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#2274679 - 08/25/22 01:38 AM HMDA Loan Purpose & Total Units?
Help! Compliance Offline
Member
Joined: Oct 2012
Posts: 94
San Antonio, TX
The Borrowing entity originally purchased properties containing 4 duplexes and some lots. There were existing leases on the homes for which the Borrower had to wait the first couple months to expire. Note the homes are also owned free and clear. Overall, the 1st 24 months of the 84 month term will be used to completely demolish the existing duplexes and build two 5-unit townhome buildings. They will have everything re-platted, so they can sell each of the 10 townhomes individually during the 60 P & I month that follow. There's more to it, but these are the key details.

1) Loan Purpose? Given the existing duplexes are owned free and clear, there is no refi component. Am I correct in believing this transaction is HMDA reportable due to the 60 month term the Borrower has allowed itself to sell all 10 homes? If so, would this be considered a purchase? If not, is it due to the SPEC/Contract home aspect as with a home builder, despite the loan not being construction-only and allowing time to sell the homes? I am sure if they all sell sooner the loan will be paid off sooner.

2) Total Units? Due to the re-platting and plans to sell the 10 townhomes individually, would I report the Total Units as 1 just like I would a HMDA transaction involving 10 individual single family homes?

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#2274688 - 08/25/22 12:58 PM Re: HMDA Loan Purpose & Total Units? Help! Compliance
Melissa S Offline
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Melissa S
Joined: Jan 2015
Posts: 321
Maine
Hi pp1865. I'm only going to address your item #2. Do I understand you correctly, that if you have a single loan collateralized by 10 individual single family homes, you are reporting this as 1 unit? If this is so, you may want to take a look at 1003.4(a)(9)-2 that provides instructions on how to handle a loan with "Multiple properties with more than one property taken as security." This sections states, in the last sentence, all those reporting items that are based on all collateral related to the covered loan, not just the one property identified for the address/county etc information. The number of units instructions are found in 1003.4(a)(31) which references back to 1003.1(a)(9)-2. If you have 10 single family homes all collateralizing one single loan, you have 10 units.
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#2274695 - 08/25/22 02:38 PM Re: HMDA Loan Purpose & Total Units? Help! Compliance
Help! Compliance Offline
Member
Joined: Oct 2012
Posts: 94
San Antonio, TX
Melissa, thanks for the direction with #2. Now let's see if anyone will be up for #1 :-)

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#2274699 - 08/25/22 03:01 PM Re: HMDA Loan Purpose & Total Units? Help! Compliance
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,958
Bloomington, IN
Overall, the 1st 24 months of the 84 month term will be used to completely demolish the existing duplexes and build two 5-unit townhome buildings.. . . . so they can sell each of the 10 townhomes individually during the 60 P & I month that follow.

Based on this comment I am assuming the loan proceeds are being used to build the new dwellings and the new dwellings are not being constructed for purpose of resale. I am also assuming the sale of the 10 townhomes are the repayment source for the loan.

Based on those assumptions this would IMO qualify as a construction permanent loan and be reportable as a purchase.
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The opinions expressed are mine and they are not to be taken as legal advice.

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