[tressa]

Would a loan to purchase and remodel a dwelling secured with the dwelling – 12 month term – interest only, setup as a construction line of credit qualify as an exemption (temporary financing) under the Ability to Repay Rules? The loan will be replaced with permanent financing at maturity.

Topic

[rcooper]

Yes, based on what you’ve described – a 12 month loan that will be replaced by permanent financing when the initial 12 month loan expires – it seems to be a temporary loan and would be exempt (per 1026.43(a)(3)(ii)) from the ATR requirements of 1026.43(c)-(f).

[Author]

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