CFPB TRID Sec. 14.3 - What are the timing requirements for providing the Loan Estimate in a construction-permanent loan?

Compliance > Regulation Z - TILA / TRID Specific > General Info
Q:  What are the timing requirements for providing the Loan Estimate in a construction-permanent loan?
 
A:  If the construction-permanent loan is disclosed as two separate transactions, a creditor must provide a Loan Estimate, by delivering or placing it in the mail, to a consumer no later than the third business day after receipt of the application for the construction or permanent phase. For example, if a consumer applies for both construction and permanent financing, but on separate days, the creditor must provide the Loan Estimate for the construction phase within three business days of receipt of the application for the construction phase and the Loan Estimate for the permanent phase within three business days of receipt of the application for the permanent phase. (Comment 19(e)(1)(iii)-5) . If a consumer applies for both construction and permanent financing at the same time, the creditor must provide the Loan Estimate for both the construction and permanent phases within three business days of receipt of the application, using either a separate disclosure for each phase or a single, combined disclosure for both phases.
 
If the creditor receives a single application for both phases and choses to conduct separate closings and provide separate disclosures for the construction phase and permanent phase, it provides the separate Loan Estimate for the permanent phase within 3 business days of receipt of such application, and may proceed with a separate closing and Closing Disclosure for the permanent phase upon completion or near-completion of the construction phase if a revised Loan Estimate is not needed. Using a separate disclosure for the permanent phase also allows a revised permanent phase Loan Estimate to be provided at any time prior to 60 days before consummation. (§ 1026.19(e)(3)(iv)(F))
 
For example, assume a creditor receives a consumer’s application for construction-only financing on Monday, June 1. The creditor must deliver or place in the mail the Loan Estimate for the construction financing no later than Thursday, June 4. If on June 1, it receives an application for both the construction and permanent financing, it must place the Loan Estimates for the construction financing and permanent financing (either as one Loan Estimate or two separate Loan Estimates) no later than Thursday, June 4. If it receives the application for the permanent financing at a later date, for example, Monday, June 8, it must deliver or place in the mail the Loan Estimate for the permanent financing no later than Thursday, June 11.
 
If the creditor conducts separate closings, providing separate Loan Estimates allows the creditor to provide separate Closing Disclosures for the separate closings. For example, assume the consumer applies for both construction and permanent financing on Monday, June 1, and the creditor anticipates that closing for the construction phase will be on July 1, but closing for the permanent phase will be one year later on June 1. If the creditor provides separate Loan Estimates, the creditor may provide separate Closing Disclosures, providing the Closing Disclosure for the construction phase at least three business days before the construction consummation on July 1, and then later providing the Closing Disclosure for the permanent phase at least three business days before the permanent phase consummation on June 1 of the next year. If the creditor provides the appropriate language on the Loan Estimate indicated that it may issue a revised Loan Estimate any time prior to 60 days before consummation and complied with all other requirements, the creditor could also issue a revised Loan Estimate prior to the June 1 consummation. ( § 1026.19(e)(3)(iv)(F))
 
For more information about providing the consumer with the Loan Estimate, see section 6 above (in the Bureau’s compliance guide).
 
 
This information can be found in the CFPB's TILA-RESPA Integrated Disclosure rule compliance guide - http://www.consumerfinance.gov/regulatory-implementation/tila-respa/
 

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