CFPB HMDA FAQ - My financial institution originated a construction only loan to a consumer to construct a dwelling. My institution determined this loan was not HMDA reportable, because it was designed to be replaced by permanent financing.

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Q:   My financial institution originated a construction only loan to a consumer to construct a dwelling. My financial institution determined this loan was not HMDA reportable under 12 CFR § 1003.3(c)(3), because it was designed to be replaced by permanent financing. Later, the consumer unexpectedly decided to modify this loan into permanent financing, without any new funds provided and without the construction loan being satisfied and replaced by a new obligation. Should my financial institution report the modified loan?
 
A:  No. Because the original construction loan was later modified into permanent financing, without a new extension of credit occurring, the modification is not reportable, under comment 2(d)-2. Further, the original construction loan was designed to be replaced by separate permanent financing, and so it remains excluded from reporting under 12 CFR § 1003.3(c)(3).
 
 
This Q&A was based on information contained in the Consumer Financial Protection Bureau’s HMDA FAQs document, version 4, dated July 28, 2020, which is updated from time to time.  This HMDA-related issuance may be found here:  https://files.consumerfinance.gov/f/documents/cfpb_HMDA_frequently-asked-questions.pdf
 

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