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#2130886 - 05/18/17 01:23 PM New LE Needed for Additional Funds on Construction
Compliance1 Offline
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Our customer is needing additional funds on their construction loan since they over budgeted. The mortgage is being held with the contractor for $245,000 and we are looking to pay off the first mortgage and replace it with a mortgage for 255,000. Should a new LE be provided in this instance?

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TRID - TILA/RESPA Integrated Disclosures Rule
#2130889 - 05/18/17 01:27 PM Re: New LE Needed for Additional Funds on Construction Compliance1
rlcarey Offline
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rlcarey
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Galveston, TX
What are you doing with the note? Collateral documents do not determine whether this involves a refinancing.
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#2130891 - 05/18/17 01:30 PM Re: New LE Needed for Additional Funds on Construction rlcarey
Compliance1 Offline
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Replacing the note with the new one.

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#2130893 - 05/18/17 01:32 PM Re: New LE Needed for Additional Funds on Construction Compliance1
rlcarey Offline
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rlcarey
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Galveston, TX
Then it would be a refinancing under 1026.20(a) and the new transaction will be subject to all Z and RESPA requirements.
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#2132327 - 05/30/17 04:26 PM Re: New LE Needed for Additional Funds on Construction Compliance1
ScoutLaRue Offline
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Posts: 73
We have a situation similar--need to add to the construction loan-- but I am reading 1026.20(a) differently...now I am confused!

We would be replacing the existing obligation with new note, but we would not extend the term out..wouldn't this be a renewal?

Paragraph 20(a)(1)
The following shall not be treated as a refinancing:
1.Renewal.
This exception applies both to obligations with a single payment of principal and interest and to obligations with periodic payments of interest and a final payment of principal. In determining whether a new obligation replacing an old one is a renewal of the original terms or a refinancing, the creditor may consider it a renewal even if:

i. Accrued unpaid interest is added to the principal balance.
ii. Changes are made in the terms of renewal resulting from the factors listed in ยง 1026.17(c)(3).
iii. The principal at renewal is reduced by a curtailment of the obligation.

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#2132331 - 05/30/17 04:49 PM Re: New LE Needed for Additional Funds on Construction Compliance1
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,637
Galveston, TX
How does adding more money for construction relate to it being a renewal if you are doing it by replacing the note? A renewal happens when a note matures.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2186845 - 07/25/18 09:24 PM Re: New LE Needed for Additional Funds on Construction rlcarey
Compliance1 Offline
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Joined: Mar 2006
Posts: 657
Is there a right or wrong way to be doing a situation like this thread is discussing? We have been doing a new note and mortgage for the additional funds the customer is requesting instead of paying the first mortgage off and adding the additional funds to the commitment amount.

Is this ok to do or should we be paying the first mortgage off and adding the additional funds? Of course I can't remember why we decided to run the loan this way...thought it was a TRID issue.

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#2186852 - 07/25/18 10:05 PM Re: New LE Needed for Additional Funds on Construction Compliance1
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,637
Galveston, TX
How you choose to do it is a State law and contract issue. Once you decide on how you are going to do it, then you can examine if TRID is triggered.
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#2186883 - 07/26/18 12:41 PM Re: New LE Needed for Additional Funds on Construction Compliance1
RR Joker Offline
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The Swamp
Other than State law issues, TRID would be triggered either way if you take a lien on the dirt for the additional funds.

Having said that, we have, from time to time simply modified the original construction note and added overruns...quick and simple and friendly for the customer.

For this, I would make certain your State has no prohibitions on added money via modification.
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