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#437826 - 12/23/05 10:43 PM Re: Another Temporary Financing Question
Dani York, CRCM Offline
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Dani York, CRCM
Joined: Apr 2005
Posts: 3,663
TN
I can see where you are coming from in regards to the info in CHIRO-07-2002; however, I would argue that the new FAQ seemingly contradicts some of what is in that document (see post 486009 above). And based on the new info you have provided from your underwriter, I would say that if the file was documented that the repayment was going to come from perm financing secured by the borrower at a later date, then you could classify the loan as temporary. But I stress that the file would need to be well documented to that fact.
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#437827 - 01/02/06 09:45 AM Re: Another Temporary Financing Question
Princess Romeo Offline

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Where the heart is
Here's another twist....are the interest payments coming from an interest reserve built into the loan? If so, then you can strengthen your argument for temporary financing.

Watch out - however, for potential HOEPA issues with interest reserve if the loan is not an RMT. Interest reserve can push the APR into the stratosphere, and you run smack into HOEPA prohibitions on balloon payments for loans with less than a 5 year term.

I ran into this little unintended consequence when dealing with loans made to wealthy borrowers who bought into a neighborhood and later decided to do a 3 wall tear-down to turn their modest 4 bedroom 2 bath home (with a view!) into a 5000 sq foot McMansion.
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#437828 - 01/09/06 03:10 PM Re: Another Temporary Financing Question
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,422
Bloomington, IN
Email sent 1/5/06

I need to get started on my HMDA scrub to get the 2005 data ready for reporting. Do I need to go back and try to identify those loans we considered temporary financing under the SCANS bulletin and add them to the LAR per the KC ruling?

Reply received 1/9/06.

Without an official Chicago Region or Washington office memorandum, I canít say which way to go. However, I think you can support whichever position you take if this should come up at your next examination. Iím sorry nothing was decided (or conveyed to examiners if it was) at this time. As soon as I hear anything, Iíll let you know.

I will be saving all my correspondence concerning this issue and I will not go back and identify these loans for 2005. However we will "tag" these loans (for 2006) so that if a final ruling does come down we can readily identify them and add them to the 2006 LAR if necessary.
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#437829 - 01/09/06 03:57 PM Re: Another Temporary Financing Question
bgehres Offline
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Joined: Mar 2005
Posts: 126
I called the Fed office in Cleveland and asked them their interpretation on the rehab and flip issue. Her reply was since they were improving the property it is reportable because its it's a home improvement and there is no temporary financing exemption on home improvement (I cannot find where temporary financing is only limited to purchases in the reg or Getting it Right). I then asked since you would record these as purchases and not H/I (purchase trumps H/I) then wouldn't this be irrelevant? She didn't know. I then asked whether we should include them on the LAR for 2005. "Yes, because they're home improvement loans."

I'm more confused now than I was before!
Last edited by bgehres; 01/09/06 04:38 PM.
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#437830 - 01/09/06 05:22 PM Re: Another Temporary Financing Question
GreatBlue Offline
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GreatBlue
Joined: Feb 2003
Posts: 2,362
Colorado
Sounds to me like your contact at the Fed is also confused. I don't see any basis in the regulation to conclude that there is no temporary financing exemption on home improvement. I also don't see any basis to consider these home improvement loans - they are purchases.
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#437831 - 01/09/06 06:47 PM Re: Another Temporary Financing Question
bgehres Offline
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Joined: Mar 2005
Posts: 126
Quote:

I don't see any basis in the regulation to conclude that there is no temporary financing exemption on home improvement. I also don't see any basis to consider these home improvement loans - they are purchases.




I agree 100%.

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#437832 - 01/09/06 07:41 PM Re: Another Temporary Financing Question
CRAatBOK Offline

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Further South than I wanna be.
I finally received an answer from the KC OCC office, and wish I hadn't. The examiner said that Washington said we now have an interpretation from the Fed that defines "spash and dash" loans as not being temporary and that they need to be reported.

I now have to go back for all of 2005 and find these loans and add them to HMDA. It is moments like this that really make me question why I like this job. Why can't they just start using the ruling in 2006? Grrrrrrr. I feel a headache coming on.
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#437833 - 01/09/06 08:29 PM Re: Another Temporary Financing Question
Reed Offline
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Reed
Joined: Sep 2005
Posts: 1,251
West Coast
So where is this interpretation from the Fed that they referenced? Has anyone actually seen it? Or were they talking about the FFIEC Q&A?

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#437834 - 01/09/06 10:47 PM Re: Another Temporary Financing Question
Jack Holzknecht Offline

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Joined: Aug 2001
Posts: 330
Louisville, KY
I believe they are referencing the Q & A.

This issue is to important to deal with only in a Q & A. This should involve a revision to Regulation C or at least an addition to the Official Staff Commentary to Regulation C.

