Thread Options
#2216079 - 06/19/19 10:15 PM Fixed Rate Construction Only Min/Max payment table
Katherine Offline
Member
Joined: Aug 2017
Posts: 62
Our doc vendor is following a different interpretation for the disclosure of the Projected Payments, Payment Calculation table on page 1 of the LE and CD. We have an 11 month interest only, fixed rate construction only loan, wherein the 12 month is the final payment of principal and interest.

In the Year 1 column, we maintain that based on Appendix D, we assume 1/2 of the loan amount and disclose the interest only payment.

However, our doc vendor is producing disclosures that have a payment range with a minimum based on 1/2 the loan amount and the maximum based on the full payment. While 1026.37(c)(1)(I) and the comments provides for a payment range for interest rate variations, for our construction only loans are fixed rate.

Is there a basis for disclosing a range, and if there is support for disclosing a range for a fixed rate adjustable payment construction only loan, should the minimum be based off of 1/2 of the loan amount and the full loan amount? To me, this looks like a weird expansion of Appendix D. Appendix D provides to disclose 1/2, if we are going to disclose a range, wouldn't be based on the true minimum (which could be $0 unless there's proceeds being used at closing such as financing closing costs) and not a hybridization adaption of Appendix D setting the minimum at 1/2 of the loan amount?

Return to Top
TRID - TILA/RESPA Integrated Disclosures Rule
#2216088 - 06/20/19 12:06 AM Re: Fixed Rate Construction Only Min/Max payment table Katherine
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 78,971
Galveston, TX
See Appendix D Comment 7 v. A. tells you exactly what to do and it does not involve placing a range in the projected payments schedule.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2216112 - 06/20/19 12:46 PM Re: Fixed Rate Construction Only Min/Max payment table Katherine
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
The only place ours shows a change is in Monthly P&I and shows only a high [based on fully drawn interest]
Last edited by RR Joker; 06/20/19 12:47 PM.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#2216120 - 06/20/19 01:18 PM Re: Fixed Rate Construction Only Min/Max payment table Katherine
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 78,971
Galveston, TX
That is not correct. The only place it would show the fully drawn payment is in the AP Table and not in the Projected Payments Table.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2216129 - 06/20/19 02:27 PM Re: Fixed Rate Construction Only Min/Max payment table Katherine
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
The AP table does reflect it...the Loan Terms DOES show it under Can this amount increase after closing. Yes...Give how often it can adjust, how high it can go and how soon and directs them to the AP table for details.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#2216130 - 06/20/19 02:28 PM Re: Fixed Rate Construction Only Min/Max payment table Katherine
RR Joker Offline
10K Club
RR Joker
Joined: Nov 2002
Posts: 20,654
The Swamp
I wasn't referring to the Projected Payments P&I. I should have been more clear.
_________________________
My opinion only. Not legal advice.

Say you'll haunt me - Stone Sour

Return to Top
#2216187 - 06/20/19 08:51 PM Re: Fixed Rate Construction Only Min/Max payment table Katherine
Katherine Offline
Member
Joined: Aug 2017
Posts: 62
I believe the vendor is treating our construction only loans as a single transaction with the permanent included in the first column too, but the problem is our construction only loans are temporary loans. Due to system limitations, or so I am told, we cannot do construction-perm loans. What happens is the borrower comes in for the construction only loan. They can and usually do apply for a permanent refinancing loan, which is a separate application, completely separate/new underwriting, near or after the end of the construction only loan.

Return to Top
#2216510 - 06/26/19 03:11 PM Re: Fixed Rate Construction Only Min/Max payment table Katherine
Oursisnottoreasonwhy Offline
Gold Star
Oursisnottoreasonwhy
Joined: Nov 2004
Posts: 489
Central Illinois
For construction loans are banks giving out 2 sets of disclosures at application one for the construction loan and one for the permanent financing? Or are they only giving the construction loan disclosures and then when the home is nearing completion making the customer reapply for a permanent loan and then providing disclosures for it at that time?

