I have listed to two different webinars that give different interpretations of the Agricultural loans being excluded. One states if the purpose is for Home Improvement, Refinance of existing mtg or purchase it is covered. But if the purpose is for planting, purchasing equipment or such it is not. The other webinar stated all Agricultural type loans would be excluded.

The CFPB guidance page 35 states: If the proceeds are used primarily for agricultural purposes or if the closed-end mortgage loan or OLOC is secured by a dwelling that is located on real property that is used primarily for agricultural purposes it is an excluded transaction.

The final rule states: 1003.3(c)(9) and comment 3(c)(9)a clarifies that all primarily agricultural purpose transactions are excluded transactions whether they are for home purchase, home improvement, refinancing or another purpose. The comment also clarifies that an agricultural purpose transaction is a transaction that is secured by a dwelling located on real property used primarily for agricultural purposes or that is secured by a dwelling and whole funds will be used primarily for agricultural purposes.

What is your interpretation?

What you have stated is correct. Ag loans are excluded from HMDA reporting for 2018.

You may have a agriculture customer, but if they are doing a consumer loan (the credit is for personal, family, or household purposes) than you have a HMDA reportable loan. If your ag customer is doing a loan that is used primarily for ag purposes than the loan is not reportable. An Ag loan can be secured by a dwelling, can include a purchase, refi, home improvement, but it must you must look to the purpose of the loan and ensure that it is for agriculture purposes as well.

Here is the exemption from Reg Z 1026.3
8. Agricultural purpose. An agricultural purpose includes the planting, propagating, nurturing, harvesting, catching, storing, exhibiting, marketing, transporting, processing, or manufacturing of food, beverages (including alcoholic beverages), flowers, trees, livestock, poultry, bees, wildlife, fish, or shellfish by a natural person engaged in farming, fishing, or growing crops, flowers, trees, livestock, poultry, bees, or wildlife. The exemption also applies to a transaction involving real property that includes a dwelling (for example, the purchase of a farm with a homestead) if the transaction is primarily for agricultural purposes.

Even if the loan isn't for ag. purposes, if it's secured by a dwelling that sits on land that is used primarily for ag. purposes, then it's also exempt.

raitchjay is correct. The ag exemption is 100%: Both purpose and ALL loans secured by a dwelling on ag property. So, for example, if I want to get a home improvement loan to remodel my kitchen, but the house is located on a farm, it is NOT HMDA.

Ooh another great discussion!

So this means keep your regs separate, Reg Z applies, HMDA does not, Reg B does.

I would like to revive this thread. I have a Comm'l loan for the purpose of refinancing a mortgage. The property securing the loan contains over 8 acres and is improved with a dwelling that is rented, and a garage that is used for storage (by a commercial business). The unimproved acreage is utilized to grow seasonal vegetables which are sold to a farm stand. The repayment of the loan is coming from the dwelling rental and the garage rental. The revenue from the vegetable sales was not obtained or utilized.

Is this reportable?

I'm a little confused as you say there is "8 acres and is improved with a dwelling" but then you say "the unimproved acreage".

Is the dwelling located on the acreage that grows the vegetables? If so, then it is a loan secured by a dwelling located on real property used primarily for agricultural purposes and is exempt. The repayment of the loan is not relevant. The fact that the vegetable sales revenues were or were not utilized is also not relevant. All that matters is that HMDA excludes all loans for Ag purposes OR that are secured by a dwelling located on Ag real estate.

I think the real question here is determining whether the 8 acres is used PRIMARILY for agricultural purposes. Your narrative indicates there is some use for agricultural (growing seasonal vegetables for sale), some use for commercial (storage) and some use for commercial-residential (rented dwelling). The HMDA guidance says you can use any reasonable standard to determine the PRIMARY use of the property. In your case, you may want to use percentage of the acreage of the property used for each purpose, in which case, a strong case would be made for primary agricultural use. However, if you use the standard of amount of income derived from each activity, you may determine it's not primarily agricultural, but rather primary commercial. That's up to you to decide and document.

The dwelling is located on the acreage that grows the vegetables. The lender did not obtain any information regarding the agricultural part of the property. I will have to have him go back and obtain this information.

