We are seeing more and more HELOC's (secured by borrower's principal dwelling or second home) and per the loan officer/customer additional funds are for business purpose (i.e. working capital, materials, equipment, etc.). The HELOC is HMDA reportable because it is refinancing the borrower's principal dwelling. If the additional funds available in the line of credit for business expenses exceeds the amount of the refinance portion, would this be considered "a covered loan primarily for business purpose"? Or.....since the HMDA Purpose is Refinance for the consumer portion of the debt, should we report as consumer purpose for HMDA?

We are trying to nail down specifics of what the reg means by "primarily" so we can be consistent on how we report these for HMDA.

Thanks in advance for any advice, tips, or suggestions!

Are you documenting these loans as a HELOC under 1026.6(a) and 1026.40? I think HMDA would follow that decision.

Thank you for your response. So do you mean if we give the disclosures required by Reg Z for an open-end LOC, we should not report business purpose for HMDA?

Well you have this:

1003.3(c)(10) - 2. Primary purpose. An institution must determine in each case if a closed-end mortgage loan or an open-end line of credit primarily is for a business or commercial purpose. If a closed-end mortgage loan or an open-end line of credit is deemed to be primarily for a business, commercial, or organizational purpose under Regulation Z, 12 CFR 1026.3(a) and its related commentary, then the loan or line of credit also is deemed to be primarily for a business or commercial purpose under § 1003.3(c)(10).

And you have this:

1026.3(a) - 1. Primary purposes. A creditor must determine in each case if the transaction is primarily for an exempt purpose. If some question exists as to the primary purpose for a credit extension, the creditor is, of course, free to make the disclosures, and the fact that disclosures are made under such circumstances is not controlling on the question of whether the transaction was exempt. (See comment 3(a)-2, however, with respect to credit cards.)

The fact that you gave disclosures isn't controlling, but I wouldn't be hunting down LOs to confirm the use of proceeds for HELOCs originated through your consumer lending processes and given in accordance with Reg Z for HMDA purposes.