CFPB TRID Sec. 14.19 - Is the Adjustable Payment (AP) table completed for a construction loan?

Compliance > Regulation Z - TILA / TRID Specific > General Info
Q:  Is the Adjustable Payment (AP) table completed for a construction loan?
 
A:  When a construction-permanent loan is disclosed as one transaction, the Adjustable Payment (AP) table must be disclosed if the construction phase permits interest-only payments. The table is required to be disclosed because the transition from interest-only payments to payments of principal and interest will be present. The Adjustable Payment (AP) is disclosed as it would be for any other loan, but the creditor may omit and leave blank the amount or range corresponding to the first periodic principal and interest payment that may change.
 
For example, because the interest-only period during the 12-month construction phase has a total amount advanced upon which the interest-only payments are based that adjusts monthly, the creditor would make the following disclosures in the Adjustable Payment (AP) table:
 
  • The “Interest Only Payments” must state “Yes for your first 12 payments”. (§ 1026.37(i)(1))
  • Under the “Monthly Principal and Interest Payments” portion of the Adjustable Payment (AP) table:
    • The First Change/Amount must disclose the timing of the first change, which is the number of the earliest possible payment (e.g., 1st payment) that may change under the terms of the legal obligation. The creditor may omit and leave blank the amount or range corresponding to the first periodic principal and interest payment that may change (§ 1026.37(i)(5)(i); comment app. D-7.iv.B)
    • The Subsequent Changes discloses the “smallest period of adjustments that may occur.” (Comment 37(i)(5)-3). In this example it is disclosed as “Every payment.”
    • For purposes of determining the number of the periodic payment that can first reach the Maximum Payment, the creditor begins counting from the first payment under the construction phase, which is the first payment of the combined transaction. (§ 1026.37(i)(5)(iii))
 
For more information on this topic, see section 2.3.5 of the TILA-RESPA Guide to Forms.
 
 
This information can be found in the CFPB's TILA-RESPA Integrated Disclosure rule compliance guide - http://www.consumerfinance.gov/regulatory-implementation/tila-respa/
 
 

Add Feedback