I see that temporary loans and bridge loans -12 months or less (loans that will be satisfied and replaced with permanent financing) are not subject to HPML. I believe temporary and short term loans are subject to HOEPA though. Answer: That is correct.
Construction loans, reverse mortgages, and loans made by a Housing Finance Agency or through the U.S. Department of Agriculture (USDA) Rural Housing Service Section 502 Direct Loan Program are, in certain cases, exempted from HOEPA coverage.
HOEPA does not apply to reverse mortgages, new purchases, or construction or home equity lines of credit. If a loan is subject to HOEPA, the lender must make certain disclosures to the borrower at least three days before the loan is finalized.
A “bridge loan” or “swing loan” in which a lender takes a security interest in otherwise covered 1- to 4-family residential property is not covered by RESPA and this part.
The bridge or swing loan is excluded as temporary financing under § 1003.3(c)(3).
Types of Real Estate Loans Exempt From RESPA Requirements
Normally, loans secured by real estate for a business or agricultural purpose are not covered by RESPA. However, if the loan is made to an individual to purchase or improve a rental property of one to four residential units, then it is regulated by RESPA.
The Home Ownership and Equity Protection Act (HOEPA) was enacted in 1994 as an amendment to the Truth in Lending Act (TILA) to address abusive practices in refinances and closed-end home equity loans with high interest rates or high fees.
Among the restrictions, the requirement for pre-loan counseling, the establishment of an escrow account, and the prohibition of prepayment penalties are notable. However, the requirement for borrower income verification is not mandated under HOEPA for all high-cost loans.
The TILA-RESPA rule applies to most closed-end consumer credit transactions secured by real property, but does not apply to: HELOCs; • Reverse mortgages; or • Chattel-dwelling loans, such as loans secured by a mobile home or by a dwelling that is not attached to real property (i.e., land).
HOEPA covers loans that meet specific criteria: The original mortgage has an APR that is 8 or more points higher than Treasury security rates. A second mortgage has an APR that is 10 or more points higher than Treasury security rates.
Which of the following is not permitted for a HOEPA loan? Making a loan solely based on the collateral value of the property. Under HOEPA, you may not make a loan solely based on the value of the borrower's collateral without considering his/her ability to repay the loan.
The usury laws do not apply to “federally related” loans secured by a first lien on residential property.
What loans are exempt from HOEPA? Not all home loans are subject to HOEPA requirements. Typically, reverse mortgages and construction-only loans are not required to meet HOEPA guidelines.
A bridge loan is a form of short-term financing that provides temporary cash flow when you don't have the funds to make a large purchase.
Obtaining a bridge loan to purchase or refinance a property is typically not considered a taxable event.
Final answer: HOEPA would not apply to a bridge loan to finance construction. Bridge loans are exempt from HOEPA regulations as they are short-term loans for construction, unlike the other options which can fall under HOEPA depending on their terms.
HOEPA (§ 1026.32(a)(1)(ii) and Comments 32(a)(1)(ii)-1 and -3): For HOEPA loans, the adjusted total loan amount threshold for high-cost mortgages for the year 2022 will be $22,969, an increase from $22,052 in 2021.
Which of the following BEST defines a HOEPA loan? An open-end or closed-end loan that has either a fixed or variable rate and has points and fees that exceed 5% of the total loan amount of $21,980 or more. MLO Qualifications and Disclosures - HOEPA/High Cost Loans/Section 32.
Unlike standard mortgage loans, bridge loans aren't covered by the Real Estate Settlement Procedures Act (RESPA), which sets standards for informing consumers about settlement costs and how lenders are paid.
Impose, with limited exceptions, a balloon payment on loans with a term of fewer than five years. Balloon exception for "bridge loans of 12 months or less", or certain rural and underserved or small creditor loans designated under 1026.43 (f) and (e)(6)
The lender must disclose the APR, the regular payment amount (including any balloon payment where the law permits balloon payments, discussed below), and the loan amount (plus where the amount borrowed includes credit insurance premiums, that fact must be stated).
A lender must also keep in mind that, like other consumer loans, bridge loans are subject to TRID disclosures. Therefore, all applicable federal and state lending requirements must be considered from the point of application to ensure that compliance difficulties do not develop down the road.
Bridge loans are typically used in real estate transactions when a person needs to purchase a new home before selling their current home. Because bridge loans are meant to be short-term and temporary, they are not subject to RESPA regulations.
The TILA-RESPA integrated disclosure rules and forms do not apply to HELOCs. Lenders are not required to provide the good faith estimate (HUD-1) described in Regulation X. Instead HELOCs are only subject to the special HELOC requirements in Regulation Z, which are substantially less consumer-friendly.