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#1651341 - 01/17/12 03:41 AM escrow construction loan
banker-12 Offline
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On a construction/permanent loan (one closing), we escrow taxes and insurance after the construction is completed and the loan is setup in payments. At this time, we provide the initial escrow disclosure and collect the escrow funds from the customer.

I noticed that we are not disclosing the escrows on the GFE or the HUD - is this okay or should we be disclosing it?

thanks,

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RESPA
#1651359 - 01/17/12 01:24 PM Re: escrow construction loan banker-12
Dan Persfull Offline
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Dan Persfull
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Posts: 47,030
Bloomington, IN
Quote:
On a construction/permanent loan (one closing), we escrow taxes and insurance after the construction is completed and the loan is setup in payments. At this time, we provide the initial escrow disclosure and collect the escrow funds from the customer.


I'm not quite sure how your "one time" close works from the above statements. All the one time closings I was associated with in the past did not require payments to be set up when the construction phase was complete. If the construction was to take 9 months the loan was set up with 9 monthly interest payments with the P&I beginning in month 10 regardless if construction was complete. If they needed an extension for the construction phase they had to apply for the extension and a new loan was made.

If you truly have a one time closing then all fees and charges associated with the loan settlement should be disclosed on the GFE and HUD.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1651921 - 01/18/12 05:14 AM Re: escrow construction loan banker-12
banker-12 Offline
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I meant to say that escrows are added to the loan when the first P & I pmt is due - loan is setup as you described above (9 monthly int pmts with the P&I due in month 10).

So should we disclose the escrows on the GFE & HUD

thanks

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#1651944 - 01/18/12 01:21 PM Re: escrow construction loan banker-12
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
If you are requiring escrow then it should be set up and disclosed with the consummation of the loan with the initial analysis given at that time or within 45 days of establishing the escrow account.

In the one time closings I referenced above the escrow account was established at consummation and the initial analysis was based on when the first P&I payment came due. There was no escrow payments during the construction phase of the loan. The first escrow payment came due with the first scheduled P&I payment.

I know it's a personal preference but after working both with a single phase (1 closing) const/perm loan and a 2 phase (2 closings) const/perm loan, the 2 phase is much easier to deal with IMO. Especially if there are cost overruns and/or other modification needed during the construction phase.

I've not dealt with a single phase const/perm loan in over 10 years and I don't miss them at all. smile
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#1652566 - 01/19/12 04:46 AM Re: escrow construction loan banker-12
banker-12 Offline
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Thank You

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#1664439 - 02/13/12 09:29 PM Re: escrow construction loan banker-12
banker-12 Offline
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We have changed our procedure when doing one time closing construction/permanent loans and are now collecting escrows at consummation(from above post)-

But we still have one construction/perm loan that we didn't collect escrows at closing. We are setting escrows up now but the customer does not have the initial deposit. this is a HPML.

Loan officer does not want to collect the initial deposit since customer does not have it and wants to set up the escrow payment for taxes based on 8 months rather than 12 to ensure we have enough to pay the taxes come October.

Can we do this?

thanks,

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#1664642 - 02/14/12 02:11 PM Re: escrow construction loan banker-12
Dan Persfull Offline
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Dan Persfull
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Posts: 47,030
Bloomington, IN
No. The escrow analysis rules (both initial and annual) are specifically spelled out in 1024.17.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#1665281 - 02/14/12 10:47 PM Re: escrow construction loan banker-12
banker-12 Offline
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Posts: 1,216
thank you

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#1665501 - 02/15/12 03:38 PM Re: escrow construction loan banker-12
banker-12 Offline
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Is collecting the cushion optional? May we collect only a month cushion or no cushion? under 1024.17 it says "cushion means funds that a servicer may require a borrower to pay......"

thanks,

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#1665768 - 02/15/12 07:53 PM Re: escrow construction loan banker-12
Dan Persfull Offline
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Dan Persfull
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Posts: 47,030
Bloomington, IN
The cushion is optional, it should be applied uniformly though to avoid any potential fair lending risks. However an exception to the rule should not cause any issues as long as the exception doesn't become the rule.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#1667256 - 02/17/12 07:24 PM Re: escrow construction loan banker-12
banker-12 Offline
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Posts: 1,216
We have a construction/perm loan (one time closing)- the loan is a 12 month interest only during the constrution phase with P & I pmts due in April 2013. Taxes are due in October 2012( at this time it will still be for land only).

We estimate the taxes and hazard insurance on the GFE, but how do we disclose it on the intitial escrow disclosure and the HUD at closing when we don't have the actual premium for the hazard insurance (not issued until construction is complete)or the taxes including the improvements.

Will we escrow taxes based on the land only since that's what will be due for 2012 and than prepare another initial escrow disclosure when construction is complete to include both the taxes and the hazard ins?

thanks,

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#1667519 - 02/21/12 04:59 AM Re: escrow construction loan banker-12
banker-12 Offline
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anyone have any thoughts to my situation stated above.......I find escrows to be difficult and I'm not sure how we are suppose to disclose escrows on a construction/permanent loan (one time closing).

thanks,

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#1668637 - 02/23/12 06:12 AM Re: escrow construction loan banker-12
banker-12 Offline
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Joined: May 2007
Posts: 1,216
thank you

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