Office bldg on land with residence

Posted By: MCCompliance

Office bldg on land with residence - 01/12/21 07:33 PM

We have a loan secured by a piece of property with 4 different buildings. One mobile home, one single family residence, a structure with horse stalls, and one partially completed office building. The dwellings and horse stalls are rented. Our loan is for the purpose of completing the construction of the office building and paying off the borrower's business partner for cash fronted on the project.

Would this loan be HMDA reportable as Home Improvement since it is for improving the land the dwellings are on? Or would it be exempt from reporting because it's construction of an office?

Thanks in advance for any suggestions.
Posted By: Adam Witmer

Re: Office bldg on land with residence - 01/12/21 08:33 PM

Assuming this isn't a refi, it would not be reportable based on what you provided.

The way you get to this answer is a bit complex, so let me try to quickly explain. First, you need to determine if this is a dwelling by definition by determining the primary use of the property. If the primary use is commercial, it isn't reportable. If the primary use is consumer (which in this case, it could be) we then need to look at the mixed-use rule for Home Improvement loans. Since the funds are not for the residential portion of the property, but are for the commercial portion, this would not be a home improvement purpose. Therefore, this would basically be an "other" purpose, commercial-purpose loan, which is not reportable.
Posted By: MCCompliance

Re: Office bldg on land with residence - 01/12/21 08:58 PM

No, this does not meet the definition of a refi. Thank you for the explanation!