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Disclosures for Construction Loan Extension

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Question: 
On construction/permanent loans with one closing-upon completion, a modification is done and the 30 year rate is set at that time. There are times we have to extend the construction period of 12 months . Usually the rate remains the same but at present the rates are changing. The construction period we base the rate on is the WSJ prime +1% fixed for 12 months. I have to extend one now and the rate will increase from 5% to 5.75%. What if any disclosures are required at time of extension?
Answer: 

It depends on whether or not a refinance occurs under 1026.20(a). If you are modifying the current obligation without replacement, then typically it would not trigger new disclosures unless you are adding or changing a variable rate features that was not previously disclosed.

First published on 05/20/2018

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