Back to this. Yes, we always have! And I still totally disagree about the barn. If the property was surveyed as to cut out the house and yard, I would not [of course]. But I totally disagree on using an agri exemption just because it's a horse barn. What if it was an 'exotic cars' barn?

It isn't an "agricultural exemption" Joker. It's just logical that the improvements aren't for the home. I know of lots of examples where businesses operate on the same property as the owner's home. For instance, an auto mechanic operates out of several buildings located on the same property as his home. If he borrowers money to build or improve a building that is totally used for the business and has nothing to do with his dwelling, that's not HOME improvement.

In the case we've been discussing the improvements aren't for the dwelling. They are for agricultural reasons. The exemption doesn't require a survey to separate the property. I guess I don't understand why you struggle with this exemption. It's been there a long time and was meant to remove improvements to mixed used properties that have nothing to do with the dwelling. The FRB (and now CFPB) does not want these applications distorting the HMDA data.

I have a horse barn and a hay barn. They increase the value of the real property I live on. Please tell me how this differs from the below? Forget whether (or a LO "assumes") or not I house only my own horses, only outside horses, or a combination. And FWIW, not many people run a boarding barn that don't also have their own.

From Randy Above:

2. Improvements to real property. Home improvements include improvements both to a dwelling and to the real property on which the dwelling is located (for example, installation of a swimming pool, construction of a garage, or landscaping).

I struggle too because every single mixed-use example (and i mean every single one) always references a single structure. They are always things like "for example, if installing new air conditioning"....you don't air condition the outdoors.

I won't post all the email exchanges that lead up to this but here is HMDAHelp's response from 2009.

-----Original Message-----
From: hmdahelp@frb.gov [mailto:hmdahelp@frb.gov]
Sent: Wednesday, June 24, 2009 11:18 AM
To: Dan Persfull
Subject: RE: Mixed Use Property-a

The mixed-use property classification applies to a single building that houses both businesses and residential units AND to properties that contain both "stand alone" dwellings that are used as a dwelling only and other "stand alone" buildings used for business purposes only.

If you have a loan that meets the requirements for more than one loan purpose, the reporting hierarchy is home purchase, home improvement, refinance.

HMDAHELP.

I recently spoke with the CFPB regarding this, and it is their position that a property with multiple structures with various uses is a multi-use property and is determined in the same way as the example of a split use single structure, which is simply an example. I personally think it makes perfect sense.

What, exactly, does that mean? The last sentence makes no sense to me!

^^^that was to Dan

In the email exchanges that weren't posted different loan scenarios were presented. That last sentence simply re-states that if you have a mixed purpose loan you follow the reporting hierarchy once you establish you have a reportable loan.

I don't disagree that that is (one) logical way to look at it.......they should make it clearer in the actual regulation and the GIR though (as i said....ONE FAQ or example that actually refers to mixed-use and doesn't follow with mixed use in a STRUCTURE would be nice).

I think anyone who reads the regulation and the GIR and the FAQs couldn't be judged for thinking that mixed-use refers to mixed-use only within one structure.....because every single example given is within one structure. Personally, i think those things should be written where bankers aren't having to call someone for clarification.

All of the references to multi-use property hinge on the various non-residential structures (or parts of the single structure) having non-personal uses. The structure that my horses live in is no more "agricultural purpose" than my neighbor's dog house. They are pets. It's a structure on my property used for personal enjoyment/property enrichment, just as a swimming pool or tennis court would be for someone who enjoys those sports. Me taking in one boarder wouldn't negate that any more than someone teaching a couple of swimming or tennis lessons in their backyard turns their places into professional facilities.

So, if the barn is built on the same acreage as the house and is used for housing of personal pet equine, I would treat it like the installation of that pool or tennis court and report it as home improvement.

If the barn is used for the commercial purpose of running a boarding business, I would treat it like the construction of an auto-body shop or some similar commercial purpose structure and exempt it.

I agree that you're right ^^^ RR Becca.
This is how we would report these here too.

If your horses are pets, like my dog, then I wouldn't disagree. But if you're a rancher that uses horses like a pickup or the "horse barn" houses cows that are "harvested" for food (commercial purpose), then it's a business. I think it depends on what part of the country you come from. In my neck of the woods, animals are eaten or raised for food for others. Most are not pets.

The regulators don't want non-dwelling related info to be recorded on HMDA LARs. It's that simple.

[Sorry to all of the PETA lovers our there. Just stating the facts].

I agree David, and that's exactly what I was trying to get across. "Agricultural" purpose means the animals being housed are "livestock." "Livestock" indicates an animal who either IS a food source or produces some kind of edible or marketable goods (like eggs, milk, or wool). Most folks I know who have horses are not using them to work ranch cattle, much less eating them, milking them, or shearing them. They fall somewhere between pet and sporting equipment - kind of an independently mobile 1200lb bike that has its own opinions and requires copious amounts of food and medical care.

