I just want to make sure I have this loan purpose right:

Taking multiple dwellings as security (owned free and clear), cash out to payoff one unsecured loan and construct a new dwelling (full advance at close).

Since there is no true refi, takes that and cash out refi off the table. So, the purpose would be Other, right? Or would the construction make it purchase?

Construction would make it a purchase.

I don't think anyone can give you an exact answer to your question with out knowing more.

If this is consumer purpose I agree it's a purchase.

If it's a commercial purpose and the intention is to sell the newly constructed home, it's not reportable. If they plan to keep it and rent it out or something, then I'd report as a purchase.

Or if the loan is short term and designed to be replaced by another loan...

I agree that more clarification is probably needed to help answer the question.

First off, thank you all for the responses and help, I appreciate it! As to more information:

- It's not temporary financing. It is a 5 year balloon note.
- We do have the loan coded as commercial because the properties taken for collateral are rental/investment properties.
- As to the construction, I do not believe the intent is to sell or even rent it out. However, the only thing noted in that regard is "the construction of a SFR home i/a/o $$$ on acreage owned by (borrower name)..."

That raises a another question. If they are not reselling or going to rent the dwelling what are they going to do with it? The loan's purpose dictates if it's consumer or commercial, not the collateral.

Now with that said it's a covered loan for the purpose of constructing a dwelling. For HMDA purposes it's a home purchase.

Dan, I started worrying about that too as I was writing my previous response. I asked my LO, and she advised the SFR is a "spec home" that will be sold once completed. There is not a contract in place yet, but that is the plan.

Spec home construction is explicitly exempted.

The citation from raitchjay's post can be found in the 2017 final rule:
2. Loan or line of credit to construct a dwelling for sale. A construction-only loan or line of credit is considered temporary financing and excluded under § 1003.3(c)(3) if the loan or line of credit is extended to a person exclusively to construct a dwelling for sale. See comment 3(c)(3)-1.ii through .iv for examples of the reporting requirement for construction loans that are not extended to a person exclusively to construct a dwelling for sale.

Then it is a business purpose loan to purchase a dwelling. IMO it would not qualify for the "Loan or line of credit to construct a dwelling for sale" exemption since it is not a construction only loan or a line of credit.

2. Loan or line of credit to construct a dwelling for sale. A construction-only loan or line of credit is considered temporary financing and excluded under § 1003.3(c)(3) if the loan or line of credit is extended to a person exclusively to construct a dwelling for sale. See comment 3(c)(3)-1.ii through .iv for examples of the reporting requirement for construction loans that are not extended to a person exclusively to construct a dwelling for sale.

I should read the entire thread and not just the last post.....i agree that this loan is not exclusively a construction-only loan.

Thank each you very much, the help is greatly appreciated!