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#32824 - 09/13/02 09:37 PM Multiple Creditors, Construction Loan and TIL
elcinoca Offline
Platinum Poster
Joined: Jan 2002
Posts: 537
Elizabeth City, NC
I would like to know how others are handling comparable situations at their banks:

One of our branches makes contruction only loans with a permanent takeout committment from another institution. We collect a 1% origination fee and show on our HUD-1 1/2% coming to us and the other 1/2% disbursed to the takeout lender. When providing our TIL disclosure at closing (for the construction phase), we use only the 1/2% fee we receive as a prepaid. We believe that Section 226.17(c)(6) allows us to do this.

The concern of one of our loan reviewers is that since we collected the full 1% at our closing, and there are multiple creditors, we should provide both the construction TIL and the permanent TIL. Well, neither we nor the takeout lender have any clue what the permanent rate and term will be until 6-8 months later after the house is built. We can't possibly supply the TIL for the permanent loan at the same time we close our construction loan. If we include the takeout lender's 1/2% in our calculations, they have to be sure not to include it again in theirs, which becomes a nightmare for everyone.

How have have some of you dealt with this on your TIL? Thanks so much for your input on this.

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Lending Compliance
#32825 - 09/13/02 10:01 PM Re: Multiple Creditors, Construction Loan and TIL
Dan Persfull Offline
10K Club
Dan Persfull
Joined: Aug 2002
Posts: 46,832
Bloomington, IN
Sec. 226.17 General disclosure requirements.
(c) Basis of disclosures and use of estimates. (1) The disclosures shall reflect the terms of the legal obligation between the parties.

(6)(i) A series of advances under an agreement to extend credit up to a certain amount may be considered as one transaction.
(ii) When a multiple-advance loan to finance the construction of a dwelling may be permanently financed by the same creditor, the construction phase and the permanent phase may be treated as either one transaction or more than one transaction.

I may be missing something but I do not see how the above section exempts the %, I do not think you cannot count the % fee paid to the other FI as PPFC. To me it is a fee associated with obtaining the loan, thus a PPFC.

As for you giving disclosures for the permanent phase of the loan, that is not your responsibility. You are not doing the loan, therefore you have nothing to disclose in relation to the permanent loan.
The opinions expressed are mine and they are not to be taken as legal advice.

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