When it comes to TRID (TILA-RESPA Integrated Disclosure) compliance, even the most seasoned professionals can encounter challenges. We recently received a very specific question about navigating TRID and manufactured home loans.
We thought other members of our community might benefit from this exchange and have published it below.
What is the correct TRID purpose for placing a manufactured (double-wide) home on land that is owned free and clear?
For context: The loan was closed with the purpose of combining the value of a new factory built manufactured home and the value of the land on which it was located immediately after closing. In order to assure the manufactured home dealer would deliver and set up the home on the land timely, the dealer was paid in three disbursements from the borrower’s proceeds which were held until a final inspection was completed.
The loan was not closed as temporary financing, but to purchase the home and place it on land. We used “Home Equity” on the Closing Disclosure, but we are being questioned as to why we did not use “Construction” since we made three disbursements from the proceeds. They were not true “advances” from the principal of the loan, but rather three disbursements from the borrower’s proceeds. We close two separate loans for true construction loans for homes built from the ground up; one being 12 months interest only and the other being a refinance of the construction loan for permanent financing. We have offered combination manufactured home and land loans for many years and have not been cited for our handling of the TRID purpose until now.
I think the auditor was triggered by the use of the terms “advance” and “undisbursed loan funds” on the Closing Disclosure to show the amount paid to the dealer at closing and the amount we were holding. We have since changed our terminology to use “payment” and “funds held.”
Answer:
If the land was used to get the funds for the manufactured home, even if it were free and clear, it would classify as a Home Equity. They could, however, be looking at it from section 1016.37(a)(6) which speaks to a lot being owed already. Constructing the home in this case is the construction phase and the permanent phase is then referred to as a refinance. If I understand your question correctly, they already own the land and are getting a loan to purchase the home. Nothing is being “constructed.”
I agree that the descriptions used for disbursement may have been confusing to the auditor. But “manufactured/mobile/modular” home definitions in the Regs (HMDA, Flood, RESPA and HUD) define this dwelling as being constructed elsewhere and moved to a permanent place. With that being said, in my opinion, it is not a site build so it is not a construction loan. Construction definitions in the regulations mentioned above define construction as being built on the land (site build). Also, I believe that if the borrower understood the original CD as you described it and you were doing it that way for everyone, it was a consistent process. If you changed the terminology for an auditor, just make sure the process is still clear to the consumer.
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