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#2142785 - 08/19/17 02:33 AM construction to perm loan APR/TIP/FC/Total PMTs
mdosu Offline
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Joined: Dec 2016
Posts: 33
All my questions are in bold:

I'm setting up our TRID forms for a single disclosure Construction to Perm. Here are the loan specs:

Construction:
Fixed Interest only for 1 year
Rate: Prime + margin (note: this rate will set prior to consummation! This will not be a discount/premium variable rate loan)

Perm:
5/1 ARM 2/2/5 Cap
Initial rate: fixed number
Adjustments 12 mo LIBOR + margin

Question:
Firstly, I'm not even sure if I have an "adjustable rate" or a "step rate" - I believe I have an adjustable rate.

So assuming I do have an adjustable rate loan, for APR and TIP, I'm spinning my wheels on how to base my calculations in 1026.17(c)1's commentaries. I'm not sure whether I am in a commentary #8 or commentary #10 situation.

In commentary 8, is this how I calculate APR: Calculate the initial rate for the construction period with the fixed construction rate, then at year 2, do I then adjust my rate to the ARM's initial fixed rate? And do I then adjust to the fully indexed rate thereafter?


What about TIP though. Is it computed on the exact same bases as APR?

What about Finance Charges and Total of Payments on the CD? - Is it the same bases as how APR and TIP is computed?

Am I correct that I don't fall under Commentary 10 scenario? However, I don't believe I have a discount/premium situation b/c my interest rate at construction is determined before consummation AND my initial fixed ARM rate is known at consummation and will not change at anytime through out origination or the loan.

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#2142793 - 08/19/17 11:24 PM Re: construction to perm loan APR/TIP/FC/Total PMTs mdosu
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 78,596
Galveston, TX
I don't think TRID ever contemplated an ARM that was going to based on two different indexes. As far as I know, you are not going to be able to create a compliant combined disclosure for this product. Go with two disclosures or a fixed rate construction phase and it solves your problem. There comes a time when it is just not worth developing consumer products with this much complexity.
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#2142876 - 08/21/17 05:22 PM Re: construction to perm loan APR/TIP/FC/Total PMTs mdosu
mdosu Offline
Junior Member
Joined: Dec 2016
Posts: 33
rlcarey, thanks for the reply. I suppose I implied there will be 2 indices for which the rates are based off. The construction phase is a fixed rate. Internally we'll base it off prime + margin, but we'll simply commit and quote a fixed rate to the customer at application.

Based on what I said, a fixed construction with a ARM perm, it's not an uncommon rate structure in the industry.

Any other additional insights or tips would be appreciated.

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#2142886 - 08/21/17 05:40 PM Re: construction to perm loan APR/TIP/FC/Total PMTs mdosu
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 78,596
Galveston, TX
Read the commentary to Appendix D in the final TRID amendments just published - they pretty much walk you through the process. Most document preparation systems should automatically handle such a loan without any issues based on a fixed rate construction loan and non-premium/discount ARM permanent.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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