Disclosures Requirements Short Term Loan

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Question:

We are making a loan to a consumer to purchase a residence and to do some renovations. The loan will be for one year until the improvements have been made and then it will be financed on the secondary market. Is this considered a RESPA loan and will need all the early disclosures.

Answer:

RESPA does not apply to temporary financing. Although that term is not defined in RESPA or HUDs Reg X, a one year loan that is to be repaid with proceeds from a more permanent secondary market eligible loan would fall into that category in my opinion and experience.

First published on BankersOnline.com 2/21/11