Compliance Alliance Question of the Week

Question:
For HMDA purposes, would a construction-to-permanent loan be considered a refinance under the Loan Purpose?
 
Answer:
It would actually be considered a home purchase loan under HMDA regardless of whether it is a combined construction to permanent loan or the permanent financing that replaces the temporary construction financing. If it is a construction-only loan to be replaced by permanent financing later, it will be excluded as temporary financing under 1003.3(c)(3).
 
3. Construction and permanent financing. A home purchase loan includes both a combined construction/permanent loan or line of credit, and the separate permanent financing that replaces a construction-only loan or line of credit for the same borrower at a later time. A home purchase loan does not include a construction-only loan or line of credit that is designed to be replaced by separate permanent financing extended by any financial institution to the same borrower at a later time or that is extended to a person exclusively to construct a dwelling for sale, which are excluded from Regulation C as temporary financing under § 1003.3(c)(3) Comment 3, 1003.2(j), https://www.consumerfinance.gov/policy-compliance/rulemaking/regulations/1003/Interp-2/#2-j-Interp-3