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#667888 - 01/18/07 04:20 PM Construction to Perm
Rather be in Vegas Offline
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Joined: Oct 2005
Posts: 248
Florida
We are doing our first construction to permanent loan and we have no procedures in place as far as disclosures are required. Does anyone have a checklist they are willing to share. Also, any guidance would be appreciated.

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#667954 - 01/18/07 04:58 PM Re: Construction to Perm Rather be in Vegas
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,761
Bloomington, IN
You disclose the permanent loan that is replacing the construction loan just as you would any other home purchase loan.

Click here and download the Real Estate Matrix 6.1.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#667974 - 01/18/07 05:10 PM Re: Construction to Perm Dan Persfull
Rather be in Vegas Offline
100 Club
Joined: Oct 2005
Posts: 248
Florida
Thank you.

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#679664 - 02/05/07 04:59 PM Re: Construction to Perm Rather be in Vegas
dach Offline
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Joined: Mar 2006
Posts: 135
I read somewhere that in order for a construction loan to be exempt from RESPA you must have a take-out committment on hand, the customer must also own the lot and it must be less than two years. The Real Estate Matrix referenced above says that the RESPA documents are only needed if you antipate providing permanent financing at the time of application.

We have a construction loan (6 mo) and do not evidence that any permanent financing will be performed by our bank, does RESPA apply in this case? Also, if we extend this loan by modification does that chenge RESPA coverage?

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#679679 - 02/05/07 05:05 PM Re: Construction to Perm dach
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,761
Bloomington, IN
There is no set in stone rule that you have to have a take out commitment. However, without a take out commitment then your institution MAY do the permanent financing and that MAY do the permanent financing triggers the RESPA disclosures. BTW, why would you do a construction only loan if you don't have a take out commitment from another financial institution or your financial institution isn't willing to do the permanent?

Modifications do not trigger new disclosures.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#680092 - 02/05/07 09:02 PM Re: Construction to Perm Dan Persfull
dach Offline
100 Club
Joined: Mar 2006
Posts: 135
At the time the loan was made it was assumed that the either the borrower would be able to pay off the loan or the borrower's father would pay the loan off. The bank would be willing to take on the permanent but is not planning to do so.


P.S. What is BTW?

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#680105 - 02/05/07 09:09 PM Re: Construction to Perm dach
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,761
Bloomington, IN
BTW = By the way.

Quote:
it was assumed that the either the borrower would be able to pay off the loan or the borrower's father would pay the loan off.


Unless the source of funds to payoff the loan were verified then that is not a very good underwriting assumption. Sorry, it's just a pet peeve of mine for a FI to do construction only loans when there is no take out plans documented.
_________________________
The opinions expressed are mine and they are not to be taken as legal advice.

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#680204 - 02/05/07 10:04 PM Re: Construction to Perm Dan Persfull
dach Offline
100 Club
Joined: Mar 2006
Posts: 135
Thanks for the help!

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