A: Regulation C, 12 CFR § 1003.4(a)(27)
, requires that a financial institution report whether the contractual terms of the loan include or would have included certain non-amortizing features.
For combined construction/permanent loans based on a single legal obligation, a financial institution reports whether the contractual terms of the construction phase, the permanent phase, or both include or would have included contractual features that allow payments other than fully amortizing payments (as defined in Regulation Z, 12 CFR § 1026.43(b)(2)). The financial institution reports this information without regard to whether the construction and permanent phases of such a combined transaction are disclosed separately pursuant to Regulation Z, 12 CFR § 1026.17(c)(6)(ii).
For example, assume a financial institution originates a combined construction/permanent loan based on a single legal obligation and the construction phase has interest-only payments (as defined in Regulation Z, 12 CFR § 1026.18(s)(7)(iv)). Also assume the financial institution discloses the construction and permanent phases of the loan separately pursuant to Regulation Z, 12 CFR § 1026.17(c)(6)(ii). In this situation, the financial institution reports that the loan includes interest-only payments. This is because there are interest-only payments in at least one phase of the construction/permanent loan. It does not matter that the financial institution chose to disclose separately for each phase, as the transaction is still based on a single legal obligation.
For construction and permanent loans where the construction loan is a separate transaction that is designed to be replaced by permanent financing, the financial institution reports only the non-amortizing features that are included in the contractual terms of the permanent loan, because the separate construction loan is excluded as temporary financing under § 1003.3(c)(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: