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#2194279 - 10/01/18 03:47 PM construction loan
parr04 Online
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Joined: Aug 2004
Posts: 388
oklahoma
Loan request is to construct consumer residence. Construction loan will be paid off from sale of current residence.
Will this loan be exempt from HMDA reporting as a construction loan or be HMDA reportable as a short term loan?

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#2194298 - 10/01/18 05:17 PM Re: construction loan parr04
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
It's a reportable purchase loan. To qualify as "temporary" you must have 2 phases.

Here's an excerpt from our training manual on this topic:
Do not report loans or lines for temporary financing. [§1003.3(c)(3)] 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]

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)]
_________________________
David Dickinson
http://www.bankerscompliance.com

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#2194315 - 10/01/18 06:13 PM Re: construction loan David Dickinson
parr04 Online
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Joined: Aug 2004
Posts: 388
oklahoma
Thanks David.

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