Temporary financing is excluded from HMDA coverage. Do you have any examples?

Compliance > Regulation C - HMDA > 2018 Provisions
Q:  Temporary financing is excluded from HMDA coverage.  Do you have any examples?
 
 
A:   A transaction is excluded as temporary financing if it is designed to be replaced by permanent financing at a later time. A loan or line of credit is not temporary financing merely because its term is short. 12 CFR 1003.3(c)(3); comment 3(c)(3)-1.
 
Here are some examples:   
 
  • Ficus Bank extends a bridge or swing loan to finance a borrower’s down payment for a home purchase. The borrower will pay off the bridge or swing loan with funds from the sale of his or her existing home and obtain permanent financing from Ficus Bank at that time. The bridge or swing loan is excluded as temporary financing.
  • Ficus Bank extends a construction loan to a borrower to finance construction of the borrower’s Dwelling. The borrower will obtain a new extension of credit for permanent financing of the Dwelling. Ficus Bank renews the construction loan several times before the borrower obtains a new extension of credit from another lender for permanent financing. The construction loan is excluded as temporary financing.
     
  • Ficus Bank extends a construction loan to a borrower to finance construction of the borrower’s Dwelling. The construction loan will automatically convert to permanent financing after the construction phase is complete. The construction loan is not temporary financing because it is not designed to be “replaced by” permanent financing.
     
  • Ficus Bank extends a nine-month loan to an investor, who uses the loan proceeds to purchase a home, renovate it, and sell it before the loan term expires. The loan is not temporary financing because it is not designed to be “replaced by” permanent financing.
 
 
ADDITIONAL INFORMATION:
This information was obtained from the CFPB’s Home Mortgage disclosure (Regulation C) Small Entity Compliance Guide.  https://s3.amazonaws.com/files.consumerfinance.gov/f/documents/201512_cfpb_hmda_small-entity-compliance-guide.pdf
 

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