Prior to TRID, it always seemed logical that the 60-day letter belonged with the 2nd loan as naturally, it will take quite awhile to build the home.

TRID has clarified that the 60-day letter is for the construction phase. Okay then. If we are expected to do disclosures for BOTH phases off of the one application if we are or may do the perm phase, what protects us from changes that may not be normal COC's during the time lapse between initial disclosure and actual processing of the perm phase without that additional protection?

Thoughts?

"for the construction phase"

You are misreading that paragraph. They are talking about the permanent phase of the construction project.

The rule is the same as with the GFE and is worded similarly.

From the Preamble:

Section 1024.7(f)(6) of Regulation X currently provides that in transactions involving
new construction home purchases, where settlement is expected to occur more than 60 calendar days from the time a RESPA GFE is provided, the loan originator cannot issue a revised RESPA GFE unless the loan originator provided the borrower with a clear and conspicuous disclosure stating that at any time up until 60 calendar days prior to the real estate closing, the loan originator may issue a revised RESPA GFE. The Bureau concluded that this approach made sense where consummation will not occur for an extended period of time. Accordingly, proposed ß 1026.19(e)(3)(iv)(F) would have provided that a valid reason for revision exists on construction loans when consummation is scheduled to occur more than 60 days after delivery of the estimated disclosures, provided that the consumer was alerted to this fact when the estimated disclosures were provided. Proposed comment 19(e)(3)(iv)(F)-1 would have clarified that a loan for the purchase of a home either to be constructed or under construction is considered a construction loan to purchase and build a home for the purposes of ß 1026.19(e)(3)(iv)(F) and would have illustrated the requirement with examples. The Bureau stated in the proposal that the proposed comment would be consistent with guidance provided by HUD in the HUD RESPA FAQs p. 21, # 2 (GFE - New construction). The Bureau did not receive any comments on proposed ß 1026.19(e)(3)(iv)(F), and is adopting ß 1026.19(e)(3)(iv)(F) and comment 19(e)(3)(iv)(F)-1 as proposed, except for minor revisions to enhance clarity.

Well thank goodness for misreading! You know, in the past we have all argued it the other way around...I've been one of the very few that felt it was geared towards the permanent loan, not the construction phase. The software produces it on the construction, rather than the permanent side as well, so I've never been fully comfortable with it.

Somewhere they give examples such as weather, etc., delaying start of construction...so that's why I thought they'd clarified it this go around to mean it applied to the construction phase.

I'm going to trust that all is well...because it's the PERM phase that I worry about!

So thanks to you both!

Well, delays in weather extend construction, delaying the closing on the permanent loan.

It's always been sort of comical anyway...like you can really figure out when you are at least 60 days out, but not less than.

We always provided the notice as a precaution, however we also always provided a GFE based on the information known at that time. Since 1/1/10 I cannot think of one time where we have converted the construction loan to the permanent loan where there was not a qualified changed circumstance that allowed us to issue a revised GFE for the affected charges for the permanent phase. The majority of these COCs are rate locks, changes in the loan amount, or changing repayment terms all at the borrower's request.

Same here, Dan. It's never caused a problem, but I could see where it could if lawyers went up on their fees across the board...or appraisers, stuff like that.

I have always wondered, if the property is under construction and there could be further delays, you would know when you were approaching 60 days before closing. 60 days is a long time to predict what is going to happen. There could be further delays.

How do banks monitor to ensure they get the new LE out for the permanent financing 60 days before the new loan closing?

I'm told that in the secondary market that in order to lock these loans for 60 days would result in a higher rate to the borrower. Typically in the secondary market, they lock & close loans within 30-45 days & this is a lower rate for the borrowers.

How are others addressing this secondary market issue?

Thanks.

That's really the borrower's choice about deciding what lock to get. It's like playing the stock market in a sense.

We have had no need to re-issue prior to 60 days, but then our two-closes are both in-house loans and not much really ever changes. If it does, it's a bona fide COC event and the 60 days doesn't matter.