Here you go
http://files.consumerfinance.gov/f/201510_cfpb_hmda-executive-summary.pdf

Is it really true that commercial purpose loans secured by a dwelling are exempt??

Here is what the summary says:

"Dwelling-secured business-purpose loans and lines of credit will be covered only if they are home purchase loans, home improvement loans, or refinancings."

Commercial purpose loans are not exempt. Commercial purpose loans are reportable when the purpose is purchase, improvement or refi. Consumer are covered regardless of purpose.

What about the AG exemption. Does that mean ANY AG loan is exempt..even if its dwelling secured. For example, a farmer has an ag loan for farming purposes secured by his farm (includes his home) and wants to refinance that note for a better rate. Would this continue to be HMDA now..or no since its "AG". OR what if a farmer is purchasing a farm and there happens to be a dwelling on it...?? I think we need their definition of "Agricultural loans".

Ag. purchases were already exempt; i haven't read the new rule yet, so i don't know if that has been expanded for other loan types or not.

In a nut-shell (I haven't read most of the 796 pages), business and ag PURPOSE loans are exempt even if they are cross collateralized by a dwelling.

Examples:
1. I need a business operating loan/line. The creditor takes my house as collateral. This is not reported and if/when the loan it is refinanced, it is not reported.

2. Ag loan to purchase tractor. Secured by farmers land including a dwelling. Not reported. Even if it's refinanced.

3. I own 45 rental dwelling properties. I get loan to improve them or buy another. This is a business purpose loan (per Reg Z), but it IS reported for HMDA.

The quote below from the ABA Newsbytes email this morning is a bit misleading....they forgot to mention the purpose test still applies for commercial. I was quite excited for a few hours.

"The rule also requires that covered lenders report information, with some exceptions, about all applications and loans secured by dwellings, including reverse mortgages and open-end lines of credit. One important exception -- which ABA and the state associations advocated vigorously for -- is for dwelling-secured transactions made for commercial purposes. Lenders do not need to report data for such loans."

Oh my!

Good point Mel. I've been struggling with how to explain this new twist too. I'm looking for a short, simple and yet understandable way of explaining the coverage of business/ag loans. Maybe we should hammer out something here that we can all use. I'll take a stab:

"HMDA does apply to business and ag loans if the purpose is to purchase or improve a dwelling and the loan is secured by a dwelling. HMDA also applies to the refinancing of these loans. HMDA does not apply to business & ag purpose loans where a dwelling is taken as collateral, but the purpose is not about the dwelling."

What do you think?

Ag purpose is exempt: 1003.3(9)

(9) A closed-end mortgage loan or open-end line of credit used primarily for agricultural purposes;

From the new Commentary:

1. Loan or line of credit used primarily for agricultural purposes. Section 1003.3(c)(9)
provides that an institution does not report a closed-end mortgage loan or an open-end line of
credit used primarily for agricultural purposes. A loan or line of credit is used primarily for
agricultural purposes if its funds will be used primarily for agricultural purposes, or if the loan or
line of credit is secured by a dwelling that is located on real property that is used primarily for
agricultural purposes (e.g., a farm). An institution may refer to comment 3(a)-8 in the official
interpretations of Regulation Z, 12 CFR part 1026, supplement I, for guidance on what is an
agricultural purpose. An institution may use any reasonable standard to determine the primary
use of the property. An institution may select the standard to apply on a case-by-case basis.

If there was an unusual situation where an ag loan was also buying a residence for rental, I could see that being reportable, but if the loan is ag purpose it is not reportable even if a dwelling is involved.

Sounds like the current HMDA rules for reporting would still hold then for business purpose loans (IOW, the 'purchase, refinance, home improvement' test), which wouldn't be hard to remember/implement. Is that right?

1. I need a business operating loan/line. The creditor takes my house as collateral. This is not reported and if/when the loan it is refinanced, it is not reported.

Granted I have not read these rules to any detail whatsoever but how does this loan when refinanced escape the refinancing definition?

