I just read the Mini-Perm conversation, but wanted to start a new question just addressing spec home construction.

We originated a loan for the construction only of a spec home. The loan term is 36 months of interest only with no permanent financing to take place on our end. In looking at Temporary Financing Flow Charts, this would be considered temporary and not reportable, but other articles/posts I've read discuss the length of this loan as not being temporary. I don't see any definition of what is considered temporary.

We have originated other spec home construction loans, but we have had them set up on a 12 month construction period with a 20 year payback. These types of loans we have reported because they are construction permanent.

Any guidance would be appreciated.

Thank you

No exact definition is given for temporary financing (or time frame), just examples; based on my own questions and research, temporary is any loan (construction only, bridge, etc.) that is going to be replaced by a more permanent loan. I have never read or heard any real objections to the longer term other than it is hard to justify that as temporary; which 3 years is a long time.

In your case, I think you have to ask yourself how will the loan be paid? If it will be with another loan, then I would go with temporary. If it will be paid in any other manner, then I think you have a reportable loan on your hands. However, if I am not mistaken, if the permanent financing is going to take place in the following year (i.e. 2017), then you would have to report it on this year's LAR.

Personal question, what are these flow charts you mention?

That's my issue. We do not have an end loan for this construction loan. The plan is for this home to be sold within the next few months and not even go the full 3 years. If we would keep this loan the full three years I'm sure we would refinance it, but we can't be sure of that at this point. It is intended to be replaced by permanent financing at some point in the near future, which is why I would like to not report it, but the 36 month term is my hurdle.

(And I just noticed that I put in my original post that no permanent financing would take place on our end. This is true, but I was meaning that this construction loan will be replaced by permanent financing, but it may not be by us to this same borrower. Does that make sense? This whole replacing this with that can get confusing. Haha!!)

We typically do not do construction only loans. Ours are 99% of the time const/perm financing and no question about reporting. We report at time of closing.


Bankers Compliance has flow charts that I reference on occasion.

A financial institution shall not report… Temporary financing (such as bridge or construction loans)… [§1003.4(d)(3)]
You say this is a construction loan. ALL constructions loans are exempt from HMDA reporting. HMDA does not say IF there's only a temporary phase, then report it. The above citation is a command to not report any construction or bridge loans. No if's, and'd or but's.

George: You can find the HMDA Flowchart Kisha is referencing at our website:
http://www.bankerscompliance.com/compliance-resources/free-downloads.htm

There's also an article, at the same link) entitled "HMDA Temporary Financing" where we discuss construction or bridge only loans. They are always exempt from HMDA reporting.

Thank you, David! As always, I appreciate your insight and your ability to help me see what is right in front of me and not question myself when I'm fairly certain I know the right answer.

BTW, this answer will change in 2018. The new HMDA definition of temporary financing requires 2 phases. But that's not today's rule.