A customer has approached us requesting a 12 month construction loan with no payments (not even interest), until maturity. We have no intention of granting the request, but the officer would like to have a regulatory reason to give the customer for why we cannot do this. Is there a reg we can point to?

There is not a regulatory prohibition against "bullet loans", so I do not recommend you pin your denial on the regulators.

A more appropriate response would be "based on our assessment of our market we are limiting the bank's exposure to new speculative construction to only those projects where the principals are willing to inject upfront funds into the construction or, minimally, can demonstrate their ability to carry the note should the property fail to sell as anticipated".