Home Mortgage Disclosure Act (HMDA)/Reg C

Frequently Asked Questions

Disclaimer: These questions and answers are provided based on those received during webinars provided by the Ellie Mae Compliance Department, and those submitted to Ellie Mae directly by you. This content is intended for general information purposes with the goal of assisting Ellie Mae’s customers and non-customers, in complying with the future provisions under Regulation C (HMDA). This information is provided as a courtesy to Ellie Mae’s customers and Ellie Mae makes no representation or warranty regarding the accuracy of the information set forth herein, and you may not rely on this information to ensure your company’s compliance with Regulation C (HMDA). This publication should not be construed as legal advice or opinion on any specific facts or circumstances, including the application of the HMDA regulations. You are advised to consult your own compliance staff or attorney regarding your specific residential mortgage lending questions or situation to ensure your compliance with all applicable laws and regulations.

What is the definition of temporary financing? Would this include a 12-month bridge loan?

Revised September 30, 2016

Temporary financing is defined as a closed-end mortgage loan or an open-end line of credit which is designed to be replaced by permanent financing. The commentary for Regulation C does not provide a specific time frame for the permanent financing, but does provide a few examples, including a bridge loan. The examples make the determination regarding exclusion based on temporary financing if there is known intention to replace the loan with permanent financing and the financing will be a separate transaction. Here is a summary of the examples provided in the commentary:

Bridge Loans - Bridge loans are excluded if the loan is used for a home purchase where the borrower will pay off the loan with proceeds from the sale of an existing home and obtain permanent financing on the new home from the lender.

Construction Loans - Construction Loans are excluded as long as the permanent financing that will replace the construction loan will be a refinance of the loan or a separate loan transaction, regardless of the lender providing the permanent financing. This includes a construction loan where the loan may be renewed one or multiple times prior to being replaced by permanent financing. However, if the loan is made as a construction-permanent loan where the transaction is already designed to convert to permanent financing, it is not excluded.

Loan or line of credit to construct a dwelling for sale. 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.

Investor Renovate and Resell Loans - These loans are also excluded when the temporary financing is not intended to be replaced by permanent financing. The commentary provides an example using a nine-month expiration term on the temporary financing, but also make it clear that the determination is based on the lack of permanent financing expected not the fact that the term is short.

Citation(s): §1003.3(c)(3); Commentary ¶3(c)(3)-1i-v