Posted By: bgehres
HMDA Home Improvement Temp Financing - 01/07/06 03:34 PM
We have a 6 month unsecured home improvement loan where the expected repayment source is the sale of farm ground. Is this considered temporary finacing?
Posted By: rlcarey
Re: HMDA Home Improvement Temp Financing - 01/07/06 08:30 PM
IMHO - it's a short term loan and reportable.
Posted By: bgehres
Re: HMDA Home Improvement Temp Financing - 01/09/06 04:35 PM
The way I read it from post #46113, temporary financing is when the bank knows that the loan will be paid from another loan or an asset sale. Wouldn't this case fall under that "definition"?
Posted By: Dani York, CRCM
Re: HMDA Home Improvement Temp Financing - 01/09/06 04:38 PM
The sale of the farm land is a source of income not permanent financing. Therefore this would be a reportable loan.
Posted By: #12
Re: HMDA Home Improvement Temp Financing - 01/09/06 05:04 PM
It is unsecured though, so it would only be reportable if the bank classifies it as home improvement...correct?
Posted By: bgehres
Re: HMDA Home Improvement Temp Financing - 01/09/06 05:05 PM
IMO - Your permanently financing your home improvements with the sale of farm land, your obtaining a loan so you can do the improvements now and not wait 6 months. I don't see how the sale of R/E is a source of income that falls into the category of wages, christmas bonus, etc.
Posted By: Dan Persfull
Re: HMDA Home Improvement Temp Financing - 01/09/06 07:28 PM
As Bonnie pointed out there is a lot of confusion and dissension in the compliance world today on temporary financing due to a bulletin put out by the FDIC KC Regional Office and a new Q&A by the FFIEC.
IMO you have a temporary loan - and at this time I have the backing of the FDIC Chicago Regional office via their SCANS bulletin CHIRO-07-2002 and my district examiner.
My advice is to contact your regional examiner and report, or not report, per their advice.
Until an official communication is produced by the Board defining temporary financing there will no longer be any "consensual" agreement on what constitutes temporary financing.
Posted By: bgehres
Re: HMDA Home Improvement Temp Financing - 01/09/06 07:54 PM
I agree with Dan. My next question would be, how is this different from a "splash and dash" loan. Wouldn't they be repaid from the sale of an asset? When the next person buys the house there's probably a 99% chance they're going to obtain a loan to buy the house. Wouldn't this distort the data by "counting it twice". In my opinion, these types of loans are not what the regulation was intended to monitor.