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#482274 - 03/16/06 06:22 PM
Re: HMDA Temporary Financing Cave In
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Junior Member
Joined: May 2004
Posts: 45
Tennessee
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My word....I can not absorb all this INFORMATION. OK, so what about the customers we have who build a spec house? They will not payoff the loan with long term financing, but rather from sale of the property(hopefully). We're saying this loan is reportable. I say that knowing that the definition of temp financing includes construction loans, but due to the way the loan will be paid off is why we determine it to be HMDA reportable. Right?
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#482275 - 03/16/06 07:25 PM
Re: HMDA Temporary Financing Cave In
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Platinum Poster
Joined: Apr 2005
Posts: 639
Out there
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I agree. I think we need some expert clarification on this spec house issue.
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#482276 - 03/16/06 07:29 PM
Re: HMDA Temporary Financing Cave In
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Platinum Poster
Joined: Mar 2004
Posts: 600
IN
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I am of the opinion that if any regulator or examiner wants to assert that any construction only loan must be reported, then they should be prepared to re-write the GIR, considering the multiple places it clearly states that a construction only loan is not reportable. What if your bank had two procedures regarding the same subject and the two procedures had contradictory information? To me this is the same situation.
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Watch out, brother, for that long black train...
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#482277 - 03/17/06 01:07 PM
Re: HMDA Temporary Financing Cave In
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100 Club
Joined: Mar 2005
Posts: 126
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I'm beginning to think they should just do away with the temporary financing exemption altogether. A little more work for a lot fewer headaches. By reporting the splash and dash loans, IMO we're reporting useless data now anyway, why not make it all a pile of garbage.
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#482278 - 03/17/06 02:17 PM
Re: HMDA Temporary Financing Cave In
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Platinum Poster
Joined: Jul 2005
Posts: 961
Lost in a regulatory fog
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The stance I'm taking is... A splash and dash loan is financing for a borrower to purchase a home, fix it up (splashes paint on it), and then will payoff the loan with the sale of the property (dashes). This loan is HMDA reportable (and may or may not be subject to RESPA). A spec house loan is financing for a borrower to construct a home, and then pay it off with the sale of the house. This loan is a construction loan and not HMDA reportable (and not subject to RESPA unless the purchase of the lot is included, or the term is more than 2 years). I talked to one FDIC guy and got the okay (of course not in writing  )
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#482279 - 03/17/06 04:38 PM
Re: HMDA Temporary Financing Cave In
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Junior Member
Joined: May 2004
Posts: 45
Tennessee
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My brain has hemorrhaged.....what do you think about the following?
1) individual's construction loan - will be replaced with perm (15,20,30 year mortgage) - Not HMDA applicable
2) construction loan contractor (spec) - will pay off with sale of collateral or some other means of income (anything other than perm financing) - HMDA applicable
3) contractor or individual build house to sell (spec)...house doesn't sell, has to be placed on payments with us. Term isn't 15-20-30, but more like 3 or 5 year with a balloon. Still consider this temporary financing - HMDA reportable.
The reason I say this is: the Q&A answers the one about splash and dash, the words "much longer" term does not tell me what I need to know, so I err on the side of obvious (15-20-30 year)and hope that works.. You know this will change about November of this year and what ever we have done will not be right and we'll have to start over!!!!!
Help me out guys...opinions please
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#482280 - 03/17/06 04:45 PM
Re: HMDA Temporary Financing Cave In
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10K Club
Joined: Aug 2002
Posts: 47,763
Bloomington, IN
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IMO 1 & 2 still falls within the construction loan exemption.
#3 would be reportable as a home purchase. Balloon loans are not temporary financing.
Keep in mind the Q&A is referencing a "splash & dash" loan. These loans are not the same as a construction loan.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#482281 - 03/17/06 05:44 PM
Re: HMDA Temporary Financing Cave In
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Junior Member
Joined: May 2004
Posts: 45
Tennessee
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on # 2 - the spec that will pay off with something other than perm financing....anything thing we do with that loan will still only be a fix until the customer can get the house sold.....the loan was never meant to be permanent and the contractor never has intentions of keeping it in his name with a long term mortgage...please explain. I agree under the old definition, but how do you discount the new one in the Q & As?
