Refinance and 25 acres or more

If a loan is a refinance and it is on more than 25 acres, is it exempt from HMDA? I only saw that you could use that exemption under Home Purchase.

The 25 acres exemption is for purchases only. You have to report refinances and home improvements.

Is that the same with the RESPA exemption? Purchase loan only?

No.

RESPA exempts any loan secured by 25 or more acres regardless of purpose.

The 25 acre rule for HMDA is a reference tool to use in conjunction with other information about the loan, it's not an automatic exemption.

If I'm buying a 50 acre estate that loan is exempt from RESPA but it's not exempt from HMDA.

HMDA only exempts the purchase if the property is primarily used for agricultural purposes; and 25 or more acres does not automatically classify the property as agricultural.

This is a home on 285 acres that is a horse ranch along with cattle. It's also a refinance. They live in the small home but it is mainly a ranch.

Dan...i've always operated under the assumption that a loan on 25 acres or more WAS automatically exempt if a purchase under HMDA....from the commentary to Reg C. "An institution may use any reasonable
standard to determine the primary use of the property, such as by
reference to the exemption from Regulation X (Real Estate Settlement
Procedures, 24 CFR 3500.5(b)(1)) for a loan on property of 25 acres
or more. An institution may select the standard to apply on a case-
by-case basis.

The part you quote says you can apply (reference) the standard to determine the primary use of the property, and the property is only exempt if the primary purpose is agricultural.

If I have 26 acres, my home, 5 car garage, swimming pool and tennis court is on 13 acres. I stable and raise horse on 13 acres. The primary use of the property is pretty well split therefore you can reference the 25 acres rule to determine the primary use of the property.

The 25 acre rule does not automatically exempt the loan from HMDA.

You also can have property that is primarily agricultural of less than 25 acres. However any loan for a agricultural purpose secured by that property would be exempt from RESPA (regardless of acreage) and Reg Z, but if it met the definition of a refinancing under HMDA it would not be exempt from HMDA.




For a purchase of the property that is primarily agricultural this would exempt it from HMDA, but the refinancing of that loan would not be exempt.

3. Farm loan. A loan to purchase property used primarily for
agricultural purposes is not a home purchase loan even if the
property includes a dwelling. An institution may use any reasonable
standard to determine the primary use of the property, such as by
reference to the exemption from Regulation X (Real Estate Settlement
Procedures, 24 CFR 3500.5(b)(1)) for a loan on property of 25 acres
or more. An institution may select the standard to apply on a case-
by-case basis.

Sorry Dan...i don't see what i'm missing....what i see is that i can use "any reasonable standard" including RESPA's exemption for loans on 25 acres or more; not only that, but that i can choose my standard on a case-by-case basis. I don't see the rigid standard you are applying in that wording. I see where the first part says if for an agricultural purpose...but to me it then gives you the out by saying you can simply use RESPA's 25 acre exemption........i do not see the rigid definition you use supported by this language....perhaps i'm missing something.

To me you are saying.....if you are in doubt about the purpose, you can go to RESPA's definition....to me this reads if i choose to use RESPA's definition/exemption, i can state it is an agricultural purpose simply because it exceeds 25 acres (for a purchase only of course).

So you're saying you're not even going to reasonably try to determine the primary use of the property. You are simply going to exempt it because it's 25 or more acres?

Using 25 acres as the only determining factor, what's reasonable about that? What reasonable factors make it primarily agricultural simply because there is 25 or more acres involved?

I can show you several estates in this area that are more than 25 acres and not one of them has any agricultural use whatsoever. However, since they are greater than 25 acres you are saying you would exempt any transaction involving the purchase of one of these estates. I just can't agree with that.

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The above comments may come across a little "strong or flippant" for a lack of a better term. They are not meant to be that way. Just not sure how to re-word them to make my point.

FWIW - Some of us are in primarily agricultural areas - so using this exemption should not be out of the question. Alot of our customers use their land that the home sits on, 25 arcres and even less, to farm in some form or another. Should we be looking at the purchase of a home with 10 acres, that they put grain on 9 acres and house sits on one, as not HMDA if it is a purchase...because it is primarily ag purpose....?

Dan...i can see your point....however, to me that is exactly what the commentary says. While i agree that may not be very "reasonable", it references RESPA by name and the 25 acre exemption specifically. There is no reference in RESPA's 25 acre exemption that even mentions agriculture, so to me by referencing it, Reg C. is saying i can assume i'm dealing with an exempt transaction if it includes 25 acres or more. (And i'm not taking your posts as "flippant" as i hope you aren't taking mine.....I would say "reason" is on your side here....but i think what the regulation actually "says" is on mine.)

That's correct. The purchase of property, regardless of acreage, that is primarily for agricultural use is not a home purchase loan for HMDA purposes even if a dwelling is located on the property.



I agree it would not be out of the question to use it as one of the determining factors, but I still contend that it should not be used as the only determining factor.

