Scenario: Construction/Permanent loan disclosed as a single transaction. Interest during the construction phase is charged only on the amount advanced for the time it is outstanding during the construction period. §1026.17(c)(6)-2 says Appendix D may be used, at the creditor's option, in calculating the APR and other disclosures. Appendix D says that if interest is only imposed based on the amount actually advanced then the disclosures and APR calculations should be based on 50% of the commitment amount.

Question: Is it compliant if a lender chooses to disclose interest based on 100% of the commitment amount because of customer complaints when the estimated payment on the LE/CD was lower than the actual payment toward the end of the construction period? The lender would be over disclosing the APR and TOP. The construction period is typically 12 months so I don't believe a range of payments for the construction period can be disclosed.

The lender would be over disclosing the APR and TOP.

Actually, the problem with that statement is that while that might increase your finance charge and the TOP, that is actually going to result in your APR being under-disclosed. It would also violate the good faith principal for providing estimates found in 1026.17(c)(2)(i).