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#482282 - 03/17/06 06:02 PM
Re: HMDA Temporary Financing Cave In
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10K Club
Joined: Aug 2002
Posts: 47,763
Bloomington, IN
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The splash and dash loan is to purchase an existing dwelling, renovate it and sell it. That is not a construction loan. Building a spec home is a construction loan, and construction loans are specifically exempt.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#482283 - 03/17/06 07:05 PM
Re: HMDA Temporary Financing Cave In
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Gold Star
Joined: Nov 2005
Posts: 315
Oregon
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But the Q&A says that Construction loans are loans that are designed to be replaced by permanent financing of a much longer term. They've changed the definition. I don't like it one bit, but I don't see how you can avoid reporting spec construction with the way the Q&A is worded.
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You keep using that word. I do not think it means what you think it means.
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#482284 - 03/17/06 08:29 PM
Re: HMDA Temporary Financing Cave In
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Junior Member
Joined: May 2004
Posts: 45
Tennessee
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I agree, the change in wording now takes away that neat little "time" matter and makes you think about the way a loan is handled when it matures
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#482285 - 03/17/06 08:41 PM
Re: HMDA Temporary Financing Cave In
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10K Club
Joined: Aug 2002
Posts: 47,763
Bloomington, IN
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The examples indicate that financing is temporary if.........
The Q&A has not changed the definition of a construction loan. As long as the construction loan is for the initial construction of the dwelling, I will rely on the construction exemption until there is written regulatory clarification to do otherwise.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.
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#482287 - 03/17/06 10:30 PM
Re: HMDA Temporary Financing Cave In
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10K Club
Joined: Nov 2000
Posts: 18,765
Central City, NE
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Quote:
So what does the Fed intend banks to do that finance housing tract financing for builders such as Centex, Griffin, S&S, Benchmark, and so on?
Good question. They didn't collect on these loans in the past. That doesn't make it wrong today. The FRB drew a line in the sand that said "we don't want temporary loans." That excluded Spec homes.
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#482288 - 03/17/06 10:33 PM
Re: HMDA Temporary Financing Cave In
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10K Club
Joined: Nov 2000
Posts: 18,765
Central City, NE
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Quote:
David,
I was trying to ooze with sarcasim. Maybe that wasn't coming through. I agree that reporting spec construction is totally inconsistant with what what Reg. C says.
I didn't pick up on this. Sorry. Probably because this whole topic makes me mad. 
Quote:
. . . but we've nevertheless changed our policy so that we report any construction or bridge loan that isn't being replaced by long term financing.
I think this is incorrect. Over reporting is not OK. I believe this will be a violation at your next exam. Maybe you have discussed this with your local examiners. If not, I encourage you to do so.
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#482289 - 03/17/06 10:36 PM
Re: HMDA Temporary Financing Cave In
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10K Club
Joined: Nov 2000
Posts: 18,765
Central City, NE
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Quote:
The stance I'm taking is...
A splash and dash loan is financing for a borrower to purchase a home, fix it up (splashes paint on it), and then will payoff the loan with the sale of the property (dashes). This loan is HMDA reportable (and may or may not be subject to RESPA).
A spec house loan is financing for a borrower to construct a home, and then pay it off with the sale of the house. This loan is a construction loan and not HMDA reportable (and not subject to RESPA unless the purchase of the lot is included, or the term is more than 2 years).
Perfect! That's exactly right. I haven't heard from any examiners that say anything different than this. The Splash and Dash memo (fiasco) didn't say to change this either.
If you all read Dan's and post and mine, you'll see that we are consistent are this. Spec Houses (construction) are NOT reported.
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#482290 - 03/17/06 10:45 PM
Re: HMDA Temporary Financing Cave In
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10K Club
Joined: Nov 2000
Posts: 18,765
Central City, NE
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I'm going to address these two posts with one: Quote:
on # 2 - the spec that will pay off with something other than perm financing....anything thing we do with that loan will still only be a fix until the customer can get the house sold.....the loan was never meant to be permanent and the contractor never has intentions of keeping it in his name with a long term mortgage...please explain. I agree under the old definition, but how do you discount the new one in the Q & As?
Quote:
But the Q&A says that Construction loans are loans that are designed to be replaced by permanent financing of a much longer term. They've changed the definition. I don't like it one bit, but I don't see how you can avoid reporting spec construction with the way the Q&A is worded.
You are both taking 1 sentence from the Q&A and placing your entire definition of temporary on it. ยง203.4(d)(3) says NOT to report "Temporary financing (such as bridge or construction loans)" Construction and bridge loans are ALWAYS exempt. The FAQ doesn't contradict this.