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#437835 - 01/11/06 04:42 PM Re: Another Temporary Financing Question
bgehres Offline
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Joined: Mar 2005
Posts: 126
Quote:

So where is this interpretation from the Fed that they referenced? Has anyone actually seen it? Or were they talking about the FFIEC Q&A?




I just received an email back from the Fed. They are indeed using the FFIEC interpretation and we are to follow that.

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#437836 - 01/11/06 09:52 PM Re: Another Temporary Financing Question
Deena Offline
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Deena
Joined: Nov 2000
Posts: 2,701
PA
Quote:

Quote:

So where is this interpretation from the Fed that they referenced? Has anyone actually seen it? Or were they talking about the FFIEC Q&A?




I just received an email back from the Fed. They are indeed using the FFIEC interpretation and we are to follow that.




That's the way our contact at the Fed is leaning, too - although he agreed to research it a bit more and get back to me.
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#437837 - 01/27/06 10:42 PM Re: Another Temporary Financing Question
AEA Offline
Junior Member
Joined: Jan 2006
Posts: 45
Might I offer a suggestion: Since the FRB are the owners of the HMDA regulation, pose your question in a letter detailing all of your issues (which are many) and send it to the FRB Board in Washington, D. C.

The last time there was this much chatter about a subject, we all had the CRA regulation changed, for good or for ill, depending on how you view CRA.

Also, how many loans could you possibly have that it would make a big difference in the accuracy of your data? In my experience, most banks do not have a significant number of temporary financing loans, no matter what definition you use.

This will only be solved when you get a "letter" (not a Q&A posted on some website) from the FRB Board in Washington, D. C. All the agencies defer to the FRB on their regulations. They are the only ones who should be issuing interpretations.

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#437838 - 01/27/06 11:20 PM Re: Another Temporary Financing Question
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,422
Bloomington, IN
If you model your letter after the one I posted at the beginning of this thread you might want to leave out the following sentence:

Please forgive me for the following statement, but what were these people on when they made this determination?
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#437839 - 01/27/06 11:42 PM Re: Another Temporary Financing Question
Jaeger Schnitzel Offline
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Jaeger Schnitzel
Joined: Nov 2005
Posts: 315
Oregon
Quote:

what were these people on when they made this determination?




And if they wanted us to go along peacably, why didn't they share??

I just got wind from our risk management department that we too are caving in and changing our procedures to define temporary financing as 1)less than 2 year term AND 2) non self amortizing AND 3)primary repayment on the loan facility is other financing.

We're NOT going to scrub '05 though. Can't wait to train my loan officers !
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#437840 - 01/29/06 12:13 AM Re: Another Temporary Financing Question
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
Quote:

Might I offer a suggestion: Since the FRB are the owners of the HMDA regulation, pose your question in a letter detailing all of your issues (which are many) and send it to the FRB Board in Washington, D. C.

This will only be solved when you get a "letter" (not a Q&A posted on some website) from the FRB Board in Washington, D. C. All the agencies defer to the FRB on their regulations. They are the only ones who should be issuing interpretations.



I see that you are a new poster. Let me provide a little background. When this first came out (June of 2005), I contacted Jane Gell, an attorney on the Federal Reserve Board. Ms. Gell is highly involved in compliance - HMDA specifically.

Ms. Gell indicated to me personally that she did not agree with the FDIC's interpretation and that she would see to a stop to this. Later she contacted me and let me know that this issue was "political".

In December, the FFIEC posted a new FAQ concerning temporary financing. The FFIEC oversees the FRB (if they put this answer on their website, they trump everybody). That day I contacted examiners at the Chicago and St. Louis FRB who I consider to be very knowledgeable of HMDA. Both were not even aware of the new FFIEC FAQ and were dumbfounded. They both indicated they had never seen anything like this before: 1) where the FFIEC trumps the FRB and 2) where the FFIEC issues a FAQ without first advising the FRB.

I agree that the FRB issues and interprets Reg C. Something is very wrong with this whole issue.
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#437841 - 01/29/06 11:51 PM Re: Another Temporary Financing Question
Princess Romeo Offline

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Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
What I still can't get over is the answer posted in another thread that "construction" loans that are made with the repayment based on the sale of the property are permanent loans to the builder and therefore reportable.

That seems to fly in the face of the actual regulation that says construction only loans are NOT reportable.

Section 203.4 Compilation of loan data.

(d) Excluded data. A financial institution
shall not report:

(3) Temporary financing (such as bridge or construction loans);


The statement was apparently so obvious on its face that it is not even addressed in the Commentary. I mean, what part of "No" is not being understood?

But then again, as stated in a different thread, the "meaning" hasn't changed, only the "interpretation."

How Fruitbatty is that?
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