Would RESPA apply?

Posted By: SuperBanker

Would RESPA apply? - 12/20/06 08:07 PM

Would RESPA apply in the case of the purchase of a primary residence where the loan is secured by the home being purchased and the former home? I have always considered this a bridge loan, but I have heard differing opinions.
Posted By: Dan Persfull

Re: Would RESPA apply? - 12/20/06 08:10 PM

What are the terms of the loan? Based on the limited information it appears you have a loan subject to RESPA.
Posted By: SuperBanker

Re: Would RESPA apply? - 12/20/06 08:35 PM

Let's say that the loan had a 9 month maturity where the borrower would sell their previous home and then term out the remaining balance over 30 years. Would RESPA apply then?
Posted By: Dan Persfull

Re: Would RESPA apply? - 12/20/06 08:46 PM

No, based on that information you would have a temporary bridge loan.
Posted By: SuperBanker

Re: Would RESPA apply? - 12/20/06 08:56 PM

What would be the only instance where RESPA would apply in this case? Would the loan have to have a maturity date of two years or greater or be amoritizing for RESPA to apply?
Posted By: Dan Persfull

Re: Would RESPA apply? - 12/20/06 09:05 PM

Quote:
What would be the only instance where RESPA would apply in this case?


There is not an "only" instance. If your loan was structured where the loan was amortizing and upon sale of the existing home the balance would be paid down and then modified, the original loan would be subject to RESPA IMO.

Quote:
Would the loan have to have a maturity date of two years or greater or be amoritizing for RESPA to apply?


As I've said beofore, don't get hung up on the 2 years. The 2 years applies to construction loans.

....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.....
Posted By: SuperBanker

Re: Would RESPA apply? - 12/20/06 09:21 PM

One more scenario. What if we had an interest-only loan that is to mature in 9 months and that had a permanent commitment from our in-house mortgage department in file? Would the temporary financing exemption apply with our in-house mortgage department providing the permanent financing?
Posted By: Dan Persfull

Re: Would RESPA apply? - 12/20/06 09:28 PM

No, if you're referring to a construction loan.

Yes, if you're referring to a purchase loan.
Posted By: Jan94

Re: Would RESPA apply? - 04/27/07 06:00 PM

We have a situation where we found that the bank originated a consumer construction loan for 24 months as an open-end loan. Now they want to change this to a closed-end but renew for another 24 months. To me this would be a refinance, but would it still be considered temporary financing for RESPA purposes? The home is not yet complete (it's over a $1MM and taking longer to finish). Thank you.
Posted By: Jan94

Re: Would RESPA apply? - 04/30/07 02:11 PM

If I had paid attention to Dan's response above, I think I would have had my answer. In going back and rereading some more, it would appear that if the construction loan has a term of two years or more, then it is covered by RESPA. I was struggling with the temporary financing definition. So if the loan is exactly 24 months it is a covered loan and temporary financing would not be applicable, is that correct? The majority of our construction loans are 12 months, but I just want to be sure I'm understanding this correctly. Thank you.