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#2127369 - 04/20/17 08:20 PM Re: HMDA Clarification Kathleen O. Blanchard
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Thanks so much Kathleen for your expert and comprehensive thought and response! My initial thought was that multifamily is truly multifamily, not what another regulation (or another regulator's interpretation) calls multifamily. Your responses confirm that.

I often ask the question here at the bank, "If you call a dog's tail a leg, how many legs does a dog have?" The answer: Four; calling a tail a leg doesn't make it a leg.

We have, and will continue to treat scattered-site loans as 1-4 family (when the underlying properties are 1-4 family dwellings) for reporting and other purposes. Beginning in 2018, I'll probably need to keep a separate spreadsheet of such loans that will be reported as multifamily for HMDA, but not for any other purpose, for explanation and reconciliation reasons.
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#2127371 - 04/20/17 08:22 PM Re: HMDA Clarification David Dickinson
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We recently did a HUGE loan on a really big apartment complex that was entirely affordable housing through a local housing agency but all of the buildings were 4-plexes.

A little leeway on the multifamily definition would really be appreciated.
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#2127375 - 04/20/17 08:26 PM Re: HMDA Clarification Sinatra Fan
Kathleen O. Blanchard Offline

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Originally Posted By Sinatra Fan
Thanks so much Kathleen for your expert and comprehensive thought and response! My initial thought was that multifamily is truly multifamily, not what another regulation (or another regulator's interpretation) calls multifamily. Your responses confirm that.

I often ask the question here at the bank, "If you call a dog's tail a leg, how many legs does a dog have?" The answer: Four; calling a tail a leg doesn't make it a leg.

We have, and will continue to treat scattered-site loans as 1-4 family (when the underlying properties are 1-4 family dwellings) for reporting and other purposes. Beginning in 2018, I'll probably need to keep a separate spreadsheet of such loans that will be reported as multifamily for HMDA, but not for any other purpose, for explanation and reconciliation reasons.


I think the burden or extra recordkeeping is a valid comment to submit.

I actually knew about this multifamily thinking months ago via questions submitted to the CFPB related to my HMDA work, but I only shared it with a limited audience. I even told the CFPB that I couldn't really do anything with that information unless they published something on this radically different viewpoint. I am sure I am not the only one to say that. It was not something that was intuitively obviously in the revised rule and commentary. From that perspective, I am glad it is out there for the industry to review and respond.
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#2127413 - 04/20/17 11:22 PM Re: HMDA Clarification David Dickinson
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Following up with what Boaty said, if we have 5 individual single family dwellings, that would be considered multi-family. However, if we had 4 four-plexes, that would be 1-4 family?
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#2127493 - 04/21/17 03:38 PM Re: HMDA Clarification David Dickinson
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No, both of those scenarios for future HMDA would be 'multi-family'. For HMDA.
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#2127498 - 04/21/17 03:52 PM Re: HMDA Clarification David Dickinson
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How many 1-4's do you have to have before it will be considered multi-family? Just more than one?
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#2127503 - 04/21/17 04:17 PM Re: HMDA Clarification David Dickinson
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Anything five units or more would be multifam. If you had a duplex and a triplex you would have a multifamily, same with two fourplexes.
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#2127505 - 04/21/17 04:28 PM Re: HMDA Clarification David Dickinson
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Oh ok.....got it. Thanks Boaty.
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#2127512 - 04/21/17 05:04 PM Re: HMDA Clarification David Dickinson
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Sure!
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#2127521 - 04/21/17 05:41 PM Re: HMDA Clarification David Dickinson
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Five units is what was conveyed to me as the controlling factor. It could still be made clearer, to avoid agonizing. Here is what the analysis section of the proposed clarification says:

