Thread Options
#2266382 - 02/15/22 04:56 PM Purchase to fix and sell
Melissa S Offline
Gold Star
Melissa S
Joined: Jan 2015
Posts: 303
Maine
This is my next-to-last loan to review and I am just about brain dead.

Loan has a 15 year term and is a balloon. Purpose is to purchase an existing single family residence property, do cosmetic repairs, and sell it, paying off the loan with sale proceeds.

The borrower has no plans to rent it; the sole purpose is to flip it.

My initial conclusion is that this IS reportable, as he is purchasing a dwelling and it will be collateralized by the purchased property. It is not being treated as a construction loan; the financing is already "permanent". It is an investment property, although the investment is only to turn a profit on resale.

Am I right on this?
_________________________
Expect the worst, hope for the best and you'll never be disappointed.

Return to Top
HMDA

   
HMDA Academy
#2266384 - 02/15/22 05:07 PM Re: Purchase to fix and sell Melissa S
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 78,965
Galveston, TX
Well, I guess if that is the intention, why the heck did the loan officer make them a 15-year loan? Sounds like somebody played games to get them a better rate/lower fees on a higher risk loan. Great example of how fair lending issues arise in the non-consumer arena.

But regardless, I would classify this a permanent loan regardless of what the stated plans were for the future.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2266393 - 02/15/22 05:56 PM Re: Purchase to fix and sell rlcarey
Melissa S Offline
Gold Star
Melissa S
Joined: Jan 2015
Posts: 303
Maine
Your guess (the 15 year term) would be as good as mine! The borrower ultimately withdrew and went with a HELOC instead
Last edited by Melissa S; 02/15/22 05:56 PM.
_________________________
Expect the worst, hope for the best and you'll never be disappointed.

Return to Top
#2266437 - 02/16/22 02:24 PM Re: Purchase to fix and sell Melissa S
Adam Witmer Offline
Power Poster
Joined: Sep 2010
Posts: 2,614
Originally Posted by Melissa S
My initial conclusion is that this IS reportable, as he is purchasing a dwelling and it will be collateralized by the purchased property. It is not being treated as a construction loan; the financing is already "permanent". It is an investment property, although the investment is only to turn a profit on resale. Am I right on this?
I agree with you.
_________________________
Adam Witmer, CRCM

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

Return to Top
#2266441 - 02/16/22 02:47 PM Re: Purchase to fix and sell Adam Witmer
Melissa S Offline
Gold Star
Melissa S
Joined: Jan 2015
Posts: 303
Maine
Thank you RL and Adam.
_________________________
Expect the worst, hope for the best and you'll never be disappointed.

Return to Top