We made a 3 year balloon note to a borrower to purchase a lot for a future homestead. With most borrowers who get these types of loans, they come back for an interim constriction loan to build the home. This borrower has paid cash to have his home built and is now almost completed. When this note balloons next year, can we still treat this as a lot loan as we originally granted and renew and extend or is this now a mortgage loan?

I would say that you will, by default, now have a loan secured by a lot and 1-4 family PR. It will be a RESPA loan at that point.

Joker is right. Since the new loan will now be secured by a dwelling, it's a 1-4 family loan subject to all applicable disclosures.

And since you now know that the land has a building on it you need to run a FHD immediately.

Thank you all.