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#2160249 - 01/11/18 04:27 PM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
raitchjay Offline
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I would argue that purchasing a "dwelling" that is in the "shape" of a home, where the only intent is to demolish it has no residential purpose to it and is not a "dwelling" for HMDA purposes. Would any of us look at it (pre-demolition) and say "that's a house". Yes we would. But it doesn't matter IMHO--Reg. C says (again, IMHO) that it isn't a "dwelling".
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#2160250 - 01/11/18 04:30 PM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
RR Joker Offline
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The point being made here with the daycare scenario is that just like a dwelling converted to daycare, office or whatever, the intent is not to be used as a dwelling . Neither is a home to be razed. It's not intended to ever be used as a dwelling, therefore it's not a dwelling for HMDA purposes.
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#2160252 - 01/11/18 04:37 PM Re: purchase lot with SFR that will be torn down-HMDA? [Re: JPC]
raitchjay Offline
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Originally Posted By JPC
I don't really see much support in 2018 HMDA for "looking at the building once the loan funds are applied." I see that HMDA reporting is necessary when there is a covered loan secured by a dwelling that is located in the 50 states, DC, or Puerto Rico. A covered-loan is a closed-end mortgage or open-end credit plan that is not an excluded transaction under 12 CFR 1003.3(c). So, in this scenario, I have a closed-end loan secured by a dwelling located in the 50 states and I do not see an exclusion under 1003.3(c). So, check, check, and check.


Dwelling means a residential structure (whether or not attached to real property) located in a state of the United States of America, the District of Columbia, or the Commonwealth of Puerto Rico. The term includes an individual condominium unit, cooperative unit, or mobile or manufactured home.

What about the structure you are contemplating makes it a "residential structure"?
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#2160254 - 01/11/18 04:39 PM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
raitchjay Offline
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Amend my last sentence to read: "What feature of the structure you are contemplating makes it a 'residential structure'?"
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#2160268 - 01/11/18 05:58 PM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
David Dickinson Offline
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Quote:
I've considered the various statements made and I'll probably just have to agree to disagree on this one. Thank you all again for the discussion.

You're free to do just that. You have EVERYONE so far telling you you're wrong. I teach HMDA for the ABA National Compliance School and meet with regulators frequently because of I'm on the ABA faculty. That doesn't make me right, but I'm comfortable I know a lot about HMDA and stand by these opinions.

You said: The borrower is not purchasing a converted facility. They are actually and truly purchasing a dwelling."
As EVERYONE has pointed out, this isn't true. If no one dwells in it, it's not a dwelling. The commentary gives examples of homes that are converted to represent this point. They can't spell out every scenario you'll ever encounter. You need to apply the logic of the regulation.

Quote:
I don't really see much support in 2018 HMDA for "looking at the building once the loan funds are applied.

I made this up to help people understand HMDA in plain English. It's not verbatim from the regulation but it's crystal clear when you look at the examples and read the entire regulation.

You can do what you want, but if you ask for advice and EVERYONE tells you you're wrong, I'd question your position.

Have a great day! smile


Edited by David Dickinson (01/11/18 06:01 PM)
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#2160315 - 01/12/18 10:49 AM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
JPC Offline
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Good points @David. I appreciate everyone's opinion. I don't mind "going against the grain" on occasion. A vacation home may not ever be used as a "dwelling" either, but you would still report the Purchase. The initial home is a dwelling that is being purchased. I see nothing that indicates this fact should be ignored and we should just look to the secondary result of doing a spec home.

As an OCC examiner for 6 years or so, I became very steeped in the Regulations and applying them to a variety of individual cases.
A lot of Compliance experts felt a certain way about dealing with and reporting counteroffers under ECOA/HMDA as far as Adverse Action Notices and denial reporting. However, I stuck by my opinion on the matter throughout the years and the CFPB validated my long-time stance and clarified this in the 2018 HMDA reporting standards. https://www.bankersonline.com/forum/ubbthreads.php/topics/2157353/1

Also, there are many experts saying to have dual HMDA lobby notices or other things related to switching over to the language posted in the 2018 standards. Whereas, it seems fairly clear to me to just move over to the 2018 language. 99% of the experts are saying you can't get HMDA data of the website that is referenced in the 2018 language; however, I have personally went to the site and pulled specific bank data. Why is everybody posting and printing in Compliance publications that the data is not yet available? Who knows.

Just trying to say that once I've researched all the applicable Regulations, commentary, faq's, etc., I tend to be very confident in my understanding of the issue and making a decision on it. I've cited Regulatory violations on many occasions and had to stand firm with my evidence to argue with Examiner's-in-Charge , as well as Bank management, Boards of Directors, and Compliance staff.

