We are working to determine whether our doc vendor can produce the required TRID 2.0 verbiage and AP Table for construction only loans disclosed in accordance with Appendix D Option 1. Would someone be able to answer the following for a 12 month interest only construction loan:
1. Loan Terms. Can this Amount Change After Closing? In disclosing "Yes," what is the required verbiage that goes in the loan terms table on page 1? I found an article which provided a sample verbiage of:
- Adjusts every mo. starting in mo.1
- Can go as high as (disclose maximum payment amount based on the max principal balance)
- Includes only interest and no principal until mo . ___ (where is this required in the regulation/commentary)

2. Loan Product - Has this changed? Currently we are disclosing "1 Year Interest Only, Fixed Rate". There is a final balloon payment for month 12 and it includes the interest that accrued. I know there was confusion before whether to disclose as 11 mo. Interest Only, Fixed Rate" when the final payment was a balloon with interest. Based on TRID 2.0, do we now disclose 11 mo. Interest Only Fixed Rate?

3. Would anyone be able to provide a sample disclosure for a construction only loan?

Help please

Thank you.

Okay, sorry, I found my answer to number 1 in the Guide to Forms. Can anyone help with questions 2 and 3? Specifically for 3, a sample AP table?

Just want to confirm - Is the interest rate fixed during the construction phase? And, is it 12 payments total with the balloon at the 12th payment?

Yes, it's 12 months, with the 12 month being the balloon payment with interest. So 11 months interest only, then 12 month interest +balloon payment.

Your product would correctly be disclosed as "11 mo. Interest Only Fixed Rate".

Jerod Moyer with Bankers Compliance Consulting did an EXCELLENT webinar on TRID 2.0 and Construction Loans complete with sample disclosures. Well worth the investment. It's available here.

I will say, with regard to the AP table, Jerod did say that based on specific conversations with CFPB, for a fixed rate construction loan with regard to disclosing subsequent changes in the AP table that the technically correct answer is "No" for whether subsequent payments changes could occur. This makes no logical sense, but that's what CFPB is indicating is the correct answer.

As part of the “First Change/Amount” disclosure in the “Adjustable Payment (AP) Table” pursuant to § 1026.37(i)(5)(i), the creditor may omit and leave blank the amount or range corresponding to the first periodic principal and interest payment that may change. In such cases, the creditor must still disclose the timing of the first change, which is the number of the earliest possible payment (e.g., 1st payment) that may change under the terms of the legal obligation.

Thank you. For the subsequent changes that makes no sense since it would be similar to the example on page 133 of the Small Entity Compliance Guide v 5.2 and be "Every payment."

Yes - every payment is correct - as you have no idea what the actual loan balance is going to be.

I'm just telling you what Jerod said in his webinar. He said they had been in touch with the CFPB on this specific issue and as illogical as it sounds, the CFPB expected answer to whether subsequent changes may occur on a fixed rate construction loan was "No". He says in the webinar, it's based on language in comment 1026.37(i)(5)-3. I'm just passing on that information.

Not really arguing, but comment 3 talks about if the payment can change under the terms of the legal obligation. On an interest only multiple advance loan, I am not too clear on how you can answer that question as "none". When you also tell them that it possibly could go to the maximum on the 1st payment.

3. Subsequent changes. The disclosure required by § 1026.37(i)(5) must state the frequency of adjustments to the regular periodic principal and interest payment after the initial adjustment, if any, expressed in years, except if adjustments are more frequent than once every year, in which case the disclosure should be expressed as payments. If the frequency of adjustments to the periodic payment may change under the terms of the legal obligation, the disclosure should state the smallest period of adjustments that may occur.

Thank you Randy. Quick question, in the Projected Payments table, Payment Calculation, 1026.37(c)(3), provides for the range of payments in year(s), it does bother me though that under the payment calculation, "Year 1" is shown for the range. If everywhere else (Product Type, AP Table Interest Only Payments? Yes for your first 11 payments), 11 months is disclosed for a 12 month construction loan, with 11 months of interest only payments, and the 12 month is the interest only + principal/balloon payment, is it correct to show the range as "Year 1"?

Also, for the Comparisons "In 5 Years," is the interest calculated based on the 1/2 loan amount assumption used in Appendix D? I looked at the Small Entity Compliance Guide and 1026.37(l)(1) but it doesn't mention the Appendix D interest calculation, however, is it correct to assume the calculation carries through the 1/2 loan amount interest calculation used for projected payments?

Not really arguing, but comment 3 talks about if the payment can change under the terms of the legal obligation. On an interest only multiple advance loan, I am not too clear on how you can answer that question as "none". When you also tell them that it possibly could go to the maximum on the 1st payment.

FWIW, my LOS shows 'every payment'

Yes, it is.

There should be no range in Year 1 of the projected payments table. The payment shown is calculated using Appendix D. The balloon payment is shown in a separate column.

See Appendix D - Comment 7(v)(A)

Thanks Randy. Sorry I meant the label "Year 1", though the time period is less than a year. Yes, we show the balloon payment (1 month interest + principal" in the "Final Payment column."

Thank you RRJoker

Year 1 is standard language...it will be that even if the loan is 6 months.

Your product would correctly be disclosed as "11 mo. Interest Only Fixed Rate".

Is this still correct for a 1 year loan term, interest only, balloon at maturity? We have the OCC telling us it should be 12 mo.

Loan term - 1 year
Product - 11 mos int only, fixed rate [or not]

Interest is spelled out