Hello,

We have a business purpose loan to an individual that is purchasing a dwelling. The structure will be demolished and a new dwelling built. Once the structure is completed the subject property will be sold. This is all being done as one loan (initial purchase and construction). Should we report this as a purchase transaction?

Thank you Twyla

Sounds like spec home construction, which is exempt from HMDA reporting. The dwelling to be razed doesn't change that fact, since there is no intention to use it as a dwelling.

FWIW

I agree with raitchjay. Just make sure you file is properly documented to support this.

Welcome to BOL T_A. I see this is your first post.

FWIW, I agree with raitchjay and NSF. Always ask yourself "what will it be when the proceeds are applied?" In your case, the borrower is not buying a dwelling. They are buying a lot with a building on it. That building will be demolished. Therefore, it's not a dwelling purchase. This is supported by the several things in Reg C, such as the definition of home improvement loan. If you look at the Commentary to this section, it gives an example of a home being purchased and converted to a daycare. I'm paraphrasing, but the commentary says this is not a home any longer. It's a daycare.

Next, you say the borrower will build a spec home (construction for sale). As raitchjay stated this is exempt. Therefore, your loan is exempt from HMDA.