Construct to Perm vs Warehouse to Apartment

Posted By: getinfo

Construct to Perm vs Warehouse to Apartment - 10/27/11 03:31 PM

HMDA Questions:

In using the logic that a construction to perm is reportable as a purchase when you take land as collateral but in the end it will be a residential property. I have a couple questions as to if the two scenarios below are reportable.

Two Scenarios:

1. A loan to purchase a warehouse with additional funds to improve the property and convert it into a 20 unit apartment building? The collateral is the warehouse but in the end will be an apartment building. IF it is considered HMDA reportable, it would be a multi-purpose loan, to purchase and improve, so improve would trump the purchase? OR, would this NOT be considered HMDA as it is NOT a loan to actually purchase, refinance, or improve an existing dwelling?

2. A loan to refinance existing debt, the loan being refinanced originally funded the purchase and conversion of an abandoned church into a 17 unit apt. building, the additional proceeds are being used to convert a vacant school into a 4 unit apartment building. The Collateral is the vacant school, but in the end will be an apartment building.
If scenario one is reportable then would this be reportable as a refinance under HMDA?
Posted By: Mrs. Rizzo

Re: Construct to Perm vs Warehouse to Apartment - 10/28/11 02:37 PM

How are the loans structured? Are you doing one loan for the purchase and rehab or two seperate? I'm just wondering if they are temporary.
Posted By: Dan Persfull

Re: Construct to Perm vs Warehouse to Apartment - 10/28/11 02:45 PM

Both scenarios IMHO are for the purchase (construction) of dwellings therefore reportable as a home purchases. Unless they meet one of the exemptions such as temporary financing mentioned by Rizz.

Quote:
so improve would trump the purchase?

A home purchase always trumps home improvement or refinancing for reporting purposes.
Posted By: getinfo

Re: Construct to Perm vs Warehouse to Apartment - 10/31/11 01:39 PM

Thanks to both of you..

Here are two more scenarios that I'd like an opinion on if you'd care to that a stab at it.

Purpose of new loan is to paydown a portion of an existing loan secured by a dwelling and new loan is secured by a dwelling. Is this a HMDA reportable loan under the refinance definition?

Purpose of new loan is to term out the outstanding balance on a LOC that was secured by a dwelling and replacing it with a new loan secured by a dwelling, however the LOC is not closed it will remain open for future advances. Is this a HMDA loan reportable loan under the refinance definition?
Posted By: hmdagal

Re: Construct to Perm vs Warehouse to Apartment - 10/31/11 01:58 PM

Neither of those scenarios are satisfying an existing obligation, so would not be reportable.
Posted By: SMQ, CRCM

Re: Construct to Perm vs Warehouse to Apartment - 10/31/11 04:24 PM

No, not reportable as refi.

However, what if customer has LOC to do construction of new dwelling, terms out majority of line, but leaves a small balance in anticipation of a few more things to do to house, i.e. landscaping? Customer may plan to simply pay down LOC when he finishes everything or transfer to a HELOC. Wouldn't we still report the termed out portion as a purchase for HMDA even though it doesn't satisfy the initial construction loan? I don't recall ever seeing that requirement for a purchase, but I can see a lender doing this.
Posted By: Dan Persfull

Re: Construct to Perm vs Warehouse to Apartment - 10/31/11 04:33 PM

IMHO doing what you describe would not be converting a construction loan to permanent financing because the construction loan still exists.