Under the ATR rules there is an exemption from certain sections of 1026.43 for “temporary financing”. It states:
(ii) A temporary or “bridge” loan with a term of 12 months or less, such as a loan to finance the purchase of a new dwelling where the consumer plans to sell a current dwelling within 12 months or a loan to finance the initial construction of a dwelling;
My question: is this simply a term length based test? Would a 6 month loan that is going to be repaid with cash still be exempt simply beacuse the term is 12 months or less or would this loan not be exempt because it isn’t a bridge to actual permanent financing and the 6 month loan IS the permanent financing.
We've had a borrower that wants to put a home on a 12 month term for interest only payments and then pay it off with cash at the end of the term. All the examples the regulation gives are typical examples of short term loans that precede longer term financing and I'm having trouble determining whether ATR would apply.