Horse Arena and home

So we have a customer that is purchasing 56 acres, a home, barns with horse stalls and a covered riding arena for horses.

I don't think this qualifies for the Agri hmda exemption.
Thoughts?

Need more info....values.....plans of the borrower...etc.

Residence worth about $250k, $550k for the barns, arena etc. Borrower plans to do riding lessons and training.

Sounds like ag. purpose to me.

Would you consider it livestock?

"Regulation Z’s official commentary states that agricultural purposes
include planting, propagating, nurturing, harvesting, catching, storing, exhibiting,
marketing, transporting, processing, or manufacturing food, beverages, flowers, trees,
livestock, poultry, bees, wildlife, fish or shellfish by a natural person engaged in farming,
fishing, or growing crops, flowers, trees, livestock, poultry, bees or wildlife. See comment
3(a)-8 in the official interpretations of Regulation Z, 12 CFR part 1026. A Financial
Institution may use any reasonable standard to determine the primary use of the property,
and may select the standard to apply on a case-by-case basis."

For Regulation Z purposes - it would likely fall into business purpose rather than ag, purpose. Training horses and giving riding lessons is really not ag. related.

Personally, i think horses qualify as livestock.

I could make an argument for either agricultural or business purposes. (Helpful, I know.)

The NAICS code for horse boarding and training is 115210 (support activities for animal production within the agricultural sector). If that's the larger portion of the activities, I'd class this as agricultural.

The NAICS code for riding lessons is 611620 (riding instruction academies or schools within the educational services sector). If that's the larger portion, then I'd class this as business.

Given the acreage, on the balance I'd lean towards agricultural purposes. However, given the statement in the Official Commentary to Reg. Z stating, "A Financial Institution may use any reasonable standard to determine the primary use of the property, and may select the standard to apply on a case-by-case basis," I think you could justify either.

At the end of the day (yes, an overworked, hackneyed phrase), the loan appears to be exempt under HMDA if you elect to call it an ag loan, a home purchase loan if you elect to call it a non-ag business-purpose loan, and exempt from TILA and Reg Z regardless of whether you consider it a business or ag loan. And, of course, your decision will also affect which line of the Call Report the loan will be reported in.

I would not cross the line between NAICS codes and Regulation Z. Regulation Z defines agricultural purpose.

8. Agricultural purpose. An agricultural purpose includes the planting, propagating, nurturing, harvesting, catching, storing, exhibiting, marketing, transporting, processing, or manufacturing of food, beverages (including alcoholic beverages), flowers, trees, livestock, poultry, bees, wildlife, fish, or shellfish by a natural person engaged in farming, fishing, or growing crops, flowers, trees, livestock, poultry, bees, or wildlife.

If someone can tell how horse training and riding lesson fall under the Regulation Z definition, I am all ears. While you might consider horses livestock, but unless you are breeding and selling them, I think it is a stretch. If they are training horses or giving riding lessons, it might not even be their own horses involved.

But make your decision, document it and move on.

We can disagree Randy, but that reads (with non-essential words removed by me) "An agricultural purpose includes...nurturing...(and)...storing...livestock."

If the horses are being cared for and/or kept on the property, i'd have no problem with an agricultural designation regardless of who owns the horses.

... by a natural person engaged in farming, fishing, or growing crops, flowers, trees, livestock, poultry, bees, or wildlife.

That would be the tricky part. But document and move on.

To be fair.....i guess i should have went on and included "by a natural person engaged in...livestock".

I could see how you would want to interpret that as requiring some ownership. I don't think you HAVE to interpret it that way, but it's definitely an interpretation you could argue and support. So i do agree.....interpret that how you will....make your choice, document it, and go on.

Yep, IR beat me to it.

Just to chime in, this would not be an ag loan in my opinion...never has and never will be. Business purpose? Yes.