We originate 1 yr construction only loans. We do not require the borrower to provide any evidence that they will take out the permanent financing elsewhere and in most cases the permanent financing is taken out with us after construction is complete.

Both RESPA and Reg Z outline the requirements for the Settlement Information Booklet. Under RESPA rules, would we have to provide a copy of the Home Loan Toolkit for our 1 yr construction only loans?

Thanks in advance.

How can you have a construction loan subject to RESPA and not Reg Z?

The Home Loan Toolkit is required by 1026.19(g). Your construction loan is subject to TRID.

I wasn't trying to imply it wasn't subject to Reg Z, but I was looking at RESPA in a box.

So since the Home Loan Toolkit need not be provided for a consumer transaction that is not for the purchase of a 1-4 family residential property, does this mean that it only has to be given on a construction loan if that loan is also for the purpose of purchasing the land?

Even RESPA specifically says:

1024.6(a)(3) In the categories of transactions set forth at the end of this paragraph, the lender or mortgage broker does not have to provide the booklet to the borrower.

Any other federally related mortgage loan whose purpose is not the purchase of a 1- to 4-family residential property.

Only on purchase money loans.

Randy, the construction loan meets the definition of a Residential Mortgage Transaction defined in 1026.2(24). Are you implying the construction loan would not be a purchase money transaction and exempt from the Home Loan Toolkit requirement? I'm asking because I specifically referred to the construction loan being subject to TRID in my post.

(24) Residential mortgage transaction means a transaction in which a mortgage, deed of trust, purchase money security interest arising under an installment sales contract, or equivalent consensual security interest is created or retained in the consumer's principal dwelling to finance the acquisition or initial construction of that dwelling.

A construction only loan is not a purchase transaction however unless it involves the purchase of the lot also.

1026.19(g)(1)(iii) The creditor or mortgage broker need not provide the booklet to the consumer for a transaction, the purpose of which is not the purchase of a one-to-four family residential property.

I learned something new. I've never paid any attention to that section for whatever reason.

Is the Home Loan Toolkit required if they purchase land only for consumer purposes, and they may build in the future, but no specific time is known? According to the borrower, if they build, it will be more than 12 months in the future.

No.