We are closing a 12 month interest only construction loan to build a primary residence and a separate term loan to build a shop on the same property simultaneously. I know the construction loan gets reported once it's converted to permanent financing. What about the shop loan? The loan clerk is wanting to code as a home improvement loan since there will be a home on the property. This is the first time anyone has wanted separate loans of this sort since we became a HMDA reporting bank. Can it be considered home improvement if no dwelling exists yet? I checked Reg C and the HMDA getting it right guide but I didn't find a clear answer.

I don't think you'll find a clear answer in any regulatory guidance on this. I think you make a determination and document your analysis.

My opinion: It's a home improvement loan as the borrower is in the process of building a dwelling. The purpose of the loan is to improve the dwelling (that is being built). If it was a shop only and no dwelling existed (or was about to exist), I would say it's not HI.