Although the 2017 amendments to the TRID rule, often referred to as TRID 2.0, added commentary to TRID provisions of Regulation Z and, particularly, Appendix D to Regulation Z, that addresses multiple advance construction loans, there has continued to be confusion in the industry on how to properly disclose construction-to-permanent, one-time-close loans, especially as a single transaction on the Loan Estimate and Closing Disclosure.
December 18, 2019, the CFPB published two new TRID Guides related to construction and construction-to-permanent loans. One guide addresses the option for using separate Loan Estimates and separate Closing Disclosures for the construction and permanent phases, and the other for using a single Loan Estimate and single Closing Disclosure for both phases of the construction-to-permanent loan. The single disclosure approach often is referred to as using “combined disclosures.” The “Guide for separate construction and permanent phase disclosures” focuses on the Loan Terms, Projected Payments, Loan Costs and Adjustable Payments tables of the Loan Estimate and Closing Disclosure. Similarly, the “Guide for combined, one-transaction disclosures” focuses on the Loan Terms, Projected Payments, Loan Costs, Adjustable Payments, and Adjustable Interest Rate tables of the Loan Estimate and Closing Disclosure.
Both Guides include section-by-section instructions and illustrations for the applicable tables, with references back to the applicable sections of Regulation Z and the Regulation Z Commentary and Appendices. They also include specific loan scenario examples for most of the required disclosures in each of the tables. However, like the TRID Rule and Appendix D, the Guides do not address some of the more common construction-to-permanent loan products offered in the market today.
The guidance included in the new Guides is the most detailed and comprehensive on construction lending TRID disclosures from the CFPB, to date. The Guides may help to improve consistency in TRID disclosures for construction-to-permanent loans in the market, which would enable borrowers to more easily shop for and compare loan products between creditors. However, the Guides are also likely to spur new questions from the industry that will, hopefully, lead to the revision of the Guides to provide even further clarification.