4. Examples—excluded business- or commercial-purpose transactions.

iii. A closed-end mortgage loan or an open-end line of credit whose funds will be used
primarily for business or commercial purposes other than home purchase, home improvement, or
refinancing, even if the loan or line of credit is cross-collateralized by a covered loan.

2(p) Refinancing.
1. General. Section 1003.2(p) defines a refinancing as a closed-end mortgage loan or an
open-end line of credit in which a new, dwelling-secured debt obligation satisfies and replaces an
existing, dwelling-secured debt obligation by the same borrower. Except as described in
comment 2(p)-2, whether a refinancing has occurred is determined by reference to whether,
based on the parties’ contract and applicable law, the original debt obligation has been satisfied
or replaced by a new debt obligation. Whether the original lien is satisfied is irrelevant. For
example:
i. A new closed-end mortgage loan that satisfies and replaces one or more existing
closed-end mortgage loans is a refinancing under § 1003.2(p).
ii. A new open-end line of credit that satisfies and replaces an existing closed-end
mortgage loan is a refinancing under § 1003.2(p).
iii. Except as described in comment 2(p)-2, a new debt obligation that renews or modifies
the terms of, but that does not satisfy and replace, an existing debt obligation, is not a refinancing
under § 1003.2(p).

Yes. No change for business purpose. Business purpose retains the purchase/improvement/refinance purpose test.

Consumer changes to all dwelling secured.

Thanks KB.

Dan, I am still pondering that. If the intent is that a business purpose refi had to be a refi of a purchase or improvement loan, that does not come through. I think that will be a question for the CFPB.

DD: So, what about this? Is this correct?

Business/Commercial and AG loans (and the refinancing of these loans) = purpose test, purchase of a dwelling, Home improvement of a dwelling, refinance of a dwelling, then HMDA......any other purpose...NOT HMDA

Consumer loans (and the refinancing of these loans): collateral test, secured by a dwelling,... then HMDA

I haven't read these rules completely or thoroughly yet. But it was my understanding from the Exec Summary that you would no longer report a refinancing of an ag loan that is dwelling secured. IOW, purpose drives before collateral.

I think Winning's summary is correct, but again, I haven't dug too deep into this yet.

I agree it's not typical, but I occasionally see a "ag" loans where the farmer has a house for workers. This could be the purchase, improvement or refinancing or a dwelling for HMDA.

But could you make the case that the purpose is agricultural, especially if a temporary residence, not someone's permanent residence? I think you could say the purpose related to farm operations.

I think that would be a tough argument. These are typically not temporary residences. As farms have gotten bigger, many of the larger operations buy farm land that has a house on it. They then use those homes to house workers - sometimes the same person that sold them the farm land. They really are no different than any other rental house.

Footnote 221:

Prior to the proposal and in public comments on the proposal, the Bureau received feedback that agricultural purpose
refinancings should be excluded from Regulation C’s coverage. The final rule clarifies that all agricultural purpose
transactions, whether for home purchase, home improvement, refinancing, or some other purpose, are
excluded transactions. See the section-by-section analysis of § 1003.3(c)(9).


Business/Commercial and AG loans (and the refinancing of these loans) = purpose test, purchase of a dwelling, Home improvement of a dwelling, refinance of a dwelling, then HMDA......any other purpose...NOT HMDA

Consumer loans (and the refinancing of these loans): collateral test, secured by a dwelling,... then HMDA

AG Loans - exempt

Are you feeling the grey hairs growing in yet?

Good summary Dan & I agree. Here's my point:
If a farmer is buying a dwelling to house workers, is that an AG purpose or a commercial purpose? I've never know the dwelling owner to give free housing. So the question would be in what "bucket" does the purchase/improvement/refinance of that dwelling fall - commercial or ag?

What if the worker quits the job and moves and now the "farmer" rents the house to a non-worker? It's not uncommon around my part of th country to have these houses rented to anyone that will rent them. The farmer merely wanted the ag land, but got the house as part of the deal. I'd have a time time not calling these commercial purpose loans as renting houses is not a AG related purpose.