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?
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.
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.
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.