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#2291007 - 11/22/23 11:31 PM Home Improvement vs Construction Purpose
Tarhe Offline
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Joined: Nov 2006
Posts: 1,395
Would this loan be HMDA reportable as "Home Improvement" (Purpose Code 2)? The loan is to an LLC that was formed to build out 14 studio units in a commercial building that was "gifted" to them. The loan funds will go towards paying the estimated construction costs related to the build out of the studio units as well as tenant improvement allowances for the commercial space. It will be mixed-use but primarily for residential purpose. I'm unclear on whether this would be considered "home improvement" as opposed to a construction loan (which would not be HMDA reportable.) The loan is long term (30 yrs). (Our loan is less than half of the expected total construction costs.)

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#2291016 - 11/23/23 02:14 PM Re: Home Improvement vs Construction Purpose Tarhe
rlcarey Offline
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Joined: Jul 2001
Posts: 83,022
Galveston, TX
Why would a construction loan not be reportable. If you consider it initial construction then it would be reported as a purchase, would it not, as this appears to be permanent financing? I think it is just a business decision if you feel the property meets the definition of a dwelling.

4. Mixed-use property. A closed-end mortgage loan or an open-end line of credit to improve a multifamily dwelling used for residential and commercial purposes (for example, a building containing apartment units and retail space), or the real property on which such a dwelling is located, is a home improvement loan if the loan's proceeds are used either to improve the entire property (for example, to replace the heating system), or if the proceeds are used primarily to improve the residential portion of the property. An institution may use any reasonable standard to determine the primary use of the loan proceeds. An institution may select the standard to apply on a case-by-case basis. See comment 3(c)(10)-3.ii for guidance on loans to improve primarily the commercial portion of a dwelling other than a multifamily dwelling.
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