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#1373131 - 04/13/10 01:59 PM Temporary financing discussion
CompDat Offline
Platinum Poster
Joined: Dec 2005
Posts: 553
I realize this is a subject that has been over played, but in response to my Bridge loan question the other day - depending on what regulators answer me back, I had always believed RESPA's definition of short term financing included construction loans, not converted to perm. financing, any bridge loan (left up to the FI to define). I also believed that short term financing was something that was replaced by longer time financing.

So along came a scenerio yesterday where a person was using a loan on their existing home, to be the downpayment of a home they were purchasing. I would normally call this a bridge loan and exempt this under the temporary financing definition, however if this was not defined by our FI as a bridge loan, and the loan would be paid off in full by the sale of the property, then I do not believe this is temporary because it would never be turned into longer term financing. Any thoughts?

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Lending Compliance
#1373159 - 04/13/10 02:28 PM Re: Temporary financing discussion CompDat
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,849
Bloomington, IN
Short term financing - a loan that will be paid from income, the sale of an asset, a gift, a settlement.

Temporary financing - a loan that is designed to be repaid by a much longer term financing.

Bridge/Swing Loan - a loan that is designed to use the equity in the existing dwelling to bridge the gap for financing of the new dwelling, such as furnishing the down-payment for the new home to secure long term financing. It is generally designed to be repaid from the sale of the existing dwelling.

IMHO using equity in the existing dwelling to purchase a new dwelling and the loan will be repaid from the sale of the existing dwelling and not longer term financing is not a bridge loan. It is not designed to bridge any financing gap for the the new home. It is financing the new home and will be paid off when sold therefore a short term loan and not a temporary loan.
The opinions expressed are mine and they are not to be taken as legal advice.

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