Document Updates: Loan Estimate (Cx18565) and Closing Disclosure (Cx18566) for Construction-to-Permanent

New Official Staff Commentary to Federal Regulation Z (12 CFR Pt. 1026), enacted as part of the “Amendments to Federal Mortgage Disclosure Requirements under the Truth in Lending Act (Regulation Z)” or, using the common vernacular, “TRID 2.0” (82 FR 37656 [2017]), provides the following guidance regarding the amounts to be disclosed in the “Mortgage Insurance” (“MI”) and “Estimated Escrow” (“Escrow”) rows of the “Projected Payments” tables (“PPT”) of the Loan Estimate and the Closing Disclosure in cases involving construction-to-permanent loans which are treated as one transaction:

“Consistent with comments 37(c)(2)(ii)-1 and 37(c)(2)(iii)-1, when the loan is disclosed as one transaction and only the terms of the legal obligation for the permanent phase require mortgage insurance or escrow, the way the creditor discloses the escrow and mortgage insurance depends on whether the first column of the projected payments table exclusively discloses the construction phase. If the first column of the projected payments table exclusively discloses the construction phase, the creditor discloses ‘0’ in the first column of the projected payments table for mortgage insurance and a hyphen or dash in the first column of the projected payments table for escrow. If the first column discloses both the construction phase and the permanent phase payments, the amount of the mortgage insurance premium or escrow payment (if any) for the permanent phase is disclosed in the first column.” (12 CFR Pt. 1026, Supp. I, Paragraph App. D-7.v.C; 82 FR 37768 [2017])

To better support this, we will be modifying the logic used for disclosing either a “0” or a “-“ for these two rows as follows:

• Mortgage Insurance
  • If there is an amount for a specific column in the PPT for the MI row, such amount will be disclosed;
  • If no amount is disclosed in any columns of the PPT for the MI row, then “0” will print in all columns, based on the assumption that mortgage insurance (or its functional equivalent) is not required to be purchased by the consumer (see 12 CFR Pt. 1026, Supp. I, Paragraphs 37(c)(2)(ii) – 1 and App. D-7.v.C);
• • If no amount is disclosed in any columns preceding one disclosing an amount for mortgage insurance, then “0” will be disclosed, based on the assumption that mortgage insurance is not required to be purchased during the timeframe reflected in the column, but will be required to be purchased at a future date (see Ibid.); and
• • If no amount is disclosed in any columns proceeding after one disclosing an amount for mortgage insurance, then “-“ will be disclosed, based on the assumption that mortgage insurance is terminated at this point of time (see Ibid.).

• Escrow
  • If there is an amount for a specific column in the PPT for the Escrow, such amount will be disclosed;
  • If no columns in the PPT for the Escrow row have any amounts, then “0” will print in all columns, based on the assumption that “no escrow account for the payment of some or all such charges will be established” (12 CFR Pt. 1026, Supp. I, Paragraph 37[c][2][iii] – 1); and
• • If there is no amount in any columns preceding or proceeding from any column(s) disclosing an amount for the Escrow row, then “-“ will be disclosed, based on the assumption that, even though an escrow account will be established, “no escrow payment is required” for that particular time period (see Paragraphs 37[c][2][iii] -1 and App. D-7.v.C).

These changes will take effect on March 24, 2018. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.

DR 256137