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#2160320 - 01/12/18 11:16 AM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
RR Joker Offline
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For the record. No one I know would consider a vacation home anything but a dwelling. They typically aren't transitory housing.


Edited by RR Joker (01/12/18 11:19 AM)
Edit Reason: re-worded to make more clear
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#2160326 - 01/12/18 11:38 AM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
raitchjay Offline
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"The initial home is a dwelling that is being purchased."

Which brings me back to my question....how do you justify this statement?
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#2160332 - 01/12/18 11:44 AM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
raitchjay Offline
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"A vacation home may not ever be used as a "dwelling" either, but you would still report the Purchase."

Why would you report it? Because the borrower would say "i'm purchasing this dwelling as a vacation home" (and who buys a vacation home and NEVER uses it?)....just like they would say "i'm purchasing this lot that has a house on it, and i'm going to demolish the house". You listen to the borrower and go from what they tell you.


Edited by raitchjay (01/12/18 11:46 AM)
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#2160333 - 01/12/18 11:45 AM Re: purchase lot with SFR that will be torn down-HMDA? [Re: JPC]
Adam Witmer Offline
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Originally Posted By JPC
A vacation home may not ever be used as a "dwelling" either, but you would still report the Purchase.


For clarification purposes, a vacation home is automatically included in the definition of a dwelling. From the commentary:
"1. General. The definition of a dwelling is not limited to the principal or other residence of the applicant or borrower, and thus includes vacation or second homes and investment properties."
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#2160443 - 01/13/18 08:31 AM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
JPC Offline
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For sure. I was just making a point that it may not really be used as a "dwelling" either. It might just sit there, or just get used as an Air BnB, which could make it exempt under the "hotel" transitory housing language.

@raitchjay - I don't get it. How do I support the statement? The initial home being purchased IS a dwelling. That's what it is, lol. "Dwelling means a residential structure, whether or not attached to real property." The initial home is a residential structure, and there is nothing in the Official Interpretation or Final Rule section-by-section analysis that provides any reason why it would be excluded from being considered a "dwelling." Just because the borrower wants to tear it down doesn't change the substance of what it is. If I buy a cell phone and then smash it into pieces with a hammer, it doesn't take from the fact that I bought a cell phone. It was still a cell phone when I bought it. If somebody asked what I purchased, I would tell them I purchased a cell phone. I would not say I bought a bunch of shattered glass, metal, and electrical components, and a Lithium Ion battery.


Edited by JPC (01/13/18 08:33 AM)

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#2160456 - 01/14/18 03:25 AM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
raitchjay Offline
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So if the borrower buys a home and intends to turn it into a convenience store, you ought to follow your logic and report that as a home purchase for HMDA...after all, it is a home at the time they're buying it. You aren't buying a cash register, a beer cooler, and a hot box....you're buying a house, right?
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#2160463 - 01/15/18 11:57 AM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
David Dickinson Offline
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Quote:
there is nothing in the Official Interpretation or Final Rule section-by-section analysis that provides any reason why it would be excluded from being considered a "dwelling." Just because the borrower wants to tear it down doesn't change the substance of what it is.

This is where HMDA clarifies that you look at what the building WILL BE, not what IT IS. The example is given in the Commentary where it says that if you convert a home to a daycare, it's not reported. Why? They bought a house. Shouldn't that be a purchase? The answer is "No, because it won't be a house when the proceeds are applied.".
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#2160492 - 01/16/18 09:18 AM Re: purchase lot with SFR that will be torn down-HMDA? [Re: David Dickinson]
JPC Offline
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@David - The issue that I have there is the Commentary does not say if you convert a home to daycare, then it's not reported. The Official Interpretation states, "Also excluded (from the definition of a dwelling) are . . . structures originally designed as dwellings but used exclusively for commercial purposes, such as homes converted to daycare facilities or professional offices." So, to me, at the time of whatever transaction is taking place, i.e. the Purchase, Refinance, Home Improvement, the structure has already been converted to a daycare. In that case one is not purchasing a dwelling, or refinancing a dwelling. They are purchasing or refinancing a daycare. This situation is different, according to how I understand this comment at least, from purchasing an actual dwelling and then using the funds to convert the structure into a daycare facility. I guess you would take the same position in a refinance? What if the borrower took cash out and used funds to convert a vacation home into a daycare facility? Would you not report this as a refinance? At the time of the transaction you have a dwelling secured loan satisfying and replacing another dwelling secured loan to the same obligor.

