HMDA – Loan Purpose – 1x Close – Replace Lender

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    It appears an exception was made to policy when the bank chose to pay off another bank’s 1x close loan earlier on in the construction process with a 1x close loan of our own. Am I correct in still reporting the Loan Purpose as a Purchase on the HMDA LAR, considering the construction was not yet complete? The LOB currently has this reported as a 32 (Cash-out Refi) on the HMDA LAR. Once again, thanks for the feedback.


    From the details provided the transaction sounds more like a refinance than a purchase loan. Regulation C defines a refinance as a closed-end mortgage loan or an open-end line of credit in which a new, dwelling-secured debt obligation satisfies and replaces an existing, dwelling-secured debt obligation by the same borrower. It sounds like your construction-permanent loan loan was replaced by a purchase-construction loan from another lender. In the situation where a permanent financing loan replaces a construction loan the transaction is reported as a purchase loan.

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