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#2029866 - 07/27/15 04:35 PM HMDA Hat Trick
RGS Offline
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RGS
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Home of the 8 time NCAA Champ ...
We have a trio of deals that have me scratching my head and researching to decide if the deals are reportable or not.

Deal 1 - Secured by Property A and Property B (which have separate legal descriptions on separate deeds). Property A is a farm. Property B contains a dwelling and a commercial building. Both are being purchased with the proceeds of the loan. The majority of the proceeds are going to purchase property A and the majority of the income generated by this property (none of it is owner occupied) will be generated by property A. If this were done as two loans, I would have a non-reportable farm purchase and a reportable dwelling purchase - but they weren't. My instinct is to let "majority rule" and not report this as property A dominates, but I can't find anything definitive to confirm or deny that instinct. I can find a lot about multiple purpose loans, but not much (if anything) about loans to purchase different property types.

Deal 2 - Reading this http://www.bankersonline.com/compliance/guru2012/gurus_comp031912a.html makes me think the deal is actually reportable as a refinance, but here goes. This deal is secured by property C & property D. Both properties are farms. The purpose of the loan is to purchase property C (which would be exempt by itself), however property D is being used as additional collateral. ASSUMING that property D is already mortgaged and that we are going to be replacing that mortgage with this new mortgage (that this indeed is actually a refinance and not an "equity tap") the previous link would make me believe this is reportable as a refinance. If it is just an equity tap, then I change my mind and consider it non-reportable as a farm purchase (yes both farms are working farms with dwellings).

Deal 3 - This is secured by property E & property F. Both are farms. 85% of the proceeds are being used to purchase property E; 15% of the proceeds are being used for improvements on the dwelling at property (which is migrant worker housing). My thought process is twofold - a) deep down I think we go with majority rules and this isn't reportable ; b) if I'm wrong, I feel that migrant worker housing is equivalent to "transitory housing" such as a dorm or a hotel and isn't HMDA reportable as per the GIR instructions and this isn't a dwelling improvement loan regardless. But - am I completely wrong? Is it A or B? Is it C?

Any nudge in the right direction will be very much appreciated.

Thanks in advance.
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#2029881 - 07/27/15 05:16 PM Re: HMDA Hat Trick RGS
raitchjay Offline
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OK
First let me say, i think these are great questions. I think Deal 3 is pretty clear-cut, for the reasons you stated: by either test, it isn't reportable (ag. purchase and the 2nd property isn't a "dwelling" for HMDA purposes).

Deals 1 and 2 come down to interpretation IMHO: some will say that any exemption for a loan excludes the loan no matter what; others will say that if you have multiple purposes, you have to consider the purposes individually to see if either purpose is HMDA reportable. I would tend to fall into this camp....my reasoning being: if you had an application to buy a car for $25,000 and get extra cash-out of $10,000 to do improvements to the home, all secured by the home, you wouldn't exempt the loan because car purchases aren't reportable, right? I would also fall back on the language in the GIR about mixed-use property..."a dwelling-secured loan to purchase property that is used primarily for residential purposes is a home purchase loan". Your scenarios deal with purchasing multiple properties, but to me, the exemption behind property A (or B, C, D, whatever the designation) doesn't impact property B (etc.), because of that statement: the loan purpose (amongst other purposes) is to "purchase property that is used primarily for residential purposes".

I am almost certain some will disagree; i can easily see the other argument too. JMHO.
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#2029882 - 07/27/15 05:25 PM Re: HMDA Hat Trick RGS
raitchjay Offline
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I think you can defend not reporting or reporting both Deals 1 & 2 (assuming 2 meets the HMDA definition of refinance); both include a property that meets the HMDA reportability requirements and another property that meets a HMDA exemption. I really think your argument is made for you whichever way you decide; you can defend reporting it; you can defend not reporting it.

I also want to add (i figure this will come up in Deal 2) that to me it makes no difference that property D's HMDA purpose is a refinance, and property C's purpose (if you can really even consider a non-HMDA reportable purpose, which is what it has) is a "purchase". They're separate properties, so i don't see property C's purpose "trumping" property B's purpose.
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#2029900 - 07/27/15 06:03 PM Re: HMDA Hat Trick RGS
Dan Persfull Offline
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Bloomington, IN
Deal # 1.

From the GIR:

3. Farm loan. A loan to purchase property used primarily for agricultural purposes is not a home purchase loan even if the property includes a dwelling. An institution may use any reasonable standard to determine the primary use of the property, such as by reference to the exemption from Regulation X (Real Estate Settlement Procedures, 12 C.F.R. 1024.5(b)(1)) for a loan on property of 25 acres or more. An institution may select the standard to apply on a case-by-case basis.


If I'm reading your question correctly the farm property being purchased does not have a dwelling on it therefore this exemption is not applicable.

