Skip to content
BOL Conferences
Thread Options
#182454 - 04/21/04 06:46 PM Time Limit on Temporary Financing
La. Lady Offline
Diamond Poster
La. Lady
Joined: May 2001
Posts: 1,873
Is the time limit for temporary financing 2 years?

Return to Top
Lending Compliance
#182455 - 04/21/04 07:22 PM Re: Time Limit on Temporary Financing
Suzie Offline
Platinum Poster
Suzie
Joined: Apr 2002
Posts: 662
Far North
If this question is in regards to the HMDA definition of temporary, you will not find a specific time period stated.
_________________________
"Whales get harpooned because they surface to spout."

Return to Top
#182456 - 04/21/04 10:04 PM Re: Time Limit on Temporary Financing
Anonymous
Unregistered

If the question concerns HMDA, the FDIC put out a bulletin discussing temporary financing. According to the bulletin, " 'temporary financing' is short-term financing that is only used until other financial arrangements to pay can be made. Accordingly, looking at the nature of the credit and how it is to be repaid is the only way to determine if it meets the 'temporary financing' exclusion." Banks should not set an arbitrary loan term to determine whether a loan is temporary financing. "Banks must look at each loan to make a proper determination."

Return to Top
#182457 - 04/21/04 10:17 PM Re: Time Limit on Temporary Financing
Dan Persfull Online
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
Quote:

the FDIC put out a bulletin discussing temporary financing.




Yeah, but you said it better and in a lot fewer words.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#182458 - 04/22/04 06:20 PM Re: Time Limit on Temporary Financing
Geoz Offline
100 Club
Joined: Apr 2003
Posts: 148
Colorado
Regarding the FDIC's bulletin, the phrase "other financial arrangements" should not be read as "other financing arrangements." I learned the hard way. In an effort to make the definition more black and white for our lenders we had interpreted this to mean other credit arrangements - after all, isn't this why construction and bridge loans are considered exempt from HMDA?

Needless to say, our two-point test was shot down by our regulators. Basically, it was: the new request would have a relatively short term - generally less than 2 years AND the applicant's intent would be "temporary financing", in other words, repayment was expected to via another loan or other credit arrangement. We didn't consider other anticipated repayment events such as bonuses and tax refunds to count. To me, those are just short term loans. This term is entirely too loose and probably results more in uneven reporting than anything.

The term "temporary financing" has been a thorn in my side since I first read the regulation. Oh yes, if you don't see me on this forum again today it's because I will be temporarily out of my office (for the rest of the day, or maybe the rest of the week. Whatever. Have a nice weekend everyone.

Return to Top
#182459 - 07/08/04 07:34 PM Re: Time Limit on Temporary Financing
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
I have searched my FIL's can cannont find one discussing temporary financing...am trying to find it to give to our HMDA officer...can someone point me to a number/date or link?
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#182460 - 07/08/04 07:40 PM Re: Time Limit on Temporary Financing
Dan Persfull Online
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 47,517
Bloomington, IN
I did not see it in a FIL. I got it through a SCANS bullentin out of Chicago. Here's the text:


Division of Compliance and Consumer Affairs 500 West Monroe, Suite 3300, Chicago, IL 60661 312-382-7500

May 29, 2002

Bulletin Number: CHIRO-07-2002

HMDA and ‘Temporary Financing’

One area of the Home Mortgage Disclosure Act (HMDA) and Regulation C that continues to confuse reporters is the exclusion for ‘temporary financing’. In this message, we will try to clarify the term ‘temporary financing’ and discuss how many banks are incorrectly applying this exclusion.

Regulation C and the HMDA: Getting It Right guide (HMDA Guide) do not define ‘temporary financing’. However, Regulation C and the HMDA Guide do provide a good foundation for understanding what ‘temporary financing’ means. Section 203.4(d)(3) of Regulation C provides some insight by stating “Temporary financing (such as bridge or construction loans).” The HMDA Guide uses similar phrases in several parts. On page 10 under “What Types of Transactions Are Excluded?” it states “Construction loans and other temporary financing (but construction-permanent loans must be reported).” On page 7 of Appendix A under “Data to be excluded”, it states “Construction or bridge loans and other temporary financing.”

Temporary is defined in the dictionary as “lasting for a limited time”. Based upon the dictionary definition and the clues in Regulation C and the HMDA Guide, ‘temporary financing’ is short term financing that is only used until other financial arrangements to pay can be made. Accordingly, looking at the nature of the credit and how it is to be repaid is the only way to determine if it meets the ‘temporary financing’ exclusion.

If we look at a construction or a bridge loan (specifically defined in HMDA as temporary), we see that the payment of the construction or bridge loan is usually from another loan (a mortgage with some scheduled duration to pay for the home) or sale of an existing home. At the time the construction or bridge loan is extended the bank knows that it will be paid from another loan or an asset sale. Therefore, the construction or bridge loan was only made until other financial arrangements to pay could be arranged and is temporary financing. Similarly, construction-permanent loans must be reported because they include an arrangement to pay.

Examiners have reported various incorrect methods used by banks to define ‘temporary financing’. Most of these methods are based on the establishment of an arbitrary loan length. For example, some banks are establishing a policy that any loan with a maturity of less than one year is a ‘temporary financing’. This type of an approach will almost always lead to disclosure errors. Banks must look at each loan to make a proper determination.

If you have any questions concerning this information, please contact us by e-mail at SCANS@FDIC.gov or call us at the Banker compliance Hotline 312-382-6926.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

Return to Top
#182461 - 07/08/04 07:51 PM Re: Time Limit on Temporary Financing
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
Thanks Dan...no WONDER I couldn't find it!
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top

Moderator:  Andy_Z