Good afternoon,
My FI currently provides a 2x close ctop loan. We take 1 application, turn it into a construction loan and then an end loan. 1 (same) application date for both loans; disclose both loans within 3 days of initial credit request.

My predecessor stated that the reason why the FI does it this way is 1) so that the FI can confirm that there is a permanent financing in place (if the FI does not receive a take-out letter) and 2) it will allow the FI to not report the construction-only phase to HMDA because the FI can prove it is temporary financing rather than short term.

My FI is now wanting to do 2 applications, with the Borrower applying for the end loan later on down the road as the construction phase draws to a close. I don't think this is a good idea. My understanding is, if my FI does it this way, then my FI will be obligated to report the construction-only loans if it is terminated before my FI receives an application for the end loan...
Can someone help me understand the consequences (good or bad) to allowing a Consumer to apply for a construction loan first, and then later applying for the end loan?

Thank you.

What does the below statement mean? If the construction loan is made on the understanding that there will be take-out refinancing whether from you or some other creditor, it would be temporary financing.

then my FI will be obligated to report the construction-only loans if it is terminated before my FI receives an application for the end loan

Hi Randy- What I meant was having proof that the end financing is intended either by a take-out letter from another lender or by my FI creating the end loan with the 1 application.
I thought that the FI had to show proof that permanent financing is intended...?

I am not sure that you need any sort of proof. It would be a simple question asked of the applicants and documented.

Sorry for the delay...Thank you, Randy. I will deem my interpretation simply as a business decision my predecessor made before me :-) Thank you for your time and knowledge!