There has been much confusion surrounding TRID disclosures (aka Integrated Disclosures) as they relate to construction loans. Much of this confusion comes from the CFPB’s failure to give us any sample disclosures for a properly disclosed construction loan. In an effort to lessen the confusion, the CFPB recently issued some guidance for disclosing construction loans.
While we were happy to see the CFPB acknowledge the issue, the content of the guidance isn’t exactly earth-shattering. Essentially, it states the following:
- You can still use the methods outlined in Appendix D for disclosing construction loans. If you’re unsure of when advances will be made, Appendix D allows you to estimate interest based on half of the commitment amount being advanced for the entire term of the loan.
- If you have a multiple-advance construction loan that may also be permanently financed by you, you can disclose the construction and permanent phases separately or combine them.
- The Projected Payments table on the Loan Estimate and Closing Disclosure must include the payments during the construction phase. If a construction loan is being disclosed as a separate transaction, the projected payments table should also show any balloon payment.
While this isn’t the type of “guidance” we were hoping for, it is a sign the CFPB is at least aware that this issue needs more clarity. Hopefully, more guidance is on the way. One can always hope, right?
Diane joined Banker’s Compliance Consulting with over 10 years of compliance experience and over 15 years of experience within the financial industry. Diane is a Certified Regulatory Compliance Manager (CRCM) and has a Bachelor’s Degree in Sociology with a concentration in Criminal Justice. She is a graduate of the Schools of Banking Compliance School and has participated in various other training opportunities throughout her career. Diane understands firsthand the struggles banks face in building and maintaining successful compliance programs. Her experience and common sense approach to consumer compliance is a great asset to our clients.
Diane and her husband have two kids who keep them busy. She enjoys running and other sports and is a big Bugs Bunny fan! She’s a bit crazy in that she does enjoy reading some of these regulations and she’s a “crazy cat lady!” Her cat tales are hilarious!