We have a borrower who came to us to purchase a home and along with that wanted some extra funds to remodel a portion of the home. We granted the loan on a temporary basis and plan on brokering the loan on the secondary market for the permanent financing. We ran this by a compliance advisor who said it would be exempt as temporary financing, but our FDIC examiner is saying it should be reported as a purchase???

What are your loan terms?

$66,000.00 loan for 12 months, Draw down line of credit, interest only payments with all due at Maturity. $60,000 purchase price and $6,000 to tear down an interior wall.

Sounds like 2 phase financing to me. 1 year of interest only with a permanent take out. I'd call it temporary.

The problem is your examiner says it's not. It's not a bridge or construction loan, so you have to convince the examiner that it fits the description in the FAQs:

The examples indicate that financing is temporary, if it is designed to be replaced by permanent financing of a much longer term. [HMDA FAQ – Loan Purpose]

Is the rate spread on the LAR only needed for consumer 1-4 family loans and not commercial loans that are being reported?

I believe the rule is that the rate spread is not applicable if the loan is not subject to Reg. Z, or if covered by Reg. Z, the application did not result in an origination for a reason other than approved but not accepted.

GuitarDude, so if the loan is subject to Reg Z then the rate spread is needed if the loan is originated?

I would also call it temporary.
HMDA

Home purchase loan means a loan secured by and made for the purpose of purchasing a dwelling.

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.