I'm on the fence with this one and would appreciate some input.

I have a commercial customer who is refinancing 3 free and clear properties and the funds will be to reimburse himself for renovation costs and to acquire additional investment properties.

Should I just ignore the reimbursement part of the loan and focus on the funds to be used to purchase future investment properties?

Thanks.

The reimbursement part doesn't represent a HMDA reportable purpose, so yes, in that sense it can be ignored. You are looking at a HMDA reportable purchase, assuming the "future investment properties" means "dwellings". ETA: and assuming the "properties" you reference being secured by are dwellings as well.

Thanks. Yes, the future investment properties are dwellings and the properties being secured are dwellings as well. I appreciate you help.

You bet.

Is it safe to assume that there was not actually a dwelling secured debt to refi? When you say he wanted to refi to reimburse himself, it wasn't really a refi if all he was doing was pulling out equity based on his prior expenditures.

I don't like the word "refinancing" when talking about free and clear properties, but since the purchase aspect would trump everything else anyway, i didn't address the refinance possibility here.

I see quite a few transactions like this one: borrower pulls out equity from RE owned free-and-clear in part for future investments even though there's no dwelling picked out - yet. I know it's the intent that matters, but what seems to happen is double-reporting. You report the part that is intended to be used in the future to acquire dwellings (as a purchase). Then, when the borrower finds a dwelling to acquire - say, 6 or 9 months from now - that transaction more often than not is reported again as a purchase. You don't want to leave a loan unreported.

What do you mean by "that transaction more often than not is reported again as a purchase"? What transaction? You mean they didn't use the money from the first loan to purchase the dwelling?

Likely they used it for a down payment.

That sounds likely.....just don't see how that leads to "double reporting". If it takes 2 loans to purchase a property, naturally both loans are reportable, and reporting them as such isn't "double reporting".