Q: For a combined construction/permanent loan or application, how does a financial institution report the loan term?
A: Regulation C, 12 CFR § 1003.4(a)(25), requires that a financial institution report the scheduled number of months after which the legal obligation will mature or terminate or would have matured or terminated.
For combined construction/permanent loans based on a single legal obligation, a financial institution reports the full loan term of the legal obligation. 12 CFR § 1003.4(a)(25). For example, if the legal obligation for such a combined construction/permanent loan includes a one-year construction phase and a 30 year permanent phase, the reportable loan term would be 31 years (372 months). Note that the financial institution reports the scheduled number of months after which the legal obligation will mature or terminate (or would have matured or terminated) without regard to whether the construction and permanent phases of such a combined construction/permanent loan are disclosed separately pursuant to Regulation Z, 12 CFR § 1026.17(c)(6)(ii).
For construction and permanent loans where the construction loan is a separate transaction, the financial institution reports only the loan term of the permanent loan. Because the separate construction loan is designed to be replaced by permanent financing, it is excluded as temporary financing under § 1003.3(c)(3).
For general information about the loan term data point, see section 5.9 of the HMDA Small Entity Compliance Guide.