Skip to content
GeoDataVision
Thread Options
#1788755 - 02/24/13 02:24 AM Dwelling tear down - commercial loan denial
notuntermywatch Offline
Gold Star
Joined: Jun 2006
Posts: 392
MN
We had a commercial applicant who owned a home in very rough shape, free and clear. They came to us for a loan to tear down that home and then build a triplex on the land.

Given that this was a commercial loan, it would not have had the typical structure where there would be a construction and then perm financing like there is with residential. Plus, it was denied pretty quick so there was no term sheet established. Would you report this as a HMDA loan purchase or not report because of the construction nature of the request.

Return to Top
HMDA

   
HMDA Academy
#1788759 - 02/24/13 09:24 PM Re: Dwelling tear down - commercial loan denial notuntermywatch
Truffle Royale Offline

10K Club
Joined: Jul 2003
Posts: 17,349
The applicant owned the home (not a purchase)free and clear so (not a refi).
There has been discussion on this board about demo and rebuilding being HI but imho, that's not applicable here because the notion was to build a triplex not keep the sfd.
I'm comfortable with stating not HMDA reportable.

Return to Top
#1795684 - 03/18/13 02:23 PM Re: Dwelling tear down - commercial loan denial notuntermywatch
Kisha Offline
100 Club
Joined: Feb 2011
Posts: 232
I would like add to this discussion if I may.

We have a loan that we originated on ag property. Our customer refinanced the property with the intention of tearing down the home. The appraisal did not consider any value for the home because it is not habitable as is. The property is being used for ag purposes. The lender obtained this information from the customer, but did not memo the file as to what the plans for the house was. The appraiser was told of the plans so did not value the house. I did not report this for HMDA because there will be no dwelling.

So, my questions are #1 Should it be reported in case the house does not get torn down? #2 Should there be a memo to the file why we asked the appraiser to not value the house? #3 When we do refinances of ag property should we consider the use of the property to determine whether the refinance should be reported?

I ask this third question because of the Soup to Nuts Q&A I read from this January. To summarize: The question was if an ag property does not have an address but the county says it is a one room SFD but it was used for only ag does the refi need reported. The answer was to consider this a mixed-use property and to determine the primary use of the property. And in this case to not report it.

We do all of our ag loans under a commercial underwriting system so should we actually be considering the primary use of the property and possibly not report any farm refinances? I'm a little stumped now because we have always reported farm refinances.

Thanks for you help in advance.

Return to Top
#1795697 - 03/18/13 03:00 PM Re: Dwelling tear down - commercial loan denial notuntermywatch
Truffle Royale Offline

10K Club
Joined: Jul 2003
Posts: 17,349
If you search this forum you'll find a number of threads that speak to buildings that were formerly used as dwellings being used for other purposes, ie: dental offices, etc.

GIR p29 States a refi is any dwelling -secure loan that replaces and satisfies another dwelling secured loan to the same borrower.
GIR p28 defines Dwelling as any residential structure.

If the building is not going to be used as a residential structure, you do not have a refinance under HMDA.
By that I mean, if the building (house) is used to store farm equipment but not for someone to live in, you do not have a refi.

Return to Top
#1795742 - 03/18/13 04:04 PM Re: Dwelling tear down - commercial loan denial notuntermywatch
Kisha Offline
100 Club
Joined: Feb 2011
Posts: 232
The customer has indicated the house will be demolished soon. According to more information I have received the house could be renovated. The former tenants supposedly "destroyed" the inside and the owner doesn't want to fix it up, just tear it down. The appraisal did not say that it was not habitable, just that it wasn't being included in the value because it would be torn down. I guess maybe I'm making too big a deal out of this. I still believe it is not reportable, but if the home could be fixed up and rented then I would change my stance. We have nothing to go on except the customer's intentions.

Return to Top
#1795744 - 03/18/13 04:08 PM Re: Dwelling tear down - commercial loan denial Kisha
Truffle Royale Offline

10K Club
Joined: Jul 2003
Posts: 17,349
Originally Posted By: Kisha
We have nothing to go on except the customer's intentions.
And that's all you need.
I'm sure you've seen the posts where someone is taking money to purchase an investment property in the future or renovate the dwelling into a dentist's office. The only information these banks had to base their report/do not report decision on was what the borrower told them. Document the file and forgetaboutit! smile

Return to Top
#1795747 - 03/18/13 04:11 PM Re: Dwelling tear down - commercial loan denial notuntermywatch
Kisha Offline
100 Club
Joined: Feb 2011
Posts: 232
I do agree and I'm good with the intentions of the customer. I guess I'm trying to get support to back up my decision not to report.

Thank you TR! I appreciate your advice.

Return to Top

Moderator:  SMQ, CRCM