[LRobbins]

We have a borrower who has a revolving line of credit that is set up to fund construction projects for multiple 1-4 family dwellings. As each individual dwelling is complete and ready for occupancy, the revolving line is paid down (not paid off) with the proceeds from the permanent financing (closed end real estate) loan that is originated by the bank. My question is for HMDA reporting, how the is the new real estate loan reported? Refinance? Since the revolving construction line is only paid down, but never completely paid off because it is used for the construction of multiple single family dwellings, we were not sure if the new loan for the permanent financing would be considered a refinance for HMDA reporting.

[jholzknecht]

Excellent question and you have done a fine job on the research. I agree with your conclusion – the loan is not a refinance since it does not “satisfy and replace” the original debt. By default the loan is for the “other” purpose (Code 4).

[LRobbins]

Thanks for your reply!! I forgot to mention that the new loan for the permanent financing of the dwelling is also business purpose to the same borrower as well. The borrower will be using the dwelling for rental income. Will the “other” purpose code #4 still be used since this is a business purpose loan, or will it be considered a “purchase” since it is the permanent financing and pay down of a portion of a construction line of credit?

[jholzknecht]

Your reply raises two issues:
1. Even though for a business purpose the transaction is HMDA reportable since it is for home purchase.
2. In my previous reply I should have noted that the permanent financing that replaces a construction loan is HMDA reportable as a purchase loan, even if for a business purpose.

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