Can someone help me understand the temporary financing exemption better? I was under the impression that all bridge loans were exempt. But if you look at the title transfer portion it would exempt almost no bridge loans the way I understand them. Except for the fact that the Title Transfer item is in the construction to perm loan exemption. Thus, it would not apply if there was no construction loan.
Last edited by CompDat; 04/09/10 05:53 PM.
For example: Person A lives in home A. They want to purchase home B but home A has not sold yet. So they do a six month loan (I realize duration does not count), that will be replaced by permenant financing once home A sales, priciple will be reduced and another loan will be created. I always thought of this as a bridge loan. But it is really a loan to buy property B, because title transfers from the seller of property B to the buyer of property B.
3) Temporary financing. Temporary financing, such as a construction loan. The exemption for temporary financing does not apply to a loan made to finance construction of 1- to 4-family residential property if the loan is used as, or may be converted to, permanent financing by the same lender or is used to finance transfer of title to the first user. If a lender issues a commitment for permanent financing, with or without conditions, the loan is covered by this part. Any construction loan for new or rehabilitated 1- to 4-family residential property, other than a loan to a bona fide builder (a person who regularly constructs 1- to 4- family residential structures for sale or lease), is subject to this part if its term is for two years or more. A ``bridge loan'' or ``swing loan'' in which a lender takes a security interest in otherwise covered 1- to 4-family residential property is not covered by RESPA and this part.