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Home Financing May Be Affected If Owner Temporarily Leaves Condo/Home – Dodd-Frank bill impacts

Dodd-Frank Bill changes to home financing may affect temporary absence from home/condo, etc.  From a banking law journal : 

 

” If you’re planning to vacate your house during a renovation financed with a home loan, your lender might have just one word for you: Unpack.

After the real-estate market crash and the passage of the Dodd-Frank financial reform law, many banks adopted new occupancy requirements for borrowers. These were meant to filter out house flippers—people who buy and renovate investment properties in hopes of profiting from a quick sale—and to ensure that only qualified borrowers buying a primary residence got the best loans with the lowest interest rate. Since banks view investor loans as riskier than loans for a primary residence, the terms are typically tougher. Interest rates on investor loans can be a percentage point or two higher, and borrowers may be required to pay more cash at closing.

Many lenders burned in the real-estate crash enacted their own occupancy requirements before Dodd-Frank went into effect in January, said Hillary Legrain, senior mortgage officer and vice president at First Savings Mortgage Corp. in Bethesda, Md. “Requiring a borrower to live in the home gives them more of an impetus to complete the construction and not abandon the property,” she said. The provisions apply only to refinanced loans and closed-end loans, which are loans that must be paid back by a certain time.

But these new bank-developed occupancy requirements have tripped up some honest homeowners who have had to prove they’re living in their home full-time, even as it’s being remodeled—and even when there are possible issues of health risks in the home, like lead-based paint or asbestos.

Some banks that didn’t draft their own occupancy requirements are interpreting elements of the Dodd-Frank financial overhaul law, such as the “ability-to-repay” provisions, to include an occupancy requirement, says Guy Cecala, publisher of Inside Mortgage Finance, a Bethesda-based mortgage-research firm. “If they are not living in the house, banks worry that under Dodd-Frank, it isn’t an owner-occupied mortgage anymore,” Mr. Cecala said.