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#2066124 - 02/25/16 08:08 PM Construction Loan Purpose
Jan94 Offline
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Joined: Mar 2001
Posts: 828
USA
I'm looking at a scenario where the bank did a short-term refinance of a initial construction loan as the house is still not complete and the loan matured. No new money was advanced. For the LE on the original construction, they showed Construction as the purpose. As the purpose on the "refinance" LE is listed as Refinance, the construction loan statement does not appear. Since the initial construction is not yet complete, should the purpose on the refinance LE be Construction or is Refinance correct and the construction loan statement is not needed? This was cited as an issue in an internal review.

Thank you.

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#2066143 - 02/25/16 08:54 PM Re: Construction Loan Purpose Jan94
John Burnett Offline
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John Burnett
Joined: Oct 2000
Posts: 39,684
Cape Cod
"Refinance" is the correct purpose label because the second loan refinanced an existing obligation. Under 1026.37(a)(9), these labels are assigned using a hierarchical list, and the first list item the loan "fits" is the one used. Refinance is higher on the list than Construction.
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John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

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#2066147 - 02/25/16 09:15 PM Re: Construction Loan Purpose Jan94
Jan94 Offline
Platinum Poster
Joined: Mar 2001
Posts: 828
USA
Thank you John for confirming. So since the purpose is listed as Refinance, the construction loan statement would not be needed and the internal review should not have written that up, would that be correct?

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#2066150 - 02/25/16 09:19 PM Re: Construction Loan Purpose Jan94
John Burnett Offline
10K Club
John Burnett
Joined: Oct 2000
Posts: 39,684
Cape Cod
Correct.
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John S. Burnett
BankersOnline.com
Fighting for Compliance since 1976
Bankers' Threads User #8

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#2066153 - 02/25/16 09:31 PM Re: Construction Loan Purpose Jan94
Jan94 Offline
Platinum Poster
Joined: Mar 2001
Posts: 828
USA
Thank you very much!

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