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#2243845 - 10/09/20 03:12 PM Temporary Financing
Somer Offline
Junior Member
Joined: May 2013
Posts: 43
I have commercial loan to a developer to provide additional funds to complete the renovations of a residential property to be sold after completion. The loan is a second mortgage behind our 1st mortgage.

My commercial department has this listed as Home Improvement for HMDA, but I believe this would be temporary financing and not HMDA reportable.

Please advise.

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#2243855 - 10/09/20 04:16 PM Re: Temporary Financing Somer
TMatt87 Offline
Diamond Poster
TMatt87
Joined: May 2011
Posts: 1,928
Idaho
The temporary financing exception only applies if the loan will be repaid with longer term financing. Since this loan is being paid off with the sale of the home, it would not qualify and would be reportable, unless another exception applies.
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All opinions are my own, not my employer's

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#2243866 - 10/09/20 05:02 PM Re: Temporary Financing Somer
Adam Witmer Offline
Power Poster
Joined: Sep 2010
Posts: 2,622
I agree with Matt. A loan is not considered temporary financing unless it is designed to be replaced by separate permanent financing.

Paragraph 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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Adam Witmer, CRCM

All statements are my opinion, not those of my employer, and should not be taken as legal advice.
www.compliancecohort.com

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