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#2122702 - 03/20/17 06:26 PM 2nd mortgage on primary to build 2nd home
Bec Offline
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My HMDA brain HMDA hurts right now so I hope that this question makes sense.
2nd mortgage on primary dwelling to construct a prefab dwelling on land that is already owned. The loan will also be used to payoff a loan secured by bare land.
In my brain, this would not be reportable. Am I missing something here? I am thinking that the construction piece doesn't really play a role in the determination because it is a 20 year fixed on the primary dwelling.
What say the gallery?
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#2122704 - 03/20/17 06:28 PM Re: 2nd mortgage on primary to build 2nd home Bec
raitchjay Offline
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OK
Sounds like a purchase to me (the 2nd mortgage loan is a 20 year fixed, right?). The money from the loan, among other things, is purchasing/constructing a new home.
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#2122708 - 03/20/17 06:31 PM Re: 2nd mortgage on primary to build 2nd home Bec
RR Joker Offline
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Agree.
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#2122737 - 03/20/17 07:37 PM Re: 2nd mortgage on primary to build 2nd home Bec
Bec Offline
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The second mortgage is a 20 year fixed for the purpose of constructing a home, which yes, I guess would be the purchase/construction of the 2nd home.
Anyone else with an opinion?
Last edited by Bec; 03/20/17 07:44 PM.
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#2122761 - 03/20/17 10:25 PM Re: 2nd mortgage on primary to build 2nd home Bec
TMatt87 Offline
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I'll third reporting as a purchase.
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#2122946 - 03/21/17 08:01 PM Re: 2nd mortgage on primary to build 2nd home Bec
David Dickinson Offline
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Purpose test = construct (purchase). Collateral test = dwelling secured. "check / check" (that's me checking off the 2 test for a HMDA reportable purchase. IOW, I'll 4th.
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#2147736 - 09/27/17 01:36 PM Re: 2nd mortgage on primary to build 2nd home Bec
Compliance NABW Offline
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Similar question, but not quite the same. Bank is doing a temporary finance loan to construct a new property. If not doing the perm, then a temp. finance loan would not be reportable; however, the Bank is also taking additional collateral in the form of the customer's current primary dwelling. Is this a purchase because of the current primary dwelling securing the loan, or is it excludable because what is being "purchased" would still just be the lot and materials under an excluded from reporting (temp. financing) loan? Thank you for your time and assistance.

Super old, but I found this thread that may still apply - https://www.bankersonline.com/forum/ubbthreads.php/topics/482149/7

The scenario I presented sounds like what is called a "Bridge" loan in this thread. So, it would seem that if the loan will be paid off through permanent financing, then the loan would not be HMDA reportable; however, if it is not designed to be paid off by permanent financing, then it would be HMDA reportable. Sound about right?

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#2147740 - 09/27/17 01:45 PM Re: 2nd mortgage on primary to build 2nd home Bec
RR Joker Offline
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Your loan is still temporary if permanent financing is paying you off.

Your last paragraph is the key.
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#2147778 - 09/27/17 03:13 PM Re: 2nd mortgage on primary to build 2nd home RR Joker
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Thank you. That's where it seemed to be headed smile.

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#2164118 - 02/12/18 07:27 PM Re: 2nd mortgage on primary to build 2nd home Bec
fretzer Offline
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I'm going to add a similar scenario to this.

HELOC for down payment of new construction using current primary as collateral. Bank giving customer investment property rate due to the funds being used to assist with purchase of new primary residence to be built. The question is, should the collateral securing the loan be considered primary or investment in relation to the occupancy code?

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#2164634 - 02/15/18 02:28 PM Re: 2nd mortgage on primary to build 2nd home Bec
fretzer Offline
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Pennsylvania
HELOC for down payment of new construction that is secured with current primary residence. Because the purpose is for the new primary, although under construction, the question is, what occupancy code should be used on the LAR for HMDA reporting? Should it be reported as "primary residence" since the home securing the loan is their current primary residence? Or should it be reported as "secondary/investment"?

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#2164640 - 02/15/18 02:38 PM Re: 2nd mortgage on primary to build 2nd home Bec
David Dickinson Offline
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…the applicant or borrower physically occupies and uses, or will occupy and use, as his or her principal residence. …an applicant or borrower can have only one principal residence at a time. …if an applicant or borrower buys or builds a new dwelling that will become the applicant’s or borrower’s principal residence within a year or upon the completion of construction, the new dwelling is considered the principal residence… [Commentary to §1003.4(a)(6) #2]

You say the new home be there primary dwelling. Is the HELOC secured by the new home or only the current home?
If only the current home, then this Commentary tells me new dwelling is their principal residence. Thus, the current home is a second residence and I would code it a "2 - Second Residence".
If the HELOC is secured by the new home (in whole or part), then I would code it as "1 - principal residence"
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#2164942 - 02/16/18 05:00 PM Re: 2nd mortgage on primary to build 2nd home David Dickinson
fretzer Offline
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Thank you David! Yes, the current home is securing the HELOC. Happy HMDA!

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