I have an exising 1st mtg customer (primary res) who owns a vacation home and wants to get a 12 mth "bridge" loan. The bank will take a 1st mtg on the vacation home and also a 2nd on his primary (only as a precaution, its not needed). He will be using the proceeds 1/4 for business purpose the 3/4 for improvements on the vacation home.

My first response to the loan officer is that its a consumer purpose loan and all the required disclosures for a other 1st mtg closed end - other consumer purpose would apply.

I know I read somewhere that the if the proceeds are being used for business & personal reasons the determination would be which received a large share. Is this true?
Also if it is personal does HMDA apply?

I thought because your Bridge loan was temporary financing the only disclosure needed was the appraisal disclosure and a HUD 1 at settlement.

Presuming that you identify the loan on your system as a home improvement loan, then the loan may be HMDA reportable. This is dependent on the source of repayment for the loan and whether you consider it temporary financing.

Based on the description you provided, I would call the loan consumer purpose. I agree that the all the early disclosures are due, except the early TIL. This is only required in the event the loan is a residential mortgage transaction. This loan is not an RMT because no first title is being acquired.

This answer is based on the assumption that, if the vacation home is rented, the borrower occupies property more than 14 days per year. If the home is rented and the borrower does not live in the home at least 14 days per year, then the procceds for the home improvement are for non-owner-occupied rental property - an exempt purpose under Reg Z.

The analysis of the proceeds is a good method to determine whether the loan is business or consumer. There is some basic discussion of this in the Commentary to section 226.3.

Just a small observation...beginning in 2004 I don't think it has to be identified on your system as home improvement since it is dwelling-secured. If it was unsecured then, yes - it would need to be classified as HI in order to report for HMDA as HI.

I agree with Paul and Popeye. This is a consumer purpose loan - majority rules. It is a HMDA loan (home improvement and dwelling secured) if it is NOT considered temporary financing.

Popeye is correct. I stand corrected.

What about this, what if the loan was originally written for 1 year (it is still 1 yr or less for def on temp financing??) and I don't report on LAR but when the maturity rolls around and the big guys decide that they want to extend it for another 6 or 12 months do you think it would turn into a violation?

For purposes of HMDA reporting the term of the loan does not determine if the loan is temporary financing. The source of repayment determines this.