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#339305 - 03/28/05 05:24 PM Exempt from RESPA?
Miss Kitty Offline
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Posts: 721
California
I am reviewing a new loan, our borrower's loan is for the purchase of 33 ac. of bare land. In reading RESSP, (3500.2(c)) tells me the loans is RESPA - however, on the flip flop side, under exemptions from coverage (3500.5(b)(a) it states that a loan on property of 25 acres or more is exempt regardles of whether the land is vacant, contains a residential structure and the purpose of the loan.

I guess I'm in need of advice from our experts in ciber-land.

Thanks!

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#339306 - 03/28/05 05:41 PM Re: Exempt from RESPA?
TomS Offline
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Posts: 318
USA
I'm not sure what you are referring to in section 3500.2(c) because I can't even find that section in RESPA.

There are two exemptions under which your loan could fall. First, RESPA exempts loans on vacant land of any acreage unless a dwelling will be built or placed on the land within two years using the loan proceeds. Second, loans on land of 25 acres or more are always exempt.

I don't know if your loan would fall under the first exemption or not, but it definitely falls under the second exemption, so the loan is not subject to RESPA.
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#339307 - 03/28/05 06:39 PM Exempt from RESPA?
Miss Kitty Offline
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Posts: 721
California
Thanks, I was second guessing myself because this is a "purchase" of the land, however it is over 25 acres. (My source of reference used was bankers compliance group)

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#339308 - 03/28/05 06:59 PM Re: Exempt from RESPA?
Dan Persfull Offline
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Bloomington, IN
Cheryle, Lee is correct, loans to purchase land only are exempt, unless it is a construction loan where title is being transferred with a portion of the construction proceeds.

Land, a single parcel, of 25 or more acres is also exempt, irregardless of the purpose. The key here is it must be a single parcel - multiple parcels totaling 25 acres or more do not qualify for the exemption if the loan is otherwised covered by RESPA.
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#339309 - 03/28/05 07:31 PM Exempt from RESPA?
Miss Kitty Offline
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Joined: Mar 2002
Posts: 721
California
Thank you Dan, as usual your explanations are very clear and concise.

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#339310 - 05/11/05 06:04 PM Re: Exempt from RESPA?
river girl Offline
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Joined: Nov 2004
Posts: 1,005
My brain has completely shut down today. I have a loan secured by a jr lien on their primary residence, purpose to purchase bare land. Not going to build on the land anytime soon, just buying the land. I say Yes TIL: COnsumer purpose, NO: Respa, bare land. Am I right?

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#339311 - 05/11/05 06:15 PM Re: Exempt from RESPA?
Dan Persfull Offline
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Bloomington, IN
Yes and no. TIL is needed, but the applicable RESPA sections do apply. The land only exemption is only if the loan is secured by land only. Your loan will be secured by a dwelling.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#339312 - 05/11/05 06:59 PM Re: Exempt from RESPA?
Anonymous
Unregistered

Where would I find the definition that the 25 acre exemption only applies if your collateral is one tract that is 25 or more acres? What if you take two tracts and one is 26 acres and one is 5 - would you have to do RESPA if the dwelling is on the 5 acre tract? Is there some Staff Commentary?

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#339313 - 05/11/05 07:11 PM Re: Exempt from RESPA?
Dan Persfull Offline
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Bloomington, IN
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#339314 - 05/11/05 07:55 PM Re: Exempt from RESPA?
David Dickinson Offline
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Central City, NE
Dan: I assume you are referring to Q&A #13 which states:

Q. Does the exemption from RESPA for the sale of a land parcel of at least 25 acres apply even if there are 2 homes on the property?

A. Yes, as long as the property is a single parcel.

I don't interpret that the same way you do so I want to have a debate on this. §3500.5(b)(1) states that RESPA does not apply to a loan on property of 25 acres or more. I believe that liens on a residence located on > or = 25 acres (and that I can combine all land taken) are exempt. IOW, the home doesn’t have to be on the > 25 acre portion.

I don't see anything that says I can't consolidate several parcels of land to arrive at the 25 acres or more exemption. I don't think this Q&A disagrees with me. Quite honestly, I'm not sure how to interpret this Q&A. Please tell me what you think it says and why you think I'm wrong.
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#339315 - 05/11/05 07:55 PM Re: Exempt from RESPA?
David Dickinson Offline
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Central City, NE
Dan: I assume you are referring to Q&A #13 which states:

Q. Does the exemption from RESPA for the sale of a land parcel of at least 25 acres apply even if there are 2 homes on the property?

A. Yes, as long as the property is a single parcel.

I don't interpret that the same way you do so I want to have a debate on this. §3500.5(b)(1) states that RESPA does not apply to a loan on property of 25 acres or more. I believe that liens on a residence located on > or = 25 acres (and that I can combine all land taken) are exempt. IOW, the home doesn’t have to be on the > 25 acre portion.

