I just discovered something that my bank does for construction loans. Everything may be fine but it's raising red flags to me. When a consumer closes a construction/permanent loan, they bring a check to the closing for the portion of the construction costs that they are going to pay out of pocket. The balance of the loan is showing a negative number at this point.
Case in point, we have a customer building a home for $610,000. Their construction loan is only for $300,000. The customer brought a check for $310,000 (plus closing costs) to closing and we hold those funds and disburse them first as disbursements are made. Everything is properly spelled out on the HUD-1, but it just sounds odd to me. Can anyone think of anything that I'm missing?