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Is it permissible for the bank to place a hold on a deposit account for funds that are not collateral for a loan, but are funds deposited to be used for a loan, for cash to close, to pay loan fees? Or the cash injection the customer will provide for a construction loan? If not, what can we do instead?
No, you may not place any funds on hold unless you have reason per Availability of Funds and Collection of Checks (Reg CC )(https://www.ecfr.gov/current/title-12/chapter-II/subchapter-A/part-229).
From a business decision – Suggestions to consider: Placing the funds on deposit into a short term CD. A draw type account for the construction loan purposes that they can make interest on.
These are of course just suggestions but are not hard fast requirements. Your FI, will need to make decisions on how you would handle and disclose this type of transaction for all borrowers to avoid potential fair lending, fair banking, and/or UDAAP issues.
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