"During implementation of the Final Rule, the Bureau was asked whether loans that are secured by five or more separate dwellings that each contain fewer than five individual dwelling units in more than one location are loans secured by multifamily dwellings. For example, a landlord might use a covered loan to improve five or more single-family dwellings in different locations, with those properties securing the loan. Because such a loan would not be secured by a housing complex or manufactured home community, it is not clear under § 1003.2(f) as adopted by the Final Rule how it should be reported. The Bureau believes that such a loan should be reported as secured by a multifamily dwelling. As with loans that are secured by multifamily dwellings in one location, the information that would be excluded from reporting under revised § 1003.4(a), such as the debt-to-income ratio discussed above, might also not be easily available, relevant, or useful for loans secured by five or more separate non-multifamily dwellings in more than one location. Consequently, to facilitate implementation and ensure the relevance and usefulness of the data collected, the Bureau proposes to add language to comment 2(f)-2 making clear that a loan secured by five or more separate dwellings in more than one location is a loan secured by a multifamily dwelling and providing an example. The Bureau solicits comment on this added language."
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#2127656 - 04/24/17 03:44 PM Re: HMDA Clarification David Dickinson
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VERY happy they took the realistic approach to counteroffers accepted, and later not originated. That's the ONLY thing that makes sense in handling those situations to me.
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#2127968 - 04/25/17 08:55 PM Re: HMDA Clarification RR Joker
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Proposed rule published today in the Federal Register: Click here
Comments due by May 25.
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#2127971 - 04/25/17 09:16 PM Re: HMDA Clarification David Dickinson
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Maybe the TRID proposed rule will FINALLY be finalized now haha smile
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#2128744 - 05/02/17 02:57 PM Re: HMDA Clarification David Dickinson
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Can someone help me reconcile the new definition of multifamily dwelling with the guidance regarding improvements to mixed use multifamily dwelling? In section 2(i) of the proposal, it states:

"To resolve this apparent tension, the Bureau proposes to amend comment 2(i)-4 to clarify that the comment applies only to multifamily dwellings. The proposed amendment would clarify that the Bureau intends comment 2(i)-4 to apply to multifamily dwellings of the type referenced in the comment (for example, a building containing five or more apartment units and retail space), and not to non-multifamily dwellings that have both residential and commercial purposes (for example, a single-family dwelling with a doctor's office).

What does the Bureau mean by "the type referenced in the comment"? A building containing five or more apartment units and retail space is the most basic example and doesn't tell me anything. Are we limiting mixed use to a single building? If not, does that mean one owner's plot of land with 4 separate cottages, but he wants to improve the mechanics garage, is considered a mixed use property and therefore be a covered loan?

The Bureau also states:
"the proposed amendments to comments 2(i)-4 and 3(c)(10)-3.ii together would clarify that a loan to improve commercial space in a multifamily dwelling would not be a home improvement loan, but a loan to improve commercial space in a dwelling other than a multifamily dwelling would be a home improvement loan."

The definition of multifamily dwelling that the Bureau gives in section 2(f) CAN'T apply to section 2(i) without limiting it in some way. My question is, what do they mean by a mixed use dwelling? Is that something the Bureau can clarify?

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#2128833 - 05/02/17 06:00 PM Re: HMDA Clarification David Dickinson
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Let me address the mixed use property issue you bring up. Mixed use is NOT limited to a single building.
I've had 2 phone conversations and 2 email exchanges with James Wiley at the CFPB about this. Here's a summary I wrote for our May 2016 newsletter about this topic: (the last 2 paragraphs specifically address the property with multiple buildings)

Mixed-Use Properties
Comment #4 provides clarification when properties are used for dwelling and non-dwelling related purposes.
A property used for both residential and commercial purposes, such as a building containing apartment units and retail space, is a dwelling if the property’s primary use is 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. [Commentary to §1003.2(f) #4]

First, let’s clarify some terminology. There is no definition of “property” in Regulation C, so we contacted the CFPB and they clarified they are referring to a “parcel” of land, which might include one or multiple buildings on it. In other words, “property” can be more than just a single building. This means, “dwelling” is referring to the primary use of the entire property/parcel; not just a single home/building on the property. You may want to go back and read the Commentary to §1003.4(a)(9) #3 we quoted under the “Multifamily Dwellings” heading at the beginning of this article.

Under HMDA in 2018, determining the primary use of mixed-use property is the same as today’s rules. However, we often see people misunderstand it, so we would like to clarify. The lender needs to determine the primary use of the entire property. The Commentary says you can use square footage or income, but it also says “such as” prior to these examples. In other words, a property might have more square footage dedicated to the dwelling portion and the dwelling portion may produce more income, but that doesn’t mean the lender has to call it a dwelling. The reverse is also true. This is not something you need to apply consistently as every property and every borrower’s intended use can be different.

Single building with Mixed-Uses
Consider a single building that has both residential and commercial space. We recommend you determine why the borrower purchased the property. For instance, imagine a building located on a main street with a retail store on the first level and two levels of apartments above it. Clearly, one-third of the building is dedicated to non-dwelling purposes and two-thirds is considered a dwelling. It’s possible that a new business isn’t yet generating much income, but the two levels of apartments are. It’s likely; however, that the borrowers purchased the entire building because they wanted to operate the retail business on the first level and they didn’t want the apartments to sit unused, so they rented them out. We think the lender can classify this building as a non- dwelling. It is the lender’s responsibility to ascertain and support how they determined the primary use.

