Management wants to make renovation loans to borrowers who want to purchase a SFR and renovate it to their liking.

The terms are 12 months interest monthly. Considering the bank is a QM bank only and in light of these final rules, what limitations
exist in Reg. Z that would limit these types of loans for a QM bank? The loan would be refinanced on perm basis once the renovation is complete.

Will these renovation loans, if we agree to do them be subject to ROR, TRID and HMDA? Thanks.

What do other banks offer for these types of requests? Thanks.

Loans of 12 months or less are exempt from ATR. Since you're concerned about it, i'll assume these aren't business purpose flips exempt from Reg. Z, so i'll mention that the term-out loans won't be exempt, and of course, being exempt from ATR doesn't relieve you of the S&S concern about ability to repay on any loan.

Oh...you asked about TRID and HMDA too. Not exempt from TRID if for consumer purpose. Exempt from HMDA if the repayment of the temporary loan will be long-term financing. If only secured by the home being purchased (which i'll assume is to be their primary residence), then they would be exempt from ROR as a residential mortgage transaction.

RofR would not apply to the purchase plus transaction

1026.2(a)(24) Comment 6. Multiple purpose transactions. A transaction meets the definition of this section if any part of the loan proceeds will be used to finance the acquisition or initial construction of the consumer's principal dwelling. For example, a transaction to finance the initial construction of the consumer's principal dwelling is a residential mortgage transaction even if a portion of the funds will be disbursed directly to the consumer or used to satisfy a loan for the purchase of the land on which the dwelling will be built.

Thank you everyone. My other concerns are HPML, HPCT pricing of these types of loans as we are a QM bank. We do not make HPMLs or HPCT. For a one year interest only loan, the spread for a first lien loan would be <1.50% of the comparable APOR correct?

Thanks again.

A one year temporary loan of this nature is exempt from Section 35 and 43.

Thank you, rl.

Bear with me please, but are you referring to the exemption from Escrows for temporary or bridge loans?

Are these one year interest only loans, exempt from the HPML thresholds as these are purchase money loans of an existing 1-4.

Thanks.

Are they exempt from the thresholds - no - are they exempt from the escrow requirements - yes. I guess I am not following the context of your concerns.

Perfect. Thanks rl. .