If the purpose of the loan is to purchase 82 acres that will be developed, and eventually sold off in lots, and there happens to be a house on one lot, is there anything in Regulation C that would allow us to exempt that loan? I looked at 1003.2(g)(4) regarding "mixed-use" property, but I don't think it fits that mold. It also doesn't fit 1003.3(c)(2), primarily because there is a dwelling on it. Any advise would be appreciated...thanks so much!

It is a mixed use property. There's a dwelling and there's 82 acres of bare land. What is the primary use of the property? It sounds like it's for housing development (sold off in lots). Will there be homes built with the current loan proceeds? If not, I think it's more of a commercial development than a dwelling purpose loan.

Let's see what others think.

We would report it as HMDA. If the land is marked for residential use, we would not view this as commercial property, and as such, not mixed-use. We'd report it as a purchase.

DMSESQ - Under the old rules, I too would have reported this as a purchase. Under the new rules, however, my understanding is a little different. The first step today is to determine if there is a dwelling. As this is a mixed use property, we determine if it is a dwelling by using a reasonable standard. In this case, it would appear that the primary purpose is to turn the land into lots for a housing development (though I agree with David that we might need a bit more clarification from the OP). Therefore, the mixed use property is not a dwelling, meaning this could not be HMDA reportable as it isn't secured by a dwelling.

that will be developed, and eventually sold off in lots

Eventually could be in 2 days or 20 years.

there happens to be a house on one lot

What do they plan to do with the dwelling? Are they going to resell it? Raze it?

The additional land appears to be neither primarily used for agricultural or business purposes. The borrower just purchased a large track of land with a dwelling on it. Is this track of land one parcel or several parcels? Mixed use property applies to structures located on the same property. So if you have a loan secured by my machine shop located in XYZ Business Complex and my home located in Green Acres Subdivision your loan is not secured by mixed use property.

Business purpose exemption - the business purpose exemption does not apply if the proceeds are to purchase, refinance or improve a dwelling. The exception would be if the loan is to a builder to build houses for resell and this does not appear to be the case in this transaction.

The loan as described was to purchase 82 acres with one lot having a dwelling located on it. I have to lean toward reporting it as a home purchase.

You might "lean" that way, but I think there's a big difference between Reg Z's business purpose and HMDA mixed use building rule. You can certainly have a building that is more than 50% square footage as a dwelling, but still call it a non-dwelling for HMDA. Likewise, I could have a parcel of land with a home and several outbuildings. The home might be most of the value, but it's where I do business; therefore, the mixed-use property is not a dwelling for HMDA. What's the primary use? That isn't necessarily square footage. You can use the income approach, income per square foot, borrower's statement of intended use, etc.

As I said in my original post, what's the primary use? Until that is decided, you can't make a determination for HMDA.

So if buy a house and turn it into a commercial space, you'd call it a purchase?

I know of several loans used to purchase an older homes that was turned into an office. The building may still have a residential renter, but it's primarily their office, not a dwelling. These buildings are mixed-use and zoned residential, but they are not HMDA reportable.

The home might be most of the value, but it's where I do business; therefore, the mixed-use property is not a dwelling for HMDA. What's the primary use?

So you are saying we can exempt a property as a dwelling if the home sits on 10 acres and the acreage the house does not sit on has a greater square footage?

The person purchasing this property does not appear to "do business" on the acreage. To be eventually developed and sold off indicates to me an investment purchase of a dwelling and acreage.

I also asked:

What do they plan to do with the dwelling? Are they going to resell it? Raze it?


The answer to those questions could influence my response but as the question has been presented I stand by a home purchase.

I was trying to be hypothetical about mixed-use properties, not specific to the OP. I'm saying you can exempt a property IF you can determine the primary use is NOT residential. Square footage is one way, but often not the best way to determine primary use. I see too many people referring to only square footage when trying to make this determination.

The person purchasing this property does not appear to "do business" on the acreage. To be eventually developed and sold off indicates to me an investment purchase of a dwelling and acreage.
This is one that I think we disagree about. I don't think they need to be doing business right now. I lean toward this being more non-residential because it will be developed and sold off. You are correct to ask about what they plan to do with the existing dwelling. The answer to that would certainly help resolve this issue.

We were told by our examiners (FDIC) to go by the "snapshot in time" rule. If it's a dwelling at purchase, it's a dwelling. If it's a dwelling turned office/daycare/some other commercial purpose, it's commercial.

Ok.......but is a building that someone once lived in but no longer does and never will again a "dwelling" according to the FDIC?

I don't agree with the "snapshot" statement if it is known the intent is to convert the dwelling into office space or for some other business purpose but no where in the regulatory definition of a dwelling will you find where a residential structure has to be lived in to be classified as a dwelling.

