We have a borrower that has a line of credit this used to fund the construction of multiple 1-4 family dwellings for investment purposes. Once the construction is complete on an individual dwelling, the line is paid down (not paid off) with proceeds from a new loan (same borrower) and set up for permanent financing. My question, for HMDA reporting, is the new permanent loan a refinance or purchase?

Purchase

Thanks for your reply!

Some people may not agree based on the setup of the initial loan you have not really conforming to the normal construction only to permanent payout. In that alternate case, the consensus may be 'not reportable' because it won't be a refinance nor home improvement.

Sorry I just muddied the water for you...perhaps others will come along with their opinion

I agree that a loan to pay down a line is not a refinance. If it were a first time, business purpose, equity loan, I would say it is not reportable. However, if you know going into the initial plan that they will be doing the line and then getting a second loan, I would consider the second loan a purchase as well (like Joker).

I agree this can be debated.

Thanks for your reply. We did know going in that the second loan would be done. The borrower is using the dwelling for rental income. I agree this is debatable, our thoughts right now is that we are going to report it as a purchase. Thanks for your help!!!

We have a commercial line of credit secured with a multi-family dwelling. The proceeds will be used to "purchase property". The lender does not know if the property will be residential/non-residential. Would this transaction be HMDA reportable (as a purchase) if the property was non-residential and therefore not considered a "dwelling"?

No. But if they do buy residential property, it is reportable. The loan officer needs to know their intentions and document. Don't leave the door open - your just asking for trouble if you do.