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#2160509 - 01/16/18 10:51 AM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
raitchjay Offline
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Would you consider a dilapidated old house to be a dwelling for HMDA purposes? "Dwellings" are lived in--either now, or anticipated in the future. Structures built as homes that are not lived in now and with no plans for anyone to live in them in the future are not "residential structures" IMHO.
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#2160513 - 01/16/18 11:02 AM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
raitchjay Offline
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Webster's definition of "residential": "used as a residence or by residents"

....so we need a definition of "residence".....

"a person's home; the place where someone lives"

That is why i have been focused on the HMDA definition of a "residential structure". If no one lives in it, and there is no plan for anyone to live in it (a person might hold on to a house for several months or years trying to sell it....they still have INTENT for it to be a residence in the future)....then i don't see how it can meet the definition of a "residential structure".
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#2160560 - 01/16/18 01:28 PM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
RR Joker Offline
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Y'all might as well just agree to disagree at this point. Each 'man' for himself in defending his LAR if the particular loan is ever questioned.
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#2160575 - 01/16/18 01:52 PM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
David Dickinson Offline
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JPC: I'm done trying to explain what is very clear to the rest of us. Just keep doing what you're doing. Why don't you email HMDA Help and post their reply?
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#2160576 - 01/16/18 01:52 PM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
JPC Offline
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It's a good discussion, but, yes, we probably agree to disagree smile.

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#2160577 - 01/16/18 01:53 PM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
JPC Offline
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HMDA help is [censored].

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#2160792 - 01/17/18 03:47 PM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
David Dickinson Offline
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JPC: First, I agree HMDA Help is not great. But I'm asking you to go to the source with your opinion vs. what the rest of us are saying and see how they respond.

Second, I think I have a new way to help you understand why I say "Always look at what the building will be once the proceeds are applied."
With you logic, if I borrower money to construct a dwelling on a bare lot I already own, you would say "it's a bare lot" and we are told to exclude loans/lines secured by bare land only [§1003.3(c)(2)]. However, the proceeds will be used to construct a dwelling. Therefore, it must be reported as a purchase.

The Commentary to §1003.3(c)(2) #1 states to exclude loans/lines secured by bare land ...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.
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#2160912 - 01/18/18 01:29 PM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
JPC Offline
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I submitted the question, but I just got some canned response that cited all the Regulations I've already read. I replied with the following:

"Thank you for your reply. Yes, I have read everything you have referenced. I answer Compliance Questions for a living pretty much. If I could find the answer in a previously issued piece of guidance, then I would not be asking the question. My inquiry was not regarding a short-term loan that was expected to be taken out by permanent financing. You did not accurately read/understand my original question. If somebody could give me a call concerning this question, I would appreciate it. I keep getting these canned responses referring me to various parts of the Official Interpretation that I have already viewed several times."

I did get a response saying sorry and for me to resubmit my original question, so we'll see if they give it a try, lol.

I agree with the above @David, but that is the only "look forward" example they specifically discuss, and even that is a recent addition for 2018.

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#2160934 - 01/18/18 03:10 PM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
NSF, CRCM Offline
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Instead of submitting it to HMDA Help try submitting it straight to the CFPB. The answer they give will probably be over the phone, but it will probably at least be more than a canned response.
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#2160939 - 01/18/18 03:30 PM Re: purchase lot with SFR that will be torn down-HMDA? [Re: bnkgrl77]
David Dickinson Offline
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Quote:
"Thank you for your reply. Yes, I have read everything you have referenced. I answer Compliance Questions for a living pretty much. If I could find the answer in a previously issued piece of guidance, then I would not be asking the question. . . . You did not accurately read/understand my original question. If somebody could give me a call concerning this question, I would appreciate it. I keep getting these canned responses referring me to various parts of the Official Interpretation that I have already viewed several times."

LOVE THIS! smile


Quote:
I agree with the above @David, but that is the only "look forward" example they specifically discuss, and even that is a recent addition for 2018.

That's not the ONLY "look forward" example. We've tried to tell you about a house being converted to a Daycare. That's two!
And this is NOT new for 2018. Building a house on land has always been considered a purchased for HMDA - at least since 1990 when I first started in this industry.
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#2161014 - 01/19/18 10:01 AM Re: purchase lot with SFR that will be torn down-HMDA? [Re: David Dickinson]
JPC Offline
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@NSF - Yeah, I've done both. It's pretty much the same response you get from both. They rarely contact you directly by phone anymore.

@David - I don't take the daycare guidance as forward looking. It seems to me to concern when the daycare already exists at the time of the transaction. Yes, building the home has always been considered, but the 2-year look forward guidance is "new" for 2018.

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