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#2043474 - 10/08/15 08:59 PM Construction - funds used to purchase lot
ALW Offline
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Joined: Dec 2014
Posts: 96
If part of the loan amount will be used in purchasing the lot, we are to classify the purpose as purchase, which we have done. When it comes to Sale Price, it says to enter the sales contract price - so this should reflect just the cost of the land? But then we are left with a small sales price and large loan amount as loan amount includes costs to construct the home. Borrowers are putting 20% down on the lot. But it says if loan amount exceeds sales price "Down Payment.Funds from Borrower" under "Calculating Cash to Close" should be zero. Where do we take into account that down payment amount?

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TRID - TILA/RESPA Integrated Disclosures Rule
#2044534 - 10/15/15 07:33 PM Re: Construction - funds used to purchase lot ALW
JAday Offline
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Joined: Jun 2011
Posts: 5
AbbyCC- did you get an answer for this? I noted it to come back and look as I have the same thing...

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#2045734 - 10/22/15 08:01 PM Re: Construction - funds used to purchase lot ALW
RR Becca Offline
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RR Becca
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out of the frying pan...
I'm looking for this answer, as well.
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#2045750 - 10/22/15 08:29 PM Re: Construction - funds used to purchase lot ALW
JessK Offline
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Joined: Jun 2010
Posts: 117
Louisiana
I have this question also and needing to disclose.

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#2045798 - 10/22/15 11:28 PM Re: Construction - funds used to purchase lot ALW
Bville Offline
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Bville
Joined: May 2001
Posts: 1,282
Out West
We just did something similar and this is how we ended up disclosing it. It may be right or may not be, but it is an option.

We subtracted the purchase price and loan fees (which were financed) from the loan amount and ended up with $30,000, which went into the Funds for Borrower line of the Cash to Close table. Our borrower brought in $50,000 and we added that to the $30,000 in Funds for Borrower and put the $80,000 in Section K as a Future Advance. It made the cash to close $50,000. The $80,000 also showed in the Adjustments and Other Credits of Cash to Close.

Technically correct or not per the regulation, cash to close came out the way we wanted it to.

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#2045811 - 10/23/15 12:42 PM Re: Construction - funds used to purchase lot ALW
RR Becca Offline
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RR Becca
Joined: Sep 2004
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out of the frying pan...
I'm just trying to figure out what to use for the 'sale price' at the top of the disclosure. Would that be the actual purchase price of the lot or the expected cost of both the lot and house to be built? Using the lot price makes more sense to me, but having a sale price of $30,000 on a $180,000 loan just looks wrong.

ETA: I will still have to sort out the funds from borrower question, but I think if we show the rest of the line amount as a "funds held for draw" disbursement it should work out right.
Last edited by RR Becca; 10/23/15 12:45 PM.
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#2045820 - 10/23/15 01:07 PM Re: Construction - funds used to purchase lot ALW
RR Joker Offline
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RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
I can tell you that on our LOS, we will have to handle this as two transactions because of the way TRID was 'designed'. One loan for the purchase and one loan for the construction. The second loan could pay off the first one...but regardless it's a PITA. Purchase/rehab loans are the same way. Two transactions due to the design on TRID.
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#2045821 - 10/23/15 01:08 PM Re: Construction - funds used to purchase lot ALW
RR Joker Offline
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RR Joker
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The Swamp
BUT, if somehow your system will handle it (right, wrong or indifferent) you would use the SP of the lot...not the total project.
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#2045824 - 10/23/15 01:11 PM Re: Construction - funds used to purchase lot ALW
RR Becca Offline
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RR Becca
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Posts: 5,245
out of the frying pan...
Thank you! This one is our trial run on this scenario. It's one of the situations that I ran out of time to test before D-Day.
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#2046592 - 10/28/15 01:14 PM Re: Construction - funds used to purchase lot ALW
RR Joker Offline
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RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
I can actually see where the software vendors have had such a hard time with implementing reliable/viable software for TRID. As usual, the government only truly accounted for 'government-type' lending. Trying to fit a round community bank loan into a square secondary-market hole is nearly impossible to make all of the pieces fit.

You get one portion right, but due to the way it was written, the rest won't calculate or populate correctly. You can likely tweak or trick the program to give you the bottom line you are looking for but then run into potential other issues like erroneous APR calculations.