Also, a boarding barn is not an 'agricultural' endeavor, as no consumable or marketable goods are being produced. It's an apartment complex for equine...therefore "commercial," not "agricultural."

!

4. Mixed-use property. A loan to improve property used for residential and commercial purposes (for example, a building containing apartment units and retail space) is a home improvement loan if the loan proceeds are used primarily to improve the residential portion of the property. If the loan proceeds are used to improve the entire property (for example, to replace the heating system), the loan is a home improvement loan if the property itself is primarily residential. An institution may use any reasonable standard to determine the primary use of the property, such as by square footage or by the income generated. An institution may select the standard to apply on a case-by-case basis. If the loan is unsecured, to report the loan as a home improvement loan the institution must also have classified it as such.

A mixed-use property (the entire property) has been improved. If you determine that the entire property is primarily residential, I believe this says an improvement to said property is a Home Improvement loan, even if the funds go to build a barn, or a shed used primarily for the home owners business, or other such 'business-purpose' use. (*Unless the improvement would change the 'primary use' of the property as a whole).

To further support this, the new rules state 'A closed-end mortgage loan or an open-end line of credit to improve an office, for example a doctor's office, that is located in a dwelling' is a covered business- or commercial-purpose transaction. Where dwelling is a property primarily residential in nature, and the improvement of that property is a Home Improvement loan.

First, You have a HUGE "IF" in your statement Colorado Girl. "If you determine that the entire property is primarily residential...".

Second, even if the bank determines the primary use is residential, the mixed-use property rule says it's "a home improvement loan if the loan proceeds are used primarily to improve the residential portion of the property." Therefore, not ALL improvements to a residential property are home improvement purposes for HMDA. The improvements have to improve the residential portion of the property, not just any portion of the property. If the improvements build a barn/shed for business purpose, it's not HI for HMDA.

The examples you gave from the new rule (a doctor's office in a home) improve the dwelling. That's why it's a HI loan. But Comment #4 (to the definition of home improvement) doesn't say that's true for all improvements to a residential property:

[i]"A closed-end mortgage loan or an open-end line of credit to improve a dwelling used for residential and commercial purposes… or the real property on which such a dwelling is located, is a home improvement loan if the loan’s proceeds are used either to improve the entire property (for example, to replace the heating system), or if the proceeds are used primarily to improve the residential portion of the property. An institution may use any reasonable standard to determine the primary use of the loan proceeds. An institution may select the standard to apply on a case-by-case basis. [Commentary to §1003.2(i) #4]

The mixed-use property rule says two things though.

"4. Mixed-use property. A loan to improve property used for residential and commercial purposes (for example, a building containing apartment units and retail space) is a home improvement loan if the loan proceeds are used primarily to improve the residential portion of the property."

This is what you're referring to right? This does state the proceeds are to be used primarily to improve the residential portion of the property to be subject to HMDA reporting (this would matter if the entire property is deemed mainly commercial but happens to have a small residential portion that's being improved.)

But it also says:

"If the loan proceeds are used to improve the entire property (for example, to replace the heating system), the loan is a home improvement loan if the property itself is primarily residential."

This states that an improvement to "the entire property" that in and of itself is primarily residential is a home improvement loan.

Are you saying that the doctor's office improvement works because even though the funds are strictly commercial, they're housed inside the dwelling; whereas an improvement to "the real property on which such a dwelling is located" wouldn't be subject to reporting because of the commercial purpose?

I like that point, CG.

If you take that office outside to a converted detached garage 5' from the dwelling and the improvements are to that office, but the home and yard are 'residential' and comprise the majority of the property, it's HI.

BUT, if you take this same situation and find out that 60% of the property is dedicated to parking for the office building, then the improvements no longer are HI because the majority of the property is dedicated to that Doctor's practice.

Sure do have to know a whole lot of details to ever come to the right conclusion on mixed-use. Even for the horsebarn, it's just doesn't seem that simple without knowing major details about the collateral.

I disagree.

Improving "the entire property" means that loan improves both the residential and commercial parts of the property (i.e. the heating system example). I don't see how converting a garage to commercial space improves the residential portion of the property.

IMO, it doesn't matter whether the property as a whole is defined as primarily residential or primarily commercial. To be HMDA reportable, the funds must be used, at least in part, to improve the residential portion of the property.

TMatt said:

This is exactly how I understand it.

Colorado Girl wrote:

What matters is what are the funds improving? The example in the commentary states the funds are being used to improve the dwelling. Therefore, it's a "HI" loan. If the funds are being used to improve something other than the dwelling or not related to the entire property, then it's not a "HI" loan.