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#2264300 - 01/05/22 02:47 PM In-Home Daycare Facilities -- HMDA reportable?
Cguru Offline
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Hello!

We have a situation where an in-home daycare has a loan - they live and run the daycare in the same house. Now, HMDA discusses mixed use property and states that a property used for both residential and commercial can be reported IF the primary use is residential.

To determine this, HMDA states you may use any reasonable standard to determine the primary use of the property, such as by square footage or by the income generated. However, it is their house and no income is generated by them just living there - only through the in-home daycare.

In this case, would the in-home daycare loan be HMDA reportable?

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#2264312 - 01/05/22 04:21 PM Re: In-Home Daycare Facilities -- HMDA reportable? Cguru
raitchjay Offline
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I'd use the square footage test. If the home is more square footage than the day care, i'd call it a home.
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#2264448 - 01/07/22 06:52 PM Re: In-Home Daycare Facilities -- HMDA reportable? raitchjay
RVFlyboy Offline
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I can think of multiple reasonable methods that could be used. Certainly, square footage might work, but what if the daycare kids have the run of the house or most of the house? Then it might still be primarily business purpose. I think you could compare income from the day care activities against comparable rent costs for a residence in that area as a proxy for income from the residence (the theory being that the owners are paying themselves rent to live there). You could use the amount of time in the day spent as a day care vs spent as a residence. I think any of those and more might be reasonable ways to determine if the use is primarily residential or not.
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#2264458 - 01/07/22 07:42 PM Re: In-Home Daycare Facilities -- HMDA reportable? Cguru
Andy_Z Offline
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Jim, would you recommend picking one method for the bank, or using different methods based on the loan, geo-area, business, etc?
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#2264470 - 01/07/22 08:44 PM Re: In-Home Daycare Facilities -- HMDA reportable? Andy_Z
RVFlyboy Offline
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Originally Posted by Andy_Z
Jim, would you recommend picking one method for the bank, or using different methods based on the loan, geo-area, business, etc?
The regulation clearly states that you don't have to use the same method on every loan.
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#2264475 - 01/07/22 08:51 PM Re: In-Home Daycare Facilities -- HMDA reportable? Cguru
Inherent_Risk Offline
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Not Jim, but every loan is different for us. We just make sure to document our files to include rationale. This is a great example why one size fits all doesn't work well.

I'll say this. I know it technically shouldn't matter, but I would absolutely be considering the loan purpose and borrowers on this one. If it's a loan to John and Jane to refinance the mortgage on their primary residence, you're going to have a harder time convincing an examiner it's not reportable. If it's to Daycare LLC for maintenance and repairs, that's going to be a easier sell even though they are both technically on the same mixed use property.

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#2264872 - 01/19/22 03:45 PM Re: In-Home Daycare Facilities -- HMDA reportable? Cguru
Compliance NABW Offline
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I always find it hard to argue, in most cases, that a property used as a primary residence isn't a "dwelling."

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#2264898 - 01/19/22 07:31 PM Re: In-Home Daycare Facilities -- HMDA reportable? Cguru
raitchjay Offline
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Why? If I use 400 Sq. feet as a living quarters and 3000 Sq. feet as my machine shop, (just as one example of an acceptable mixed use test)...why would it be hard to argue that the space is primarily commercial and thus not a dwelling for HMDA purposes?
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#2264950 - 01/20/22 09:02 PM Re: In-Home Daycare Facilities -- HMDA reportable? raitchjay
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Originally Posted by raitchjay
Why? If I use 400 Sq. feet as a living quarters and 3000 Sq. feet as my machine shop, (just as one example of an acceptable mixed use test)...why would it be hard to argue that the space is primarily commercial and thus not a dwelling for HMDA purposes?

Yes, sorry, I posted in error. This is a concept I use for Reg. Z, not HMDA, i.e. I find it difficult to argue that a loan used for a primary residence is not consumer purpose.

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