We believe that the ability-to-repay (ATR) and qualified mortgage (QM) rules exempt all bridge loans with terms of twelve months or less, regardless of when a bridge loan was entered into. 12 CFR 1026.43(a)(3)(ii). (The regulations do not fully define the term “bridge loan,” other than specifying that the term of such a loan should be twelve months or less.)

If a loan qualifies as a bridge loan, and has a term of twelve months or less, the ATR/QM rules will not apply to a renewal of the loan for a term of twelve months or less (provided that the transaction is not considered a “refinancing” under Regulation Z). As explained in the staff commentary:

“Renewable temporary or ‘bridge’ loan. — Under §1026.43(a)(3)(ii), 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.” Official Interpretations, 12 CFR 1026, Paragraph 43(a)(3), Comment 1.