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I was told by our regulator that any loan made where the primary source of repayment is the sale of the property can not be considered temporary financing, including construction loans.

I don't agree with them, but that doesn't really matter.

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This is why David made the point that he did. Banks are not in a position to argue with their regulator when it seems their regulator has taken leave of their senses, so we need to get the various organizations involved to bring this to a head and get a uniform consensus and definition that does not leave room for such "imaginative" interpretation.

I have to wonder HOW someone can READ the HMDA regulation where it says point blank:

Section 203.4 Compilation of loan data.

(d) Excluded data. A financial institution
shall not report:

(3) Temporary financing (such as bridge or construction loans);

So how can you look at that and then say "You must report Construction loans?"

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Okay - I'll make the first comment/correction on "my" Temporary financing definition:

1. Temporary financing includes any loan for the initial construction of a dwelling provided that loan does not also include permanent financing.

2. Temporary financing is any loan, regardless of purpose, that is secured by a dwelling but where the loan is made on the premise that repayment of any of the principal loan balance will NOT come from the ordinary income or revenue of the borrower, but will come from either the sale of the property or from financing that will be repaid by ordinary income or revenue of the borrower.

3. Loans to finance the intial construction of more than a single 1-4 family dwelling are not reportable regardless of any principal reduction schedule.


This amendment is intended to clarify:

- Construction-perm loans ARE reportable.

- Interest-only payments would not disqualify a loan from being considered temporary

-Loans that have principal reductions during the term of the loan would no longer qualify as "temporary" (with the exception of loans described in item #3) so you don't have someone trying to pass off a 2 year loan with principal and interest payments as "temporary" because the borrower is still looking to sell the property.

-Make it clear that tract construction loans are not HMDA reportable even if there are principal reductions.


Any more thoughts?

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I think you will need to come up with some clarification on "ordinary income". Can't have any gray areas.

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So according to your contact at the FED, is a loan used to construct a dwelling for resale fall under the "temporary financing" exemption?

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I do not have to go back through the 2005 loans either - OCC. Flagging in 2006 is a good idea though.

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Grrrr. Oh well, I will consider my experience as character building. At least now I will recognize some of the regular names that come up for 2006.

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So according to your contact at the FED, is a loan used to construct a dwelling for resale fall under the "temporary financing" exemption?

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Yes.

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Wouldn't this be 'no"?

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So according to your contact at the FED, is a loan used to construct a dwelling for resale fall under the "temporary financing" exemption?

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Yes.

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Wouldn't this be 'no"?

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No..it would be "yes"..temporary financing exemption:construction loans.

I have a huge feeling this "hurried" Q&A answer will be revisted...it's causing way too much conflict and will go nowhere towards uniform reporting.

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So according to your contact at the FED, is a loan used to construct a dwelling for resale fall under the "temporary financing" exemption?

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Yes.

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Wouldn't this be 'no"?

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No..it would be "yes"..temporary financing exemption:construction loans.

I have a huge feeling this "hurried" Q&A answer will be revisted...it's causing way too much conflict and will go nowhere towards uniform reporting.

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I agree, because I am completely confused now. In the example given, the source of repayment is the proceeds from the sale of the newly constructed house not permanent financing, right? I thought if the source of repayment for a loan was anything other than permanent financing - you had to report it. Isn't that what all the confusion is about?

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So according to your contact at the FED, is a loan used to construct a dwelling for resale fall under the "temporary financing" exemption?

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I agree this is still exempt. This is what I call a "spec. house loan". This is NOT the same as a "splash and dash" or "rehab" loan. Those are purchases and the new FAQ makes it clear they are to be reported because they aren't construction loans. A Spec. House loan is a construction loan and clearly (at least to me ) meets the exemption.

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FWIW, our regulator (KC FDIC) agrees with David. They said a loan to construct a home & sell it (spec home) is construction & therefore not reportable. A loan to purchase, fix up & sell a dwelling (splash & dash) is reportable.

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That’s exactly the opposite interpretation that I received from our fed office. I’m glad to see all the regulators are on the same page with this.

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I’m glad to see all the regulators are on the same page with this.

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