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#2198855 - 11/21/18 02:24 PM Spec home turned to a vacation rental
RSC Offline
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Joined: Aug 2011
Posts: 69
We have a builder that had purchased two vacant lake lots a year ago. The plan was to build a house on one lot and then sell it "not HMDA reportable as a Spec. home. Then the plans changed and the builder decided to keep the house and turn it into a vacation rental. The LOC was paid to a zero balance and a partial release of the mortgage was done. The LOC was kept open so that the builder could build on the second lot. A new loan was taken against the house and lot and termed out. Is the new loan HMDA reportable and if so would it be reported as purchase or refinance?

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#2198882 - 11/21/18 05:15 PM Re: Spec home turned to a vacation rental RSC
David Dickinson Offline
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Central City, NE
If I understand correctly, the new loan is paying down the LOC. If so:
It's not a refinance because it didn't satisfy/replace an existing loan.
It's not a home improvement loan.
We don't report "Other" for business purpose loans (unless they are refinance - which we know it isn't)
IF the new loan will be used to build a new house that is not a spec house, then that would be a purchase, but it sounds like the LOC is being used for that purpose.

Therefore (if I have understood all of this correctly), it falls through the cracks and is not reportable for HMDA.
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#2198889 - 11/21/18 06:02 PM Re: Spec home turned to a vacation rental David Dickinson
RSC Offline
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Joined: Aug 2011
Posts: 69
Thanks Dave you did understand it correctly.
Would it matter if the individual used it as their vacation home one week out of the year and rented it out the rest of the year as a vacation home? I don't think that is the case in this one, but I was just wondering in case another one comes along.

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#2198916 - 11/21/18 08:04 PM Re: Spec home turned to a vacation rental RSC
RVFlyboy Offline
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Soaring over Georgia
Dare we go the route of calling this transitory residence, therefore not HMDA reportable?
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#2198928 - 11/21/18 09:20 PM Re: Spec home turned to a vacation rental RSC
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
If the borrower was living in it - even one week a year - there could be an argument that this isn't a business purpose "builder" loan. Instead, it's a loan to construct a personal residence. The exemption for builders is about spec homes, not personal homes.
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