A borrower obtained a closed-end line of credit from us secured by a manufactured home community. The borrower intends to use the line of credit to purchase manufactured homes and place them in empty lots in the manufactured home community securing the line of credit. If the borrower is unable to sell the manufactured homes outright, they will obtain a closed-end loan from us secured by the manufactured home, and their line of credit will be paid down in an amount proportional to the closed-end loan. Would the line of credit be exempt from HMDA reporting as temporary financing? Also, if the borrower pays off the line of credit with a new line of credit secured by the same manufactured home community, would this be HMDA reportable?

We believe that the line of credit is HMDA reportable, as the temporary financing exception would not apply to the loan you described. Additionally, we believe your new line of credit would be a HMDA reportable “refinancing.”

Business or Commercial Purpose Exception

Regulation C states that a closed-end mortgage loan or an open-end line of credit secured by a lien on a dwelling is HMDA reportable, unless an exception applies. While there is an exception for loans made primarily for a business or commercial purpose, this exception does not apply if the loan is “a home improvement loan under § 1003.2(i), a home purchase loan under § 1003.2(j), or a refinancing under § 1003.2(p).” A “home purchase loan,” as defined by Regulation C, is a “closed-end mortgage loan or open-end line of credit for the purpose, in whole or in part, of purchasing a dwelling.” Regulation C and its Official Interpretations provide that a “dwelling” can be a manufactured home or a manufactured home community.

We believe your loan would be a reportable “home-purchase loan,” as the borrower’s purpose is to purchase dwellings using the loan funds, and the exception for loans made primarily for a business or commercial purpose would not apply.

Temporary Financing Exception

We do not believe the loan you described would fall under Regulation C’s exception for temporary financing, since it is not designed to be replaced by separate permanent financing.

Regulation C’s requirements do not apply to “temporary financing.” Regulation C’s Official Interpretations define “temporary financing” as “a loan or line of credit . . . designed to be replaced by separate permanent financing extended by any financial institution to the same borrower at a later time.” In your case, separate permanent financing is extended only if a particular manufactured home does not sell. Additionally, the loan is paid down by a certain amount when the borrower obtains a separate loan for a manufactured home, rather than being replaced.

Note that Regulation C’s Official Interpretations state that a “construction-only” loan or line of credit would be excluded as temporary financing and excluded if the loan or line of credit is “extended to a person exclusively to construct a dwelling for sale.” However, we do not believe that purchasing previously constructed manufactured homes and placing them on open lots in a manufactured home community would be considered “construction” that would make your loan a non-reportable “construction-only” loan or line of credit.

HMDA Reportable Refinancings

Regulation C provides that a loan or line of credit made primarily for a business or commercial purpose is not excluded from HMDA reporting if the loan is a “refinancing.” Regulation C defines refinancing as “a closed-end mortgage loan or an open-end line of credit in which a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower.” Consequently, if your borrower pays off their old loan secured by the manufactured home community with a new line of credit that is also secured by the manufactured home community, we believe you will be required to report the new line of credit under Regulation C.

For resources related to our guidance, please see:

Regulation C, 12 CFR 1003.3(c) (“The requirements of this part do not apply to: . . . (10) A closed-end mortgage loan or open-end line of credit that is or will be made primarily for a business or commercial purpose, unless the closed-end mortgage loan or open-end line of credit is a home improvement loan under § 1003.2(i), a home purchase loan under § 1003.2(j), or a refinancing under § 1003.2(p)”)

Regulation C, 12 CFR 1003.2(j) (“Home purchase loan means a closed-end mortgage loan or an open-end line of credit that is for the purpose, in whole or in part, of purchasing a dwelling.”)

Regulation C, 12 CFR 1003.2(f) (“Dwelling means a residential structure, whether or not attached to real property. The term includes but is not limited to a detached home, an individual condominium or cooperative unit, a manufactured home or other factory-built home, or a multifamily residential structure or community.”)

Regulation C, Official Interpretations, Paragraph 2(f), Comment 2 (“A dwelling also includes a multifamily residential structure or community such as an apartment, condominium, cooperative building or housing complex, or a manufactured home community. A loan related to a manufactured home community is secured by a dwelling for purposes of § 1003.2(f) even if it is not secured by any individual manufactured homes, but only by the land that constitutes the manufactured home community including sites for manufactured homes.”)

Regulation C, 12 CFR 1003.3(c) (“The requirements of this part do not apply to: . . . (3) Temporary financing; . . .”)

Regulation C, Official Interpretations, Paragraph 3(c)(3), Comment 1 (“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.”)

Regulation C, Official Interpretations, Paragraph 3(c)(3), Comment 2 (“A construction-only loan or line of credit is considered temporary financing and excluded under § 1003.3(c)(3) if the loan or line of credit is extended to a person exclusively to construct a dwelling for sale. See comment 3(c)(3)-1.ii through .iv for examples of the reporting requirement for construction loans that are not extended to a person exclusively to construct a dwelling for sale.”)

Regulation C, 12 CFR 1003.2(p) (“Refinancing means a closed-end mortgage loan or an open-end line of credit in which a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower.”)