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#1773300 - 01/07/13 09:05 PM
Re: Is RESPA Triggered?
Glutes
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Power Poster
Joined: Aug 2001
Posts: 7,364
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I vote no.
What sayeth others?
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#1773346 - 01/07/13 10:07 PM
Re: Is RESPA Triggered?
Glutes
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10K Club
Joined: Jul 2001
Posts: 84,210
Galveston, TX
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Regarding "transfer of title to the first user", do we have that here?
Well you have it for one of them.........
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#1773350 - 01/07/13 10:09 PM
Re: Is RESPA Triggered?
Glutes
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Joined: Aug 2001
Posts: 7,364
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So if for one, then RESPA applies?
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#1773354 - 01/07/13 10:12 PM
Re: Is RESPA Triggered?
Glutes
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10K Club
Joined: Jul 2001
Posts: 84,210
Galveston, TX
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Well, I don't think you will find any guidance on this issue, but in this age of consumer protection, how would you proceed? ![smile smile](/forum/images/graemlins/default/smile.gif)
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#1773381 - 01/07/13 10:42 PM
Re: Is RESPA Triggered?
Glutes
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Joined: Aug 2001
Posts: 7,364
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I wouldn't have to be asking the question, because we don't grant construction loans unless our mortgage department approves the perm. So ours will ALWAYS be subject to RESPA.
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#1773482 - 01/08/13 02:07 PM
Re: Is RESPA Triggered?
Glutes
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10K Club
Joined: Aug 2002
Posts: 47,648
Bloomington, IN
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From 1024.5:
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.
I understand Randy's concern under the current regulatory environment but in this case proceeds of the loan are not being used to transfer title to the first user (the existing owner is simply adding an additional owner) therefore I think one has a solid standing to exempt the loan from RESPA.
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#1773486 - 01/08/13 02:11 PM
Re: Is RESPA Triggered?
Glutes
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10K Club
Joined: Jul 2001
Posts: 84,210
Galveston, TX
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Dan, I guess I would have to agree now that you put it that way ![smile smile](/forum/images/graemlins/default/smile.gif)
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#1773639 - 01/08/13 04:32 PM
Re: Is RESPA Triggered?
Glutes
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Power Poster
Joined: Aug 2001
Posts: 7,364
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I love you guys!!
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#1997997 - 02/24/15 09:29 PM
Re: Is RESPA Triggered?
Dan Persfull
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Platinum Poster
Joined: Dec 2005
Posts: 594
Texas
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From 1024.5:
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. ... I thought I had previously asked this question in here and it was answered, but I can't seem to locate the question. Perhaps it wasn't asked and I simply remembered this comment from Dan which reinforced my understanding of when the temporary financing exemption doesn't apply due financing transfer of title the first user. Question...would the temporary financing exemption still apply in an interim construction loan scenario that involves financing the lot PAYOFF as in the example above? Lot payoffs...not to be confused with lot purchases. My understanding has been that in a lot payoff scenario, the transfer of title has already occurred in a previous transaction...so even though part of the loan proceeds (first draw) in an interim construction loan will be used to payoff the lot loan, there isn't any transfer of title going on...correct? While in a lot purchase scenario, if the first draw is used to purchase the lot and therefore transfer title, then obviously the temporary financing exemption would be voided. Sorry if this is a redundant question.
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#1998007 - 02/24/15 09:52 PM
Re: Is RESPA Triggered?
Glutes
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10K Club
Joined: Aug 2002
Posts: 47,648
Bloomington, IN
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If you are paying off an exiting loan on the lot then it has already been purchased and the loan proceeds are not being used to transfer the title to the first user. That has already taken place.
if the first draw is used to purchase the lot and therefore transfer title, then obviously the temporary financing exemption would be voided.
Correct.
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#1998095 - 02/25/15 03:18 PM
Re: Is RESPA Triggered?
Glutes
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10K Club
Joined: Aug 2002
Posts: 47,648
Bloomington, IN
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As long as the transaction is not being purposely structured to circumvent the reg. then there would be no issue. It's not uncommon for someone to find that "perfect" lot to build on but it may be several months or years before they are ready to build their "dream" home on that "perfect" lot but they want to purchase the lot before someone else does.
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#1998242 - 02/25/15 09:26 PM
Re: Is RESPA Triggered?
Glutes
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10K Club
Joined: Oct 2000
Posts: 40,086
Cape Cod
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It is really interesting that so much time is spent by lenders trying to figure out the implications of this single paragraph in Regulation X. It is admittedly a bone of contention, and one that has caused confusion for years.
Once August 1 has arrived, applications received won't have to go through this exhausting analysis. If it will be a closed-end consumer loan secured by real property (dirt, with or without a dwelling, construction or not, temporary or not) and it's not a reverse mortgage, it will be covered by the Integrated RESPA/TILA loan estimate and closing disclosure requirements in Regulation Z sections .19, .37 and .38.
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#1998342 - 02/26/15 03:15 PM
Re: Is RESPA Triggered?
Glutes
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10K Club
Joined: Aug 2002
Posts: 47,648
Bloomington, IN
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When a transaction is "structured" to circumvent the regulation it is generally referred to as evasion, however as you pointed out I'm not aware of a evasion clause in RESPA as there are in Reg. Z.
We have on several occasions made a short term loan to purchase a lot knowing full well it would be anywhere from 2 months on before the borrower would begin construction but they needed to purchase the lot either to keep someone else from purchasing it or the seller would not wait the 60 days or so for the borrower to get a construction loan. Those cases, IMO, are not structured to evade the regulatory requirements. However if the loan officer is wanting to do this simply to avoid a RESPA loan because your FI does not make RESPA covered loans then I would have to opine the transaction is being structured for the purpose of evasion.
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