A commercial loan is HMDA reportable if it meets the purpose based test AND collateral based test (both)? OR just one or the other meaning if it only meets one of these tests?

HMDA applies to purchases, refinances & home improvement loans secured by a dwelling. Therefore, it's a purpose AND collateral test. Commercial vs. consumer is not a factor for these. In 2018, a dwelling secured equity loan for business purpose will only be reportable when it is refinanced.

So, to clarify for Business Loans - any refinance loan to buy business equipment, which is secured by a dwelling is HMDA reportable from 2018?

I thought that scenario is reportable now.....because it meets the current definition of a refinance. Where is the exemption?

There really isn't change for business purpose loans in 2018. Business purpose loans secured by a dwelling are exempt the first time (just like they are now) unless it is to purchase or improve a dwelling. However, if the loan is refinanced, it is reportable (juts like they are now).

What "changed" in 2018 was about mixed used properties. Today's rules are pretty clear that a single building that is both residential and not residential can be classified either way. If the building is classified as non-residential, the CFPB made it very clear that it's not a dwelling for future loans.

What they also brought out (I wish more clearly) is that this also applies to parcels with multiple buildings. Imagine a parcel that has my house and 4 outbuildings that I use for commercial purposes. You might classify this as a non-dwelling property and therefore, it is not subject to HMDA. Even if I get a subsequent loan to improve the dwelling, it's not subject to HMDA because the parcel is classified as a non-dwelling.

Sorry, David, I guess I didn't understand the above statement. But you mean, by the statement, that nothing changes with respect to that scenario from 2017 to 2018.

Correct. Except in 2018 a bank may exempt a business that has a dwelling because they classify it as a non-dwelling.

Just to make it very clear: Beginning in 2018, all HMDA reportable transactions must be dwelling secured (this removes the current home improvement loans not secured by dwellings.)

Consumer purpose loans secured by dwellings will all be HMDA reportable as purchase, refinance or cash out refinance, home improvement or other.

Business purpose loans secured by dwellings will be reportable only if the purpose is purchase, refinance or home improvement. There is no cash out refi or "other" for business purpose loans.

A refinance (or a cash out refi for consumer purpose) must still be dwelling secured and be satisfying and replacing a dwelling secured loan (regardless of original purpose of the loan being satisfied and replaced) and at least one borrower must be same on the old and new dwelling secured loan.

Therefore, a dwelling secured loan that is satisfying and replacing a dwelling secured loan (consumer or business purpose) that was not originally HMDA reportable will be HMDA reportable just as it is now. Always refer to the HMDA definition of refinance.

And all agricultural-purpose, not only purchase, are now exempt, correct?

Loans and lines with an agricultural purpose (use of proceeds) as well as all loans secured by land and dwelling when land has a primarily agricultural purpose are not reportable for HMDA. (See the commentary re agricultural purpose.)

Commercial properties with a mixed use (residential and non-residential) that are primarily non-residential are also not reported because the property will not be considered a dwelling. See the mixed use discussion. If the property is primarily residential it is a dwelling, otherwise, it is not so loans would not be dwelling secured.

KB's "summary" is correct. There are exemptions that still come in to play:
Temporary financing (must now always be 2 phases of financing). '
Business purpose loans secured by a dwelling (unless refinanced - like we were discussing
All boats/campers
Transitory & medical services

And of course, buildings that don't meet the definition of "dwelling", like some mixed-use buildings/properties, are not HMDA.

Hopefully, this helps. Coverage is tough, but I feel like it will be easier in 2018 because they added home equity loans and cleaned up some things (like temporary financing).

Please forgive me, but I'm still struggling with two aspects of this.

1) Is the refinancing of a dwelling secured loan that was originally exempt as agricultural purpose (say crop production) reportable - just like it is today - or not?

2) Re: the secured by dwelling and land with a "primarily agricultural purpose" exemption - does it matter if the home is located ON the farmland? For example, if a loan is secured by a residence in town and a separate parcel of farmland located elsewhere, would the "ag property" exemption still be met?

Becca for 1) I don't think so. It would now be exempt as ag. purpose, if i understand it correctly.

ALL loans secured by farms (even if there is a dwelling) and all loans for Ag purposes are exempt in 2018. Collateral doesn't matter.

The following is from our HMDA Training Outline:

VII. Do Not Report (Excluded Loans and Lines):
C. Agricultural Purpose (100% Exclusion):
1. Loan Purpose:
Do not report any applications for loans or lines primarily for agricultural purposes.
[§1003.3(c)(9)] A bank may rely on §1026.3(a) comment #8 (Truth in Lending) for additional guidance on loan 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. [Commentary to §1003.3(c)(9) #1]

2. Collateral:
Do not report any applications for loans or lines ...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 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. [Commentary to §1003.3(c)(9) #1]

The example you give about a residence in town and a farm also securing the loan is interesting. We submitted a similar question to the CFPB about this. Our example was:
A loan to improve a dwelling located off the farm (in town). The loan is secured by the home being improved AND by a dwelling located on a farm. Does the exemption apply? Or does it not because the dwelling being improved is not located on the property being used for ag purposes?

We have not received a reply yet.

I understand about the agricultural purpose loans being exempt when they are new money. The fact that they are not specifically excluded from the definition of refinance is what's hanging me up. From what you're saying, though, even the 9th or 10th refi of what was originally an ag loan would still be exempt? No matter what other new funds may have been added to the loan over the course of those multiple refinances? That is assuming, of course, that we have the capability to track records back that far and tell what any given ag coded refi was originally used for.

Please don't read this as me being snarky - I'm just forseeing lots and lots of research time/headaches trying to figure out which loans on the commercial/ag side are reportable refis and which ones aren't.

Correct. ALL ag purpose loans and loans secured by ag land are exempt. That's the way it was prior to 2004. They are finally reversing the error they made 14 years ago.

I didn't read your comments as snarky. You're clarifying.

Thanks, David. I don't know why I cannot get my head around this. I think the fact that they are treating ag vs commercial purpose refis differently is part of it.

You're right. That makes no sense to me.

So in the case of the situation where the dwelling is in town and separate from the agricultural land...you have to look hard at your actual purpose because if it's not ag purpose, it would be reportable because the dwelling is not on the ag land.

Oh boy. This is going to be such a cluster for us rural banks.

That's pretty much what I'm thinking. Most everybody is all excited about getting to exclude all this stuff, and I'm over here banging my head on the desk because they've made figuring out what's included and what's excluded on the ag side that much more complicated. At least for the way this bank operates.

Absolutely! It's going to be a big fat mess.

We just talked to Shelly Thompson at the CFPB about this. She agreed this isn't clear. She said it could go either way (reportable or exempt). She said "make a decision to report or not and document why."

In other words, you could say "this is not subject to HMDA because the loan is secured by a dwelling on agricultural land."
OR
You could say "This is subject to HMDA because the proceeds are not used to purchase/refinance/improve a dwelling on agricultural land."

Hopefully, the examiners will see it in the same common sense way Shelly Thompson does.

I think that "ON agricultural land" bit says a lot. I think I'll stick to reporting anything that meets purchase/refi/improve if the house isn't actually sitting on the farm. That's a lot clearer cut to me.

Thanks for sharing your answer!

I agree with you Becca. I think it's easier to defend "the house being purchase/refinance/improved is not ON the ag land"; therefore, it's reportable.

I agree. "ON" is a key word for this subject.