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#1602998 - 09/13/11 06:00 PM Construction Loan explanation...
MB Guy Offline
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Joined: May 2004
Posts: 10,124
Way, way south.
I wrote the following brief explanation for some of our private bankers just to give them an idea as to how a RESPA GFE works with construction loans.

I appreciate anything you can add or find that is incorrect, thanks.

Quote:
1. Single Closing:

a. When there is a single closing, there should be one Good Faith Estimate (GFE) prepared for the entire transaction, listing all appropriate settlement costs associated with both the construction and permanent portions of the loan including inspection fees, flood insurance, etc. on that one GFE.
b. Any fees that may be specific to construction loans, as well as any costs related to the permanent financing portion of the loan must be on the GFE.
c. The GFE must be given to the consumer within three days of the completed application.
d. The bank will be held to the related tolerances for accuracy of the settlement costs on the GFE through the inception of the permanent portion of the loan.

2. Two Closings:

a. If there are two closings, one for the temporary financing and one for the permanent financing, two GFEs should be prepared reflecting the closing costs for each portion of the loan, but both must be given to the customer within three days of the completed application.
b. The bank must provide the GFE to the borrower with a clear and conspicuous disclosure stating that at any time up until 60 calendar days prior to closing, the loan originator may issue a revised GFE. If no such separate disclosure is provided, the loan originator may not issue a revised GFE in the absence of changed circumstances or another event (24 CFR 3500.7(f)).
c. The bank may change the settlement costs portion of the permanent financing by reissuing a GFE at least 60 days prior to the closing on the permanent portion of the loan.
d. Again, however, the bank will be held to the related tolerances for accuracy of the appropriate settlement costs on the GFE for the permanent portion of the loan.
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RESPA
#1603022 - 09/13/11 06:21 PM Re: Construction Loan explanation... MB Guy
RR Joker Offline
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The Swamp
I won't comment on the first part since I've never been exposed to single closings...but the two closings looks okay to me.
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#1603032 - 09/13/11 06:28 PM Re: Construction Loan explanation... RR Joker
#Just Jay Offline
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#Just Jay
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Cheeseheadland
I won't comment on the second part since I've never been exposed to two closings...but the single closing looks okay to me.
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#1603034 - 09/13/11 06:32 PM Re: Construction Loan explanation... #Just Jay
MB Guy Offline
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Joined: May 2004
Posts: 10,124
Way, way south.
Thank you both.
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#1603042 - 09/13/11 06:35 PM Re: Construction Loan explanation... MB Guy
RR Joker Offline
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RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
laugh
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My opinion only. Not legal advice.

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#1603123 - 09/13/11 07:55 PM Re: Construction Loan explanation... #Just Jay
Arizona Offline
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Joined: Nov 2009
Posts: 106
Would anyone have a sample of what a single close construction to perm loan would look like?

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#1638133 - 12/12/11 08:00 PM Re: Construction Loan explanation... MB Guy
Daylily Offline
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Joined: Apr 2009
Posts: 13
Georgia
We have a const/perm one time closing where we are doing the const phase and then a modification for the perm phase with our secondary market lender. We failed to disclose the construction loan fees (inspection, flood, etc) on the GFE. When we do the HUD will these be reimbursable or since the bank does the inspections can we just not show any of the construction fees on the HUD?

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#1638236 - 12/13/11 02:27 AM Re: Construction Loan explanation... Daylily
rlcarey Online
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rlcarey
Joined: Jul 2001
Posts: 78,925
Galveston, TX
Modifying a construction loan to permanent financing? This has been discussed before and I am really at a loss how you would do that in today's environment and get all the disclosures correct. You need legal counsel assistance.
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