We are doing a 6 month interim loan for home improvements. We will be doing another loan closing once the improvements are done for the perm phase. Do I need to run my rate spread and Hoepa worksheet on the interim phase?

This would be temp financing so HMDA does not apply therefore no rate spread. I would say yes to check on HOEPA since if it is a consumer credit transactin secured by the consumer's principal residence.

So, HOEPA applies to temp financing??? I am surprised! Every 6 month interim is going to have an outrageous rate spread, and is sure to fail the APR spread test. I am truly surprised.

CT, I've been digging through my "bibles" and I'll have to agree with ArrowHead. If the transaction is orginated, secured by the borrower's principal dwelling and is for refi, home equity or home improvement, it's subject to HOEPA.

Well...it looks like my loan is going to be a HOEPA loan. Can you tell me where I can find the instructions on how to do a HOEPA loan? Do you know off hand if there are any time sensitive docs that need to be signed prior to closing?

You can find a HOEPA Calculator and disclosure, for free, at our website (under "Other Documents"):
http://www.bankerscompliance.com/compliance-resources/free-downloads.htm

You can also look in §226.31 & §226.32 but it is poorly written (confusing). Try the calculator and see if it answers your questions.

CT, we use David's HOEPA calulator. It also has the disclosure there for you should your loan come out to be HOEPA. You will just need to diclose to the customer before closing that their note is high priced.

And don't forget about the restrictions on the loan going forward.

Is there a consensus among the posters here about whether interest only payments would be considered a balloon feature?

Here are some definitions I found:
From InvestorWords: A large, lump-sum payment scheduled at the end of a series of considerably smaller periodic payments. A balloon payment may be included in the payment schedule for a loan, lease, or other stream of payments.
Answers.com: A final loan payment that is significantly larger than the payments preceding it.
MSN Money: A final loan payment that is considerably higher than prior regular payments, in order to pay off the loan. You may have a balloon payment for a short-term loan that you anticipate refinancing.

In the same scenario, the perm loan that replaces this temporary one would be reported as a "refinance". Accordingly, the home improvement loan made by the bank would never be reported under HMDA, because it was temporary, and you do not report refinanced home improvement loans as "home improvement". Correct?

I would report the permanent portion of the temporary home improvement loan as a home improvement loan on HMDA, not as a refinance.

Interest only loans are most definitely considered balloon loans.