Situation:
We are doing a Demand Loan for 10 months interest only so that the borrowers can purchase a property to rehab and then sell. I say that this loan is HMDA reportable because the expected source of repayment is the sale of the property. Is this correct?

Yes. See the FAQs. http://www.ffiec.gov/hmda/faqreg.htm

. . . For example, a lender may make a loan with a 1-year term to enable an investor to purchase a home, renovate it, and re-sell it before the term expires. Such a loan must be reported as a home purchase loan. See 203.2(h).