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#2187852 - 08/02/18 07:06 PM HMDA - Demolish Build New
Cat Lover Offline
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We did a loan last year for which the funds were to payoff an existing loan at another institution and the additional funds were being used to demolish and construct a new luxury home. We provided the funds to payoff existing loan and provide a construction permanent loan for the new house to be build. Would that be a refinance loan in the old HMDA definition or construction / perm loan.

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#2187879 - 08/02/18 09:00 PM Re: HMDA - Demolish Build New Cat Lover
swiggles Offline
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Under the old rule? Home improvement, which trumps refinance.
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#2187894 - 08/02/18 09:46 PM Re: HMDA - Demolish Build New Cat Lover
Moman Offline
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Swiggles - I would have coded this as a purchase transaction, which trumped both of the other choices under HMDA pre-2018, since this was ground-up construction. It's an entirely new home to me which is not home improvement.

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#2187922 - 08/03/18 01:29 PM Re: HMDA - Demolish Build New Cat Lover
swiggles Offline
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In past BOL discussions....unless I am losing my mind.....such a project was deemed home improvement.
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#2187924 - 08/03/18 01:53 PM Re: HMDA - Demolish Build New Cat Lover
Adam Witmer Offline
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Swiggles, you aren't losing your mind. The challenge is that some reported it as a purchase and some report it as a HI loan. I've always taken the approach that if part of the existing home is being used, such as the foundation or one or two rooms (like my in-laws did), then that would be a HI loan. If, however, the entire dwelling is raised and they start from scratch for the new one, then I view that as an initial construction. Therefore, I would code this as Moman did - a purchase.
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#2187925 - 08/03/18 01:53 PM Re: HMDA - Demolish Build New Cat Lover
Adam Witmer Offline
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I was able to find this older thread where Kathleen, David and Dan (all who know HMDA extremely well) also called this a purchase. https://www.bankersonline.com/forum/ubbthreads.php/topics/1466838/Tear_Down_Rebuild.html
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#2187959 - 08/03/18 03:48 PM Re: HMDA - Demolish Build New Adam Witmer
Cat Lover Offline
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Thank you all.

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#2188728 - 08/10/18 04:59 PM Re: HMDA - Demolish Build New Cat Lover
julesbok Offline
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Joined: Mar 2014
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OK
On a similar note - we have a customer (LLC) that purchased a home with cash in June 2018. The LLC is now requesting a loan to demolish the existing house, construct a brand new house and convert the loan to perm status upon completion of construction. The home will become the primary residence of the managing member of the LLC.

Question - since the LLC already owns the subject property, will we still report the construction/perm as a Purchase for HMDA purposes, or if not, how would it need to be reported?

Thanks in advance for any guidance on this situation.

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#2188730 - 08/10/18 05:05 PM Re: HMDA - Demolish Build New Cat Lover
Dan Persfull Offline
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Bloomington, IN
construct a brand new house and convert the loan to perm status upon completion of construction

I am assuming this is a 2 phase (closing) transaction.

The construction loan (phase 1) would not be reportable.

The permanent loan (phase 2 refinancing the construction loan) would be reported as a purchase.
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#2188735 - 08/10/18 05:22 PM Re: HMDA - Demolish Build New Cat Lover
julesbok Offline
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No. This is one loan, int only for 18 mos to demolish old house and build new house, then remaining seven years w P&I.

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#2188736 - 08/10/18 05:25 PM Re: HMDA - Demolish Build New Cat Lover
Dan Persfull Offline
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Bloomington, IN
This is one loan, int only for 18 mos to demolish old house and build new house, then remaining seven years w P&I

Const/perm loans are reported as a purchase
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#2188743 - 08/10/18 05:46 PM Re: HMDA - Demolish Build New Cat Lover
julesbok Offline
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Okay. That's what I thought, but wanted to be sure since the LLC already owns the property free and clear. Was second guessing myself.

Thanks Dan! :-)

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#2188745 - 08/10/18 05:54 PM Re: HMDA - Demolish Build New Cat Lover
Dan Persfull Offline
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Bloomington, IN
The majority of home construction is done on land already owned.
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#2191028 - 08/29/18 03:34 PM Re: HMDA - Demolish Build New Cat Lover
complyorelse Offline
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Related scenario. We made a construction/perm loan to someone to complete a home that was never finished (after being started in 2013). The home only ever had a foundation, rough plumbing, and block walls - no roof. I'm unsure if this would be a home improvement loan or a purchase since the shell would never have been considered a home without a roof. Thoughts?

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#2191032 - 08/29/18 03:38 PM Re: HMDA - Demolish Build New Cat Lover
raitchjay Offline
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You are NOW making a new loan to complete the home? If so, it would be a purchase, not home improvement. You can't improve an unfinished home.
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#2191047 - 08/29/18 04:02 PM Re: HMDA - Demolish Build New Cat Lover
complyorelse Offline
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Agreed. Thank you for your input.

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