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Under the ATR rules there is an exemption from certain sections of 1026.43 for “temporary financing”. It states:
(ii) A temporary or “bridge” loan with a term of 12 months or less, such as a loan to finance the purchase of a new dwelling where the consumer plans to sell a current dwelling within 12 months or a loan to finance the initial construction of a dwelling;My question: is this simply a term length based test? Would a 6 month loan that is going to be repaid with cash still be exempt simply beacuse the term is 12 months or less or would this loan not be exempt because it isn’t a bridge to actual permanent financing?
Yes, the test is basically a term length based test. The Commentary in Section .43(a)(3)(ii) states, “a temporary or “bridge” loan with a term of 12 months or less is exempt from § 1026.43(c) through (f). Examples of such a loan are a loan to finance the purchase of a new dwelling where the consumer plans to sell a current dwelling within 12 months and a loan to finance the initial construction of a dwelling. Where a temporary or “bridge loan” is renewable, the loan term does not include any additional period of time that could result from a renewal provision provided that any renewal possible under the loan contract is for one year or less. For example, if a construction loan has an initial loan term of 12 months but is renewable for another 12-month loan term, the loan is exempt from § 1026.43(c) through (f) because the initial loan term is 12 months.”
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