Because HMDA reporting becomes effective as the permanent phase begins (Action Taken Date)
This may be your procedure, but it isn't a requirement. HMDA allows you to report either the closing OR the date the loan converts to permanent financing:For a construction/permanent covered loan, the institution reports either the closing or account opening date, or the date the covered loan converts to the permanent financing. Although an institution need not choose the same approach for its entire HMDA submission, it should be generally consistent (such as by routinely using one approach within a particular division of the institution or for a category of covered loans).
[Commentary to §1003.4(a)(8)(ii) #5]
I've always recommended you go with the original closing date. Otherwise, you have to prove the conversion date, which is not readily available when looking at the note. Therefore, auditors have to dig a little deeper to find this answer.
Either way, I don't think you have a balloon. I would contact your LOS vendor and ask them why there system is doing this.