Hello - hoping for some opinions... We do one time close construction loans, where after construction the note is modified and the loan is amortized out. We don't lock the amortized loan's interest rate until shortly before modification.

We keep the in-house loan during the construction period, and then sell the modified amortized loan to the secondary market.

One of our investors is insisting that we must issue a GFE when we lock the interest rate for the amortized loan... but in reality the loan technically could have been closed months prior to the issuance of the GFE - and we're doing a modification.

In your opinion, is this a valid interpretation? Much appreciated!

bump - anyone have any thoughts on this? Thanks again!

You need to talk to your legal counsel. How someone can modify a short-term multiple advance construction loan into a long term permanent loan without replacing the existing obligation and therefor by pass all permanent disclosures sounds like something the regulators would question whether or not it meets the definition of refinancing under 1026.20 and more importantly see it as a UDAAP.