When we commit to do a construction loan for a 1-4 family residence we always commit to do the permanent as well. (Two separate closings). The construction loan is a single payment loan due at maturity. If the owners are currently living on the property, let's say - in a travel trailer.

Do we need to start escrow on the temporary portion of the loan? I think we need to escrow. Someone else here, says, no. It's temp financing with no payments due, and no insurance needed from the borrowers.

A temporary construction loan does not require escrowing in regards to HPML construction loans are exempt. Once the permanent financing is started, that is when you will need to escrow for HPML.

That's what we are doing CO - but something make we want to say that since we know we are doing the perm - we should be escrowing on this since they live there now.

Anon,

I haven't read anything that says it would be required until permanent financing starts.
Does your internal policies prohibit you from escrowing in this case? If not, you would not be breaking any compliance rules that I know of if you escrow now.

Const/perm one time closes would require you to establish the escrow at consummation with the escrow beginning with the first payment of the permanent phase. Outside of that construction only and temporary loans are exempt under 226.35(a)(3).