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#1887982 - 01/17/14 03:56 PM Construction Period
Kelsey D Offline
Platinum Poster
Joined: Aug 2006
Posts: 516
Ohio
We are doing a 12 month construction loan with 11 interest-only payments followed by a balloon payment. Initially, I assumed this loan was exempt from ATR. But what if our loan closes on 2/20 with the first payment on 4/1 and final payment on 3/1 of next year? Technically the construction period exceeds 12 months due to the odd days in February. Is this loan subject to ATR?
_________________________
Don't make me say, "I told you so!" Sincerely, your friendly Compliance Officer.

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Ability to Repay/Qualified Mortgage Rule
#1892679 - 01/31/14 07:22 PM Re: Construction Period Kelsey D
Kelsey D Offline
Platinum Poster
Joined: Aug 2006
Posts: 516
Ohio
Still no definitive answer on this. Our vendor is taking the conservative approach and considering the loan in my example to be covered by ATR.

The commentary specifically addresses odd days in regard to the maximum 30 year term for QMs. It says...

Quote:
Paragraph 43(e)(2)(ii).
1. General. The 30-year term limitation in 1026.43(e)(2)(ii) is applied without regard to any interim period between consummation and the beginning of the first full unit period of the repayment schedule. For example, assume a covered transaction is consummated on March 20, 2014 and the due date of the first regular periodic payment is April 30, 2014. The beginning of the first full unit period of the repayment schedule is April 1, 2014 and the loan term therefore ends on April 1, 2044. The transaction would comply with the 30-year term limitation in 1026.43(e)(2)(ii).

Unfortunately, there's no similar language in regard to the 12-month construction term.

Is anyone else dropping their construction phases to 11 months or less to avoid ATR requirements?
_________________________
Don't make me say, "I told you so!" Sincerely, your friendly Compliance Officer.

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#1892683 - 01/31/14 07:27 PM Re: Construction Period Kelsey D
hgliii Offline
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Joined: Mar 2012
Posts: 574
IMO, a construction loan is exempt from ATR, unless your are also making the permanent loan also.

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