No building value/lot loan

Is there anything that would be a regulatory violation in this case: financing a lot purchase that there is a home on the property but it is really in bad shape and will be removed from the property at some point. If having a property evaluation done on land only, no value is being placed on the residence. Could you waive insurance on it if this is the case?

Great question. Two regulatory concerns come to mind, though they may not apply to you.

First, if you are a HMDA reporter, talk to your HMDA team as it appears there could be a "dwelling" for HMDA purposes, meaning this could be HMDA reportable. Secondly, if this is in a high-risk flood zone, you would need flood insurance in order to close the loan and cannot waive that requirement until the residence is torn down.

If you are not giving any value to the property, hazard insurance is a matter of safety and soundness with no technical regulatory requirement that I can think of. Regulation Z will depend whether an exemption (like business/commercial or agricultural purposes) applies, but I don't see enough information to make that determination.

Ditto.
I remember one of Andy’s gems from many years ago.

If there is property with a structure in a SFHA that would fall down if you leaned on it, there are 3 choices:
1 - get flood insurance and make the loan
2 - don’t get flood insurance and don’t make the loan
3 - lean on the building before closing.

Actually that statement came from me and I got it from Rich Slevin in one of his Flood Insurance seminars in Indianapolis some 20 years ago. I don't remember his title but at the time he was associated with the NFIP/FEMA out of their Chicago office.

Hello, I have the same scenario but a different regulatory aspect - would ATR apply on this loan if the dwelling is uninhabitable? I can't find discussion on "dwelling" for TILA. I did find it for HMDA but didn't want to assume.

Well, if you have a dwelling under Regulation Z, you have a dwelling inhabitable or not, so documenting that determination would be your first step.

But isn't ATR just good standard underwriting - what is the hesitation?