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#1571913 - 06/29/11 10:04 PM If we do a contruction loan....
MB Guy Offline
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If we do a construction loan at our bank (not including the lot purchase), with the perm takeout commitment at a subsidiary mortgage company, does RESPA still apply?
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RESPA
#1572219 - 06/30/11 03:09 PM Re: If we do a contruction loan.... MB Guy
David Dickinson Offline
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If you are doing the construction phase only, there is no title transfer and your bank has a commitment from another lender, you do not have to comply with RESPA. Refer to §3500.5(b)(3).
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#1572540 - 06/30/11 07:06 PM Re: If we do a contruction loan.... David Dickinson
MB Guy Offline
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Yes, agree about the conditions, but I wasn't sure that if a subsidiary mortgage company is doing the perm financing, does that count as us doing the perm for RESPA purposes?

Thanks...
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#1572951 - 07/01/11 03:25 PM Re: If we do a contruction loan.... MB Guy
David Dickinson Offline
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If they are a separate entity (have their own tax ID # and not a department of the bank), then "they" are not "us". If they are a department of your bank, "they" is "you" and then YOU are doing both phases.

I hope this makes sense.
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#1572961 - 07/01/11 03:37 PM Re: If we do a contruction loan.... David Dickinson
RR Joker Offline
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laugh
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#1573640 - 07/05/11 03:12 PM Re: If we do a contruction loan.... RR Joker
MB Guy Offline
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Thanks David, appreciate the clarification.
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#1575297 - 07/07/11 09:20 PM Re: If we do a contruction loan.... MB Guy
isaidno Offline
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What if this happens. You had no intention of doing the permanent financing at your bank and don't issue a GFE or ETIL for construction. Then you find out that the mortgage dept. gave the borrower a commitment letter for permanent financing in the name of your bank along with the GFE and TIL for the end loan? Would we issue a GFE now along with the HUD and just cure the errors? Basically reimbursing all fees?

We had asked for guidance from our compliance resource in the beginning, but none of us knew that the commitment had our name on it. We want to do what is right.

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#1575345 - 07/08/11 01:06 AM Re: If we do a contruction loan.... isaidno
rlcarey Online
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You had no intention of doing the permanent financing at your bank and don't issue a GFE or ETIL for construction.

How can this happen? If you don't have a commitment letter in your hand from another lender, then you have to be contemplating doing the permanent financing.

"The exemption for temporary financing does not apply to a loan made to finance construction of 1- to 4-family residential property if the loan is used as, or may be converted to, permanent financing by the same lender or is used to finance transfer of title to the first user. "

If your mortgage department issued a GFE, then follow the rules found in the FAQ - you can reissue if they gave the proper disclosure - GFE – New construction Q. #1. If not, you are stuck with it without a change in circumstances.
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#1575406 - 07/08/11 12:52 PM Re: If we do a contruction loan.... rlcarey
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Randy is correct. Anytime you don't have a permanent takeout from another lender, you have to assume you could end up making the perm whether you wanted to or not. Anytime you don't have a commitment up front...disclose both phases at the time of the CL and be sure to give the "60 day" construction letter.
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#1575669 - 07/08/11 05:34 PM Re: If we do a contruction loan.... RR Joker
isaidno Offline
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I understand what should have happened. Construction was handled in commercial and the end loan was handled in mortgage. First time for both of them after downsizing. There was a misunderstanding and we thought that we had a committment from an outside source. After the construction closed, we found out mortgage guy issued a committment in our name. He also issued a GFE and TIL, but not for the same rate as the construction loan. So now we're trying to figure out what the right thing is to do to fix it. I understand we can't really "fix" it, but we should be able to get some guidance on what others would do if they were in this situation.

So, we're sitting with a GFE and TIL for the end loan with different rates and fee than what were charged for the construction loan. Would you issue the construction GFE now with no fees and just reimburse them to the customer and leave the end loan GFE and TIL alone for now?

Or would you use the end loan GFE for the construction loan and honor that rate and fees? If so, would we then be able to redisclose if there is a changed circumstance at the end of construction?

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#1575951 - 07/09/11 04:21 PM Re: If we do a contruction loan.... isaidno
rlcarey Online
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These are two separate transactions with separate fees and rates, etc. I'm not sure what the quandary is?
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#1576044 - 07/11/11 01:56 PM Re: If we do a contruction loan.... rlcarey
Always In Training Offline
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You can't give an early TIL or a GFE on a loan that has already closed.

Why was this started on the commercial side? Is it commercial purpose?

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#1576270 - 07/11/11 06:11 PM Re: If we do a contruction loan.... Always In Training
MB Guy Offline
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Sounds like a Private Banking situation.

That said, in a situation like this, I'd try to figure out what situation makes the most sense (original intent by borrower and lender), but always err on the side of the equation that benefits the customer more.

Hard to make a clear decision on what to do without actually knowing what the terms are and how it was originally disclosed.
Last edited by MB Guy; 07/11/11 06:13 PM.
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