We have a good customer requesting a type of loan we've never done before. The customer wants a 100% loan to purchase a new residence, as a 9 month interest only bridge loan. At the end of 9 months, if their previous house has not sold, their employer will purchase the property. Are there any regulatory concerns/prohibitions or additional disclosures for doing this kind of loan? Any advice would be greatly appreciated.

Sounds like a short term loan rather than a temp or bridge loan to me which would require disclosures.

Just to be clear, which property will the employer purchase? If it's the current home, will they be paying off the new home? If so, it's short-term.

If they will be buying the current home and then the customer will use proceeds to pay down and do permanent financing on the balance, it would then be a bridge loan.

The employer would be buying the old residence at the end of 9 months. Then the customer would be refinancing the interest only loan on the new residence into a regular mortgage.

That should qualify as a bridge loan then. You will bypass early disclosures. You will still have the final TIL and ROR if you also retain an interest in the current PR.

Of course, your FACTA and Flood requirements don't go away.

Thanks

Does bridge loan take into account the collateral?

If a borrower wants a 12 month loan to purchase a new home, the collateral being taken is the new home and the source of repayment is borrower's cash flow, and liquidation of the existing home. (Basically, it's a 12 month loan to purcahse a primary residence)

This loan is trying to be passed off as a "bridge" loan but don't most bridge situations take the existing home as collateral?

This sounds more like a short term loan to purchase a primary residence rather than a bridge loan but I'm looking for a definition of "bridge" to determine if this situation can be considered a bridge loan.

Thoughts?

I have a slightly different - but similar - situation that was presented over the weekend.

The customer wants to buy a new home and has their own down payment. They are "downsizing" and the new home they want to buy is considerably lower priced than what they currently own. Their current home is on the market but has not yet sold. They want to do a 12-month interest-only loan on their current mortgage until the house sells, at which point the interest-only loan will be paid off. They have only been in their current home for 6 years, so there is a pretty hefty balance due.

Would this be considered a bridge loan, a short-term loan, or just a balloon loan which will likely be extended if the house doesn't sell in the next 12 months?