A loan officer and I are disagreeing on whether a "bridge loan" should be reportable or not. Here is the situation:

Loan 1 -- $40,000 to purchase new home secured by the new home. Term note sold to the secondary market. Obviously purchase loan and HMDA reportable.

Loan 2 -- $80,000 loan also for purchase of the new residence (same property as Loan 1). The loan will be secured by current residence and paid off upon sale of current residence. I say this is HMDA reportable under the new temporary financing definition, but the loan officer thinks this shouldn't be reportable.

Loan 2 is a true bridge loan and is therefore exempt from HMDA reporting.

I thought because Loan 2 was not being paid off by permanent financing, but being repaid from the sale of an asset then it would be reportable? Am I not understanding this new temporary financing definition right?

Regulation C exmepts bridge loans. See 203.4(d)(3).

So, even though the person needs $120,000 to purchase this new home, I'll only be reporting $40,000 because the "bridge loan" would never be reported (remember, it's not getting converted to permanent financing)? Seems odd to me that I wouldn't report the whole purchase amount. But if that's what the two of you are saying, then I'll go along with that. I guess I have a few loans I need to go back to and take off the LAR.

They are correct, bridge loans are specifically exempted from Reg C, just like rental properties are specifically exempted for Reg Z purposes as an automatic business purpose.

Magic Banker refers to a true bridge loan. What is the definition of a true bridge loan?

I have a 90 day loan to purchase property A which is secured by property A & Property B. Loan will be paid off by sale of property B. Is this a bridge loan and therefore exempt from Hmda? I had researched other threads and had come to the conclusion that since loan is being paid off by sale of asset, it would be reportable as a home purchase, but now I am confused.

This can be confusing.

You will not find any regulatory definition for a bridge loan. A bridge loan is most commonly considered a short term loan that is to bridge the gap between the down-payment and to obtain the funds for permanent financing.

In CSB1 case the $80,000 loan was to bridge the gap between the down-payment and the amount to be financed, therefore making it a bridge loan.

In your situation I would not consider your loan a bridge loan. Your loan does not appear to be bridging any gap to obtain permanent financing.

OK, now I'm confused. IMO, the loan scenario I presented above is not to bridge any gap. Both loans will close at the same time. I see it very similar to the situation described by laf0915. What am I not getting?

$80K is the downpayment for the permanent financing of $40K in the purchase of the property. Loan #2 is being taken out solely for the pupose of providing access to that equity until the existing home can be sold. That's what makes it a bridge loan.

In other words, what is needed to purchase this property is a $40K permanent loan and $80K that is currently tied up in equity in the existing home. The purpose of loan number two is to provide access on a temporary financing basis to that equity that's tied up until the house can be sold.

I understand your confusion. Unfortunately, that's the can of worms that was opened up by FFIEC in publishing their interpretation without any opportunity for industry comment on the confusion and implications of such a position.

The $80,000 is borrowing equity from the existing home to apply as a down payment to obtain permanent financing for the new home, or at least that's what your post implies.

The loan is bridging the gap between the purchase of the new home and the sale of the old home in order for the borrower to obtain financing for the full purchase price of the new home.

If the $80,000 was the full purchase price of the new home and was to be repaid solely from the sale of the home then it would not be a bridge loan.

OK, now I get it. Thanks so much for clearing it up!

I understand that bridge loans are not subject to HMDA. Do I have to give the borrower a GFE?

Look to 3500.5.

I hate to bring this back up, but.....is collateral factored into whether or not you have a bridge loan?

I'm financing the down payment for home A, secured by home A, and the loan will be paid off by the sell of home B.....is this a bridge loan or do I have a temporary loan?