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Must banks verify the "occupy type" of the property securing a covered loan?

Regulation C, which implements the Home Mortgage Disclosure Act, requires reporting banks to indicate whether the property securing a covered loan is or will be used as a principal residence, second residence, or investment property (“occupancy type”). Comment 4 to §1003.4(a)(6) clarifies, for example, “a property is investment property if the borrower does not, or the applicant will not, occupy the property.” Must banks verify this information?

It appears not.

Neither the regulation nor related guidance explicitly addresses whether banks must verify the information in the occupancy type field. However, Regulation C elsewhere states that banks are permitted to rely on information provided by the applicant/borrower. For example, Comment 1 to §1003.4(a)(3) states that banks may rely on the applicant's or borrower's stated purpose for the loan and need not verify the proposed use of the loan proceeds. In addition, one would expect that if verification of the occupancy type were required, the regulation would make that requirement clear. (July 2020)

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