I'm still working on an ARM const/perm product. We have decided to disclose it with two truth in lending disclosures. My construction TIL is showing interest only and looks fine. However, the interest rate and payment summary portion of the TIL for the perm portion is also showing the interest only payments for the consturction loan. Its it anyone elses understanding that if I'm disclosing the interet only portion on the construction TIL that the perm TIL wouldn't include interest only payments but would only show the amortized portion of the transaction?

Sounds like your "perm" disclosure is a contruction/perm disclosure.

The problem that you have by now separating the construction/perm loan into two disclosures is that it leaves the bank in no-mans land. There is absolutely no guidance as to how to treat the loan from an HPML or for rate spread reporting in HMDA.........

...except for the Reg. Z transaction disclosures which are less likely to stumble into reimbursement status when you divide and conquer.

Richard,

Those are ones that I am talking about. While Appendix D remains - which allows you to split the transaction for TIL disclosure purposes, the newer HPML rules trigger when the APR exceeds a specific threshold. Which APR do you use if you have two?? The same applies for reporting the APR rate spread for HMDA - which one do you use? There is no guidance in either regulation that addresses this.

It is once again a situation where the complexity of the regulations have outstripped its own complexity So, divide and conquer from a reimbursement status and get cited for two unrelated violations??

Has anyone asked the regulators how they're training examiners to check and enforce these confusing rules?

Until it's clear, the best course of action would be to weigh the risks and penalties that would apply if you guess wrong. I'd also consider which violations might cost an exam-rating downgrade. Regardless of the ultimate decision, keep good records of the process used to arrive at a decision. That will demonstrate attention to changing requirements and good faith efforts to parse the old vs. new rules in order to arrive at course of action most likely to comply with all the rules as you understand them.

oh my - this is doomsday! We started as one TIL but because of the research I did we changed to two TIL's because of the possible reimbursement issues. I'm hoping we will be okay on the HPML as we always verify income and will be escrowing on these accounts. The HMDA issue has thrown me for a loop now!

Based on the following, I thought construction phase was exempt from HPML criteria. If that is the case, then if you disclose as two transactions ( and you do them both at consummation)the long term TIL disclosure & terms would reflect the HPML constraints..

What have I missed?

§ 1026.35 Prohibited acts or practices in connection with higher-priced mortgage loans
(3) Notwithstanding paragraph (a)(1) of this section, the term “higher-priced mortgage loan” does not include a transaction to finance the initial construction of a dwelling, a temporary or “bridge” loan with a term of twelve months or less, such as a loan to purchase a new dwelling where the consumer plans to sell a current dwelling within twelve months, a reverse-mortgage transaction subject to §1026.33, or a home equity line of credit subject to §1026.40.

That is the $64,000 question. It is not two transactions, it is one. Plus most of the time, all the PPFCs are loaded into the construction loan.

Ahhh, I see what you mean now! I guess there is just no easy solution. Then it would seem, disclosing as 1 step would be the safer process?