Construction Loan change in Loan Amount after a CD

Posted By: ccman

Construction Loan change in Loan Amount after a CD - 12/12/19 05:58 PM

Our Loan Ops Mgr is asking if a Change in Terms is sufficient for an increase in the loan amount of a construction loan (usually 12 mo. int. only)
fixed rate loan require a new disclosure. The concern is that post closing to increase the loan amount would require an increase in the title insurance. Would revised TRID disclosures be needed in addition to a Change in Terms Agreement? or would this be considered a new loan request altogether requiring new TRID disclosures?

Thanks.
Posted By: rlcarey

Re: Construction Loan change in Loan Amount after a CD - 12/12/19 06:12 PM

Depends on how it is accomplished:

Official Interpretation

20(a) Refinancings

1. Definition. A refinancing is a new transaction requiring a complete new set of disclosures. Whether a refinancing has occurred is determined by reference to whether the original obligation has been satisfied or extinguished and replaced by a new obligation, based on the parties' contract and applicable law. The refinancing may involve the consolidation of several existing obligations, disbursement of new money to the consumer or on the consumer's behalf, or the rescheduling of payments under an existing obligation.
Posted By: ccman

Re: Construction Loan change in Loan Amount after a CD - 12/12/19 06:28 PM

I understand that there will be no new obligation that replaces the old one and that the Change in Terms Agreement simply states what is changing and the original contract remains in tact. No change in maturity or interest rate only the loan amount will change.

Thanks.
Posted By: ccman

Re: Construction Loan change in Loan Amount after a CD - 12/12/19 09:02 PM

One other consideration would be a fee to increase the Title Policy if charged to the borrower, how would this be handled in relation to an
increase in the loan amount. Would this fall into the category of a refinancing and require disclosures? Essentially a new loan amount with new fees and new LE?
Posted By: rlcarey

Re: Construction Loan change in Loan Amount after a CD - 12/12/19 09:15 PM

I don't think charging a fee has anything to do with "the original obligation has been satisfied or extinguished and replaced by a new obligation,"
Posted By: ccman

Re: Construction Loan change in Loan Amount after a CD - 12/12/19 09:24 PM

Perfect. Thank you rl. Just needed some clarity. Thanks again.