Any help with this loan would be greatly appreciated. Thanks in advance!

Consumer: Jane Doe

Loan #1: #0000011 – Purchase House & Improvements, 6 -Month Term was considered temporary – Not HMDA

Loan #2: #0000022 – Additional loan for Home Improvements, 36 - Month Term – Reported as Home Improvement on LAR

Loan #3: #0000033 – Loan to renew both of the above loans (#0000011 & #0000022) with additional funds to complete construction, 6 - Month Term - Not HMDA

At the end of 6 months when we do the permanent financing how do we report this loan? I would say Purchase, but we already reported as a Home Improvement.

Like I said thanks in advance!

I need to back up here.....funds to complete construction of what? We started with home improvement loans and jumped to construction somehow.

I'm confused, too, but if you mean what I think you mean...I would report the permanent loan as a refinance.

If Loan #3 included additional funds for the construction of a dwelling, then the perm loan that replaces it would be reportable as a purchase. I'm just confused if by "construction" in Loan #3 you mean additional funds to finish the home improvement or if you really mean construction.

Sorry loan #0000033 - Was additional funds to finish home improvements not construction.

Then I stand by my refinance answer.

Agreed.

Ditto

Don't forget, folks, that home improvements involve "construction work" so it is not wrong to use that word...it just is not a "construction loan" for HMDA.

I disagree with the others. Purchase trumps refinance and home improvement. Your initial short-term loan wasn't reported because you were going to replace it with perm financing (and report the perm financing as purchase). In the interim they obtained an additional loan for HI. For your final loan, you should report it as purchase, because it is the perm financing of your temporary purchase loan. Yes, you are also refinancing the HI loan, but purchase is the primary purpose of the long-term loan.

I believe when this topic has been heavily debated, the only time your report purchase on a temporary loan's perm out is on a bona fide construction loan to permanent phase.

The rest are considered refinances when termed out.

I don't disagree; but because of HMDA, my mind (right or wrong) has just trained itself to say "when they finish the improvements" NOT "when they finish the construction" when it comes to home improvement/renovation.

the TRID brain likely needs to think like that, too! Just sayin!

But it is important to remember that it can actually be a construction loan, managed as a construction loan, etc. but reported as a home improvement for HMDA. Larger home improvement loans can actually be handled as construction financing.

You can confuse lenders, who are setting up a construction loan with construction draws, inspections, etc. by telling them it is not a construction loan.

I try to differentiate in conversations by saying, "for reporting purposes"....

Kathleen, i appreciate that perspective. I try to accomplish the same thing by stressing that we can set the loan up as a "draw-down line of credit" and have inspections, but that it isn't a "construction" loan unless we're building a house from the ground up. Do you think that accomplishes the same thing?

I should say, i started in this industry 8 1/2 years ago and HMDA was one of my first challenges, so my conception of the words "construction" and "home improvement" sprouted from that....so in my way of thinking, it isn't hard to segregate "construction" from a "draw down line of credit", which, in my experience, is what lenders really mean when they want to talk about "setting up a construction loan".

(I'm most definitely not saying i'm "right" and others are "wrong" on this issue; just trying to explain why i look at it the way i do.)

Well, you may need to follow construction rules for Z depending upon funding. For HMDA, you are correct, but discussions often go beyond HMDA in the bank when a new loan is discussed. That is my only point!