I don't see anything that says I can't consolidate several parcels of land to arrive at the 25 acres or more exemption. I don't think this Q&A disagrees with me. Quite honestly, I'm not sure how to interpret this Q&A. Please tell me what you think it says and why you think I'm wrong.
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#339316 - 05/11/05 08:16 PM Re: Exempt from RESPA?
Anonymous
Unregistered

Sorry to butt in on this important dicussion, but I did not want to start a new thread. Is the "Special Information Booklet" the same as "Settlement Costs, a HUD Guide".

Thanks

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#339317 - 05/11/05 08:25 PM Re: Exempt from RESPA?
river girl Offline
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Posts: 1,005
Thank you Dan. So I say Hmda and MSTD: NO
Flood:Yes
GFE:Yes
Final TIL and HUD-1a: Yes
ROR:Yes
Appraisal:Yes (according to bank policy)

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#339318 - 05/11/05 08:52 PM Re: Exempt from RESPA?
Dan Persfull Offline
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Bloomington, IN
First to answer Anon's question on the 26 and 5 acre tract. IMO RESPA would apply because the dwelling is located on less than 25 acres and the 26 acres would not be subject to RESPA because no dwelling exists on it.

3500.5(b)(1) states that loans on property not properties of 25 acres or more are exempt.

If you take more than one parcel, then your loan is not secured by a property, but it is secured by several pieces of property.

You're asking me to defend my position that only a single parcel qualifies for the exemption. My opinion is based on the wording of 3500.5(b)(1) and the Q&A that says a sale of property of 25 or more acres with a dwelling, or in this case 2 dwellings, is exempt as long as the acreage is contained in one parcel. Where is your basis in the Reg. that allows you to combine properties to arrive at the 25 acres?

If you could combine acreage, then all you have to do to avoid RESPA is to make loans taking properties as an abundance of caution totaling more than 25 acres and then after the loan closes release all abundance of caution properties. You wouldn't have to worry about Sec. 8, GFEs, ETILs, HUD Settlement Statements, etc.
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#339319 - 05/11/05 08:54 PM Re: Exempt from RESPA?
Anonymous
Unregistered

Quote:

Sorry to butt in on this important dicussion, but I did not want to start a new thread. Is the "Special Information Booklet" the same as "Settlement Costs, a HUD Guide".


Yes it's the same thing..
Thanks



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#339320 - 05/11/05 09:17 PM Re: Exempt from RESPA?
David Dickinson Offline
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Central City, NE
Quote:

3500.5(b)(1) states that loans on property not properties of 25 acres or more are exempt.

If you take more than one parcel, then your loan is not secured by a property, but it is secured by several pieces of property.

You're asking me to defend my position that only a single parcel qualifies for the exemption. My opinion is based on the wording of 3500.5(b)(1) and the Q&A that says a sale of property of 25 or more acres with a dwelling, or in this case 2 dwellings, is exempt as long as the acreage is contained in one parcel. Where is your basis in the Reg. that allows you to combine properties to arrive at the 25 acres?



First, I don't think HUD was thinking about this when they wrote parcel in the singular vs. plural usage. For instance, I have 2 properties with 20 acres each. A house is located on 1 of the properties. I have "a loan on property of 25 acres or more" do I not? Saying that it can't be plural would also state that if I make a second loan on 40 acres (one property) is not exempt because the exemption in §3500.5(b)(1) states "a loan . . not loans.

I still don't understand the Q&A. Can you explain the answer in different terms (I must be dense today).

Quote:

If you could combine acreage, then all you have to do to avoid RESPA is to make loans taking properties as an abundance of caution totaling more than 25 acres and then after the loan closes release all abundance of caution properties. You wouldn't have to worry about Sec. 8, GFEs, ETILs, HUD Settlement Statements, etc.



1. True, but how is this different than the TIL exemption for loans of >$25,000? That's where they drew the line, but it's not my fault. Does a loan officer making a loan of $25,000 secured by a car think "Hmmm .... if I lend them $1 more, I can avoid TIL?"

2. I believe the logic behind the 25 acre exemption was that (just like TIL) large land typically doesn't involve consumers. Therefore, these borrowers don't need RESPA protection.

3. I know of a loan officer that closed home refinancings and home equity loans without taking the home as collateral. He avoided ALL of RESPA and RofR. The next day he "modified" the loans and took an interest in the borrower's home. He gave the RofR then, but the money had already been advanced. PLEASE DON'T TRY THIS AT HOME!
The FRB criticized him in their general comments (very harshly and they knew he was playing games), but they couldn't cite him for any RESPA or RofR violations.

This is similar to your example (he found a loophole), but that doesn't make me wrong for reading the exemption the way I do.

Lastly, and I know that this doesn't make me right, but I've never seen a bank cited for combining the properties and exempting RESPA. We have the following wording in our Advanced Lending Manual:
RESPA does not apply to:
1. Liens on a residence located on > or = 25 acres (combine all land taken). The home doesn’t have to be on the > 25 acre portion.

