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#2052326 - 12/03/15 06:10 PM Purchase Rehab loan
ahou Offline
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ahou
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The loan is to purchase land, the home on the land, and do rehabilitation to the dwelling. The purpose of the loan would be a purchase under TRID. Mgmt wants to set up the loan as it would a construction perm, with a construction period and then perm financing. Can the bank disclose as purchase and use Appendix D for the rehab period with perm as a refi? Not sure how to do this.

17(c)(6)-2: CONSTRUCTION LOANS. Section 1026.17(c)(6)(ii) provides a flexible rule for disclosure of construction loans that may be permanently financed. These transactions have 2 distinct phases, similar to 2 separate transactions. The construction loan may be for initial construction or subsequent construction, such as rehabilitation or remodeling.
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TRID - TILA/RESPA Integrated Disclosures Rule
#2052397 - 12/03/15 08:56 PM Re: Purchase Rehab loan ahou
John Burnett Offline
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John Burnett
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Cape Cod
Yes, it can be done, if the bank knows how to use its loan origination system to generate the disclosures and other paperwork. Use of Appendix D is not restricted to loans for initial construction only.
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#2052434 - 12/03/15 11:49 PM Re: Purchase Rehab loan ahou
ahou Offline
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ahou
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Thanks John
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#2052562 - 12/04/15 05:50 PM Re: Purchase Rehab loan ahou
RR Joker Offline
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The Swamp
What I've never figured out on a loan such as this is HOW to do it under D...the initial advance (the purchase) is known...so at no point are you actually an assumed 50/50 split.
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#2052708 - 12/05/15 02:30 PM Re: Purchase Rehab loan ahou
rlcarey Offline
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Galveston, TX
You take into account the initial advance and treat the remaining funds under Appendix D. This is usually a manual calculation as most LOS systems won't handle it.
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#2052762 - 12/07/15 03:08 PM Re: Purchase Rehab loan ahou
RR Joker Offline
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RR Joker
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The Swamp
Exactly...and does anyone actually DO that? I know I don't. That was my point in saying the above so that the original poster didn't automatically assume that 'yes it can be done' was as simple as telling the LOS it was a draw note and ending up with an inaccurate APR. wink
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#2270785 - 05/23/22 07:41 PM Re: Purchase Rehab loan RR Joker
Jamie G Offline
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Joined: Jun 2016
Posts: 4
Hey RR -- Did you ever find a good way to disclose these? We are seeing more and more Purchase/Rehab loans, so I'm trying to figure out the most efficient way to tackle this... manual calcs or two separate loans... the latter will not go over well of course... but I haven't found the magical formula for calculating it manually either. I wish the FFIEC calculator would let you enter the amount to base it on instead of locking it down at 50%.

Thanks.

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#2270788 - 05/23/22 08:02 PM Re: Purchase Rehab loan ahou
rlcarey Offline
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rlcarey
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Galveston, TX
You know, I was just in the HELP screens of the FFIEC APR calculator and while this is neither law nor regulation, I found a statement in the Help section under Construction Loans very intriguing:

Construction Loan
The APR program begins with two loan options. The first option is the Regular APR option. This option applies to all closed-end credit transactions. However, it need not be used for loans that meet the conditions of Appendix D to Regulation Z.

The second option, Construction Loan, applies only to loans that meet the conditions of Appendix D to Regulation Z. Loans subject to Appendix D involve multiple advance loans, including (but not limited to) real estate construction loans, for which the amounts or dates of advances are not known at the time disclosures are furnished.

If part or all of the initial advance is used to pay off one or more other loans, the Construction Loan option would still be available for the consolidated loan if the dates or amounts of any of the subsequent advances are unknown.

If the amounts and timing of all advances are known, or if there is only a single advance, the APR program's Regular APR option must be used.
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