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#2128053 - 04/26/17 05:07 PM Purchase or Construction Loan?
Frosh Offline
Member
Joined: Mar 2015
Posts: 89
Customer is purchasing a building to construct 4 condominiums. The loan is a non-revolving line of credit for 18 months. The customers plans to pay off the line of credit with the sale of the condominiums or if not sold, rent them out. Per loan officer's assistant there is no plan to refinance. To me, this seems like a purchase, any other thoughts? Thank you in advance.

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#2128093 - 04/26/17 06:18 PM Re: Purchase or Construction Loan? Frosh
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
I agree. If there's plan to refinance, it's not 2 phases and not temporary. It's a short term purchase and reported as a purchase. Much like a "splash and dash" or "flipping" loan.
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#2132217 - 05/26/17 07:17 PM Re: Purchase or Construction Loan? Frosh
fretzer Offline
Member
Joined: Dec 2008
Posts: 76
Pennsylvania
How about a commercial loan that is classified as a commercial construction loan to finance the acquisition and renovation of a single family house for investment purposes?

In the regulation, construction only loans are not reported, but this is not a ground up construction. Would you report?

Thank you!

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#2132219 - 05/26/17 07:25 PM Re: Purchase or Construction Loan? Frosh
raitchjay Offline
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Joined: Oct 2009
Posts: 8,763
OK
Yes. A loan has to meet the Reg. C definition of "construction only" to get that exemption. If the plan is to buy and flip a house, it's reportable.
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#2132220 - 05/26/17 07:33 PM Re: Purchase or Construction Loan? Frosh
fretzer Offline
Member
Joined: Dec 2008
Posts: 76
Pennsylvania
Thank you! Happy Memorial Weekend!!

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#2132222 - 05/26/17 07:36 PM Re: Purchase or Construction Loan? Frosh
raitchjay Offline
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Joined: Oct 2009
Posts: 8,763
OK
Yw....you too.
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