How should an institution determine whether a loan is for a business or commercial purpose under the Home Mortgage Disclosure Act (HMDA) when a non-owner-occupied dwelling is purchased, refinanced, or improved but no rent is collected?

Under HMDA and its implementing Regulation, Regulation C, an institution determines whether a loan is for a business or commercial purpose by evaluating the loan’s primary purpose. Comment -2 to § 1003.3(c)(10) refers to Regulation Z’s business purpose exemption to make this determination. Specifically, it provides that “[i]f a closed-end mortgage loan or an open-end line of credit is deemed to be primarily for a business, commercial, or organizational purpose under Regulation Z, 12 CFR 1026.3(a) and its related commentary, then the loan or line of credit also is deemed to be primarily for a business or commercial purpose under § 1003.3(c)(10).”

Accordingly, the determination of whether a loan is for a business purpose is not based solely on whether the property is non-owner-occupied or an “investment property” under § 1003.4(a)(6). Instead, financial institutions should analyze the transaction consistent with the guidance in Regulation Z. Comments -4 and -5 to § 1026.3(a) address loans involving rental property and discuss factors such as rental income and the particular borrower’s relationship to the property. Here, if no rent will be charged to the family members occupying the property, that fact may indicate the transaction is more consistent with a consumer purpose loan. However, no single factor is determinative, and the institution should consider the transaction as a whole when determining the loan's primary purpose. Institutions should also review how the loan was disclosed under Regulation Z for consistency with HMDA reporting.

(August 2026)