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#1743644 - 09/24/12 11:49 PM Construction Loan - escrows
Many Hats Offline
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Orlando, FL
Can someone please give me a quick & dirty explanation of a one time close and a two time close AND how you would escrow for taxes and insurance for each of those?

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RESPA
#1743677 - 09/25/12 01:00 PM Re: Construction Loan - escrows Many Hats
Dan Persfull Offline
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Dan Persfull
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Posts: 46,418
Bloomington, IN
At a previous employer we did one phase closes. The escrow payments began when the loan went into the P&I payment phase.

For our two phase closes we begin the escrow with the permanent phase.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1743858 - 09/25/12 04:51 PM Re: Construction Loan - escrows Many Hats
Many Hats Offline
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Orlando, FL
Okay, so let's go with a one phase close....how does the bank disclose the escrow on the GFE and HUD?

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#1743870 - 09/25/12 05:10 PM Re: Construction Loan - escrows Many Hats
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
You got me going back a long ways but the initial analysis is based on when the first P&I payment begins and that begins the computation year. The reserves are collected based on that analysis and disclosed as such.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1743988 - 09/25/12 07:43 PM Re: Construction Loan - escrows Many Hats
Many Hats Offline
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Joined: May 2008
Posts: 915
Orlando, FL
So, let's say the construction period is 12 mo (at interest only), then the bank would disclose on the GFE an estimate for the homeowners insurance and issue an initial disclosure statement based on P&I pmts with escrow after the 12 mo. And, the borrower would need to come to closing with escrow reserves (showing in the 1000 series of the HUD)?

This is still confusing to me. I wish I could just have a sample of it being done perfectly.

If anyone is versed in doing these types of construction loans and has samples of the RESPA/TILA disclosures, I would so appreciate it.

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#1744011 - 09/25/12 08:05 PM Re: Construction Loan - escrows Many Hats
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
I wish I could just have a sample of it being done perfectly.

LOL. This is exactly why we don't do the one phase const/perm loans here.

Your escrow documents would look like they would if there was no construction phase. The only difference is the escrow payment doesn't begin until the permanent phase begins and your pay ins and pay outs (computation year) are based on that date.

If your first P&I payment is June of next year then you show your first escrow payment being due in June and then you show the pay outs in the months they are due between June and May to complete your analysis.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1744128 - 09/25/12 11:02 PM Re: Construction Loan - escrows Many Hats
Many Hats Offline
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Joined: May 2008
Posts: 915
Orlando, FL
What about the GFE? Would you show the escrows on the GFE (even though they don't start until later on)?

And, on the HUD, do you collect for for taxes and insurance (and it will just be held in escrow until the pay outs)?

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#1744181 - 09/26/12 12:52 PM Re: Construction Loan - escrows Many Hats
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,418
Bloomington, IN
1. Yes, you are collecting the reserves at closing.

2. As I rememberr any taxes due during the construction period would be the responsibility of the borrower to pay. However the way our taxes are structured very seldom would any be due. They have to have a buildier's risk policy paid through the term of the construction phase with the HOI going into effect 30 days before the first P&I payment is due.
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The opinions expressed are mine and they are not to be taken as legal advice.

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