Ok we are having one of those Monday morning discussions. I have a home builder wanting to build single family homes (4 at a time) in a low-mod track and will be priced to attract the first time home buyer – very affordable. The loans can not be HMDA (construction) but could they be considered for Community development. They really are going into an area that will revitalize the neighborhood.?

With the information provided, if they are not CRA reportable, then they could be considered CD loan. Make sure that the builder states that the LMI indiviuals/families are his target market. I don't know if just the low price will be sufficient.

Thank you,, they are not on the CRA report due to 1-4 family RE secured nor HMDA due to construction, so no double dipping.. That is a good idea about the builder..

The key will be to substantiate the "community development purpose", in this case the provision of "affordable housing". This can be a tricky area, because what qualifies is somewhat vague. Moreover, the documentation standard will be very high. Even if the builder intends the housing for LMI people, how will he control that? And how can you be certain that the houses will be sold primarily to LMI people? What will you do if 2 of the 4 purchasers are not LMI people? What documentation will you insist on to substantiate the community development purpose? Is the project being developed under a plan to provide affordable housing developed by a local government agency? What will the builder do if some middle or upper-income buyers profer the asking price before any LMI people do?
Any community development activity is always challenged by examiners to prove that it meets the definition. So document, document and document!

One other suggestion - if this is a genuine attempt to develop affordable housing for low and moderate income people normally the developer works with the Department of Community and Economic Development for the state (frequently tax and other incentives may apply). If the developer in your situation has done so, it would be very helpful to get the documentation if any from the DECD pertaining to this project. This would help establish that it is a genuine affordable housing project.