N.Y. Comp. Codes R. & Regs. tit. 3 § 82.10

Current through Register Vol. 46, No. 45, November 2, 2024

Section 82.10 - Bridge loans

(a) A lender may make a first-lien mortgage loan 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 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 82.5 of this Part shall apply to the loan throughout its duration.

(4) The disclosure provisions of section 82.6 of this Part shall apply, except that the alternative disclosures for balloon-payment loans contained in section 82.6(b) of this Part 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 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; and

(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.

N.Y. Comp. Codes R. & Regs. Tit. 3 § 82.10