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Additional funds for a construction loan and disclosures

Question: We make combined construction-permanent loans with complete RESPA and TIL disclosures when we close on the construction phase of the loan. If a borrower requests additional funds to complete construction, and adds this amount to the permanent loan, do we need to redisclose?

Answer: As long as your first set of disclosures were correct and accurate, you should not have to redisclose. This additional advance could be handled as a modification to the existing loan. The customer became obligated for both loans (and so did the lender) at the original settlement. The advance or modification is a subsequent event unless you decide to prepare new loan documents.

Copyright © 2003 Compliance Action. Originally appeared in Compliance Action, Vol. 8, No. 7, 7/03

First published on 07/01/2003

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