HMDA Mixed Use Properties

By Deb Jost

Here is our third in a series of HMDA Blogs. Today, I want to discuss mixed-use properties. We also discussed this in our April 2011 newsletter.

The first example is that of a professional builder who applies for a loan to purchase a commercial property which he intends to convert into residential condominiums. The bank will finance both the purchase of the commercial building and the construction.

The “type” of property is what the borrower “intends” it to be used for. In this case, the property would be a dwelling because the intention is to convert the building into residential condominiums. Since part of the proceeds are to purchase a dwelling and the loan is secured by a dwelling, the loan should be reported as a purchase.

Now let’s twist that around a bit. A local builder wants to finance the purchase of a three-family home and convert it into a mixed-use property where one unit is an apartment, one unit is an office and the third unit is a commercial store front. The bank will finance the purchase of the three-family home and will also finance the renovations.

The first step is to first determine the primary purpose of the property. Is it primarily a dwelling or not? This can be done using any reasonable method such as square footage (how much square footage is for the dwelling areas vs. the commercial use areas) or using the income approach (how much income is generated from the apartment vs. how much is generated from the commerical areas). If the property is primarily a dwelling, then this would need to be reported as a purchase.