A: You are correct; the regulation does not care why the mortgage was put on the property. In fact, the Interagency Q&A on Flood Insurance in the Other Security Interests section, question 9, addresses this. The answer given about whether the regulation would apply in such a situation is that it does and that “The Act and Regulation look to the collateral securing the loan. If the lender takes a security interest in improved real estate and contents located in an SFHA [special flood hazard area], then flood insurance is required.” This is true regardless of the reason for taking the security interest. Funds Availability. Q: When putting a large deposit hold on a deposit made up of a mix of different check types (on-us, transit, etc.), are we required to separate out any on-us checks for a maximum of a two-day hold or are we allowed to put a maximum seven-day hold on the full amount regardless of check type? A: For the large deposit exception, a depository bank may extend hold schedules when deposits (other than cash or electronic payments) exceed $5,525 on any one business day. A hold may be applied to the amount in excess of $5,525. To apply the rule, the depository bank may aggregate deposits made to multiple accounts held by the same customer, even if the customer is not the sole owner of the accounts. The regulation provides that this exception applies to local and nonlocal checks, as well as to checks that otherwise would be made available on the next (or second) business day after the day of deposit. Although the first $5,525 of a day’s deposit is subject to the availability otherwise provided for checks — in other words, not affected by the hold — the amount in excess of $5,525 may be held for an additional period of time. HMDA. Q: A year ago, we made a business-purpose loan for a borrower to build a cabinet shop on the parcel of land that includes his residence. Our collateral was the entire parcel, including the residence. Because this business-purpose loan was not for the purchase, refinance or improvement of a dwelling, we did not report it under HMDA when it originated in 2022. This year, the loan was refinanced, with a new note replacing the old note. This time, because there is a dwelling on the site that is part of our collateral and the purpose of the loan is to refinance the businesspurpose dwelling-secured loan, this refinancing is now HMDA reportable. Do you agree that the loan was not HMDA reportable when originated in 2022, but it is now HMDA reportable in 2023 as a refinance? A: Yes, your understanding is correct. A business-purpose loan is not reportable unless for the purchase of a dwelling, the refinancing of a dwelling or the improvement of a dwelling. Your original loan was not for any of these purposes, but the new loan is a “refinancing” under Regulation C. RESPA. Q: Is it accurate to state that mortgage loans made on residential properties, such as the business owner’s primary or secondary home, that are for business, agricultural or commercial purposes are exempt from RESPA? Also, are loans involving rental properties of one- to four-family units exempt from RESPA? The loan would be considered for business purposes for purchasing or refinancing and for updating/repairs to the properties. I have been reading mixed information regarding the treatment of rental properties as covered by RESPA and being exempt. A: The loan’s purpose determines exemption, not the collateral. As you noted, RESPA exempts loans that are primarily for business or commercial purposes and relies on the definitions and guidance in Regulation Z for this determination. Credit extended to acquire, improve or maintain rental property (regardless of the number of housing units) that is not owner-occupied is considered to be for business purposes and not be covered under RESPA. There is a little wrinkle if the owner occupies one of the units. Then, the exemption depends on both the loan purpose and the number of units. Credit extended to acquire the rental property is deemed to be for business purposes if it contains more than two housing units. However, credit extended to improve or maintain the rental property is deemed to be for business purposes if it contains more than four housing units. A business-purpose loan is not reportable unless for the purchase of a dwelling, the refinancing of a dwelling or the improvement of a dwelling. 16 Community Banker
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