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#2054713 - 12/17/15 04:38 PM individual borrower, corporate purchaser - report?
ForceFull1 Offline
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Individual is obtaining a loan secured by his residence to fund down payment for several 4-plex investment properties.
The investment properties are being purchased by a corporation.
Do the different entities involved negate reporting? Or do we still report?

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#2054715 - 12/17/15 04:46 PM Re: individual borrower, corporate purchaser - report? ForceFull1
David Dickinson Offline
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Central City, NE
Sounds like a purchase to me. Loan is secured by individual's residence (dwelling secured) to purchase dwellings. It's odd, but should be reported.
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#2054721 - 12/17/15 04:52 PM Re: individual borrower, corporate purchaser - report? ForceFull1
Kathleen O. Blanchard Offline

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Yes, report. It is simply a third party pledge of the collateral, which is a dwelling A dwelling secured purchase of a dwelling is reportable.
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#2054750 - 12/17/15 06:19 PM Re: individual borrower, corporate purchaser - report? ForceFull1
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Between the lines
For a home purchase loan, you report the property taken as collateral.
If you take multiple properties as collateral, including the property being purchased, then you report the property purchased. (Any one of them if 1 entry, unless you want to go with multiple lines on the LAR.)
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#2054823 - 12/17/15 08:47 PM Re: individual borrower, corporate purchaser - report? ForceFull1
Colorado Girl Offline
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But if the individual taking the loan to fund down payment isn't the 'purchaser' of the properties, how can it be a Purchase? Isn't this more like a gift situation?

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#2054858 - 12/17/15 09:31 PM Re: individual borrower, corporate purchaser - report? ForceFull1
David Dickinson Offline
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"Purchase" is a defined term in Reg C. What you describe meets that definition. It's a dwelling secured loan to purchase a dwelling. The downpayment is no less part of the purchase than the remaining balance. No where does it state the person making the person isn't the "purchaser" or that they have to be the same person. As KB stated, it's a "third party pledge".

There's even a Commentary that indicates if 2 loans are needed to purchase a property (like an "80/10/10"), then both the 80% loan and the 10% "downpayment" loan are reported as purchases.
If an institution making a first mortgage loan to a home purchaser also makes a second mortgage loan to the same purchaser to finance part or all of the home purchaser's down payment, the institution reports each loan separately as a home purchase loan. [Commentary to ยง1003.2]
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#2054866 - 12/17/15 09:39 PM Re: individual borrower, corporate purchaser - report? ForceFull1
raitchjay Online
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Originally Posted By ForceFull1
Individual is obtaining a loan secured by his residence to fund down payment for several 4-plex investment properties.
The investment properties are being purchased by a corporation.
Do the different entities involved negate reporting? Or do we still report?


If we changed the OP's scenario to read this way:

"Individual is obtaining a loan secured by his residence to fund down payment for a home. The home is being purchased by his daughter."....wouldn't we call that a gift (and not report)? I think that's Colorado Girl's point (she can correct me if i'm wrong). If so, how is the original scenario different? I just see her point...not saying i (or she) is right......just seeking clarification.
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#2054867 - 12/17/15 09:40 PM Re: individual borrower, corporate purchaser - report? ForceFull1
Colorado Girl Offline
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I must be misunderstanding "The investment properties are being purchased by a corporation." I apologize, I thought that it sounded like an individual was funding or possibly 'gifting' the down payment for a corporation purchasing investment properties.

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#2054872 - 12/17/15 09:56 PM Re: individual borrower, corporate purchaser - report? ForceFull1
Kathleen O. Blanchard Offline

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I missed the down before the word payment. That is a very odd situation.

I think we need more info:

Will the individual have any ownership interest in the properties?
Will the individual be a co-borrower on the loan to the corporation?
Is the bank funding a loan to the corporation?
Is the individual lending the funds to the corporation? A business normally doesn't just accept gifts. Funds in a business transaction have to be accounted for.
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#2054876 - 12/17/15 10:04 PM Re: individual borrower, corporate purchaser - report? ForceFull1
David Dickinson Offline
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I agree it's odd and stated as such in my original post. However, I think it meets the definition of "purchase" in HMDA. It's dwelling secured and the purpose of the money is used to purchase a dwelling. I don't see anything in the regulatory definition that requires the borrower to be the owner.

Home purchase loan means a loan secured by and made for the purpose of purchasing a dwelling.
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#2054877 - 12/17/15 10:08 PM Re: individual borrower, corporate purchaser - report? ForceFull1
raitchjay Online
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IMHO, if you 'purchase' a dwelling, at the end of the transaction, you would own (at least partially) a dwelling. Otherwise, you aren't purchasing a dwelling; you're giving someone a gift of money.
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#2054882 - 12/17/15 10:22 PM Re: individual borrower, corporate purchaser - report? raitchjay
Kathleen O. Blanchard Offline

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Originally Posted By raitchjay
IMHO, if you 'purchase' a dwelling, at the end of the transaction, you would own (at least partially) a dwelling. Otherwise, you aren't purchasing a dwelling; you're giving someone a gift of money.


Agreed. With a purchase should come some ownership interest.
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#2054898 - 12/18/15 05:44 AM Re: individual borrower, corporate purchaser - report? ForceFull1
David Dickinson Offline
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Central City, NE
So if that logic is true, then this money isn't being used to purchase the dwelling. Hmmm. What is the money being used for then? The OP said "to fund down payment".

Again, I agree this is odd, but I don't think I could argue with an examiner that the downpayment loan isn't to purchase a dwelling. It's not my argument and it's not worth arguing, but I think you're on thin ice to try to not report this loan.
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#2054899 - 12/18/15 09:57 AM Re: individual borrower, corporate purchaser - report? ForceFull1
Kathleen O. Blanchard Offline

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With more information, the loan could be categorized:

Funds for loan to corporation (not a purchase) -as RJ said, like a loan for a parent to gift downpayment to child - this is common
Funds to purchase partial interest in building (purchase)
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Kathleen O. Blanchard, CRCM "Kaybee"
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www.kaybeescomplianceinsights.com

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#2055097 - 12/19/15 04:15 AM Re: individual borrower, corporate purchaser - report? ForceFull1
David Dickinson Offline
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Central City, NE
I agree with that. Could go either way.
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#2055286 - 12/22/15 03:01 PM Re: individual borrower, corporate purchaser - report? ForceFull1
ForceFull1 Offline
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smalltown Iowa
Thanks for the great discussion. Ultimately I ran this by our local FDIC office, and they agreed it should be reported as a purchase. The proceeds will be used to purchase a dwelling, and the loan is secured by a dwelling. The difference in borrowing entities does not factor into that decision. Or so they say. So, we will be reporting.

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