CFPB TRID Sec. 14.12 - How does the creditor disclose the construction phase of a construction-permanent loan in the Projected Payments table?

Compliance > Regulation Z - TILA / TRID Specific > General Info
Q:  How does the creditor disclose the construction phase of a construction-permanent loan in the Projected Payments table?
 
A:  If the amounts or timing of construction phase advances for a construction-permanent loan are unknown at or before consummation, and the creditor uses Option One under appendix D to calculate the interest-only payments, the creditor discloses the periodic payments for the construction phase in the Projected Payments table as follows:
 
1. Loan disclosed as two separate transactions. The creditor discloses the construction phase in the Projected Payments table as it would for any other loan. It cannot omit the number and amounts of any interest-only payments. If the amount of an interest-only payment is unknown at the time of the disclosure, the creditor should use appendix D to estimate the monthly payment amounts.
 
If the interest rate of the construction phase is a fixed rate, the amount disclosed using appendix D is a single amount, and is not disclosed as a range from $0 to the interest-only payment amount based on the full principal balance available to the consumer during the construction phase.
 
If the construction phase has an adjustable rate, the creditor discloses in the first column of the Projected Payments table a range of payments, (§§ 1026.37(c)(1)(iii) and (c)(2)(i)(A)). The maximum possible interest rate and the minimum possible interest rate under the terms of the legal obligation are applied to either one-half the commitment amount or the entire commitment amount, depending on the appendix D calculation option chosen. (§ 1026.37(c)(2)(i)(A)).
 
When the construction phase is disclosed as a separate transaction, the Projected Payments table must also disclose the balloon payment feature, as the payments made during the construction phase would not repay the principal balance. (Comment app D-7.v.A). See section 14.13 below for the balloon payment disclosures required for the construction phase.
 
2. Loan disclosed as a single transaction.  If the construction phase is less than one year, the creditor discloses the construction phase payments in the first column of the Projected Payments table. The first column also reflects any amortizing payments, mortgage insurance and escrow payments for the permanent phase if the construction phase is not a full year. The remaining columns reflect the payments for the permanent phase. (Comment app D-7.v.B). See section 14.16 below for how to disclose the escrow items during the construction phase.
 
 
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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