What about a loan secured by 113 acres, of which 55 are tillable and crops planted? The remainder of the acreage is timber and pasture but this property includes a dwelling which is approximately 1/2 of the total value of the total acreage. Does this property meet the ag exemption because it is located on acreage that is farmed or does 1/2 the acreage have to be farmed or 1/2 the value of the total property be farmland? Just not sure...

Either the loan purpose or the property needs to be PRIMARILY agricultural in nature.

55 acres of row crops sounds like a farm to me. Also, pasture is a farming area. So the farmers have a nice home - does that make it not a farm? It's not about the percentage of acres or the value of the home. You simply need to determined the primary PURPOSE of the land.

For example: I grew up on a hog farm that was a total of 10 acres. The farming area was only about 4 acres, but we had 2500 pigs. I guaranty you it smelled like a farm. Let's say our home was worth $1MM (it wasn't). Is it not a farm because the hog buildings only occupies 4/10th's of the total area? Is it not a farm because the house is worth more than the hog buildings? I don't think so. This was a farm.

Timber could be agricultural too, especially if there are plans to sell the timber at some point.

David, I'll disagree somewhat with you. You say you simply need to determine the primary PURPOSE of the land. The reg says that loans used primarily for agricultural purposes are exempt (12 CFR 1003.3(c)(9)). The commentary clarifies that a loan is used primarily for ag purposes if the loan proceeds will be used for ag purposes or the land is USED primarily for ag purposes (emphasis added). So where you are relying on the land being ag land for purpose of the exclusion I think it has to be used, not just purposed for ag use.

That all said, the reg allows you to use any reasonable standard for purposes of determining the primary purpose of the funds or the primary use of the land. And it would seem to me that with 55 or 113 acres actually being used for crops, additional land for pasture for the farm livestock, and timber land, you would have a primary use of the land as agricultural.

Can I throw a wrench in this discussion? I'm having a moment...or two...regarding CRA and HMDA in relation to the following scenario:

Farm equity is being used to purchase a residential investment property. The farm is the collateral, which has a dwelling on it but is used primarily for farming purposes.

I'm thinking this is NOT HMDA reportable since the collateral is farmland. But, is this CRA reportable since the property securing the loan is farmland and the loan amount is $500,000 or less?

The purpose is throwing me off. I'm thinking this will be CRA reportable as a farm loan. Appreciate everyone's feedback.

If the collateral is a dwelling on a farm, HMDA is exempt. I'll let someone else answer the CRA question, but I think you're right.

Thanks for the quick response David! I'll see what others say. Have a good night!

Would it be safe to clarify in our HMDA procedures that if the property is zoned Ag by the Property Appraiser, then it would not be a reportable loan? Sometimes it isn't clear as to how the property will primarily be used; big yard only or will there be some kind of "ag production" going on so the benefit of an Ag exemption (lower property taxes) remains with the property. Zoning at the time the loan is made seems to be a safe way to go. Any thoughts are most appreciated.

No. You have to know the properties use. I can buy what used to be a farm and not use it for that purpose. There must be ag production currently going on to be exempt.

David, thank you for your response. This particular loan is stumping me. The borrowers have horses and the parcel has an arena used for training/practicing hunter/jumper activities. It is shared access with a neighboring property. It sure sounds ag but the loan officer believes the horses are just "hobby horses" meaning it isn't income producing. Thoughts?

It's up to your institution to classify it. Horse pets are not agricultural. If this is a business, then you might be able to classify it as non-residential (which would remove HMDA requirements). If it's not a business, then it doesn't really sound like a farm to me. It sounds like more of a pet/hobby/fun area to me.

Whatever you choose, document you why. Don't leave it open for debate.

Thank you! We're reporting it. Thank you for providing some clarity.

Unless they are breeding/selling/producing the horses being trained at this facility, it has no ag purpose.

It's possible, as David indicates, it could be a viable BUSINESS...if they are renting stalls/pasture space/paid training. Again, not an agricultural pursuit...

We have many loans that are on smaller parcels, 10-15 acres (sometimes less), do you agree that is the land is used to grow crops or as pasture for livestock, it would be HMDA exempt?

Would acreage even matter as long as the farm portion is larger than the residential portion?

The number of acres or percentage of portion has nothing to do with it being a farm or not. You need to determine the primary use. I grew up on a 10 acre pig farm. We had 2500 pigs. It doesn't take a lot of acres to raise pigs. It definitely was a farm (and smelled like it!).