We initially provided the Notice to Home Loan Applicant on a residential real estate construction loan, we are now renewing the loan (there is no new money, the borrower simply needs more time to complete the construction). We do not need to disclose another Notice to Home Loan Applicant to the borrower with this renewal do we? Disclosing the notice initially should meet the FACTA requirement right? Thanks.

IMO - I don't think you would have to if you did not pull a new credit report.

You have to provide the disclosure for each loan transaction. If this is a new loan transaction then you would need to provide the notice. Why not simply extend/modify the maturity date for the period needed.

I see so we need to disclose on every home loan application even if it is for construction and the take out will come from another lender?

Yes. The reg does not exempt construction or other temporary financing.

I have to respectfully disagree w/Dan. No new money, no new credit report, the disclosure is not required.

If this was new monies and using the same credit report, then yes, I do agree that the disclosure is again required even though it is the same credit score/report used.

A no-cash out refinance is a new loan transaction initiated by a consumer for a consumer purpose, therefore the notice is required even if a previous obtained score is used. Part of the disclosure is when the score was obtained.

If the existing loan is modified then there is no new loan transaction and the notice would not be required.

However, no new money being advanced or no new credit report being pulled in the new transaction does not exempt the disclosure from being given.

(g) Disclosure of credit scores by certain mortgage lenders

(1) In general

Any person who makes or arranges loans and who uses a consumer credit score, as defined in subsection (f) of this section, in connection with an application initiated or sought by a consumer for a closed end loan or the establishment of an open end loan for a consumer purpose that is secured by 1 to 4 units of residential real property (hereafter in this subsection referred to as the "lender") shall provide the following to the consumer as soon as reasonably practicable:

I think we are missing something. Would the Notice apply if comply girl has the loan officer state in his credit memo the old Credit Scorewas not considered?

Not IMO, if the score is present how can you prove you didn't use the score in some form.

The key here, as I said in my original response, if this is a new loan transaction (refinancing) then the disclosure is required.

If it is a continuation of the existing transaction (obligation), it is not.

It's not often that I disagree with Dan, but I do here. The Home Loan notice is triggered when you "use" a credit score. If you already entered a loan, gave the notice and are simply renewing the loan for more time, I don't think there is a new credit decision. Therefore, I doubt you "used" the credit score. In fact,I doubt there is any new underwriting, etc. for the renewal.

If there was underwriting for this renewal then I think you would trigger the Notice since you have the score.

Actually David, I'm not sure if we are disagreeing.

My original reply stated if this is a new loan transaction they would have to provide the notice.

If they are renewing, modifying or extending the existing transaction then I would agree because the notice is only required once for the same transaction, however, if they are refinancing where the existing transaction is being satisfied and replaced by a new transaction then I will have to stay with my opinion that a new NHLA disclosure is required.

Interesting question here...(or maybe I'm so fried at this point that I have overlooked the answer).

We are making a loan to a borrwer that is to finish construction on his new primary residence. The loan will be secured by a commercial building and a rental dwelling owned by his father.

Is the NHLA and Credit Score Disclosure required?

Thanks for any replies.

Yes if the rental dwelling is a 1-4 residential real property. The notice is required when a consumer initiates a credit request for a consumer purpose that is to be secured by a 1-4 residential real property. The 1-4 residential real property does not have to be the primary residence.

Thanks Dan!

That's the way I was leaning, but it is always good to have a guru's input.

I appreciate your help!!

I agree with Dave's interpretation. The key is whether you used the credit score. When restructuring a construction loan for the permanent financing, I don't think that you are re-using the credit score. You are simply re-writing existing credit.

The no-new-note test is based in RESPA and TILA and I don't think it applies here. What matters is whether you used the credit score.

In interpreting this requirement, we should also look to the purpose of the FACT Act. The purpose here was to make the consumer aware of their credit score and the reasons for it. Providing an identitical notice nine months later (telling the customer the same thing you already told them) not only serves no purpose, but may be misleading. The customer's current credit score may be different.

All this changes, of course, if you pull a new credit report and score when deciding on the new or refinanced loan. New score = new disclosure. The actual language in the act covers anyone who "makes or arranges." Arguably, refinancing or renewing is making or arranging.

All this being said, I think the key to whether you should provide the notice is triggered by whether you obtained a credit score in connection with the current transaction.