Ok for HMDA do you call this a home purchase eventhough the customer is only buying it for the lot?

If I understand correctly, that's what MyScamper's original post was saying. She said that Chicago FDIC is saying that if a single loan is done to finance the acquisition, teardown and reconstruction it would be considered a construction loan and would not be HMDA reportable. On the other hand if one loan was done to finance the acquisition, and another loan was done to finance the tear down and reconstruction, the acquisition loan would be reportable as a home purchase loan. The construction loan would still not be reportable.

FWIW MB, that is how I see the interpretation also.

I just had a phone conversation with the examiner that is doing our on-site training tomorrow. She and the review examiner had a conference call with some Washington FDIC honcho and a rep from the FED. They have backed off some from the statements that were made on the FDIC Chicago Region conference call. She stated that for those transactions that were not clearly reportable or not reportable, they were going to be looking for a reasonable standard based on intent that the bank uses on a consistent bases. For example, if the borrower purchases a lot that happens to have a dwelling on it (which is not considered in the appraisal value)with the INTENT of tearing down the house and building a new one, it is NOT reportable because it is a lot loan. If the bank then gives builder funds to pay off this loan and construct the new building, it is NOT reportable because this is a construction loan. Guess What?!?! This is exactly how we were (not) reporting these loans before!!!!! She strongly emphasized the "reasonable standard" and "intent" criteria and suggested it would not be a bad idea to put our "reasonable standards" in writing so that all loan officers would be on the same page.

Loans qualifying as temporary financing:

1. Loans meeting the definition of a bridge or construction loan.
2. Loans made where the source of repayment will be other long term financing arrangements by PSB or another lender. If the long term financing arrangement is from another lender there must be a take out commitment from the lender in the file.

All other loans that meet the definition of a home purchase, home improvement or refinancing are now reportable for HMDA purposes. The purchase/renovation of a dwelling where the loan is to be repaid by the sale of the dwelling (or another asset) is no longer eligible for the temporary financing exemption.

Dan - This was from your very first post back in January and you were absolutely right, based on the guidance we received from our FDIC examiner during our on-site training.

She confirmed that the purchase/rehab/resale loans are HMDA reportable as purchases. If it were purchase/rehab with the "INTENT" of getting permanent financing at the end, it would be temporary financing.

She emphasized "Reasonable Standard" and "Intent". Here is a direct quote from one of the slides: TEMPORARY FINANCING - To determine if loan is reportable or not:Institutions should define temporary financing based on their business practice AND establish consistent criteria to evaluate whether a loan is temporary financing. This is referred to as "Reasonable Standard."

Also, "If the applicant knows or expects the loan to be replaced by permanent financing, then the initial, originated loan is temporary."

Our take away from the training is that we need to develop and implement the reasonable standards (which are bank defined) based on the borrowers intended use of the funds, and ensure that the standards are consistently followed.

If anyone has questions, I will try to answer them based on what we were told today.

Thanks for the input. It sounds like the FDIC examiners are trying to be reasonable in their approach. And I certainly can buy into the "reasonable standard" guideline.

I wanted to add this to humor you. I have a lender who is doing a loan to a customer to construct a portion of the customers house. Note: under the definition of construction this is not an actual construction loan. He is going to refinance the 1st and this 2nd loan when complete into one home mortgage. I told him this is temporary financing and not to complete HMDA, because he is replacing the 2nd (and the 1st) with another loan.

Oh please respond. We can talk all day about this one.

Funny you should have the exact situation that the FDIC examiner gave in our training session. She obtained a construction loan to build an addition, and at completion got an end loan that paid off the construction loan and 1st mortgage. She said this was temporary financing. So you are correct.

Thanks for the response. I was basing my decision on the fact that the plan was to replace the construction portion loan.