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#2211331 - 04/17/19 01:46 PM 2 collateral properties
dutchbltz Offline
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HMDA's Commentary explains that "A loan or line of credit is used primarily for agricultural purposes if its funds will be used primarily for agricultural purposes, or if the loan or line of credit is secured by a dwelling that is located on real property that is used primarily for agricultural purposes (e.g., a farm)" and, that agricultural transactions are exempt.

I have a scenario where we took 2 pieces of collateral, with the purpose of the loan being to purchase a (non-farm) primary residence. One piece of collateral is the purchase property, and the other is a farm.

First of all - IS THIS EVEN REPORTABLE? The commentary says if the loan is secured by a dwelling located on a farm.... which this loan partially is. However, it's also secured by a dwelling, to purchase a dwelling.

IF it is reportable, how many units is the loan secured by? Do we count the farmhouse as a dwelling? Or is the fact that the farm in and of itself would not be reportable outweigh the fact that a dwelling is located on the farmland?

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#2211395 - 04/17/19 05:43 PM Re: 2 collateral properties dutchbltz
Carolina Blue Offline
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I think you still have a reportable purchase loan. The thought behind the agriculture exemption is that the property is not a dwelling and therefore your loan is not dwelling secured.

So when you think from that perspective, you still have a dwelling secured loan. One of your properties is not a dwelling but the one being purchased is a dwelling. From a HMDA perspective, the agricultural property is the same as taking vacant land as additional collateral. So that answers your next question, you only have 1 unit (assuming the primary being purchased is a single family home).

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#2211397 - 04/17/19 05:47 PM Re: 2 collateral properties Carolina Blue
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I can't edit the previous post. But what I meant in that second sentence is "The thought behind the agriculture exemption is that the property is not a dwelling and therefore if your loan is ONLY secured by agricultural property then it's not dwelling secured." Any additional collateral must be looked at separately.

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#2211408 - 04/17/19 06:12 PM Re: 2 collateral properties dutchbltz
RR Joker Offline
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Based on purpose and location of PR purchase, it's definitely reportable. I'm on the fence for number of units laugh! I think you could argue it both ways if need be.
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#2211414 - 04/17/19 06:19 PM Re: 2 collateral properties RR Joker
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In this thread David gave a good summary answer that I think covers the OP's question.

You pick one property and report IT consistently when reporting:

1. Construction Method
2. Occupancy Type
3. Property Address
4. Property Location
5. Lien Status
6. Manufactured Home Secured Property Type
7. Manufactured Home Land Property Interest

When reporting the other data, you use all properties, not just the one chose for the above 7 items.

So, you should report the number of units based on all properties taken as collateral.

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#2211418 - 04/17/19 06:22 PM Re: 2 collateral properties dutchbltz
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I'm confused about the farm house, dutch. Is it inhabited as a home or used for farm business purposes?

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#2211419 - 04/17/19 06:25 PM Re: 2 collateral properties dutchbltz
RR Joker Offline
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I think you may be missing the point, TR. The question is in regard to the farmhouse. If all that was involved were the farmhouse and farm, it would not be reportable at all because the 'farmhouse' would be exempt ie, not a dwelling.

Therefore, since it IS reportable due to primary purpose and off-farm primary residence purchase, do you have one or two units...I think you could argue it either way and likely not get slapped...a very rare situation shouldn't be penalized harshly I would not think.
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#2211421 - 04/17/19 06:27 PM Re: 2 collateral properties dutchbltz
raitchjay Online
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Where in the regulation does it say that an exemption can be nullified by another purpose?
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#2211422 - 04/17/19 06:31 PM Re: 2 collateral properties dutchbltz
raitchjay Online
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The regulation says a loan for a primarily ag. purpose OR a loan secured by land used primarily for ag. purpose is exempt. It doesn't (to my knowledge) give ifs, ands, or buts about that. Just asking because if there's been guidance on this that i missed, i'd like to know it.
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#2211423 - 04/17/19 06:33 PM Re: 2 collateral properties dutchbltz
Truffle Royale Offline

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1 or 2 units is answered in the snip from David above. His answer did not leave me with the impression that you could argue either way but rather that based on the collateral you go with 2 units. That's why I shared it.

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#2211427 - 04/17/19 06:37 PM Re: 2 collateral properties Truffle Royale
dutchbltz Offline
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The farm house is inhabited as a dwelling, however, it is not the dwelling being purchased. It's owned by the parents, actually, and is just extra collateral to improve CLTV and reduce risk. But since farms are typically exempt from HMDA, I'm not sure if it counts as a unit (because it IS a dwelling), or, if as one of the other posters suggested, if it is considered as vacant land.

