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#2201927 - 01/02/19 09:23 PM Temporary Financing?
hiphiphmda Offline
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Customer is refinancing primary residence to change to interest only to allow them to sale the property. This loan I believe is temporary financing but would the fact that we are refinancing an existing 1-4 secured require it to be reportable?

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#2201929 - 01/02/19 09:25 PM Re: Temporary Financing? hiphiphmda
raitchjay Offline
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OK
If the plans for repayment are the sale of the home, that isn't temporary financing for HMDA, as the anticipated repayment wouldn't be anticipated long-term financing, but the sale of the home. In short, this loan sounds reportable.
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#2201941 - 01/03/19 12:12 PM Re: Temporary Financing? hiphiphmda
Adam Witmer Offline
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I agree with raitchjay. In order to be temporary financing, your loan must be designed to be replaced by another loan (i.e. permanent financing) at a later time. Since your situation sounds like the loan is designed to be paid off from the sale proceeds, it does not appear to meet the definition of temporary financing.

From the commentary to 1003.3(c)(3)
"1. Temporary financing. Section 1003.3(c)(3) provides that closed-end mortgage loans or open-end lines of credit obtained for temporary financing are excluded transactions. A loan or line of credit is considered temporary financing and excluded under ยง 1003.3(c)(3) if the loan or line of credit is designed to be replaced by separate permanent financing extended by any financial institution to the same borrower at a later time."
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#2201948 - 01/03/19 02:23 PM Re: Temporary Financing? hiphiphmda
David Dickinson Offline
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David Dickinson
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Central City, NE
I also agree. Let me make it simple:
There must be 2 loans to call one temporary.

For example:
Construction loan followed by permanent financing.
Bridge loan followed by permanent financing.
The construction and bridge loans in these examples are not reported because they are temporary. They are followed by permanent financing that is reported. You might call something "temporary" but if no other financing follows it, it is a short-term loan that is reported.
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#2201951 - 01/03/19 02:37 PM Re: Temporary Financing? hiphiphmda
John Burnett Offline
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Cape Cod
And there is the one exception to that simple explanation -- The loan or line of credit to construct a dwelling for sale, which is considered temporary notwithstanding the lack of a permanent financing loan to follow.
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#2203405 - 01/18/19 04:16 PM Re: Temporary Financing? hiphiphmda
RSC Offline
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Posts: 69
Does the temporary financing apply to the home improvement loans also?

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#2203406 - 01/18/19 04:18 PM Re: Temporary Financing? hiphiphmda
raitchjay Offline
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Yes, the temporary financing rule isn't impacted by the purpose of the loan. The part that Adam has bolded above is your guide.
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#2203418 - 01/18/19 04:36 PM Re: Temporary Financing? hiphiphmda
RSC Offline
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Thank you

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#2203661 - 01/23/19 02:40 PM Re: Temporary Financing? David Dickinson
Sheba Offline
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Sheba
Joined: Mar 2002
Posts: 73
Oz
So if I have a 7 month loan secured by the dwelling and that loan will be paid off with 401K proceeds, I would report that loan because it is not paid off with permanent financing. Correct?

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#2203670 - 01/23/19 03:14 PM Re: Temporary Financing? hiphiphmda
dutchbltz Offline
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Got a question that ties right into this exact scenario.

We do LOTS of these loans - an interest only refi to allow for the purchase or construction of a new primary residence. In these situations, we hold only the former primary residence, and they are intended to be paid off by the ultimate sale of the home, not a new loan.

What do you call the occupancy for the (soon to be former primary) residence? According to the commentary, a borrower can only have one primary residence at a time, and it appears that the new residence should be the primary.... does that make the current primary residence then a secondary?

Interested to hear what everybody else does in these scenarios.

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#2203694 - 01/23/19 05:16 PM Re: Temporary Financing? hiphiphmda
Dan Persfull Offline
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Bloomington, IN
Sheba - your are correct. That would make the covered loan short term financing, not temporary financing.

dutchblitz - From .4(a)(6) - requires a financial institution to identify whether the property to which the covered loan or application relates is or will be used as . . .

Since the loan is only secured by the current primary residence IMO that is how the occupancy would be reported. As you said it's not their former residence yet.
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#2203698 - 01/23/19 05:29 PM Re: Temporary Financing? hiphiphmda
raitchjay Offline
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OK
Not that Dan needs my agreement, but i do agree.
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#2203701 - 01/23/19 05:34 PM Re: Temporary Financing? hiphiphmda
David Dickinson Offline
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Central City, NE
I agree with Dan's response to Sheba. The occupancy issue that dutchbitz brings up is interesting. I'm in the camp that you always look at what it will be once the proceeds are applied. The new house will be their primary dwelling and the current house (used as collateral) will be sold. Therefore, I would report it as Code 3. That's "Investment Property" but it's also the catch-all for non-primary and non-secondary residence.

With that said, I think this is gray and you could go either way.
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#2203706 - 01/23/19 05:38 PM Re: Temporary Financing? Dan Persfull
Sheba Offline
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Sheba
Joined: Mar 2002
Posts: 73
Oz
Thanks Dan and company. I appreciate the clarification.

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#2203939 - 01/24/19 09:52 PM Re: Temporary Financing? hiphiphmda
Compliance NABW Offline
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Thanks John for the Spec Home reminder, I would have done the same if not for you smile
Last edited by Compliance NABW; 01/24/19 09:53 PM.
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