Appendix D to Part 1026 - Multiple Advance Construction Loans
12:9.0.1.1.1.9.1.1.4 : Appendix D
Appendix D to Part 1026 - Multiple Advance Construction Loans
Section 1026.17(c)(6) permits creditors to treat multiple
advance loans to finance construction of a dwelling that may be
permanently financed by the same creditor either as a single
transaction or as more than one transaction. If the actual schedule
of advances is not known, the following methods may be used to
estimate the interest portion of the finance charge and the annual
percentage rate and to make disclosures. If the creditor chooses to
disclose the construction phase separately, whether interest is
payable periodically or at the end of construction, part I may be
used. If the creditor chooses to disclose the construction and the
permanent financing as one transaction, part II may be used.
Part I - Construction Period Disclosed Separately
A. If interest is payable only on the amount actually advanced
for the time it is outstanding:
1. Estimated interest - Assume that one-half of the commitment
amount is outstanding at the contract interest rate for the entire
construction period.
2. Estimated annual percentage rate - Assume a single payment
loan that matures at the end of the construction period. The
finance charge is the sum of the estimated interest and any prepaid
finance charge. The amount financed for computation purposes is
determined by subtracting any prepaid finance charge from one-half
of the commitment amount.
3. Repayment schedule - The number and amounts of any interest
payments may be omitted in disclosing the payment schedule under §
1026.18(g). The fact that interest payments are required and the
timing of such payments shall be disclosed.
4. Amount financed - The amount financed for disclosure purposes
is the entire commitment amount less any prepaid finance
charge.
B. If interest is payable on the entire commitment amount
without regard to the dates or amounts of actual disbursement:
1. Estimated interest - Assume that the entire commitment amount
is outstanding at the contract interest rate for the entire
construction period.
2. Estimated annual percentage rate - Assume a single payment
loan that matures at the end of the construction period. The
finance charge is the sum of the estimated interest and any prepaid
finance charge. The amount financed for computation purposes is
determined by subtracting any prepaid finance charge from one-half
of the commitment amount.
3. Repayment schedule - Interest payments shall be disclosed in
making the repayment schedule disclosure under § 1026.18(g).
4. Amount financed - The amount financed for disclosure purposes
is the entire commitment amount less any prepaid finance
charge.
Part II -
Construction and Permanent Financing Disclosed as One Transaction
A. The creditor shall estimate the interest payable during the
construction period to be included in the total finance charge as
follows:
1. If interest is payable only on the amount actually advanced
for the time it is outstanding, assume that one-half of the
commitment amount is outstanding at the contract interest rate for
the entire construction period.
2. If interest is payable on the entire commitment amount
without regard to the dates or amounts of actual disbursements,
assume that the entire commitment amount is outstanding at the
contract rate for the entire construction period.
B. The creditor shall compute the estimated annual percentage
rate as follows:
1. Estimated interest payable during the construction period
shall be treated for computation purposes as a prepaid finance
charge (although it shall not be treated as a prepaid finance
charge for disclosure purposes).
2. The number of payment shall not include any payments of
interest only that are made during the construction period.
3. The first payment period shall consist of one-half of the
construction period plus the period between the end of the
construction period and the amortization payment.
C. The creditor shall disclose the repayment schedule as
follows:
1. For loans under paragraph A.1 of part II, other than loans
that are subject to § 1026.19(e) and (f), without reflecting the
number or amounts of payments of interest only that are made during
the construction period. The fact that interest payments must be
made and the timing of such payments shall be disclosed.
2. For loans under paragraph A.2 of part II and loans under
paragraph A.1 of part II that are subject to § 1026.19(e) and (f),
including any payments of interest only that are made during the
construction period.
D. The creditor shall disclose the amount financed as the entire
commitment amount less any prepaid finance charge.
[76 FR 79772, Dec.
22, 2011, as amended at 78 FR 80130, Dec. 31, 2013]