Home Improvement Loan Disclosure
Question: We are making a home improvement loan to a customer. Can we prepare disclosures the way we would for construction loans?
Answer: It depends. If you are making a closed end loan with all of the funds advanced at closing - or placed into an escrow account - you should prepare a standard Truth in Lending disclosure showing the APR, finance charge, and payment schedule. However, some home improvement loans may actually be structured more like a construction loan by making advances only as the improvements are made. In effect, these loans, while for the purpose of home improvement rather than home construction, are actually construction loans. If the loan plan meets the definitions of Appendix D, you can use the Appendix D construction loan disclosures for the home improvement/construction loan. However, if the plan for the loan does not meet Appendix D specifications, you'll have to use another method to prepare disclosures.
Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 12, 11/04
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