[Brandy L. Bradley]

Under the new rule, the permanent financing replacing a temporary construction loan will be reported as a purchase. Does this also mean that the permanent financing replacing a loan for the purchase/setep of a MH should be reported as a purchase as well?
I feel as though the answer is yes based on the reference to the second bullet point of the “Secured by unimproved land” exemption, where the Reg refers to the construction of a dwelling and the purchase of a dwelling to be placed on land in the same context.

What is your opinion on this matter?

[jholzknecht]

Neither HMDA nor Regulation C directly addresses your issue, therefore we all are guessing at the proper way to disclose the purpose of your loan. We suggest you may want to seek guidance on this issue from the CFPB.

Comment 2(j) – 3. states, ” A home purchase loan includes both a combined construction/permanent loan or line of credit, and the separate permanent financing that replaces a construction-only loan or line of credit for the same borrower at a later time.”

The term “home purchase” is defined as, ” a closed-end mortgage loan or an open-end line of credit that is for the purpose, in whole or in part, of purchasing a dwelling.” The term dwelling includes a manufactured home. The term “construction loan is not defined, but logically includes a loan to construct a dwelling. A loan to purchase and install a manufactured home does not clearly fit the concept of a construction loan.

While your reference to Paragraph 3(c)(2),“Secured by unimproved land” exemption, does refer to the construction of a dwelling and the purchase of a dwelling to be placed on land in the same context, that section does not deal with temporary financing. Paragraph 3(c)(3), which does deal with temporary financing, does not include as an example of temporary financing a loan to purchase and install a manufactured home. We believe that such a loan is temporary if it is designed to be replaced by separate permanent financing extended by any financial institution to the same borrower at a later time.

An argument can be made that your loan would be a home purchase loan. An argument can also be made that your loan is a refinance, 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. If Comment 2(j) – 3 referred to replacing temporary financing instead of replacing a construction loan we would be more persuaded by your argument.

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