And maybe this should be under HMDA - if so, feel free to move it.

I followed a thread within the last year I think, about how the CFPB seems to have shifted its thinking on HMDA reportable loans from what it will be to what is it at the time of consummation. Most of the conversation revolved around abandoned dwellings and the CFPB still considers them to be dwellings, no matter what shape they are in, for HMDA reporting purposes.

So we have a loan that we would have considered HMDA, based on what it will be, but are now calling it not HMDA because of what it was at consummation. Borrower bought a motel. It was a vacation motel with all the rooms as suites (included kitchen facilities). The borrower's intent is not to operate it as a motel, but to rent out the suites as apartments on short or long term leases, as furnished studio apartments. No renovations are being planned for the property. There is also a SFR on the property, but as the motel is larger both in square footage and income, it is a motel that is being bought. Motels are not HMDA reportable so we are calling it not HMDA.

My question is, since this shift in thinking, has anyone been cited on an exam for basing the HMDA reporting on what it is at consummation, rather than what it will be? My concern is that there is nothing specific that states reportability is based on what it is at consummation in the regulation, commentary, or FAQs, although a lot can be inferred, so I really don't want this one to come back and bite us.

Thank you.

Hey Cloud,

I was likely one of the main commenters in the thread you were following. I can't speak much to HMDA exams currently, but what it is at consummation vs. what it will be is not quite the right way to look at it. It's heavily dependent on the particular scenario. With demolish and construct new situations, a "dwelling" is seen as being purchased. There's no intent to use it as such because it is dilapidated or whatever. In such a scenario, the intent of how the property will be used doesn't really matter. However, in your scenario, there is not much practical difference between a vacation motel and an apartment building here, especially as you mention no renovations are necessary to convert it to an apartment building. It's similar, imho, to a person buying a beach home to use as an AirBnB. The intention matters in the scenario, as if the person was using it as a vacation home, then it would be a "dwelling." However, if they use it for AirBnb nightly and weekend rentals, it is transitory housing and not a dwelling. So, the intent here is to use the property as an apartment building. Therefore, I would understand this to be a dwelling. Also, you mentioned a SFR on the property. If this is a separate structure from the motel, then this would also qualify as a "dwelling" under HMDA, which would make the loan reportable as well. What you mentioned about square footage and income is for situations where one building (property) is split into commercial and residential components. It is not for when you have multiple properties.

[4. Mixed-use properties. A property used for both residential and commercial purposes, such as a building containing apartment units and retail space, is a dwelling if the property's primary use is residential. An institution may use any reasonable standard to determine the primary use of the property, such as by square footage or by the income generated. An institution may select the standard to apply on a case-by-case basis.]

Yes, but if I purchase a beach home, it is clearly a dwelling. I may use it myself or I may rent it out, but I have bought a dwelling. In this case, the borrower bought a motel.

I remember some past threads regarding the mixed property as well. I am not sure if the CFPB has clarified anything in regards to that, but there were a number of people that advocated that, even though the examples only talked about a single structure, you still needed to look at the whole property. For example, not far from here is a trucking company. They have garages and machine shops and other commercial buildings. There is also a SFR which I am sure the owner of the company lived in at one time. Anyone purchasing the property is probably purchasing it for the business, not the SFR. Looking at the property as a whole, it is clearly a commercial property. The same with this, the borrower bought a motel, a commercial property, that happened to have SFR on the property. Has the CFPB given a bright line that says mixed use only considers individual buildings and not a property as a whole?

Sorry . . . I never noticed your follow-up. I've never seen anything that would lead me to believe the commercial garage and machine shop scenario is not HMDA reportable. You have a free standing "dwelling" as collateral. As long as it's either a Purchase, Refi, or Home Improvement, then it is reportable from what I understand.

It doesn't matter that the beach home is clearly a "residence." If the borrower stated they are buying it in order to use it for weekend rentals, then it is not a "dwelling" per HMDA.