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#835990 - 10/17/07 02:52 PM Cabin on a lake - NOT relaxing
Cornfed Turtle Offline
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Joined: Mar 2006
Posts: 1,323
"...Somewhere in Middle Americ...
OK - - - follow along if you dare - - -

One of our commercial customers owns some lakefront property in another state. His idea was to build vacation cabins that are permanently affixed to foundations. He is constructing these cabins and selling them to local consumers.

The cabins are being purchased but the "dirt" is not. The buyers are signing a 10-yr, non-auto-renewal lease on the land. The cabins are theirs.

Our commercial customer is guaranteeing each mortgage loan. His guaranty is secured by a mortgage that our commercial department holds on the land - - all of it.

We are doing the purchase money mortgages on these cabins. (Don't ask.) I am comfortable with the promissory notes and security documents we have prepared, but......I'm not the CO.

Here's my thinking on the regulatory compliance end.... we do a flood, we provide a copy of the appraisal, Reg Z applies but RESPA doesn't.

Something feels wrong about not doing a HUD at closing, but.....

(Sorry this got so long.....)

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#836300 - 10/17/07 05:22 PM Re: Cabin on a lake - NOT relaxing Cornfed Turtle
David Dickinson Offline
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David Dickinson
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Posts: 18,762
Central City, NE
Let me get this straight:
You are making consumer purpose loans to purchase the cabins, but the borrowers "lease" the land. Your loan is secured by the cabin and by a collateralized guaranty (secured by the dirt). Is this right?
(I thought I'd confirm before anyone attempts to answer).
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#836311 - 10/17/07 05:30 PM Re: Cabin on a lake - NOT relaxing David Dickinson
David Dickinson Offline
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David Dickinson
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Central City, NE
Also, read this thread from yesterday:
http://www.bankersonline.com/forum/ubbth...;gonew=1#UNREAD
It discussed collateralized guarantees and RESPA. Then let us know if I've understood your scenario correctly and what questions remain.
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#836335 - 10/17/07 05:53 PM Re: Cabin on a lake - NOT relaxing Cornfed Turtle
Truffle Royale Offline

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Cornfed, what happens at the end of the 10 year lease? Say, the cabin owner doesn't renew the lease but won't vacate or sell the cottage.

The only experience I've had with land lease situations is Hawaii but there, the lease was always for longer than the mortgage.

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#836442 - 10/17/07 06:48 PM Re: Cabin on a lake - NOT relaxing Truffle Royale
Cornfed Turtle Offline
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Joined: Mar 2006
Posts: 1,323
"...Somewhere in Middle Americ...
David: Yes and How did I miss that post in my search??????? Truffle: Yikes!

The loans are secured by the cabin. I have been thinking of them as though they were mobile homes on rented land.

There is also a dirt secured gty. I was thinking no RESPA as there is technically no real estate security. The actual collateral is a cabin, albeit affixed to the dirt. (Geez!) I always think of guarantees as not being collateral. (Like the thread you reference)

We are doing our mortgages for five years. That is shorter than the lease period and is in keeping with SD law for renewing the mtg every 5 years. According to the terms of the lease, if the Landlord chooses not to renew, the cabin owner has 30 days to get it off the land. Ouch!

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#836704 - 10/17/07 09:11 PM Re: Cabin on a lake - NOT relaxing Cornfed Turtle
HRH Okie Banker Offline
Power Poster
Joined: Jan 2003
Posts: 3,070
Oklahoma
You might have to see if you should be filing a leasehold mortgage. One that will document the bank's rights under the terms of the tenant's lease and the tenants rights under that lease. Tenant's rights are different than the rights of homeowners.

Foreclosing or proceeding against a tenants rights to a cabin might not be covered under the mortgage you use day-to-day. I would at least have an attorney review your standard mortgage with these transactions in mind.
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#836748 - 10/17/07 09:34 PM Re: Cabin on a lake - NOT relaxing HRH Okie Banker
Cornfed Turtle Offline
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Joined: Mar 2006
Posts: 1,323
"...Somewhere in Middle Americ...
Nail on the head, OB. Our attorney drafted addenda to both sets of docs - - - each establishing our rights with respect to the lease.

I'm still thinking no RESPA.....no HUD. Flood yes.... etc...etc

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#1263051 - 10/07/09 04:42 PM Re: Cabin on a lake - NOT relaxing Cornfed Turtle
Carolina Blue Offline
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Carolina Blue
Joined: Jul 2005
Posts: 960
Lost in a regulatory fog
Have the same situation and just want to make sure that this info. is correct. We have a lake resort where the landowner is leasing lots to people to build houses on them. These are 1 year leases with no option to buy and the owners discretion to renew. I have no idea why someone would do this and why we are loaning to them, but anyway...

We have a leasehold mortgage and UCC filings on the site improvements, so

RESPA- does not apply?
Flood- does apply?
Reg.Z MDIA- does not apply?
Reg.Z HPML and HOEPA- does apply if it's their primary dwelling?

Now second part, what happens if RESPA does not apply and the lender provides a GFE and the attorney provides a HUD statement to the borrower anyway? I had another attorney tell me that even if RESPA does not apply, as soon as we provide RESPA docs we are bound by the RESPA rules. Any thoughts will be much appreciated.

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#1263157 - 10/07/09 06:10 PM Re: Cabin on a lake - NOT relaxing Carolina Blue
HRH Okie Banker Offline
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Joined: Jan 2003
Posts: 3,070
Oklahoma
CB - Alot depends on your transaction. Can you please expand your question to tell us a more about your transaction(s). Are you making a loan to the landowner who is paying down a lot loan as lots are leased? Are you making loans to each individual person leasing lots? Are you making loans to lease the lots and build houses?
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#1264047 - 10/08/09 07:58 PM Re: Cabin on a lake - NOT relaxing HRH Okie Banker
Carolina Blue Offline
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Carolina Blue
Joined: Jul 2005
Posts: 960
Lost in a regulatory fog
Sorry, these are construction/perm loans to the individuals to build the houses on the leased lots.

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