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#2247126 - 01/04/21 07:40 PM SFR as abundance of caution
Melissa S Offline
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Melissa S
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I hope I'm thinking of this right.

I have a commercial loan where the proceeds are purchasing two commercial real estate properties - no residences at all.

The loan is collateralized by the 2 commercial properties, but an abundance of caution 2nd mortgage was taken on the business owner's personal residence. The value of the residence was NOT used in the LTV calculation and the value was not a consideration in the approval of the loan.

I am thinking this is NOT a reportable transaction. Is this correct, or is my brain fried from working at home for 10 months?

Thanks.
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#2247127 - 01/04/21 07:42 PM Re: SFR as abundance of caution Melissa S
Skittles Online
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I agree since the proceeds of the loan are not being used to purchase, refinance or improve a dwelling.

Don't worry - I've been working from home for 10 months too and question myself daily.
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#2247128 - 01/04/21 07:43 PM Re: SFR as abundance of caution Melissa S
raitchjay Online
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It's not reportable, since it doesn't meet the purpose test (purchase, refinance, or home improvement), and business purpose loans can't be reported as "other".
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#2247129 - 01/04/21 07:46 PM Re: SFR as abundance of caution Melissa S
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Thank you SKITTLES and RAITCHJAY. Appreciate the quick confirmations!
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#2247130 - 01/04/21 07:48 PM Re: SFR as abundance of caution Melissa S
raitchjay Online
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I just want to add......abundance of caution and your comments about the value don't really play into this.....it isn't reportable strictly because it doesn't meet the definition of a HMDA reportable transaction. Change your scenario to consumer purpose and keep all other facts the same (well, except for purchasing commercial real estate obviously) and it WOULD be reportable.
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#2247131 - 01/04/21 08:07 PM Re: SFR as abundance of caution raitchjay
Melissa S Offline
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Thank you. I had done a search on this forum for abundance of caution before posting, and one thread came back with the comment that if the value was not used in the LTV calculation, then it wouldn't be reportable, and another comment stated that it would be reportable, but the only thing being reported would be the number of units as the value was not considered. would this be the situation if the purpose of my loan were consumer rather than commercial?
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#2247132 - 01/04/21 08:13 PM Re: SFR as abundance of caution Melissa S
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Remember - abundance of caution ONLY gets you out of the appraisal requirement. All other regulatory requirements apply, HMDA (when applicable), Flood, rescission, TRID, etc.
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#2247134 - 01/04/21 08:43 PM Re: SFR as abundance of caution Melissa S
raitchjay Online
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(What Skittles said.) The LTV stuff (we're an exempt bank, and i have already forgotten a lot of stuff i used to know about this) is only a factor insofar as WHAT to report for that field.....it has no impact on WHETHER the loan is HMDA reportable or not.
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#2247136 - 01/04/21 08:52 PM Re: SFR as abundance of caution Melissa S
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Here's what Reg. C, 1003.4(a)(24) says:

Except for purchased covered loans, the ratio of the total amount of debt secured by the property to the value of the property relied on in making the credit decision.

I think if you didn't rely on the home in your LTV ratio, you'd report what you did rely on (the LTV with just the commercial RE).
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#2247137 - 01/04/21 08:58 PM Re: SFR as abundance of caution raitchjay
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but, I would include the unit count of the abundance of caution property in the total unit count, correct?
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#2247138 - 01/04/21 09:02 PM Re: SFR as abundance of caution Melissa S
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Yes, you would include the number of units. You are to report the number of units (housing units) that secure the loan. Even if you don't rely on the value of the home in your LTV, that doesn't change the fact that your loan is SECURED by the home.
Last edited by raitchjay; 01/04/21 09:04 PM.
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#2247139 - 01/04/21 09:04 PM Re: SFR as abundance of caution raitchjay
Melissa S Offline
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Thank you, again, raitchjay
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#2247140 - 01/04/21 09:05 PM Re: SFR as abundance of caution Melissa S
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You're welcome.
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