"exclusivity" of building SFR exclusively to sell

Posted By: HMDAHamsterWheel

"exclusivity" of building SFR exclusively to sell - 04/21/22 05:32 PM

"A construction only loan or line of credit is considered temporary financing and excluded under Regulation C if the loan or line of credit is extended to a person exclusively to construct a dwelling for sale."

The phrase construction only loan exclusively to build a house for sale is all over the place... But what about the lot? The builder has to buy a lot or if they own it already refinance a lot loan to build the house for sale....Buying a lot or refinancing a lot would mean the funds are not "exclusively" used for building a house to sell....

1. Wouldn't a builder getting a loan to buy a lot and to build a dwelling for sale still be excluded?

2. Would building a house for sale...and also paying off say credit cards also be excluded from reporting? Paying off credit cards is excluded from a business purpose HMDA transactions since it's not to purchase a dwelling, refi a dwelling or make home improvements... So why would adding an additional excluded transaction to a builder to sell loan make it not an excluded transaction?...

3. Is the "exclusivity" really just so if something additionally being done with the funds that would make it HMDA reportable (dwelling purchase, refi or home improvements) doesn't prevent the loan from reported?...

4. It also says to a person in this exclusion. We can use this for entities too, right?

To be reportable for HMDA a business purpose loan has to be a home purchase, refi of a dwelling or home improvements...so it doesn't make sense to me that adding additional funds (that would be excluded for HMDA reporting)to a construction loan would make it reportable....

Am I over thinking this? I was told a long time ago that with HMDA you need to throw all logic and common sense out the window...But I still want to make sense of this....

Has anyone had experience talking with the CFPB saying they are not reportable or anything?
Posted By: Inherent_Risk

Re: "exclusivity" of building SFR exclusively to sell - 04/21/22 06:55 PM

1) I would think the FAQ question about why a loan to purchase a lot with a dwelling to knock down and build a dwelling for sale has a corollary that if the dwelling wasn't there, then the loan could be excluded, so I like to think this falls under the exclusion. Purchasing the land is part of the construction process as it were.

2/3) I've never run into this personally. Generally, a spec home loan is just that and not other stuff wrapped into it. That would be tricky to navigate. I think your #3 gets to what the intent of the reg is, but it's not really what the words say, so I'm not sure what the CFPB would say.

4) Corporations are people too.
Posted By: Dan Persfull

Re: "exclusivity" of building SFR exclusively to sell - 04/21/22 08:13 PM

Double posted
Posted By: HMDAHamsterWheel

Re: "exclusivity" of building SFR exclusively to sell - 04/21/22 08:34 PM

Thank you that is how I look at these loans.

The "to a person exclusively" is what has always bothered me. That would make only loans to a borrower who was an individual and had paid off land owned free and clear building a house to sell excluded....that just doesn't make sense.

Plus the CFPB had explained in the 2017 proposed rules that they didn't want building to sell loans reported and they had been trying to clarify that by "construction only loans" they didn't want people thinking buying a house to renovate and resell were excluded transactions.
Posted By: HMDAHamsterWheel

Re: "exclusivity" of building SFR exclusively to sell - 04/21/22 08:35 PM

i'll delete the other thread since you were the only person to respond to it.