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#2044801 - 10/17/15 10:43 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
RVFlyboy Offline
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Soaring over Georgia
You have to remember, Farm Girl, that although FDIC has responsibility for examining and enforcement, only the CFPB has interpretive authority for Reg Z.
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TRID - TILA/RESPA Integrated Disclosures Rule
#2044857 - 10/19/15 03:35 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
I have not heard from the CFPB but my FDIC Review Examiner telephoned me this morning. She will be discussing the issue with a couple of "senior" examiners and she also impliend they then will most likely contact Washington.
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#2044874 - 10/19/15 04:13 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
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Illinois
We have a construction only LE that has to go out today. MortgageBot is disclosing as interest only fixed and showing the interest payment as if the loan were fully disbursed on day 1. We talked to them about Appendix D and they won't budge. We have the OCC in house, so I'm hoping to get an opinion from them.
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#2044967 - 10/19/15 07:53 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
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I heard from the FDIC and they are advising us to disclose the product as interest only.

For our 9 month interest only construction loan we were advised to disclose it as:

Product - 9 mos. Interest Only, Fixed Rate

If I hear from the CFPB I will post if they give a consenting or opposing opinion to the FDIC's.
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#2045557 - 10/21/15 11:14 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
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Missouri
That's the same answer I got from the FDIC. Did your contact explain why we would not follow Appendix D and why it states we should disclose the short term interest only payment loans that have a balloon payment as a Balloon feature? I'm just curious because I kept asking the examiner I was speaking with and she never did give me an answer.

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#2045583 - 10/22/15 01:40 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
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The 2 examiners I spoke with basically said that .37(a)(10) took precedence in reporting the product. They relied primarily on the CFPB "Guide to Forms" publication and I believe it was page 15 or 16. I'm at a different branch today and don't have those notes with me. They didn't say it but left me with the impression they think that the Appendix D guidance would apply to construction loans that were single pay loans or for some reason had P&I payments.

I can't say that I 100% agree with them but with them providing that opinion and 2 major software companies I'm dealing with are disclosing in alignment with that opinion I'm going to run with it.
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#2045701 - 10/22/15 07:09 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
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Missouri
That's what we are doing also. I have documented my call to the FDIC very well in case there is any change to this.
Thank you Dan for your help; I appreciate it.

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#2047838 - 11/03/15 08:36 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
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I just received a call from the CFPB and they gave me the same guidance as the FDIC did.

Based on the opinions I received from the FDIC and CFPB it appears they agree that .17(a)(10) overrides Appendix D.
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#2050383 - 11/18/15 08:38 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
RVFlyboy Offline
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Dan, how does FDIC and CFPB reconcile disclosing 9 mo interest only when the interest only payments only happen for 8 months and the full principal and interest are due in month 9?
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#2050473 - 11/19/15 02:39 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
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They didn't even though I kept referring them to the Commentary for 1026.37(a)(10)(2)(ii).
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#2051213 - 11/24/15 06:06 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
parr04 Offline
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Based on the information from the CFBP and FDIC the product would be a 9 month interest only loan. Under the loan terms section would you still answer yes to "balloon payment' and state the balloon payment due at the end of the 9 month period?

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#2052617 - 12/04/15 07:41 PM Re: Construction Only Loan Product & Pmt Change parr04
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I have the same question...help anyone?
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#2052630 - 12/04/15 08:00 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
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Bloomington, IN
Under the loan terms section would you still answer yes to "balloon payment' and state the balloon payment due at the end of the 9 month period?

Yes.
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#2052639 - 12/04/15 08:15 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
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Thank you Dan.
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#2057007 - 01/06/16 06:45 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
Jan94 Offline
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USA
Was there any resolution to the disclosure of the AP table? We have a 12 month interest-only construction loan and are disclosing as 11 month with a balloon. However, the response to the question about whether the payment will change has been No and no AP table. However, we've had some internal "complaints" from lenders that this is misleading to our customers and believe the response should be Yes as depending upon the amount of the draws, the payment could increase after consummation. If we change the response to Yes, the AP table will generate but we don't know what to put in it as we do not do the permanent financing so will not know the subsequent payment information. I don't believe there has been any other guidance around this scenario. Are you also showing the AP table? Thank you for your consideration.

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#2057010 - 01/06/16 06:46 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
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No changes that I'm aware of. Still presenting as described based on a strict 50% assumption.
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#2057014 - 01/06/16 07:10 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
Jan94 Offline
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So no AP table. Have you (or anyone) had any similar discussions about saying No to the payment changing? We believe it is correct and in accordance with the current direction, but from a customer's point of view, could we say Yes and just not include the AP table (granted this would be a manual effort) since we don't know the information? We've tried to help the lender understand that it is an "estimate" based on a certain amount being outstanding and yes the payments could increase based on further draws, but that doesn't make the disclosure "incorrect". Thank you!

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#2057015 - 01/06/16 07:14 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
rlcarey Online
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Galveston, TX
but from a customer's point of view, could we say Yes and just not include the AP table

No and I doubt your software will allow it either.
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#2057016 - 01/06/16 07:19 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
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Well, it's not just that one thing that's troublesome...on our note it states a final balloon payment of 'up to $', together with accrued interest will be due...well, that balloon payment is the principal plus one month of 50% interest. Chances are, by maturity it will be fully advanced...so again...not exactly precise, is it?!?

I can't advise you on varying from what your vendor defaults to...sorry!
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#2057020 - 01/06/16 07:27 PM Re: Construction Only Loan Product & Pmt Change Dan Persfull
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Galveston, TX
on our note it states a final balloon payment of 'up to $',

Well that is a real problem as that represents your legal obligation and has nothing to do with TRID. TRID is a disclosure. What you need legally is a whole 'nother animal. You need to contact your legal counsel.
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#2057079 - 01/06/16 10:12 PM Re: Construction Only Loan Product & Pmt Change RR Joker
Jan94 Offline
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USA
Thank you both for your insight. No our vendor will not generate it without the AP table; it would have to be done "manually"........we are working with legal counsel, it's been a challenge no doubt. Just don't really know how else to explain it to a lender so they have some sense of confidence in talking to their borrowers.

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