My management team has decided to create a "One Time Close" construction and permanent financing product. I have never worked with this product and need guidance.

The loan structure is intended to be either a 5 or 7 year note with an amortization of up to 30 years. The initial payment will be an interest only payment during the advancing portion (either 12 or 18 months). The loan will automatically convert to a P&I payment for the remainder of ther term, with a balloon payment at the end.

I know the regulatory requirements are different since the temporary exemption no longer applies to this product. What would the disclosure requirements be in the two situations below?

1. What is the impact if the revolving period (interest only monthly payments) needs to be extended because the construction phase did not get completed in the expected timeframe?

2. What is the impact if the construction phase has cost over-runs and the client requests an increase to the loan amount? This would happen in the interest only advancing portion before the P&I payments start.

At least the interest rate is fixed so we don't have an ARM loan.

To start, these loans will need RESPA disclosures if they're to consumers, if these are commercial requests they wouldn't.

1. If your borrowers do not get their construction completed before the end of the interest only period. Modify or refinance the loan.

2. If the construction phase has over-runs. You can either refinance w/ new money. Or you could give them another loan secured by the 2nd lien (if enough equity is availsble) or another form of collateral.

These loans will also be reportable to HMDA as purchases.

This should help, I know I'm just skimming the surface though.