Under RESPA, the exemption for temporary financing does not apply to a loan 'used to finance transfer of title to the first user'. Would you please help me on what this actually means in layman's terms. Your assistance would be greatly appreciated.

Our examiners have made it pretty clear to me (OCC). Others may have a little different view, however.

If title is transfered with our loan proceeds, RESPA applies EXCEPT if the loan is a true bridge loan. Those are still exempt even though title is transfered.

Iglover, Thank you for your explanation but I think I need some more help. I thought that a bridge loan falls under the RESPA definition of temporary financing. If this is the case, wouldn't any federally related mortage loan then be covered under RESPA if title is transfered with the creditor's loan proceeds? Maybe a picture would help me reason this out. Would you please give me an example of a temproary loan used to transfer title with our proceeds that would not be a bridge loan?

24 CFR §3500.5 Coverage of RESPA.
(a) Applicability. RESPA and this part apply to all federally related mortgage loans, except for the exemptions provided in paragraph (b)
of this section.

(b) Exemptions.
(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.

I think the regulation explains itself. Bridge loans are not covered by RESPA.

I forgot the example. A loan to purchase a lot and construct a home on the lot. The loan is a single payment (interest only monthly with a balloon at maturity and the term is 6 months to be paid from retirement funds. This would be temporary financing but would be subject to RESPA because of the title transfer. This is not a bridge loan (not repaid from the sale of the borrower's other dwelling).