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#967875 - 06/02/08 11:30 PM temporary financing?
Chocaholic Offline
Gold Star
Joined: Aug 2005
Posts: 443
Northwest
We have a builder who wants to obtain a 12 month loan to allow the purchase of a 4plex...which he plans to rent out in the short term... at the end of our term... he intends to come back for a land development loan to tear down the four plex and develop it into buildable lots...
Ok..in a perfect world and in a perfect market my thought is .. this is temporary financing... but... who says anything long term will come to pass.. he may sell at end of term as market is not good, or he may proceed with original plan or he may request long term.. financing..

Still temporary?

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#967877 - 06/02/08 11:42 PM Re: temporary financing? Chocaholic
Mrs. Rizzo Offline
10K Club
Mrs. Rizzo
Joined: Mar 2006
Posts: 10,392
Curled up by the fire...
What are the terms of the loan? P&I amortized?
I'm leaning towards it being just a short term purchase loan.
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#967906 - 06/03/08 11:48 AM Re: temporary financing? Mrs. Rizzo
Pickles Offline
Gold Star
Joined: Apr 2006
Posts: 275
Beach Bum, East Coast, USA
Unless there is a commitment for the permanent finacing, it is temporary. But don't confuse "short term" financing with temporary financing. What is the repayment schedule of this loan? If the loan will be paid from ordinary income & not the sale of the assest or funds from permanent financing, chances are it is not temporary. In addition, it may not matter because it sounds like a "business purpose" loan so RESPA, Reg. Z won't apply.
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#968275 - 06/03/08 05:12 PM Re: temporary financing? Pickles
Chocaholic Offline
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Joined: Aug 2005
Posts: 443
Northwest
the loan will be interest only payments..out of builders company income, and there is no committment for long term financing... this definitely is a business purpose, so I'm only looking to determine if HMDA reportable or not..

The question I am struggling with is the purchase of 1/4 family rental property that is to be rented for the duration of our loan (12 months) then, builder plans to redo the loan ( with some bank not necessarily us and we have issued no committment) to tear down structure and make it into building lots..

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#968304 - 06/03/08 05:36 PM Re: temporary financing? Chocaholic
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,016
Bloomington, IN
Sounds to me like this is the permanent financing for the purchase of the quadplex.

BTW, since there will be no principal reduction, and the quadplex will be demolished, I hope the current land value and the anticipated appreciated land value in 1 year will support the required supervisory LTV for any new loan that is to be secured by the land only for the land development.
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#968312 - 06/03/08 05:38 PM Re: temporary financing? Chocaholic
Pickles Offline
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Joined: Apr 2006
Posts: 275
Beach Bum, East Coast, USA
It can be considered "temporary" since his intent is to obtain permanent financing, however, I am still leaning towards it being a short term purchase loan since he is going to make monthly interest payments from income.
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Living life in the fast lane, hitting bumps along the way, but enjoying the ride!!!!

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#968368 - 06/03/08 06:00 PM Re: temporary financing? Pickles
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 47,016
Bloomington, IN
I see no where that his intent is to get permanent financing for the quadplex. Only that it is a possibility. His intent for permanent financing is to refinance the loan and get additional money for land development. In fact it appears his purpose for this loan is to actually acquire the land more than acquiring the quadplex. Since the new loan will not be secured by a dwelling, the quadplex will be torn down, the new loan will not be a refinancing nor will it be for the permanent financing of the quadplex purchase. However he intends to use the quadplex as a rental dwelling, so I see nothing temporary about this "home purchase" loan. Just MHO.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#968639 - 06/03/08 08:55 PM Re: temporary financing? Dan Persfull
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
I agree with Dan. You don't plan on 2 phase financing, it's not a bridge or a construction loan. Therefore, it's not temporary financing.
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#970175 - 06/05/08 07:03 PM Re: temporary financing? David Dickinson
Chocaholic Offline
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Joined: Aug 2005
Posts: 443
Northwest
thank you all for your comments... I am leaning towards, purchase as well.

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