The most common HMDA questions that we receive are about how to properly report multipurpose and multifamily properties. And it’s understandable… The 2018 modifications to HMDA were massive and many financial institutions are still dealing with the challenges of collecting data under the burdensome new requirements.
Here’s a breakdown of how to properly report multifamily and multipurpose properties for HMDA
Let’s start with ‘multifamily”.
The construction method and total units, together, replaced property type reporting filed in the prior Regulation C data collection; the information required by the new data points is very similar to what was required before, but institutions now must report the precise number of units rather than categorizing dwellings into one-to-four family dwellings and multifamily dwellings.
The “multifamily dwelling” is often misreported. There are several areas that cause reporting issues with this type of property. The first is understanding what multifamily is and is not…
For HMDA reporting, a multifamily dwelling is a residential structure that houses five or more families.
Even though condominium buildings can house five or more families, if each unit is individually owned, then the dwellings should be reported as one-to-four family dwellings, not a multifamily property.
On the other hand, apartment buildings generally do not have individual ownership of each unit, so the building should be reported as a multifamily dwelling.
It is a common misconception that the purchase of an entire mobile home park (e.g., the purchase of five or more individual mobile homes) should be reported as a multifamily property type. Because each mobile home falls within the definition of an individual unit, the property type should be reported as manufactured housing and not a multifamily property.
The fields that are focused on multifamily must be understood and reported correctly. They include:
- Multifamily residential structure or community such as an apartment, condominium, cooperative building or housing complex, or a manufactured home community.
- The number of individual dwellings units that are income-restricted pursuant to Federal, State, or local affordable housing programs.
- If the dwelling related to the property identified is a manufactured home and not a multifamily dwelling, whether the covered loan is, or in the case of an application would have been secured by a manufactured home and land, or by a manufactured home and not land.
- If the dwelling related to the property identified is a manufactured home and not a multifamily dwelling, whether the applicant or borrower:
- Owns the land on which it is or will be located or, in the case of an application, did or would have owned the land on which it would have been located, through a direct or indirect ownership interest; or
- Leases or, in the case of an application, leases or would have leased the land through a paid or unpaid leasehold.
Now on to “mixed-use” or “multipurpose.”
When a mixed-use property is taken as collateral in a HMDA reportable transaction, according to Appendix D of “A Guide to HMDA Reporting,” when reporting the purchase of a mixed-use property (e.g., an apartment building that contains a convenience store), or the real property on which a dwelling is located, is a home improvement loan, or if the proceeds are used primarily to improve the residential portion of the property an institution may:
- Use any reasonable standard to determine the primary use of the property, such as by square footage or by income generated; and
- Select the applicable standard on a case-by-case basis.
In the example of an apartment building that contains a convenience store, an institution may determine that most of the square footage is being used for residential purposes and, because the structure is an apartment building that can house five or more families, the property type could be reported as a multifamily dwelling.
It is important to clearly document in policy and/or procedure what method the institution intends to use so the process is a consistent approach.
Reporting of HMDA data continues to be a challenging task for many, and we field HMDA questions all the time. If you’re struggling with a HMDA challenge, get in touch with us at support@mycomplianceresource.com.
To understand the nuances of HMDA more fully check out Scrubbing & Submitting 2023 HMDA Data, happening January 10th, and our HMDA Essentials class, happening February 7th.