Compliance Q&A: HMDA Exemption Question

Question:

We are in the process of underwriting a Commercial 10 YR Term loan to a Church for the purpose of purchasing a single family residence (zoned as single family) that will be used as a place of worship. Is this a HMDA covered transaction or is there an exemption that exists that excludes this loan?

Answer: If the loan will be replaced by permanent financing later, then it’s possible that it might fall into the temporary exception:

Temporary financing. Section 1003.3(c)(3) provides that closed-end mortgage loans or open-end lines of credit obtained for temporary financing are excluded transactions. A loan or line of credit is considered temporary financing and excluded under § 1003.3(c)(3) if the loan or line of credit is designed to be replaced by separate permanent financing extended by any financial institution to the same borrower at a later time. For example:…

https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/Interp-3/#3-c-3-Interp

Otherwise, if not, the bank may be able to document that this is not in fact used as a residence, and thus, does not fall into the definition of a “dwelling”:

Exclusions. Recreational vehicles, including boats, campers, travel trailers, and park model recreational vehicles, are not considered dwellings for purposes of § 1003.2(f), regardless of whether they are used as residences. Houseboats, floating homes, and mobile homes constructed before June 15, 1976, are also excluded, regardless of whether they are used as residences. Also excluded are transitory residences such as hotels, hospitals, college dormitories, and recreational vehicle parks, and structures originally designed as dwellings but used exclusively for commercial purposes, such as homes converted to daycare facilities or professional offices.

https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/Interp-2/#2-f-Interp-3

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