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#1630181 - 11/18/11 03:01 PM
Build a barn - HMDA?
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Joined: Feb 2003
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We have a loan with a purpose of building a barn on the borrower's 7 acre property that already contains his primary residence and a detached garage. The loan will be secured by a second lien on this property.
Is this HMDA reportable as home improvement?
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#1630186 - 11/18/11 03:05 PM
Re: Build a barn - HMDA?
AuditorK
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Joined: Sep 2004
Posts: 5,249
out of the frying pan...
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Unless the barn is for a business or income-producing agricultural purpose, I would say yes. Note - I qualified agricultural purpose with "income-producing" because housing the grandkids' pet ponies is not an agricultural purpose - it's personal.
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#1630198 - 11/18/11 03:22 PM
Re: Build a barn - HMDA?
RR Becca
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Posts: 962
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Makes sense.
So a loan to construct a chicken breeding house on a 35 acre property that contains a primary residence, barn, farm fields - is not home improvement either then by the explanation you provided.
These agricultural loans (where the home is located on the property where the farm business occurs as well) are mighty confusing when it comes to HMDA.
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#1630206 - 11/18/11 03:28 PM
Re: Build a barn - HMDA?
RR Becca
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Joined: Sep 2004
Posts: 5,249
out of the frying pan...
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just to expand a bit... I explain it to our LOs this way:
If you have a customer build a business office, commcercial garage, or retail shop on a portion of the land that includes their primary residence, would you call that home improvement? No. The same logic applies to *income-producing* agricultural facilities.
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#1630234 - 11/18/11 03:53 PM
Re: Build a barn - HMDA?
RR Becca
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Posts: 9,110
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Interesting Becca. What about this scenario? Your examples are instances where the borrower builds something (business office, commercial garage, etc.) SEPARATE from the home. While i know someone adding a commercial garage to their home isn't going to happen, what difference do you see if the business office, instead of being built separately, is ADDED on to the home? In my mind, that is undoubtedly home improvement and i'm trying to connect the dots in my head as to how it being separate from the home would make a difference. Just curious and looking for some clarity. You've made me think today.
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#1630238 - 11/18/11 03:56 PM
Re: Build a barn - HMDA?
raitchjay
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Joined: Sep 2004
Posts: 5,249
out of the frying pan...
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I would then refer to the mixed-purpose building rules (square footage vs income, etc.). I apologize for making you think on a Friday. That should never happen.
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#1630243 - 11/18/11 04:02 PM
Re: Build a barn - HMDA?
RR Becca
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Haha. So true. I can't poke holes in your logic in the original question; is this an inferred thing? I'm wondering if one could make the argument that a commercial garage is "improving" the worth of the home. I guess i'm struggling with the concept because i don't SEE a business-purpose test in regards to HI loans anywhere.
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#1630246 - 11/18/11 04:03 PM
Re: Build a barn - HMDA?
raitchjay
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Well...i take that back. I see it in regards to mixed-use property. But, if a commercial garage is placed on a homestead that currently has no commercial use, it wouldn't yet be mixed-use property.
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#1630264 - 11/18/11 04:17 PM
Re: Build a barn - HMDA?
Kathleen O. Blanchard
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Joined: Sep 2004
Posts: 5,249
out of the frying pan...
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I can see where the argument can be made, but I think this may be one of those "pick a method and be consistent" things. I tend to fall back on how the loan would be coded for purpose. If the loan is being used to build the commercial garage, for example, I don't believe the LO is going to code it "home improvement."
I think I'm probably expressing this poorly, as well.
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#1630431 - 11/18/11 07:07 PM
Re: Build a barn - HMDA?
AuditorK
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Joined: Sep 2010
Posts: 2,662
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Makes sense. These agricultural loans (where the home is located on the property where the farm business occurs as well) are mighty confusing when it comes to HMDA. Keep in mind that the agricultural/farm exemption only applies to a purchase, not a refinance.
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Adam Witmer, CRCM All statements are my opinion, not those of my employer, and should not be taken as legal advice. www.compliancecohort.com
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