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#213986 - 07/21/04 07:44 PM Compliance and construction loans
Anonymous
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1. Can we use one ROR form for all of our construction to perm loans (some are for remodeling and some are for purchasing/constructing)?

2. Is it appropriate and compliant to allow borrowers to use some or all of their piggy-back HELOC proceeds to build a home?

3. Do our ARM disclosures need to include the construction loan phase for our construction to perm loans (sometime the construction phase is in excess of 12 mos.)?

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Lending Compliance
#213987 - 07/22/04 01:58 PM Re: Compliance and construction loans
GreatBlue Offline
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GreatBlue
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Colorado
Quote:

1. Can we use one ROR form for all of our construction to perm loans (some are for remodeling and some are for purchasing/constructing)?



Only those loans for remodeling are potentially subject to ROR. You shouldn't require ROR on purchasing/constructing

Quote:

2. Is it appropriate and compliant to allow borrowers to use some or all of their piggy-back HELOC proceeds to build a home?



I don't see any problems with it. You will need to do ROR on the HELOC for subsequent advances.

Quote:

3. Do our ARM disclosures need to include the construction loan phase for our construction to perm loans (sometime the construction phase is in excess of 12 mos.)?



I believe the commentary to 226.19(b) allows you to treat the construction phase separately from the permanent phase for disclosure purposes, but if your construction phase exceedes 12 months, then you are subject to the ARM program disclosures.
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#213988 - 07/22/04 05:27 PM Re: Compliance and construction loans
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Can we provide a one size fits all ROR for all of the loans under #1? Thanks.
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#213989 - 07/22/04 06:19 PM Re: Compliance and construction loans
GreatBlue Offline
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Colorado
I'm not sure exactly what you're asking. You do not want to provide a ROR at all for either the construction or permanent financing of the initial construction of the borrower's principal dwelling.

As to construction loans that are really remodels of the customer's existing principal dwelling, then I would think the general ROR would work for them all.
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#213990 - 07/22/04 06:40 PM Re: Compliance and construction loans
Lavender Offline
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What if it's easier to manage in providing one disclosure across the board? Can we do this for ease/simplicity?
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#213991 - 07/22/04 06:58 PM Re: Compliance and construction loans
RR Joker Offline
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The Swamp
If you will read your RofR forms, you will see that one is for refi at your institution/new money and one is for refi/all new $/different lender...generally. Use what is appropriate for your situation.
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#213992 - 07/22/04 07:05 PM Re: Compliance and construction loans
Lavender Offline
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Waht if we don't know at closing whether or not the HELOC piggyback proceeds are going to be used for construction costs or not? Thanks.
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#213993 - 07/22/04 07:08 PM Re: Compliance and construction loans
GreatBlue Offline
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GreatBlue
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Colorado
Quote:

What if it's easier to manage in providing one disclosure across the board? Can we do this for ease/simplicity?




It's possible I still don't understand your question. But if what you're asking for is whether it's ok to go ahead and provide ROR on true construction loans, IMO, that is a bad idea.

You are doing a disservice to your customer to require them to wait 3 business days before receiving access to funds if there's no regulatory requirement to do so.
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