by Dan Persfull:
Making the following assumptions:
Borrower used personal funds to purchase a rental property.
Borrower takes equity out of rental property to replenish their personal funds. (Consumer purpose loan subject to TRID)
This would be reported as a Code 4. Other for HMDA.
by Jim Bedsole:
A key point in Dan's assumptions is "personal funds". It could be that your borrower runs a business that acquires and rents housing property and the purchase was made from "business funds", not "personal funds". But to Dan's point, just because the loan will be secured by non-owner occupied rental property does not automatically make it a business purpose loan. Many lenders fail to make that distinction. See Comment 1026.3(a)-4 which provides an explanation that only credit for the acquisition, improvement, or maintenance of such non-owner occupied property is automatically considered business purpose credit. For all other purpose credit, you'll have to make the determination using the other factors within 1026.3(a).