There are apparently areas of the country where it's long-standing practice to modify the construction-only loan rather than refi when the lender ends up with both pieces of the transaction. I am told that at one time several years back, the Fed was pondering whether to prohibit the practice, since the borrower never got TiL disclosures on the perm phase, but apparently dropped the proposal.
John S. Burnett
Fighting for Compliance since 1976
Bankers' Threads User #8