CFPB TRID Sec. 14.20 - Does the creditor disclose the Adjustable Interest Rate (AIR) table for construction loans?

Compliance > Regulation Z - TILA / TRID Specific > General Info
Q:  Does the creditor disclose the Adjustable Interest Rate (AIR) table for construction loans?
 
A:  When the construction-permanent loan is disclosed as one transaction, if the construction phase has one fixed rate while the permanent phase has a different fixed rate, it is disclosed as a step rate product and the Adjustable Interest Rate (AIR) table is required. The disclosures would be similar to other step rate products. If either or both phases have an adjustable rate, the Adjustable Interest Rate (AIR) table is also required. Similarly, if the interest rate for the permanent phase is unknown because the creditor reserves the right to set the rate upon conversion from the construction phase, making the loan an adjustable rate product, the Adjustable Interest Rate (AIR) table is also required. (§ 1026.37(j); Comment 37(j)-1)
 
When the construction-permanent loan is disclosed as two separate transactions, the Adjustable Interest Rate (AIR) table is required for either phase where the interest rate of the phase may increase after consummation. If the creditor does not know the interest rate for the permanent phase of the loan, for example if the interest rate will be set upon conversion or the permanent phase has an adjustable rate, the rate disclosed is the fully indexed rate, which is the interest rate calculated using the index value and margin at the time of consummation. If the index value and margin that will apply at the time of consummation are not known at the time the disclosure must be made, the fully-indexed rate disclosed may be based on the index in effect at the time the disclosure is delivered. (§§ 1026.37(j)(3) and 37(b)(2); Comment 37(b)(2)-1). For more information on determining the interest rate for adjustable rate construction loans used in the disclosures for the Adjustable Interest Rate (AIR) table, see section 14.9 above.
 
 
 
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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