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#2263653 - 12/15/21 04:28 PM Primarily for Business Purpose?
Luv2run Offline
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I am wondering how others are reporting a situation where a borrower is borrowing funds for the purpose of paying off a commercial loan that does not appear on his credit report, but he is listed as the borrower on the statement provided? Would you report this as Primarily for Business Purposes? The statement clearly shows this as a commercial loan.

I generally go by whether or not the loan being paid off is on the borrowers credit report as a consumer debt, but am not sure about this one???
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#2263657 - 12/15/21 05:17 PM Re: Primarily for Business Purpose? Luv2run
rlcarey Online
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I guess I am having a hard time equating the purpose of a new loan with whether or not a previous loan that is being paid off appears on a consumer's credit report.
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#2263658 - 12/15/21 05:29 PM Re: Primarily for Business Purpose? Luv2run
Dan Persfull Offline
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Regardless of the loan's purpose if it is secured by a dwelling and is paying off another dwelling secured loan to the same borrower it meets the definition of a refinance under HMDA.

I agree with Randy...the loan being reported to the credit bureau or not has absolutely nothing to do with determining if the new loan is subject to HMDA reporting.

1003.3 Exempt institutions and excluded and partially exempted transactions.*

(10) A closed-end mortgage loan or open-end line of credit that is or will be made primarily for a business or commercial purpose, unless the closed-end mortgage loan or open-end line of credit is a home improvement loan under § 1003.2(i), a home purchase loan under § 1003.2(j), or a refinancing under § 1003.2(p);

(p) Refinancing means a closed-end mortgage loan or an open-end line of credit in which a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower.
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#2263663 - 12/15/21 06:15 PM Re: Primarily for Business Purpose? Luv2run
Luv2run Offline
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I know the purpose of the loan is a refinance and I am reporting it. I am confused by the business or consumer purpose field.

In a webinar yesterday, presented by a guru, it was conveyed that a purchase of an investment property is a business purpose. I totally get that.

My question here is, can the refinancing of a commercial loan be viewed as a business purpose? The reason I look at the borrower credit report is to determine if this mortgage being paid off is in fact consumer debt. If it is, then I report it as NOT primarily for business purpose since it is consumer debt. Easy. But what about a commercial loan? It is not being reported as consumer debt on his credit report, and the statement the borrower provided clearly states the mortgage being paid off is a commercial loan.
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#2263666 - 12/15/21 06:33 PM Re: Primarily for Business Purpose? Luv2run
rlcarey Online
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What makes you think that a loan that I personally have on a rental property is not going to show on my credit report? You are placing reliance on a credit report for something that is not true. You have no control what other creditors report to a CRA. You report HMDA based on the application at hand - not based on what is being paid off.
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#2263667 - 12/15/21 06:40 PM Re: Primarily for Business Purpose? Luv2run
Luv2run Offline
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I don't necessarily think that because it is not on the credit report, it is not consumer debt. That is why I am posting this question. I was wondering what others do in this situation.

I think I am just going to report it as not primarily for business purposes. From the response I am getting here, I am getting the impression that perhaps I am overthinking things simply because the statement is showing the mortgage as a commercial loan.

Thanks very much!
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#2263672 - 12/15/21 06:57 PM Re: Primarily for Business Purpose? Luv2run
rlcarey Online
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You have me completely lost here. How in the world do you prepare a loan package for closing without knowing whether the extension of credit is for consumer or for business purposes? That is where I am lost. This is not something that you decide at the time of HMDA reporting. That is a decision you have to make within three business days of application to determine whether or not you have to provide consumer disclosures.
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#2263674 - 12/15/21 07:27 PM Re: Primarily for Business Purpose? Luv2run
Luv2run Offline
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OK, let me try to explain this. This is a mortgage loan taken on our personal lending side of business, sold to Freddie Mac so all consumer disclosures were sent as required. We are buttoned up that way. Every compliance item on the list checked off and then some.

The borrowers took out equity from an investment property to pay off a mortgage on another investment property. I am reviewing the LAR now. The only reason I asked about the field for HMDA is because the mortgage they paid off was a commercial loan.
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#2263677 - 12/15/21 08:05 PM Re: Primarily for Business Purpose? Luv2run
rlcarey Online
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So what you are suggesting is that you have a loan that for all intents and purposes has been fully disclosed as a consumer purpose loan and you are planning to override all of that documentation for HMDA reporting purposes. I think you are way over thinking this IMHO.
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#2263678 - 12/15/21 08:10 PM Re: Primarily for Business Purpose? Luv2run
rlcarey Online
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Official Interpretation
Paragraph 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).
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#2263679 - 12/15/21 08:21 PM Re: Primarily for Business Purpose? Luv2run
Luv2run Offline
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The reference above was very helpful!

Thank you for your input on this!
Last edited by Luv2run; 12/15/21 08:31 PM.
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