Multiple Buildings on the same property
What if there are multiple buildings on the property? The Lender will need to determine if the entire “property” or “parcel” of land is used primarily as a dwelling or not. For example, let’s say there’s a concrete company that has several business-use buildings AND a home on the same parcel of land. Just because there is a home on the land does not automatically classify this “property” as a “dwelling”. The lender can make the determination that the primary use of the property is as a non-dwelling based on such factors as specified in the Commentary (income generated, square footage, etc.)

It’s extremely important that lenders classify mixed-use properties (both single building and multiple buildings). Once you do, that property will retain that classification (a dwelling or a non-dwelling) for any subsequent loans. For example, if you classified the retail/apartment building we described above as a non-dwelling and years later the borrower wants to refinance the loan, it’s not subject to HMDA. Why? Because the building is not a dwelling according to your initial classification. Therefore, it doesn't meet the definition of refinance (dwelling secured loan replacing a dwelling secured loan). Likewise, even if the borrower applies for a loan to improve only the residential portion of the mixed-use building, it’s not a home improvement loan. Once again, because the building is classified as “non-dwelling”. We asked the CFPB these very questions and they agreed.

-----------------
(that's the end of the article. Now to address your last questions.

So the first step is to classify a property as a dwelling or not. If it's not classified as a dwelling (by the lender), then a loan secured by that property is NOT subject to HMDA - because it's not a "dwelling" [even if there's a dwelling on the property or the building contains a dwelling(s).] When I talked to the CFPB, I gave an example of a mixed use property that was primarily non-dwelling. Then I said "what if they borrow money only to be used to improve the dwelling portion. The answer was "it's not subject to HMDA because the building is not classified as a dwelling."

Does this help with your other questions?
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#2128840 - 05/02/17 06:48 PM Re: HMDA Clarification David Dickinson
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David....your last paragraph in the article supports the way i have (already) looked at refinancing mixed-use property--that if it's use was determined to be primarily commercial the first time, refinancing the loan didn't meet the HMDA definition because it wasn't secured by a "dwelling". IOW, the mixed-use test is determining whether or not the property is considered to be a "dwelling" for HMDA purposes. Thanks for sharing.
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#2128945 - 05/03/17 02:55 PM Re: HMDA Clarification David Dickinson
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Thanks, David. I generally adhere to the summary written above. My confusion is in your last paragraph where you gave the example of a mixed use property that is primarily a non-dwelling. Current GIR reads:
"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 we're ONLY improving the residential portion of the mixed use building, I've always reported that type of transaction even if the commercial/retail portion is significantly bigger and generates significantly more income (by all standards is primarily commercial use). Is the CFPB saying that approach is incorrect, or are they just going in a different direction under how they've written the new rule?

I think I see what you're saying under the new rule. Even though we may be improving exclusively the residential portion of the property, the property may not have been classified as a dwelling, which means it would not be a covered loan.

What about this example: One parcel with applicant's primary residence, two rental mobile homes and a garage for commercial use. Property is determined to be primary use dwelling but the loan proceeds are used to improve the garage. Under the new proposal, even improvements to the commercial portion of a non multifamily dwelling would be reportable. That would be a change from the current guidance on mixed use property, correct?

Thanks for helping me wrap my mind around this. crazy I'm saving that article above for reference later!

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#2129075 - 05/03/17 09:25 PM Re: HMDA Clarification David Dickinson
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This statement confuses me: "The Bureau believes the proposed amendment to comment 3(c)(10)-3.ii would clarify that non-multifamily dwellings are not "mixed-use property" as described in comment 2(I)-4, even if they contain an office or other commercial space.

So if you have a building with retail on the bottom and three apartments on the top, if it's not a mixed-use property, what is it? Commercial or residential?
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#2129164 - 05/04/17 02:31 PM Re: HMDA Clarification David Dickinson
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Did you go to their comment on 3(c)(10)-3? See the last paragraph in the middle column on page 19148 of the proposed changes you got your quote from.

A closed-end
mortgage loan or open-end line of credit
to improve a dwelling other than a
multifamily dwelling, even if primarily
for a business or commercial purpose,
would be a home improvement loan
under § 1003.2(i) and would not be
excluded under § 1003.3(c)(10).

