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#2210834 - 04/11/19 05:01 AM TRID - Construction Loan w/ Refinancing P/O
Katherine Offline
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Under TRID 2.0, how are loans that have refinancing and is also a construction loan be disclosed. I understand the loan purpose is Refinance. But, how should the adjustable payment table be treated.

The Loan Product is an 11 month Interest only, fixed rate.

The Final payment is the balloon payment.

Example. Loan is $500,000. Construction cost is $200,000. Also, we are paying off a mortgage lien on the subject property for $100,000 (refinancing).

For the AP table, can we still leave the payment range blank in the "First Change/Amount" row? Or must we disclose the minimum of the payment range based on the $100,000 disbursement which is being drawn at closing to payoff the lien and then have the maximum based on the full $500,000.

Also, because the loan includes refinancing, the TIP calculates based on the full loan amount?

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#2210837 - 04/11/19 11:25 AM Re: TRID - Construction Loan w/ Refinancing P/O Katherine
rlcarey Online
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rlcarey
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Galveston, TX

Example. Loan is $500,000. Construction cost is $200,000. Also, we are paying off a mortgage lien on the subject property for $100,000 (refinancing).

Where is the other $200,000 going?
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#2210917 - 04/11/19 07:24 PM Re: TRID - Construction Loan w/ Refinancing P/O rlcarey
Katherine Offline
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The remaining funds are going back to the customer.

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#2210918 - 04/11/19 07:29 PM Re: TRID - Construction Loan w/ Refinancing P/O Katherine
Katherine Offline
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Because land values here are so high, we have variations which include, cashout, refinancing, or other payoffs in conjunction with our 1 year loans that include construction. Usually before the term is up they'll apply for a separate refinancing loan, or sometimes they were just waiting for another property to sell and then payoff the loan.

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#2210925 - 04/11/19 07:53 PM Re: TRID - Construction Loan w/ Refinancing P/O Katherine
rlcarey Online
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rlcarey
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Galveston, TX
To make a good faith estimate in this case, you would have to calculate the finance charge associated with the interest over the life of the loan based on a disbursement of $300,000 at loan closing and multi-advances of the remaining $200,000 over the course of the construction period. Not too many LOSs will handle these sorts of hybrid loans.
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#2210930 - 04/11/19 08:23 PM Re: TRID - Construction Loan w/ Refinancing P/O rlcarey
Katherine Offline
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Joined: Aug 2017
Posts: 62
Thank you. So leaving the payment range blank has only been blessed for loans wherein the loan is only construction?

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#2210933 - 04/11/19 08:31 PM Re: TRID - Construction Loan w/ Refinancing P/O Katherine
Katherine Offline
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Joined: Aug 2017
Posts: 62
Reading the commentary further, wouldn't we have the argument that the amount is unknown and therefore, we can leave it blank?

" Initial payment adjustment unknown. The disclosure required by ยง 1026.37(i)(5) must state the number of the first payment for which the regular periodic principal and interest payment may change. This payment is typically set forth in the legal obligation. However, if the exact payment number of the first adjustment is not known at the time the creditor provides the Loan Estimate, the creditor must disclose the earliest possible payment that may change under the terms of the legal obligation, based on the information available to the creditor at the time, as the initial payment number and amount"

Because the exact payment number at first adjustment could be more than just the $300,000 (cashout and refinancing) because the borrower could also have taken a partial draw on the construction proceeds, the commentary appears to allow leaving the range blank and just disclosing at 1st payment.

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