We have a loan for a purchase of 300+ acre farm. The customer is buying the property for an investment as he feels he has too much in the stock market. Customer does NOT plan to harvest row crops or raise cattle. The property has a manufactured home which a friend will live in rent free.

Would this be HMDA reportable if the property will NOT be used for agricultural purposes?

If it's not used for ag purposes, then it's not a farm. It's a large lot. However, it seems strange to me that the borrower wouldn't rent out the 300+ acres to someone that does use it for farming purposes. If this happened, then I would call it a farm. (It doesn't have to be farmed by the owner to be a farm.)

If the land is simply going to sit and not be used, then I would report it as a rental home purchase.

Thanks David. It seems strange to me also but that is what the Lender has documented in the file.

If it were me, I'd send someone out there to check periodically to verify it's not going to be used for crop production. Do you think he bought the land to miss out on over $50,000 a year in rent? Or is he looking for a tax write-off, since he'll still have to pay annual property taxes.

The reverse is also true, the government has programs that will pay to keep land OUT of production, or put into some kind of conservation. While he might not qualify for certain programs, there are many out there, just check the USDA Farm Services Agency web site for a sample. Don't know how you'd find out if he's receiving any income at all from something like this. Good luck!

For what purpose? If the buyer sometime later down the road decides to let the next door neighbor farmer plow up 10 acres, it does not change the purpose of the loan when the loan closed.

Why would you do that after the loan closes? What would be the purpose of sending someone out, say every 6 months, to see if the land is being farmed? Why would the bank care if the borrower began farming the land 6, 18, 24 months etc. after the loan closed?

If the borrower wanted to refinance the loan and the bank wanted to exempt it as an agricultural loan then I can see verifying the use of the land at that time but not until then.

I kinda wish I had a friend like that

Sorry, I just disagree. Someone buying 300+ acres of farmland and saying he's not going to use it for the purpose to which it is best suited smacks of fraud in my part of the country.

We see this happen now and then with somebody wanting to buy what is currently farmland and hold it for future development (i.e. hope that someday in the future a developer will want to pay an obscene amount of money for it). They don't do anything at all with it in the meantime except perhaps use it for hunting.

Not agricultural purpose.
Not commercial purpose (personal investment usually).
HMDA purpose = purchase of non-owner occupied property.

It's all about 'location, location, location', right!? I'd be curious if the OP knows it is adjacent to a town, interstate exchange, or whether it's in the middle of nowhere.

I'm trying to figure out what possible gain/fraud a person would have/be perpetrating by buying investment real estate [in lieu of the stock market investment]. What are they gaining by calling current farmland, non farm, if they really plan to farm it? What fraud are they potentially committing unless, maybe, it's suspected they will use it as a "grow" farm for an illegal crop? Probably a stretch as well as an assumption.

What do you hope to accomplish by making periodic ride-bys? And if that skeptical or suspicious, why make the loan to begin with?

I'm purely curious, because as RR Becca describes above...it really isn't uncommon around our parts at all. In fact, we'd see a much higher likelihood of calling it a farm, when it's really a place to go hunt

Oh and I completely forgot the original poster simply asked about HMDA reportability. FWIW, I agree with the others - non owner occupied dwelling.

Lots of fertile land around here that lies fallow.

Worrying about fraud and reporting for HMDA are two totally different things. We need to stay on topic in those posts or they go all over the place, such as this one has............

You have my sincere apology.

It is no biggie - don't worry about it - just that I have seen threads go on for weeks as people interject more and more hypothetical scenarios and unrelated problems and we end up several weeks after the original poster long dropped out because they got their answer in the first couple of posts.

We have a lot of properties that are categorized as pasture land and so it's hard to tell if they are actually using it for that or not. Unless there is a picture of a cow grazing, it's hard to tell.

Sometimes these borrowers have a small amount of schedule F revenue but determining "primary" purpose is still difficult. I'm trying to come up with a hard and fast rule for my team to make a determination.

Does anyone else have any guidelines they are basing their decision on?

First, pasture land is definitely an ag purpose. It's common that there are no cattle (or horses or whatever) on it as farmers have to let pastures regrow after using them for grazing. '

Second, wouldn't you have to have a dwelling on the pasture land for this to be applicable exemption? I'm trying to think of a scenario where this would come into play if you didn't have a dwelling on it. Are you trying to say you do have a dwelling on pasture land and wondering if it's exempt from HMDA?

Yes, there are definitely dwellings on the land.