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#186316 - 05/03/04 08:13 PM Model Home - HMDA reportable?
KrisH Offline
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KrisH
Joined: Mar 2003
Posts: 358
Massachusetts
We do a lot of construction lending to contractors, which is typically non-HMDA reportable, as it falls under temporary financing exemption. Periodically, we do loans for model homes within a subdivision, and will often write them for 2-3 years until the subdivision is complete, at which point the developer will sell the model as well. We do not include these loans on the HMDA LAR either, because we consider it temporary financing. However, we have just given a construction loan for a model home within a 100+ lot subdivision that was written for a 20 year term. (I have no idea why) Basically it's a 12 month interest only loan, converting to a 20 year amortized loan, even though it is expected that the loan will pay off within 5 years or so.

My gut instinct is that this is a HMDA reportable loan, because it's a dwelling (even though no one will be living there) and it was given a 20 year term. Am I correct in my thinking? Or would the commercial purpose exemption apply here, since they won't be making any income from it?
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#186317 - 05/04/04 02:09 PM Re: Model Home - HMDA reportable?
hmdagal Offline
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hmdagal
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I would find it difficult to justify this as temporary financing. Presumably, once payments start, they will be made from ordinary income. I would report this loan.

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#186318 - 05/04/04 02:15 PM Re: Model Home - HMDA reportable?
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
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Central City, NE
I wouldn't call it temporary financing either. However, I wouldn't report this under HMDA. This is not a dwelling. It is a model.
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#186319 - 05/04/04 02:33 PM Re: Model Home - HMDA reportable?
KrisH Offline
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KrisH
Joined: Mar 2003
Posts: 358
Massachusetts
Quote:

I wouldn't call it temporary financing either. However, I wouldn't report this under HMDA. This is not a dwelling. It is a model.




I'm sorry, I wasn't clear enough in my original post - I never thought that this fell under the temporary financing exemption, because it was written for 20 years. The main gist of my question was whether it fell under any other exemption, mainly what David pointed out about it not really being a "dwelling" since it will be used as a model, and no one will actually be living there.

Thank you both for your responses.
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#186320 - 05/04/04 02:45 PM Re: Model Home - HMDA reportable?
hmdagal Offline
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hmdagal
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Call me crazy, but we had a contractor move in to a model home after a few years. It was discovered at the time a renewal was processed, so we were able to add the loan to the LAR at that time. Something only has to happen once for me to be wary of similar transactions, and I'm not sure how they would determine if someone was living in this model home during the course of a 20 year loan.

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#186321 - 05/04/04 03:05 PM Re: Model Home - HMDA reportable?
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Quote:

Call me crazy, but we had a contractor move in to a model home after a few years. It was discovered at the time a renewal was processed, so we were able to add the loan to the LAR at that time. Something only has to happen once for me to be wary of similar transactions, and I'm not sure how they would determine if someone was living in this model home during the course of a 20 year loan.



But that's not what they are intended for. These are not dwellings - or at least not supposed to be. This is no different than any other inventory when it is used as a model home.
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