b'Consumer Laws / Business Loans continued from page 8applicants income comes from a publicletters when requested.Alternatively, theIn order to comply with these requirements, assistance program.14Again, because ECOAlender can make it a policy to send a formallenders will need to revise their loan and Regulation B apply to all creditors andadverse action letter every time such actionapplications to ensure they are capturing commercial and personal credit, businessis taken in order to comply with the statute. the relevant field data in the application purpose loans are within the scope.Thatprocess, including the ethnicity, gender, being said, the nature of most businessB. The Home Mortgageand age of the borrower (even when it purpose lending companies is to evaluateDisclosure Act (HMDA) seems inapplicable).A manual revise of whether to extend credit based on factorsthe application to cover those fields is like the type of collateral, the borrowersHMDA requires certain financial institutionspossible.In the alternative, many lenders credit score, and the borrowers experienceto collect, report, and disclose aspects ofuse a modified 1003 as their base loan relevant to the use of the proceeds.their mortgage lending activity.20In 2018,application, which is supplemented to Lenders should take care to ensure thatHMDA was amended to modify the typesbetter suit business purpose loans.After their underwriting guidelines follow thoseof lenders, transactions, and data included,the revisions to HMDA, an addendum to and other similar non-discriminatoryas well as the processes for reporting andthe 1003 was issued which adds an extra reasons for deciding to extend credit.Indisclosing.Notably, HMDA now appliespage to the application and requests all addition, lenders should look at the typesto closed-end mortgage loans, which arerelevant HMDA data from the applicant. of loans they have extended and denied indefined as an extension of credit thatAt a minimum, lenders should include this the past to ensure that due to evaluatingis secured by a lien on a dwelling.Thepage in their loan applications to collect the the location of the collateral that they aredefinition of dwelling is now expandeddata they will need to comply with annual not unintentionally redlining or otherwisebeyond a 1-4 family residential structureHMDA reporting.When completing the avoiding lending in areas that could lead tounder HMDA, and includes a detachedannual reporting, there are many software a claim that the lender has discriminatoryhome, an individual condominium orproviders that can easily collate the data practices. cooperative unit, a manufactured home orand complete the reports for lenders.An other factory-built home, or a multifamilyexample is QuestSoft, which is software 3. adverse action letters residential structure or community.made specifically for HMDA reporting.Because HMDAs definitions focus on An adverse action occurs when a lenderproperty type rather than loan purpose,C. The Fair Housing Actdenies or revokes credit, changes the termHMDA now covers lenders making loans of credit, or refuses to grant credit.15Anto developers of residential housing.TheFairHousingActprohibits adverse action does not include a lendersdiscrimination based on sex, familial refusal to extend additional credit under aSpecifically, HMDA applies to lenders whostatus, race, color, religion, national origin, current arrangement where the applicantmade at least twenty-five closed-endor disability for transactions involving is delinquent, or when the requested creditmortgage loans in each of the two the lastdwellings.21The Act defines dwelling as is more than a previous credit limit.16ECOAtwo years, OR one hundred open-end creditany building occupied or intending to be requires lenders to provide applicants/ lines in each of the two last years.HMDAoccupied as a residence by one or more borrowers with a notice stating the reasonsrequires lenders making the applicablefamilies, or land sold for the construction of for an adverse action whenever an adverseloans to prepare a Loan Activity Registersuch a building.22Family includes a single action is taken.17The notification must beincluding certain data to the Consumerindividual.23Because the transactions in writing, and received by the borrowerFinancial Protection Bureau (CFPB).Therecovered are based on property type rather within thirty days.18For borrowers withare over one hundred fields that need tothan purpose, business purpose loans are gross revenue over one million the priorbe completed and reported to the CFPBwithin the scope of the Fair Housing Act. year, lenders may notify of adverse actionsfor each applicable transaction.TheThe discriminatory actions prohibited by verbally or in writing within a reasonablereporting is problematic for private lenders,the Fair Housing Act are also prohibited timeframe, rather than the thirty-daybecause it requires data points with certainby the ECOA, with the former focused written notice requirement for consumeroptions that are not applicable to businesson housing transactions and the latter or small business applicants.19The bestpurpose loans.For example, the ethnicity/ including all credit transactions.Therefore, way to easily implement this requirementrace/sex/age of the applicant or borrowera lender seeking compliance with ECOA is to provide the borrower with a noticemust be reported, which creates confusionrequirements will likely comply with Fair upon receipt of an application that if theirwhen a borrower or applicant is an entity.Housing Act requirements. application is denied they have the right toAdditional data points to report include request the statement of reasons for denial.the date of application, the type of loan, This will place the onus on the borrowerthe property type, and many more.to ask for the reasons of denial, and lender will only need to provide adverse actioncontinued on page 10Points of InterestFall 2019Page 9'