I have read through RESPA (again) to research this. I am just wondering if I am on the right track...

Under 3500.2:

Federally related mortgage loan or mortgage loan means as follows:
(1) Any loan (other than temporary financing, such as a construction loan, which is less than 2 years):
(i) That is secured by a first or subordinate lien on residential real property, including a refinancing of any secured loan on residential real property upon which there is either:
(A) Located or, following settlement, will be constructed using proceeds of the loan, a structure or structures designed principally for occupancy of from one to four families (including individual units of condominiums and cooperatives and including any related interests, such as a share in the cooperative or right to occupancy of the unit);



Under 3500.5:

(b) Exemptions.

(3) Temporary financing. Temporary financing, such as a construction loan. The exemption for temporary financing does not apply to a loan made to finance construction of 1- to 4-family residential property if the loan is used as, or may be converted to, permanent financing by the same lender or is used to finance transfer of title to the first user. If a lender issues a commitment for permanent financing, with or without conditions, the loan is covered by this part. Any construction loan for new or rehabilitated 1- to 4-family residential property, other than a loan to a bona fide builder (a person who regularly constructs 1- to 4- family residential structures for sale or lease), is subject to this part if its term is for two years or more. A ``bridge loan'' or ``swing loan'' in which a lender takes a security interest in otherwise covered 1- to 4-family residential property is not covered by RESPA and this part.
(4) Vacant land. Any loan secured by vacant or unimproved property, unless within two years from the date of the settlement of the loan, a structure or a manufactured home will be constructed or placed on the real property using the loan proceeds. If a loan for a structure or manufactured home to be placed on vacant or unimproved property will be secured by a lien on that property, the transaction is covered by this part.

Question...
SO, now, if I have a construction loan which includes fund for the land purchase, and the term is less than one year, that it is NOT subject to RESPA??? My head is spinning so be kind.

Maria, you are correct, as long as there is no permanent financing involved.

Steve, thanks... sometimes you just need that confirmation...

(And I'll never call you Loretta, either...)

You're welclome . . . and THANK YOU!

I must be missing something.

Quote:

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Under 3500.5:

(b) Exemptions.

(3) Temporary financing. Temporary financing, such as a construction loan. The exemption for temporary financing does not apply to a loan made to finance construction of 1- to 4-family residential property if the loan is used as, or may be converted to, permanent financing by the same lender or is used to finance transfer of title to the first user.

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Isn't the bold text above an exception to the exemption... and therefore the example given would be subject to RESPA?

Double negatives and exceptions to exemptions tend to baffle me!

I hear you, that's why my head was spinning. I think they key here is "if the loan is used as, or may be converted to, permanent financing by the same lender or is used to finance transfer of title to the first user."

So, as long as it isn't converted to permanent financing, it shoul be OK.

But if the first draw is to pay for the lot and transfer the title to the end user, RESPA applies. Also it says 'may be converted to'.

I agree. I thought that you lost the temporary financing exemption on a construction loan if you used loan proceeds to transfer title.

Same here.

I'm with GreatRiver, Skittles, and Cowboy Fan here (Sorry Loretta - er, I mean Steve ). If you're financing the purchase of the lot, RESPA applies.

I also agree the exemption would not apply when the transfer of title to the first user is involved.

Sorry, guys, I was wrong. I was reading a quick reference guide, and forgot to look at the notes on the next page, which indicated RESPA does apply "if the construction loan also finances transfer of title of the land to the first user of the residence."

Mea culpa, mea culpa; mea maxima culpa.

Thanks everyone, now my head hurts...

So, if the loan is secured by a lien against the property, it is exempt; if the loan is used to finance the property, it is NOT exempt.

Thanks, sorry to be such a PITA.

Now for the Trillion dollar question. Why in the world would DUH (I mean HUD) differentiate this?

Does anyone have a logical explanation?

I usually don't have a problem with regulatory provisions if I can fathom why they came about.

That's why I LOVE reading Final Rules, replete with commentary!!!!

Bzzzzzt... What is: becasue DUH likes to make life interesting?