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HMDA - Investment Purpose Loan

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Question: 
A loan is being made under an individual's name for investment purposes. It is not going to be owner-occupied and is not a primary or secondary residence/principal dwelling; it's a purchase, renovate and re-sell. The rate spread is N/A, correct? Since it is not under a business name are we required to gather the Government Monitoring Information on the individual(s)?
Answer: 

Whether the rate spread is NA will depend on the purpose of the loan. The purchase of an investment property is not automatically exempt as a business purpose loan and Reg Z exempts rental property. If I have an opportunity to buy a piece of property for 40% of it's value, renovate it and resale it for a profit then I have made a personal investment, therefore, it is a consumer loan. If I'm in the business of buying, renovating property for resale then that would be a business purpose and exempt. You need to look to 226.3 and its Commentary for guidance.

First published on BankersOnline.com 2/26/07

First published on 02/26/2007

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