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#2186936 - 07/26/18 03:15 PM Construction to Perm with 2nd loan, HMDA?
Red Raiders Offline
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Red Raiders
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Compliance Land
Had an odd situation pop up. We have a borrower that had a construction loan for $500,000. Upon completion, we did a secondary market loan for $400,000 secured by the home constructed. We also did a $100,000 loan to pay off the rest of the construction loan; however, this $100,000 loan was for 12 months and secured by the borrower's prior residence that will be sold to pay off the $100,000 loan.

What is the HMDA purpose on this 2nd loan? Purchase because it is still funds used to payoff the construction loan or Other? This was a head scratcher for sure...
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#2186954 - 07/26/18 04:27 PM Re: Construction to Perm with 2nd loan, HMDA? Red Raiders
hmdagal Offline
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hmdagal
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Purchase. It's being used to pay off a construction loan.

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#2186971 - 07/26/18 05:17 PM Re: Construction to Perm with 2nd loan, HMDA? Red Raiders
Red Raiders Offline
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One opinion in our department was that this was not reportable and was really a bridge loan. I didn't view it that way and was thinking like hmdagal that it is still funds to payoff the construction loan and should be reported and as a Purchase.
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#2186983 - 07/26/18 05:39 PM Re: Construction to Perm with 2nd loan, HMDA? Red Raiders
Adam Witmer Offline
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Originally Posted By Red Raiders
One opinion in our department was that this was not reportable and was really a bridge loan.

Well, bridge loans are no longer exempt under the 2018 HMDA rules unless they are going to be replaced by a new loan. Is the 2nd going to be replaced by a new loan?

From the commentary:
"i. Lender A extends credit in the form of a bridge or swing loan to finance a borrower's down payment on a home purchase. The borrower pays off the bridge or swing loan with funds from the sale of his or her existing home and obtains permanent financing for his or her new home from Lender A or from another lender. The bridge or swing loan is excluded as temporary financing under § 1003.3(c)(3)."
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All statements are my opinion, not those of my employer, and should not be taken as legal advice.
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#2186985 - 07/26/18 05:43 PM Re: Construction to Perm with 2nd loan, HMDA? Red Raiders
David Dickinson Offline
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David Dickinson
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Central City, NE
I agree with hmdagal that this is a purchase. I also agree with Adam, that IF they want to call it a bridge loan, it's still reported. It's 1 phase and therefore, doesn't qualify for the temporary financing exemption. Either way they want to look at this, it needs to be reported as a purchase.
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#2187035 - 07/26/18 08:21 PM Re: Construction to Perm with 2nd loan, HMDA? Red Raiders
Red Raiders Offline
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Red Raiders
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Compliance Land
Thanks everyone for confirming what I suspected was the answer (although I obviously wasn't confident smile )
Last edited by Red Raiders; 07/26/18 08:32 PM.
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