Deal #2:

This was hard for me to follow, but again it does not appear A & C have dwellings on them therefore the farm purchase exemption does not apply. If the loan on property D, assuming it is dwelling secured, is being refinanced as a part of this deal then you have a reportable refinancing.

Deal #3:

Again it's not clear but if property E (the property being purchased) has a dwelling on it then it would be exempt under the farm exemption regardless if additional property if being taken as collateral or the purpose of any excess funds.


Also, since you referenced percentages and majority a few times, it does not matter what the majority of the loan proceeds will be used for. If any portion of the loan proceeds will be used for a home purchase, home improvement or a refinancing as those terms are defined in Reg. C then the loan is reportable.
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#2029901 - 07/27/15 06:07 PM Re: HMDA Hat Trick RGS
raitchjay Offline
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I assumed the farms mentioned had dwellings on them (perhaps that wasn't the proper assumption, but i figured based on the questions, they did; otherwise, they would seemingly be pretty straightforward).
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#2029902 - 07/27/15 06:10 PM Re: HMDA Hat Trick RGS
raitchjay Offline
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Dan, i'm curious: you mention the exemptions not being available if no dwellings were on the farms (i agree), but your last statement: "Also, since you referenced percentages and majority a few times, it does not matter what the majority of the loan proceeds will be used for. If any portion of the loan proceeds will be used for a home purchase, home improvement or a refinancing as those terms are defined in Reg. C then the loan is reportable."

if these farms all have dwellings on them, do you agree with my statement that one property's HMDA reportable nature can't be trumped by another property's HMDA exemption all within one loan?
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#2029903 - 07/27/15 06:17 PM Re: HMDA Hat Trick RGS
Dan Persfull Offline
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The way he referred to the properties as "farms" lead me to believe they didn't. Primarily based on the following:

"Property A is a farm. Property B contains a dwelling and a commercial building."

"deal is secured by property C & property D. Both properties are farms. The purpose of the loan is to purchase property C (which would be exempt by itself)," Why is exempt? Because it has a dwelling on it or because it's fram land being purchased? The question isn't clear.

" This is secured by property E & property F. Both are farms. 85% of the proceeds are being used to purchase property E; 15% of the proceeds are being used for improvements on the dwelling at property " Is the dwelling on property E or property F?

It was difficult to determine if the "farms" had dwellings on them the way the questions were worded.
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#2029905 - 07/27/15 06:19 PM Re: HMDA Hat Trick RGS
raitchjay Offline
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Yes, upon re-reading, it isn't clear. I approached it as if their were dwellings on the farms; you did the opposite. Need clarification i guess.
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#2029909 - 07/27/15 06:25 PM Re: HMDA Hat Trick RGS
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
do you agree with my statement that one property's HMDA reportable nature can't be trumped by another property's HMDA exemption all within one loan?

If the loan's primary purpose meets an exemption then it is exempt.
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#2029910 - 07/27/15 06:26 PM Re: HMDA Hat Trick RGS
RR Joker Offline
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Deal 1 - Purchase, due to property B containing a dwelling and it's a purchase and isn't a farm.

Deal 2 - Purchase of a farm (with dwelling) secured by that farm and an existing farm (with dwelling) Based on purpose, I'd say exempt.

Deal 3 - If the dwelling is a normal dwelling, can you really call it transitory just because that's what they are currently using it for? Seems to me it's a reportable HI. (because of HMDA's definition of HI and "at least in part, for repairing"
Last edited by RR Joker; 07/27/15 06:35 PM. Reason: Added my reasonings for Deal 3 and HI rules
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#2029913 - 07/27/15 06:32 PM Re: HMDA Hat Trick RGS
raitchjay Offline
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I just think we're looking at the classic "irrestible force" meets an "immovable object". On the one hand, there is a property with a purpose attached to it that meets an exemption from HMDA reporting. On the other hand, there is a property with a purpose attached to it that requires reporting because it meets the HMDA definition of a purchase, refinance, or home improvement. I think it depends on how you read "A dwelling-secured loan to purchase property that is used primarily for residential purposes is a home purchase loan". Does primarily there clarify "loan" or "property"? You can argue either i guess, but it seems to me to clarify "property", and these scenarios have multiple properties.
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#2029921 - 07/27/15 06:44 PM Re: HMDA Hat Trick RGS
swiggles Offline
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Setting up a pole to determine how many reading this thread, know what a hat trick is. LOL
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#2029959 - 07/27/15 07:56 PM Re: HMDA Hat Trick RGS
Dan Persfull Offline
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Bloomington, IN
what a hat trick is

Taking off my hat and once again finding a full head of hair.
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#2029968 - 07/27/15 08:05 PM Re: HMDA Hat Trick RGS
RR Joker Offline
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RR Joker
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The Swamp
laugh!!
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#2029975 - 07/27/15 08:12 PM Re: HMDA Hat Trick RGS
raitchjay Offline
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OK
laugh
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