We have an in-house loan to purchase a home, 12 month term with 30 year amortization. Interest and principal payments are due monthly. The customer is hoping to refinance in a year and have the loan sold to the secondary market. Is this temporary financing? Does RESPA apply? Thank you.

Temporary financing is < 2 years

Does the temporary financing exemption apply to Home Purchases? I know that it specifically addresses construction loans. Also, is the only definition of temporary financing (per RESPA) that the term is less than two years?

Thank you.

Thank you!

And I'm a bit on the other side of the fence from MB because it is amortized with P&I payments until and IF such other arrangements happen...I would not call it temp financing.

Food for thought. Thanks everyone.

To play devil's advocate.....are you then saying a 1, 3 or 5 year balloon mortgage note would be temporary financing? I would venture a guess that at least 95% of these loans rollover into other financing.


PS. It sounds to me the original poster has a 1 year balloon note.

That's the reasoning behind my post, Dan. Thanks for putting it a little different way. Generally, anytime we are dealing in repayment other than ordinary income, we look at whether or not temp financing applies. But if we have an amortizing loan with a balloon at maturity, we do not allow temp financing exemptions.

Really, nothing about our temporary financing definition has changed other than the "splash and dash" change. That would be the one exception to our general rule!

Thanks everyone.

1. RESPA refers to "swing" loans as being exempt from RESPA. Can someone explain that term to me?
2. Would a 3-year loan for a downpayment to purchase a home be exempt from RESPA? It is set up with monthly payments but the borrower hopes to pay it off early with the sale of their existing home. The existing home was used as collateral.
Hope you don't mind me asking two questions!

1. Swing = bridge loan. A loan that is temporary to cover the time that it takes to sale the borrower's current dwelling.

2. If the loan is set up on a 3 year term, you cannot consider it temporary. RESPA has a 2 year maximum. However, even if this was a 2 year loan, the monthly payments makes me think that it still isn't temporary. If you loan was set up as a single payment with supporting comments indicating the loan would be repaid from the sale of the existing home, I would then call this a bridge (or swing) loan and consider it temporary.

FWIW I agree with David.

I've always look at it this way. If you have set the term of the loan to have principal and interest payments, then you have set up a repayment schedule for that loan and it is not temporary. Basically what you are doing is setting up a balloon mortgage, in your case a 3 year balloon. To the best of knowledge balloon mortgages do not qualify for the temporary financing exemption.