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#482224 - 01/20/06 09:43 PM Re: HMDA Temporary Financing Cave In
Princess Romeo Offline

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Okay - I'll make the first comment/correction on "my" Temporary financing definition:

1. Temporary financing includes any loan for the initial construction of a dwelling provided that loan does not also include permanent financing.

2. Temporary financing is any loan, regardless of purpose, that is secured by a dwelling but where the loan is made on the premise that repayment of any of the principal loan balance will NOT come from the ordinary income or revenue of the borrower, but will come from either the sale of the property or from financing that will be repaid by ordinary income or revenue of the borrower.

3. Loans to finance the intial construction of more than a single 1-4 family dwelling are not reportable regardless of any principal reduction schedule.


This amendment is intended to clarify:

- Construction-perm loans ARE reportable.

- Interest-only payments would not disqualify a loan from being considered temporary

-Loans that have principal reductions during the term of the loan would no longer qualify as "temporary" (with the exception of loans described in item #3) so you don't have someone trying to pass off a 2 year loan with principal and interest payments as "temporary" because the borrower is still looking to sell the property.

-Make it clear that tract construction loans are not HMDA reportable even if there are principal reductions.


Any more thoughts?
Last edited by Bonnie M; 01/20/06 09:46 PM.
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#482225 - 01/21/06 01:32 PM Re: HMDA Temporary Financing Cave In
bgehres Offline
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I was told by our regulator that any loan made where the primary source of repayment is the sale of the property can not be considered temporary financing, including construction loans.

I don't agree with them, but that doesn't really matter.

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#482226 - 01/21/06 05:34 PM Re: HMDA Temporary Financing Cave In
Princess Romeo Offline

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Quote:

I was told by our regulator that any loan made where the primary source of repayment is the sale of the property can not be considered temporary financing, including construction loans.

I don't agree with them, but that doesn't really matter.




This is why David made the point that he did. Banks are not in a position to argue with their regulator when it seems their regulator has taken leave of their senses, so we need to get the various organizations involved to bring this to a head and get a uniform consensus and definition that does not leave room for such "imaginative" interpretation.

I have to wonder HOW someone can READ the HMDA regulation where it says point blank:

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);


So how can you look at that and then say "You must report Construction loans?"
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#482227 - 01/23/06 06:35 PM Re: HMDA Temporary Financing Cave In
CRAatBOK Offline

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Quote:

Okay - I'll make the first comment/correction on "my" Temporary financing definition:

1. Temporary financing includes any loan for the initial construction of a dwelling provided that loan does not also include permanent financing.

2. Temporary financing is any loan, regardless of purpose, that is secured by a dwelling but where the loan is made on the premise that repayment of any of the principal loan balance will NOT come from the ordinary income or revenue of the borrower, but will come from either the sale of the property or from financing that will be repaid by ordinary income or revenue of the borrower.

3. Loans to finance the intial construction of more than a single 1-4 family dwelling are not reportable regardless of any principal reduction schedule.


This amendment is intended to clarify:

- Construction-perm loans ARE reportable.

- Interest-only payments would not disqualify a loan from being considered temporary

-Loans that have principal reductions during the term of the loan would no longer qualify as "temporary" (with the exception of loans described in item #3) so you don't have someone trying to pass off a 2 year loan with principal and interest payments as "temporary" because the borrower is still looking to sell the property.

-Make it clear that tract construction loans are not HMDA reportable even if there are principal reductions.


Any more thoughts?




