Good Morning HMDA lovers.

We have a business cusomter that regulary uses their own funds for a quick purchase of a dwelling.

They then come to us for financing to remiburments for the funds.

This does not fit into the standard defintition of purchase when looking at the "timing".

However, the use of the funds were to purchase a dwelling despite the timing.

Please chime in with thoughts on if it this is NOT reportable due to funds not used directly for Purchase/Refi/HI or reportable as a purchase?

Thanks

"However, the use of the funds were to purchase a dwelling despite the timing."

I know what you're trying to say, but you can't purchase something you already own. Not reportable as stated.

However, the use of the funds were to purchase a dwelling despite the timing.

The loan proceeds were not used to purchase a dwelling. They were used to replenish the borrower's bank account.

I agree - not reportable as stated.

Just to add more... We do these loans very frequently. Not reportable at this shop, either.

Loans to reimburse personal funds used for purchasing or improving are not reported for my shop either. The funds being loaned didn't facilitate the purchase or improvement.

Contrast that scenario, which I will agree is not reportable, with an open-end line of credit used to fund purchases of dwellings to be rehabbed and sold.

open-end line of credit used to fund purchases of dwellings to be rehabbed and sold

"Splash and dash" loans are not excluded from reporting. However, open-end lines of credit are only reported at account opening. Any use of the funds afterward the initial account opening to purchase or improve a dwelling would not be reportable.

reimbursement loans are common in our neck of the woods and we do not report them either.

Very late to the party on this, but I finally came across a similar scenario. Could this be coded as "Other" for purpose? In our situation, we had an individual buy a rental house in cash. They now are getting delayed financing to reimburse their personal cash reserves. While the property is investment, the funds seem seem to have consumer purposes as it is going towards an individual and the funds are not contingent on a commercial-only use (exempt Reg Z transaction) - equity could be used for whatever.

to reimburse their personal cash reserves

I would agree with Other.

I wanted to jump in on this conversation.

The thread below has a better related discussion, but since it's no longer active I thought I would add it in here.
https://www.bankersonline.com/forum/ubbthreads.php/topics/2275540/1

We have a loan where the borrower is "Replenishing working capital to buy more homes" after they've paid cash for a purchase and remodel.
Typically, we do not report when a borrower ONLY states they're replenishing their capital/reserves. However, if we know that capital will be used to buy more homes, should we report this as a Home Purchase?

Replenishing working capital to buy more homes"

Based on this comment I would report because the intended use for the working capital is to purchase more homes is specifically identified.

So....for this scenario, if "other" is chosen, you're saying that the loan is HMDA reportable as a consumer-purpose loan?

1003.3 (c)(10) states that a loan that is deemed to be for business or commercial purpose is ONLY reportable if it is, by HMDA definition, a home purchase loan, a home improvement loan or a refinance of a dwelling-secured loan. Otherwise, it’s not reportable. Then 1003.4(a)(3) states that if a loan secured by a dwelling is not for, by HMDA definition, a home purchase loan, a home improvement loan or a refinance of a dwelling-secured loan, then the purpose is “other.” The commentary then reiterates what 1003.3 has already stated….that if a business purpose loan is not for home purchase, home improvement or refinance of a dwelling-secured loan, it’s not reportable. There is no “other” category for business/commercial loans. And nothing in the reg states that if a loan is secured by a dwelling but is not a purchase/improve/refi, that the purpose is “other” and the loan must be treated as a consumer purpose loan. The reg states that it’s simply not reportable. ONLY loans for a consumer purpose (as per Reg Z, generally) that are secured by dwellings are reported as “other.” The purpose of this, I’m assuming, is to draw into reporting, home equity loans and the like…..like loans secured by rental property, but the funds will be used for a consumer purpose such as college tuition.

So, if we have a loan to an individual to reimburse personal cash reserves after purchasing an investment SFR, if the bank processed said loan as a business-purpose loan and then reported it as "other," would that not trigger red flags because "other" is not to be used for business-purpose loans, but we have not consumer HMDA data to report.....like APR and TRID stuff.

Which scenario? There are 2 scenarios in this thread that are reportable. 1) replenish personal cash reserves (consumer other) and 2) replenish a working capital line where the line is used to purchase dwellings (commercial purchase).

I think Dan was saying that it would be reported as a purchase because the intended use of the working line is to purchase more dwellings. I do not think it is even possible to report a business purpose other loan. It would certainly be an error.

If you have a loan to replenish PERSONAL cash reserves and you process it as business purpose loan, then you might have a Reg Z problem, but I do not believe that is either of the scenarios in this thread where the loan would be reported.

Oh...sorry....my question pertained specifically to the use of "other" as the loan purpose. That purpose is ONLY used for consumer-purpose loans whereby Regulation Z disclosures would have to have been provided? Because if "other" is used for a business-purpose loan and the fields for consumer-purpose loans were not populated on the LAR, wouldn't that cause some sort of red flag when filing the LAR?

Surprised this is just a quality edit, but yes.

Q613
Loan Purpose
Business or Commercial Purpose; Loan Purpose
Please review the information below and update your file, if needed.
1) If Business or Commercial Purpose equals 1, then Loan Purpose generally should equal 1, 2, 31, 32, or 5.

if "other" is chosen, you're saying that the loan is HMDA reportable as a consumer-purpose loan?

If the loan is a consumer purpose loan secured by a dwelling it will always be subject to reporting either as a home purchase, home improvement, refinance, cash-out refinance or other.

We're being made to select "other" when the loan has been processed as a business purpose loan made to an individual who buys and sells, buys/flips/sells homes, purchased a house with cash and wants to reimburse funds. I figured doing that would create some sort of edit.

Inherent Risk states that it would create a quality edit Q613

So either the lenders should be processing these as consumer-purpose loans OR the loans aren't reportable at all...same as if a business entity had the same scenario.

"business purpose loan made to an individual who buys and sells, buys/flips/sells homes, purchased a house with cash and wants to reimburse funds."

Sounds like business purpose other, which would not be reportable, to me. If something is business purpose other for us, it is not reported, and we are done with it for HMDA purposes.

We're being made to select "other" when the loan has been processed as a business purpose loan made to an individual who buys and sells, buys/flips/sells homes, purchased a house with cash and wants to reimburse funds. I figured doing that would create some sort of edit.

I would be talking to my software vendor why the software is forcing you to choose other for a business purpose loan and causing you to have to deal with quality edits.

This is what Compliance is instructing us to do. I don't know how they explain away the edit.

This is what Compliance is instructing us to do. I don't know how they explain away the edit.

Then let the compliance team waste their time dealing with the edits...