Please help me decide if, and if so how, a loan needs to be reported on our LAR. Here's the deal:

1. The application is for a loan secured by the borrower's current primary residence, which they own free and clear.

2. The proceeds will be used to purchase a vacant lot, improve it and then build a new home on it. The borrowers plan to occupy this new home as their primary residence upon completion.

I'm thinking it isn't a purchase loan, since the lot is currently unimproved. And it isn't a refinance, since the loan doesn't replace an existing debt. But is it home improvement loan? As I read the reg, since it is secured by a dwelling and the proceeds will be used to improve a dwelling or the real estate that the dwelling is attached to, it would be a home improvement loan. But since the land doesn't currently HAVE a dwelling on it, I'm second guessing myself.

If none of your money will be used to construct/purchase the dwelling I would not report this loan. There is no dwelling located on the land being improved.

Construction loans aren't reportable for HMDA unless the construction is for repair or remodel of an existing dwelling.

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Construction loans aren't reportable for HMDA

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Not knowing whether the loan is set up as temporary on the existing home makes these answers speculative, but if the proceeds from the loan are set up as a const/perm loan secured by the current residence would make this loan reportable.

Speaking of temporary financing, this issue keeps coming up and we can't seem to agree on it and I would appreciate some help. Home improvement loan for $15,000 originated in 2004 unsecured. The term of the loan is 6 months with a single payment of principal and interest due at that time. The pay back of the loan is income primary and the sale of the home after the improvements are made as secondary. We are divided on whether or not this is temporary financing? Thoughts? Thank you as always.

If the primary source of repayment is income it would not be temporary.

The loan is a FNMA conforming 30 year. The borrowers got all the dough at closing. The file is silent on whether the borrowers intend to sell the current home and payoff the loan, or keep it and have two homes. It is possible (based on my knowledge of the location) that the home to be constructed will be a second/vacation home.

So, I think the consensus here is that it would be a reportable as a home improvement loan... right?

This would be reported as a purchase transaction.

The proceeds are to construct and permanently finance a new residential dwelling. Initial construction/permanent loans are purchase transactions under HMDA.