A customer who has an open MTG at another bank requested a construction loan to add onto their home with our bank. Now the customer wants to combine their open MTG at the other bank with the construction loan they have with us.

I know the order of what trumps what, however, this has got me stumped. I would assume to list it as a home improvement because they are just adding onto their home. Does it matter that the original loan was done as a construction? Or once all paperwork is done it will actually show as a home improvement.

I am going to say Home Improvement.

I had a situation in the past when a fire destroyed a house. They were completely rebuilding, but used the old foundation. The Bank did the loan as a construction loan, but we reported as a home improvement. I know that's different than your situation above, but I thought the thought process may be similar.

So the loan will combine their mortgage loan from another bank with the "construction" loan they already have with your bank.

Just my opinion, but I don't see this as home improvement or purchase. If the new loan "replaces and satisfies another dwelling secured loan" then I would report as refinance.

Your loan is not construction for HMDA, it is home improvement. It is a construction loan, construction is taking place, and it is likely monitored as a construction loan, but for HMDA it is home improvement because it is not initial construction. Paying off the prior mortgage is a refinance, and that is trumped by home improvement.

You have a home improvement loan.

It does replace and satisfy another dwelling secured loan but a home improvement trumps a refinance. That is why I was leaning toward a home improvement.

That is correct. Your loan is home improvement. If any portion of the loan is home improvement, it is reported as home improvement.

Thanks so much Kathleen, this is what I thought. Just wanted to double check.

I must be misunderstanding the first post. I understood it to say the home improvement loan was already on the books and this new request was to combine the two already existing loans into a new loan.

If the new loan is paying for new home improvements then I would agree with home improvement, but I didn't get that from the first post.

Sorry for the confusion.

NSFW, I agree with your last post above.
If the improvement (construction) is already done, then this is a refinance.

Well much will depend upon the order of what happens. If the current loan just gets more money added to it, it stays home improvement.

If a NEW loan is made that pays off the home improvement at the end of the construction and pays off the first mortgage at the other lender, that new loan will be a refinance.

The loan on our books if for a construction loan. The customer added on to their home. The loan they want to replace is at another bank. We are just adding that loan amount and the "construction" at our bank together. So that is why I see this as a home improvement.

They are paying off the existing loan at the other bank and then refinancing the "construction" - "home improvement" here.

Will the "adding that loan amount and the construction" be done via a loan that will pay off your original loan that was for the improvements or are you increasing the loan amount?

That is the question.

If you will make a new loan that pays off the home improvement loan and pays off the original mortgage at another lender, you will have a refinance at that point.

The way you wrote this, you answered the question for yourself.