It has always been my understanding that construction only loans are considered temporary financing and not HMDA reportable. Recently, I was told that if a construction only loan is made for a spec home that is not designed to be replaced with permanent financing of a longer term (i.e., the borrower intends to pay the loan off with proceeds from the sale of the home), then the construction loan is not temporary financing and is HMDA reportable. If this is true, then I'm not sure what 'purpose' would be reported since none of the options seem to make sense in this scenario.

Can someone confirm that my understanding is accurate? Or have I been wrong all along?

I came across your post while looking for something else and saw no one responded. So just in case you still need an answer...
Going by the litteral interpretation of the reg., which I think you should, you are correct. Construction only loans are not HMDA reportable regardless if the loan will not be replaced by longer term financing. The explanation in the FFIEC FAQ covering temporary financing (where the replaced with longer financing phrase was introduced) is deisgned to catch the "splash and dash" loans. These reportable short term loans are not construction only loans like your situation. Hope this helps.

Temporary financing aside....which of the three purposes is a spec loan? That should be your answer as far as I know.

I would think the building of spec homes would be considered a business purpose loan and therefore not reportable. However, we don't do spec loans, so I haven't had to deal with them.

I'm with Carolina Blue....construction only loans are specifically exempted and not reportable.

Spec homes are not reportable. They become reportable if they end up being termed out for more than additional temporary financing because of inability to sell - sometimes they will be rented out or the builder will move in! That crosses the line to reportable. Otherwise - not reportable. The long term loan to the purchaser of the spec home, which may or may not be through your bank, will of course be reportable.

Having a business purpose doesn't exempt a loan from being HMDA reportable. Lots of companies are in the rental business and their purchases, improvments and refis all get reported.

Just to clarify for any newbies out there, I think JSD is responding to Matt's comments about business purpose loans and how this does not affect HMDA reporting. It will be exempted on Reg Z as a business purpose, not HMDA because of business purpose.

However, as Kathleen stated, HMDA specifically exempts "temporary loans" such as construction loans. If the builder has to renew, term it, moves into the property because he can't get it sold; you should report for HMDA.

Thanks SMQ!

What if a commercial construction line of credit is used to construct homes....then some homes are termed out by the builder but the construction line of credit is not being paid off? Are these reportable?

If the builder has a guidance line of credit and does individual loans for each spec home. The actual individual loans would not be reported because it's a temporary financing. Once the builders client purchases the home it would then be reportable as a purchase. Correct?