I think you will need to come up with some clarification on "ordinary income". Can't have any gray areas.
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#482228 - 02/01/06 07:22 PM Re: HMDA Temporary Financing Cave In
RR Joker Offline
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Just quickly, I spoke with our FED examiner a few minutes ago after Becca pointed me to this uproar...he said contruction and bridge loans were fine...but where we used to consider purchasing a home on a single-pay note, source of repayment resale...no longer would qualify. He said we will not be required to redo for 2005...and he recommended flagging our temps beginning 1-1-06 in case all the uproar causes a restatement of the answer and we end up needing to delete them. I did not request this in writing tho..sorry...Just thought you might want to hear something from an authority actually at the FED.
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#482229 - 02/03/06 05:25 PM Re: HMDA Temporary Financing Cave In
bgehres Offline
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So according to your contact at the FED, is a loan used to construct a dwelling for resale fall under the "temporary financing" exemption?
Last edited by bgehres; 02/03/06 05:25 PM.
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#482230 - 02/06/06 06:10 PM Re: HMDA Temporary Financing Cave In
CRAatBOK Offline

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Boy your examiners are nicer than mine. I had to go back and hunt all mine for 2005 and add them. I couldn't get anything in writing either, and I asked.
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#482231 - 02/10/06 04:46 PM Re: HMDA Temporary Financing Cave In
Dan Persfull Offline
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I spoke with my contact from the FDIC Chicago Regional Office yesterday. It looks like we will have to follow the FAQ posted on the FFIEC site.

He did say they are working on a new SCANS bulletin that will address the issue and they are also going to try to address a few of the questions that have been posted here. As soon as it is released (which will be a few weeks probably) I will share its content.
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#482232 - 02/10/06 04:52 PM Re: HMDA Temporary Financing Cave In
rlcarey Offline
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Great - just what we need is more regional interpretations.
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#482233 - 02/10/06 04:53 PM Re: HMDA Temporary Financing Cave In
SMQ, CRCM Offline

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I do not have to go back through the 2005 loans either - OCC. Flagging in 2006 is a good idea though.
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#482234 - 02/10/06 08:29 PM Re: HMDA Temporary Financing Cave In
RR Joker Offline
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Quote:

So according to your contact at the FED, is a loan used to construct a dwelling for resale fall under the "temporary financing" exemption?




Yes.
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#482235 - 02/10/06 08:47 PM Re: HMDA Temporary Financing Cave In
CRAatBOK Offline

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Quote:

I do not have to go back through the 2005 loans either - OCC. Flagging in 2006 is a good idea though.




Grrrr. Oh well, I will consider my experience as character building. At least now I will recognize some of the regular names that come up for 2006.
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#482236 - 02/14/06 05:43 PM Re: HMDA Temporary Financing Cave In
Tesla Offline
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Quote:

Quote:

So according to your contact at the FED, is a loan used to construct a dwelling for resale fall under the "temporary financing" exemption?




Yes.




Wouldn't this be 'no"?

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#482237 - 02/14/06 06:47 PM Re: HMDA Temporary Financing Cave In
RR Joker Offline
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Quote:

Quote:

Quote:

So according to your contact at the FED, is a loan used to construct a dwelling for resale fall under the "temporary financing" exemption?




Yes.





Wouldn't this be 'no"?




No..it would be "yes"..temporary financing exemption:construction loans.

I have a huge feeling this "hurried" Q&A answer will be revisted...it's causing way too much conflict and will go nowhere towards uniform reporting.
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#482238 - 02/14/06 07:19 PM Re: HMDA Temporary Financing Cave In
Tesla Offline
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Quote:

Quote:

Quote:

Quote:

So according to your contact at the FED, is a loan used to construct a dwelling for resale fall under the "temporary financing" exemption?




Yes.





Wouldn't this be 'no"?




No..it would be "yes"..temporary financing exemption:construction loans.

I have a huge feeling this "hurried" Q&A answer will be revisted...it's causing way too much conflict and will go nowhere towards uniform reporting.




I agree, because I am completely confused now. In the example given, the source of repayment is the proceeds from the sale of the newly constructed house not permanent financing, right? I thought if the source of repayment for a loan was anything other than permanent financing - you had to report it. Isn't that what all the confusion is about?

