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How broad should the home improvement definition be applied for HMDA reportability and loan purpose? The definition includes dwelling secured loans to repair, rehabilitate, remodel, or improve the dwelling or real property. Would maintenance be included in that definition? Home maintenance can mean a lot of things, such as painting, changing HVAC unit filters, deep/steam cleaning carpet as well as other things. Is that considered a repair? If maintenance is delayed it can become a repair. Some maintenance such as changing paint colors could be considered a remodel to update a home to improve the value. Would these types of maintenance be considered home improvement?
Also, if the consumer declares a HMDA reportable dwelling secured loan as for the purpose of future maintenance, is that specific enough to support the home improvement purpose code? For a 10 year consumer HELOC, a declaration of maintenance can mean lots of things over time. Is it reasonable to conclude that the home maintenance purpose is home improvement for HMDA?
Regulation C defines “home improvement as “a closed-end mortgage loan or an open-end line of credit that is for the purpose, in whole or in part, of repairing, rehabilitating, remodeling, or improving a dwelling or the real property on which the dwelling is located.’ The definition does not mention home maintenance, but an argument can be made that maintenance work is synonymous with repair or rehabilitate.
The Official Interpretations list several specific examples of “home improvement” including:
• Replacing a roof
• Remodel a kitchen
• Installation of a swimming pool, and
• Construction of a garage, or landscaping.A good argument can be made that painting a house is similar to replacing a roof; both are examples of rehabilitation.
The Official Interpretation also states, “In determining whether a closed-end mortgage loan or an open-end line of credit, or an application for a closed-end mortgage loan or an open-end line of credit, is for home improvement purposes, an institution may rely on the applicant’s or borrower’s stated purpose(s) for the loan or line of credit at the time the application is received or the credit decision is made. An institution need not confirm that the borrower actually uses any of the funds for the stated purpose(s).” Stating the loan purpose on the application as “home improvement – paint the house” or “home rehabilitation – Carpet cleaning” improves the likelihood that examiners will agree with your categorization.
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