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#1999306 - 03/02/15 09:50 PM using Change in Terms to extend temporary loan
Chocaholic Offline
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Joined: Aug 2005
Posts: 443
Northwest
We have a situation where we made a short term loan pulling equity out of one home owned free and clear to build new retirement home. Both homes were owned free and clear so not true bridge loan IMO- initial home has not sold and they cannot get financing ... can we extend using a change in terms document for another 6-12 months to give them a little more time to sell. we have not provided any disclosures up to this point for the extensions... at what point if any, does this look like we are avoiding the disclosure requirements of a mortgage?

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Lending Compliance
#1999322 - 03/02/15 10:35 PM Re: using Change in Terms to extend temporary loan Chocaholic
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
What is your definition of a bridge loan?

I'm confused by this: "Both homes were owned free and clear". You said their current home was free & clear, but you also said they are borrowing money to build the retirement home. How are both "free & clear"?

As long as you provide extensions, no new TIL or RESPA disclosures are triggered. If you term out the loan, disclosures are triggered. Can you extend for another 6-12 months? Sure.

How many times can you do that / how long can you keep doing it and avoid disclosures? That's not discussed in any regulation. An examiner might have an opinion that differs from yours, but it's just that - an opinion.
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David Dickinson
http://www.bankerscompliance.com

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#1999330 - 03/02/15 10:47 PM Re: using Change in Terms to extend temporary loan David Dickinson
Chocaholic Offline
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Joined: Aug 2005
Posts: 443
Northwest
My def'n of a bridge loan is gap financing- whereby one piece of residential collateral is used to borrow money to purchase a 2nd piece of residential collateral with the idea that when the first home sells, the 2nd home will either be refinanced or paid-off in full.

In this case, the 1st home was primary residence.. 2nd home was a vacation home that was to be remodeled to become new primary residence when 1st home sells... both properties had no loans outstanding at the start. Loan was placed against 1st home. Now 2nd home is complete and 1st home has not been sold, nor have they been able to qualify for a home loan. Discussing this with mgmt. I do not believe this initial scenario met my def'n anyway but was more likely temporary financing.

I appreciate your thoughts, and so if I understand, as long as we continue by extend maturity date, no new disclosures are required.

Would there be any issues if we charge a fee to do this? By issues I mean trigger disclosures.
Last edited by Chocaholic; 03/02/15 11:04 PM.
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#1999368 - 03/03/15 02:46 PM Re: using Change in Terms to extend temporary loan Chocaholic
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Thanks for your response. So the 2nd home was already built? Your first post said the money was being used "to build new retirement home". The second posts says "2nd home was a vacation home that was to be remodeled". If the second posts is accurate, I agree this is not a bridge loan, but it could still be temporary financing. However, after reviewing all of your information, I think it's a short term but not temporary (for HMDA, RESPA).

Concerning the continued extensions: You can continue to extend, as many times as you'd like. Typically, continued extensions become more of a S&S issue than a compliance issue.

Charing a fee has no relevance to triggering disclosures. Many banks charge fees for doc prep/admin for extensions without providing new disclosures.
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David Dickinson
http://www.bankerscompliance.com

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