1. Commercial Lenders are starting to structure commercial construction loans with extended maturities (i.e. 20 years) with 'interest only' to be paid for the first year or until construction is completed. Then, per the comments on the note, the borrower will begin to make monthly payments of principal and interest. The payment amount is not specified. Per the lenders, the loan is not to be resigned by the customer at the point the payments change.

Previously, I was instructing them not to report these as HMDA as they were construction loans, however, I see where they could be considered construction-permanent loans (which should be reported per HMDA).

2. Also, if these loans are not HMDA reportable, there is the CRA exclusion of loans for non-farm non-residential property construction and land development purposes with original maturities of 60 months or less.

Do you agree that they would be CRA reportable as the original maturity of the note is actually 20 years (in most cases) with the payments changing from interest only to principal and interest during the repayment of that note. Again, the note would not be resigned by the customer at the point the payments change.

It is my understanding that the purpose of structuring loans in this manner is to avoid having the customer come in to resign.

Does anyone have any comments OR thoughts they'd be willing to share? Thanks.

It sounds like you have a loan with a construction phase and then, assuming stabilization takes place, a mini-perm phase. Unless these loans are for multi-family, I don't know why they would be HMDA reportable. I don't think enough information is provided to determine whether these loans are small bisiness, small farm or community development, so I don't know if they are CRA reportable either.

I'm as confused as Don. (Runs with the name I guess) Are these loans for houses or commercial buildings? If they're commercial buildings, they're CRA reportable. You're providing the "permanent" financing in one fell swoop, but you are providing it. These aren't short term construction notes.

If they're notes on HMDA reportable properties...they're HMDA reportable. Again, it's permanent financing no matter what fancy packaging you want to place on it.

Now...ARE YOUR LENDERS NUTS!!! Think profitability and think of the customer. Construction loans are risky, hence the higher pricing and monitoring. They also typically carry fees that associate with that risk.

Take out financing is typically provided at a lower rate as the risk phase of the project has been mitigated after construction. They also carry fees for the bank.

Not wanting the client to sign again? That's a ridiculous answer. I've been a lender for many years. It's standard practice to have a construction note with term out. It's good for the client (reduced rate upon term out) and good for the bank (fee income and reduced monitoring). Smack someone with a wet noodle. They've lost their minds!