On Wednesday, December 18, 2019, the CFPB published two guides on preparing TRID disclosures for construction-only and construction-permanent loans as required by Regulation Z. Under Regulation Z, a creditor may treat a construction-permanent loan as either one combined transaction or as two or more separate transactions. If the loan is treated as one combined transaction, the creditor discloses both the construction phase and the permanent financing phase combined on each disclosure. If the loan is treated as separate transactions, the creditor provides a separate set of disclosures for each phase of the construction-permanent loan. The “Combined Guide” provides guidance for disclosing the construction and permanent phases together and the “Separate Guide” provides guidance for disclosing the phases separately, including disclosures for construction only loans.
The Construction Loan Guides (the Guides) were designed to address industry requests for clarification or more formal guidance on the completion of TRID disclosures for construction loans due to the complexity of disclosures for such transactions. The Guides break down the regulatory requirements for each section of the form into plain language and provide examples to illustrate compliant completion of the forms based upon various scenarios. The Guides work with other CFPB general TRID resources, including the TILA-RESPA Integrated Disclosure Small Entity Compliance Guide and the TILA-RESPA Integrated Disclosure Guide to the Loan Estimate and Closing Disclosure Forms, to review how to provide particular disclosures on the TRID forms for construction-only and construction-permanent loans.
The Guides do not provide a complete review of the TRID Rule, but instead highlight particular sections of the Loan Estimate and Closing disclosures based on the questions received by the CFPB regarding correct form completion for construction loan disclosures. At the end of the Guides, there is more information about the TRID Rule and related implementation assistance from the CFPB that can support any of the other pieces not addressed by these guides.
While the Guides pertain to compliance with the TRID Rule, they are not a substitute for the rule. Only the TRID Rule, its Official Interpretations (also known as commentary), and Appendix D provide complete and definitive information regarding the requirements for construction loans. However, the discussions, tables, and examples in the Guides provide citations to the sections of the TRID Rule on the subject being discussed for proper reference.
Financial institutions that offer construction only loans and construction-permanent loans may find the Guides helpful to better understand the Loan Estimate and Closing Disclosure requirements for these complex transactions.
Follow the link below to access the Combined Guide:
Follow the like below to access the Separate Guide: