Mortgage concepts: What are the different types of loans?

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Mortgage Concepts is a recurring video series covering best practices and compliance training for mortgage originators in California. This video discusses the different types of loans, identifying which governing entity by which a loan is insured or guaranteed. To get course credits for renewing your NMLS license, visit firsttuesday.us.

Type of loan

This data point indicates whether the request or loan was:

  • insured by the Federal Housing Administration (FHA);
  • guaranteed by the US Department of Veterans Affairs (VA); Where
  • guaranteed by the Farm Service Agency (FSA) or the Rural Housing Service (RHS). [12 CFR §1003.4(a)(2)]

Purpose of the loan

The financial institution must declare whether the request or loan is:

  • home purchase;
  • refinance;
  • cash flow refinancing;
  • home improvement loan; Where
  • other. [12 CFR §1003.4(a)(3)]

For multipurpose loans, the purposes of the loan are prioritized in the order presented above. In other words, if a loan is both a home purchase and a home improvement loan, it is classified as a home purchase and not a home renovation. Likewise, if a loan is both a home improvement loan and a refinance, the loan is classified as a refinance. [Official Interpretation of 12 CFR §1003.4(a)(3)-3, -6]

Failure to properly register the purpose of the loan is another common violation of HMDA.

Amount of the loan

For home purchase loan, home improvement and refinancing loan applications or arrangements, the loan principal is reported. For home purchase loans purchased, enter the outstanding principal balance. [12 CFR §1003.4(a)(7)(i)]

term of the loan

The loan term is the expected number of months after which the principal will mature or end. [12 CFR §1003.4(a)(25)]

Action taken and date

The disposition of the request is flagged as one of the following:

  • loan issued;
  • request approved but not accepted by the requester within the specified timeframe;
  • Request refused;
  • request withdrawn;
  • file closed for incompleteness;
  • loan purchased;
  • request for prior approval denied; Where
  • pre-approval request approved by not accepted. [12 CFR §1003.4(a)(8)]

The date of the action is also recorded. Another common violation of HMDA is failure to properly record the “Type of Action”.

Reason for refusal

Financial institutions that refuse a loan must provide up to four reasons for refusal. Reasons for refusal include:

  • debt-to-income ratio (DTI);
  • employment history;
  • credit history;
  • collateral;
  • insufficient liquidity;
  • unverifiable information;
  • incomplete credit application;
  • mortgage insurance refused; Where
  • other. [12 CFR §1003.4(a)(16)]

Address and location of the property

The address of the property that is or would have secured the mortgage is listed, along with the state, county, and EA of its location. [12 CFR §1003.4(a)(9)]

Construction method

This data point indicates whether the property was on-site or prefabricated housing. [12 CFR §1003.4(a)(5)]

Type of occupation

The property will be declared as that of the applicant:

  • Principal residence;
  • second home; Where
  • Investment property. [12 CFR §1003.4(a)(6)]

Privilege Status

This data point reveals whether the loan is a first lien or in a subordinate position. [12 CFR §1003.4(a)(14)]

Information on prefabricated houses

If the dwelling is a prefabricated house, the following must be declared:

  • the type of property securing the loan; and
  • the interest of the loan property. [12 CFR §1003.4(1)(29)-(30)]

Property value

The value of the property used by the financial institution to make its credit decision is reported. If no value is used when making the decision, such as if the borrower never submits credit information or the application is incomplete, the financial institution is not required to report that information. [12 CFR §1003.4(a)(28)]

Total units

The number of units of property securing the loan sought is indicated. [12 CFR §1003.4(a)(31)]

Affordable multi-family units

This data point requires the declaration of the number of limited income units that will secure the requested loan. [12 CFR §1003.4(a)(32)]


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