CFPB HMDA FAQ Const 2 - My financial institution originated a construction only loan. After origination…the builder …would like…a permanent loan. Is either the first or the second loan HMDA reportable?

Compliance > Regulation C - HMDA > CFPB
Q:   My financial institution originated a construction only loan to a builder exclusively to construct a dwelling for sale. My financial institution determined this loan was not HMDA reportable, as it was considered temporary financing under comment 3(c)(3)-2. After origination of the loan and construction of the house, the builder has not been able to find a buyer for the home, and would like to replace the first loan with a permanent loan and rent out the house.
Is either the first or the second loan HMDA reportable?
 
A:  In regard to the first loan, the fact that the house was not sold after construction, and permanent financing was unexpectedly obtained, does not render the construction-only loan reportable. However, the financial institution must report the second loan as a home purchase loan because it is permanent financing that replaces a construction-only loan under comment 2(j)-3.
 
 
This Q&A was based on information contained in the Consumer Financial Protection Bureau’s HMDA FAQs Compliance Aid, which may be updated from time to time.  This HMDA-related issuance may be found here: 
 

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