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#2171053 - 03/30/18 01:47 PM HMDA Business Purpose Home Improvement
Kelly J Offline
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We have a commercial loan that will be made to a business. The purpose of the loan is to improve a multifamily dwelling; however, the collateral securing the loan is a different 1-4 family rental. Wouldn't this still be HMDA reportable? The Loan Officer feels that due to the dwelling not being the property being improved it won't be HMDA based on the exemptions in 1003.3 and the definition of Home Improvement. I disagree. Can anyone clarify this?

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#2171055 - 03/30/18 01:54 PM Re: HMDA Business Purpose Home Improvement Kelly J
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It's a reportable purpose for commercial HMDA's secured by a dwelling - thus reportable.
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#2171057 - 03/30/18 01:54 PM Re: HMDA Business Purpose Home Improvement Kelly J
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Yes it would still be HMDA Reportable. You are correct.

As long as the loan purpose is to purchase, improve or refinance a dwelling, for a business purpose loan, and is secured by a dwelling, then it would be HMDA.
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#2171058 - 03/30/18 01:54 PM Re: HMDA Business Purpose Home Improvement Kelly J
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Oh and welcome to BOL!
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#2171086 - 03/30/18 02:58 PM Re: HMDA Business Purpose Home Improvement Kelly J
David Dickinson Offline
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To be subject to HMDA, you must meet the "collateral test" and the "purpose test". §1003.2(e) indicates a reportable transaction is an application for a loan [§1003.2(d)] OR line [§1003.2(o)] secured by a dwelling (unless otherwise excluded) where the purpose is to:

1. Purchase a Dwelling
2. Refinance a Dwelling
3. Improve a Dwelling
4. Home Equity (consumer purpose)

What you described meets both tests and is not exempt (that we know of). Therefore, it is subject to HMDA.
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#2237879 - 06/10/20 09:21 PM Re: HMDA Business Purpose Home Improvement Kelly J
NoJustNo Offline
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To revive this - the original poster indicated that the property securing the loan was NOT the property being improved. I'm curious as to how the loan purpose would be reported given the definition of "home improvement" from 1003.2(i) states:

(i) Home improvement loan means a closed-end mortgage loan or an open-end line of credit that is for the purpose, in whole or in part, of repairing, rehabilitating, remodeling, or improving a dwelling or the real property on which the dwelling is located.

Shouldn't you not ever have a loan purpose of "other" on a commercial loan? Isn't "on which the dwelling is located" saying that the property being improved has to be the property securing the loan?

I'm curious why this loan would be reportable?

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#2237881 - 06/10/20 09:26 PM Re: HMDA Business Purpose Home Improvement Kelly J
raitchjay Offline
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OK
What it's saying is that a home improvement loan must improve a dwelling OR the real property a dwelling sits on. It doesn't say that the loan proceeds must improve the dwelling that secures the loan. You are correct though that "other" is not an option for business purpose loans.

ETA: There simply isn't any language in the definition of a home improvement loan that specifies the improvements must be to a dwelling that secures the loan. A "dwelling" doesn't cease to be a "dwelling" because it isn't securing your loan.
Last edited by raitchjay; 06/10/20 09:37 PM.
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#2237887 - 06/10/20 10:18 PM Re: HMDA Business Purpose Home Improvement Kelly J
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raitchjay - thank you!! Too late in the day to think about HMDA!

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