The new Truth in Lending Act/Real Estate Settlement Procedures Act Integrated Disclosure (TRID) rules were effective on October 3, 2015. Many lenders scrambled to master the details of the new disclosures. Construction loans were particularly difficult because of a lack of binding clarification of the requirements. But help has arrived.
On July 28, 2016 the Consumer Financial Protection Bureau (CFPB) published proposed rules to clarify the TRID rules for construction loans. Final rules were published on July 7, 2017. The final rules are effective on October 10, 2017 and compliance is mandatory on October 1, 2018. While the revisions are available as of October 10, 2017 many of the changes will require system changes that must be completed by the mandatory compliance date.
Prior to TRID many construction loans were exempt from the old disclosure requirements; but TRID clearly expanded the scope of Regulation Z to cover most construction loans.
Initially the CFPB provided few details regarding completion of the Loan Estimate and the Closing Disclosures for these loans. The 2017 revisions clarify many lingering forms issues. Unfortunately, the regulation still does not contain sample forms for construction loans.
The program provides an update on regulatory guidance for construction loans. Both the program and the detailed manual provided to attendees are updated for the 2017 revisions. The program explains coverage and exemption rules and provides section-by-section guidance on completing the Loan Estimate and the Closing Disclosure for the most typical construction loan options. Numerous form samples are provided. The program provides answers for the many questions bankers have regarding the proper disclosure of construction loans.
Upon completion of the program, participants understand:
When and why construction loans are covered by the TRID 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 disclose "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 Alternative Cash to Close" and "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
The program is designed for those seeking answers to questions regarding the proper disclosure of construction loans. This program is designed for everyone involved in the origination of construction loans, those making decisions on construction loan products, compliance staff and auditors.
Jack Holzknecht is the CEO of Compliance Resource, LLC. He has been delivering the word on lending compliance for 42 years. In 37 years as a trainer over 130,000 bankers (and many examiners) have participated in Jack’s live seminars and webinars. Jack’s career began in 1976 as a federal bank examiner. He later headed the product and education divisions of a regional consulting company. There he developed loan and deposit form systems and software. He also developed and presented training programs to bankers in 43 states. Jack has been an instructor at compliance schools presented by a number of state bankers associations. As a contractor he developed and delivered compliance training for FDIC examiners for ten years. He is a Certified Regulatory Compliance Manager and a member of the National Speakers Association.
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