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#2264043 - 12/27/21 07:42 PM Perm - Temp - Perm
JobSecurity Offline
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Joined: Oct 2009
Posts: 583
I have a loan that was originally to purchase a rental unit. It was permanent financing at that point.

Then borrower wanted to purchase another rental home and refinanced that loan for additional funds out to purchase the rental home. This loan is 12 mths interest only. Borrower then plans to refinance this loan and put back on permanent financing after placing the new rental purchase on permanent financing.

I don't think this is reportable as it is temporary but it being a refinance also throws me off. Reportable or not?

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#2264875 - 01/19/22 04:15 PM Re: Perm - Temp - Perm JobSecurity
Compliance NABW Offline
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Posts: 1,637
Sounds like the current transaction is a "cash-out" refinancing to purchase a rental home secured by an existing rental home and/or the new rental home being purchased. Loan is 12 months I/O and seems to be intended to be replaced by permanent financing. I am confused though as to the last part of your statement. It seems like there is only one loan that changes forms a couple of times. What do you mean by "put back on permanent financing after placing new rental on permanent financing?" Are you splitting the loan into two separate notes? Wasn't the new rental purchase done with a cash-out refinancing of the initial loan?

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#2264913 - 01/19/22 10:18 PM Re: Perm - Temp - Perm JobSecurity
JobSecurity Offline
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Just putting both loans on permanent at the same time.

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#2264949 - 01/20/22 08:56 PM Re: Perm - Temp - Perm JobSecurity
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Originally Posted by JobSecurity
Just putting both loans on permanent at the same time.

What are the two loans? I only see one.

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#2264956 - 01/20/22 09:55 PM Re: Perm - Temp - Perm JobSecurity
Dan Persfull Offline
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Dan Persfull
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Posts: 46,967
Bloomington, IN
Sounds like the borrower is refinancing the rental just purchased to get cash out to purchase another rental. Then in 12 months he intends to split the loan and put each rental into their own permanent financing.

If that assumption is correct the new loan you are questioning would be a temporary loan and not reportable.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#2264961 - 01/20/22 10:09 PM Re: Perm - Temp - Perm JobSecurity
JobSecurity Offline
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Posts: 583
That is correct Dan. Thank you.

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#2264983 - 01/21/22 03:25 PM Re: Perm - Temp - Perm JobSecurity
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Joined: Oct 2015
Posts: 1,637
Okay, yes, I specifically asked was the loan being split into two separate notes and it wasn't addressed. Yes, I agree with Dan. Both notes will likely be reportable when they are put into permanent financing. However, the current transaction is considered temporary financing.

5. Two or more debt obligations. Section 1003.2(p) provides that, to be a refinancing, a new debt obligation must satisfy and replace an existing debt obligation. Where two or more new obligations replace an existing obligation, each new obligation is a refinancing if, taken together, the new obligations satisfy the existing obligation. Similarly, where one new obligation replaces two or more existing obligations, the new obligation is a refinancing if it satisfies each of the existing obligations.

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