We have a situation with a contract for deed and just want to see how HMDA Help would handle the situation……

• Our practice for HMDA is if you have a contract for deed you are paying off, and the contract for deed has a 1-4 family dwelling on the property we would treat this as a PURCHASE for HMDA.

• A situation we have currently dealing with a contract for deed is as follows:
1. 3 Individuals went together to purchase bare land (55 acre development area) - 2 of the individuals paid cash for their portion of the transaction and the 3rd person had to do a contract for deed on the bare land for his portion

2. While the 3 individuals owned the land, they used other sources of funding to build a twin home on the land. They currently rent the twin home out and receive rental income from the twin home.

3. The 3rd individual needs to sell his portion, which he has currently on a contract for deed. The other 2 owners would buy out the 3rd person's share.

4. They have come to our bank for the loan transaction to buy out the 3rd partner with the contract for deed and finish up some final road grade, etc on the land to get it ready for sale of all the lots they have developed on the 55 acres.

Questions:
1. Would our loan request be HMDA reportable or not? The purpose of the funds are to pay off a contract for deed (keeping in mind the original contract for deed was for bare land only, since then a twin home has been built on the property), plus some other items to get the land ready for lot sales.
2. Our practice states that if we pay off a contract for deed with a 1-4 family dwelling on it, we treat that as a PURCHASE for HMDA. Do we consider the contract for deed as the original contract for deed with no dwellings on it or currently as it stands with a dwelling on it?

Please let me know your thoughts. Thank you.

So if I understand, Borrowers A & B already own the land and they want to purchase C's portion. The contract for deed is not theirs (it's C's) so it really has nothing to do with their loan. They will pay C for ⅓ of the land and C will pay off the contract. They own their portion of this dwelling & land free and clear.

If I understand correctly:
1. This is a purchase of ⅓ interest (they already own ⅔ collectively) in a dwelling. I would report it as a purchase on the LAR.
2. You're not paying off a contract for deed. You are lending money to 2 borrowers to buy out a 3rd owner. Don't consider the contract for deed and it makes this issue much clearer.

Just for clarification purposes - what does the above reference to? (&#8531 / &#8532).

Thanks -

That's weird. I'll try again.
1. This is a purchase of one-third interest (they already own two-thirds collectively) in a dwelling.
(I typed "1 / 3" and "2 / 3" and it converted it to those numbers).