Dealing with this made me realize the APR calculations from pre-TRID for Purchase/rehab closed-end lines are more than likely NOT RIGHT. I was able to produce paperwork...but the accuracy of the calculations is...well...highly debatable looking at it now. crazy
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My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

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#2046866 - 10/29/15 01:30 PM Re: Construction - funds used to purchase lot ALW
newyork Offline
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Joined: Aug 2008
Posts: 415
On your construction/purchase of lot loans, are you having to do 2 separate loans, one for the construction and one for the purchase of the lot?

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#2046868 - 10/29/15 01:31 PM Re: Construction - funds used to purchase lot RR Joker
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
Originally Posted By RR Joker
I can actually see where the software vendors have had such a hard time with implementing reliable/viable software for TRID. As usual, the government only truly accounted for 'government-type' lending. Trying to fit a round community bank loan into a square secondary-market hole is nearly impossible to make all of the pieces fit.

You get one portion right, but due to the way it was written, the rest won't calculate or populate correctly. You can likely tweak or trick the program to give you the bottom line you are looking for but then run into potential other issues like erroneous APR calculations.

Dealing with this made me realize the APR calculations from pre-TRID for Purchase/rehab closed-end lines are more than likely NOT RIGHT. I was able to produce paperwork...but the accuracy of the calculations is...well...highly debatable looking at it now. crazy


Made me laugh! (But not at you.)
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HMDA/CRA Training/Consulting/Mapping
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#2046879 - 10/29/15 01:45 PM Re: Construction - funds used to purchase lot ALW
Kathleen O. Blanchard Offline

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Kathleen O. Blanchard
Joined: Dec 2000
Posts: 21,281
Re the value when doing the initial disclosures, the instructions say to enter the value at the time the disclosure is being made, so that would be the lot.
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Kathleen O. Blanchard, CRCM "Kaybee"
HMDA/CRA Training/Consulting/Mapping
The HMDA Academy
www.kaybeescomplianceinsights.com

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#2047060 - 10/29/15 06:50 PM Re: Construction - funds used to purchase lot ALW
CountryBanker Offline
Gold Star
Joined: Mar 2013
Posts: 260
Northern IL
newyork, for what it's worth, we did NOT create 2 separate loans (we manipulated our LOS to give us the 'correct' figures). The first draw (really) is the lot purchase, and we're showing a "Construction Holdback" (title company's label, not ours) for the funds from which the construction draws will be taken. Think Loan Amt $300M, lot purch $100M, $200M available to build.

Oh, and it's closing today.
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#2047313 - 10/30/15 06:11 PM Re: Construction - funds used to purchase lot ALW
RVFlyboy Offline
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RVFlyboy
Joined: Oct 2000
Posts: 5,980
Soaring over Georgia
CountryBanker - where are you showing the "Construction Holdback" - in section K?
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#2047541 - 11/02/15 06:36 PM Re: Construction - funds used to purchase lot ALW
CountryBanker Offline
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Joined: Mar 2013
Posts: 260
Northern IL
Oh, sorry Jim, just got back here... Yes, in K. It's where it made the most sense. The Title Company agreed, even though at first contact Oct.27, the Title Co Closer asked us "are you sure construction loans need the CloD?" That was a confidence builder.
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#2047552 - 11/02/15 06:44 PM Re: Construction - funds used to purchase lot ALW
RVFlyboy Offline
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RVFlyboy
Joined: Oct 2000
Posts: 5,980
Soaring over Georgia
So, CB, how does that reconcile with this post: https://www.bankersonline.com/forum/ubbt...;_c#Post2047545

Or does it need to?
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Jim Bedsole, CRCM, CBA, CFSA, CAFP
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#2047688 - 11/03/15 02:24 PM Re: Construction - funds used to purchase lot ALW
newyork Offline
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Joined: Aug 2008
Posts: 415
When the LE was prepared for this transaction, the construction with lot purchase, does your system allow a calculating cash to close table on page 3?

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#2047932 - 11/04/15 02:44 PM Re: Construction - funds used to purchase lot ALW
Dodge Offline
100 Club
Joined: Mar 2010
Posts: 241
What if none of the proceeds are going towards the purchase of the lot on which as house will be built on; instead, the customer is purchasing the lot in cash. How would that be disclosed, or would it? I had this situation just come up and did a test of the LE and CD to see if it would show that customer should bring the cash for the lot. It did not show it on the LE or CD, but all my other documents disclosed that the customer would bring in the cash for the lot.

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