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#1645810 - 01/04/12 03:42 PM Home Improvement/Construction TIL
Arizona Offline
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Joined: Nov 2009
Posts: 106
How would you handle TIL for a borrower request to refinance home and add $50,000 to make home improvements? The borrower wants to continue to make principal and interest payments however the loan will not be fully disbursed all at once, it would be handled in disbursements over a 4 month period. How would you disclose this type of scenario for TIL purposes so that it does not appear that you are over disclosing interest?

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#1645836 - 01/04/12 04:21 PM Re: Home Improvement/Construction TIL Arizona
Richard Insley Offline
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Richard Insley
Joined: Oct 2000
Posts: 10,179
Toano, VA
If you're the first lienholder and there's no one behind you, why don't you do a simple construction-only loan under a second mortgage? When the funds are fully advanced and the construction note matures, then refi the two together. If the borrower want's to start making higher payments now, you can modify the existing mortgage note with no need for TIL disclosures. The construction loan disclosures can be calculated using Appendix D. When you do the final refi, it will disclose like any other mortgage loan.
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#1645866 - 01/04/12 04:57 PM Re: Home Improvement/Construction TIL Arizona
Arizona Offline
100 Club
Joined: Nov 2009
Posts: 106
If we have a new construction/perm loan where the borrower is requesting to make P & I payments, how should that scenario be handled for TIL purposes?

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#1645939 - 01/04/12 06:02 PM Re: Home Improvement/Construction TIL Arizona
Richard Insley Offline
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Richard Insley
Joined: Oct 2000
Posts: 10,179
Toano, VA
How are you handling the payment schedule?
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#1645956 - 01/04/12 06:23 PM Re: Home Improvement/Construction TIL Arizona
Arizona Offline
100 Club
Joined: Nov 2009
Posts: 106
That is what we are attempting to figure out. We were going to amortize as if the full amount is disbursed but wouldn't that over disclose the interest? Would sure be nice if there was a how to book with dozens of different disclosures samples but that would change as soon as rules change again.

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#1646019 - 01/04/12 07:27 PM Re: Home Improvement/Construction TIL Arizona
Richard Insley Offline
10K Club
Richard Insley
Joined: Oct 2000
Posts: 10,179
Toano, VA
TIL disclosures must reflect the legal obligation between you and the borrower. That includes your obligation to fund the loan, i.e., the amounts and timing of advances. It also includes the repayment plan--amounts and timing.

Unless you're setting a fixed funding schedule, you will need to estimate the amount of construction interest and fit that into the new promise to pay. You'll also need to project the amortizing principal balance on the old money as of the date you expect the new money to be advanced in full. Using that value and date, you can then calculate the new P&I necessary to pay the loan off on the scheduled maturity date.
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