Loan for a term of 12 months, would that be considered temporary financing for HMDA reporting?

It depends. David Dickinson (Banker's Compliance Consulting) has an excellent (free) paper of this topic.

See: http://www.bankerscompliance.com/compliance-resources/free-downloads.htm

Look for: HMDA Temporary Financing

Hope this helps.

A loan is not temporary simply because it is short term. See the link above for more information.

I hope you were able to download out article on HMDA Temporary Financing (thanks for providing the link Ski). As SMQ states, it's not the term that makes a loan temporary. It either needs to be a construction loan, a bridge loan, or 2 phase financing (the first term is the temporary phase followed by a permanent phase that is HMDA reportable).

David: What about construction loans by a builder? The builder get the loan to construct a 1-4 family home but there is not permanent financing. The loan will be paid off when the home is sold. Are these reportable as a purchase or it is exempt as a construction loan?

Construction only loans are exempt regardless how they will be paid off.

I read the following from somewhere so I thought construction loans would only be exempt if they are paid off with a permanent loan somewhere:

A loan with a term of more than 2 years would ordinarily not be considered temporary financing. However, a loan with a term of two years or less is NOT automatically temporary financing. You must look to the expected source of repayment of the loan to determine whether the loan is temporary financing. If the expected source of repayment for the loan is another loan (either from us or from another lender), and the term of the loan is two years or less, the loan is temporary financing. If, however, the expected source of repayment is some other type of source (such as sale of the property or other asset or regular income), the loan will be HMDA reportable, even if the term of the loan is less than 2 years.

From 1003.2:

5. Construction and permanent financing. A home purchase loan includes both a combined construction/permanent loan and the permanent financing that replaces a construction-only loan. It does not include a construction-only loan, which is considered “temporary financing” under Regulation C and is not reported.

Showgirl: That sounds like an internal policy and someone's opinion. It's not the regulation.

§1003.4(d) states:
Excluded data. A financial institution shall not report:
(3) Temporary financing (such as bridge or construction loans);

I read that as a command. SHALL NOT report and then construction is given as an example. There's no If's, and'd or but's in the regulation about this.

If you go to our website, you'll find an article called "HMDA Temporary Financing" in the Free Resources section:
http://www.bankerscompliance.com/compliance-resources/free-downloads.htm
I think this will be helpful to you.

I've seen this before too! It's on an old tool on BOL. https://www.bankersonline.com/sites/default/files/tools/HMDAChart1.PDF

That being said, this ^^ explanation is what I use for the short term loans and "splash and dash" loans my staff try to call temporary just because the loan term is short in nature.

As pointed out above, construction loans are pretty much specifically exempt from HMDA reporting as temporary financing. And that's because construction-only loans are designed/intended/assumed to be replaced by something permanent.

Dani: Yes that is the document where I read it. Obviously this must be outdated.

And to add to the confusion, I know of a bank that was cited by their examiner for reporting the following loan. The examiner considered this loan to be "temporary" and thus, not reportable:

7 year loan (30 year amortization with a balloon) to refinance the initial construction loan of a condominium complex. The real estate market took a dive just before the project was completed, so the builder decided to rent out the units and wait and see if the market would come back enough to make a profit selling the individual units. Repayment for the loan was from rental income and potential sales of the units.

It was in the final report of exam, and the particular examiner is a rather senior examiner with the particular agency. I know - it made no sense to me or to the bank. To me, this was about as HMDA as HMDA can get - refinance of a lien on a dwelling for the purpose of having people live in the dwelling.

That is insane!

I would argue that one all day Princess. A 7 year, amortized loan is NOT temporary. There's also no definitive plan for a 2nd phase of financing. It is "about as HMDA as HMDA can get". Care to share when this was cited and by what agency?

FDIC - Los Angeles - 2013 or early 2014 for a loan reported on the 2012 LAR.

It was not up to me to argue since it was a client,and the bank chose not to fight it. I even called HMDA Help about it and they basically said they could no longer issue binding opinions since the regulation is now under the jurisdiction of CFPB. The folks at HMDA Help were sympathetic and told me they were starting to see more and more confusion as to what is temporary and what is not temporary.

The compliance officer at the Bank said he would contact the FDIC for every HMDA reportable loan and get, in writing, a determination if the loan was reportable. The bank only did about 25 or 30 reportable transactions a year and yet always managed to have a purchase of 1-4 (usually a rental unit) that triggered HMDA the following year.

Classic example of regulations running amok and not contributing one iota of positive impact for fair lending, safe and sound banking, consumer protection, or any other myriad of reasons we have regulations.

Exactly! We all know there are good and bad examiners just like there are good and bad bankers. I hope the examiners that read this will all agree that this is wrong and if you can't agree, please tell us why.