[MBT_Compliance1]

I would like to ensure we disclose our various construction loan products correctly.

Based on the guidance quoted below from your TRID for Construction Loans manual, a construction only loan with monthly or quarterly interest payments and principal outstanding due at maturity would be disclosed as “interest only”, correct?

“The CFPB has provided guidance that a construction only loan that contains interest only terms with a balloon payment would be disclosed as “interest only” in the Purpose field and the AP table would not be disclosed. Note: This oral guidance not included in the Regulation Z or the Official Interpretations.”

Based on the commentary quoted below found in your Understanding and Implementing the New Integrated Disclosures manual, would these loan types be considered “balloon payment”?

– Semi-annual interest payments with principal outstanding due at maturity
– Single payment with all interest and principal outstanding due at maturity

“Balloon Payment- Single and Double Payment Transactions Comment 37(b)(5)-2
The definition of a “balloon payment” under § 1026.37(b)(5) includes the payments under transactions that require only one or two payments during the loan term, even though a single payment transaction does not require regular periodic payments, and a transaction with only two scheduled payments during the loan term may not require regular periodic payments.”

Thanks!

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[rcooper]

Based on the guidance quoted below from your TRID for Construction Loans manual, a construction only loan with monthly or quarterly interest payments and principal outstanding due at maturity would be disclosed as “interest only”, correct? –

Yes, that is correct according to oral guidance we received from the CFPB. I want to reiterate what was stated in the manual, which is that this is not written in the regulation or commentary nor did we receive official written guidance from the CFPB, but at this point their oral guidance is our best information.

You are correct that if you have an interest only construction loan with a balloon payment that the balloon payment would be disclosed in the Loan Terms table according to 1026.37(b)(5) even though the product may be described as interest only.

Based on the commentary quoted below found in your Understanding and Implementing the New Integrated Disclosures manual, would these loan types be considered “balloon payment”?

– Semi-annual interest payments with principal outstanding due at maturity
– Single payment with all interest and principal outstanding due at maturity

From my understanding of what you are asking and the informal guidance we have received from the CFPB the first scenario would be listed as “interest-only” in the product description and as having a balloon feature under the Loan Terms table. And scenario 2 would be balloon for both.

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