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#1717985 - 07/07/12 05:06 PM subject to RESPA?
wtlender Offline
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Joined: Sep 2007
Posts: 62
Borrower is securing a loan with 3acres and the purpose of loan is to construct a barn with an apartment living quarters. Borrower is trying to sell current homestead, but hasn't. Borrower will live in apt after current homestead sells so that they can build new home on acreage in the future. Is loan subject to RESPA?

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Lending Compliance
#1717986 - 07/07/12 05:21 PM Re: subject to RESPA? wtlender
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,293
Is the bank providing permanent financing?
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
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#1717987 - 07/07/12 05:39 PM Re: subject to RESPA? Kathleen O. Blanchard
wtlender Offline
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Joined: Sep 2007
Posts: 62
yes, the bank will be providing permanent financing.

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#1717988 - 07/07/12 05:49 PM Re: subject to RESPA? wtlender
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,293
I don't see anything here that would exempt the barn with residential quarters - no exemption for business purpose.

Therefore, the construction loan is subject to RESPA due to the permanent financing. The citation is in RESPA, Coveraage:

(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.


_________________________
Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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