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#1258033 - 09/28/09 07:06 PM Bridge Loan? I dont think so.
CompDat Offline
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OK here is a scenrio. A customer comes in for credit to buy a new home. They live in property A and want to buy property B. They secure the one year loan with property A and will pay the loan off with the procedes of the loan. I was told this is not RESPA or Reg. Z because its a bridge loan. IMO this is not a bridge loan. There will be no second loan because the applicants own property A fee and clear. It will just be paid off with the sale.

IMO RESPA, Reg. Z, RoR (applies because they secured it with home A) and HMDA all apply to this loan. Please opine.

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#1258055 - 09/28/09 07:33 PM Re: Bridge Loan? I dont think so. CompDat
David Dickinson Offline
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David Dickinson
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Central City, NE
I believe a bridge loan is "the gap financing between the purchase of the new home and the sale of the old home." There doesn't have to be a 2nd loan to be a bridge loan.

I believe HMDA & RESPA are absolutely exempt from your scenario. RofR will apply for the reasons you state.

I've wrote a position paper on this issue. Specifically, read the page of the article entitled "HMDA Temporary Financing" found at our website:
http://www.bankerscompliance.com/compliance-resources/free-downloads.htm
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#1258070 - 09/28/09 07:51 PM Re: Bridge Loan? I dont think so. David Dickinson
CompDat Offline
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Thanks Dave. See you in two weeks.

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#1258094 - 09/28/09 08:14 PM Re: Bridge Loan? I dont think so. CompDat
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
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I agree with David. A bridge loan bridges the gap between the purchase of one home and the sale of the other. The sale of the original home may very well provide sufficient proceeds to pay off the bridge loan, with no long term financing needed. The first home just wasn't sold in time.

That being said, I have seen bridge loans morph into long term financing because things didn't go as planned but that is another conversation.
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#1258125 - 09/28/09 08:30 PM Re: Bridge Loan? I dont think so. Kathleen O. Blanchard
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Where do flip homes come into play with this? Like the FAQ? Customer buys a home fixes it up to keep for a year and sell it to pay-off the debt completely. We would report in that situation, why not in this situation? Our consistent rule here is if the bridge loan will not be refinanced and reported at a later date, then it needs to be reported now. It depends on what the customer tells us at application on what they intend to do. If they say they want to purchase a home and pay down the balance with the sale of the existing home, then refinance the balance, that is a bridge loan and we don't report until the perm/final financing. If they say they will pay it completely off with no balance later then we report it now.
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#1258173 - 09/28/09 09:26 PM Re: Bridge Loan? I dont think so. Relax
CompDat Offline
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Because HMDA specifically excludes "bridge" loans. Since David and Kaybee believe this is a bridge (which I am inclided to after being taught that bridge does not include a colateral requirement), it gets excluded.

Temporary Financing. When is a loan "temporary financing" such that it is exempt from reporting?

Answer: The regulation lists as examples of temporary financing construction loans and bridge loans. See 203.4(d)(3). Construction and bridge loans are illustrative, not exclusive, examples of temporary financing. The examples indicate that financing is temporary if it is designed to be replaced by permanent financing of a much longer term. A loan is not temporary financing merely because its term is short. For example, a lender may make a loan with a 1-year term to enable an investor to purchase a home, renovate it, and re-sell it before the term expires. Such a loan must be reported as a home purchase loan. See 203.2(h).

http://www.ffiec.gov/Hmda/faqreg.htm#TemporaryFinancing

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#1258176 - 09/28/09 09:28 PM Re: Bridge Loan? I dont think so. CompDat
Kathleen O. Blanchard Offline

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Purchase, renovate, buy (flip loans or "splash and dash") are reportable as a purchase.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#1258186 - 09/28/09 09:39 PM Re: Bridge Loan? I dont think so. Relax
David Dickinson Offline
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David Dickinson
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Central City, NE
The FRB drew a line in the sand and said "do not report temporary financing". They didn't say "if a loan will not be reported otherwise, report it." They tell us not to report bridge and construction loans. We don't get to decide or use "logic" to say "I think I should report this. Otherwise, it won't get reported."

There is no definition of these the terms "construction" and "bridge" because they are understood. I don't think anyone would argue the definition I gave in my first post is a bridge loan. The FRB says to not report these.

The "splash and dash" or flipping loans are purchases. They are not construction or bridge loans. They don't meet the definition of temporary financing. Therefore, they must be reported.
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#1258187 - 09/28/09 09:42 PM Re: Bridge Loan? I dont think so. David Dickinson
CompDat Offline
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I agree. A flipped home is a purchase because there will be no loan to replace the flipped loan to the same borrower. Thus, it cannot qualify as temporary - unless we get some much better guidence from the FFIEC.

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#1258190 - 09/28/09 09:45 PM Re: Bridge Loan? I dont think so. CompDat
David Dickinson Offline
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David Dickinson
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Central City, NE
A flipped loan is not reported because there is not loan to replace it. A flipped loan is not reported because it is a purchase and it is not "temporary financing".
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#1258199 - 09/28/09 09:55 PM Re: Bridge Loan? I dont think so. David Dickinson
CompDat Offline
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USA
You and I may be using different definitions for flipped. To me, the term flipped applies to the splash, of the splash and dash. It is flipped into the sale. Unless your second sentence needs to remove the not. That or I am very confused.

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#1258606 - 09/29/09 05:28 PM Re: Bridge Loan? I dont think so. David Dickinson
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
IN has a definition for a bridge loan.

"Bridge loan" means temporary or short term financing with a maturity of less than eighteen (18) months that requires payments of interest only until the entire unpaid balance is due and payable.
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