Construction loans are significantly impacted by the TRID rules. Many construction loans were exempt from the old disclosure requirements; however, these loans are clearly covered by the new rules.
Many lenders are still scrambling trying to master the details of the new integrated disclosures. Construction loans are causing problems because of a lack of binding clarification of the requirements.
The CFPB provided few details regarding completion of the Loan Estimate and the Closing Disclosures for these loans. The regulation does not contain sample forms for construction loans. The Commentary only mentions construction loans a few times and those references provide little guidance for completing the forms.
Creditors continue to report problems producing construction loan disclosures using loan origination software (LOS) products. Apparently some LOS products cannot produce construction disclosures while others produce the disclosures for some construction loan options, but not for others.
Lenders need solutions. Without details, how do you complete disclosures, or check disclosures produced by your LOS? Without details, how do you determine what construction loan options to offer to your customers? It does not appear likely that the CFPB will provide binding guidance in the near future.
The 2015 TRID for Construction Loans webinar conducted in October 2015 has been updated to include, among other new information, informal guidance provided by the CFPB in its March 2016 webinar on the same topic.
This program is designed to fill the void created by the lack of regulatory guidance for construction loans. It explains coverage and exemption rules. It provides section-by-section guidance on completing the Loan Estimate and the Closing Disclosure for the common construction loan options. It answers the many questions you have regarding the proper disclosure of construction loans.
This program will cover:
- When and why construction loans are covered by the new integrated disclosure rules;
- How to complete the loan estimate and closing disclosure for:
- Construction only loans
- Combined construction/permanent loans (both one-close and two-close); and
- Permanent financing that replaces construction financing.
- How to properly estimate interest on a construction loan;
- The impact of a construction only loan versus a lot purchase/construction loan;
- When to disclosure "Sales Price," "Estimated Value," or "Appraised Value;"
- How to determine the proper "Purpose" of the loan;
- How to properly describe the "Product;"
- The proper disclosure of projected payments;
- How to properly disclose inspection fees;
- How to disclose undisbursed construction funds;
- Completing the "Cash to Close," Optional Alternate Cash to Close," and the "Cash to Close" in the Borrower's Summary of the Closing Disclosure;
- When the AP Table is needed and how to properly complete it;
- How to complete the "In 5 years" disclosure for short-term construction loans;
- When to include the "60 days prior to consummation" disclosure; and
- Much more.
This program is designed for everyone involved in the origination of construction loans, those making decisions on construction loan products, compliance staff and auditors, who need answers to questions regarding the proper disclosure of construction loans.
TRID for Construction Loans - Updated
Questions and Answers