I have a HMDA denied loan that was denied due to DTI, Insufficient cash, and unverified information. The underwriter has added comments to the file as follows: “File shows approve/eligible but to qualify for a cash out refinance, customer must own and OCCUPY subject property for the most recent 12-month period. Customers are switching current primary to make investment property their primary so have not occupied.” So, it sounds like they do intend to occupy the residence as a primary residence. However, they do not currently occupy the residence and already have a primary residence.

So based on this information (switching primary to investment and investment to primary) and what I found in the regulation they cannot have two primary residences at the same time. So, from what I see I would report as an investment property because they can only have one primary residence at a time! Would you agree with this?

From regulation: “For purposes of § 1003.4(a)(6), an applicant or borrower can have only one principal residence at a time. “

2. Principal residence. Section 1003.4(a)(6) requires a financial institution to identify whether the property to which the covered loan or application relates is or will be used as a residence that the applicant or borrower physically occupies and uses, or will occupy and use, as his or her principal residence. For purposes of § 1003.4(a)(6), an applicant or borrower can have only one principal residence at a time. Thus, a vacation or other second home would not be a principal residence. However, if an applicant or borrower buys or builds a new dwelling that will become the applicant's or borrower's principal residence within a year or upon the completion of construction, the new dwelling is considered the principal residence for purposes of applying this definition to a particular transaction.


Based on this from 1003.4(a)(6)(2) "However, if an applicant or borrower buys or builds a new dwelling that will become the applicant's or borrower's principal residence within a year or upon the completion of construction, the new dwelling is considered the principal residence for purposes of applying this definition to a particular transaction".....i would report as a primary residence, based on the information you provided. I understand that your scenario isn't a purchase, but i feel like the same logic can be applied.

If you go further and look at the HMDA definition of "investment" home, you get this: "...a property is an investment property if the borrower does not, or the applicant will not, occupy the property". Applicant says they intend to occupy the property. To my way of thinking, that means it isn't an investment home.

Thanks for your input. I saw that part in the regulation about intent. I guess I am questioning this because they currently occupy another residence and have lived there for 34 years, and it is their primary residence. They have never lived in the investment property that they own, and it appears the intent is to switch the occupancy for each residence. So that's why I looked at the part in the regulation that they cannot have more than one primary residence. So, are you saying the intent of occupying the investment property is what I need to look at and not the piece about more than one primary residence? The collateral property for the loan is the current investment property and not their current primary residence. Thank you.

I have to go to a meeting in 5 minutes; perhaps others will show up with their opinions. What i've stated is my opinion at this moment, but i can see where you're coming from.

Thank you so much. Sorry this one is a new one for me and is confusing. I just want to make sure I report the occupancy correctly.