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#482239 - 02/14/06 07:34 PM Re: HMDA Temporary Financing Cave In
Dani York, CRCM Offline
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I don't believe the initial construction loan would. I say this because construction loans are specifically mentioned as temporary financing in the Q&A.
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#482240 - 02/14/06 07:53 PM Re: HMDA Temporary Financing Cave In
Reed Offline
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What got this whole thread going was that I asked that question and got an entirely different response. Unless someone is holding out on us, I don't believe that anyone has gotten a real definitive answer from someone that counts on this yet.

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#482241 - 02/14/06 08:11 PM Re: HMDA Temporary Financing Cave In
David Dickinson Offline
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Quote:

So according to your contact at the FED, is a loan used to construct a dwelling for resale fall under the "temporary financing" exemption?



I agree this is still exempt. This is what I call a "spec. house loan". This is NOT the same as a "splash and dash" or "rehab" loan. Those are purchases and the new FAQ makes it clear they are to be reported because they aren't construction loans. A Spec. House loan is a construction loan and clearly (at least to me ) meets the exemption.
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#482242 - 02/14/06 10:14 PM Re: HMDA Temporary Financing Cave In
Bullseye Offline
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FWIW, our regulator (KC FDIC) agrees with David. They said a loan to construct a home & sell it (spec home) is construction & therefore not reportable. A loan to purchase, fix up & sell a dwelling (splash & dash) is reportable.

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#482243 - 02/15/06 01:38 PM Re: HMDA Temporary Financing Cave In
Reed Offline
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Sweet! that's the clarification I've been waiting for.

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#482244 - 02/15/06 01:48 PM Re: HMDA Temporary Financing Cave In
Dan Persfull Offline
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Things that make you go hmmmmmm. . . . . .

Federal Register / Vol. 67, No. 32 / Friday, February 15, 2002 / Rules and Regulations Page 7231

Temporary Financing Regulation C generally does not permit lenders to report temporary financing. The Board has not amended these rules. The Board believes that, although in some cases the data would not be duplicative—such as where a lender originates construction loans but does not offer permanent financing these instances appear to be relatively few. Time Period. The Board requested comment on whether the regulation should define ‘‘temporary loans’’ in terms of a time period. A few financial institutions requested a definition that includes a specific time period. Upon further analysis, however, the Board believes that in the absence of any generally accepted time frame for ‘‘temporary financing,’’ it is impracticable to provide a ‘‘bright-line’’ test. Instead, the regulation will continue to offer examples, such as construction financing.
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#482245 - 02/17/06 12:54 PM Re: HMDA Temporary Financing Cave In
bgehres Offline
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Quote:

FWIW, our regulator (KC FDIC) agrees with David. They said a loan to construct a home & sell it (spec home) is construction & therefore not reportable. A loan to purchase, fix up & sell a dwelling (splash & dash) is reportable.



That’s exactly the opposite interpretation that I received from our fed office. I’m glad to see all the regulators are on the same page with this.

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#482246 - 02/17/06 02:21 PM Re: HMDA Temporary Financing Cave In
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#482247 - 02/17/06 02:26 PM Re: HMDA Temporary Financing Cave In
Dan Persfull Offline
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Quote:

I’m glad to see all the regulators are on the same page with this.




From my conversation with my contact out of Chicago - your regulator's interpretation won't hold water - the only interpretation that will count will be that of the Board. They (you're regulator) can only give you guidance - but the Board has the final say in the interpretation.
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#482248 - 02/17/06 03:20 PM Re: HMDA Temporary Financing Cave In
COMPLIcated Offline
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Our FDIC contact in Oklahoma City which covers the Dallas Region said that a construction loan to construct a personal residence, a spec home, or a custom home does fall under the temporary financing exclusion. He also said that we were to report home purchases that are investment properties to be resold (whether improvements were made or not). FWIW - he also said that we were still to exempt bridge loans and we could use whatever our bank defines as a bridge loan.

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