Read the entire Answer (from the FFIEC FAQ):
Answer: The regulation lists as examples of temporary financing construction loans and bridge loans. See 203.4(d)(3). Construction and bridge loans are illustrative, not exclusive, examples of temporary financing. The examples indicate that financing is temporary if it is designed to be replaced by permanent financing of a much longer term. A loan is not temporary financing merely because its term is short. For example, a lender may make a loan with a 1-year term to enable an investor to purchase a home, renovate it, and re-sell it before the term expires. Such a loan must be reported as a home purchase loan. See 203.2(h).
It says Construction and Bridge loans are Illustrative. IOW, there may be other types of temporary financing. Then the Q&A gives some guidance for other types. This doesn't over ride what you already have exempt (construction/bridge). It gives guidance on OTHER types of temporary loans that may exist.
For instance, if I wanted to borrower money to remodel my kitchen. If you did a multiple advance HI loan that will be replaced at the end of the improvement period (6 months) with a 5 year loan, this first loan would NOT be reported, yet it isn't a "construction" loan.
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#482291 - 04/05/06 05:11 PM
Re: HMDA Temporary Financing Cave In
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Power Poster
Joined: Feb 2005
Posts: 5,349
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Thanks for all the information.
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#482292 - 04/26/06 04:41 PM
Re: HMDA Temporary Financing Cave In
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New Poster
Joined: Mar 2006
Posts: 7
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I read on the internet that the rehab loans ahould have been included in our 05 submission. Did anyone back up and do this? Did anyone resubmit? I couldn't find on the FFIEC site where it said we must.
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#482293 - 04/26/06 05:07 PM
Re: HMDA Temporary Financing Cave In
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Diamond Poster
Joined: Sep 2005
Posts: 1,163
Georgia
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By calling it a clarification, they technically required you to back up and do that. Talk to you EIC and see if he/she will agree to not ask about that issue for 2005 on the basis that moving temporary loans to permanent loan status in November was more than a mere clarification of an existing rule.
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#482294 - 04/26/06 08:04 PM
Re: HMDA Temporary Financing Cave In
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Power Poster
Joined: Mar 2004
Posts: 6,172
Further South than I wanna be.
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I think there has been a variety of answers to this. I was told by our examiner that I had to go back and add them. Others were told they didn't have to. I think you better contact your examiners and ask them.
_________________________
Life is not the way it's supposed to be. It's the way it is. The way you cope with it is what makes the difference.
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#482295 - 05/05/06 10:40 PM
Re: HMDA Temporary Financing Cave In
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Gold Star
Joined: May 2006
Posts: 452
Between here and there
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I just finished reading this entire thread (with great interest) and noticed how interpretations by the posters (and your regulators) changed from January to April. This has been a nightmare for us too, because our niche is construction lending (no end financing, EVER).
I'm wondering if any of you listened in on the FDIC's Chicago Region conference call on 4/25/06. The phones at the local FDIC field office were ringing off the hook after that one. Here is some of the guidance we received by 2 Field Examiners out of the Princeton Field office and L. Ray Jackson, the Regional Director, who I'm sure many of you are familiar with:
1) Purchase and rehab loans (splash & dash) are HMDA reportable because the event that came first is the purchase.
2) Developing a tract of land and building homes for resale - NOT HMDA reportable.
3) Conversion of a building from commercial use to residential condos - NOT HMDA reportable.
4) Large addition to a home (even if over 50% SF addition) is a home improvement loan, not construction
5) Tear downs - if 2 separate loans, the loan to purchase the lot is HMDA reportable as a purchase, and the construction loan is NOT HMDA reportable. If it is all one loan, NOT HMDA reportable.
Needless to say, this guidance pretty much was the opposite of previous instructions. When I called our Review Examiner, she said, "Heard you on the call and was expecting to hear from you". I provided her with an email listing numerous questions regarding construction loans, refinancing, when is a dwelling a dwelling (how much has to be completed before it is a dwelling), etc. My last email from her said they were going to Washington with my concerns. We have an examiner coming on-site on Tuesday 5/9/06 to provide HMDA training for our Lenders and Admin. Assts. I will post her remarks/responses after that.
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#482298 - 05/08/06 06:48 PM
Re: HMDA Temporary Financing Cave In
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Gold Star
Joined: May 2006
Posts: 452
Between here and there
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Actually, not all "tear downs" are old delapedated houses. Most of ours are pretty nice houses, but the builder wants the lot to build an even bigger and better house.
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