CFPB HMDA FAQ Const 7 - For a combined construction/permanent loan, how does a financial institution comply with the requirement to report the first date the interest rate may change?

Compliance > Regulation C - HMDA > CFPB
Q:   For a combined construction/permanent loan, how does a financial institution comply with the requirement to report the first date the interest rate may change?
 
A:   Regulation C,  12 CFR § 1003.4(a)(26), requires that a financial institution report the number of months, or proposed number of months in the case of an application, until the first date the interest rate may change after closing or account opening.  Note that § 1003.4(a)(26) provides a single standard for reporting that does not depend on loan type or loan purpose and that applies regardless of how the interest rate adjustment that may occur is characterized.  
 
For combined construction/permanent loans based on a single legal obligation, the construction phase is not excluded as temporary financing, so the financial institution reports the number of months, or proposed number of months, until the first date the interest rate may change after closing or account opening regardless of whether the construction and permanent phases of the loan are disclosed separately pursuant to Regulation Z, 12 CFR § 1026.17(c)(6)(ii).  
 
If the interest rate may first change during the construction phase, the financial institution reports the number of months, or proposed number of months, after the closing or account opening until the date that the interest rate may first change.  If the interest rate may first change during the permanent phase, the financial institution reports the number of months, or proposed number of months, after closing or account opening until the date that the interest rate may first change, which includes the number of months in the construction phase and any months in the permanent phase that occur before the interest rate may first change.
 
For construction and permanent loans where the construction loan is a separate transaction designed to be replaced by permanent financing, the financial institution reports the number of months until the interest rate may change in the permanent loan only, because the construction loan is excluded as temporary financing under § 1003.3(c)(3). 
 
For general information about the introductory rate period data point, see section 5.25 of the HMDA Small Entity Compliance Guide
 
 
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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