Do you have any information that addresses higher priced mortgages and construction to permanent loans?
We are working on a this type of loan product and have the following questions:
1. Most likely we will have a “step rate mortgage” which allows a fixed rate for the construction period and a different fixed rate for the permanent period; however, is written as one note. Reg Z permits either 2 separate disclosures with options on where the points can be allocated or one disclosure with less flexibility. Higher Priced mortgages exclude construction loans but since our product is a one phase is the construction exemption lost? If we elect to do 2 separate disclosures, which phase is the higher priced mortgage calculated on?
2. Loan would be covered under builders risk for the first year. Therefore, when must escrow for insurance start? We can escrow for taxes on unimproved at closing and include shock payment notice but estimating the homeowner’s insurance at the beginning of the construction phase is just a pure guess on cost. Should we not get the borrower’s insurance premium before the annual escrow analysis, all of the money is refunded back to them. If we don’t start escrowing for insurance until the permanent phase begins, are we in violation of Reg Z if the loan is a higher priced mortgage (even though homeowner’s insurance was NA)?