Subsequent to our state-by-state construction-to-permanent review, discussed in a previous post, we have modified and added several documents for Texas construction-to-permanent loans. This was necessary because Texas construction loans are not structured the same as they are in other states. The Texas Real Estate Forms Manual § 52.2 says:
The contractor, the owner, and the owner’s spouse sign the mechanic’s lien contract. For repair or renovation construction, this contract must be signed only at the offices of the third-party lender, a lawyer, or a title company. Tex. Const. art. XVI, § 50(a)(5)(D).
The owner executes the mechanic’s lien note payable to the contractor; the note should bear no interest and be payable in a single payment on completion of construction. The contractor thus is not a creditor under the federal Truth in Lending Act because no finance charge is involved and the obligation is payable in four or fewer installments. 15 U.S.C. § 1602(f).
The contractor endorses the mechanic’s lien note to the third-party lender and assigns the lien with a transfer of lien, which is filed with the county clerk of the county in which the property is located. See section 24.1 and form 24-1.
The third-party lender renews and extends the mechanic’s lien note by having the owner execute a note payable to the third-party lender; it bears interest and is payable as agreed between the owner and the third-party lender.
To satisfy these requirements, we are implementing the following documents:
- Mechanic’s Lien Note (Cx8757)
- TX Transfer of Lien (Cx8781)
- TX Residential Construction Contract (Cx22814)
- TX New Home Closing Certificate (Cx22815)
The Mechanic’s Lien Note (Cx8757) will print for all Texas Closing Packages when Field 1179 “New Construction?” is Yes. The Texas Transfer of Lien (Cx8781) will print for all Texas Closing packages, and should be used when appropriate. Our TX Residential Construction Contract (Cx22814) should print for all Texas construction-to-permanent Closings packages where Field 126667 “FNMA Construction Forms” is Yes, since it replaces the generic FNMA Construction Contract (Cx22650). The new TX New Home Closing Certificate (Cx22815) prints for all Texas Closing packages that are for any construction or improvement purpose where Field 1179 “New Construction?” is Yes.
These new documents will be in effect on December 28, 2018. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.
Mechanic’s Lien Note (Cx8757) and TX Transfer of Lien (Cx8781) have been modified to print in Texas Closing Packages when “Loan Proceeds Used for Construction or Repair/Remodeling” (field index 60136) is set to ‘Yes’.
If “Loan Proceeds Used for Construction or Repair/Remodeling” has not been set, its value defaults to ‘Yes’ when:
- “Loan Purpose” is Construction Only or Construction to Permanent;
- “Building Status” is one of the following:
- Subject To Repair
- Proposed Construction
- Under Construction
- Subject To Alteration;
- “Refinance Loan: Purpose of Refinance” is Home Improve;
- “FHA Section Code” is 203k;
- “Rehabilitation/Renovation Yes/No” is Yes;
- “Special Program” is Homestyle;
- “FNMA HomeStyle Renovation Forms” is Yes; or
- “FNMA Construction Forms” is Yes.
These changes are effective immediately. If you have any questions or concerns about these changes, please contact Client Support at 1.800.497.3584.