RESPA Apply to Interim Construction Loan?

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Question:

Would RESPA apply in this scenario? A customer walks into a bank and has a title to land and asks for a $500,000 interim construction loan. The customer has a perm takeout of $450,000 (with another institution) and wants to have the bank do a HELOC (2nd) for the remaining $50,000 when the perm takeout is closed. Since the Bank is doing a HELOC to cover part of the payoff of the construction loan, would this make the interim construction loan a RESPA loan?

Answer:

In my opinion, yes. You are handling part of the permanent financing. This would be similar to an 80/20 loan. Each section of the 80/20 loan is subject to RESPA whether both sections are done by the same financial institution or separate ones. You would not need to provide a GFE or a HUD for the HELOC. See 3500.7(h) and 3500.8(a) but you would for the construction phase.

First published on BankersOnline.com 6/20/11