After identifying additional loans that should have been included in our HMDA scrub in 2017 and I have the following.

Non-Revolving Line of Credit for 18 months and an additional 18 months if needed. The purpose is to payoff a mortgage and with the additional funds left, finish construction of a single family house.

Would this be a reportable loan or because of being less than 2 years I don't worry about it? I'm concerned that is does have an option for additional term and could be Home Improvement or Refi.

Thanks

What's the source of repayment after the 18 months?

The funds from the sale of the property once construction if final.

If you are finishing construction, then it's still a construction loan, not a home improvement loan. Construction loans are a "Purchase" for HMDA. Since you don't know for sure if this will be replaced by another loan and since it will be paid from the sale of the home, I would call it a short term purchase and report it. Things could change, but you have to make a call one way or the other now.

You could say it will be replaced by the 2nd 18 month financing. If that route was chosen, the first loan would be a temporary loan and the 2nd loan would be reported as a purchase.

Pick one, document why and report one or the other.

Thank you David. I started a new job and I'm doing a scrub for HMDA and have found some loans that to me are reportable and just wanted to make sure. I'm having to go back to 2015, since the bank had only identified like 17 reportable loans in 2017. So far I found more than 25. I have some that are a mix of things being done with the proceeds so I may be posting some other post.

Thanks.

Confusion has just set in, please help me out. If borrower is selling the home they are currently constructing is this transaction exempt from reporting? This does not seem to be a borrower who is constructing a home for his own future residence. Thanks

compliancejunkie: HMDA doesn't care if it's for their own residence or not. If you are constructing a dwelling, it's a purchase (either the 1 phase or the 2nd of 2 phase financing). Sounds like you have a bridge loan with no permanent financing. That's reported as a purchase.

Here's some regulatory references to help you understand:

Builder loans are exempt:
A construction-only loan or line of credit is considered temporary financing and excluded… if the loan or line of credit is extended to a person exclusively to construct a dwelling for sale. [Commentary to §1003.3(c)(3) #2)]

Short term financing is reported:
Lender A originates a loan with a nine- month term to enable an investor to purchase a home, renovate it, and re-sell it before the term expires. …the loan is not designed to be replaced by permanent financing and therefore the temporary financing exclusion does not apply. Such a transaction is not temporary financing… merely because its term is short. [Commentary to §1003.3(c)(3) #1(v)] 

Construction (2 phase financing):
Lender A extends credit to a borrower to finance construction of a dwelling (i.e. the construction phase). The borrower will obtain a new extension of credit for permanent financing for the dwelling, either from Lender A or from another lender… The initial construction loan is excluded as temporary financing… because the construction loan has been designed to be replaced by permanent financing. [Commentary to §1003.3(c)(3) #1(ii)] Construction to permanent (one closing) and construction only loans not designed to be replaced by separate permanent financing are not considered to be temporary financing and must be reported as applicable. [Commentary to §1003.3(c)(3) #1(iv)]

Bridge or Swing Loan (two-phase financing):
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… because the bridge loan has been designed to be replaced by permanent financing. [Commentary to §1003.3(c)(3) #1(i)] Bridge loans not designed to be replaced by separate permanent financing are not considered to be temporary financing and must be reported.

Temporary Financing:
A loan or line of credit is considered temporary financing and excluded… if the loan or line of credit is designed to be replaced by separate permanent financing (i.e. two-phase financing) extended by any financial institution to the same borrower at a later time. [Commentary to §1003.3(c)(3) #1]

IF you have 1 phase financing, it must be reported.

After identifying additional loans that should have been included in our HMDA scrub in 2017

Sounds like you have a bridge loan with no permanent financing. That's reported as a purchase.

Bridge loans were exempt in 2017.

Good point Dan. I didn't see (or forgot) this was a for a 2017 application. I agree these were not reported in 2017 but are in 2018.

David, this construction loans looks like temporary financing and excluded under 1003.3(c)(3). The loan is extended to construct a dwelling for sale. Cat Lover states the loan will be paid off by selling the dwelling after completion.
Do I have that right? I don't get it why this is a purchase. Please help.

If this was a speculation home, AND if it was a loan in 2018, it would not be reported. As I posted on 8/9/18:
Builder loans are exempt:
A construction-only loan or line of credit is considered temporary financing and excluded… if the loan or line of credit is extended to a person exclusively to construct a dwelling for sale. [Commentary to §1003.3(c)(3) #2)]

But if this is not a spec house/builder loan, then it would be reported (in 2018).

This string has gotten chaotic. First, Cat Lover said this was a 2017 loan (but it's posted in the HMDA 2018 forum). So I was confused and responded in reference to the 2018 rules.

Cat Lover does state the loan will be paid off by selling the property. Cat Lover doesn't say what "the property" is. Is it the house being built or the property the borrower's current reside in. In other words, they'll sale their existing home and move into the new (constructed) home.