Compliance Q&A: HMDA and Construction Loan Reporting

Question:

For HMDA reporting, the purpose is to construct 45 additional apartment units but collateral is existing 68 unit apartment complex and land where borrower will build the additional units. The payment terms are 24 payments of interest only thru 3/15/21 then payments of P & I starting 4/15/21 amortized over 25 years. Would it be considered a construction loan and not reportable or construction to perm all in one and reportable?

Answer:

If you are doing the construction to perm, then it would be reportable unless otherwise excluded. If you are doing construction-only, which is planned to be taken out by another loan, it is temporary financing and not HMDA reportable.

Section 1003.3(c)(3) provides that closed-end mortgage loans or open-end lines of credit obtained for temporary financing are excluded transactions. A loan or line of credit is considered temporary financing and excluded under § 1003.3(c)(3) if the loan or line of credit is designed to be replaced by separate permanent financing extended by any financial institution to the same borrower at a later time.

Comment 1 to §1003.3(c)(3): https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/3/#3-c-3-Interp-1

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