Return to Top
#2216512 - 06/26/19 03:31 PM Re: Fixed Rate Construction Only Min/Max payment table Katherine
raitchjay Offline
Power Poster
Joined: Oct 2009
Posts: 8,701
OK
Unless you have a takeout commitment from another lender, you can't do the "make them re-apply" thing and be in compliance with TRID. If you're doing a construction only loan followed by a perm loan, then you'll need 2 sets of early disclosures provided within 3 business days of the application date.
_________________________
I'm fixin' to fix that.

Return to Top
#2216515 - 06/26/19 03:39 PM Re: Fixed Rate Construction Only Min/Max payment table raitchjay
Oursisnottoreasonwhy Offline
Gold Star
Oursisnottoreasonwhy
Joined: Nov 2004
Posts: 489
Central Illinois
Thanks raitchjay! That's the way we currently do it and thought maybe I had missed some change in the rules.

Return to Top
#2216517 - 06/26/19 03:40 PM Re: Fixed Rate Construction Only Min/Max payment table Katherine
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 78,971
Galveston, TX
raitchjay - that is not true. This was addressed in TRID 2.0. The permanent loan LE has to be delivered within 3 business days of application for the permanent loan. That is whether that happens simultaneously with the construction loan application or somewhere down the line after the construction application. A take-out commitment is not a consideration.
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2216519 - 06/26/19 03:59 PM Re: Fixed Rate Construction Only Min/Max payment table Katherine
Oursisnottoreasonwhy Offline
Gold Star
Oursisnottoreasonwhy
Joined: Nov 2004
Posts: 489
Central Illinois
So rlcarey you are saying it is acceptable to only give a construction Loan LE and then have the customers reapply later for the perm financing and give disclosures for it at that later date? Do you have a section in the reg I can review that covers this?

Return to Top
#2216522 - 06/26/19 04:17 PM Re: Fixed Rate Construction Only Min/Max payment table Katherine
raitchjay Offline
Power Poster
Joined: Oct 2009
Posts: 8,701
OK
Sorry for the misinformation then...our construction loan applications here are always one of 2 types--either construction/perm or construction only with a takeout, so i let that color my answer. Again, my apologies.
_________________________
I'm fixin' to fix that.

Return to Top
#2216526 - 06/26/19 04:31 PM Re: Fixed Rate Construction Only Min/Max payment table Katherine
rlcarey Offline
10K Club
rlcarey
Joined: Jul 2001
Posts: 78,971
Galveston, TX
19(e)(1)(iii) comment 5
_________________________
The opinions expressed here should not be construed to be those of my employer: PPDocs.com

Return to Top
#2216532 - 06/26/19 04:51 PM Re: Fixed Rate Construction Only Min/Max payment table Katherine
Oursisnottoreasonwhy Offline
Gold Star
Oursisnottoreasonwhy
Joined: Nov 2004
Posts: 489
Central Illinois
Thanks rlcarey. That will save us some work. Here's the site for those interested 1026.19(e)(1)(iii) comment 5-iii. Assume the creditor receives a consumer's application for construction financing only on Monday, June 1. Assume further that the creditor receives the consumer's application for permanent financing on Monday, June 8. The creditor must deliver or place in the mail the disclosures required by § 1026.19(e)(1)(i) for the construction financing no later than Thursday, June 4, the third business day after the creditor received the consumer's application for the construction financing only, and not later than the seventh business day before consummation of the construction transaction. The creditor must deliver or place in the mail the disclosures required by § 1026.19(e)(1)(i) for the permanent financing no later than Thursday, June 11, the third business day after the creditor received the consumer's application for the permanent financing, and not later than the seventh business day before consummation of the permanent financing transaction.
Last edited by Oursisnottoreasonwhy; 06/26/19 04:57 PM.
Return to Top