We are originating a loan that is a purchase of one parcel with two buildings. Property is zoned industrial. One building is a commercial building that will be used for the housing of equipment for the business that is purchasing the property. The second building is a dwelling that will be rented out to tenants as a home.

HMDA GIR states that an institution may select the standard to apply on a case-by-case basis by income or square footage. The commercial building is larger (barely) and the primary source of repayment for the loan is income generated from the business and not the home.

Ultimately, the property was purchased for the commercial building. The home is a "bonus" that will "help offset some costs for obtaining the loan" (comment by the borrower).

Do we have to report this for HMDA as a home purchase? I say no because we have the choice, but others are telling me that since there is a home that will generate income it needs to be reported. I kind of feel that reporting this would be considered over reporting to cover our tails instead of making a firm decision and being consistent on similar situations in the future.

Any opinions would be great! Thank you!

IMO, you must report as a home purchase. Mixed-use applies when there's mixed-use within a structure, not amongst multiple structures that by themselves have no mixed-use.

So I must be misinterpreting what mixed-use property is?? I am looking at the property as a whole and not whether it is in one structure or separate structures.

I don't like how it says property instead of structure because, to me, it leaves the door open. I know it says in () for example, an apartment building containing a convenience store, but that's just an example and not something set in stone.

I look at it like this: if my loan finances the purchase of the Empire State Building.............and a mobile home that somehow sits next to it, i have a HMDA reportable purchase loan, if both structures secure my loan. If my loan finances the purchase of the Empire State Building (and is secured by it), which within it contains living quarters for the building superintendent, then i have mixed-use, which in that case would obviously be dominated by the commercial use of the majority of the property and the loan would not be HMDA reportable.

I understand where you're coming from. I just have to wrap my brain around the fact that my interpretation is skewed. What else is new in HMDA world.

Thank you for your insight. I do appreciate it very much!

I need some help with this one--a fellow employee emailed this question to me.

"Sorry another question about HMDA…..If we are completing the end loan and it secures 3 businesses with apartments upstairs is it HMDA reportable? I would think they’re not but I want to make sure."

Thanks for your help.

I think here you'd want to use the 50% rule. If more than 50% of the square footage or revenue is from the businesses, you can call the property "commercial".

My understanding is that you could either go by the square footage or by the rents but you should be consistent.

Would this same logic apply to a refinance secured by multiple properties? Loan secured by 2 properties: one 2-unit residential apt. building (1,500 sq. ft.) and one 2-unit commercial building (3,000 sq. ft.). HMDA reportable because of the one 2-unit residential apt. building even though the total square footage is majority commercial?

Again, IMO, the mixed-use test is never about multiple properties. It's only when there's mixed-use within one structure. Your loan would be reportable because of the 2-unit residential apartment.

Agreed.

If you read the Getting It Right Guide, you will also note that the carve-out for mixed-use properties is discussed for purchase and home improvement purposes. There is no discussion of the carve-out for refinance transactions. See Page D-4 & D-5.

IMO this is because a refinance is defined as a dwelling-secured loan extinguishing a dwelling-secured loan. In a refinance situation, either the mixed-use property is a "dwelling" for HMDA purposes or it isn't. IOW, it would default to the same test you used for the purchase loan. If you refinance a mixed-use property that is 95% commercial use and 5% dwelling, it's not reportable, because for HMDA purposes, it isn't a "dwelling".

From the previous posts I believe that I know the answer but want to confirm.
Customer is purchasing a 21,000 sq ft building that has 8,000 sq ft on main floor and basement that will be for commericial use but has 5,000 sq ft upstairs that will be used for 10 single unit apartments.

From what I read it is not HMDA reportable because more than 50% us for commercial use. Correct?

You say the total square footage is 21,000, but 8,000+5,000=13,000. What is the rest of the square footage used for?

Sorry, both the main floor and basement are 8,000 sq ft each.

Okay that makes sense. So yes, the commercial square footage is more than 50% so you can call this propery commercial and not a dwelling.

Thanks manimal. It's always nice to get confirmation.

Always happy to help where I can.

Sorry guys, I just have to weigh in on this discussion. Kisha, I would assess the PROPERTY the same way you did. The real purpose of the loan is to acquire the property for the warehouse to house the equipment,and the home is just a bonus. How do you all explain the farm property exemption for HMDA reporting then? Purchase a farm property that has a dwelling on it is not HMDA because the rationale is they are purchasing the farm not the home. To me Kisha's situation is the same. As for the refinance issue. If a dwelling is involved we always report as HMDA per the refinance definition, "a dwelling secured loan that satisfies and replaces a dwelling secured loan." It does not matter if that is the main use for the property. Again, go back to the farm property, a farm property is refinanced and has a dwelling on it is HMDA reportable. I know I may be putting logic to something that has no logic, but it hasn't failed us yet, and we have been doing that since 2004.

I hold to the belief that mixed-use property never involves multiple structures. Mixed-use is used to determine the dwelling status of a single structure.

And HMDA doesn't care what the "real" purpose of the loan is that i'm aware of; simply whether "any" of the purposes involved in your multiple-purpose loan meet the HMDA definitions of a HMDA reportable transaction. As to the ag. exemption, it specifically refers to purchases only, and to ag. purpose only, so i fail to see the correlation with mixed-use.

And you'll need to point out to me in the GIR where it says "if the home is only a 'bonus', you don't need to report".

In my experience, when applying logic to a HMDA situation, it is always wrong - there is no logic to Reg C!
That being said, we would report this transaction because there is a dwelling being purchased. Don't think it serves you well to bring the farm exclusion into this scenario as it has no bearing to the loan purpose in my humble opinion.