I want to get some clarification on the purpose "Other". I know this purpose is to be used for when no other purpose applies. For example, when a property is owned free and clear and borrower is taking out cash to pay for medical expenses. Would this apply if the property is free and clear and borrower is taking out equity for home improvement or would this be classified as a HI loan?

We won't report HELOCs because we fall under the 500 threshold, however, if we did, would the "other" purpose be used when a loan is a HELOC?

Thank you!

Yes, Home Improvement would trump other in the priority (purchase > > c/o refi > refi > HI > other)

"If a covered loan is a home improvement loan as well as for another purpose, but the covered loan is not a home purchase loan, a refinancing, or cash-out refinancing, an institution complies with § 1003.4(a)(3) by reporting the covered loan as a home improvement loan"

We don't report on HELOCs, but I assume they would typically be either Home Improvement or other.

Thank you!

I am struggling to find another scenario where we would use "other purpose". If anyone can provide one please post it! Thank you!

An example I use in my training is that the customer owns the home free and clear, no outstanding liens, and wants cash to buy raw land that they eventually want to build on. Not a purchase, since the customer isn't purchasing a dwelling. Not a refinance, since the customer isn't paying off any liens. Not home improvement, none of our funds are going to improve a dwelling. None of our funds are going for the eventual construction either. So "Other" is the only purpose that would apply.

Or a home equity loan to fund a trip to Hawaii.....or buying Christmas gifts.....or paying off credit cards....or to buy a boat...etc.

Thank you!

Brightside3277: The raw land example would be reportable if they plan to build within 2 years, otherwise it would not be reportable, correct? Would the same apply if they were taking out the funds to pay medical expenses? or would that fall under home equity?

raitchjay: however, if we don't report home equity loans (do not meet threshold) we would not report that loan as other, or anything, correct?

Thank you, trying to wrap up some informal training and want to make sure we are providing correct information.

Are we talking about HELOCs, or closed end home equity loans?

My raw land example was a closed end home equity loan. I believe the "build within 2 years" is a RESPA rule, and doesn't really play into HMDA. And yes, the same would apply for medical expenses. The "Other" 2018 HMDA purpose encompasses both home equity and other.

Paragraph 3(c)(2)

1.Loan or line of credit secured by a lien on unimproved land.

Section 1003.3(c)(2) provides that a closed-end mortgage loan or an open-end line of credit secured by a lien on unimproved land is an excluded transaction. A loan or line of credit is secured by a lien on unimproved land if the loan or line of credit is secured by vacant or unimproved property, unless the institution knows, based on information that it receives from the applicant or borrower at the time the application is received or the credit decision is made, that the proceeds of that loan or credit line will be used within two years after closing or account opening to construct a dwelling on, or to purchase a dwelling to be placed on, the land. A loan or line of credit that is not excludable under § 1003.3(c)(2) nevertheless may be excluded, for example, as temporary financing under § 1003.3(c)(3).

Reading this makes me think that it would be reportable if borrower built within 2 years. Maybe I am missing something?

Brightside's example was of a loan secured by a home owned free and clear to purchase raw land, not simply a loan secured only by raw land. The intent to build and timeframe thereof is irrelevant.

Thank you! that's what I was missing.

One day it will all be crystal clear...I'm sure of it!!

It's easy to get lost in the details. There are just so many!

We don't ask the purpose for our home equity lines of credit. If the applicant states that they want it for home improvement purposes, do we have to report the purpose as home improvement or because we don't ask for a purpose, would we be okay in reporting "other" for all of our helocs?

If you know it is being used for HI then I can't see how it would be compliant to report other. In my opinion you should probably be asking that question on all of them. I know that on almost every loan I have ever taken out, I was asked if any portion would be used for home improvement.

We don't ask the purpose for our home equity lines of credit.

It's the financial institution management's responsibility to ensure they have proper procedures in place to collect and report the required data. If you are not exempt from reporting HELOCs then you should be collecting the proper data.

(a) Data format and itemization. A financial institution shall collect data regarding applications for, and originations and purchases of, home purchase loans, home improvement loans, and refinancings for each calendar year.

Agree. You should always ask for the purpose of funds. You might think it's none of your business, but
1) as Dan points out, you need it to properly comply; and
2) It is your money. Therefore, it's your right to know. If they were going to do something illegal with it, wouldn't you want to know that? Lenders's have a responsibility to not fund illegal activities and to report it. Loans can be a source of terrorist financing, illegal drugs, and other criminal activities. You should ask and know the purpose of all loans.

Thanks to both Dan and David. I appreciate your quick and accurate responses.

Just for further documentation. The following is taken from page 2 of the 2013 HMDA Reporting Getting it Right (GIR) manual.

Management's Responsibilities
If your institution is required to comply with HMDA, management must ensure that:
Procedures are in place for collecting and maintaining accurate data regarding each loan application, loan origination, and loan purchase— for home purchase loans, home-improvement loans, and refinancings

It's also a BSA requirement on any loan over $10,000 to determine the purpose of the loan. That would include HELOCs.

That requirement only applies to loans not secured by real property.

§ 103.33 Records to be made and retained by financial institutions.

Each financial institution shall retain either the original or a microfilm or other copy or reproduction of each of the following:

(a) A record of each extension of credit in an amount in excess of $10,000, except an extension of credit secured by an interest in real property, which record shall contain the name and address of the person to whom the extension of credit is made, the amount thereof, the nature or purpose thereof, and the date thereof;