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#1403808 - 06/15/10 04:21 PM Is this a Bridge Loan?
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A customer was purchasing a home to be used as their primary dwelling. There were no other dwellings/collateral involved in the transaction. The loan officer classifed the loan as a bridge loan with a term of 12 months interest only payments. The customer provided a Mortgage Loan Commitment from a home finance company with a 90 day expiration. As it turns out, at the end of 12 months the customer did not/was unable to get permanent financing and we ended up with the perm financing. Was this really a bridge loan? Can the term "bridge loan" bridge a financing gap between temp and perm financing?
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#1404733 - 06/17/10 04:17 AM Re: Is this a Bridge Loan? Likes to Comply
jlroberts Offline
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Did the customer have a current home that they were trying to sell? When we use the term bridge loan it's usually a short term interest only loan on a home being purchased before they can sell their current home. Once the current home is sold they will either pay off the short term loan or refinance it into permanent financing. In some case we take collateral on both properties (current and new) but not always.

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#1404735 - 06/17/10 09:54 AM Re: Is this a Bridge Loan? jlroberts
mbucheeri Offline
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isn't bridge loan usually being use just to book the property untill the permenant finance is found?

nevertheless, in this case when will the title deed get transfered to the owner this way?

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#1404786 - 06/17/10 01:06 PM Re: Is this a Bridge Loan? Likes to Comply
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In this case, the customer is only purchasing a home. They did not have a home to sell, they were renting. This is only a purchase transaction. My concern is that the loan officer considers a bridge loan to be a loan that bridges a financing gap. For instance, the customer wants a quick purchase and uses our institution for the loan, but the customer has intentions on seeking long term financing with a different institution. In this case the customer had a mortgage committment letter from another bank. The loan was coded as bridge and therefore considered exempt from RESPA.
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#1404813 - 06/17/10 01:41 PM Re: Is this a Bridge Loan? Likes to Comply
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
Quote:
My concern is that the loan officer considers a bridge loan to be a loan that bridges a financing gap. . . . In this case the customer had a mortgage committment letter from another bank.


I would consider the loan a bridge loan also because bridging the financing gap is the purpose of a bridge loan, or at the very least the loan was intended to be a temporary loan. However I would question the judgment of the loan officer for booking it for 12 months when he only had a 90 day commitment. The loan should not have been booked longer than the commitment. This loan officer was down right incompetent IMO and caused the bank to have to book a loan that most likely will be rated marginal.
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#1404958 - 06/17/10 03:35 PM Re: Is this a Bridge Loan? Likes to Comply
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Thanks for the help.

I have another question. For interim construction loans RESPA applies if our institution will also provide the permanent financing. Does this also apply to bridge loans and/or temporary loans. If the permanent financing will be elsewhere then not subject to RESPA and if perm is in-house then is subject to RESPA? or is it expempt from RESPA regardless of who provides perm financing?
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#1404985 - 06/17/10 03:55 PM Re: Is this a Bridge Loan? Likes to Comply
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
Bridge and temporary loans are specifically exempt in 3500.5.
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