Dan, how do you deal with dilapidated unlivable dwellings? Borrower statement, appraiser's statement, tax statement?

Reg. C says a dwelling is a "residential structure". In my opinion, (and according to the dictionary) residential structures have people living in them or are there for people to live in in the future. If the intent is to tear down what used to be a dwelling, i don't see how it can fit the definition of a "residential structure" anymore.

Here's just a couple of examples I got from a google search.

Arizona state law defines residential structure as, “any structure, movable or immovable, permanent or temporary, that is adapted for both human residence and lodging whether occupied or not.” (A.R.S. § 13-1501)

From FEMA Definitions:

Residential Building. A non-commercial building designed for habitation by one or more families or a mixed-use building that qualifies as a single-family, 2 - 4 family, or other residential building.


If I buy a "dwelling" for investment purposes that I have no intention of living in or allowing any other person to live "dwell" in while I own the property then using the having to be dwelled in logic I am not purchasing a dwelling.

If the intent is to tear down what used to be a dwelling, i don't see how it can fit the definition of a "residential structure" anymore.

And that's why I specifically stated I didn't agree with the snapshot comment if it is known at the time of the loan the residential structure will be converted to office space or some other business purpose.

Dan...i am not saying it has to be lived in.....i think it either has to be lived in or *intended* for someone to live in. If i have a vacant home that i intend to sell or rent out but it's currently vacant...that's still a "dwelling". But if i have a dilapidated house or a home that i'm about to tear down, IMO it is no longer a "residential structure" or a "dwelling". No one lives there....no one ever will live there.

Here are definitions i find:

Residential: concerning or relating to residence.

Residence: a person's home; the place where someone lives.

Dan...i think we're on the same page then...i just think some of these responses i see from agencies like the FDIC or FRB about "dwellings" are taken out of context......the FDIC says "if it's a dwelling at consummation, then report it as a dwelling".....well, i think there's more to it than that...that's all. People see that and say "ok....this is a house (even though no one lives in it...no one ever will...and it's about to be torn down) at the time of my loan, so i should report it". IMO, it may be a "house" at the time of the loan, but it is no longer a "residential structure" or a "dwelling".

.....i think it either has to be lived in or *intended* for someone to live in.

Then in my example of purchasing a dwelling for investment purposes you would not report the loan as a home purchase because I have no intention of living in it or allowing anyone else to live in it. So for my purposes it would not be a dwelling.

Residential: concerning or relating to residence.

Residence: a person's home; the place where someone lives.

I agree in order for a residential structure to be a residence then someone would have to be living in it. But the regulation doesn't define a dwelling as a residence. It defines it as a residential structure. And even FEMA definition states a residential building (structure) is one "designed for habitation" by one or more families. It does not say it has to be inhabited to be a residential building.

If you're buying a home for investment purposes, you have intentions of someday somebody living in it.....you plan to sell it someday for someone to live in it as their home, so yes, it would be a "dwelling".

Dan....it has always been my understanding that if a regulation doesn't specifically define a word, then we go to the dictionary, not to another regulation's definition. I'm sure though that we could both find dictionary definitions that suit what we're trying to say.......you can find one that says "designed to be lived in" and i can find one that says "the place where someone lives".

I'm comfortable arguing my take on it with examiners, as i know you are too.

If I have an investor who buys a home to buy and flip, they have no intention of anyone living in it during the time they own it...but it's still intended to remain a dwelling and is reportable.

In RJ's example, I believe he is not referring to this setup at all. He's referring to a situation that the dwelling is no longer 'fit' to be a dwelling, is to be razed or is to be turned into something else, such as an office.

I certainly never meant to imply "must be lived in immediately to qualify as a dwelling". I think i said that a home that i intend to sell or rent down the road, but that is currently vacant, is still a "dwelling".

Right....it may just be semantics, but in my eyes, the thing that makes these loans not reportable is that the structures no longer qualify as "residential structures" or "dwellings". I mean...if they did still qualify....we'd have to report them.

you have intentions of someday somebody living in it

No I don't. The person that purchases it from me may or may not want to dwell in it and I really don't care what their intentions are as long as they pay me my asking price.

My point is a residential structure is a structure designed to be used as a residence. Reg. C defines a dwelling as residential structure, not a residence.

I have never wavered from this opinion and until someone shows be a regulatory cite that the residential structure has to be a "residence" to be covered I never will.

So is a loan to buy 20 acres with a dilapidated house (that the borrowers won't live in or tear down...it'll just continue to sit there) reportable? It was "designed to be used as a residence".