HMDA: Temporary Financing Exclusions

The HMDA requirements state that institutions should NOT report loans or lines for temporary financing. While that might seem pretty straightforward, we find there is often a lot of confusion surrounding this exclusion. So, what is temporary financing? The Commentary to §1003.3(c)(3) #1 states a loan or line of credit is considered temporary financing … if the loan or line of credit is designed to be replaced by separate permanent financing extended by any financial institution to the same borrower at a later time. This could include things like bridge/swing loans or loans for the initial construction of a dwelling. For example, say you make a 12-month loan to construct a dwelling. Once the construction is complete, it will be paid off and replaced with permanent financing (i.e., two-phase financing). In this case, the initial 12-month loan is considered temporary financing and is not HMDA reportable. The permanent loan; however, is HMDA reportable as a Purchase.

The key thing to remember is that the temporary financing designation is driven by having two phases and not simply because a loan/line has a short term. For example, a construction-only loan/line that won’t be replaced with permanent financing IS reportable for HMDA. There is one exception to this rule; however, for builder loans as the Commentary to §1003.3(c)(3) #2 states, a construction-only loan or line of credit is considered temporary financing and excluded… if the loan or line of credit is extended to a person exclusively to construct a dwelling for sale.

David explains more in the video.

HMDA Resources!



David Dickinson

David’s banking career began as a field examiner for the FDIC in 1990. He later became a Compliance Officer and Loan Officer for a small bank. In 1993, he established Banker’s Compliance Consulting. Along with his amazingly talented Team, he has written numerous compliance articles for prestigious banking publications and has developed compliance seminars that Banker’s Compliance Consulting produces.

He is an expert in compliance regulations. He is also a motivational speaker and innovative educator. His quick wit and sense of humor transforms the usually tiring topic of compliance into an enjoyable educational experience. David is on the faculty of the American Bankers Association National Compliance Schools and has served on the faculty of the Center for Financial Training for many years. He also is a frequent speaker at the ABA’s Regulatory Compliance Conference. He is also a trainer for hundreds of webinars, is a Certified Regulatory Compliance Manager (CRCM) and has been a BankersOnline Guru for many years. The American Bankers Association honored David with their Distinguished Service Award in 2016.

David and his wife Karen have three adult children, four grandchildren (none of whom live at home!) and two cats (of which Dave is allergic … the cats, not the children!). They recently moved to an acreage outside of Lincoln, Nebraska where he gets to play with his tractor. When possible David can be found fishing, making sawdust in his shop, or playing the guitar and piano. He also enjoys leading worship at his church.

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