On numerous occasions, I have had examiners attend our seminars. I have also taught this for the FDIC (at the Regional Office level) and no one has said that it was incorrect. All of my materials had to be preapproved by the FDIC compliance division before I could teach.

Your approach would be safe, but I believe that my interpretation isn't wrong.

Your move. BTW, I appreciated your dialog in this.
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#339321 - 05/11/05 09:27 PM Re: Exempt from RESPA?
Dan Persfull Offline
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Bloomington, IN
I'm going to have make a quick reply because I have a short meeting to go to. I'll try to reply further tomorrow.

Quote:

I have "a loan on property of 25 acres or more" do I not?




No. You have a loan on properties totaling 25 acres.

As I'm reading the Q&A the questioner is asking if they are financing the sale of property of 25 acres with 2 houses, is the loan exempt from RESPA, in other words does the fact 2 houses on the parcel cause each to be considered sitting on 12 1/2 acres. The answer is saying no, as long as the parcel is 25 or more acres, the loan is exempt.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#339322 - 05/11/05 10:37 PM Re: Exempt from RESPA?
David Dickinson Offline
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David Dickinson
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Posts: 18,765
Central City, NE
Quote:

No. You have a loan on propertyies totaling 25 acres.



I see your point, but as I stated earlier, I don't think that HUD cares if this is plural or singular. Just like my argument about making loans on 25 acres or more is still exempt.

Quote:

The answer is saying no, as long as the parcel is 25 or more acres, the loan is exempt.



I don't think this Q&A specifically addresses the same issue we are discussing. HUD is addressing the issue that you don't divide the land by the number of houses.

The answer ("Yes, as long as the property is a single parcel.") is trying to make sure that there isn't one house on 15 acres and one house on 10 acres. But I think this is different then what I'm addressing.

I appreciate your dialog on this issue. I will be out all of Thursday morning, so if you don't here from me, it's not that I'm done discussing. To be continued...
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#339323 - 05/12/05 05:47 PM Re: Exempt from RESPA?
Dan Persfull Offline
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Bloomington, IN
Quote:

The answer ("Yes, as long as the property is a single parcel.") is trying to make sure that there isn't one house on 15 acres and one house on 10 acres.




If you have a loan secured by both properties, how would this be different than what you are addressing? Based on what you are saying, you have a loan secured by property of 25 acres or more and it would be exempt.

I sent the following to HUD, and I also left a voice-mail with the same question:

RESPA HUD's Regulation X

3500.5(b)
Exemptions.
(1) A loan on property of 25 acres or more.

Does this exemption apply to a single parcel or to multiple parcels?

Examples:

1. A purchase, or refinance of a 27 acre parcel containing a 1-4 residential dwelling. This transaction would be exempt based on 3500.5(b)(1).

2. A purchase, or refinance of a 15 acre parcel containing a 1-4 residential dwelling and an additional 15 acre parcel of land only (total acreage equals 30). The loan's purpose is not for an agricultural purpose or qualifies for any other exemption. Would this transaction be exempt from RESPA requirements based on 3500.5(b)(1)?
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The opinions expressed are mine and they are not to be taken as legal advice.

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#339324 - 05/12/05 08:55 PM Re: Exempt from RESPA?
David Dickinson Offline
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David Dickinson
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Central City, NE
Thanks Dan. It will be interesting to see what HUD has to say. Until then . . .
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#339325 - 05/12/05 08:59 PM Re: Exempt from RESPA?
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
Quote:

Until then . . .




That might be an understatement waiting on HUD's response.

I've already gotten 3 emails that my email has been forwarded to this or that department (but no answer yet).
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The opinions expressed are mine and they are not to be taken as legal advice.

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#339326 - 05/12/05 09:01 PM Re: Exempt from RESPA?
David Dickinson Offline
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David Dickinson
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Central City, NE
Uh oh. . . We may know how many licks does it take to get to the center of a tootsie pop before we get HUD's response to our question.
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David Dickinson
http://www.bankerscompliance.com

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#339327 - 05/12/05 09:35 PM Re: Exempt from RESPA?
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
I just received my 4th email response (or lack thereof) from HUD:

This is in response to your recent electronic mail message to HUD's Denver Homeownership Center, Underwriting Division, which has been forwarded to the Technical Support Branch.

It appears you are located in Indiana. Please direct your question to the Atlanta Homeownership Center. The Atlanta Homeownership Center may be contacted toll free at 1-888-696-4687.


ARGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGGG!!!!

I'll try to call them tomorrow.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#339328 - 05/12/05 09:36 PM Re: Exempt from RESPA?
David Dickinson Offline
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David Dickinson
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Central City, NE
Quote:

BTW, why would I have to call the Homeownership Center instead of the Underwriting Division?



No wonder we are confused. We are dealing with DUH (I mean HUD).
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#339329 - 05/12/05 09:37 PM Re: Exempt from RESPA?
Dan Persfull Offline
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Dan Persfull
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Posts: 47,568
Bloomington, IN
You're too quick for my edit.
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