We believe this transaction would be exempt from both TILA and RESPA as a business purpose transaction, since the borrower will be renting out the property.

For HMDA purposes, there appears to be a difference of opinion as to whether the transaction is reportable at all. It would not fall under the definition of “refinancing,” since there is no existing obligation secured by the home to replace. In our view, the most logical interpretation of HMDA and Regulation C is to treat this as a purchase transaction, since the loan is made for the purpose of purchasing the remaining 6/7 interest in the home. However, because the borrower would be purchasing only a portion of the property, already having inherited a 1/7 interest in the home, we are aware that some institutions would not treat the transaction as a purchase and would not report it for HMDA purposes. Whether you report the transaction as a purchase or choose not to report it at all, we highly recommend adopting a consistent approach for all residential loans involving fractional inherited property interests.

For resources related to our guidance, please see below:

• Regulation X, 12 CFR 1024.5(b)(2) (RESPA exemption of business purpose loans)

• Regulation Z, 12 CFR 1026.3(a) (TILA exemption of business purpose loans)

• Official Interpretations, 12 CFR 1026, Paragraph 3(a), Comment 4 (“Credit extended to acquire, improve, or maintain rental property (regardless of the number of housing units) that is not owner-occupied is deemed to be for business purposes”)

• Regulation C, 12 CFR 1003.2 (HMDA defines “home purchase loan” as “a loan secured by and made for the purpose of purchasing a dwelling” and defines “refinancing” as “a new obligation that satisfies and replaces an existing obligation by the same borrower”)