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#2211546 - 04/18/19 06:53 PM Re: 2 collateral properties dutchbltz
David Dickinson Offline
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Quote:
I have a scenario where we took 2 pieces of collateral, with the purpose of the loan being to purchase a (non-farm) primary residence. One piece of collateral is the purchase property, and the other is a farm.

First of all - IS THIS EVEN REPORTABLE? The commentary says if the loan is secured by a dwelling located on a farm.... which this loan partially is. However, it's also secured by a dwelling, to purchase a dwelling.


Commentary to §1003.3(c)(9) #1 says to not report any loan/line …if the loan or line of credit is secured by a dwelling that is located on real property that is used primarily for agricultural purposes

This doesn't say but, if, unless, . . . It says "Don't Report ANY loan/line that is secured by a farm house" (in plain English). It also doesn't say, report if:
The farm house is part of the collateral,
The farm house is not the only collateral,
If you feel like you should.
It simply says DO NOT REPORT these.

I talked to a CFPB attorney about this back in 2017 and presented a scenario of a farmer moving to town. The farmer is giving his/her farm house as collateral to purchase a new home in town. The attorney stopped me and said "don't report it."
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#2211551 - 04/18/19 06:57 PM Re: 2 collateral properties dutchbltz
David Dickinson Offline
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Carolina Blue: You stated in your first post - "The thought behind the agriculture exemption is that the property is not a dwelling and therefore if your loan is ONLY secured by agricultural property then it's not dwelling secured." Any additional collateral must be looked at separately.
I believe the logic of not reporting farm houses is that they don't fit or compare to most residential housing. The combined loan to value, debt to income and other underwriting ratios of farm loans are drastically different than "normal" (urban) housing loans.
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#2211553 - 04/18/19 07:02 PM Re: 2 collateral properties David Dickinson
Carolina Blue Offline
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wow, that changes my whole line of thinking. I was treating agricultural property like any other non-dwelling secured property.

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#2211556 - 04/18/19 07:13 PM Re: 2 collateral properties dutchbltz
RR Joker Offline
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I talked to a CFPB attorney about this back in 2017 and presented a scenario of a farmer moving to town. The farmer is giving his/her farm house as collateral to purchase a new home in town. The attorney stopped me and said "don't report it."

I believe this falls short of the entire scene. My understanding was and has been that IF you have a farmer putting up collateral of his farm which contains a home to buy a new home away from the farm [that you are not taking as security] it would not be reportable.

I totally agree with this as not reportable.

What I'm not so sure would be hastily decided on is taking the dwelling being purchased that is nowhere near the farm and also taking the farm that has a dwelling on it.
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#2211557 - 04/18/19 07:13 PM Re: 2 collateral properties dutchbltz
David Dickinson Offline
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You have to be old (like me) to remember that ag loans (even with houses) were never intended to be part of HMDA. Prior to the 2004 changes, they were all exempt. In 2004, the FRB revamped HMDA and the definition of "refinance" captured farm loans. My discussions with FRB officials (those that actually wrote the regulation) indicated this is not what they intended. It only took the regulators 14 years to straighten out the mess. In the mean time, many forgot what it used to be like and many joined the compliance world, so they never knew this "logic."

I suddenly feel even older. smile
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#2211568 - 04/18/19 07:51 PM Re: 2 collateral properties David Dickinson
Carolina Blue Offline
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Lost in a regulatory fog
So just for my (and maybe Joker's) clarification, you are saying:
App#1- funds will be used to purchase a primary dwelling secured by a warehouse (property #1) and a rental dwelling (Property #2)- HMDA reportable

App#2- funds will be used to purchase a primary dwelling secured by a farm (property #1) and a rental dwelling (Property #2)- NOT HMDA reportable

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#2211635 - 04/19/19 03:31 PM Re: 2 collateral properties dutchbltz
David Dickinson Offline
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Quote:
App#1- funds will be used to purchase a primary dwelling secured by a warehouse (property #1) and a rental dwelling (Property #2)- HMDA reportable

App#2- funds will be used to purchase a primary dwelling secured by a farm (property #1) and a rental dwelling (Property #2)- NOT HMDA reportable

I agree with both. App #1 is reportable because you are purchasing a dwelling and the loan is secured by a dwelling AND because there are no exemptions for a warehouse.
App #2 is not reportable. Even though you are purchasing a dwelling and it is secured by a dwelling, it is also secured by farm property. There is an "overriding" exemption that tells us not to report these.

I didn't write the rules. wink
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#2211650 - 04/19/19 04:27 PM Re: 2 collateral properties David Dickinson
Carolina Blue Offline
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Thanks as always David! I need to go update my guide eek

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#2211825 - 04/23/19 01:29 PM Re: 2 collateral properties dutchbltz
dutchbltz Offline
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Thanks everyone for your thoughts on this. We did not report.

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