-
tion or website. For example, lenders might disclose on an appli-
cation that the loan product is only available to those 18 or older.
In addition, if the bank discloses the restriction on the ap-
plication or website, it might be argued that the borrower did
not apply “in accordance with the creditor’s procedures,” so
therefore there is no denial.
That being said, Regulation B does not address this issue
specifically, so it is not clear.
If the bank clearly discloses prior to application, that it does
not make solar-panel loans to non-residents, it could conclude
that there is no application and thus no need to report under
HMDA. If it determines that there is an application, it would
use the “denial” code (code 3) and the reason code “other”
(code 9). (Response provided 11/2016.) ■
CAFP, and Director
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