Am I correct in that construction-only loans (construction of a home for sale) are exempt from reporting even if the borrower is not the actual builder? For example, John and Jane want to have a SPEC home built to sell for a profit and they contract with a builder to get it done.

The commentary to 1003.3 (3) simply states that a construction-only loan is considered temporary financing and excluded if the loan is extended to "a person" exclusively to construct a dwelling for sale.

Am I correct in my interpretation?

Yes.

Thanks, Dan. The compliance officer here is making us verify whether or not the borrower is the contracted builder to determine reportability. He says that if the borrower is not the builder, the loan is reportable.

Ask them where in this statement is says the borrower and the contractor have to be the same person.

2. Loan or line of credit to construct a dwelling for sale. A construction-only loan or line of credit is considered temporary financing and excluded under § 1003.3(c)(3) if the loan or line of credit is extended to a person exclusively to construct a dwelling for sale.

the loan or line of credit is extended to a person exclusively to construct a dwelling for sale

John and Jane want to have a SPEC home built to sell for a profit and they contract with a builder to get it done.


John and Jane are borrowing money exclusively to construct a home for sale. The regulation does not state, or even imply, the person constructing the home and the borrower have to be the same person.

Take Randy's advice and ask them to provide documentation to support their opinion.

So, while on the subject, what do you guys think of this scenario? Borrower bought and financed a lot with a house on it. Now, the borrower is getting a new loan, paying off the old loan (lot with house on it) and extra money to raze the house and build a speculative home on the lot.....will sell the spec when construction is complete.

Construction Only? or Refinance?

Refinance of an existing dwelling.

That probably is the new interpretation for HMDA, but to me, i don't understand how the spec home construction part is just ignored. Yes, it's a refinance, but it also contains new money to build a spec home, which is explicitly exempt. I don't see how it's different than a loan that is to purchase a primary residence and 400 acres of ag. land--still exempt, even though part of the proceeds would be HMDA reportable.

Well...i went and found the applicable FAQ....i guess they hang their hat on the word "exclusively". (Even though i still don't agree that a structure about to be razed qualifies as a "dwelling", but we've had that discussion ad nauseum already, so i'll leave it at that.)

Dumb question....how do I find the HMDA Q&A?

I found it on the CPFB website......i'd link it to you, but i can't in here.

Thanks, Raitchjay!!!!