We are currently being reviewed for HMDA and I wanted to check my understanding of how to apply HMDA to construction/perm loans.
We make construction to Perm loans. We do not make land loans and we do not make construction only loans. We have always added all applications and originations on the LAR regardless of the action taken.
We are being told if it doesn't lead to an origination then a construction to perm loan is not reportable as there is no dwelling constructed.
Here is my understanding of HMDA
You need to determine if you have a covered transaction-Closed end (we do not make enough HELOC's to be reportable), secured or TO BE secured by a lien on a dwelling, not excluded by any reason in 1003.3(c)
Construction to Permanent is a purchase as defined under 1003.2(j) and not excluded under 1003.3(c)(3)-1.iv
We have determined it is a covered transaction and is a purchase as it will automatically convert to permanent financing and our lien will be on the dwelling. The loan is not originated, either we deny it, the customer withdrawals it, or we approve it and the customer does not move forward with the loan.
We have been putting those on our HMDA LAR as we have already determined it to be a covered transaction. The reviewer is stating since no dwelling is ever constructed you have no dwelling only bare land and it becomes not HMDA reportable.
The scenario in question-The loan was approved as a construction/perm financing and ultimately closed ANA. The applicant never built on the land. It is still bare land. The reviewer indicated as no dwelling was built and it is still bare land it is not reportable.
But I thought it was intent that mattered, "proposed" use of the funds and "proposed lien". If the loan would have been originated the lien would have been on a dwelling and not on bare land.