I have a customer that is purchasing his primary residence, but he is putting up a rent house as collateral. We do not have lien against his primary residence. When I am reporting this loan to HMDA, what should the occupancy be? Is occupancy purpose driven or is it driven by the property that the loan is secured by?

Refer to I.A.#6 in Appendix A of Reg C.

Appendix D
Supplement I to 12 C.F.R. Part 1003 Staff Commentary on Regulation C
Paragraph 4(a)(6).
1. Occupancy—multiple properties. If a loan relates to multiple properties, the institution reports the owner-occupancy status of the property for which property location is being reported. (See the comments to paragraph 4(a)(9)).
Paragraph 4(a)(9).
2. Property location—multiple properties (home purchase/refinance of home purchase). For a home purchase loan, an institution reports the property taken as security. If an institution takes more than one property as security, the institution reports the location of the property being purchased if there is just one. If the loan is to purchase multiple properties and is secured by multiple properties, the institution reports the location of one of the properties or reports the loan using multiple entries on its HMDA/LAR (with unique identifiers) and allocating the loan amount among the properties.

Amanda, because the purpose of your proceeds are purchase, and there is only one property (I am assuming) securing the obligation, you will report the occupancy for the rental property taken as security.