Then on page 19146

Comment 3(c)(10)–3.ii explains that a
closed-end mortgage loan or an openend
line of credit to improve an office,
for example, a doctor’s office, that is
located in a dwelling, would be a
covered loan.

intends comment 2(i)–
4 to apply to multifamily dwellings of
the type referenced in the comment (for
example, a building containing five or
more apartment units and retail space),
and not to non-multifamily dwellings
that have both residential and
commercial purposes

And then on page 19170

4. Mixed-use property. A closed-end
mortgage loan or an open-end line of credit
to improve a multifamily dwelling used for
residential and commercial purposes

Basically as I read the proposed changes the mixed-use exemption is going out the window unless it involves a multifamily property.
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#2129192 - 05/04/17 03:21 PM Re: HMDA Clarification David Dickinson
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It would appear so. I was hoping that I was missing something because this just makes it more confusing especially for the commercial lenders who would handle this sort of credit. frown cry mad ::pulls hair out::
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#2129194 - 05/04/17 03:31 PM Re: HMDA Clarification David Dickinson
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Wait, I'm confusing myself again. So do we NOT first look at a building that's not multifamily and determine if it's a dwelling or not? If the mixed used exemption is going away (on less than 5 units) are all commercial buildings with an apartment in it automatically considered dwellings?
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#2129218 - 05/04/17 04:45 PM Re: HMDA Clarification David Dickinson
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I've not read that far into it yet. We deal with very few mixed use properties.

But the following statement does imply that may be the outcome:

The Bureau believes the proposed
amendment to comment 3(c)(10)–3.ii
would clarify that non-multifamily
dwellings are not ‘‘mixed-use property’’
as described in comment 2(i)–4, even if
they contain an office or other
commercial space
.

Now with that said I've noticed these cites deal with improving the structure.

The following is in the new commentary:

4. Mixed-use properties. A property used for both residential and commercial purposes, such as a building containing apartment units and retail space, is a dwelling if the property's primary use is 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.

So it appears for purchases you can still determine if the property is primarily used for commercial or residential purpose, but any improvement loans will have to follow multifamily guidance.

As I said this opinion is all based just on a quick read as of today of the quoted cites.
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#2129232 - 05/04/17 05:04 PM Re: HMDA Clarification David Dickinson
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We've got several posts on the table that I need to address:
First, Dan - I understand. That's why I called and emailed the CFPB. They seem to say 2 things that are mutually exclusive. They say don't report a building(s) that is not classified as a dwelling, but the HI examples say you do report a HI loan that will be used to improve the dwelling portion. Every time, the CFPB (2 different rep's) said "if the lender didn't classify the building as "primarily dwelling", then HMDA is off the table." I've told them they need to make this crystal clear in upcoming training/announcements. Otherwise, it can easily be seen differently and field examiners will most likely being interpreting it differently.

Second, dlucas said: I think I see what you're saying under the new rule. Even though we may be improving exclusively the residential portion of the property, the property may not have been classified as a dwelling, which means it would not be a covered loan.
Correct!

What about this example: One parcel with applicant's primary residence, two rental mobile homes and a garage for commercial use. Property is determined to be primary use dwelling but the loan proceeds are used to improve the garage. Under the new proposal, even improvements to the commercial portion of a non multifamily dwelling would be reportable. That would be a change from the current guidance on mixed use property, correct?
If the loan is not being used to improve the dwelling or the entire parcel (that includes a dwelling), then it is not a HI loan. That's in today's rules as well as the 2018 rules. Look at the commentary to the definition of "home improvement" in today's rules and you'll see this spelled out.

The key to all of this is: (bolded emphasis)
[i]4. Mixed-use properties. A property used for both residential and commercial purposes, such as a building containing apartment units and retail space, is a dwelling if the property's primary use is 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.

Another example I gave was a mixed use building that was considered primarily non-dwelling. What if it is refinanced? The reply was "HMDA doesn't apply. It's not a dwelling according to the lender."
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#2129243 - 05/04/17 05:49 PM Re: HMDA Clarification David Dickinson
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Wow, well I'm glad I'm not the only one that is having a hard time with this, it's clear as mud.

I'll stick to the determine if it's a dwelling first strategy but without the CFPB making it perfectly clear I imagine that the examiners could go either way on this one.
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#2130564 - 05/16/17 01:00 PM Re: HMDA Clarification David Dickinson
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s this HMDA reportable?

The customer has a loan at ABC bank that is secured by a 1-4 family dwelling. The purpose is "cash out to purchase equipment". The same customer has approached our bank seeking to refinance this loan. Would this loan now qualify as HMDA reportable since the purpose is "refinance"?
Last edited by SportsMom2; 05/16/17 01:31 PM.
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