We have a customer buying a flip house. Our loan is 12 months interest only. It is HPML. It is a bridge loan. they are doing 12 months until they sell current home. Do they have to have interior appraisal and/or second appraisal? is it exemption from all because of temp finance?

When they sell the current home, will they pay down and get long-term financing, or will they pay it in full?

pay down and refi difference.

It looks like you have an exemption from the HPML appraisal requirement at 1026.35(c)(2)(v):

(v) A loan with maturity of 12 months or less, if the purpose of the loan is a “bridge” loan connected with the acquisition of a dwelling intended to become the consumer's principal dwelling.

The exemption is from (c)(3) through (c)(6), which covers all of the HPML appraisal requirements, including the "flip" appraisal.

If your bank does the refi, you'll look at the question of HPML applicability again.