|
|
|
 |
Compliance Gurus
Lending Gurus
Security Gurus
Marketing Gurus
Technology Gurus
eBanking Gurus
|
Construction Loan Compliance
by Andy Zavoina
BIO AND CONTACT INFO
Question: We make interest only multiple advance construction loans. In many cases, the first draw is taken the day of the settlement to pay off the land acquisition mortgage with the remainder of the loan proceeds used for construction. I think that since we know that one portion of the loan will be be outstanding from day one that we must base the APR on two payment streams; 1. the first draw interest from day one, and 2. the "construction amount" treated seperately in the usual "half amount outstanding at any time" manner. This shoots the APR through the roof. Everyone I ask thinks I am crazy and am overthinking Appendix D.
Answer: I agree with you, because it is the most accurate way to do so. I wrote an Excel template some years ago to allow for this exact funding scenario.
If the accuracy were ever challenged in court, allowing for the initial draw would be much closer to the actual costs than assuming it was spread over the term of the loan.
Appendix D to Reg. Z allows you to use the one-half estimate of the amount funded when you do not know what the schedule of disbursements will be. It is misleading to ignore the initial draw when you know it will be at closing.
First published on BankersOnline.com 9/3/01
Home | Compliance | Lending | Operations | Security | Marketing | Technology | eBanking
BOL Archives Privacy Policy Important Disclaimer Recommend This Site ! Contact Us
BankersOnline is a free service made possible by the generous support of our
advertisers and sponsors. Advertisers and sponsors are not responsible for site content. Please help us keep BankersOnline FREE to all
banking professionals. Support our advertisers and sponsors by clicking
through to learn more about their products and services.
|
|
|
Print Friendly!
Email This Article!
Discuss NOW!