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#479711 - 01/07/06 03:34 PM HMDA Home Improvement Temp Financing
bgehres Offline
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We have a 6 month unsecured home improvement loan where the expected repayment source is the sale of farm ground. Is this considered temporary finacing?

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#479712 - 01/07/06 08:30 PM Re: HMDA Home Improvement Temp Financing
rlcarey Offline
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IMHO - it's a short term loan and reportable.
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#479713 - 01/09/06 04:35 PM Re: HMDA Home Improvement Temp Financing
bgehres Offline
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The way I read it from post #46113, temporary financing is when the bank knows that the loan will be paid from another loan or an asset sale. Wouldn't this case fall under that "definition"?

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#479714 - 01/09/06 04:38 PM Re: HMDA Home Improvement Temp Financing
Dani York, CRCM Offline
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The sale of the farm land is a source of income not permanent financing. Therefore this would be a reportable loan.
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#479715 - 01/09/06 05:04 PM Re: HMDA Home Improvement Temp Financing
#12 Offline
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It is unsecured though, so it would only be reportable if the bank classifies it as home improvement...correct?
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#479716 - 01/09/06 05:05 PM Re: HMDA Home Improvement Temp Financing
bgehres Offline
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IMO - Your permanently financing your home improvements with the sale of farm land, your obtaining a loan so you can do the improvements now and not wait 6 months. I don't see how the sale of R/E is a source of income that falls into the category of wages, christmas bonus, etc.

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#479717 - 01/09/06 05:42 PM Re: HMDA Home Improvement Temp Financing
bgehres Offline
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Quote:

It is unsecured though, so it would only be reportable if the bank classifies it as home improvement...correct?



Yes, it was classified as a home improvement loan.

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#479718 - 01/09/06 05:45 PM Re: HMDA Home Improvement Temp Financing
#12 Offline
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Quote:

Quote:

It is unsecured though, so it would only be reportable if the bank classifies it as home improvement...correct?



Yes, it was classified as a home improvement loan.




Then I would report it.
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#479719 - 01/09/06 06:07 PM Re: HMDA Home Improvement Temp Financing
Princess Romeo Offline

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Quote:

IMO - Your permanently financing your home improvements with the sale of farm land, your obtaining a loan so you can do the improvements now and not wait 6 months. I don't see how the sale of R/E is a source of income that falls into the category of wages, christmas bonus, etc.



If the property being improved is the farm land, and this loan is for purposes of "bridging" the time between improvements and sale of the improved property, then you can probably make a good argument for "temporary" financing.

This does not appear to be the case.

Also, as you can see by this thread the regulatory agencies are not all that clear these days on what is and what is not temporary financing, especially when it comes to home improvement.
Last edited by Bonnie M; 01/09/06 06:12 PM.
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#479720 - 01/09/06 07:28 PM Re: HMDA Home Improvement Temp Financing
Dan Persfull Offline
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As Bonnie pointed out there is a lot of confusion and dissension in the compliance world today on temporary financing due to a bulletin put out by the FDIC KC Regional Office and a new Q&A by the FFIEC.

IMO you have a temporary loan - and at this time I have the backing of the FDIC Chicago Regional office via their SCANS bulletin CHIRO-07-2002 and my district examiner.

My advice is to contact your regional examiner and report, or not report, per their advice.

Until an official communication is produced by the Board defining temporary financing there will no longer be any "consensual" agreement on what constitutes temporary financing.
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#479721 - 01/09/06 07:54 PM Re: HMDA Home Improvement Temp Financing
bgehres Offline
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I agree with Dan. My next question would be, how is this different from a "splash and dash" loan. Wouldn't they be repaid from the sale of an asset? When the next person buys the house there's probably a 99% chance they're going to obtain a loan to buy the house. Wouldn't this distort the data by "counting it twice". In my opinion, these types of loans are not what the regulation was intended to monitor.

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#479722 - 01/09/06 08:20 PM Re: HMDA Home Improvement Temp Financing
Princess Romeo Offline

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Quote:

In my opinion, these types of loans are not what the regulation was intended to monitor.




And this is what happens when a bureaucratic reading of regulation gets in the way of the spirit. See the discussion on ISB banks trying to get credit for Community Development Loans.
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