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#479993 - 01/09/06 05:07 PM HMDA Construction Loan
jzirbes Offline
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Joined: Dec 2003
Posts: 14
Under the new FAQ, I'm unclear if a construction loan to construct a primary residence is HMDA reportable. The loan is for 12 months and is to be repaid by outside permanent financing (no commitment). Because I do not have a commitment for permanent financing, is this HMDA reportable?

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#479994 - 01/09/06 05:40 PM Re: HMDA Construction Loan
bgehres Offline
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Joined: Mar 2005
Posts: 126
I think that these loans are specifically exempt from reporting, however, using your same logic to get a better explanation on the rehab and flip example, I asked this question in a lengthy call with an examiner this morning. Her reply: "Are you going to purchase the house?" (If I bought the lot and paid the contractor, don't I already own the house?) If anyone can explain what she was asking here, you're doing better than me.

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#479995 - 01/09/06 08:27 PM Re: HMDA Construction Loan
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,422
Bloomington, IN
Quote:

"Are you going to purchase the house?"




With no commitment (either internal or external) for permanent financing are you (the FI) going to purchase/foreclose on the house if the borrower cannot obtain permanent financing elsewhere?

Quote:

Because I do not have a commitment for permanent financing, is this HMDA reportable?




Under the new ruling by the FFIEC and the KC opinion, I would say yes. (I don't agree with it, but that's their ruling.)
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The opinions expressed are mine and they are not to be taken as legal advice.

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#479996 - 01/09/06 08:29 PM Re: HMDA Construction Loan
#12 Offline
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Joined: Jun 2005
Posts: 1,338
I thought construction loans were specifically mentioned as a type of temporary financing, and therefore not reportable?
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#479997 - 01/09/06 08:59 PM Re: HMDA Construction Loan
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,422
Bloomington, IN
Quote:

I thought construction loans were specifically mentioned as a type of temporary financing, and therefore not reportable?




Argue that with KC, you won't get any argument from me.

If you have no commitment and you end up foreclosing because permanent financing could not be obtained then you wound up with a "permanent" loan. (KC's reasoning is if the loan is not to be paid by a permanent financing arrangement then you do not have a temporary loan. Without a commitment there is no permanent financing arrangement.)

Again, totally BS IMO.

If you can't tell this whole mess really has be _issed off.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#479998 - 01/17/06 01:10 AM Re: HMDA Construction Loan
Marty McKay Offline
Member
Joined: Oct 2004
Posts: 95
Where can I learn more about the KC opinion?

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#479999 - 01/17/06 03:10 PM Re: HMDA Construction Loan
Bullseye Offline
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Bullseye
Joined: Jan 2004
Posts: 968
As I stated in another thread I am working on this question with FDIC KC Regional as well. So far, the answer that I am getting is that a speculative construction loan (a construction loan to a builder for a home to be sold) would not go on because the BUYER's permenant financing would be reportable. I requested them to clarify that the reason this doesn't go on is not that it is construction, but instead that there would eventually be SOME TYPE of permenant financing (not that I agree with that, the buyers could pay cash). So are we to decide whether or not there may/may not be some type of permenant financing and use that as the basis for determining whether or not a construction loan goes on? Again, still waiting for the response.

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