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#482174 - 01/13/06 02:23 AM
Re: HMDA Temporary Financing Cave In
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10K Club
Joined: Aug 2002
Posts: 47,698
Bloomington, IN
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The entire text of the Q&A is in my post starting this thread, however the Q&A can be found by clicking here and then clicking on Loan Purpose.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#482175 - 01/13/06 01:54 PM
Re: HMDA Temporary Financing Cave In
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Diamond Poster
Joined: Oct 2004
Posts: 2,126
Connecticut
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Just returned from meeting with regional FDIC Field Review Examiner and discussed this and other issues with her. She was unaware of the KC pronouncement, but my notes of her explanation of temporary financing show that she said the "meaning hasn't changed, but the interpretation has". The key to the interpretation is if the loan is going to be paid from a permanent financing source then the loan is temporary, but if it is going to be paid from a sale of the property (i.e., splash and dash) it is a reportable HMDA mortgage. I suggested she visit this thread to get an understanding of the confusion and frustration among many HMDA reporters on this controversy.
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#482178 - 01/13/06 02:13 PM
Re: HMDA Temporary Financing Cave In
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Diamond Poster
Joined: Sep 2005
Posts: 1,251
West Coast
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Quote:
There used to be a blurb in GIR, I think it was in a discussion of lot loans, that if any of the loan proceeds were used to begin construction of a dwelling, it would be reportable. Of course, I can't find it now, so maybe they took it out of the book.
Does anyone else remember this? Was Shannon correct in saying that a construction loan could not be reportable (even in my example) because it isn't dwelling secured?
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#482184 - 01/13/06 05:39 PM
Re: HMDA Temporary Financing Cave In
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100 Club
Joined: Mar 2005
Posts: 126
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I received a phone call from our regulator (fed) clearing up the construction loan issue (at least for us). We are to report the short term construction loans where the purpose is to build a house for resale. Her explanation was that the loan we are making is considered the "permanent financing" for the builder because they do not have any intention of obtaining another loan.
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#482186 - 01/13/06 06:23 PM
Re: HMDA Temporary Financing Cave In
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Joined: Mar 2005
Posts: 126
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#482188 - 01/13/06 06:53 PM
Re: HMDA Temporary Financing Cave In
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100 Club
Joined: Mar 2005
Posts: 126
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My understanding standing is if the payoff of the loan is supposed to be another loan, then it is considered temporary. I don't think you actually have to have the commitment for the permanent loan, just the intent (I could very easily be wrong on this).
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#482190 - 01/13/06 07:21 PM
Re: HMDA Temporary Financing Cave In
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10K Club
Joined: Aug 2002
Posts: 47,698
Bloomington, IN
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Quote:
we don't do const-perm loans, we do const-only.
Following the Q&A logic, the construction loan is a permanent loan for you as you have no commitment of long term financing. BTW, if you have no commitment for take out financing, why would you do the construction loan?
An email just sent to my contact at the FDIC Chicago Regional Office:
We desperately need official regulatory guidance on this issue.
By going to http://snipurl.com/ljs5 and reading the comments, you will be able to see that the release of the new Q&A has caused a lot of controversy and confusion among the compliance world. This Q&A also appears to be in direct conflict with the SCANS bulletin CHIRO-07-2002 released in May 2002.
I will not pull any punches and tell you right out I think the new interpretation is ludicrous. I will also state that XXXXXXX has been of great assistance in trying to get this resolved, but apparently there has been no official comments released either from the FDIC’s Washington, DC or Chicago Regional Offices.
If you follow the logic of the Q&A then the exemptions for construction and bridge loans might as well be eliminated from the Regulation.
Below is the text from emails sent to XXXXX and you can read my other thoughts and frustrations in the above link.
Any comments and direction that you can provide will be greatly appreciated. I will even offer to travel to the Regional Office, at my own expense if necessary, to try to get some meaningful guidance on this issue.
Thank you, Dan Persfull
Last edited by Dan Persfull; 01/13/06 07:24 PM.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#482192 - 01/13/06 07:58 PM
Re: HMDA Temporary Financing Cave In
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Power Poster
Joined: Jun 2001
Posts: 8,272
Where the heart is
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Quote:
My understanding standing is if the payoff of the loan is supposed to be another loan, then it is considered temporary. I don't think you actually have to have the commitment for the permanent loan, just the intent (I could very easily be wrong on this).
This will put RESPA and HMDA on opposite ends of the "meaning" of temporary financing. For financing to be "temporary" in REPSA, there can be NO permanent financing, not even the intent for permanent financing, by the same lender.
In HMDA, according to this latest missive, if you do NOT have permanent financing on the hook, then your loan is NOT temporary.
This is absolute insanity, but I fear that someone in a position of power made a bad decision, but the agencies may circle the wagons to defend it since NO ONE wants to admit they made a mistake.
I mean, look at what they did the notion of "Refinacing." We now have to look at SBA and other commercial loans to see if residential property is going to be affected in a commercial take-out or refinance.
This is getting the HMDA Data further and further AWAY from the original intent - too see if red-lining and discrimination exist that affects minority home buyers, homeownes, and housing stock in minority areas.
Good job!
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#482193 - 01/13/06 08:13 PM
Re: HMDA Temporary Financing Cave In
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10K Club
Joined: Aug 2002
Posts: 47,698
Bloomington, IN
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I just got of the phone with my Chicago contact. He was chuckling about some of the comments being made and said it was refreshing to be able to read so many candid comments and that for the most part people being able to keep some humor about them. Bonnie's mushroom salad kind of stuck out in his mind. He is going to contact his KC contact to get a copy of the "splash and dash" letter (he hadn't seen it) and then he said he will see what he can do to get the ball rolling to get some sort of official comment from either the FDIC or the Fed. So I/we will just have to wait to see what kind of response I/we will get. As I told him, all we are looking for is some definitive guidance on temporary financing and that as long as we had that we could live with it whether we agreed or disagreed.
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The opinions expressed are mine and they are not to be taken as legal advice.
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#482197 - 01/13/06 09:19 PM
Re: HMDA Temporary Financing Cave In
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Power Poster
Joined: Jul 2002
Posts: 5,568
New Jersey
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Quote:
Jack owns a home, Jill owns a home. Jack & Jill get engaged & decide to build a home. They get a construction loan, sell both of their homes & pay off the construction loan. Does this fall on the LAR as a reportable entry because it is not being followed up with permenant financing or do I still get to use the construction loan exemption? And, since the Q & A just came out in December, if this loan is expected to be reported, would I have to go back & change my LAR for 2005?
I doubt you'll get an answer, because the regulators don't know Jack. (except mine, of course)
Last edited by Steve Hoogerhyde; 01/13/06 09:21 PM.
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