New York Codes, Rules and Regulations › Title 3 - BANKING › Chapter I - GENERAL REGULATIONS OF THE SUPERINTENDENT › Part 80 - Investment In Junior Lien Mortgage Loans By Commercial Banks, Savings Banks, Credit Unions, Mortgage Bankers And Savings And Loan Associations › Section 80.11 - Bridge loans

Current through Register Vol. 46, No. 28, July 10, 2024
(a) A lender
				may make a junior mortgage loan (as such term is defined in section
				80.1  of this Part) on
				the terms and conditions listed in subdivisions (b) and (c) of this section,
				provided that the borrower occupies the property at the time the loan is made
				and provided that the proceeds of the loan are used or are to be used by the
				borrower to finance the purchase of replacement residential property, as such
				use is ascertained by the lender prior to processing of the application by
				means of a copy of a contract executed by the loan applicant for the purchase
				of the replacement property and by any additional means that the lender may
				require.
(b) A bridge loan, as
				defined in subdivision (a) of this section, may be made by a lender for a
				maximum term of one year. A bridge loan may be made, at the option of the
				lender, without any required repayment of either principal or interest during
				the term of the loan, provided that no compounding of interest occurs. In
				addition, the period for the loan may be divided into two terms, in which
				event, prior to commencement of the additional term, the borrower may be
				required to pay off any interest accumulated over the first term.
(c) All bridge loans shall be offered under
				the following terms and conditions:
(1) The
				loan shall be due and payable upon the closing of the borrower's sale of the
				property securing the loan.
(2) The
				loan may be prepaid by the borrower at any time, without penalty.
(3) The notification provisions of section
				80.5  of this Part
				shall apply to the loan throughout its duration.
(4) The disclosure provisions of section
				80.4  of this Part
				shall apply, except that the alternative disclosures for balloon-payment loans
				contained in section
				80.4(b) 
				shall be stated as:
(i) In the case where the
				lender is offering a single-term loan, or where the lender will offer an
				extension of the loan, which extension was not provided for at the commencement
				of the loan:
THE TERM OF THE LOAN IS [MONTHS] [ONE YEAR]. AS A RESULT, YOU
				  WILL BE REQUIRED TO REPAY THE ENTIRE PRINCIPAL BALANCE AND ANY ACCRUED INTEREST
				  THEN OWING [MONTHS] [ONE YEAR] FROM THE DATE ON WHICH THE LOAN IS MADE.
THE LENDER HAS NO OBLIGATION TO REFINANCE THIS LOAN AT THE
				  END OF ITS TERM. THEREFORE, YOU MAY BE REQUIRED TO REPAY THE LOAN OUT OF ASSETS
				  YOU OWN OR YOU MAY HAVE TO FIND ANOTHER LENDER WILLING TO REFINANCE THE
				  LOAN.
(ii) In the case
				where the lender is offering a loan divided into two terms:
THE TERM OF THE LOAN IS MONTHS. AT MATURITY, MONTHS FROM THE
				  DATE ON WHICH THE LOAN IS MADE, AND IN THE EVENT A REFINANCING IS REQUIRED, THE
				  LOAN WILL BE EXTENDED AT [AN INTEREST RATE TO BE DETERMINED AT THE SOLE
				  DISCRETION OF THE LENDER] [THE SAME RATE] [THE SAME RATE TO BE DETERMINED BY
				  MOVEMENT IN INDEX]. SUCH INTEREST RATE MAY BE HIGHER THAN THE INTEREST RATE TO
				  BE PAID ON THIS LOAN.
In cases where the lender will extend the loan for a second
				  term at the same rate of interest, the last sentence of the above disclosure
				  shall be omitted.
(5) Whether the loan is offered for one term
				or two terms, fees and points may be taken only once at the inception of the
				loan, and the borrower may not be charged more than three points at that time.
				For purposes of this section:
(i) Permissible
				fees are limited to a property appraisal fee and to the fees and expenses for
				obtaining a credit history of the applicant. Any amount collected in excess of
				the actual cost of the credit report fee and property appraisal fee must be
				returned at or prior to closing.
(ii) A point is one percent of the principal
				amount of the loan, which may be charged only at the time of closing of the
				bridge loan.
(6) The
				loan shall be at a fixed rate of interest within each term of the
				loan.