Build a barn - HMDA?

We have a loan with a purpose of building a barn on the borrower's 7 acre property that already contains his primary residence and a detached garage. The loan will be secured by a second lien on this property.

Is this HMDA reportable as home improvement?

Unless the barn is for a business or income-producing agricultural purpose, I would say yes.



Note - I qualified agricultural purpose with "income-producing" because housing the grandkids' pet ponies is not an agricultural purpose - it's personal.

Makes sense.

So a loan to construct a chicken breeding house on a 35 acre property that contains a primary residence, barn, farm fields - is not home improvement either then by the explanation you provided.

These agricultural loans (where the home is located on the property where the farm business occurs as well) are mighty confusing when it comes to HMDA.

True. Just remember that the ag purpose exemption doesn't apply to refinances.

just to expand a bit... I explain it to our LOs this way:

If you have a customer build a business office, commcercial garage, or retail shop on a portion of the land that includes their primary residence, would you call that home improvement? No. The same logic applies to *income-producing* agricultural facilities.

Interesting Becca. What about this scenario? Your examples are instances where the borrower builds something (business office, commercial garage, etc.) SEPARATE from the home. While i know someone adding a commercial garage to their home isn't going to happen, what difference do you see if the business office, instead of being built separately, is ADDED on to the home? In my mind, that is undoubtedly home improvement and i'm trying to connect the dots in my head as to how it being separate from the home would make a difference. Just curious and looking for some clarity. You've made me think today.

I would then refer to the mixed-purpose building rules (square footage vs income, etc.).

I apologize for making you think on a Friday. That should never happen.

Haha. So true. I can't poke holes in your logic in the original question; is this an inferred thing? I'm wondering if one could make the argument that a commercial garage is "improving" the worth of the home. I guess i'm struggling with the concept because i don't SEE a business-purpose test in regards to HI loans anywhere.

Well...i take that back. I see it in regards to mixed-use property. But, if a commercial garage is placed on a homestead that currently has no commercial use, it wouldn't yet be mixed-use property.

But the purpose isn't to IMPROVE the HOME. It's to build a business facility.

Improve the home or the real property....is it adding value would be the question.

Home improvement loan means:
(1) A loan secured by a lien on a dwelling that is for the purpose, in whole or in part, of repairing, rehabilitating, remodeling, or improving a dwelling or the real property on which it is located;

See definition I posted right above.

I can see where the argument can be made, but I think this may be one of those "pick a method and be consistent" things. I tend to fall back on how the loan would be coded for purpose. If the loan is being used to build the commercial garage, for example, I don't believe the LO is going to code it "home improvement."

I think I'm probably expressing this poorly, as well.

Consistency is key. Review the definitions, do some research (HMDA Help (!), your regulator, etc.), make your decision and treat all similar cases the same.

Keep in mind that the agricultural/farm exemption only applies to a purchase, not a refinance.