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Rate Spread for HMDA on a Construction-Permanent

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Question: 
When reporting the rate spread for HMDA on a construction-permanent loan, should the rate spread for the construction phase be reported or the permanent phase, which will take place a year later?
Answer: 

While it is not exceedingly clear, as it is not directly addressed in the CFPB guidance, it would make the most sense that the Rate Spread would be reported from the construction loan CD, as the guidance indicates that this is the interest rate you would report.

For example, assume a combined construction/permanent loan is based on a single legal obligation with a 6% interest rate for the construction phase and a 4% interest rate for the permanent phase. Regardless of whether the financial institution uses combined or separate disclosures pursuant to Regulation Z, 12 CFR § 1026.17(c)(6)(ii), the financial institution reports 6% for the interest rate under § 1003.4(a)(21).

The other option is to contact the CFPB for guidance.

[Editor's note: Randy updated his response on 5/8/2020.]

First published on 01/19/2020

Last updated on 5/8/2020

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