A couple of thoughts on this.
First, I agree that 1003.3(c)(9) of Reg C/HMDA automatically exempts a loan that is primarily for agricultural purposes.
From Reg C: "(9) A closed-end mortgage loan or open-end line of credit used primarily for agricultural purposes;" and from the commentary: "1. Loan or line of credit used primarily for agricultural purposes. Section 1003.3(c)(9) provides that an institution does not report a closed-end mortgage loan or an open-end line of credit used primarily for agricultural purposes. 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). An institution may refer to comment 3(a)-8 in the official interpretations of Regulation Z, 12 CFR part 1026, supplement I, for guidance on what is an agricultural purpose. An institution may use any reasonable standard to determine the primary use of the property. An institution may select the standard to apply on a case-by-case basis.
So, is the loan primarily for agricultural purposes? If so, DI under Reg C was not supposed to be collected on this application and it will not be reported for HMDA.
Now, you bring up a good question on Reg B and raitchjay has provided some good things to consider. For me, here is the thought process I would go through. First, is the dwelling going to be occupied? If not, you can automatically rule our Regulation B from the discussion:
"(1) A creditor that receives an application for credit primarily for the purchase or refinancing of a dwelling occupied or to be occupied by the applicant as a principal residence, where the extension of credit will be secured by the dwelling,"
Now, if it is to be owner occupied as a primary residence (which you appear to say it would be), then you will have to determine if the loan was "primarily" for the purchase of the dwelling. To me, it very will could be as this is going to be their home, but I guess there could be an argument that the primary reason for the loan was to purchase ag. Here is an example that comes to mind: if the applicant is downsizing primary residences and actually had enough cash from the sale of their prior house to cover the new primary residence, but didn't have near enough funds to cover the farm. Either way, you will want to document your file as to why or why not.
Finally, it is important to keep in mind that "removing the GMI" doesn't make a violation (IF there was/is one) go away. For any violation of GMI/DI, I would want to know if there was a misunderstanding from the applicant as to the purpose of the loan, or did the lender just not understand when GMI/DI was required? If the application originally appeared to require DI, but something changed later, then I would note this in the file and move on. If, however, it wasn't required from the very beginning, these types of violations should be used as a training opportunity as you would have a violation for collection DI/GMI when not required.
Adam Witmer, CRCM
All statements are my opinion, not those of my employer, and should not be taken as legal advice.www.compliancecohort.com