RESPA Title Transfer/ Bridge Loan

Posted By: CompDat

RESPA Title Transfer/ Bridge Loan - 04/09/10 01:18 PM

Can someone help me understand the temporary financing exemption better? I was under the impression that all bridge loans were exempt. But if you look at the title transfer portion it would exempt almost no bridge loans the way I understand them. Except for the fact that the Title Transfer item is in the construction to perm loan exemption. Thus, it would not apply if there was no construction loan.

For example: Person A lives in home A. They want to purchase home B but home A has not sold yet. So they do a six month loan (I realize duration does not count), that will be replaced by permenant financing once home A sales, priciple will be reduced and another loan will be created. I always thought of this as a bridge loan. But it is really a loan to buy property B, because title transfers from the seller of property B to the buyer of property B.

3) Temporary financing. Temporary financing, such as a construction loan. The exemption for temporary financing does not apply to a loan made to finance construction of 1- to 4-family residential property if the loan is used as, or may be converted to, permanent financing by the same lender or is used to finance transfer of title to the first user. If a lender issues a commitment for permanent financing, with or without conditions, the loan is covered by this part. Any construction loan for new or rehabilitated 1- to 4-family residential property, other than a loan to a bona fide builder (a person who regularly constructs 1- to 4- family residential structures for sale or lease), is subject to this part if its term is for two years or more. A ``bridge loan'' or ``swing loan'' in which a lender takes a security interest in otherwise covered 1- to 4-family residential property is not covered by RESPA and this part.
Posted By: David Dickinson

Re: RESPA Title Transfer/ Bridge Loan - 04/09/10 08:37 PM

I read this to say a Bridge loan is ALWAYS exempt. Construction loans aren't exempt if there is a title transfer.
Posted By: CompDat

Re: RESPA Title Transfer/ Bridge Loan - 04/09/10 09:30 PM

Thank you David, that is how I read this too.
Posted By: RR Joker

Re: RESPA Title Transfer/ Bridge Loan - 04/12/10 01:16 PM

FWIW, after consulting with our regulator (FRB)...we have changed our
definition" of a bridge loan to the following: (even though the reg, to me, distinctly places emphasis on construction loans only when it comes to "may"...the regulator basically defines "bridge" broadly)

This could change if HUD ever makes good on giving a real definition on what a bridge loan really is!

Bridge Loan A loan made for the purchase of a new primary residence, short-term of 12 months or less, and secured by the new home, old home or both. Intent is to payoff the new loan with the sale of the current primary residence or pay down and refinance with a different lender (commitment in hand, like a construction loan).

{if the intent is to pay down and we may do permanent financing, all purchase money disclosures apply}
Posted By: CompDat

Re: RESPA Title Transfer/ Bridge Loan - 04/12/10 01:28 PM

See what we are doing is securiting a loan to purchase a property (B) with property A that is being sold by the borrower and property B. It will be paid off when property A sells and refinanced as a home purchase loan.

We have an audit staff that asserts that there is a title transfer in here. The title transfer provision applies to construction loans as it is the "initial title". Title transfers apply to RESPA but the exemption for temporary financing removes the loan. HUD never defines a bridge loan, thus, in my opinion, we are free to define a bridge in any way we see fit, so long as we keep it consistent and it is really not a permemant loan.
Posted By: RR Joker

Re: RESPA Title Transfer/ Bridge Loan - 04/12/10 02:40 PM

All I'm saying is that our examiners (FRB) defines bridge loans broadly, simply because HUD has not!

(HUD SAYS they are going to ...I wish they would!)

anyway, based on our examiner's expectations...if we may be doing that permanent financing you mention...they would expect us to disclose both phases, just as if it were a construction loan.

Right, wrong, or indifferent...I'll err on the side of caution and followm my examiner's advise on this one! I'd rather "over disclose" than be written up for a "technicality" on differing opinions!
Posted By: Research

Re: RESPA Title Transfer/ Bridge Loan - 04/13/10 06:21 PM

Just to clarify, in this case - temporary "bridge" loan made for 100% financing purchase of a home. When their exisiting home sells - loan will be paid down by sale - and remaining will be converted to perment financing by us.

According to discussions - this would be called "bridge loan" not short term purchase - temporary and would be exempt from RESPA so, since no GFE is is page 3 completed on the HUD1 at closing. HUD1 is completed and reconciled with buyer/seller GFE section would then be left blank? do we fill in N/A so there is no tolerance issues?
Posted By: jme3

Re: RESPA Title Transfer/ Bridge Loan - 04/22/10 01:53 PM

On bridge loans and loans to purchase vacant land only, where RESPA does not apply, we and the title companies we work with are providing pre 1-1-10 HUDs.