A consumer construction loan (done through our commercial department)purpose is to add approximately 1300 sq to an existing home/structure. Our commercial loan would be used to pay off the existing first mortgage plus include additional proceeds for construction portion. Since in a Home Improvement/Refi situation we would report on the improvement and not the refi would I assume that I do not report HMDA in this case because this loan would be considered a construction loan/temporary financing???

This construction loan was to be paid off and replaced by a long term mortgage through our Mortgage Department, once construction was done. We believe that our commercial loan is NOT a Construction to Perm loan because the intent was to have two distinctly separate loans (one for the Construction and one for the permanent end financing).

My interpretation would be to consider the construction loan (commercial loan) temporary therefore not report HMDA . And that the Mortgage Loan would have to be reported as a Refi.

This is NOT a construction loan. The home is already built. However, it does sound like 2 phase financing. You don't report the first phase in these situations as it is temporary financing.

When you make the permanent loan, it would not be a refinancing. It would be reported as a HI loan since you didn't report the first phase.

BTW, this is not a "commercial loan" just because it is done by a LO in your commercial loan department. It sounds like a consumer purpose loan.

You may find our article "HMDA Temporary Financing" helpful. You can find it at our website:
http://www.bankerscompliance.com/compliance-resources/free-downloads.htm