And i am definitely not saying you can't exempt unless it's more than 25 acres....i definitely get the idea that you can live on a farm of less than 25 acres....but to me the regulation here is making it easy for me....if it's more than 25 acres and it's a purchase...exempt it. To me Reg C's commentary is kind of at loggerheads with itself here...it starts by saying if it's for an agricultural purpose, exempt it...it then says "you can use the RESPA 25 acre test if you wish TO FIGURE OUT THE PURPOSE", which again, has no reference at all that i can see to agriculture......

That's my point exactly. HMDA says if you can't determine the use of the property then you may reference RESPA's 25 acre rule to figure it out.

BUT, HMDA very plainly states the property must be primarily for agricultural use before its purchase is exempt.

Dan....i really don't want to belabor my point and i see yours.....but it says you can use "any reasonable standard"...and then points you to RESPA and says "here's a reasonable one for you"...if i'm using a test that the Regulation itself provides and i exempt it based on that, i would feel confident arguing it. RESPA is where this all started....RESPA exempts 25 acre loans simply because they're 25 acres....HMDA points you to that exemption and says you can use that one. You are reading it as "you first must have an agricultural purpose; if you're not sure, you can use the RESPA test"...i am reading it as "you need to have an agricultural purpose which can be defined for you by RESPA's 25 acre exemption"....i understand your interpretation of it...but i think my interpretation is just as valid...

Where is this in the reg or in Getting it Right?

Look in the Commentary to Reg. C, Definitions 203.2.

OK - found it - thanks.

The more i've looked at this....don't you end up with either a Reg Z or a RESPA test for "agricultural purpose"? As illogical as it might be, if i use the test SPECIFICALLy mentioned in the Regulation i'm dealing with (Reg C), how can that be considered to be an inferior definition (regulatorily) to the one in Reg Z (which Reg. C does not mention)?

My two cents: I think the RESPA 25 acre guideline came about due to the fact that the disclosures are due within 3 days of application and it would be difficult for most lenders to verify the exact nature of the collateral in that short of a time period.

-----Original Message-----
From: hmdahelp@frb.gov [mailto:hmdahelp@frb.gov]
Sent: Wednesday, March 03, 2010 8:09 AM
To: Dan Persfull
Subject: RE: Small Farm Loan & 25 Acres (E)

No, you cannot automatically exempt a loan to purchase a dwelling located on 25 acres or more regardless of the property's use.





Dan Persfull To
<dpersfull@peoples-bank.com> "'hmdahelp@frb.gov'" <hmdahelp@frb.gov>
cc
03/02/2010 02:12 PM
Subject
RE: Small Farm Loan & 25 Acres (E)





I appreciate your quick response but I fully understand that the purchase of property used primarily for agricultural purposes is exempt even if a dwelling is located on the property and that is there is some question to the actual use of the property I can apply the 25 acre rule on a case by case basis. My question is can I automatically exempt a loan to purchase a dwelling located on 25 acres or more regardless of the property's use? As an example, in our area there are lake properties with a dwelling located on 25 or more acres and there is absolutely no agricultural use of the property whatsoever. Although I am aware the property is not primarily used for agricultural purposes can I exempt the purchase simply because the dwelling is located on 25 or more acres?

Maybe I should rephrase the question as follows:

If I have a request to purchase a property located on 25 acres or more am I (the financial institution) responsible for determining if the property is primarily used for agricultural purposes OR can I simply exempt it as a home purchase because the dwelling is located on 25 or more acres without any regard to the property's actual use?

Thank you for your assistance,

Dan

-----Original Message-----
From: hmdahelp@frb.gov [mailto:hmdahelp@frb.gov]
Sent: Tuesday, March 02, 2010 1:45 PM
To: Dan Persfull
Subject: Re: Small Farm Loan & 25 Acres (E)

Home purchase loans are not HMDA reportable if the loan is to purchase property used primarily for agricultural purposes, even if the property includes a residential dwelling. Use of the 25 acres or more rule to determine the reasonable standard for primary use may be used by the institution on a case-by-case basis.

HMDAHELP


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Is a loan is to purchase property of 25 acres or more with a dwelling located on the property automatically exempt from being reported as a home purchase under the Small Farm exemption regardless if the property is primarily used for agricultural purposes?

Dan Persfull

OK, spoke to a couple of my examiners (they returned my email by phone call today). In theory they agree with me, but they also said they can see Jay's point of view and that there is no "official" guidance.

They would expect a set of reasonable standards be used to determine the primary use, not just the one BUT because of the wording they would not be critical as long as the 25 acre standard was applied consistently on all similar type loans.

Thanks for the follow-up Dan.

Ok, so if the loans are being refinanced from another institution-I have 4 loans to the same borrower-all with the same collateral--7 parcels making up 361 acres. Six are vacant and the last is 80 acres with a house on it. These then should all be HMDA reportable as a refinance---correct?

Thanks.

bump.

Correct.

Thanks hmdagal!