The following question is from one of our staff members - your comments will be gretly appreciated.

"Ok, bare with me. When it comes to HMDA and business related transactions, it can get a little cloudy. I have a loan here to XYZ Investments. The purpose is to purchase land to further develop into individual lots. There is a SFR on the property being purchased. I say that this transaction is not subject to HMDA because the funds actually are being used to develop and not solely to purchase the property which does have the SFR on it.

We had a similar transaction to a LLC which I did report as HMDA, because the land was not being developed, and a SFR was on the land when purchased."

Similar Question

What are they going to do with the dwelling? If it will be razed and the land used as part of the development, don't report the loan.

If the dwelling will be kept, it's a reportable transaction.

You might also determine that this loan is temporary financing. Most of our development loans are interest only, for a relatively short time period, and will be paid from the sale of the lots. If that is the case, it would meet the temporary financing exemption from HMDA.

I agree with the answer in the link CB provided because the "cabin/dwelling" was purchased as a vacation home.

I agree with hmdagal's analysis also, with one minor exception. If the dwelling is to be used as their business office for this project then I would not report it either.

The key question is what will be the use of the dwelling purchased? If it will be used as a dwelling it is reportable, if it will not then it's not reportable.

I hope I can get my question answered using this thread. Two very similar came up today & I'm not sure of the answer. Loan proceeds will be used in one case to build a hay barn on land where there is a dwelling. The loan will be secured by the dwelling plus farm equiment. The second loan will not be secured by a dwelling and the proceeds will be used to turn a portion of the dwelling into a business (bait shop).
Are these to be reported as Home Improvements on our LAR?

I'll take a shot and let the experts confirm (hopefully) or shoot down.

Re: HI
1) yes - improves land secured dwelling is on
2) no - because it's being turned into a business and is not dwelling secured. (not as sure on this one)

I believe # 2 will still be a dwelling with a business within it.

What about the explanation on page D-5 of the GIR for mixed-use property? Since the $ will be used primarily for the business portion of the dwelling and not the residential portion, I would vote for not reporting # 2.

2. Purpose of the loan is to establish a business, and it is not secured by a dwelling according to the post, therefore not reportable.