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#1795386 - 03/15/13 05:57 PM One Year Term Loan- HMPL
Dodge Offline
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Customer applied for a one year note to construct a shop on his current residence. The loan will be secured by his primary home and it's a consumer purpose. The customer will pay off the loan once the customer sales some other real estate he owns. At this moment in time there are no plans to do permanent financing any where. We are do early disclosures and HMDA (home improvement), but what about escrow? Is it safe to say that escrow doesn't apply because in the definition of temporary financing under Regulation Z it doesn't say it has to be replaced by permanent financing?

(C) A temporary or “bridge” loan with a loan term of twelve months or less, such as a loan to purchase a new dwelling where the consumer plans to sell a current dwelling within twelve months

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#1795431 - 03/15/13 06:52 PM Re: One Year Term Loan- HMPL Dodge
KPOC Offline
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There's really no good definition of temporary financing, but this doesn't sound like temporary financing, it sounds like a short-term loan. It will be paid off in 12 months, but will not be replaced by a longer term obligation. In my opinion it is a short-term loan and subject to Regulation Z.

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#1795446 - 03/15/13 07:13 PM Re: One Year Term Loan- HMPL Dodge
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Sorry, missed your main question. Remember, escrow applies to first liens only.

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#1795462 - 03/15/13 07:30 PM Re: One Year Term Loan- HMPL Dodge
Dodge Offline
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This is going to be a first lien, and its a one year single pay. I agree it's short term per the FAQ on FFIEC for Regulation C because it will not be replaced by permanent. However, Regulation Z does not say anything about permanent financing. Escrowing for a one year single pay seems a little silly.

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#1795466 - 03/15/13 07:35 PM Re: One Year Term Loan- HMPL Dodge
KPOC Offline
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I agree, that's the rub. I agree that it is a little silly, but I still do not think this would be considered temporary financing.

Anyone else have opinions?

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#1795470 - 03/15/13 07:38 PM Re: One Year Term Loan- HMPL Dodge
raitchjay Offline
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OK
Wouldn't the loan qualify as a bridge loan? I thought that was why they specifically referenced bridge loans, because while there is no permanent financing contemplated, they are still specifically exempted.
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#1795473 - 03/15/13 07:43 PM Re: One Year Term Loan- HMPL Dodge
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I don't think it would be a bridge loan because it is not bridging the gap between the sale and purchase of a dwelling. Which is the definition I normally use. This sounds like simply a 12-month HI loan.

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#1795480 - 03/15/13 07:47 PM Re: One Year Term Loan- HMPL Dodge
raitchjay Offline
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OK
Ah ok. That makes sense.
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