Loan to build a shed on property primarily used for farming. Loan will be secured by home & 120 acres. My thinking is that this loan would not be HMDA reportable as home improvement because proceeds are not being used to improve the residential portion. Just wanted to see if I was on the right track.

Is the shed for home use or farm use? HI is defined in GIR p 26 as a loan "...made for the purpose of improving the dwelling or the real property on which it is located..." The shed I just put on my property was part of a home improvement loan. However I would argue that a milking shed on the farm down the road would not be an HI loan for HMDA.

See GIR Appendix D 203.2(g)4. for an answer.

You lost me, swiggles. D 203.2(g)4 (p D-6) deals with home-purchase, commercial and other loans. Original post was asking about HI.

The shed will be used for farm equipment storage etc.

That doesn't matter IMO. If the shed is located on the same parcel/tract as the dwelling then it is improving the real estate upon which a dwelling is located therefore meeting the definition of a HI loan. If the shed is on a different parcel/tract then it would not meet the definition. And just in case you were wondering the acreage and agricultural use would not exempt it. The small farm exemption is only for a purchase transaction, not HI or refinancings.

Page D-6 shows (h)4, which deals with home purchase loans. I referred to page D-5 which shows (g)4. Section (g) refers to home improvement loans. Am I reading something incorrectly?

Then I'd argue that the shed was not HI and point to Appendix A IV. B 1 regarding data to be excluded where it states "goods for business inventory" would be an example of HI loan secured by dwelling not HMDA reportable.

How is a shed to store the inventory/goods qualify as inventory?

Goods for business inventory is the goods that make up of the inventory.

For the sake of discussion, Dan, wouldn't the shed be listed as an asset on the business side of the farm same as the barn? Would improving the barn be an HI? Don't know if they have pole sheds in Indiana but they're common place here and that's why I asked about the shed's use.

You could not use this section as a basis for not reporting it as a home improvement loan.....if the shed is not used to store personal property? It is used to store commercial farm property. Or would this be a big stretch?

4. Mixed-use property. A loan to improve property used for residential and commercial purposes (for example, a building containing apartment units and retail
space) is a home improvement loan if the loan proceeds are used primarily to improve the residential portion of the property. If the loan proceeds are used to improve the
entire property (for example, to replace the heating system), the loan is a home improvement loan if the property itself is primarily 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.

What difference does it make if it's a pole barn, etc.? If it adds value to the property then it is improving the real property upon which a dwelling is located. And yes the shed would be an asset the same as a detached garage would be. It would also be very possible for the shed to quit being used to store farm equipment and store personal items, or turn it into a garage.

The definition of a home improvement loan is any loan where a portion of the loan proceeds are to be used to improve a dwelling or the real property upon which the dwelling is located. (We won't go into the dwelling and non-dwelling secured scenarios.)

Therefore, if the shed is being built on the same parcel/tract of land that the dwelling is located on then how does that not qualify as improving the real property upon which a dwelling is located?

OK.....I buy that. Thank you for your explanation.

Dan, does swiggles' post 626469 change your opinion any?
(Not arguing, mind you. I'm enjoying the debate.)

No, this is not mixed used property. There is no question that a dwelling exists on the property, we're just not sure if it's on the same parcel/tract, however we will assume it is.

The mixed use property test is a test to apply to see whether you have a dwelling. IOWs, if you have a convenience store that has 4 apartments above it Reg. C allows you to apply a test either by square footage or income production on whether the property qualifies as a dwelling. If the convenience store square footage is greater or produces more income then Reg. C allows you not to qualify that as a dwelling. However if the test proves the apartments have a greater square footage or greater income generation then you would have a dwelling for reporting purposes.

What test are you going to apply to the dwelling located on the property in question whether it qualifies as a dwelling when it is being used exclusively as a residence, or at least that's my assumption?

Thanks for everyone's opinions. The reason I questioned this is because I read in the GIR the statement that Swiggles refers to in her post #626469. I was thinking that the property was mixed use because of the farm. Dan's last post explains the mixed use property.

I had this same question a while back and asked HMDA Help (...I know...I know...) and FWIW, their answer back was "the regulation doesn't seem to distinguish between 'building' and 'property'." So in situations like the one described above we wouldn't report the loan unless the improvements to the property were primarily for the dwelling.

Actually it does imply a difference if you look through the GIR, i.e.:

Dwelling. Dwelling means any residential structure, whether or not attached to real property. It includes vacation or second homes and rental properties;

and;

Census Tract. Indicate the census tract where the property is located.

If you read the GIR you will find that where it is referring to "land" they use the term real property and when they are referring to a dwelling they use the term dwelling or property. Take the second example, a MH is a dwelling and some HM loans do not include real property, but you have to report the location of the MH/dwelling/property.

Property Located Outside Metropolitan Area. For loans on property located outside the metropolitan areas in which an institution has a home or branch office, or for property located outside of any metropolitan area, the institution may choose one of the following two options.

Once again they refer to reporting the property, but if the property is not a dwelling you don't report it. Loans for real property without a dwelling/property is not subject to Reg. C.

and;

A loan to improve property used for residential and commercial purposes (for example, a building containing apartment units AND retail space)

and one last example:

Property Type. Report whether the loan or application was for manufactured housing, a multifamily dwelling, or a one-to-four-family dwelling other than manufactured housing.

Here they are referring to the property being manufactured housing, a 1-4 dwelling or a multi-family dwelling. Why wouldn't they just say dwelling type?

Dan, your argument made sense to me...but so did my own. So I had a discussion with my Fed examiner. Here's some of what was said.

Your (Dan's) position is a logical interpretation of the terms and is a reasonable argument.

My (TR's) interpretation that the shed is for business purposes on a multi-purpose parcel of significant acerage also is a reasonable argument.

When dealing with grey areas such as this, we discussed looking to the spirit of the Regulation and logical interpretations of the terms using common sense.

Home Improvement to the real property on which the dwelling is located as exemplified in GIR D-5 implies personal usage of the improvements, "...swimming pool, garage, landscaping".

The primary purpose of the land and improvement here are not personal. The shed being built here is for business purposes and will most likely be counted as a business asset on the financials of the farm. Future use of the shed in a non-business manner is irrelavant because you should not anticipate the future when reporting HMDA now.

So, with my examiner's blessing, I will continue NOT to report this type of loan on my LAR.

Thanks for the stimulating discussion. I always learn something from you!

I am glad that you followed up on this TR. I would not be comfortable classify such a loan as home improvement. I will use (if it ever comes up) the arguement of the spirit of the regulation. thanks.

Then if you don't follow the definition of a home improvement loan, then why follow the definition of a refinancing? The spirit of HMDA was not to include all the business purpose loans that are now brought in under that scope. And no where can I find that the improvement to the real property upon which a dwelling is located must be or implied that they must be for personal use.

However, as long your examiner is in agreement then go for it. Just be sure if your examiner changes that you get their opinion and that the examiner's opinion coincides with the regulator's opinion.

And yes, this has been a good discussion.

Because Dan, we all know the examiners get to define the spirit. And it wouldn't be HMDA if it made sense.