The CFPB released a resource intended to help lenders understand and implement the TILA-RESPA integrated disclosures (“TRID”) when extending construction loans.
The CFPB’s factsheet provides that construction loans are subject to TRID requirements as long as they are closed-end consumer credit transactions secured by real property. The only exception is those construction loans that are open-end transactions or loans for a commercial purpose. Because construction loans usually involve multiple advances, Appendix D to Regulation Z provides a special procedure to estimate and disclose such terms, as well as guidance for the calculation of the interest portion of the finance charge.
TRID has not eliminated the option that lenders have had all along, i.e., to treat the construction phase and the permanent phase as either one transaction or more than one transaction for purposes of the required disclosures. If treated as one transaction, a single set of disclosures (Loan Estimate and Closing Disclosure) covers both phases of the transaction. Otherwise, a separate set of such disclosures has to be provided for each phase.
The CFPB is considering additional guidance to facilitate compliance with TRID, including a webinar on construction loan disclosures