A: Regulation C, 12 CFR § 1003.4(a)(21)
, requires that a financial institution report the interest rate applicable to the approved application, or to the covered loan at closing or account opening.
For combined construction/permanent loans based on a single legal obligation, the construction phase is not excluded as temporary financing, so the interest rate that applies at closing or account opening is the initial interest rate for the construction phase.
For example, assume a combined construction/permanent loan is based on a single legal obligation with a 6% interest rate for the construction phase and a 4% interest rate for the permanent phase. Regardless of whether the financial institution uses combined or separate disclosures pursuant to Regulation Z, 12 CFR § 1026.17(c)(6)(ii), the financial institution reports 6% for the interest rate under § 1003.4(a)(21).
Further, comment 4(a)(21)-1
explains that for covered loans or applications subject to the disclosure requirements of Regulation Z, 12 CFR § 1026.19(e) and (f), a financial institution complies with § 1003.4(a)(21) by reporting the interest rate disclosed on the applicable disclosure. For covered loans or approved applications for which disclosures were provided pursuant to both the early and the final disclosure requirements in § 1026.19(e) and (f), a financial institution reports the interest rate disclosed pursuant to § 1026.19(f). A financial institution may rely on the definitions and commentary to the sections of Regulation Z relevant to the disclosure of the interest rate pursuant to § 1026.19(e) or (f). Thus, for the example above, the financial institution reports the interest rate disclosed on the Closing Disclosure for the transaction, if combined disclosures are used, or the Closing Disclosure for the construction phase, if separate disclosures are used pursuant to Regulation Z, 12 CFR § 1026.17(c)(6)(ii).
For construction and permanent loans where the construction loan is a separate transaction designed to be replaced by permanent financing, the financial institution reports only the initial interest rate of the permanent loan.
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: