Some discussion is going on regarding "refinancing" a construction-only loan to an amortized loan and whether or not the bank can still consider this a "renewal" vs. a "refinance". Loan processing states it is a refinance and in our system will give it a new note number. Lender does not want it to have a new note number as this will "payoff" the original loan and the bank then "loses the history" (that is a system issue). We feel that loan processing is correct and that this should be treated as a refinance and it would be HMDA reportable (as long as the new loan is secured by a dwelling). Just wanted some other thoughts on whether the bank can actually continue to classify this as a "renewal" vs. a "refinance"? Thanks for your help!

Actually, for HMDA purposes this would be considered a purchase loan. How you classify it internally or how you handle the loan number and loan history is really an operational issue.

Thank you for catching me, this would be reported as a purchase on the LAR (I knew that....) guess I got caught up in the operational discussion. Regrouping now..

Following up, leaving HMDA out, if the loan changes from single pay to amortized payments would this not be considered a "refinance" since you are now changing the terms and will get a new note? Or could this in fact be a "renewal" since it is still technically the same loan (if no new money is advanced)? I always struggle with this as to understanding the difference or again is it really an "operational" issue? Thanks!

The conversion of a construction loan to permanent financing is still considered a residential mortgage transaction. Whether you consider it a renewal or refinancing for your accounting system is up to you, however appropriate disclosures will be required since a new note is satisfying and replacing the old note.